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Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 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. My email is lee@myUSAssurance.com

TAMPA, Fla. (WFLA) — Florida homeowners will see their bills go up as the state’s property insurance crisis continues. Multiple insurance providers in the state have left the market, even after a special legislative session was held to address business and homeowner needs. Now, residents themselves are footing the bill from companies pulling out of Florida.

In August, another insurance company was added to the list of providers that became insolvent, the tenth since April 2021. The Florida Insurance Guaranty Association is the state-created non-profit which “establishes and maintains a service-oriented operation for processing covered claims of insolvent members.” FIGA was established by the legislature in 1970.

For the second time in 2022, FIGA has issued a surcharge to homeowners on their insurance policy premiums, in order to cover claims from companies that have entered receivership. It’s the third time this has happened since 2020, according to FIGA. So far in 2022, FIGA assessments have approved surcharges to go up a collective 2%, with 1.3% added in March and another 0.7% added in August.

The 0.7% increase was approved on Aug. 19 after the Florida Office of Insurance Regulation ordered a levy.

Citing Florida statutes, FIGA said “members will be able to recoup the .70% assessment from their policyholders over the Assessment Year starting January 1, 2023 through December 31, 2023.”

According to the request for new levy by OIR, “the liquidation of Southern Fidelity Insurancecompany resulted in FIGA receiving in excess of 5,000 claims with unpaid losses and return premium in excess of $178 million.”

FIGA reported to OIR that their forecasted cash flow would be “materially impacted” by the insolvency of Southern Fidelity. Thus, the non-profit said they need the collection of surcharges to continue into 2023. The letter from FIGA to OIR said the surcharge collections will “result in approximately $168 million in assessments for FIGA policies” through Dec. 31, 2023.

The insolvencies across Florida’s property insurance companies comes amid a potential downgrade to company ratings for 17 providers, which was only delayed, not withdrawn, and the possibility of homeowners being on the hook if their companies are downgraded or fully fail.

While Florida has instituted a temporary fix for the Demotech ratings downgrade, another insurance company is weighing an exit from the state as well. Demotech’s president Joe Petrelli told WFLA.com that the downgrades were delayed “until further notice,” after pressure from Florida’s government. However, The state insurance commissioner, David Altmaier, has also put nearly 30 insurers on a watch list, according to previous reporting by WFLA.

At the end of July, OIR announced a temporary reinsurance arrangement with Citizens Property Insurance Corporation while the ratings downgrade was weighed. The solution, according to OIR, would “allow insurers to meet an exception offered by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation,” letting Floridians keep their homeowners coverage during hurricane season.

“OIR’s greatest priority is ensuring consumers have access to insurance, especially during hurricane season; and because of the uncertainty with the status of Demotech’s ratings, we’ve been forced to take extraordinary steps to protect millions of consumers,” Altmaier said in July

Altmaier said the quick fix was an “innovative arrangement” that would let consumers keep coverage while allowing insurance agents to avoid moving policies, which would let lenders “have confidence that these insurers continue to meet mortgage qualifications.”

According to American Family Insurance, a national insurance company, property insurance is not technically, legally required for homes that are fully owned and no longer subject to mortgage payments, which are a loan. If a resident owns their home outright, there is no lender requiring payment, and thus, the insurance itself is optional. Many mortgage lenders do require insurance policies.

As of July, more than 30% of homes sold in Florida were paid for in cash, meaning there is no mortgage policy attached to them.

Bankrate, a consumer financial service company, says many insurance policies use a type of coverage known as replacement cost to calculate the monthly and yearly rates for coverage plans used by homeowners. However, the replacement cost refers to the cost to replace or rebuild a home that becomes damaged.

During the ongoing inflation issues facing the national and global economy, the prices of materials, a skilled labor shortage, and other supply chain problems have increased the costs for construction and repair. This has resulted in policy premiums increasing.

The median sell price for Florida homes was $412,303, according to Florida Realtors. This means that if you have a mortgage, your replacement cost, depending on the type of insurance plan you have, would cover about what you paid to purchase the home.

To handle the failing insurance companies, the assessment levies from FIGA have added the surcharges to fund payments to insurance claims filed by those losing the policies from the folded insurers.

While the total assessment for levies was increased a collective 2%, in 2020, the Florida Legislature allowed a potential for bigger increases due to emergency needs. “Emergency Assessments were increased from 2% to 4% annually during the 2020 legislative session,” according to FIGA. Before 2015, insurance companies paid assessment fees to FIGA, then added a surcharge to each policy until the money spent was recouped. 

FIGA said in 2015, the assessment statute was amended by the legislature to allow FIGA to “obtain funds quickly, but also introduced an option for insurers to remit assessments” when they’re collected over a yearlong policy term. From 2013 to 2020, no assessments were levied, according to information from FIGA.

Since 2020, assessments were levied three times.

But, even with the added levies and subsequent surcharges, FIGA reports that they will only cover up to $300,000 in claims costs. This means that, at least for median prices of homes sold in July, Florida residents won’t be able to get a full replacement cost recouped for themselves if they need to file a claim. Instead, they’ll be shorted $112,000 on average, based on current market data.

The Florida Chief Financial Officer’s office reports there are currently 15 companies in liquidation and receivership, with 11 of the companies property insurers.

