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Policymakers need to find a way to get banks involved in property mitigation if Florida is to improve its hurricane resiliency, according to a former state insurance commissioner.

Banks are currently unmotivated to protect mortgages through mitigation because the government steps in and bails them out when there is a crisis, Kevin McCarty, who was insurance commissioner of the state for 13 years, told the audience of the Florida Association of Insurance Reform (FAIR) Foundation’s conference in Tampa on May 2.

McCarty spoke about resiliency and mitigation, emphasizing the need for both in the catastrophe prone state.

“We know we are going to have more storms; we also know there is a lot of uninsured property,” McCarty said. “We also know somebody is mysteriously not at the table.”

He was referring to banks, which he said continue to be bailed out by the government and therefore will continue to make money no matter what. He referenced the financial crisis as an example of how banks are not motivated to protect their financial assets.

“Until banks actually have skin in the game, they are not going to be at the table,” he said.

McCarty’s said it’s important to think about what strategies could work to hold banks accountable and bring them to the table.

“If I as a taxpayer have to pay for it, it should be part of the law that if you have a federally backed mortgage you have to have an all-perils policy – and that means all perils,” McCarty told the audience, which responded with big applause.

Please enjoy the full article below;

https://www.insurancejournal.com/news/southeast/2018/05/08/488539.htm

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In an open letter to Citizens President, CEO an Executive Director Barry Gilway, Patronis said the state-backed insurer should be subject to the same rules as state agencies and organizations when it comes requiring lobbyists be registered, but as of now that isn’t the case.

“Currently, lobbyists and private insurers are not statutorily required to disclose their efforts on behalf of clients and private interest they represent before Citizens Property Insurance Corporation,” Patronis wrote.

Citizens Legislative Affairs staff currently do register as lobbyists. Patronis’ letter says it is targeted towards those who represent third parties and private interests, such as businesses, and lobby Citizens.

Patronis wrote transparency is “one of the best ways we can ensure accountability,” and that it should be “crystal clear who is interested in influencing Citizens policy changes or securing contracts with [Citizens].”

Please enjoy the full article below;

https://www.insurancejournal.com/news/southeast/2018/05/04/488273.htm

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Peoples Trust Insurance lost $42 million in 2016, was recently in financial “shambles,” and was overvalued by more than $50 million when current President and CEO George W. Schaeffer agreed to buy half of the company from the widow of his late partner. Those claims surfaced in a memo that Schaeffer reportedly sent to Eileen Gold, widow of company co-founder Mike Gold, before he sued her for the return of $4 million he says he overpaid her.

Schaeffer and Gold are now suing each other in Palm Beach County Circuit Court.

In his suit, Schaeffer is demanding that Eileen Gold release him from his May 2014 agreement to pay $30 million for the Golds’ half of the Deerfield Beach-based company. He says an analysis conducted following Mike Gold’s death in January 2014 “grossly misrepresented” the company’s value as $88 million, but that Schaeffer later discovered it had been poorly managed and was actually worth $34 million in June 2014.

As a result, Schaeffer’s suit says, the $21 million he has so far paid to Eileen Gold was $4 million more than he should have paid. The suit demands that Eileen Gold release Schaeffer from having to pay the remaining $9 million as agreed, and repay $4 million the widow received “unlawfully” and as “unjust enrichment.”

Eileen Gold filed in both suits a memo she said Schaeffer hand-delivered on Dec. 8 — a week before the two filed their respective suits.

The memo includes the words “Privileged and Confidential Inadmissible Settlement Communication” and is headed “To: Eileen Gold. From: George Schaeffer.” It accuses Mike Gold of “mismanaging the company very badly” and hiding it from his then-partner.

“Unfortunately, I also learned that Mike spent almost every day of the week at a casino and at a massage parlor. And it appears that he was using cash from the company to finance these activities,” the memo states.

“Upon reviewing the books and records of the company, we have found that Mike had apparently engaged in CRIMINAL activity with the company, including the borrowing of funds from the insurance company. This is a crime. There are many other examples. But this company that was in supposedly good shape was actually in shambles, and lost $42 million last year alone.”

The memo then contends that an independent forensic accounting firm reviewed the prior valuation and found it was actually worth $34 million in 2014. “So the most I would have ever had to pay you was $17 million,” it says. “And yet I have already paid you $21 million; am supposed to pay you $9 million more; and on top of that I am supposed to pay you a percentage of the company if I should ever sell.

