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July 20, 2020 • Vol. 98 No. 14
Contents
News & Markets
News & Markets
News & Markets
How the E&S Market Confronts Florida-Specific Challenges
Citizens to Resume Policy Cancellations, Nonrenewals on Aug. 15
Appeals Court Rejects Florida Hotel’s Coverage Interpretation in Suit Against Insurer
6 8
New Florida Law Requires Review of Coastal Construction Projects
10
Suspension of Florida Attorney Behind Thousands of Insurer Lawsuits Puts Focus on Legal Abuse in State
13 13
Citizens Launches New Online Agent Learning Center
14
Best: Reinsurance Pricing, Pandemic Add to Woes for Florida Property Insurers
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18
Florida Congresswoman Requests Longer Hurricane Season
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Florida Residual Workers’ Comp Plan Issues $27.6M in Premium Refunds
Departments 4 People
2 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
INSURANCEJOURNAL.COM
“THE DEDUCTIBLE INSTALLMENT PLAN WAS A GODSEND!”
September 10, 2017 was a day that Edie and Marvin Hartley will never forget. Hurricane Irma was rapidly approaching. The normally placid creek behind their home was rising. They took shelter upstairs as the creek water engulfed the first floor of their beloved home. Record-breaking wind driven rain severely damaged their roof, ceilings and their detached garage.
The Deductible Installment Plan is available only from Cypress Property & Casualty Insurance Company • If homeowners use one of our preferred vendors, their repair work can begin immediately while they pay their deductible in three installments. • No payment is due for the first six months. The last two payments are billed on an annual basis thereafter. Payments can be made sooner. • No fees. • No interest. • No credit check. • No increase in premium. • Applies to up to 2% of the hurricane or catastrophic event deductible for both HO3 and HO6 policies. • Available to all HO3 and HO6 insureds at no extra charge! To learn more: Call 1-877-560-5224 or visit www.cypressig.com/DIPFL A patent has been filed. Must use a Cypress approved vendor. Not applicable to HO4 policies. This document is a brief description of the DIP benefit and is not meant to be a contract, please refer to actual endorsement. Please refer to your policy for full terms and conditions.
WORKING TOGETHER. Phone: 877-560-5224 www.cypressig.com
“Cypress was an absolute pleasure to work with! Every Cypress customer service representative was so helpful and courteous. They were beyond generous with their time, explanations and finding us contractors to repair our home. All of the subcontractors were excellent.” – Edie Hartley, homeowner
People Florida
Steve Thompson
Insurance Office of America (IOA) promoted Steve Thompson to the newly created position of senior vice president of enterprise initiatives. Thompson joined IOA in 2017 as a managing partner over its program division. Thompson has worked in other capacities as well as programs during his tenure and in his new role he will oversee carrier relations, data, international capabilities, MGAs and programs. Prior to joining IOA, Thompson served as partnerships, programs and alliances executive at The Hartford, having had various roles over the course of his 20 years with the company. IOA is a full-service insurance agency founded in 1988 by John Ritenour and Valli Ritenour. IOA is ranked 13th on Insurance Journal’s 2019 Top 100 Independent Property/Casualty Agencies report. Headquartered in Longwood, Fla., part of the greater Orlando community, IOA has more than 1,200 associates located in over 60 offices in the U.S. and London. The board of directors of
United Insurance Holdings Corp., a property/casualty
insurance holding company based in Florida, appointed R. Daniel Peed as chairman of the board of directors and
chief executive officer, effective July 1, 2020. Peed most recently served as vice chairman of the company’s board of directors. Greg Branch, who has served as chairman of the board since the company’s founding in 1999, will remain a member of the board of directors and assume the title of chairman emeritus effective the same date. Peed succeeded John L. Forney, who stepped down as president and chief executive officer on June 30, 2020, to pursue other opportunities. Peed has an extensive background in the insurance marketplace spanning more than 30 years. He was a co-founder of AmRisc LLC, served as the president and chief executive officer from December 2000 to December 2018, and most recently served as AmRisc LLC’s non-executive vice chairman from December 2018 until December 2019. Peed has been vice chairman of the company’s board of directors since the acquisition of American Coastal Insurance Company in April 2017. Founded in 1999, UPC Insurance is an insurance holding company that sources, writes and services personal and commercial residential property and casualty insurance policies using a group of wholly owned insurance subsidiaries and one majority owned insurance subsidiary through a variety of distribution channels. The company currently writes policies in Connecticut, Florida, Georgia, Hawaii, Louisiana, Massachusetts, New Jersey, New York, North
4 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
Carolina, Rhode Island, South Carolina and Texas. From its headquarters in St. Petersburg, UPC Insurance’s team manages the insurance company, including sales, underwriting, customer service and claims.
