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Florida’s insurance commissioner has appointed two longtime veterans of the department to high-level regulatory positions.
Virginia Christy’s name will be familiar to anyone who has read Florida Office of Insurance Regulation consent orders when property insurers are deemed insolvent. Since 2017 she was the director of the Property and Casualty Oversight unit at OIR and her affidavits and analyses of carriers’ financial straits have accompanied delinquency proceedings notices.
Christy
Now, Christy has been elevated to deputy commissioner of property and casualty, a role that was held for many years by Susanne Murphy. Murphy stepped down late last year to become a consultant at a regulatory and lobbying law firm.
Commissioner Michael Yaworsky, who took office in February, said in a statement that Christy is a skilled regulator with more than a decade in the regulation field. Before leading the oversight unit, Christy, an attorney, was OIR’s chief assistant general counsel. Prior to joining the office, she was an assistant public defender in Florida, the OIR said in a news release. She has a bachelor’s degree from Missouri Southern State College and a law degree from Florida Coastal School of Law in Jacksonville.
Parker
Yaworsky also named Sheryl Parker as the state’s first deputy commissioner of market regulation, overseeing insurer reporting, examination and consumer protection requirements that were beefed up by recent legislation. The position may be little change in function for Parker, who has been OIR’s director of P/C market regulation since 2019, handling examinations and investigations of insurance companies.
Parker started at OIR in 2012 and had previously worked at the Department of Financial Services. Before that, she was a licensed insurance agent in Florida and North Carolina, OIR noted. Parker earned her bachelor’s degree in business administration at Kaplan University.
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The Florida Office of Insurance Regulation will hold a rate hearing Thursday, June 8, on Citizens Property Insurance Corporation’s proposed 12.5% average increase for homeowners and larger increases for other types of policies.
The state-created insurance company, established more than 20 years ago as an insurer of last resort, has been limited by statute on how much it can raise premiums each year, a glidepath that many in the insurance industry have criticized as being far too low and causing Citizens to balloon in size to more than 1.4 million policies in force this year.
The Florida Legislature in 2022 raised the glidepath, allowing average rates to increase by as much as 15% by the year 2026. That is still well below the recent increases requested by several primary market carriers, some of which have reached into the triple digits this year.
Citizens’ Tim Cerio
The rate hearing will examine Citizens’ proposed personal lines account HO-3 rate increase of 12.6%, on average, and a HO-6 average rate increase of 10.8%. For Citizens’ coastal account, rates would climb 13.7% for HO-3 policies and by an average of 24.8% for HO-6 policies.
For mobile home policies, rates for the coastal account would jump by an average of 24.2% under the proposed increase.
The hearing will begin at 3 p.m. Eastern time at the Knott Building in Tallahassee, and is accessible online. Registration for the web-based virtual meeting is available here and stakeholders can participate via phone by calling 1-877-309-2071. The access code is 315-402-185. Comments can also be sent via email to ratehearings@floir.com.
The hearing comes a week after the Florida OIR agreed to allow two market-based insurers to take out thousands of policies from Citizens. Slide Insurance Co. will take up to 25,000 policies, mostly from Citizens’ personal lines account, and Loggerhead Reciprocal Interinsurance Exchange will take 1,000 policies, the OIR orders note.
The consent order for Slide does not specify how much of an increase in premiums that policyholders will see, if any. But Florida lawmakers this year raised the ceiling on that, barring Citizens from writing or renewing policies if a primary market carrier’s rates are within 20% of Citizens’.
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Viewpoint: Impact of Florida Tort-Reform Bill Becomes Clear, But Litigation Expected
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On March 24, 2023, Governor Ron DeSantis signed into law House Bill 837, resulting in the enactment of sweeping tort reform (“the Act”). The Act impacts various aspects of the civil justice system. The most salient features of this latest wave of tort reform are discussed below.
Plaintiffs Who Are More than 50% at Fault Recover Nothing
Prior to the amendment of Florida Statute § 768.81, Florida was considered a pure comparative fault state, meaning that a claimant’s contributory fault diminished the amount of damages awarded in proportion to the claimant’s fault, but it did not bar recovery. Now, however, Florida has shifted to a modified comparative fault scheme. This means that although a claimant’s fault will still diminish the amount of damages awarded in proportion to their fault, a claimant will be barred from recovery if they are more than 50% at fault. This bar to recovery does not, however, apply to actions for personal injury or wrongful death arising out of medical negligence.
