Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Outside of the turbulent state of Florida, the Southeastern U.S. saw its share of insurance issues, from carriers pulling out of Georgia to roof-matching requirements in Kentucky to liquor liability problems in South Carolina and dog bites in Alabama. (See our Jan. 2 edition for the top Florida stories of 2023.)
About the same time that it announced a major pull-back from the Florida and California markets, Farmers Insurance also sent thousands of nonrenewal notices to Georgia homeowners. In Georgia, though, the carrier appears to have misunderstood the state’s rather unique law on nonrenewals – and was forced to backtrack. Georgia Insurance Commissioner John King put out a bulletin in July saying Farmers had rescinded the nonrenewal notices that were mailed to homeowners that month. The nonrenewals explained that if the home’s roof was 15 years old or more, Farmers would no longer write the property. That’s not allowed under Georgia statute 33-24-46, which forbids carriers from changing underwriting guidelines or eligibility rules for existing policies unless the changes apply to an entire class or territory and has been approved by the commissioner’s office.
Matching requirements for roofs and interior furnishings have been a tough issue in the property insurance industry for years. Recent developments show how insurers and regulators in different Southeast states are managing the mandates. In Kentucky, the state Department of Insurance in October posted an advisory opinion, attempting to clarify the intent of the state’s matching statute. On the one hand, Kentucky law does not permit a “line of sight” rule for roofs: “If the shingles on one slant of a residential roof must be replaced due to damage covered by an applicable property insurance policy, and absent the availability of matching shingles that would render the slant in question reasonably uniform to the remainder of the roof, then an entirely new roof must be installed,” state Insurance Commissioner Sharon Clark wrote in her Oct. 17 bulletin. In Florida, where insurers have blamed a cottage industry of roof scams for helping to implode the insurance industry, several carriers are now relying on newly accepted endorsements to limit what they will pay to match non-damaged materials. The Florida Office of Insurance Regulation in recent months has approved policy forms filed by no fewer than eight property insurers, which limit the amount the carriers will pay to replace undamaged materials to create a matching, uniform appearance after repairs, state records show.
Wanted in South Carolina: $1 million in liquor liability coverage at an affordable premium to prevent closure of establishment. That’s the type of advertisement one can imagine bars and bistros across the Palmetto State running this fall, as the full impact of state laws become painfully clear. A million-dollar liquor liability insurance requirement, along with South Carolina’s joint-and-several tort statute that can hold a dram shop liable for millions in damages – plus the result of some recent high-profile lawsuits – has had insurance agents and brokers scrambling to find coverage for some of the state’s favorite watering holes and restaurants. “It’s just out of hand. It’s a crazy thing,” said Tom Bates, market president of the Stokes-Farnham Insurance Agency in Greenville. “I’ve tried to go to the standard market first, but if you have any kind of hair on your account, you have to go to the excess and surplus market.”
Nationwide General Insurance has avoided payment of a dog bite claim filed by a homeowner it insured who ran a firearms business out of his garage. A federal district court for Alabama ruled in June that the business exclusions in all three Nationwide policies issued to David Hope applied, even though the man his dog bit was as much a friend as he was a customer and there was no money involved in the transaction taking place when the dog bit him.
Allstate Insurance is no longer eligible for one of the largest incentive packages from the state of North Carolina, created when Allstate pledged to add more than 2,200 workers in Charlotte. The insurance carrier said too many remote workers made the in-person jobs requirement impracticable. The state’s Economic Investment Committee agreed in July to end a 2017 incentives agreement with Allstate, which could have pocketed as much as $17.8 million in cash if it met job-creation goals, the Associated Press and other news outlets reported.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Million-dollar court cases, expert predictions and in-depth market analysis — Insurance Journal’s top-read directors and officers insurance stories in 2023 scrutinized notable national headlines through a D&O lens. Meanwhile, big-picture evaluations continued to draw attention, as did a legal dispute over a “bump-up” exclusion.
1. D&O Repercussions of the Silicon Valley Bank Collapse
Shortly after Silicon Valley collapsed in March, eyes turned toward an AM Best commentary issued as a warning to the insurance industry. Had the federal government not stepped in to make SVB depositors whole, D&O insurance providers for startups and venture capitalists, as well as financial institutions supporting these entities, would have been staring at potentially significant claims. The bank’s downfall “highlights the critical importance of enterprise risk management, asset/liability management, and liquidity profiles” during a period of rising interest rates, AM Best said.
Later, in May, a bankruptcy judge allowed officials with SVB’s parent company to tap into the $210 million in insurance coverage available through directors and officers liability policies to defend themselves against litigation that followed the bank’s collapse. The Committee of Unsecured Creditors for the SVB Financial Group bankruptcy had objected to the expense, but Martin Glenn, chief bankruptcy judge for the Southern District of New York, said the insurance policies themselves state that the bank’s directors and officers get first dibs on any proceeds from the D&O policies.
2. Short-Lived Excess D&O Lawsuit Made Headlines During FTX Fallout
Readers closely monitored a brief excess D&O development following the collapse of global cryptocurrency exchange FTX. In October, FTX founder Sam Bankman-Fried filed a suit in federal court against his excess insurance company, seeking payment of legal costs. He dropped that lawsuit in November, days after he was found guilty of one of the biggest financial frauds on record. Kevin M. LaCroix, executive vice president at RT ProExec, a division of RT Specialty, said in a D&O Diary blog post that the coverage dispute raised some interesting questions related to the distribution of D&O coverage to multiple insureds.