Tom Brady
Centauri Specialty Insurance Holdings and its subsidiaries added Tom Brady as vice president of Claims and Rick Moore as vice president of Sales and Agency Relations. Brady joined the team in April 2020 and is responsible for all facets of the claims operations, including setting policies and procedures, TPA oversight, coordination of adjusters, and management of Centauri’s catastrophe preparedness program. Brady has more than 30 years of insurance industry experience. Prior to joining Centauri, he spent 10-plus years at IMS Claim and Catastrophe Services, a large regional catastrophe adjusting company, where he directed internal managers and field staff to meet operational, financial, and service requirements. In the event of a catastrophe, he would establish and deploy a field office with all essential resources. Early in Brady’s career, he was “in the field” where he managed a portfolio of
property, casualty and catastrophic insurance claims from filing through resolution for the state, region or nation, depending on the event. In addition to handling property claim files, he also represented carriers, alone or with counsel, in various pretrial hearings and mediations. He later became an agency owner in the state of Florida on both the captive and independent agency side. As a part of the leadership team, Moore is responsible for the growth and management of numerous sales channels, including expanding Centauri’s footprint within the independent, general agency and national partner network. In addition, Moore oversees agency relations, corporate marketing and communication for Centauri Insurance. Moore started his career at Progressive Insurance in Cleveland, Ohio, where he managed various aspects of service and sales throughout his eight-year career there. He later started an independent agency, reaching more than $10 million in premium sales with locations in three different states. Moore decided to sell his agency and joined Brown & Brown Insurance. At Brown & Brown, Moore managed various departments and served as the National Segment leader for Personal Lines and Small Commercial. Centauri Insurance is a property and casualty insurance company based in Sarasota, Fla., which currently operates across nine states with continual plans for expansion. INSURANCEJOURNAL.COM
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News & Markets
How the E&S Market Confronts FloridaSpecific Challenges By: Steven Finver & Albert Geraci
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xcess and surplus insurers provide critical coverage options for emerging, distressed or difficult-to-place risks throughout the United States. In the state of Florida, the E&S market offers a lifeline for many insureds seeking property and liability coverages, particularly as a firming insurance market leaves more and more businesses and individuals unable to find coverage in the standard marketplace. The importance of E&S markets to Florida property owners is easily understood. Florida is highly catastrophe exposed. With a tropical to sub-tropical climate and the longest coastline in the contiguous United States (approximately 1,350 miles), the state is particularly vulnerable to hurricanes, windstorms and flooding. Furthermore, more than 75% of 6 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
Florida’s residents live within 10 miles of the coast, according to USApopulation. org. As a very popular travel and retirement destination, Florida also boasts a plethora of multi-family habitational, restaurant and hospitality related businesses — entities that were already facing significant coverage challenges as we entered 2020. The market has tightened even further at mid-year, with those business segments now finding excess liability coverages difficult or impossible to place in the standard marketplace, particularly entities with assault and battery exposures. At mid-year 2020, if an insured located in the state of Florida has an exposure that involves eating, sleeping or drinking, the E&S market is likely to offer the best, and possibly the only, coverage option. Although some insureds may be reluc-
tant to secure coverage through non-admitted markets, their concerns are largely unwarranted. The E&S market is regulated differently from the admitted market; however, non-admitted carriers are regulated and overseen through 15 state stamping (or service) offices — para-governmental agencies located across the United States. Unlike admitted carriers, policies secured through non-admitted (E&S) carriers are not backed by state insurance guaranty funds, which cover all or a portion of insurance claims if an admitted carrier becomes insolvent. On the other hand, non-admitted carriers can offer nimbleness, speed and creativity. They are not encumbered by a lengthy state approval process. They have greater rate flexibility and the freedom to offer a broader range of insurance options, or even to create