By current policy choices, the costs of failing property insurance companies are now passed on to Florida residents, so a state-run insurance nonprofit can recoup the costs of paying out claims for the companies that have folded. “A public workshop will be held on September 21 by FIGA to provide members with information on how to report and remit surcharges collected for the 2022 Assessments,” according to the company.

Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 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. My email is lee@myUSAssurance.com

https://www.wesh.com/article/tropical-depression-nine-florida/41347676#

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As of 11 a.m., Tropical Depression Nine was moving west-northwest at 14 mph with maximum sustained winds of 35 mph. It was located 515 miles east-southeast of Kingston, Jamaica and 1,015 miles southeast of Havana, Cuba. It is expected to become a tropical storm by Friday afternoon.

See the latest maps, models and paths here

In the latest forecast, the National Hurricane Center said the system could hit Florida as a major hurricane, or Category 3 hurricane. The National Weather Service urged Florida residents and visitors to gather supplies and track the forecast.

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“We still have Tropical Depression Nine, as of the 11 a.m. advisory,” WESH 2 meteorologist Kellianne Klass said. “Tropical Depression Nine is still expected to become a tropical storm later today, but it will struggle to do so. Conditions this weekend look more favorable for development. This storm is expected to strengthen to a major Category 3 hurricane with winds of 115 mph by Wednesday morning. There is still a lot of uncertainty about where exactly this system will make landfall in Florida. Southwest Florida to Tampa Bay are all in play for landfall. Still thinking the impacts for Central Florida will be around Tuesday through Thursday. GFS and European models are still not in agreement with the speed of the storm. GFS has the storm lingering off of the coast through Friday. The European model kicks the storm out by Thursday. This is still a fluid situation as we still need to fine-tune the exact landfall and timing of the storm.”

Below: WESH 2 Meteorologist Eric Burris takes deep dive into the tracks and modelsPlay Video

WESH Hurricane guide

WESH 2 Hurricane Survival Guide 2022

Surviving the season

Surviving the season: Everything you need to know this hurricane season in Florida

KNOW WHAT TO DO WHEN A HURRICANE WATCH IS ISSUED

  • Stay tuned to WESH 2 News, wesh.com, or NOAA Weather Radio for storm updates.
  • Prepare to bring inside any lawn furniture, outdoor decorations or ornaments, trash cans, hanging plants, and anything else that can be picked up by the wind.
  • Understand hurricane forecast models and cones.
  • Prepare to cover all windows of your home. If shutters have not been installed, use precut plywood.
  • Check batteries and stock up on canned food, first-aid supplies, drinking water, and medications.

The WESH 2 First Warning Weather Team recommends you have these items ready before the storm strikes.

  • Bottled water: One gallon of water per person per day
  • Canned food and soup, such as beans and chili
  • Can opener for the cans without the easy-open lids
  • Assemble a first-aid kit
  • Two weeks’ worth of prescription medications
  • Baby/children’s needs, such as formula and diapers
  • Flashlight and batteries
  • Battery-operated weather radio

WHAT TO DO WHEN A HURRICANE WARNING IS ISSUED

  • Listen to the advice of local officials. If you are advised to evacuate, leave.
  • Complete preparation activities
  • If you are not advised to evacuate, stay indoors, away from windows.
  • Be alert for tornadoes. Tornadoes can happen during a hurricane and after it passes over. Remain indoors, in the center of your home, in a closet or bathroom without windows.

HOW YOUR SMARTPHONE CAN HELP DURING A HURRICANE

A smartphone can be your best friend in a hurricane — with the right websites and apps, you can turn it into a powerful tool for guiding you through a storm’s approach, arrival and aftermath.

Download the WESH 2 News app for iOS | Android

Enable emergency alerts — if you have an iPhone, select settings, then go into notifications. From there, look for government alerts and enable emergency alerts.

If you have an Android phone, from the home page of the app, scroll to the right along the bottom and click on “settings.” On the settings menu, click on “severe weather alerts.” From the menu, select from most severe, moderate-severe, or all alerts.

PET AND ANIMAL SAFETY

Your pet should be a part of your family plan. If you must evacuate, the most important thing you can do to protect your pets is to evacuate them too. Leaving pets behind, even if you try to create a safe space for them, could result in injury or death.

  • Contact hotels and motels outside of your immediate area to see if they take pets.
  • Ask friends, relatives and others outside of the affected area whether they could shelter your animal.

Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 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. My email is lee@myUSAssurance.com

Posted: Sep 8, 2022 / 01:06 PM EDT
Updated: Sep 9, 2022 / 08:14 AM EDT

TAMPA, Fla. (WFLA) — Florida homeowners will see their bills go up as the state’s property insurance crisis continues. Multiple insurance providers in the state have left the market, even after a special legislative session was held to address business and homeowner needs. Now, residents themselves are footing the bill from companies pulling out of Florida.

In August, another insurance company was added to the list of providers that became insolvent, the tenth since April 2021. The Florida Insurance Guaranty Association is the state-created non-profit which “establishes and maintains a service-oriented operation for processing covered claims of insolvent members.” FIGA was established by the legislature in 1970.

