• 300 Words (More or Less) 2014

    Advocacy_IconEach year, FAIA's advocacy staff develops succinct summaries of insurance-related issues to help lawmakers, the media, and the public better understand these often-complicated insurance topics.

    Consumer Advocate's Legislation
    Bad Faith Reform
    Workers' Compensation Reform
    Small Group Full Time Employee Definition
    Accuracy in Damages 
    Private Flood Insurance

    Consumer Advocate’s Legislation

    PROBLEM: Vendors, remediators, and contractors are abusing assignment of insurance benefits by escalating the scope and cost of repairs well beyond the actual damage. This abuse only serves to line the pockets of unscrupulous individuals and their attorneys, and, in turn, drives up the cost of insurance for all Floridians. The current insurance claims handling process is also poorly understood by consumers.

    BACKGROUND: A workgroup created by the Florida Insurance Consumer Advocate examined the claims handling process and found four areas where statutory reform is needed to protect the rights of both insurers and policyholders: (1) abuses in the area of post-loss assignment of benefits; (2) the practice by a handful of carriers in denying claims or canceling insurance policies based solely on the use of credit information; (3) policyholders who, because of a lack of information, are unsure of their rights after a loss; and (4) regulation of mediators and neutral evaluators involved in the claims handling process.

    SOLUTIONHouse Bill 743 by Rep. Hood addresses the four problem areas. (1) The proposed legislation provides that an agreement assigning benefits for repair or replacement is valid only if the agreement allows an insurance policy to prohibit post-loss assignment, except when:

    • An insured assigns the right of payment to a person or entity for mitigation services arising from a covered loss, and the assignment is limited solely to the right to be named as a co-payee for services rendered;
    • For the limited purpose of compensating a public adjuster; or
    • For the payment of an attorney’s fee for representation of the insured.

    (2) The bill prohibits insurers from denying claims or canceling an insurance policy or contract solely based on credit information available in the insured’s credit report if the insurance policy or contract has been in effect for more than 90 days. (3) It creates a detailed Homeowner Claims Bill of Rights that must be delivered to the insured within 14 calendar days after a claim is reported. (4) It gives the Department of Financial Services the ability to investigate mediators and neutral evaluators in a manner similar to how it investigates insurance agents and agencies.

    CS/Senate Bill 708 by Sen. Bean currently addresses only problem areas 2–4, but Sen. Bean is hoping to reach consensus on the assignment-of-benefits issue.

    CALL TO ACTION: Support passage of HB 743 and CS/SB 708.

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    Bad Faith Reform

    PROBLEM: Fear of being hit with awards far in excess of policy limits forces many insurers to settle and pay claims even when the insurer doubts the validity of the claim, increasing the premiums for everyone.

    BACKGROUND: Under the current provisions of §624.155, F.S., any person—not just the insured—can bring a civil action against an insurer for failure of that insurer to, in good faith, settle a claim within policy limits.

    Plaintiffs’ attorneys demand policy limits in almost every case, even those where liability of the insurer is doubtful, and the insurer usually has only 60 days in which to investigate the claim and make a decision on whether or not to pay. On top of that, some courts grant a “multiplier” or enhancement when granting attorney fees. The threat of almost unlimited damages far in excess of policy limits, coupled with extravagant attorneys’ fees, often forces insurers to pay policy limits even in cases where liability is in doubt. This is especially true given the case law trend that merely losing in a court case is often equated with bad faith. These forced settlements lead to increases in the overall cost of insurance for everyone.

    SOLUTION: Senate Bill 1494 by Sen. Thrasher and House Bill 187 by Rep. Passidomo address the problem by:

    • Requiring a third-party claimant to take additional steps before alleging bad faith, and
    • Providing that with respect to a third-party claimant, the insurer does not violate the bad faith criteria if, within 60 days after receiving the written demand from the third party, or within 90 days after the insurer receives notice of the claim, the insurer offers to pay the lesser of the amount demanded or the policy limits.