a customized policy. When E&S carriers spot a trend, they can immediately introduce a new solution. They are not subjected to the oftenlengthy state approval process required of admitted carriers. The E&S market is also well funded. Very few E&S carriers go out of business. According to the National Association of Insurance Commissioners, surplus lines direct premium volume was $49.9 billion at year-end in 2018, representing 7.4 percent of the $676.6 billion of total U.S. direct premiums written. While this percentage may seem small compared to the total, NAIC points out that without E&S, many insureds would not be able to secure coverage. Additionally, as of mid-year 2019, 98% of the surplus lines insurers had AM Best Long-Term Insurer Credit Ratings (ICR) of an A or higher, compared with 82 percent of the total P/C industry, further corroborating the segment’s ongoing financial strength. In the current challenging rate environment, it is important to keep in mind that while businesses and individuals may not be able to secure the coverage limits they desire in the non-standard market with the funds they have available, they will still find coverage where none may exist INSURANCEJOURNAL.COM
in the standard marketplace. For example, the admitted market generally will not place coverage for Florida radio towers, especially for those over 1,500 feet, due to the size, costs and damage if the structure falls. Similarly, companies that maintain radio towers also are untouchable within the standard market. But the non-admitted market can and will place these high-risk exposures. Another common coverage filled by non-admitted markets are high profile political rallies and concerts. Without the creativity of the E&S markets and the ability to craft policy wording to meet clients’ goals, these special events would not occur. For retail agents and brokers who are seeking coverage options for their clients in the non-admitted market, there are several important steps to take to ensure the best outcome: • Do your homework. Research the wholesalers ahead of time — make sure
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they are financially strong, well-regarded and offer the requisite expertise. Get to know the players. The stronger your relationship with a wholesale broker, the better the result. Once you have identified the wholesaler(s) you want to work with, get to know each of their office’s areas of strength and how well they align with your client needs. Put together a strong submission. The more information you provide to the wholesaler upfront, the quicker and more accurately they can respond. Allow sufficient time — wholesale submissions have increased by double digits for both commercial and personal lines. If in doubt as to whether a wholesaler offers the coverage you seek, just ask. The non-standard market exists to provide coverage for difficult-to-place risks, so there is virtually no risk that markets are unwilling to consider.
E&S acts as a safety valve for the insurance industry and our economy. While there are several differences between admitted and non-admitted carriers, E&S has the flexibility and creativity to provide the best coverage solutions for clients — options unavailable in the standard market. Retail agents and brokers who do their research in the non-admitted market, will find it is a strong and viable option to meet their clients’ insurance needs, in Florida and throughout the United States. Steven Finver and Albert Geraci both serve Florida independent insurance agents by assisting them with accessing and navigating the excess & surplus lines marketplace. Finver is RPS area vice president, based in Fort Lauderdale, Fla. He can be reached at (786) 924-7083 or Steven_Finver@rpsins.com. Geraci is RPS area president, also based in Fort Lauderdale. He can be reached at (954) 377-2025 or Albert_Geraci@rpsins.com.
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JULY 20, 2020 INSURANCE JOURNAL | FLORIDA | 7
News & Markets New Florida Law Requires Review of Coastal Construction Projects By Bobby Caina Calvan
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urther acknowledging that climate change is a growing concern in his state, Florida Gov. Ron DeSantis has signed into law a measure requiring public coastal construction projects to first be reviewed for impacts on the state’s fragile seashore because of rising sea levels. The signing was hailed by environmentalists as an important step in addressing the encroaching ocean in a state with more than 1,300 miles of shoreline and where two-thirds of the 22 million residents live along the coast. The bill was one of 28 signed into law by DeSantis June 30, including one that undoes a ban on sunscreen imposed by Key West. The ban was meant to protect fragile coral reefs from the possibly harmful chemicals contained in sun-blocking creams. DeSantis has tried to cast himself as a champion of the environment, particularly