A judicial panel of the Fourth Circuit Court of Appeals ruled in May that insurance broker Towers Watson may not be entitled to $80 million in insurance to cover settlements of shareholder lawsuits related to the merger between Towers Watson and Willis in 2015.
In its ruling, the appeals court in Richmond reversed a coverage victory won by Towers Watson in federal district court in Alexandria in 2021. Towers Watson was later denied a rehearing by a federal appeals court.
The coverage dispute centered on a “bump-up” exclusion in the D&O liability policies issued to Towers Watson in 2015. A bump-up exclusion generally bars coverage for losses stemming from judgments or settlements in connection with claims against the insured seeking an increase, or “bump up,” in the consideration paid in an acquisition. Towers Watson shareholders filed several lawsuits in Virginia and Delaware against Towers Watson’s chairman and CEO and others, alleging that they received below-market consideration for their shares in the merger.
4. D&O Big Picture Discussions Took Center Stage in Spring
Many heavily read D&O stories between March and May highlighted concerns from experts regarding the D&O landscape. AM Best said it remains to be seen how long the rate and price increase reprieve can last, while Dan Beatty and Erin Zimmerman said the current D&O market is out of balance, with insurers facing a soft underwriting landscape just as the volume and severity of claims are rising.
And, while analysts at Fitch Ratings estimated that combined ratios for the D&O liability line remained below breakeven in 2022, Fitch determined that with competition fueling price declines and the economic conditions uncertain, “the line is under pressure.”
5. CEO: W.R. Berkley Isn’t Going to Chase D&O Market ‘Down the Drain’
He said the insurer was not going to follow the directors and officers market “down the drain.”
Berkely said there had been a lot of new entrants into the D&O market because “there’s not a lot of barriers to entry to getting into that space.” However, the additional supply was not being met by demand.
“We have seen a dramatic reduction in IPOs,” Berkley said. “We’ve just seen a dramatic reduction in a lot of the activity that would drive D&O purchasing.” This, according to Berkley, includes transactional liability. M&A activity “has fallen off a cliff,” he said.
“The reality is that the demand has been reduced and the supply has increased, and that has led to an unattractive, competitive environment from our perspective,” Berkley said.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Homeowners rates, real estate impacted
A new survey shows reinsurance prices in the upcoming renewal will be upwards of 30% more expensive than this year, catastrophe exposed commercial properties are expected to see the biggest reinsurance rate hikes, reinsurance prices are impacting homeowners insurance premiums and that’s now hurting Florida’s real estate market, plus the newest group selling property insurance in Florida. It’s all in this week’s Property Insurance News.
Reinsurance Prices: Global insurance brokerage & risk management firm Gallagher Re is out with its latest survey on reinsurance pricing ahead of the January 1, 2024 renewal period. It surveyed 24 of the reinsurers most active in the regional market this fall and found the overall dollar amount of capacity to be deployed in property Cat coverage was likely to remain flat, with price increases from 10% to 30%. Gallagher Re says reinsurers’ overall appetite for US regional property catastrophe (Cat) coverage remains healthy, but carriers are proving less willing to provide aggregate covers for regional property Cat risk, preferring instead to deploy capital through occurrence excess of loss (XOL) programs. The bottom of programs remains difficult given recent loss activity from severe convective storms.
Cat Exposed Properties Most Vulnerable: Catastrophe exposed commercial property insurance renewals are expected to see some of the biggest rate gains in 2024, due to the challenging reinsurance market and its ever-rising rates. That’s according to broker WTW, which according to Artemis “paints a fairly bleak picture for those with property in regions where natural catastrophes and severe weather are prevalent.” That would certainly include Florida. WTW expects property insurance rate increases of 10% to 25% for those properties.
Florida Real Estate Impacted: We’ve said it before and we’ll say it again: the increasing property insurance rates – driven in part by higher reinsurance prices – are now outpricing home ownership for a growing number of would-be Florida real estate buyers. This article last week by Benzinga, Florida Is Beginning To Lose Homeowners Over High Insurance Premiums, outlines the greater impact this is having on Florida’s economy and the inter-relationship with rising reinsurance costs. Another piece last week,Why the Florida homeowners insurance crisis should worry us all points out that homeowners insurance costs went up 40% this year. It’s why we mentioned in the introduction to this newsletter’s Bill Watch that the Florida Legislature in its upcoming January session could – and should – create a program to provide more public reinsurance capacity to provide more consumer relief. Below is something that we spotted on LinkedIn and found interesting as rising reinsurance costs are part of the 212% increase in catastrophic losses in the U.S. from 2019 to 2022 noted.
Newest Entrant into Florida Market: The Florida Office of Insurance Regulation announced last week that it’s given approval for Condo Owners Reciprocal Exchange to form as a property and casualty reciprocal insurer in Florida. Reciprocal insurance exchanges are a form of insurance organization in which individuals and businesses exchange insurance contracts and spread the risks associated with those contracts among themselves. Policyholders of a reciprocal insurance exchange are referred to as subscribers. Condo Owners Reciprocal Exchange is to be a Florida-based, domestic property and casualty insurer and applied to receive its permit and subsequent Certificate of Authority. It’s the latest among this year’s new entrants to the Florida marketplace, following the past 18 months of legislative reforms.