    This legislation is a very good and reasonable first step toward bad faith reform, taking the law back to its original intent: to punish egregious behavior.

    CALL TO ACTION: Support passage of SB 1494 and HB 187.

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    Workers’ Compensation Reform

    PROBLEM: The way workers’ compensation “stop-work” orders (SWOs) are applied often results in lengthy work stoppages that ultimately hurt the people the workers’ compensation (WC) system is designed to protect: employees, who now have no place to work.

    BACKGROUND: The Florida Department of Financial Services (DFS) Division of Workers’ Compensation identified a number of problems with the way SWOs are applied in cases where employers do not have proper WC coverage for their employees.

    DISCUSSION: If an employer fails to comply with WC coverage requirements, the DFS must issue a SWO, which requires an employer to cease all business and pay one-and-a-half times what the employer should have been paying in WC premiums for all periods of non-compliance over the previous three years, or $1,000, whichever is greater. To determine if proper coverage was in place, the employer must produce three years’ worth of records and has only five days from the DFS request to do so. Finding records going back that far is often difficult, especially for small businesses. The SWO remains in effect until proper coverage is obtained and the DFS issues a release, which is contingent upon either paying the assessed penalty, or agreeing to a re-payment schedule.

    SOLUTION: Senate Bill 444 by Sen. Galvano and CS/CS/House Bill 271 by Reps. Cummings and Broxson propose legislation that strikes a balance between making firm penalties for non-compliance with WC coverage and providing ample opportunity for employers to come into compliance and continue to provide jobs. The legislation:

    • Increases the time for producing DFS-requested business records from 5 to 10 business days after receiving written notice to do so.
    • Authorizes the DFS to issue a conditional release from the SWO for an employer that has secured appropriate coverage, if the employer pays $1,000 as a down payment on the penalty and agrees to a re-payment schedule for the remainder.
    • Credits the initial payment of premium made to secure proper coverage against the penalty if this is the first SWO against the employer. There are special rules for calculating proof of coverage when an employee leasing company is involved.
    • Reduces the look-back period from three to two years, but increases the penalty multiplier from one-and-a-half to two times the unpaid premiums.
    • This “clean up” bill also addresses a number of technical areas of the WC statutes that need adjustment and clarification.

    CALL TO ACTION: Support passage of SB 444 and CS/CS/HB 271.

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    Small Group Full-Time Employee Definition 

    PROBLEM: A discrepancy between the federal and state definitions of a full-time employee could confuse employers and create market disruption in the small group health insurance market. 

    BACKGROUND: The Patient Protection and Affordable Care Act (PPACA) defines a full-time employee for large and small groups as one who works at least 30 hours a week. But §627.6699(3)(h), F.S., defines a full-time employee for small groups as one who works at least 25 hours a week. The PPACA definition is used to define eligibility in the small group exchanges, also known as the SHOP Marketplace. As PPACA implementation continues, the inconsistency could create confusion as employers attempt to use the exchange to purchase coverage.

    How full-time employees are defined is critical to the group health insurance market, as these definitions govern who is eligible for coverage. Groups must meet participation requirements before a group policy can be issued; currently, 70 percent of eligible employees must enroll in the plan offered in order for an employer to participate in the SHOP Marketplace at any point during the year.

    SOLUTION: House Bill 969 by Rep.Cummings and Senate Bill 1364 by Sen. Bradley amend §627.6699(3)(h), F.S. to reflect the PPACA-created federal definition of a full-time employee by defining an “eligible employee” as an employee who works full time, having a normal work week of 30 or more hours.

    CALL TO ACTION: Support passage of HB 969 and SB 1364. 

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    Accuracy in Damages

    PROBLEM: Florida law allows juries in personal injury cases to only see the amountbilled for medical treatment. This amount does not reflect the actual cost, because medical providers typically discount their standard billing rates for the benefit of Medicaid, Medicare, or an insurance company. The inflated standard billing rate greatly overstates the injury to the claimant, creating a false impression that misleads a jury as it determines total damages..