Please enjoy the full article below

http://www.sun-sentinel.com/business/fl-bz-peoples-trust-valuation-lawsuit-20180420-story.html

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Imagine filing a claim with your insurance company for hurricane damage and, months later, not only is your home not fixed, but you get served with a lawsuit by your insurance company.

Dozens of South Florida customers of Deerfield Beach-based People’s Trust Insurance are finding themselves in an unlikely and possibly unprecedented position — they’re being sued by their insurer.

Since July 1, People’s Trust has filed at least 242 lawsuits against its policyholders in Miami-Dade, Broward and Palm Beach counties, according to court records. Of those, 161 have been filed since Nov. 17, a day after the Sun Sentinel first reported the strategy.

The new suits include 113 against the company’s customers in Miami-Dade, 38 in Broward and 10 in Palm Beach County.

Attorneys for some of the defendants accuse the company of using the suits to bully their clients into accepting subpar repairs — and punish them for securing help from lawyers and independent public adjusters.

When People’s Trust decides to sue a customer, it’s intimidating, especially for people who have never been involved in a suit, said Anthony Lopez, a Coconut Grove-based attorney who specializes in insurance litigation.

Anthony Tinelli, a Miami attorney who formerly worked as a defense attorney for People’s Trust, said he’s representing seven Hurricane Irma victims who were recently sued by the company. “For one insurance company to sue its homeowners to that extent is unprecedented,” he said.

Another Miami-based attorney, Rafael Alonso, attributed the recent surge in lawsuits by the company to disputes over Hurricane Irma claims. “I’ve never seen an insurance company, especially after a natural disaster, suing its insureds,” he said.

People’s Trust says the attorneys and public adjusters generate disputes by preventing the company from sending its affiliated repair contractor — Rapid Response Team — to fix customers’ homes, as the customers agreed to allow when they signed up with the insurer. In exchange, policyholders were given a discount off their premiums, usually totaling $200 or less, the suits state.

People’s Trust and Rapid Response Team are both among a suite of related companies owned by entrepreneur George W. Schaeffer.

Please read the full article below

http://www.sun-sentinel.com/business/fl-bz-peoples-trust-insurance-sues-100-more-customers-20180419-story.html

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An insurance agency owner in Florida has been arrested after he admitted to stealing more than $60,000 in insurance premiums, according to a statement from the Florida Department of Financial Services (DFS).

Michael Christopher Hensley, owner BOSC Insurance Company and Hensley Insurance Company, admitted to stealing $61,954 in insurance premiums between 2011 and 2018 in Orange County, Fla

The theft was discovered after an investigation by the DFS Disaster Fraud Action Strike Team (DFAST) revealed that Hensley had solicited various commercial businesses to procure property and casualty insurance under both of his companies BOSC and Hensley Insurance. Hensley has had no active appointments on his license since 2010, making his licensed expired as of 2014 and unlicensed as of March 9, 2015.

After the impacts of Hurricane Irma, a commercial business property sustained extensive damage caused from the storm. The business owner attempted to contact his insurance agent, Hensley, for guidance on the claim process. After multiple calls and no response from Hensley, the owner contacted the listed insurance carrier on the Certificates of Insurance that Hensley had been providing the business with annually since 2012. An insurance representative with the listed company informed that the business was not insured with them nor had he ever been insured with the insurance company. Upon this revelation, the owner of the business contacted the CFO’s Orlando Field Office for assistance.

As a result of the DFS investigation, Hensley admitted to collecting monthly insurance premiums payments from nine different commercial business and providing them with false Certificates of Insurance coverage. Hensley went to various insurance company’s websites and made copies of their general liability policies. He would then take the companies information and transfer it to Certificates of Insurance and provide the fraudulent documents to the unsuspecting businesses as proof of insurance. Hensley further admitted to using the money that he obtained from the victim businesses for his own personal benefits

Please enjoy the full article below;

https://www.insurancejournal.com/news/southeast/2018/04/19/486791.htm

 

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In another step shifting risk to private markets, the Federal Emergency Management Agency (FEMA) said it intends to secure additional reinsurance for the National Flood Insurance Program (NFIP) through issuance of a catastrophe bond.

FEMA began purchasing private reinsurance in 2017 and recovered $1.042 billion from the private markets due to losses from Hurricane Harvey. In early January 2018, FEMA continued the practice by securing $1.46 billion in reinsurance from 28 private reinsurers to cover any qualifying NFIP flood losses in excess of $4 billion per event occurring in calendar year 2018.

FEMA said it now plans to transfer additional risk by engaging the capital markets for the first time through an insurance-linked securities (ILS) transaction on or about July 1, 2018.