Lodestar Fee is Sufficient
In cases where courts are authorized to award attorney fees, Florida courts have historically increased the Lodestar amount (i.e., the reasonable hourly rate multiplied by the reasonable number of hours expended) by applying a contingency fee multiplier in certain cases. With the amendment of Florida Statute § 57.104, the Legislature has created a strong presumption that a Lodestar fee is sufficient and reasonable in cases where attorneys’ fees are determined or awarded by the court. This presumption may be overcome only in rare and exceptional circumstances, and evidence that competent counsel could not otherwise be retained is required. Hence, the Legislature has—in effect—virtually abolished the use of contingency fee multipliers except under very limited circumstances.
Near-Elimination of One-Way Attorney Fees
Previously, insurers were generally required to pay attorneys’ fees in first-party cases where the insured prevailed. This is no longer the case. Under the newly created Florida Statute § 86.121, an insurer is required to pay attorney fees only in declaratory actions, and only if (i) there has been a total denial of coverage, and (ii) the named insured, omnibus insured, or named beneficiary prevails in the declaratory action. Notably, this statute does not apply in actions arising under a residential or commercial property insurance policy. One-way fees in property insurance claims litigation were already limited by Senate Bill 2A, approved in December.
Insurer Protections from Bad-Faith Actions
The Legislature has also increased insurers’ protections from bad faith actions. In a nutshell, an insurer may not be sued for bad faith if it tenders the lesser of the policy limits or the amount demanded within 90 days of actual notice of a claim. Alternatively, if there are multiple claimants, insurers may file an interpleader action within 90 days of receiving notice of competing claims or make the policy limits available, pursuant to binding arbitration.
Time Limit for Negligence Actions Cut to Two Years
The time for commencing action for negligence has been cut in half; parties now have two years to file suit under Florida Statute § 95.11(4)(a). The effect of this amendment is that the statute of limitations applicable to ordinary negligence claims now mirrors that applicable to claims for professional malpractice.
Uniform Standards for Calculating Medical Damages
In the newly created statute, the Legislature has provided guidelines regarding the admissibility of evidence to prove past and future medical expenses in personal injury or wrongful death actions. Notably, evidence offered to prove the amount of damages for past medical treatment or services that have been satisfied is limited to evidence of the amount actually paid, regardless of the source of payment.
As to unpaid charges for already incurred medical treatment or services, § 768.0427 sets forth a non-exhaustive list of evidence which may be introduced. The type of evidence which may be admitted is contingent upon whether the claimant has insurance and, if so, the type of insurance. The same holds true for future medical expenses.
Transparency on Letters of Protection
A letter of protection is a written agreement between a patient and a medical provider wherein the latter agrees to defer collection of any medical bills until the patient recovers in a lawsuit. The intent is for the medical provider to be paid from the proceeds of the lawsuit.
Letters of protection are often executed after an attorney refers their client to a physician. The existence of a referral relationship is relevant to potential financial bias. Nevertheless, in the landmark case of Worley v. Central Florida YMCA, 228 So. 3d 18 (Fla. 2017), the Florida Supreme Court held that a lawyer’s referral of a client to a medical provider is protected by the attorney-client privilege.
Under HB 837, the Legislature has completely abrogated Worley. Claimants must now disclose specified information regarding letters of protection, including whether the claimant was referred for treatment. If the claimant was referred, they must disclose the identity of the person who made the referral—even if the referral was made by the claimant’s attorney.
Substantive Versus Procedural
Significantly, whether the enactments brought about by the Act apply to cases filed prior to the effective date or solely to cases filed after March 24th is a point of contention between plaintiffs and defense lawyers. It is well settled in Florida that procedural law applies retroactively, substantive law does not; substantive law affects vested rights and duties, while procedural law constitutes the means for effectuating or enforcing already existing rights.
Although Section 30 of HB 837—which states that the act shall apply to causes of action filed after the effective date—would seem to resolve the question of the new enactments’ temporal reach, statutory language regarding temporal reach is not dispositive. In the Florida Supreme Court case of State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55 (Fla. 1995), the court reviewed a statute enacted in 1990 which expressly stated that it would apply retroactively to 1982. However, the court opined that in determining whether the statute would indeed apply retroactively, it was not the language in the statute that governed. Instead, the nature of the statute was dispositive. Because the court concluded that the statute under review was substantive in nature, it held that despite the clear statutory language regarding temporal reach, it could not be applied retroactively.