For the second time in 2022, FIGA has issued a surcharge to homeowners on their insurance policy premiums, in order to cover claims from companies that have entered receivership. It’s the third time this has happened since 2020, according to FIGA. So far in 2022, FIGA assessments have approved surcharges to go up a collective 2%, with 1.3% added in March and another 0.7% added in August.

The 0.7% increase was approved on Aug. 19 after the Florida Office of Insurance Regulation ordered a levy.

Citing Florida statutes, FIGA said “members will be able to recoup the .70% assessment from their policyholders over the Assessment Year starting January 1, 2023 through December 31, 2023.”

According to the request for new levy by OIR, “the liquidation of Southern Fidelity Insurancecompany resulted in FIGA receiving in excess of 5,000 claims with unpaid losses and return premium in excess of $178 million.”

FIGA reported to OIR that their forecasted cash flow would be “materially impacted” by the insolvency of Southern Fidelity. Thus, the non-profit said they need the collection of surcharges to continue into 2023. The letter from FIGA to OIR said the surcharge collections will “result in approximately $168 million in assessments for FIGA policies” through Dec. 31, 2023.

The insolvencies across Florida’s property insurance companies comes amid a potential downgrade to company ratings for 17 providers, which was only delayed, not withdrawn, and the possibility of homeowners being on the hook if their companies are downgraded or fully fail.

While Florida has instituted a temporary fix for the Demotech ratings downgrade, another insurance company is weighing an exit from the state as well. Demotech’s president Joe Petrelli told WFLA.com that the downgrades were delayed “until further notice,” after pressure from Florida’s government. However, The state insurance commissioner, David Altmaier, has also put nearly 30 insurers on a watch list, according to previous reporting by WFLA.

At the end of July, OIR announced a temporary reinsurance arrangement with Citizens Property Insurance Corporation while the ratings downgrade was weighed. The solution, according to OIR, would “allow insurers to meet an exception offered by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation,” letting Floridians keep their homeowners coverage during hurricane season.

“OIR’s greatest priority is ensuring consumers have access to insurance, especially during hurricane season; and because of the uncertainty with the status of Demotech’s ratings, we’ve been forced to take extraordinary steps to protect millions of consumers,” Altmaier said in July

Altmaier said the quick fix was an “innovative arrangement” that would let consumers keep coverage while allowing insurance agents to avoid moving policies, which would let lenders “have confidence that these insurers continue to meet mortgage qualifications.”

According to American Family Insurance, a national insurance company, property insurance is not technically, legally required for homes that are fully owned and no longer subject to mortgage payments, which are a loan. If a resident owns their home outright, there is no lender requiring payment, and thus, the insurance itself is optional. Many mortgage lenders do require insurance policies.

As of July, more than 30% of homes sold in Florida were paid for in cash, meaning there is no mortgage policy attached to them.

Bankrate, a consumer financial service company, says many insurance policies use a type of coverage known as replacement cost to calculate the monthly and yearly rates for coverage plans used by homeowners. However, the replacement cost refers to the cost to replace or rebuild a home that becomes damaged.

During the ongoing inflation issues facing the national and global economy, the prices of materials, a skilled labor shortage, and other supply chain problems have increased the costs for construction and repair. This has resulted in policy premiums increasing.

The median sell price for Florida homes was $412,303, according to Florida Realtors. This means that if you have a mortgage, your replacement cost, depending on the type of insurance plan you have, would cover about what you paid to purchase the home.

To handle the failing insurance companies, the assessment levies from FIGA have added the surcharges to fund payments to insurance claims filed by those losing the policies from the folded insurers.

While the total assessment for levies was increased a collective 2%, in 2020, the Florida Legislature allowed a potential for bigger increases due to emergency needs. “Emergency Assessments were increased from 2% to 4% annually during the 2020 legislative session,” according to FIGA. Before 2015, insurance companies paid assessment fees to FIGA, then added a surcharge to each policy until the money spent was recouped. 

FIGA said in 2015, the assessment statute was amended by the legislature to allow FIGA to “obtain funds quickly, but also introduced an option for insurers to remit assessments” when they’re collected over a yearlong policy term. From 2013 to 2020, no assessments were levied, according to information from FIGA.

Since 2020, assessments were levied three times.

But, even with the added levies and subsequent surcharges, FIGA reports that they will only cover up to $300,000 in claims costs. This means that, at least for median prices of homes sold in July, Florida residents won’t be able to get a full replacement cost recouped for themselves if they need to file a claim. Instead, they’ll be shorted $112,000 on average, based on current market data.

The Florida Chief Financial Officer’s office reports there are currently 15 companies in liquidation and receivership, with 11 of the companies property insurers.

By current policy choices, the costs of failing property insurance companies are now passed on to Florida residents, so a state-run insurance nonprofit can recoup the costs of paying out claims for the companies that have folded. “A public workshop will be held on September 21 by FIGA to provide members with information on how to report and remit surcharges collected for the 2022 Assessments,” according to the company.

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By William Rabb 

Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 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. My email is lee@myUSAssurance.com

A Florida insurance company has landed another blow against one of the industry’s most active opponents, after an appeals court upheld the dismissal of a breach-of-contract lawsuit brought by an assigned contractor.

In an opinion published Sept. 16, Florida’s 2nd District Court of Appeals found that Richie Kidwell and his Air Quality Assessors LLC failed to show why the 2019 assignment-of-benefits reform law did not apply to an AOB agreement signed in late 2019.