    BACKGROUND: The greatest cost drive of economic damages in a personal injury lawsuit is often the cost of medical treatment and the effect it has on other damage awards. In Florida, the general rule is that only the billed amount of medical treatment is admitted into evidence and considered by a jury. But since the claimant owes a treating medical provider only the reduced charges that are actually accepted by that provider, the compensation of those charges should be the actual amount paid, not the inflated amount billed. Additionally, under Florida law, if a defendant is liable for causing a claimant’s injuries, that defendant (and his/her insurer) is also liable for a medical provider’s alleged malpractice that aggravates the claimant’s injuries, even if the treatment was unnecessary. This principle invokes the so-called “Stuart instruction,” which directs a jury to award additional damages resulting from negligent, unskillful, or unsuccessful medical care. 

    SOLUTION: Senate Bill 1128 by Sen.Richter and House Bill 379 by Rep. Hood ensure that the evidence considered in a case is not misleading and that a fair verdict is rendered. The legislation divides medical bills into two categories: (1) those that have already been paid; and (2) those where an outstanding balance is due or has not yet been billed due to a “letter of protection” (LOP), where the provider agrees not to bill the claimant for medical services until the lawsuit has concluded. In the first category, the actual amount paid is the maximum amount recoverable and a jury cannot see the difference between the billed amount and the actual amount paid. In the second, the parties may introduce into evidence for the jury to see the usual and customary charges of medical providers in the same geographic area for similar services; amounts billed by the provider, or those un-billed charges held back under a LOP; and any amounts the provider receives in compensation for selling the rights to a LOP. As to payment for unnecessary treatment, the bill provides that if a defendant proves by the preponderance of the evidence that treatment was not medically necessary, the defendant is not liable for damages resulting from the medically unnecessary treatment. 

    CALL TO ACTION: Support passage of SB 1128 and CS/HB 379.

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    Private Flood Insurance 

    PROBLEM: Dramatic increases in flood insurance premiums mandated by passage of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) could paralyze the real estate market in Florida, where nearly 40 percent of all National Flood Insurance Program (NFIP) policies are written.

    BACKGROUND: The NFIP is approximately $24 billion in debt, due to what the federal government contends is inadequate premium rates. To address this shortfall, Congress passed BW-12, which requires, among other things, that the NFIP raise rates to reflect “true flood risk.” That translates to premium rate increases for some, but not all, policyholders, and in some cases, increases as high as 1,000 percent.

    President Obama signed HR3370, the Homeowner Flood Insurance Affordability Act of 2014, on March 21, 2014, that softens the impact of these dramatic spikes, but it does not totally solve the problems. With the NFIP being the only game in town, some think the long-term solution is free market competition. To that end, Florida lawmakers are considering legislation, Senate Bill 542 by Sen. Brandes and CS/House Bill 879 by Rep. Hooper, to incentivize a private flood insurance market in Florida as an alternative to the NFIP. 

    DISCUSSION: Before a Florida market-based plan becomes law, answers are needed to several important questions, including:

    • Why haven’t private carriers been writing flood insurance coverage in Florida when they already have the ability to do so?
    • If companies are required to offer flood insurance at rates adequate to cover the risk, will there really be any savings to consumers?
    • How will carriers make their rates?
    • How will this affect the excess flood market?
    • Assuming private flood insurance offered by admitted carriers will be covered by the Florida Insurance Guaranty Association (FIGA), how would a company’s catastrophic-flood failure affect FIGA at a time it likely would be strained by similar failures due to hurricane losses?
    • Will banks or lending institutions accept a primary flood policy offered outside of the NFIP?

    FAIA applauds the efforts of Florida lawmakers to assist consumers, and will work with the bills’ sponsors to ensure the legislation does not create unintended consequences. 

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