The Florida legislature is a difficult place to navigate. The place is an adult maze, and it takes effort to find the right room. Possibly, the logistics are a warning to novice citizens such as me that actually try to have some small input regarding the laws we agree to abide.

In Senators Mike Fasano and Rhonda Storms Come to the Rescue of Policyholders, I commented on the Florida Senate proposal that would repeal prompt payment of replacement cost benefits. I was asked if I could participate yesterday in a “workshop” of sorts where Senator Rhonda Storms asked lobbyists from the insurance industry and then some consumer advocates to explain some of the issues underlying the proposed legislation.

People may underestimate the intelligence of Rhonda Storms. She is a lawyer by training and can easily get to the critical issues of a complex problem. Until I spent time discussing insurance related matters with her last year, I was not aware of how bright she truly is. Rhonda Storms is a colorful person and enjoys quips that the media love. I honestly believe her outlandish comments come from boredom during a debate–wasting time by not going to the heart of the matter. She is a bottom line person that expects honesty and candor. Senator Storms takes her job seriously and works hard for the people.

The insurance industry representatives use the word “fraud” to seemingly justify everything they propose. They said it with visceral passion yesterday. If you were from Mars and did not know better, you would think insurance is the most defective product ever made because it makes otherwise honest people into crooks. I hope our representatives can see through this sham and appreciate that their constituents don’t become criminals or morally corrupt as a result of an insurance claim. It almost smacks of McCarthyism applied in an insurance sense.

Being an attorney and having to zealously advocate for clients, I can appreciate that the insurance lobbyists have a job to do and are under pressure. They are successful if they can convince our representatives of the insurance company’s version of reality and persuade those representatives to pass laws favorable to them. That is fair and that is the American way.

"At War With The Weather" is a Must Read for Those Involved in the Debate of the Florida Property Insurance Market. Listening to those insurance lobbyists yesterday, I wondered how many read the book or have studied the Replacement Cost Coverage claim issues. I wondered if they cared why the laws were enacted, thought about the issue from their client’s customers points of view, or whether they even cared because all that matters is pleasing their client on the outcome of the legislation. And, I can appreciate the last concern because when you are retained by a client, “winning” is why you get hired.

After the meeting was over and Senator Storms thanked everyone for educating her, I stopped this amateur endeavor and worked on cases for clients that probably have no idea I was calling from Tallahassee. This concept is important. There are no professional lobbyists for policyholders in Tallahassee. As I pointed out in Sean Shaw is a Refreshing and Intelligent Advocate for Floridians–We Deserve This Type of Representation, Sean Shaw is as close as it gets to a policyholder lobbyist. I also made a “gallows joke” with some others that if the law were repealed, I would personally profit more because there would be more litigation over various and commonly disputed issues, as there was before these Replacement Cost Laws were passed. Only my potential future clients could care about this issue, and there would be far fewer of them if the laws stay the same—I started wondering if it was all worth the effort.

Nevertheless, I have to work on active cases and cannot afford the time to go back and debate the replacement cost benefit issues today in Tallahassee. If I were there, these are some of the points I would try to have our Senators consider. My opinions are not based on speculation, but on my experience in litigating residential claims before these laws passed.

SB 2044 removes the prompt payment of full benefits and places additional requirements on residential policyholders that would repeal all the work done by this Legislature following the windstorms of 2004 and 2005 and end 70 years of common law protections for policyholders suffering partial damage to their homes.

History: The Florida Legislature passed Replacement Cost Laws that require insurers to pay replacement cost benefits to policyholder who purchased “replacement cost insurance.” These laws resulted from claims delays and disputes that were inherent when insurers withheld prompt and full payment of replacement cost benefits. Many policyholders were outraged that many insurance companies sold a “replacement cost policy” only to find that the full “replacement cost benefits” for their real and personal property were withheld. Prior to that time and through the present, Florida common law required that insurers pay for “repairs” to structures suffering partial damage on an actual cash value basis without depreciation taken. Glens Falls Ins. Co. v. Gulf Breeze Cottages, 38 So.2d 828 (Fla. 1949).

SB2044 proposes that policyholders who pay a significant additional premium for replacement value coverage (RCV) and who incur a loss to their home or personal property, then have to accept payment other than on a “replacement cost basis.” The proposed laws allow an insurance company to pay smaller, actual cash value (ACV) benefits and “hold back” any other funds until, (a) on the dwelling, after a contract is signed to replace or repair the home; and, (b) on personal property, until the homeowner provides receipts for the personal property (i.e. pay for replacement and prove the amount of the same with receipts).