Adding this new resource will enable FEMA to transfer risk through two avenues – the traditional reinsurance markets and the capital markets. Wright said that using both markets will create more competition and reduce the NFIP’s risk transfer costs. It will also enable FEMA to access greater market capacity and spread its risk across a more diverse pool of companies and investors, according to the announcement.

“The NFIP requires a stronger financial framework built on expanding our portfolio of actuarially-priced policies. Transferring more of the risk burden to the private capital markets continues to be part of that strategy,” said Roy Wright, director of the NFIP.

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https://www.insurancejournal.com/news/national/2018/04/05/485448.htm

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PROPERTY

  1. AOB REFORM  SB62/SB1168/HB7015

 

An onerous version of AOB reform is on the move in the Senate. SB1168, by Senator Steube, passed its second committee of three committees on February 6th, but no action last week. SB1168 also amends current law to provide that a misrepresentation, omission, concealment of fact, or incorrect statement on an insurance application may prevent recovery only if the misrepresentation, omission, concealment of fact, or incorrect statement directly relates to the cause of the claim. If the misrepresentation, omission, concealment of fact or incorrect statement directly relates to the cause of the claim, one of the following must apply:

  • The misrepresentation, omission, concealment, or statement is fraudulent or is material to the acceptance of the risk or to the hazard assumed by the insurer; or
  • If the true facts relative to the loss claimed had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have:
    • Issued the policy or contract;
    • Issued the policy or contract at a premium rate at least 20 percent higher than the rate actually charged;
    • Issued a policy or contract in as large an amount; or
    • Provided coverage with respect to the hazard resulting in the loss.

In addition, SB1168 also amends current law to prohibit an insurer from utilizing “managed repair” controls, such as requiring that a particular vendor make repairs to a dwelling insured on the basis of replacement costs. It also prohibits the insurer from even recommending or suggesting a particular vendor to make repairs to a dwelling insured on the basis of replacement costs.

 

The bill also requires the assignee to provide a copy of the assignment agreement to the insurer within the earlier of 7 days after execution of the agreement, or 48 hours after beginning nonemergency work if the insurer has a facsimile number and e-mail address on its website designated for the delivery of such documents. It allows the insurer to inspect the property at any time. If the insurer fails to attempt in good faith to inspect the property within 7 days after learning of the loss and promptly deliver to the assignee written notice of any perceived deficiency in the assignee’s notice or the work being performed; however, the failure may be raised to estop the insurer from asserting that work done was not reasonably necessary or that the notice was insufficient.

SB1168 passed the Judiciary committee with 7 yeas, and 3 nays in week five. Committee Chairman Greg Steube pushed an amendment that eliminated language that prohibits carriers from factoring any attorney fees into their premium. The bill now has one more committee in the Senate. We continue working to stop this bill from advancing.

Industry’s preferred AOB bill is SB62 by Senator Hukill, which has not been scheduled for a committee hearing and is unlikely to advance given the composition of the Banking & Insurance committee in the Senate.

 

Meanwhile, the Florida House of Representatives AOB reform HB 7015 by Representative Trumbull was sent to the Senate in the first week of the legislative session. While the House version is not a perfect solution, the bill makes significant changes to the way property repair vendors are restricted in their use of an “assignment of benefits” or “AOB.”   The bill requires disclosures be provided to insureds before entering into an AOB. It also moves to a “loser pays” attorney fee system. The House legislation provides the insured with an opportunity to rescind the assignment within 7 days of entering into the contract with the vendor. Further, the bill increases consumer protections and required vendors to provide written estimates of the work to be completed and required the assignee to notify the insurer of the assignment within 3 days of it being executed.   While it would be better to eliminate attorneys’ fees to repair vendors altogether, this bill is an improvement over the current system.

 

In the end, it is unlikely that the House and Senate versions of AOB will match up. But if the House bill moves toward the Senate version, it will be a weaker product and possibly even onerous.

 

  1. AOB MANAGED REPAIR WITH RESTRICTIONS SB1140

 

B1140 by Senator Garcia specifies requirements for an insurer offering residential coverage that places a restriction on the policyholder’s choice of contractor necessary to repair damage covered by the policy. Those restrictions would require the use of a contractor with an active license, prohibiting the contractor from placing a lien on the covered property for the work performed, ensure that all necessary permits are obtained for the work being performed, and guarantee the quality of work performed by the contractor under the policy for 3 years after all work has been completed.

 

The bill has not been scheduled for a committee hearing and has no House companion.