Tags: Condo Owners Reciprocal Exchange, Florida Homeowners Insurance Market, Florida Office of Insurance Regulation, Florida Property Insurance, Florida Real Estate Market, Florida Reinsurance, Gallagher Re, Reinsurance, WTW
“Lisa Miller is a true champion for the insurance industry, with her regular updates! We appreciate all you do and keeping us up to date on priority issues!”
Gillian Lloyd, Account Executive
Zywave
Milwaukee, WI
GET THE LATEST UPDATES IN YOUR INBOX FOR FREE!SUBSCRIBE NOW
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
The stewards of Florida’s property insurance industry refused to tamp down their enthusiasm at this week’s Florida Chamber Insurance Summit in Orlando.
Recent legislative reforms are driving down lawsuits — the wildcard of risk modeling — and enticing more reinsurance capital and new insurance companies into the state, many said.
Ultimately, insurance leaders said Thursday, the reforms will make insurance risks more predictable and property insurance rates should stabilize.
Policyholders might not be ready to declare victory, particularly after enduring multiple years of rate hikes that sent Florida’s average premium to three times the national average. Some have said the reforms tilted the playing field too far in insurers’ direction.
But summit participants say what they’re seeing is a good start. Without the reforms, investors weren’t willing to fund reinsurance coverage necessary to keep the market alive, they said.
Views and actions of high-level executives of reinsurance providers are closely monitored throughout the industry. Reinsurers provide insurance that insurance companies must buy each year to ensure they can pay claims after catastrophic weather events.
And in recent years, uncertainty about increasing numbers of claims and lawsuits in Florida have triggered concerns among reinsurers about the wisdom of investing in the state, several speakers said on Thursday. Reinsurance prices increased as a result, and insurers have been forced to recover those additional costs by hiking premiums charged to homeowners.
The past couple of years have also brought uncertainty over whether enough reinsurance capacity would be available at the beginning of hurricane seasons to cover all Florida-based insurers.
In a session on reinsurance rates and availability, Justin O’Keefe, chief underwriting officer for RenaissanceRe, Florida’s largest provider of catastrophe reinsurance, rattled off numerous developments that are enticing reinsurance capital back into the state:
A number of policies held by state-owned Citizens Property Insurance Corp. are being reduced through the company’s depopulation efforts.
Six new companies were approved this year to begin offering insurance in the state.
“Fair” rate increases are being approved by the Office of Insurance Regulation to keep pricing on par with risk.
The state is spending hundreds of millions of dollars through the My Safe Florida Home program to help homeowners fund improvements to reduce or eliminate prospects of insurable storm damage.
And early signs are emerging that claims costs are coming down as a result of the legal reforms, which, among other changes, eliminated the ability of plaintiffs’ attorneys to claim so-called one-way attorneys’ fees if an insurer settles a litigated claim for any amount over its initial settlement offer.
A year after the one-way attorney fee statute was reformed during a special legislative session in December 2022, several insurers said they were beginning to see fewer lawsuits filed against them, reported Mike Yaworsky, the state’s insurance commissioner.
New cases against Citizens declined 17% during the first 10 months of 2023, according to a new report released by the James Madison Institute on Thursday. “This reduction is noteworthy,” the report said, “given Hurricane Ian’s impact in September 2022, which would normally trigger a spike in new litigation over the next year.”
“A lot of that stuff, from a reinsurance perspective, gives us more certainty, more credibility,” O’Keefe said, “of how to price the risk in Florida.”
John Seo, co-founder and managing director of Fermat Capital Management LLC, called the turn “amazing” and “phenomenal.”
“I’ve been spreading the message worldwide to a global investor base that really is breathing a great sigh of relief.”
Later, he said, “You’ve now opened up the runway for tens of billions of dollars of fresh capital to flow into Florida over the next three to five years.”
Bryon Ehrhart, global head of growth and strategic development at AON, a reinsurance brokerage, said the reforms made it possible for the company to continue placing reinsurance in Florida.
“I think we’ve gotten it back to an insurance market rather than a fraud market,” Ehrhart said. “That’s what we hope to see continuing.”
Predicting payouts after storms, known as risk modeling, had become impossible prior to the reforms because of the high levels of claims litigation in the state, Ehrhart said.
O’Keefe said that his firm ended up paying $500 million more than it projected after 2017’s Hurricane Irma. None went to rebuilding communities or increasing insurers’ surpluses, he said.
“We all probably have an assumption of where that half a billion dollars went to and I won’t go into the details,” he said.
Seo said Citizens and the Florida Hurricane Catastrophe (CAT) Fund provided a backstop that prevented Florida’s insurance market from collapse prior to enactment of the legal reforms.
Citizens is the insurer of last resort that covers homeowners unable to find affordable coverage elsewhere. The Florida CAT Fund provides reinsurance coverage that can be accessed before insurers must turn to their private reinsurance coverage.
“In the absence of Citizens and the CAT Fund, I think Florida could be in free fall,” Seo said. He added that now, “Everything’s all coming together in a really, really nice way.”
Still, speakers also noted potential problems that the market could face as it waits for further declines in litigation.
Ehrhart noted that many Florida insurers are still undercapitalized and over-reliant on the state’s ability to impose surcharges on all auto and home policyholders to cover claim-paying shortfalls. He asked what could happen after three to five years of consecutive busy storm seasons.
Florida has the ability to levy surcharges of up 90% of policyholders’ existing premiums, he said. “Everyone knows those economics will not work.”