in his support of Everglades restoration and controlling algae blooms that have mucked up rivers, lakes and coastal waters. But environmentalists have been pushing the governor to act more aggressively in the arena of climate change by supporting alternative energy and reducing the state’s reliance on carbon fuels that contribute to climate change. The bipartisan bill DeSantis signed on coastal construction is limited to public projects that rely on state money. Under the new law, public construction projects would have to take into account rising sea levels, flooding and the potential for damage to increasingly fragile coasts. "The delicate relationship between our coastal communities and the environment requires that our Legislature take meaningful steps to ensure that coastal construction be completed with an understanding of sea level rise and an appreciation for protecting our natural resources," said state Rep. Vance Aloupis, a Miami Republican who got his party behind the measure. In the Senate, the effort was led by Sen. Jose Javier Rodriguez, a Miami Democrat 8 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
who has been wearing rain boots during recent legislative sessions to bring attention to climate change. "In a state where more than two-thirds of the population lives near the coast, requiring planning when state taxpayer dollars are spent on infrastructure in the coastal zone is a necessary and long overdue initial step in addressing the impacts of climate,’’ Rodriguez said. Rodriguez has said the measure is another baby step in a political climate that has made it challenging to take quick action on climate change. Environmentalists have called on the governor and the Republican-led Legislature to move more urgently. A legislative analysis estimated that property values in Florida could sink by more than $300 billion by the end of this century because of rising sea levels. Last year, the governor appointed a chief resiliency officer to help lead his administration in addressing climate change, but that official left earlier this year for a job with the Trump administration and the vacant position has not been filled. On the matter of sunscreen, skin cancer and coral reefs, DeSantis landed on the side of sun worshipers who the governor has now given tacit approval to slather away. Some lawmakers expressed doubt in
some studies that concluded that sunscreens containing oxybenzone or octinoxate do harm to coral. More persuasive, they said were the health risks posed by the sun to unprotected skin. There is indisputable evidence, they noted, that direct exposure to the sun’s rays increases the risk of developing skin cancer. Opponents of the bill asserted that there were products less harmful to the environment, including Zinc-based creams. And they argued that the measure was a preemption of local authority by a Legislature that shouldn’t be meddling in local affairs. Key West is a popular destination among fishermen. Snorkelers and scuba divers are also drawn to the reefs anchored offshore. The ordinance was set to go into effect on Jan. 1 of next year, but has now been preempted with the governor’s signature. Key West wouldn’t be the first place to ban sunscreen. Hawaii, the U.S. Virgin Islands, the Caribbean island of Bonaire and the archipelago nation of Palau in the western Pacific have all enacted sunscreen bans. Drug store chain CVS announced in August that it will remove the chemicals from 60 of its store brand sunscreen products, and it and other companies are now marketing mineral-based "reef safe’’ sunscreen. Copyright 2020 Associated Press. INSURANCEJOURNAL.COM
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News & Markets Suspension of Florida Attorney Behind Thousands of Insurer Lawsuits Puts Focus on Legal Abuse in State By Amy O’Connor
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Florida attorney who, with his firm, has filed thousands of assignment of benefit and first party lawsuits against Florida property insurers over the last several years, is fighting an emergency suspension granted against him by the Florida Supreme Court last month at the request of the Florida Bar. The move came in response to the Florida Bar’s 48-page June 4 petition alleging that Scot Strems, owner and sole named partner of Coral Gables-based Strems Law Firm, has been the respondent of several complaints before the Florida Bar and that he and his firm are “causing great public harm.” However, after the state high court issued the suspension, Strems responded with a motion to disolve it on June 26. In that filing, Strems’ attorneys argue that the alleged misconduct does not justify the emergency suspension. A court referee was then tasked with making a determination on the Strems’ motion that will be presented to the Florida Supreme Court. Meanwhile, Florida insurers are hoping the situation sheds light on the state's need to enact legal reforms.