“We are hard-pressed to conclude that Air Quality’s assessment was not a service that falls within the scope of an ‘assignment agreement,’” the court’s opinion said.

The Kidwell Group and Air Quality, based in Orlando, had sued American Integrity Insurance Co., a carrier that has proven to be one of the more aggressive Florida insurers in fighting AOB claims and in finding ways to reduce litigation and exposure. The Charlotte County suit charged that the insurer had wrongly denied payment to Air Quality for mold assessment and other services after water damage at a home owned by Robert and Maureen Mucciaccio.

Kidwell

American Integrity argued at trial that the AOB agreement did not include provisions required by House Bill 7065, which became Florida Statute 627.7152 in July 2019. The law requires agreements to include language that allows the homeowner to rescind the agreement without penalty; requires assignees to send the agreement to the insurer within three days of signing; requires an itemized estimate of costs; along with other provisions.

American Integrity’s attorneys also said Kidwell failed to give notice 10 days before filing his suit, as required by the law.

Kidwell’s lawyer countered that the agreement with the Mucciaccios was not a true AOB, but an assessment of the remediation work that was needed on the home. “This non-emergency indoor environmental assessment in no way is meant to protect, repair, restore, or replace damaged property or to mitigate against further damage to the property,” the agreement noted, Air Quality said.

The county court judge didn’t buy it, decided that the agreement was invalid and dismissed Kidwell’s suit.

On appeal, Chad Barr, Kidwell’s attorney in this and other recent appeals against insurers, argued that there remained a factual dispute over whether the 2019 AOB law governed Air Quality’s type of service, and if the agreement was an actual AOB.

The appeals court said it was.

“The AOB is an ‘assignment agreement’ under section 627.7152, regardless of Air Quality’s attempts to disguise it as something else,” Judge Edward LaRose wrote in the opinion.

The Legislature did not exclude assessment services from its definition of AOB agreements, the judge said. He quoted from American Integrity, which had cited the old adage, “If it looks like a duck and quacks like a duck, then it is a duck.” The insurer added that, regardless of what labels Air Quality applied to its contract, the services were of the type covered in the statute.

Kidwell’s lawyer also argued that the statute should not be retroactively applied, since the insurance policy was issued long before the 2019 law was passed. The appeals court didn’t buy that argument, either, noting that the county court judge had correctly determined that the law applied to AOBs executed after July 1, 2019, and the agreement with the Mucciaccios was signed months later.

This is at least the second Florida appeals court to reach that conclusion. In April, the 4th District Court of Appeals held that the statutory notice of intent to sue applies to all assignment-of-benefits agreements signed after the 2019 law was enacted, even if the insurance policy pre-dates the statute.

American Integrity’s attorney in the appeal, Kimberly Fernandes, of Kelley Kronenberg, said the Mucciaccios decision won’t necessarily put to rest the contention that HB 7065 does not govern AOB agreements. Kidwell and others have argued that an assignee essentially “stands in the shoes” of the insured, who is covered by a policy that may have been written before the law was enacted.

“I would not go that far just yet, as a few appellate courts have not ruled on this issue,” Fernandes said. “However, there is no conflict at this time…”

The opinion may not help curtail AOB lawsuits, but could help ensure that contractors and their attorneys pay close attention to the requirements of the policy and the statute.

“The court’s message was clear to me – comply with the changes put in place by the Legislature,” Fernandes said in an email.

Kidwell’s American Integrity suit and the appeal are one of many filed by Kidwell in recent years. Few have been decided in the contractor’s favor.

In August, a Leon County Circuit Court dismissed Kidwell’s suit that challenged the constitutionality of Senate Bill 2D, passed in May, which took further aim at AOBs. The law bars assignees of benefits from having their attorneys’ fees paid by defendants when the AOB plaintiffs prevail in court. The lawsuit, by Air Quality and the Restoration Association of Florida, which Kidwell heads, charged that the law violates equal-protection and due-process rights and denies contractors access to courts.

Kidwell has appealed the dismissal. The case is pending before the 1st District Court of Appeals.

The contractor and his organizations have lost other appeals that turned on the finer points of AOB agreements. In October 2021, the 4th DCA upheld the dismissal of a suit brought by the Kidwell Group and Air Quality Assessors versus Geovera Specialty Insurance Co., finding that both spouses had not signed the AOB agreement as required by the policy.

In Kidwell Group and Air Quality Assessors vs. United Property & Casualty Insurance, Florida’s 4th District Court of Appeal in June upheld a lower court’s dismissal of a breach-of-contract suit. The court found that the assignee-contractor did not provide an itemized, per-unit cost estimate of the services to be performed in the restoration, as required by law.

Kidwell could not be reached for comment late Tuesday.

By Insurance Journal Staff Reports 

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In a twist of fate and a sign of the times, some Florida business groups are backing the Democrat in a state House race in the Tampa area, while trial lawyers are putting their weight behind the Republican challenger.

The Tampa Bay Times reported that many in the plaintiffs’ bar, who have historically backed Democratic candidates, are now supporting Republican candidate Danny Alvarez in his bid for the House District 69, in southeast Hillsborough County. And incumbent state Rep. Andrew Learned, a Democrat, has won the favor of business groups, perhaps because of his support for legislation aimed at reducing runaway insurance claims litigation.