Under this framework, at least one Florida trial court has already held that Florida Statute § 768.0427 is procedural and applies to pending cases. On May 19th, Circuit Court Judge Anne-Leigh Gaylord Moe of Hillsborough County entered an order granting the defendant’s motion in limine in the case styled Sharon M. Sapp v. James Brooks (Case No.: 17-CA-5664). In so doing, the judge ruled that § 768.0427 applies to pending cases, notwithstanding Section 30 of HB 837.
Continued litigation can be reasonably anticipated on the substantive-versus-procedural debate.
Jessica Hernandez is an associate attorney and Norman Waas, is a shareholder with Falk Waas, an insurance defense law firm in Florida.
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Deirdra Funcheon June 1 is the start of hurricane season. It’s also a deadline for Florida property insurance companies to get their reinsurance in place. What’s happening: Insurance companies buy their own insurance — reinsurance — to spread out risk and cover claims. Experts are expecting the price of it in Florida to jump 40 – 50% — or even 70%. Of the money insurance companies rake in from premiums, they can wind up spending more than half of that on reinsurance, David Paul, principal of ALIRT Insurance Research, tells Axios. Why it matters: Increased costs get passed on to consumers, and our state is in the midst of an insurance crisis. Companies have gone insolvent and rates have skyrocketed. A recent ALIRT report shows problems have been brewing since Hurricane Andrew in 1992. Reinsurers finally “cried uncle” this year, hiking prices or considering just leaving the state. Context: Inflation, fraud, litigation, and Hurricane Ian — “the second costliest insured loss ever on record globally” according to a report by the American Property Casualty Insurance Association — all contributed to reinsurers backing away. Yes, but: The state legislature passed reforms to reduce lawsuits against and costs for insurance companies, which should help lower rates. Critics have characterized these reforms as a giveaway to insurance companies. What they’re saying: Bruce Lucas, founder and CEO of Tampa-based Slide Insurance, tells Axios reinsurance has a domino effect on the economy. Insurance companies need reinsurance to be rated “A.” Most people with mortgages are required by lenders to buy insurance from only A-rated firms. Without the reforms, “there would be a cataclysmic event taking place here in two weeks,” Lucas says. Some insurance and reinsurance companies would likely have stopped doing business in the state. Between the lines: Seeing the opportunity to charge higher prices, Berkshire Hathaway decided to offer more reinsurance this year, Barron’s reports. The firm could lose as much as $15 billion if a hurricane hits Florida. But if not, “we’ll make several billion dollars as profit,” said Ajit Jain, Berkshire’s head of insurance operations. What’s next: Even if reinsurance remains expensive, in about 18 months the reforms will kick in and lawsuits will die down, Lucas predicts. That will save insurance companies money and consumer rates could then drop substantially. Deirdra’s thought bubble: I insured a townhouse last year for $2,877 and just got a quote for this year: $6,394. “It’ll probably double for next year” — but then go down, Lucas says.
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A federal lawsuit claims FEMA failed to take into account skyrocketing flood insurance costs generated by its new rating system, Risk Rating 2.0.
Ten states, along with 43 Louisiana parishes and more than a dozen levee districts, are suing FEMA, the Department of Homeland Security and the Federal Insurance and Mitigation Administration to have the new rate methodologies declared unlawful. Other states the federal government are Florida, Idaho, Kentucky, Mississippi, Montana, North Dakota, South Carolina, Texas and Virginia.
Louisiana Attorney General Jeff Landry unveiled the lawsuit at a press conference in New Orleans on June 1, the official start of hurricane season.
“Risk Rating 2.0 flood insurance policy has now become a natural disaster of its own,” Landry said.
The lawsuit, filed in U.S. District Court for the Eastern District of Louisiana, alleges FEMA violated its statutory authority by using secret hypothetical events to develop and implement Risk Rating 2.0 while failing to communicate its rating methodology to the public.
Since Risk Rating 2.0 began going into effect in October 2021, some homeowners in coastal states have reported soaring flood insurance premiums. The new rating system is designed to be more fair and more precise, and to use a range of factors, not just a property’s location near a flood zone, advocates have said. While many sites’ flood premiums are rising, many have also dropped under RR 2.0.
But elected officials have heard from constituents whose rates have spiked.