And reinsurance costs likely won’t fall this year, despite the downward claims trend, because of updates to risk modeling that take into account increased frequency and severity of severe, non-hurricane, weather events.
But even those issues could not quell the jubilant attitude at the summit, which prompted Yaworsky to declare, “It feels very good that we have stopped the bleeding in the market.”
Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Floridians concerned about liability when sharing their automobiles with children or friends can relax a bit after the Florida Supreme Court’s recent ruling on the state’s long-standing dangerous instrumentality doctrine. Its decision in Emerson v. Lambert, SC 2020-1311(Fla. Nov. 16, 2023), once again limits the doctrine.
Essentially, the doctrine was created to place financial responsibility on individuals who entrust the use of “dangerous instrumentalities” (i.e., automobiles) to others. In the real world, the doctrine often arises in cases where commercial companies allow their employees to use company vehicles and an accident occurs while the employee is “entrusted” with the vehicle. Courts have applied the doctrine in a myriad of other contexts in which another individual is operating a vehicle entrusted to him/her by the vehicle’s owner.
While the application of the doctrine is rather wide-reaching, various court decisions through the years have limited its application. For example, liability has been capped for short-term lessors and owners who are natural persons, as opposed to business entities. The doctrine has also eliminated vicarious liability for long-term automobile lessors and prohibits the imposition of vicarious liability on car rental companies.
In Emerson, a 21-year-old boy, was driving home when he hit a motorcyclist, causing life-altering injuries. The motorcyclist sued the boy and brought vicarious liability claims against his parents for his negligent use of the family vehicle. The motorcyclist claimed the boy’s father was vicariously liable as the vehicle’s titleholder, while his mother was vicariously liable as the bailee who allowed their son to drive the vehicle.
The jury found in favor of the motorcyclist and concluded the mother was a bailee who consented to her son’s use of the vehicle. After considering fault apportionment, amongst other factors, the jury’s verdict resulted in a net judgment of more than $18 million. The court reduced the father’s responsibility to $600,000, based on the statutory maximum allowed by Florida law for vehicle owners, but it still entered a final judgment against the son and mother for the full amount of the verdict.
On appeal, the Florida Supreme Court tackled the question of whether one family member who is a bailee of a car can be held vicariously liable when the vehicle’s acknowledged, titled owner is another family member who is also vicariously liable under the doctrine. The court found that the vehicle’s owner (the father) is vicariously liable to the motorcyclist for his injuries by statute and common law. However, in sharing his vehicle with his family members (the mother and son), the vehicle’s owner did not increase the number of people liable to the motorcyclist, and therefore, did not increase the amount of potential recovery under the doctrine.
The court acknowledged that in enacting the statutory maximum allowed for vehicle owners, the Florida Legislature had laid out protections for the vehicle owners as they are generally not directly at fault for causing the injury. Allowing the mother to hold any responsibility for the motorcyclist’s injuries would ultimately result in a way for plaintiffs and their attorneys to get around the statutory maximum for vehicle titleholders when the vehicle is shared amongst the family. Thus, the court answered the question in the negative.
This is a decision that will likely have implications for other scenarios.
Consider this hypothetical situation where a family owns several vehicles registered under the parents’ names. Two of these cars were acquired for the children, John and Jane. Let’s imagine John’s car breaks down, prompting him to request the use of Jane’s vehicle from her. Jane gives permission to John to borrow the vehicle her parents let her use. With her consent, John drives her vehicle, still bearing the parents’ names on the title. Unfortunately, John ends up in a car accident. In this case, under Emerson, Jane can potentially find protection from vicarious liability under the dangerous instrumentality doctrine, as long as the parents can be held vicariously liable as the title owners who have not expressly objected to permissive use. This situation also protects an insurer from being responsible for the damages assessed against multiple insureds, especially for Jane, who would not fall under the vicarious liability cap for natural persons.
Expanding on the previous hypothetical, let’s envision a scenario where John approaches Jane to borrow the car that remains titled to the parents. Rather than driving the vehicle himself, John’s girlfriend gets behind the wheel and gets into an accident.
With the slight change of facts, Emerson could potentially apply in different ways depending on specific circumstances. When considering the application of Emerson in this context, several questions arise.
Since John’s girlfriend is outside the immediate family unit, one must assess if permissive use extended to her. What would happen if the parents’ consent to the children did not extend to the girlfriend? What if the parents did not give specific consent but no one contests the permissive use? Moreover, does this situation fall under the concept of bailment? Lastly, would Emerson provide protection to Jane and John in this specific scenario?
Let’s change the hypothetical to a divorced couple with a driving-age child. In the process of separating, the husband left the vehicle with the former wife without formally removing his name from the title. The vehicle was solely titled in his name. The former wife regularly uses the vehicle for her daily activities. Subsequently, the wife permits the son to borrow the vehicle to go to a friend’s house. As in our other scenarios, the son gets in a motor vehicle accident. Under this hypothetical, in the event the husband declines permissive use of the vehicle, Emerson may not provide legal protection. In this situation, the court may also have to analyze an additional element of permissive use.
In sum, situations like the hypotheticals above are bound to arise due to the complex nature of familial relationships, shared property, and legal implications of such. Thankfully, the Florida Supreme Court stopped what would likely have been very artful pleadings by plaintiff’s attorneys any time a vehicle was shared amongst several individuals. Questions surrounding permissive use, consent from title owners, and bailment, will all have to be analyzed to see whether potential protection will be offered from Emerson.