Learned

Learned, who voted in favor of 2021’s Senate Bill 76 and for SB 2D and SB 4D at this year’s special property insurance session of the Florida Legislature, has reported significant contributions from insurance companies, Associated Industries of Florida, and Publix grocery store company, all of which have leaned toward pro-business candidates in the past, the newspaper reported.

In the last few months, Learned has received contributions from Allstate Insurance Co., Zurich American Insurance, Courtesy Insurance Co., the Committee for Florida Justice Reform, and the Committee of Florida Agents, according to the Florida Department of State’s elections website. He also has seen in-kind support from the Florida Democratic Party and financial contributions from the Communications Workers of America.

Learned, in the House since 2020, has said that he agrees to some extent with the insurance industry stance that claims litigation is excessive in Florida and has helped drive up the cost of homeowners insurance.

“Last year, I broke with the majority of my party to vote for reforms in Senate Bill 76,” Learned wrote in a lengthy letter to constituents earlier this year, posted on his website.

“I had held my foot down on an issue I felt would disadvantage families who lost roofs in hurricanes–just as mine once did–and could not afford to replace it,” he added without specifying which amendment to SB 76 he was referring to. “Ultimately, I was able to negotiate that protection into the bill and I therefore felt comfortable voting for the final product.”

The representative suggested in the letter that insurers are not without blame, that some legitimate claims don’t get paid, and some policyholders need a good lawyer. He also quoted a statistic that shows that a third of the claims lawsuits in Florida were filed by just 25 attorneys.

Sponsored by Florida Surplus Lines Service Office (FSLSO)

He claimed that some of those lawyers, along with roofers, are supporting his opponent, Alvarez. Alvarez, a Tampa attorney who practices family law, could not be reached for comment by the Times.

Alvarez

The state elections site and the newspaper reported that Alvarez has received contributions from some trial lawyers and from the Florida Justice Association, a trial lawyers’ advocacy group. He also has seen in-kind support from the Florida Republican Party and checks from a Tampa bail-bond and surety company.

Learned also said in the letter that “a number of folks I’ve met with indicated that some of the worst offenders (insurers who were short-changing insured) were seemingly some of the same companies going insolvent. I don’t think it’s too far of a stretch to imagine that insurance companies on the brink of going under tighten their belts trying to save the company, and in so doing short-change some clients on their claims either knowingly or unknowingly.”

Attorney Clif Curry of the Justice Association told the Times that Learned “has repeatedly voted against legislation that would protect consumers and hold businesses accountable” in other areas as well as insurance, and consistently chooses “protecting business interests” over consumers.

Learned’s campaign leads in financing, with more than $300,000 cash, compared to about $130,000 for Alvarez, the Times noted.

By William Rabb

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AMBest Report Shows Florida Insurers Far Out of Line on Reinsurance Dependency

By William Rabb | September 15, 2022

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Mango Questions State-Run Ratings Agency Idea

Florida-domiciled property carriers are extremely reliant on the reinsurance market, making them vulnerable to coming price hikes, a just-released report from the AM Best financial rating firm said.

Despite that, AM Best is willing to consider rating more of those Florida insurers as the state grapples with the best way to handle the fallout left after another rating firm, Demotech, this year announced potential downgrades of more than a dozen companies.

Jeff Mango, managing director at AM Best, on Wednesday cast doubt on Florida lawmakers’ reported plans to create a state-run rating firm.

“You ultimately have to look at the default rates among rated insurers per rating level and the performance across different rating agencies. If Florida insurance companies’ default rates remain high, will a state rating agency do any better than rating firms do now?” Mango asked. “I would challenge that idea.”

Mango

A state Legislative Budget Commission last week agreed to spend $1.5 million to hire a consultant to examine ways to pull the state out of the potential ratings crisis, perhaps by better utilizing other rating firms or by setting up a state agency to conduct financial stability analyses on carriers. The action came after Florida regulators and insurance agents questioned the validity of Demotech when the firm in July warned of the pending downgrades.

The AM Best report on Florida’s reinsurance burden warned that some struggling insurance companies will only see higher costs as reinsurers prop up so many companies, take on exceptional amounts of ceded premium and fund losses in the state.

“Premium assumed by U.S. (re)insurers has grown roughly 66% the last three years, and the loss ratio has still spiked—again, even without significant hurricane losses over that time, further suggesting that current prices are not adequate to cover the claims inflation and fraud,” reads the report. “As such, reinsurers have been pulling back from the Florida property market or significantly raising prices.”

The AM Best report echoed recent statements from Moody’s and S&P Global that indicated that most reinsurers expect rates to rise again in the next few months. That’s on top of June renewal prices that increased by as much as 50% for some Florida property carriers.

The analysis, released during the Rendez-Vous de September reinsurance conference in Monte Carlo this week, offered other brow-raising findings that show how out of line the Florida market is with other states on its reinsurance tab. Mango said analysts looked at about 45 Florida insurers, but not the larger national carriers that enjoy a larger capital base and which aren’t as dependent on reinsurance. Many of the smaller companies have participated in Citizens Property Insurance Corp. takeouts, leaving them with premium and losses, but not much surplus, Mango said.