Flood rates in Houma, Louisiana, southwest of New Orleans, will see the average premium increase from $982 per year to $3,511, according to ZIP-code data released last month by FEMA. In Florida, Key Biscayne will see flood rates as high as $7,000 annually on average.
FEMA Releases New Flood Insurance Rates by ZIP Code. Brace for Impact.
Communities hit by historic flooding in recent years will see drastic price increases, too. Albany, Kentucky, will see prices increase from $741 to $4,597 on average.
Rate increases are limited to no more than 18% annually on renewals based on federal law.
The attorneys general 112-page complaint claims FEMA rate calculations ignore important risk factors like the effect of levees on the likelihood of flood damage.
“Building levees, using pumps and other flood control measures should be calculated into these premiums the same way that your auto insurance calculates additional safety measures in the cars that you buy,” Landry said.
The lawsuit claims increased flood insurance costs will lead to fewer policies in force and less coverage in areas susceptible to flooding, creating greater risk for exposure.
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“It’s a big upgrade,” NHC storm surge specialist, Cody Fritz, told National Public Radio last week.
The system, which combines wind and storm tracks with new data on vegetation in the storm’s path, also allows surge modeling for the first time for Puerto Rico and the U.S. Virgin Islands, which have been hard-hit by storms in recent years.
The changes don’t come a day too soon, officials said.
“We are seeing a sharp increase in catastrophic storm surge impacts in our coastal communities,” Ken Graham, director of NOAA’s National Weather Service, said in a statement. “Our new capabilities to effectively and accurately model and forecast storm surge (are) critical to upholding the NWS mission of protection of life and property.”
Also, Aon, the global data analytics firm, on Thursday unveiled a new computer model and forecasting system that allows insurers to better assess portfolio losses as soon as a hurricane’s landfall point becomes clear.
The Auto Event Response program combines NHC data with up to 10 academically reviewed models to produce real-time impacts on exposed properties, Aon Managing Director Daniel Hartung explained in a webinar.
The system, which examines properties in a storm’s actual path, rather than basing losses on simulations or probabilistic forecasts, can produce a “quantifiable loss estimate at various granularities,” he said.
It also provides a better idea of the actual wind speeds as hurricanes move inland and decay, he said. A report will be delivered automatically via email to subscribers, within an hour of a forecast update.
A new version of Aon’s Impact Forecasting, an enhanced hurricane model, is now being reviewed by the Florida Hurricane Commission, Aon’s Will Skinner said.
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Florida Governor Signs Insurer Accountability, Wind-Mit Discount Bills Into Law
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Florida’s governor this week signed the Insurer Accountability Act and two other bills that put new restrictions on insurers and require premium discounts for homeowners’ wind-mitigation efforts.
Senate Bill 7052 was passed this spring after the Florida Legislature approved controversial claims-litigation and attorney-fee limitations designed to help ease cost burdens on property insurers. The Florida Office of Insurance Regulation, in a statement Thursday, said the accountability act will bar insurers from altering independent adjusters’ damage estimates unless they provide a full explanation and a copy of the original estimate to policyholders.
The practice came to light last December when three independent adjusters told Florida legislators that a number of insurers had been making wholesale changes to their reports while making it look like the insurer-revised reports had been written by the adjusters.
Clarifies that once a roof deductible is applied, no other deductible under the policy may be applied to any loss caused by the same covered peril.
Extends the time period for an individual deployed to a combat zone or combat-support posting to file a property insurance claim for the duration of the deployment.
Requires mitigation discounts be updated at least every five years and requires insurers to provide information on their websites describing hurricane mitigation discounts that are available.
Requires liability insurers to follow proper claims-handling practices on behalf of their policyholders and increases penalties for insurers that do not.
Prohibits officers and directors of impaired or insolvent insurers from receiving bonuses.
Increases the maximum OIR administrative fines that may be levied on insurance companies by 250% in most cases, and by 500% for violations during a state of emergency, such as a hurricane.
House Bill 799, which Gov. DeSantis also signed this week, expands wind-mitigation benefits by requiring insurers to allow premium discounts in their rate filings. Many insurers had already provided credits for hurricane-hardening efforts, but the law now mandates some discounts. It takes effect July 1.
The bill also dropped the 2022 requirement that high-rise condominium unit owners must purchase flood insurance if they are covered by Citizens Property Insurance for wind damage.
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Eight Months After Ian, Struggles Continue for Swamped Florida Residents
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Eight months ago, chef Michael Cellura had a restaurant job and had just moved into a fancy new camper home on Fort Myers Beach. Now, after Hurricane Ian swept all that away, he lives in his older Infiniti sedan with a 15-year-old long-haired chihuahua named Ginger.