Kimberly Kanoff Berman is a shareholder and Sheri-Lynn Corey-Forte and Tiffany Moore-Silverman are associates in the Fort Lauderdale office of civil defense litigation law firm, Marshall Dennehey. Berman focuses her practice on appellate law and Corey-Forte and Moore-Silverman concentrate on automobile liability and other general liability matters.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
What is ‘Incurred Cost’ in Insurance Policy? Florida Appeals Court Weighs in
Property insurance contracts often contain provisions requiring insureds to “incur” costs before insurance companies issue payments. For example, “ordinance or law” provisions provide “you may use up to 25% of the limit of liability that applies . . . for the increased costs you incur due to the enforcement of any ordinance or law,” and “reasonable emergency measures” provisions provide “we will pay up to $3,000 for the reasonable costs incurred by you for necessary measures taken solely to protect covered property . . . from further damage.”
Some policies contain “supplemental claims” provisions, providing, “a supplemental claim means a claim for additional loss or damage from the same peril, which we have previously adjusted or for which costs have been incurred while completing repairs or replacement pursuant to an open claim.” Perhaps most notably, the “loss settlement” provision in many policies provides, “we will initially pay at least the actual cash value of the insured loss, less any applicable deductible. We will then pay any remaining amounts necessary to perform such repairs as work is performed and expenses are incurred.”
Florida’s 5th District Court of Appeal, in State Farm Florida Ins. Co. v. Joretha M. James, No. 5D22-1404 (Dec. 1, 2023), recently addressed the meaning of “incurred cost” in an insurance policy. In James, State Farm appealed a final judgment issued in favor of the insureds, asking the appellate court to overturn the trial court’s decision and find that James did not “incur” tear out costs as required under the policy to obtain coverage. Although the DCA rejected State Farm’s argument, the court provides helpful guidance on what a court will consider to be an “incurred cost” under an insurance policy.
In James, the policy contained a “tear out” provision: “if a loss insured to Coverage A property is caused by water or steam escaping from a system or appliance, we will also pay the reasonable cost you incur to tear out and replace only that particular part of the building or condominium unit owned by you necessary to gain access to the specific point of that system or appliance from which the water or steam escaped.” This provision, like the ones noted above, requires the insured to “incur” a cost before payment is made.
Even though the term “incur” is used frequently in insurance policies, it is almost never defined. In James, the DCA specifically stated, “we begin by noting … the policy was drafted by State Farm, which failed to include a definition of the meaning of the word ‘incur,’ thereby leaving it open to potentially different meanings.” James, at 3. The DCA also noted that “[b]ecause ‘incur’ is not defined, ‘it should be given its plain and ordinary meaning’ in the context presented.” Id. citing to Gov’t Emps. Ins. Co. v. Macedo, 2017.
Merriam-Webster’s dictionary defines “incur” to mean “to become liable or subject to.” In layman’s terms, to “incur the cost of something” means to spend money on something. In the context of an insured “incurring” a cost as required under an insurance policy, however, the term “incur” is slightly broader. The Florida Supreme Court has held that “‘to incur’ means to become liable for the expense, but not necessarily to have actually expended it. We agree.” Ceballo v. Citizens Prop. Ins. Corp., 2017. In other words, under Florida law, an insured does not actually have to spend money in order to “incur” a cost.
The question remains: What must insureds do to prove that they have incurred costs under their policies? Obviously, the first way would be to prove they have actually spent money on something. However, as noted above in the Ceballo case, the Florida supreme court held that an insured does not actually have to spend money to incur a cost. In James, the DCA identified another method to prove insureds have incurred costs. The DCA found that the insured “incurred the loss for which reasonable repair costs are due and payable as reflected by the contract.” This interpretation is more clearly set out in the concurring opinion offered by Judge Makar: “State Farm makes the argument that incurring costs means the policyholder must have an ironclad irrevocable contract; or that the policyholder must have paid such costs. Both arguments are less reasonable than the middle ground that the policyholder advances, i.e., that by entering the contract at issue she has incurred the costs for purposes of payment under the tear out clause.” The decision is consistent with a Fourth DCA decision which held “at the time of the original appraisal, Jossfolk had not applied for repairs of the roof. Thus, he had not incurred or become liable for any additional expense.” See Jossfolk v. United Prop. & Cas. Ins. Co., (Fla. 4th DCA 2013).
The James court’s decision was impacted by the fact that the word “incur” was not defined in the policy. The court noted that “the policy could have been written to say that State Farm would reimburse ‘the reasonable costs you have paid for tear out’ repairs, but it was not.” In other words, if an insurance company wants to limit incurred costs to expenses the insured actually pays for, then the insurance company can either rewrite the applicable provision to define the term “incur” or provide a dollar limit.
However, even for policies where the term “incur” is not defined, the James decision still has a significant application. It makes clear that for insureds to “incur” costs they can do one of two things: They can spend their own money or they can sign a valid and enforceable contract for work to be performed.
What insureds cannot do after James is simply rely on an estimate to prove their incurred costs. The insureds must present an actual contract signed by the insureds with someone who will actually perform the work in order for costs to be “incurred.”
Nathaniel Tobin is a partner with Chartwell Law, in Miami. He focuses on first-party and third-party insurance coverage, insurance defense.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Tax collectors in more than 30 Florida counties have joined a lawsuit against a home-hardening and energy efficiency program, arguing that it misleads homeowners and saddles them with huge property tax bills.
