Florida Property Insurance Bill SB 408 Becomes Law

Gov. Rick Scott Signs Major Reform Legislation

In this AP file photo, Florida Gov. Rick Scott, right, delivers a speech to the Florida legislature in Tallahassee, Fla. (AP Photo/Chris O'Meara) In this AP file photo, Florida Gov. Rick Scott, right, delivers a speech to the Florida legislature in Tallahassee, Fla. (AP Photo/Chris O'Meara)

When Florida Gov. Rick Scott signed SB 408 today, he said, “A healthy, stable and competitive private insurance market is critical to the success of Florida, given the hazards we face. I commend the Florida Legislature, especially Sen. Richter and Rep. Wood, for bringing this important legislation forward.”

The bill, which addresses cost drivers in an attempt to reform Florida’s unsteady property insurance market, became effective upon the governor’s signature. As it made it way through the legislative process it faced strong opposition from various quarters, most notably from Sen. Mike Fasano, R-New Port Richey. Fasano fought many of the bill’s provisions and as recently as this week was urging Scott to veto it.

A synopsis by Thomas J. Maida and Paul Lowell of Foley & Lardner LLC details a number of the significant reforms in the legislation, including:

  • Expanding exclusions from losses covered by the Florida Hurricane Catastrophe Fund to include losses caused by perils other than a covered event, such as fire, theft, flood or rising water, as well as amounts paid for waivers of deductibles and bad faith awards.
  • Limiting public adjuster compensation for reopened or supplemental claims to 20 percent of the claim payment (10 percent for Citizens Property Insurance Corp. claims) and requiring additional disclosure statements and notices to certain parties. 
  • Requiring insurers to provide two replacement cost coverage options for payment of personal property insurance claims. The first option pays the full replacement cost without reservation. The second option pays the depreciated value and holds back the remainder of coverage until the policyholder provides receipts.
  • Requiring a policyholder to file windstorm and hurricane claims within three years.

Rates were addressed in several portions of the legislation. SB 408 reinstates the requirement that carriers submit rate change requests using the file-and-use process until May 1, 2012. In file-and-use, an insurer must receive approval from the Office of Insurance Regulation (OIR) before changing its rates. The bill allows carriers to seek rate increases up to 15 percent to adjust for reinsurance costs; the OIR has 45 days to approve or disallow the request.

Follow the Progression of SB 408 Through the Florida Legislature

The bill increases the minimum surplus requirements for new residential property insurers (those approved on or after July 1, 2011) from $5 million to $15 million. For insurers that hold a certificate of authority prior to July 1, 2011, the surplus requirement gradually increases to $15 million over the next decade.

SB 408 also addresses sinkhole claims, which have proliferated in Florida in recent years. Carriers sought to have the mandatory coverage language deleted but settled for language specifically defining “structural damage” to narrow the definition of a sinkhole loss. Additionally, the new bill requires a policyholder to pay 50 percent of sinkhole testing costs up to $2,500 if the policyholder requests testing after an insurer denies the sinkhole claim; sinkhole claims must be filed within 2 years of the covered loss.

The governor’s approval, which was universally expected, brought kudos from major insurance groups and others:

Florida Association of Insurance Agents Senior Vice President of Public Affairs Kyle Ulrich: “By signing Senate Bill 408, Governor Rick Scott has taken necessary and long overdue actions to stabilize Florida’s property insurance market and increase competition in the marketplace. We applaud Governor Scott for taking this step to provide necessary relief to Floridians looking for more affordable options to insure their property. 

“State Sen. Garrett Richter, State Rep. John Wood and legislative leadership deserve high praise for tackling this complex issue. We sincerely appreciate their hard work to craft this comprehensive and critically needed reform plan to spur recovery in our insurance market.

“After enduring years of misguided policies that have wrecked our homeowners’ insurance market, this new law will go a long way in repairing the serious damage that has been done and sends a strong signal to the world that Florida is open for business. That is good news for consumers who will benefit from Governor Scott and the Legislature’s action to promote the needed stability and predictability in the marketplace.”

Florida Insurance Commissioner Kevin McCarty: “I commend Governor Scott for his leadership during the legislative session and for signing SB 408 relating to property and casualty insurance.  This bill focuses on addressing cost drivers in the system and will yield long-term benefits for Florida by stabilizing the property insurance market and attracting new capital investment to our state.” 

National Association of Insurance and Financial Advisors- Florida spokesman Bob Lotane: “We applaud the Florida lawmakers who seriously weighed the issues to address the challenges that confront our property insurance markets rather than those who cast an eye toward the next political office and look to score cheap political points. 

“Florida faces an array of unique natural risks and this legislation will help us continue to protect Floridians property while also attracting badly needed competition and capital to our state.”

The American Consumer Institute Center for Citizen Research President Steve Pociask: “It is my strong view that SB 408 represents meaningful and pro-consumer reforms that will encourage competition, increase policyholder surplus and protect consumers from insurer insolvencies.” 

Property Casualty Insurers Association of America Assistant Vice President and Regional Manager William Stander: "PCI thanks Gov. Scott for signing SB 408, which is a major step forward toward restoring private, market-based solutions in Florida. This new law will address the concerns of consumers and policyholders about the cost of property insurance in Florida and help stabilize the state's insurance marketplace.

"We also commend the legislative leaders who led the charge for reform, Sen. Garrett Richter (R-Naples) and Rep. John Wood (R-Haines City), and the overwhelming majority of Florida's legislators who voted for this important legislation. The fact that the House supported the bill 85-33, and the Senate passed it 26-11, demonstrated broad support for moving Florida's insurance market forward.

"SB 408 will protect insurance consumers by addressing many of the cost drivers that push rates higher. The bill will make it an unfair and deceptive trade practice for public adjusters to mislead people at a time when they need help the most. It also will cap public adjuster fees, meaning more settlement money in the hands of consumers, while taking measures to ensure that properties are properly repaired, meaning safer homes and better resale values.

"This law will help restore a healthy, stable and competitive insurance market that provides economic security and peace of mind to policyholders. It is an excellent example of how government, industry and the people of Florida can work together to stabilize and improve the state's insurance market. It is a common-sense, long-term solution that utilizes market-based solutions and means stronger homes and safer families."

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