Case Background
Strems’ firm was accused by the bar of engaging in “mendacious, bad-faith conduct” and making dishonest or even fraudulent statements to other parties involved in suits, including the court. The bar has also accused Strems of illegally filing multiple lawsuits on an individual policy claim, delaying and ignoring court deadlines, and violating court orders. “Mr. Strems sits at the head of a vast campaign of unprofessional, unethical, and fraudulent conduct that now infects courts and communities across the state,” the bar’s petition stated. The bar claimed that given the pattern of conduct by Strems and his firm and the “clear and unquestionable” harm to the 10 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
public, the immediate suspension was warranted. Strems’ attorney, Mark Kamilar, said in an email to Insurance Journal after the suspension that, “Scot Strems strongly disputes the allegations.” The firm’s website states the firm has approximately 20 attorneys across six offices in the state and that it specializes in first party property claims, in which it represents homeowners against their property insurers. A former associate of the firm testified it had filed more than 10,000 suits against Florida property insurance companies. “Despite the professional veneer of the firm’s website, dockets across Florida are replete with orders sanctioning Mr. Strems and his subordinates for the delay, misrepresentation, and bad faith that have become the hallmarks of their firm’s litigation practice,” the bar stated in its petition. The petition says Strems’ firm files separate lawsuits against insurers for individual claims, “even though they occur under the same policy, at the same property, and at the same time.” After these cases are filed, water mitigation firm All Insurance Restoration Services Inc. (AIRS), subsequently files multiple lawsuits in county courts relating to the same losses. The bar petition states that while SLF does not typically represent AIRS, the water mitigation firm will proceed under an AOB that has been executed by SLF’s clients. “The end result is that the involvement of respondent and his firm results in four separate lawsuits filed resulting from the same alleged occurrence,” the bar petition said. The bar cited a motion from Avatar Insurance Co. that the firm has worked in tandem with AIR and the public adjusting firm Contender Claims Consultants, noting the entities are involved in “literally thousands of claims together, more likely tens of thousands of claims.” The 700 pages of documents that accompanied the petition as evidence included: • More than 30 orders and other filings of
case dismissals with prejudice because of “willful violations” of a court’s orders or purposeful delays, as well as sanctions against the firm, involving 18 cases against eight different insurance companies. • A class action lawsuit by claimants who say they were illegally solicited and profited off of by the firm and other third parties. • Affidavits by two Thirteenth Judicial Circuit Court judges who have handled hundreds of cases brought by Strems. • A deposition of the firm’s former litigation manager who testified that the firm has handled as many as 10,000 suits at once, that Strems' attorneys for the firm didn’t keep track of their time and fee sheets stating time spent on cases were falsified. The bar said “numerous parties have been and continue to be injured by [Strems'] bad faith,” including: insurers and their counsel who must litigate these cases; the courts; the public and Florida homeowners “whose premiums ultimately fund both sides of SLF’s cases;” and the clients of Strems’ “who are sometimes conscripted (unwittingly or otherwise) into the firm’s conduct, and whose claims are frequently rendered worthless due to court sanctions.” Also cited in the petition are synopses of orders and other filings in 18 separate cases that “lay bare the pattern of unethical and unprofessional conduct by respondent and SLF.” “The orders … by no means represent the totality of sanctions issued against respondent and his firm. Indeed, the orders themselves make reference to yet more sanctions orders which are not addressed in this petition,” the bar stated. In an affidavit dated May 4, Judge Gregory Holder of the Thirteenth Circuit Court in Hillsborough County, Fla., said he personally had presided over hundreds of first party property claims cases involving Scot Strems or the Strems Law INSURANCEJOURNAL.COM
Firm. Holder said he and other judges in the court’s General Civil Division have had many conversations concerning the pattern and practice of Strems and the Strems Law Firm. “Universally, these discussions have noted his absolute violations of the Rules of Professional Responsibility and blatant obstruction of justice in virtually every case where he and his firm enter an appearance,” Holder stated. Holder also noted Strems’ conduct has resulted in “clear and unquestionable great harm to these Florida citizens who have chosen Mr. Strems and his firm to represent their interests.”
Affected Companies
Florida-based Security First Insurance Co. has litigated hundreds of Strems' cases INSURANCEJOURNAL.COM
and filed multiple sanctions against the firm. Representatives from the company told Insurance Journal the firm engaged in the aforementioned delay tactics on claims investigations, inflated or misrepresented claims, and delayed court proceedings like discovery efforts and depositions on claims lawsuits in attempts to increase its fee payouts. Security First currently has 209 open cases with the Strems firm. In January, Security First deposed former Strems' litigation manager and managing partner, Christian Aguirre, in a $321,000 fee dispute. Aguirre, who resigned from the firm in 2018, testified that at one point during his tenure the firm had as many as 10,000 lawsuits against insurance companies and that he personally handled as many as 700 in one year for the firm.