The Florida PACE Funding Agency has pushed back, winning a court order earlier this month that requires one county to keep the program’s assessments on tax bills this year and in the future.
“This victory is not only a pivotal moment for FPFA but also carries far-reaching implications for residents and special districts throughout Florida,” a program official said in a statement. “The decision ensures the continued support for essential home improvements that countless Florida families rely on.”
The issue has gained attention around the state as homeowners struggle with soaring property insurance premiums. A similar, state-run program, known as My Safe Florida Home, provides matching grants for wind-mitigation work on homes, which can result in premium discounts or smaller premium increases for homeowners.
But that program has proven so popular that it has seen a backlog of applicants. The Florida governor has proposed another $107 million in funding for the My Safe Florida Home program for next year. Critics have charged that’s not enough to help thousands of needy homes in storm-swept Florida.
Meanwhile, the PACE program, which stands for Property Assessed Clean Energy, has made its own headlines, as many county officials have railed against it. Unlike a loan mechanism, homeowners who sign up with PACE agree to have the funding tacked on to their property tax bills each year. The program was authorized by the Florida Legislature years ago.
But some county leaders have warned that many residents don’t understand the process and have been surprised by 300% increases in their property taxes, according to news reports and court records.
In the suit filed in Leon County Circuit Court, tax collectors are asking a judge to bar PACE from utilizing the property tax assessment system. The complaint cites a July resolution from the Leon County Board of Commissioners, declaring that PACE “poses an immediate danger to the health, safety, or welfare of the citizens of the County and compromises significant legal rights…” The judge had previously ruled that PACE did not need county government approval for the added assessments.
Supporters of PACE have said that it provides badly needed new roofs and windows for lower- and middle-income residents and for those who can’t obtain bank loans for the mitigation work.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Gas Eyed as Source of South Florida House Explosion That Injured 4
WEST PARK, Fla. (AP) — Four people were injured in an explosion early Tuesday that severely damaged a Florida house, authorities said. Investigators were focused on gas as the possible cause.
The Broward Sheriff`s Office said in an email the blast was reported at 12:34 a. m. Tuesday in the city of West Park, a suburb of the Fort Lauderdale-Hollywood area.
Four people inside the house were taken to local hospitals. Details of their injuries were not immediately available.
Fire Battalion Chief Michael Kane told reporters the injured are members of the same family. The initial focus of the probe is a possible gas explosion, he said.
The sheriff`s office said some nearby homes and vehicles were damaged by the blast. Some homes were also evacuated by firefighters. No other injuries were reported.
The state fire marshal is investigating what caused the explosion.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Recent Florida legislation that has limited plaintiffs’ attorney fees and has raised the bar for bringing bad-faith claims against insurers appears to have already had an impact on the level of claims litigation in the state. Policyholder lawyers note that it has become more difficult to invest the time to combat alleged stonewalling and delay tactics by insurance lawyers.
“I fear the recent insurance bailout passed by Florida’s legislature is only going to incentivize these types of litigation tactics,” said Jacksonville attorney Robert Jameson, who recently won sanctions against Universal Property & Casualty Insurance Co. and one of its lawyers.
But it’s possible that recent court rulings and legislation could have other effects on insurance defense actions.
One of the central issues in insurance claims disputes in Florida has been over discovery of claims adjusters’ estimates and their notes. Several independent adjusters, who work on a contract basis for insurance carriers, have accused insurers of altering their estimates without telling them or the insureds.
I’m hoping this opinion will help stamp out some of the delay tactics we’ve seen.
Some plaintiffs’ attorneys have attempted to gain access to field and desk adjusters’ estimates and photographs, to show how damage reports may have been changed. “Stonewalling” by Universal Property & Casualty attorneys in order to block discovery of the adjuster’s notes and to depose the adjusters, in fact, is a chief reason behind some of the sanctions orders leveled against Universal in recent years.
Aside from frustration with alleged gamesmanship and non-compliance with court orders, Florida judges also are taking a dim view of insurers who claim that adjusters and their notes and manuals should be categorically protected from discovery.
In Homeowners Choice Property & Casualty Insurance Co. vs. Thomas and Linda Thompson, Florida’s 1st District Court of Appeal on Nov. 22 held that, for the most part, the carrier must allow access by the plaintiffs. It was the second time in less than two years the court had ruled that way.
“Simply put, ‘there is no categorical legal rule prohibiting discovery of underwriting manuals in breach of contract cases, especially if they are relevant,’” the 1st DCA judges wrote, quoting from the 2022 case, People’s Trust Insurance Co. vs. Foster.
“The insurer’s assertion of privilege was overly broad, just as was the assertion in Foster,” the November opinion reads. “Documents in claims and underwriting files are not automatically work product. The insurer did not argue or prove that the requested documents were prepared in anticipation of litigation; and to the contrary, the documents ordered produced were created just days after the hurricane and before any coverage determination had occurred. We find no departure from the essential requirements of law.”
Adjusters’ notes also are not considered trade secrets, to be kept confidential, the judges noted.
“I’m hoping this opinion will help stamp out some of the delay tactics we’ve seen,” said Brian Hancock, the policyholder attorney in the HCI vs. Thompson case.
He noted that he had to file three motions to compel HCI to provide information in that case after the insurer did not comply with his previous requests. HCI did not comment on the litigation.
A Florida bill signed into law in May, the Insurer Accountability Act, also now requires insurers to follow accepted claims-handling practices and to maintain claims-handling manuals that comply with statutes and customary industry practices.