Like hundreds of others, Cellura was left homeless after the Category 5 hurricane blasted the barrier island last September with ferocious winds and storm surge as high as 15 feet (4 meters). Like many, he’s struggled to navigate insurance payouts, understand federal and state assistance bureaucracy and simply find a place to shower.
“There’s a lot of us like me that are displaced. Nowhere to go,” Cellura, 58, said during a recent interview next to his car, sitting in a commercial parking lot along with other storm survivors housed in recreational vehicles, a converted school bus, even a shipping container. “There’s a lot of homeless out here, a lot of people living in tents, a lot of people struggling.”
Recovery is far from complete in hard-hit Fort Myers Beach, Sanibel and Pine Island, with this year’s Atlantic hurricane season officially beginning June 1. The National Oceanic and Atmospheric Administration is forecasting a roughly average tropical storm season forecast of 12 to 17 named storms, five to nine becoming hurricanes and one to four powering into major hurricanes with winds greater than 110 mph (177 kph).
Another weather pattern that can suppress Atlantic storms is the El Nino warming expected this year in the Pacific Ocean, experts say. Yet the increasingly warmer water in the Atlantic basin fueled by climate change could offset the El Nino effect, scientists say.
In southwest Florida, piles of debris are everywhere. Demolition and construction work is ongoing across the region. Trucks filled with sand rumble to renourish the eroded beaches. Blank concrete slabs reveal where buildings, many of them once charming, decades-old structures that gave the towns their relaxed beach vibe, were washed away or torn down.
Some people, like Fort Myers Beach resident Jacquelyn Velazquez, are living in campers or tents on their property while they await sluggish insurance checks or building permits to restore their lives.
“It’s, you know, it’s in the snap of the finger. Your life is never going to be the same,” she said next to her camper, provided under a state program. “It’s not the things that you lose. It’s just trying to get back to some normalcy.”
Ian claimed more than 156 lives in the U.S., the vast majority in Florida, according to a comprehensive NOAA report on the hurricane. In hard-hit Lee County – location of Fort Myers Beach and the other seaside towns – 36 people died from drowning in storm surge and more than 52,000 structures suffered damage, including more than 19,000 destroyed or severely damaged, a NOAA report found.
Even with state and federal help, the scale of the disaster has overwhelmed these small towns that were not prepared to deal with so many problems at once, said Chris Holley, former interim Fort Myers Beach town manager.
“Probably the biggest challenge is the craziness of the debris removal process. We’ll be at it for another six months,” Holley said. “Permitting is a huge, huge problem for a small town. The staff just couldn’t handle it.”
Then there’s battles with insurance companies and navigating how to obtain state and federal aid, which is running into the billions of dollars. Robert Burton and his partner Cindy Lewis, both 71 and from Ohio, whose mobile home was totaled by storm surge, spent months living with friends and family until finally a small apartment was provided through the Federal Emergency Management Agency. They can stay there until March 2024 while they look for a new home.
Their mobile home park next to the causeway to Sanibel is a ghost town, filled with flooded-out homes soon to be demolished, many of them with ruined furniture inside, clothes still in closets, art still on the walls. Most homes had at least three feet of water inside.
“No one has a home. That park will not be reopened as a residential community,” Lewis said. “So everybody lost.”
The state Office of Insurance Regulation estimated the total insured loss from Ian in Florida was almost $14 billion, with more than 143,000 claims still open without payment or claims paid but not fully settled as of March 9.
With so many people in limbo, places like the heavily damaged Beach Baptist Church in Fort Myers Beach provide a lifeline, with a food pantry, a hot lunch stand, showers and even laundry facilities for anyone to use. Pastor Shawn Critser said about 1,200 families per month are being served at the church through donated goods.
“We’re not emergency feeding now. We’re in disaster recovery mode,” Critser said. “We want to see this continue. We want to have a constant presence.”
In nearby Sanibel, the lingering damage is not quite as widespread although many businesses remain shuttered as they are repaired and storm debris is everywhere. Seven local retail stores have moved into a shopping center in mainland Fort Myers, hoping to continue to operate while awaiting insurance payouts, construction permits, or both before returning to the island.