Other takeaways from the report include:

  • Reinsurance recoverables and ceded premiums for the Florida insurers were 5.7 times greater than policyholder surplus in 2021, compared with an industry average of just 0.5 times. The ceded premium amounted to more than $7 billion in 2021. “These Florida personal property companies report significantly elevated dependency ratios, highlighting their sensitivity to reinsurance pricing. Pricing will continue to impact business plans and companies’ ability to use reinsurance structures with adequate limits to protect against severe storms,” the three-page report noted.
  • Premiums assumed by reinsurers and losses paid has soared. The analysis found that premiums assumed by U.S.-based reinsurers for the Florida market have grown by two-thirds in the last three years and losses have increased fourfold, “even without significant hurricane activity.” Losses paid topped $1 billion in 2021 – ten times more than the 2012 number.
  • The largest share of Florida insurers’ ceded premiums went to the Florida Hurricane Catastrophe Fund, at 10%; followed by Berkshire Hathaway at 8.3% of the market, the report said. Ten reinsurers accounted for half the reinsurance market.

The increase in losses paid is significant, but probably not enough to threaten reinsurers, AM Best said.

“Given that the vast majority of companies have exposures of less than 5% to these companies, total current Florida exposure is still likely manageable for reinsurers,” the report said. “Still, reinsurers are likely to remain selective in the risks they reinsure, placing further burdens on the Florida homeowners market.”

By William Rabb 

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How Fraud Probe for Florida’s Guarantee Insurance Led to Payroll, Tax Convictions

By William Rabb | September 14, 2022

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The name Guarantee Insurance is not one that is likely to be recalled with fondness by many Floridians. The workers’ compensation carrier in 2017 was declared insolvent, a rarity in what is one of the most profitable lines of insurance.

Guarantee was headed by Steve Mariano, who also was majority owner of the now-bankrupt Patriot National, a tech and insurance group in south Florida. State regulators charged that Guarantee improperly transferred millions of dollars to Mariano and his associated firms, leaving the comp insurer badly undercapitalized.

But one thing that Guarantee may have done correctly ultimately led to a years-long investigation by state and federal authorities into one of the largest payroll fraud schemes in south Florida, said the head of the private investigative firm that helped unravel the scheme. The program supplied off-book construction labor, avoided millions in federal tax payments and defrauded the insurer of more than $1 million in premiums.

Guillermo Inamagua and Mayra Velasquez pleaded guilty to the crimes in early 2022. Inamagua was sentenced in July to almost four years in prison and must pay more than $6 million in restitution and forfeit two houses.

Jason Linn
Linn

“One of the reasons this blew up and became millions of dollars in restitution was because all three of the disciplines came together,” said Jason Linn, president of Contego Investigative Services. “The premium fraud people did their thing, surveillance did theirs, and the SIU team packaged it up and worked with law enforcement to bring it to a resolution.”

The Orlando-based Contego, one of the larger insurance investigation firms in the country, was the hired special investigations unit, or SIU, for Guarantee Insurance in 2014, when questions began to surface about the payroll fraud. Ahead of the International Association of Special Investigative Units annual conference this week in San Diego, the Insurance Journal spoke with Linn about the investigation and about new tools that insurance SIUs are using to detect fraudulent activity by employers and claimants.

Linn said that red flags arose when injured workers from Inamagua’s labor company began filing what seemed like an unusually large number of claims.

“They were processing claims at a volume and a type that they shouldn’t have been,” Linn said. “It came off as way too many claims for a small company.”

Sponsored by Florida Surplus Lines Service Office (FSLSO)

Guaranty’s claims management team, adjusters and Contego’s investigators decided further scrutiny was needed. They sent observers to the construction sites that Inamauga’s firm had supplied laborers for, counted the workers and found the number to be close to typical, large commercial construction sites of similar nature.

Soon, it was obvious that the alleged fraud wasn’t just a small-time operation. The SIU brought in the Florida Department of Financial Services investigations and fraud unit, which later contacted the U.S. Department of Justice and the Internal Revenue Service.

The authorities later determined that Inamagua’s company had just one certificate of insurance, purportedly covering 12 or so employees, but it had paid as many as 160 workers, mostly under the table. The scheme cost Guarantee Insurance some $1.4 million in premiums and deprived the IRS of more than $6 million in payroll taxes, prosecutors said. Part of the restitution will be used to help pay claims for the now-liquidated Guarantee Insurance, Linn said.

Linn had these words of wisdom for insurance carriers and their SIUs fighting what may seem to be an endless stream of underreported payroll and premium fraud in workers’ compensation:

“The best thing is to start having conversations. Some big carriers are so silo’ed off that nobody’s talking to each other,” Linn said. “If a bunch of claims come in and they don’t match the policy, is someone grabbing hold of that data and saying, ‘it doesn’t make sense?’ Or are they just processing the claims?”

He also said that building a thoroughly documented case is crucial. Contego was able to present state DFS investigators with solid evidence, which helped lead to the federal charges. He noted that Contego has several former Florida DFS investigators on staff and that helped bring the state authorities on board.