In the deposition, included as evidence in the petition for Strems' emergency suspension, Aguirre said the Strems firm did not instruct him to keep track of his time and the law firm billed for case meetings that never occurred. Bill Mitchell, head of the First Party Practice Group for insurance defense firm Conroy Simberg in Tampa, called the Strems Law Firm “the worst” in terms of firms that sue Florida insurers. He said he personally had multiple interactions with the Strems firm in cases he worked where its attorneys would fail to show up for examination under oath requests, depositions, and not respond to discovery. The goal of Strems, he said, was to incur larger fees by dragging out the cases. “When you negotiate a settlement
continued on page 12
JULY 20, 2020 INSURANCE JOURNAL | FLORIDA | 11
News & Markets continued from page 11
after a year and a half, they feel they are entitled to a higher fee of that settlement when in reality that claim could have been settled in 30 days,” Mitchell said. Roger Desjadon, CEO of Florida Peninsula Insurance Co., said the company has had a “magnitude” of lawsuits submitted by the Strems firm — and in many cases it has been multiple lawsuits on the same loss. He described Strems as among the top three or four firms filing lawsuits against his company. “This particular law firm is a very well recognized name in the state of Florida in the realm of lawsuits for profit, or the allegation of lawsuits for profit,” he said. On June 16, Citizens Property Insurance Corp. filed a civil complaint against the firm, alleging it has been a victim of an alleged scheme of sham lawsuits by the firm and others, and accuses Strems of racketeering activity.
Strems' Response to Bar Allegations
On June 26, Strems’ attorneys filed a motion to dissolve the June 9 order of suspension. His attorneys claim in the petition that Strems’ alleged misconduct by the bar does not warrant the emergency suspension, saying the bar’s petition is “deficient [and] does not demonstrate that Mr. Strems is causing ‘immediate and serious injury to a client or the public.’” In detailing reasons for why the suspension should be dissolved, Strems' attorneys said the bar cannot demonstrate a likelihood of prevailing on each element of the alleged rule violations, many of the allegations in the bar’s petition pertain to lawyers other than Strems, the allegations of a “duplicitous filing scheme” is not supported by facts, and that there is no evidence of an ongoing course of misconduct that is causing or likely to cause continued harm, among other arguments. “While the totality of the allegations may justify Bar scrutiny, they fall woefully short of justifying emergency suspension,” the petition reads. To determine if the suspension should stand, the Florida Supreme Court appointed a referee, Judge Dawn Denaro of the 11th Judicial Circuit Court of Florida, who 12 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
heard several days of testimony beginning July 7 from Strems’ attorneys and the Florida Bar regarding Strems’ case.
Denaro at a later date. Strems’ trial before the Florida Supreme Court is set for September.
“The vast majority of people do not file frivolous lawsuits. They do not file frivolous claims, but they’re all bearing the cost of a handful of bad actors.”
AOB and Lawsuit Abuse
Bar council Derek Womack said during the hearing that the conduct at issue in the case is “monumental.” “The evidence manifested a dizzying web of rule violations that has resulted in considerable harm to Strems law firms’ clients, the judiciary, and the public at large,” he said. As referee, Denaro was to make a recommendation to the Florida Supreme Court on if Strems' suspension should remain in place or be lifted based on the hearing testimonies and evidence presented from both sides. That recommendation had not been rendered as of press time.
What’s Next
The Supreme Court’s emergency suspension stated that Strems could no longer accept new clients and must cease to represent any clients as of July 10. In addition, Strems was required to notify all clients, opposing counsel and courts where he is counsel of record of his suspension. Additionally, Strems was required to provide the Florida Bar with the requisite affidavit listing all clients, opposing counsel and courts informed of the order also within 30 days. Strems was to stop disbursing or withdrawing funds from any trust account related to his law practice without approval, as well as other conditions related to financials in the June 9 Florida Supreme Court order. On July 10, Denaro granted Strems’ motion to access his personal bank accounts to pay staff and any personal bills. The court’s freezing of trust accounts related to the Strems Law Firm and Strems remain in place and will be considered by
Some in the insurance industry hope this situation will be an example to the Florida Legislature of how certain law firms are taking advantage of insureds and exploiting the state’s legal system for their own gain, and that lawmakers take steps to address the issue. “I would like to see a greater focus on how these sort of actions impact the industry as a whole and consumers as a whole, because unfortunately I think a lot of people have the misconception that when we, being insurance companies, pay fraudulent, frivolous or over-inflated claims, that it’s a victimless crime and that it doesn’t matter,” said Melissa Burt DeVriese, president of Security First. DeVriese said insurers in Florida are filing large rate increases because of losses related to excessive litigation like what was happening with Strems, and, “Guess who pays those rate increases? The consumer.” “The vast majority of people do not file frivolous lawsuits. They do not file frivolous claims, but they’re all bearing the cost of a handful of bad actors,” she said. “That’s what I’d like to see come out of this situation is a focus on bad actors, a focus on the cost drivers in the Florida market that are leading consumers to pay more for their homeowners insurance than they should be.” Desjadon said addressing the issues with this one particular law firm is a good step, but the problems won’t go away even if Strems is disbarred. He said the legislature needs to look at the one-way attorney fee statute and changing the formula of fee multipliers on first party lawsuits so attorneys are not incentivized to file frivolous claims. “I think that this for everyone really is kind of a wake-up call that something needs to be done, or the alternative is there will undoubtedly continue to be problems with pricing and problems with availability,” he said. INSURANCEJOURNAL.COM