They call themselves the “Sanibel Seven,” said Rebecca Binkowski, owner of MacIntosh Books and Paper that has been a Sanibel fixture since 1960. She said her store had no flood insurance and lost about $100,000 worth of books and furnishings in the storm.
“The fact of the matter is, we can get our businesses back up and running but without hotels to put people in, without our community moving back, it’s going to be hard to do business,” she said. “You hope this is still a strong community. ”
Yet, the sense among many survivors is one of hope for the future, even if it looks very different.
Cellura, the chef living in his car, has a new job at another location of the Nauti Parrot restaurant on the mainland. Insurance only paid off the outstanding loan amount on his destroyed camper and he didn’t qualify for FEMA aid, leaving him with virtually nothing to start over and apartment rents rising fast.
But, after 22 years on the island, he’s not giving up.
“I believe that things will work out. I’m strong. I’m a survivor,” he said. ”Every day I wake up, it’s another day to just continue on and try to make things better.”
Photo: Velazquez at her Fort Myers Beach home, where storm surge reached almost to the ceiling. (AP Photo/Rebecca Blackwell)
Copyright 2023 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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SFR Services, a Florida restoration firm made famous by its volume of claims litigation and its charges that United Property & Casualty Insurance Co. had instructed desk adjusters to alter their estimates, now finds itself in some legal trouble of its own.
A circuit judge in Lee County recently found that SFR had intentionally concealed and misrepresented material facts during the appraisal process in a Fort Myers-area condominium claim dispute with Tower Hill Prime Insurance Co. after Hurricane Irma in 2017. The firm stuck with an estimate of $233,000 and failed to disclose a contract with a roofing company, which charged less than half of that for the actual work, Judge Michael McHugh wrote in his May 9 order.
“SFR Services was aware that the cost of the scope of roof work was $99,000, at least as of March 20, 2020,” the judge noted. “Despite knowing this information, SFR Services continued to present an estimate generated by Elite Claims and continued to represent that the value of the roof replacements for the clubhouse and both gatehouses was more than $230,000, while simultaneously indicating that its overhead and profit fell in line with the industry standard of 20%.”
Members of an appraisal panel, assigned to resolve differences between two other estimates, said they were unaware of the lower price from Castillo Roofing when they awarded the higher amount on the claim. The judge found that SFR, as an assignee of the condominium association, had violated the concealment and misrepresentation provision of the insurance policy and was “tainted by fraud.”
McHugh ruled in favor of Tower Hill and vacated the higher appraisal award, voided part of the coverage and agreed to Tower Hill’s request for a new umpire on the appraisal.
SFR, based in Stuart, Florida, has already asked Florida’s 6th District Court of Appeals to review the decision.
“Unfortunately we are appealing this egregious ruling,” SFR’s principal, Ricky McGraw, said in an email to Insurance Journal. “We have moved to disqualify the judge presiding over the case. Florida has made it hard for contractors that help their clients.”
SFR’s attorney, Melissa Giasi, asked the judge to disqualify himself, arguing that he was prejudiced by his concerns about McGraw’s allegedly fraudulent activity; the judge did not hold a jury trial; and he adopted a final order drafted by Tower Hill that contained numerous errors. When that motion failed, Giasi asked the appeals court to step in and prohibit McHugh’s order. The appeals judges declined.
In its answer to Tower Hill’s 2020 motion in Lee County, which asked the court to vacate the high-end appraisal award, the SFR attorney also argued that Tower Hill had “unclean hands,” had acted in bad faith and had improperly adjusted the claim amount.
Judge McHugh did not see it that way. He also pointed out that the insured, Rookery Pointe Homeowners Association, did not participate in the alleged fraud.
“In fact, the condo association, through its former president, Debbie Kiel, testified they were so concerned with the estimate provided by SFR Services, they got their own estimates which were in line with Castillo Roofing’s estimate,” the judge wrote.
McGraw and SFR Services for years have been thorns in the sides of several insurance carriers in Florida. Court records show that the firm has filed hundreds of lawsuits against insurers over AOB claims in recent years. Most famously, in early 2022 SFR charged in a federal lawsuit that United Property & Casualty had conspired with adjuster firms to systematically deny and underpay thousands of roof claims after Hurricane Irma.
The lawsuit, charging anti-racketeering law violations, purported to show copies of text messages by a desk adjuster, sent at the behest of UPC, to field adjusters directing them to avoid estimating roof damages altogether because the insurer planned to issue blanket denials.