SIUs now have another trick that has made fraud easier to spot. Contego was purchased this year by Charles Taylor, the London-based insurance and claims management company. And Charles Taylor recently acquired an Argentina firm known as Fraud Keeper, one of several companies that makes software that can spot unusual activity in claims, Linn explained.

“It sits on top of the claims platform and can go inside our case management system,” he said. “And it does exactly that – looks for trends, the number of claims from a certain policy, and looks at what’s expected under the policy limits.”

Linn also said that one way to deter premium and payroll fraud in workers’ comp is to stiffen the penalties for fabricating certificates of insurance.

“Printing fake COIs needs to be a felony,” he said. “That’s outright fraud. You’re not covering employees and the state’s on the hook for it. Employees think they’re covered and jobsites think they’re covered, but they’re not.”

The insurance industry was abuzz a few years ago with talk that certificates could be made foolproof with the use of blockchain technology, the digital foundation that allows all cryptocurrency transactions to be traced, making counterfeiting difficult if not impossible. But Linn said that while some employers and insurers now employ the method, many construction companies, subcontractors and trucking companies have yet to adopt the technology.

SIUs have yet to make extensive use of technology to flag potentially fraudulent property insurance claims, which have plagued the Florida insurance market in recent years. Some units may use drones to check roof conditions after a roof claim is filed, he said. But more often, investigators use computers to scour records, check building permits or to look for a motive, such as evidence of a failing business when fire destroys a commercial property.

“We look behind the scenes: Did someone have an axe to grind? Did someone make a threat on social media, or did they go through a rough divorce or have a business issue and they needed the insurance money,” he said.

TOPICS FLORIDA FRAUD

By William Rabb |

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Proving that an insured misrepresented the extent of damage from a storm may have just become a little more complicated for Florida insurance companies.

Florida’s 5th District Court of Appeals last week reversed a trial court’s summary judgment order, which found that a homeowner in Orlando had made false statements about existing roof problems, allowing Security First Insurance Co. to deny coverage. The appellate court remanded the case to the Orange County Circuit Court, noting that the trial judge should have let a jury decide the credibility of the insured’s statements.

“The general rule remains intact: Credibility determinations and weighing the evidence ‘are jury functions, not those of a judge,’ when ruling on a motion for summary judgment,” the DCA wrote, citing 1986 and 2018 federal appeals court decisions.

The case could ultimately end up in the insurer’s favor, after a trial and appeal. But for now, it could put insurers on notice that courts generally “abhor forfeiture of insurance coverage,” as the DCA noted in the Sept. 9 Gracia vs. Security First opinon. Insurers also may need to take extra steps to show a claimant intentionally concealed or misrepresented information, and a carrier probably should think twice before asking a judge to dismiss a suit based on that.

Packer

“Yes, it complicates things in that the court commented about how courts are so anti-forfeiture of insurance coverage,” said Michael Packer, managing attorney and co-chair of the insurance practice group at Marshall Dennehy law firm, based in Fort Lauderdale. “But it also shows that if someone has truly misrepresented, there are ways to demonstrate that.”

The dispute began in 2017, when Mariana Gracia filed a claim for losses due to roof damage after a spring storm. Ormond Beach-based Security First investigated and agreed to pay $11,000 for restoration work. Gracia demanded more, the insurer denied the larger amount, and Gracia filed suit for breach of contract.

The key moment came during a deposition, when Gracia revealed that a home inspection had been done on the property in 2015. When asked about the results, she said that “everything was good,” and “the roof was in good condition.”

Security First obtained the inspection report, which included photographs showing ceiling damage, roof issues and leaks consistent with the damage Gracia had cited in her claim. The insurer then amended its defense of the claim, citing the policy’s concealment and fraud provision that triggered forfeiture of coverage.

Sponsored by Florida Surplus Lines Service Office (FSLSO)

Gracia’s attorney argued to the trial court that, despite the inspection report, the damage the homeowner was claiming happened in the 2017 storm, and that the report did not automatically establish that she had intentionally mistrepresented the facts.

The trial court sided with Security First on its motion for a summary judgment, declaring that the policy was voided and finding that the homeowner’s explanation was not credible.

The judge relied on Florida’s recently adopted Rules of Civil Procedure, handed down by the state Supreme Court in 2021. The rules appear to allow judges to decide credibility issues when it is obvious that a jury would agree. But the appeal court’s opinion said the trial judge, Kevin Weiss, overstepped and that credibility decisions should go to a jury.

“Only when the record evidence blatantly contradicts a litigant’s version of the facts will a court be allowed to weigh conflicting evidence or determine the credibility of a witness,” the DCA wrote.

The per curiam opinion also acknowledged that recent decisions by other appeals courts in Florida have questioned the conflicting wording of similar insurance policies, in which one line appears to require the insurer to show intentional misrepresentation, while another line does not.

Florida courts also have held in recent years that the question of intent turns on when the statement is made. If the insured misrepresents during the initial policy application process, “the law in Florida is clear: An insurer can later void a policy based on an insured’s false statement without a showing of intent to mislead.”

Eisnaugle

But for statements made after a loss, two appeals courts in the last two years have found that insurers must prove intentional fraud to trigger the voiding of the policy. What Security First offered in the Gracia case – Gracia’s short deposition statement about the pre-existing damage – was too vague to establish falsity, 5th DCA Judge Eric Eisnaugle wrote in a concurring opinion.