News & Markets Citizens to Resume Policy Cancellations, Nonrenewals on Aug. 15
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itizens Property Insurance Corp., Florida’s insurer of last resort, will resume processing cancellations and nonrenewal notices next month after halting them back in March in response to the state’s coronavirus outbreak. The insurer said in an agent bulletin July 9 that it will resume the processing of cancellations and nonrenewals beginning Aug. 15, 2020. Citizens originally stopped these processes on March 27 to ease the burden for policyholders due to the impact of the COVID-19 health risk. The insurer said direct-billed customers with past-due premium accounts must make a payment to avoid cancellation by August 15. For policyholders who are
unable to pay their past-due amount, Citizens will allow them to make a payment arrangement. This option is available only to COVID-affected policyholders with past-due balances, and they must contact Citizens by August 15 to initiate the arrangement. Payment arrangement options are not available for new business or current policyholders who have less than three months remaining in their policy term. Citizens said it would immediately email impacted agents and provide policy lists and details regarding payment options, as well as mail/e-mail eligible past-due policyholders with payment options and related information. It will also contact via mail or e-mail ineligible policyholders information that their policy
will cancel if payment is not received by August 15. If a customer’s coverage is no longer needed, agents should cancel it in the PolicyCenter as soon as possible, Citizens said. Additionally, Citizens has developed special payment arrangements for eligible policyholders affected by COVID-19. Specific details are available on its website. The special payment arrangement will divide the past-due amount evenly by the number of months left in the term. The option is available for its commercial and personal lines products, except for new business or for current policyholders who have less than three months remaining on their policy term. Citizens will also resume processing cancellations and nonrenewals on August 15 for policies that do not meet Citizens’ underwriting guidelines. Citizens’ program for allowing agents to submit alternative documents and deferrals for new business applications will also end on August 15.
Citizens Launches New Online Agent Learning Center
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lorida’s Citizens Property Insurance Corp. has launched an online learning center for agents and licensed customer service representatives that offers online learning modules, recorded webinars, and registration for Citizens webinars and classroom training. The new Citizens Learning Center (CLC) was announced by the insurer on July 6 and can be accessed by agents through the Citizens website via the “Agents” page. Citizens said it will continue to send training bulletins and post webinar and class trainings on its “Training” page, with links directing users to CLC. The new learning center features numerous course options, the ability to request transcripts and design training playlists, as well as categories of training recommendations, required or suggested trainings. Agents can also register for webinars, earn badges for learning activities, and view their comINSURANCEJOURNAL.COM
Image Courtesy of Citizens
pleted courses. CLC offers mobile capability, which Citizens said enables access using mobile devices supported by iOS and Android. Noncredentialed APs cannot access CLC at
this time. Citizens soon will provide login credentials and a CLC webinar for these APs. Citizens said it will provide CLC webinars in the future. JULY 20, 2020 INSURANCE JOURNAL | FLORIDA | 13
News & Markets Best: Reinsurance Pricing, Pandemic Add to Woes for Florida Property Insurers
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redictions for a challenging Florida reinsurance renewal season came true this year as reinsurers tightened up pricing and capacity after several years of considerable losses in the state’s property market. And, ongoing challenges will further stress the market going forward. According to a new report on the Florida property insurance market from AM Best, elevated hurricane activity and rising claims severity brought on by social inflation have led reinsurers to increase rates by 25% or higher, with individual company rates varying considerably based on loss experience, risk appetite and financial condition. “The pressures have led to changes in reinsurers’ appetite, as they limit their own concentrations in this volatile state,” the Best Market Segment Report, “Multiple Threats Flank the Florida Property Insurance Market” states. “The hardening reinsurance market is becoming only more challenging amid the uncertainties surrounding the pandemic and its potential to further pressure the Florida market.” The Best report dissected numerous issues in Florida’s property insurance market, including higher reinsurance pricing and social inflation that continues to challenge the financial strength of Florida personal property writers and impact coverage availability and affordability in the state. These headwinds have become more complex amid the COVID-19 pandemic, the Best report found. Even before the pandemic, Florida insurers faced an uphill battle with the hardening reinsurance market. Best noted that despite the absence of a major hurricane in 2019, the combined ratio of 51 Florida-domiciled personal property insurers analyzed for the report, excluding Citizens Property Insurance Corp., was 14 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
107.7, remaining essentially flat compared with 2017-2018, when two major hurricanes made landfall. “Reinsurers have incurred considerable assumed losses in the past several years, owing to hurricane activity and rising claims severity brought on by social inflation,” said Chris Draghi, senior financial analyst, AM Best. “This loss creep could continue over the next few months, as the three-year statute of limitations to report a Hurricane Irma loss approaches in September.”