A federal judge dismissed the suit in October, noting that a federal statute leaves it up to states to regulate the business of insurance, so the federal racketeering law did not apply.
Florida regulators this year deemed UPC insolvent and have placed the company into liquidation, likely making claims suits against the insurer a long shot.
Meanwhile, SFR has made similar allegations in state court against individuals associated with the insurer. In a suit filed last week in Pinellas County, SFR charges that a number of adjusters, UPC officials and UPC board members engaged in a scheme to underpay claims from Irma, “no matter how badly people’s roofs were damaged.” The complaint cites deposition testimony from a field adjuster who said that UPC officials demanded that he remove portions of his damage estimates.
Giasi (Florida Bar)
In the Lee County case, the judge said SFR was the party that engaged in misrepresentation, a judgment that has left some insurance defense attorneys with a strong sense of schadenfreude. They said that the alleged tactics by SFR have not been uncommon in the years of claims litigation against insurers, and have helped drive exorbitant defense costs.
The Rookery Pointe case began in 2019, when the condo association signed an AOB agreement with SFR. The restoration contractor initially provided an estimate of $355,759 for replacement of three common-area roofs – on the gatehouses and the clubhouse, plus a fourth building that was not clearly identified.
SFR contracted with Elite Claims Consulting as its public adjuster on the condos, and in 2020 Elite submitted its own estimate of $314,828, the court explained. The next day, SFR contracted with Castillo Roofing to replace the three roofs for $99,000. McGraw confirmed that in his own testimony during the court proceedings, the judge’s order said.
McGraw also signed a sworn proof-of-loss statement, based on the Elite Claims estimate of $314,828. SFR also directed Castillo Roofing to submit a permit application with a declared value of $233,525, something the judge said was intentionally misleading.
In response to Elite’s estimate, Tower Hill in March 2023 requested that the parties submit their differences to an appraisal panel. The insurer also requested information on any bids by roof contractors on the Rookery Pointe structures.
“Without question, the Castillo Roofing bid submitted to SFR Services would have been responsive to this request,” Judge McHugh wrote. “Yet, SFR Services did not approve it, nor did it provide the documentation to Rookery Pointe or Elite Claims to produce to Tower Hill.”
SFR argued in court that it was not obligated to provide the Castillo bid, because it was party to an AOB agreement: It had been assigned the rights and benefits of the policies, but not the duties or obligations.
McHugh
The judge noted that in years’ past, court rulings have found that assignees did not have to uphold certain duties of the insured. But that case law was superseded by a 2019 AOB reform law passed by the Florida Legislature. That statute also requires assignees to provide up-to-date and revised estimates of repair work, the judge said.
SFR also failed to provide the Castillo price during the appraisal process, the judge wrote, citing a 1999 Florida appeals court opinion that held that there must be a “meaningful exchange of information” for an appeals panel to accurately arrive at a fair number. But SFR’s chosen appraiser for the appraisal panel had testified that he was unaware of the Castillo price and based his conclusions on the higher estimates. Tower Hill’s chosen appraiser said the same. McHugh acknowledged that Tower Hill on its own could have solicited more estimates.
“Without the Castillo Roofing invoices and information, there was never a meaningful exchange of information necessary for a proper appraisal,” the judge noted. McHugh acknowledged that Tower Hill, on its own, could have solicited more estimates on the work.
A Tower Hill representative testified in the trial that the insurer would have paid the Castillo $99,000 price, plus standard overhead and profit, if the company had known about it – thus avoiding months of litigation.
The attorney for Tower Hill in the case, Michael Monteverde, could not be reached for comment for this article.
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.
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Two clashing climatic behemoths, one natural and one with human fingerprints, will square off this summer to determine how quiet or chaotic the Atlantic hurricane season will be.
An El Nino is brewing and the natural weather event dramatically dampens hurricane activity. But at the same time record ocean heat is bubbling up in the Atlantic, partly stoked by human-caused climate change from the burning of fossil fuels.
Many forecasters aren’t sure which weather titan will prevail because the scenario hasn’t happened before on this scale. Most of them are expecting a near- draw – something about average. And that includes the National Oceanic and Atmospheric Administration, saying there’s a 40% chance of a near-normal season, 30% chance of an above-average season (more storms than usual) and a 30% chance of a below-normal season.
The federal agency Thursday announced its forecast of 12 to 17 named storms, five to nine becoming hurricanes and one to four powering into major hurricanes with winds greater than 110 mph. Normal is 14 named storms, with seven becoming hurricanes and three of them major hurricanes.