Security First officials and its attorney in the appeal, Angela Flowers, could not be reached for comment Tuesday. And the court opinion did not address one practical matter: Whether a four-point inspection, now required by more and more Florida insurers when writing new policies, would have uncovered the existing damage and why Security First did not ask for one.

Packer, the insurance defense attorney who is not associated with the Gracia case, said that it may be impractical, time-consuming and expensive for insurers to require the inspections on all properties. Inspection reports also can differ greatly, depending on the inspector.

Packer said the appellate court’s opinion offers other guideposts for insurers: Future HO policies could include language to the effect that post-loss misrepresentations need not be intentional to trigger cancelation of the policy. And, he added, carriers’ attorneys should be prepared to ask more questions in deposition, especially if the insured reveals that a previous inspection had been done, in order to nail down misrepresentation and intent.

The homeowner’s appeals lawyer in the case, Melissa Giasi, could not be reached. But attorneys for policyholders have said that insurers are often too quick to argue misrepresentation or fraud by the insured, and this decision could help put up some guardrails.

TOPICS LEGISLATION FLORIDA

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By: Jackie Callaway
Posted at 11:00 AM, Sep 09, 2022 and last updated 6:01 PM, Sep 09, 2022

TAMPA BAY — Nothing in Florida’s law stops contractors from cold calling homeowners, and ABC Action News recently found men working for one Tampa Bay roofer told residents they likely qualified for a free roof courtesy of their insurance company.

Melissa Crans caught the door knock and sales pitch on her Ring camera. Crans didn’t answer the door and spoke to the two strangers via the Ring speaker. She said she was not interested, but they persisted. The men told her an inspector would be by later to determine if her roof qualified for a free replacement.

One of the men said he represented a contractor who was reroofing homes in the Oldsmar neighborhood.

“They are just a company working with all the homeowner’s insurance to cover the cost of the roof replacements,” he told her.

Down the street from Crans, homeowner Trigg Kelley told ABC Action News three men recently approached him about a roof giveaway.

“I said I’ve already got a roofer,” Kelley recalled. “And they said, ‘we can get it through your insurance for free.’”

ABC Action News called the roofer listed on the card left for Crans to ask about the door knocks and free roof pitches. He claimed they canvassed neighborhoods hit by severe weather and offered to check roofs for storm damage that may be covered by insurance. The contractor said he would talk to the employees about using the words “free roofs.”

ABC Action News is not naming the roofer because there is nothing illegal about these door knocks. In 2021 Governor DeSantis signed a bill into law that outlawed these solicitations. A judge blocked that portion of Senate Bill 76 after a roofer filed suit claiming the law violated freedom of speech.

But former Florida Deputy Insurance Commissioner Lisa Miller and other insurance experts blame these cold calls, in part, for Florida’s skyrocketing premiums.

Miller told ABC Action News, “Insurance companies are not in the business of replacing roofs unless there is a legitimate damage claim.”

Door-to-door solicitations like these can lead to denied insurance claims and roofers suing the insurance companies. The Insurance Information Institute said more than 100,000 lawsuits were filed against Florida property insurers in 2021 alone. That represents about 76% of the suits filed nationwide.

A new law, passed in May, is expected to affect contractors who do insurance-based work. Senate Bill 2-D changed the requirement that a roof with 25% or more damage had to be replaced. If your roof meets the 2007 building code you have the option to repair it.

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Rising seas will engulf millions of homes, business and parcels of land, and will reshape coastlines, property lines and local tax bases around the Southeast in less than 40 years.

And Florida, North Carolina, Louisiana and Texas will see the most impact, according to a new study from Climate Central.

The non-profit research organization, which aims to present the effects of rising seas and other climate changes to news outlets and policy makers, said that as many as 9 million acres in the Southeast will likely be underwater by the year 2100, affecting properties worth a total of more than $108 billion, according to a report by the Washington Post.

“As the sea is rising, tide lines are moving up elevation, upslope and inland,” said Don Bain, a senior adviser at the organization, who led the analysis. “People really haven’t internalized that yet — that ‘Hey, I’m going to have something taken away from me by the sea.’ ”

Louisiana is at the top of the list for states with the most to lose. It will see some 25,000 properties and 2.5 million acres fall below the high-tide line by 2050, the report found. But parts of Florida and other coastal states also will be soaked.

And as once-prime real estate becomes worthless, communities in those states will lose tax revenue – at a time they may need it most to deal with the effects of sea water.

“Diminished property values and a smaller tax base can lead to lower tax revenues and reduced public services — a potential downward spiral of disinvestment and population decline, reduced tax base and public services, and so on,” the analysis found.

Shifting property lines will also lead to legal disputes and political debate. Local governments could be asked to remove or manage submerged structures, roads, sewer systems and septic tanks, the analysis said, the Washington Post reported.

The Climate Central study is similar to others that have predicted dire consequences from climate change in coming decades. A recent report in the New York Times said extreme weather is rapidly becoming the norm.

Top photo: A flooded intersection near Southwest Fourth Street and Eighth Avenue in the Little Havana neighborhood of Miami, after heavy rains in June. (Daniel A. Varela/Miami Herald via AP)

TOPICS PROPERTY

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