Regulators may request copies of the manuals. If insurers fail to meet expectations, OIR may use its authority to protect policyholders, state Insurance Commissioner Michael Yaworsky said last summer. The manuals are probably considered trade secrets and won’t be publicly available, he said.
Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers’ comp insurance issues for a trade publication for a few years.
Please call Lee from USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer
Universal Property & Casualty Insurance Co. officials are discounting the significance of recent Florida judges’ rulings that have slammed the company for violating court orders, have forced Universal to default on lawsuits, have referred a Universal lawyer for disciplinary action, and required company officials to explain what’s going on.
Those court orders are no more common than sanctions against policyholder attorneys and are largely the result of “the war” – the vast amount of claims litigation and bad-faith actions brought by plaintiffs’ lawyers in Florida in recent years, which have burdened insurers with thousands of deposition and document requests, Universal’s legal officials said.
Miller
“Before the war, a lot of things would be worked out between attorneys, through professional courtesy,” said Travis Miller, a top attorney for Universal, one of Florida’s largest property insurance carriers.
One of the court orders against Universal came last month in Nassau County. It went far beyond previous sanctions orders and has raised eyebrows across the state, according to policyholder lawyers and a Florida law professor.
Compared with Citizens Property Insurance Corp., the largest carrier in the state, the number of Universal lawyers seems low. Citizens has about 18,300 lawsuits pending and about 1,022 lawyers. That’s 18 cases per attorney for Citizens, half the load carried by Universal litigators.
The circuit judge’s order, requiring Universal’s general counsel to answer questions about corporate legal practices later this month, “is breathtaking, really,” said Robert Jarvis, a law professor at Nova Southeastern University in Fort Lauderdale.
The action by Nassau County Circuit Judge Eric Roberson is just the tip of the iceberg, said policyholder attorneys who have seen dozens of sanctions and other orders against Fort Lauderdale-based Universal in the last few years.
“In my 37 years of practice, I’ve never seen an insurance company exhibit such a contemptuous disregard for court orders,” said Matthew Danahy, of Tampa, a former insurance attorney who now represents policyholders in claims disputes and has obtained several court orders against Universal.
Others have said the alleged stonewalling practices are common among several Florida insurance companies, and have slowed down claims litigation and have frustrated policyholders. The actions also run the risk of earning Universal and the Florida insurance industry another black eye and the ire of policyholders already miffed at recent premium increases – especially if the practices and sanctions are widely reported in local news media, said Jarvis.
Several plaintiffs’ lawyers suggest that Universal’s team of in-house and law firm attorneys appear to be so overloaded that they can’t keep up with court deadlines. Either that, or it’s a deliberate strategy by the insurer to “wear out” plaintiffs, force settlements or delay payouts. In at least one pleading, a Universal lawyer blamed the missed deadline on his staff. Florida insurance defense attorneys have said that judges across the state are trying to clear away a backlog of cases that piled up during the COVID-19 shutdown, and have cracked down on missed deadlines.
Danahy
Whatever the reason, earning the anger of judges has proved somewhat costly for Universal. In the Nassau County case, Judge Roberson took the unusual step of striking the pleading, or forcing the insurer to default in the underlying claims lawsuit. The final amount to be paid is confidential, but the complaint asked for more than $30,000.
The judge in that case also ordered Universal to pay the plaintiff’s attorney fees and has given the policyholder grounds for a bad-faith lawsuit claim.
The Universal attorney that Roberson referred for a Bar investigation, P. Alejandro Perez, did not return phone calls and emails from Insurance Journal. A Bar official said an investigation has been opened, but she declined to provide further information.
Roberson lost his patience with Perez in a Fernandina Beach couple’s claims dispute. One order came in October when the judge sanctioned Universal for “blatant discovery stonewalling” and failing to comply with two previous court orders.
“The two prior times apparently did not get the message through that discovery gamesmanship will not be tolerated in this court,” Roberson wrote.
He fined Universal $100 per day, up to a maximum of $7,500, paid to the Florida Bar, to be used for efforts to promote professionalism.
Less than three weeks later, Roberson found that Perez and Universal had still not disclosed all required information by the court’s deadline and Perez had displayed “a disturbing lack of candor to the court.” The judge then barred Universal’s expert witness and struck Universal’s pleading.
“This is now, without a doubt, the most egregious act of willfully defying court orders and professional obligations that the court has seen in its tenure,” Roberson wrote.
The judge also ordered Universal’s general counsel to a hearing Dec. 7 to provide answers to questions about Universal’s policies and procedures on discovery requests; its legal staffing, training, and supervision of the staff; and its record keeping on expert-witness payments. A transcript of the hearing was not available this week.
Policyholder lawyers have said Universal’s alleged mismanagement of litigation may not be that different from the case of notorious plaintiff’s lawyer Scot Strems, who became known as “Public Enemy No. 1” for the Florida insurance industry. Strems was charged with failing to properly manage thousands of claims lawsuits and for filing thousands of suits, many on the same insurance claim. He was disbarred in 2022.
The Bar declined to say what penalties Perez could face.
Veterans of the Florida insurance industry have argued that property insurers in the last half-decade have faced a flood of unnecessary claims lawsuits – so much that litigation costs became a key reason behind rate increases and at least 10 insurer insolvencies. The Florida Legislature responded in late 2022 and early 2023 with sweeping limits on litigation and plaintiffs’ attorney fees.