• Policyholders are paying premiums for RCV coverage and therefore, should not be limited to ACV or anything other than what is being advertised or suggested as being purchased. Laws should not be made which reinforce that purchasing RCV means getting something else other than full and prompt RCV, as a matter of law.

• Insurance companies have no legitimate basis to withhold policyholder RCV claim amounts when selling RCV policies. However, they will wrongfully profit from such legislation allowing for the same because (1) they get to play the float during the period that they hold onto the RCV money without paying the interest from such withholding to the policyholder (2) policyholders that fail to replace for one reason or another will never obtain the money. Such uncollected RC benefits do not go to help the neighborhood, community, or anybody other than the insurance companies which, through this law, keep money otherwise owed to their customers who paid additional premiums for those benefits. While the insurance industry argues there is a public policy behind their attempt to change the law by influencing people to rebuild, repair and replace, they fail to highlight the obvious—insurance companies make more money by playing the float with the policyholders cash and may make windfall profits the same way a retailer does when the gift card goes uncollected.

• The purported reason that this legislation is needed is to prevent fraud is, therefore, a myth. Prior to 2006, a number of insurance companies honestly advertised “replacement cost coverage,” which actually paid policyholders “replacement benefits” as the current law requires. The current claim that some insurers make that this bill will prevent fraud is disproven by these other companies selling the coverage in Florida before the 2006 Laws. And, those same companies offer it in other states today, without claiming that such prompt replacement benefits result in fraud by their customers. 

• Significant delay of payment to policyholders to repair structures is already occurring and does not need to be encouraged. Most mortgages require dual signatures on any insurance check – one from the homeowner and the other from the mortgage company. The mortgage company then has the right to inspect and approve of the progress and repairs to a dwelling before releasing payment of the insurance benefits. Checks and balances are in place for repair. There is no real need to further burden policyholders and delay repair during an already emotionally and financially traumatic time. Policyholders do not need the additional hassle of the insurer arguing how the repair or replacement should be made simply because the insurance adjuster does not like how the construction contract calls for repair or replacement.

• Homeowners who pay a premium for RCV coverage and who sustain a loss, should be able to use the funds as they see fit – it is their money. Whether it is used for nicer tile or wood floors in the home, or to put nicer fixtures in the home, or to remodel the structure in a manner acceptable to the mortgage company and the homeowner but not as it was, it is the homeowner’s money-subject to mortgage requirements-and the homeowner should be able to spend as they think is best for them.

• Litigation, claims disputes, and claims delays have been reduced because insurance company adjusters are not subject to first estimating RCV, holding back an arbitrary depreciation figure which the policyholder may dispute, and then determining when the held back RCV payments are due as the insurance company adjuster inspects the construction contract and the hundreds, if not thousands, of receipts. Simple and prompt claims payment standards, as the current law requires, should be encouraged.

• Any insurer may repair or replace a damaged structure at its own cost without payment of monetary benefits pursuant to the Florida Valued Policy Law and standard insurance policies. These provisions take whatever possible profit incentive that may exist for the policyholder out of the transaction and were written for the insurer’s benefit. Thus, in addition to what has been pointed out previously, there is a fallacy that insurers are looking for a change in the laws to require repair to benefit society or that they cannot require replacement of damaged structures. Insurers currently have the legal right to do so, but they do enforce this legal right because they want the risk and uncertainty of the rebuilding costs and complications of dealing with a construction that goes awry to remain with the policyholders.

• Many policyholders cannot fully replace or repair because they cannot afford the additional and increased cost to upgrade to the new building ordinances which are not paid for under RCV. Thus, many insurers will obtain windfall profits, often at the expense of the less affluent or fixed income policyholder that cannot afford Code Upgrade Coverage. Code Upgrade Coverage is an additional cost above RCV. Many policyholders do not have this coverage or enough of it.

• Many policyholders cannot fully replace or repair because they cannot afford the additional costs of perils limited or excluded under the policy. Thus, insurers obtain windfall profits because of other policy language they can use to prevent the complete repair or replacement from occurring. Many insurance companies limit the amounts paid for damaged items such as debris removal, the increased costs to remove mold following a water loss, asbestos removal and other perils, while excluding portions of damage in their entirety, such a wind driven rain and other certain water losses. Policyholders may not have enough money to pay for the entire cost of repairing a structure as a result of the limitations and exclusions under the policy and never receive RCV benefits that they paid for. Indeed, they cannot even use the RCV benefits to help make up for the limited or excluded items of a claim.

And, for those that read last night’s post, Representative Janet Long Gets a Hug From Chip Merlin, I will follow up on that story at a later date.