“It’s definitely kind of a rare setup for this year. That’s why our probabilities are not 60% or 70%,” NOAA lead hurricane seasonal forecaster Matthew Rosencrans said at a Thursday news conference. “There’s a lot of uncertainty this year.”
No matter how many storms brew, forecasters and Federal Emergency Management Agency Director Deanne Criswell reminded U.S. coastal residents from Texas to New England and people in the Caribbean and Central America that it only takes one hurricane to be a catastrophe if it hits you.
“That’s really what it boils down to is: Which is going to win or do they just cancel each other out and you end up with a near-normal season?” said Colorado State University hurricane researcher Phil Klotzbach. “I respect them both.”
The two forces couldn’t be more opposite.
El Nino is a natural temporary warming of the Pacific that happens every few years and changes weather worldwide. Climate models predict as the world warms, El Ninos get stronger.
Decades of observation show that generally the Atlantic is quieter with fewer storms during El Nino years. El Nino’s warmer waters make warmer air over the Pacific reach higher up in the atmosphere, influencing winds and creating strong upper level winds that can decapitate storms, killing them, Klotzbach said. It’s called wind shear.
El Nino’s effects are not direct and “it’s not as in-your-face as a very warm ocean,” said University of Miami hurricane researcher Brian McNoldy. El Nino and its variations are the single biggest yearly factor in NOAA’s forecast, accounting for up to 38% of its prediction, Rosencrans said.
The Atlantic, especially hugging the African coast to the far east where storms form, is about 1.8 to 3.6 degrees Fahrenheit (1 to 2 degrees Celsius) warmer than the average of the last 30 years and is the warmest it has been for this time of year, Klotzbach said. Warm Atlantic waters not only make storms stronger and more able to withstand El Nino’s shear but they create an opposite direction upper level wind that could counterbalance El Nino.
“It’s starting to outpace 2010 by a decent margin, which is sobering because 2010 was stinking hot,” Klotzbach said.
“The anomalously warm ocean temperatures unquestionably have a human fingerprint on them,” said former NOAA hurricane scientist Jim Kossin, now of the risk firm The Climate Service.
Scientists don’t even have past years that look the same to help figure out what will happen, Klotzbach and McNoldy said.
So which is going to win between El Nino and the hot oceans?
“I know it’s not a satisfying answer to say ‘we just don’t know,’ but we don’t,” said University of Albany atmospheric sciences professor Kristen Corbosiero.
The pioneer in the field, Colorado State, is predicting a slightly below normal 13 named storms, six hurricanes with two of them becoming major. All but a handful of nearly two dozen private, university and government forecast teams and models call for a near normal Atlantic hurricane season with between six and eight hurricanes.
But they hedge their bets too.
“AccuWeather is expecting a near normal to slightly below normal season due to the onset of an El Nino,” said AccuWeather senior hurricane forecaster Dan Kottlowski, who then added that the warm Atlantic complicates everything. “Due to extensive warm water, there is still a higher than normal chance for a high impacting hurricane to affect the U.S. this season.”
The University of Arizona looks at the same two clashing forces and sees a different outcome, predicting a higher-than-normal nine hurricanes, 19 named storms and five major hurricanes because it expects ”the Atlantic side to be dominant, leading to a very active season,” said University of Arizona atmospheric sciences professor Xubin Zeng.
Forecasters ran out of names during a record 30 Atlantic named storms in 2020 and with 21 storms in 2021. Last year was normal. Earth had a La Nina for the past three years, which generally increase Atlantic hurricane activity. Hurricane season runs June 1 to November 30.
McNoldy said this summer may be quieter in the Caribbean where El Nino’s shear can have more sway, but busier in Bermuda and U.S. East Coast north of the Caribbean, where El Nino isn’t as potent.
Random chance plays a big role, Kossin said: “It’s a bit like rolling dice but with the addition (warm ocean) and subtraction (El Nino) of weights to the dice. ”
The warmer Pacific has forecasters expecting a “near-to-above normal” hurricane season for waters around Hawaii, said Chris Brenchley, the director of the Central Pacific Hurricane Center. That amounts to four to seven tropical cyclones in the region, but fewer could actually come ashore in the islands.
Photo: Wilbur-By-The-Sea, on Florida’s east coast, after Hurricane Nicole last November. (AP Photo/Rebecca Blackwell, File)
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