Jameson
And just before the law took effect this year, several policyholder law firms filed more than 50,000 lawsuits, swamping insurance firms and filling court dockets, according to attorneys involved and news reports.
Insurers should be forgiven for making mistakes or “fighting back” while trying to handle an overwhelming number of legal actions, some in the industry have said. Others on the insurance side said that it would be counterproductive for an insurance carrier to purposely flaunt judges’ orders as a way to wear down the other side.
“It’s not deliberate. That would be absurd,” said Matt Lavinsky, president of the Florida Defense Lawyers Association. He added that he had never seen FDLA members engage in such tactics.
Universal officials said the fault lies in part with overzealous claimants’ lawyers. So many requests for depositions of corporate representatives have led to a scheduling and logistical nightmare, which has led to missed deadlines, Universals’ lawyers said.
And plaintiffs’ attorneys have been hit with just as many, if not more, sanctions orders in recent years, some for misrepresenting the facts or exaggerating the amount of damage in claim – a major violation in the eyes of most judges. In other cases, jury awards ended up being the same as or less than what Universal had offered early on in settlement attempts, showing that some claims litigation is completely unnecessary and costly to policyholders, Miller explained.
The plaintiffs’ lawyers have brought the recent Universal sanctions orders to the attention of the news media in an attempt to disparage insurers and fuel a reversal of the 2022 and 2023 tort-reform legislation, said Lavisky, of the defense lawyers association.
“The increased frequency of plaintiffs blanketing various outlets with information they purport to ‘prove’ a point is a deliberate attempt to paint a picture that is grossly one-sided and misleading and detrimental to the market and its insurance-buying consumers,” Universal’s Miller said in an email.
Members of the plaintiffs’ bar have said there’s little chance of Florida’s lawmakers changing course anytime soon. Danahy and Robert Jameson, the claimants’ attorney in the Nassau County case, said the alleged stonewalling practices have gone on for years, all around the state, and have little to do with the recent flood of claims suits. Danahy, Jameson and others provided Insurance Journal with more than 40 judges’ orders since 2017, imposing sanctions on Universal or demanding that its lawyers comply with court orders.
Here’s a sampling of the orders, confirmed through county clerks of court:
In 2017, in Palm Beach County, a circuit judge ordered Universal to pay a $700 settlement, after the deadline had passed, along with a $1,000 penalty.
In 2018 in Miami-Dade County, a circuit judge was so fed up with Universal’s lack of response to discovery requests that he threatened to strike the pleading and decide the case in favor of the homeowners. Two weeks later, the Universal attorney notified the plaintiffs that he had complied.
In 2022 in Broward County, a judge entered a default judgment against Universal after violation of court orders and a failure by the insurer’s attorney to coordinate mediation or provide a corporate representative for deposition.
In 2023, a Broward judge struck Universal’s pleading, awarding $93,000 in damages to the insured. Earlier, the judge found that “defendant’s blatant and inexcusable failure to comply with numerous court orders was ‘so egregious and pervasive that there (was) no remedy short of striking of its pleadings that could restore the prejudice to plaintiff and protect the integrity of the judicial process.’”
“I’ve never heard of any defendant that has caught the attention of judges like this and has been sanctioned by so many judges,” said Jarvis, the law professor.
To be sure, charges of improper behavior can be found on both sides of the divide. A number of plaintiffs’ attorneys besides Scot Strems have faced their own sanctions and Bar investigations through the years. One attorney who has obtained judges’ orders against Universal in recent years, for example, was reprimanded by the Bar in 2014 for failing to supervise his staff and failing to read affidavits before filing them.
Miller provided more than 60 examples of orders against plaintiffs lawyers, including a 2022 jury verdict that found that a plaintiff had made false statements.
But claimants’ lawyers insist that Universal’s tactics have moved well beyond being isolated incidents. Danahy has gone so far as to file a petition with the Florida Office of Insurance Regulation, asking it to revoke Universal’s certificate of authority.
Universal had failed to pay up on a judgment in Miami-Dade, Danahy said in his Oct. 23 letter, and state law requires that, when an insurer does not pay a final judgment within 60 days after it is entered, “the office shall forthwith revoke the insurer’s certificate of authority.”
Danahy’s letter argued that statutes also require the revocation or suspension when an insurer engages in conduct that is hazardous to policyholders or the public.
A spokeswoman for OIR said only that the case is ongoing and the agency continues to monitor developments. Miller said that the delayed settlement payment was the result of some quirky procedural issues with the court, along with extenuating circumstances that should soon be resolved.
As far as legal staffing goes, Miller and Lewis noted that Universal has about 250 attorneys – two-thirds of which are in-house. The carrier currently has about 9,800 claims suits pending, or roughly 38 cases per lawyer.
The Florida Bar said it does not have rules on a maximum number of cases per lawyer. By comparison, 38 claims would be far below the hundreds of cases that the Strems law firm attorneys were each said to be handling in 2019 and 2020.
But compared with Citizens Property Insurance Corp., the largest carrier in the state, the number of Universal lawyers seems low. Citizens has about 18,300 lawsuits pending as of September, officials reported at a recent board meeting. And it has about 1,022 lawyers, at any given time, on average. Most of them with outside firms.
That’s about 18 cases per attorney for Citizens, half the load carried by Universal litigators.
Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers’ comp insurance issues for a trade publication for a few years.
The Home Insurance Guru 