Pandemic Exposure
Many Florida personal property writers focus on lines of business that have been relatively unaffected by the COVID-19 pandemic, with regard to covered losses (i.e., homeowners, fire and allied lines), according to the report. AM Best expects any pandemic impact to be moderate, given that most carriers with commercial policies require physical loss or have exclusionary language for viruses. “The majority of current news centers on business interruption losses, in which this composite group of companies has a more limited presence,” Best said. “Nonetheless, some carriers have expanded into smaller commercial lines in an effort to improve product diversification and therefore profitability. AM Best expects any impact to be moderate, however, given that most carriers’ policies require physical loss or have exclusionary language for viruses.” However, the economic downturn has the potential to influence premium collection, which would affect cash flow and liquidity. Best said 31 of the 51 companies it covered in its report had no common stock exposure, while 15 had moderate exposure of under 20% at the end of 2019. Another area of concern, Best notes, is
the risk of additional losses as the state enters peak hurricane season. “An increase in storm activity could lead to more accumulated insured losses for the year, and the COVID-19 crisis as the potential to amplify damages,” Best said. Lower levels of hurricane supply inventories due to the pandemic, as well as the potential for elevated loss adjustment expenses and repair costs from social distancing, etc., could further complicate the already tenuous situation. However, many insurers have benefited from investing in technology, i.e. electronics claims processing, online assessments, as well as aerial imagery and drones.
AOB Relief
The market has experienced some relief from long-standing assignment of benefits issues thanks to reforms passed in 2019. Best noted that companies have noticed a slowdown in AOB-related claims, “but more work is required.” The reforms, while creating a more level playing field for AOB-specific incidents, did not entirely halt social inflation pressures, Best said. “It does not address first-party litigation, which presents the same severity and one-way attorney fee issues but without an assignment of benefit,” Best said. Reforms introduced this year to address that issue did not pass, but Best said attention to the issue will likely continue as property insurance rates rise statewide. Best said insurers it rates “have developed ways to mitigate exposure by managing their geographic distributions and risk accumulations, in addition to strengthening their underwriting guidelines and raising rates.” The rating process includes consideration of the current market’s impact on ratings, but also the potential responsiveness and execution of corrective plans to circumvent pressures in the future.
Ongoing Challenges
Still, Best noted that the operating performance of Florida personal property INSURANCEJOURNAL.COM
writers has deteriorated thanks to the ongoing challenges. Combined ratios of the composite 51 insurers was over 100 for each of the last four years. And, “despite the absence of a major hurricane in 2019, the composite’s combined ratio remained stated at 107.7, compared to 107.7 in 2017 (Hurricane Irma) and 108.0 in 2018 (Hurricane Michael).” “The unprofitable results in 2019, despite a considerably more benign hurricane season, speak to the difficulties insurers are facing beyond the weather,” Best said. A combination of the rising severity of claims through AOB and first-party litigation, margin-crunching reinsurance costs, and adverse development all play a role. Noncatastrophe water and roof claims development have also seriously impacted insurers results. “Not only must insurers contend with rising claims severity owing to growing net loss and loss adjusting expenses from social inflation, but they must also deal with rising reinsurance costs, further narrowing margins." Compounding the situation is the need for insurers to purchase prudent reinsurance catastrophe protection despite the elevated costs. Should insurers be unable to do so economically because of rising losses, more capital may be at risk, diminishing overall balance sheet strength, Best said. As a result of these issues and corresponding insurer consolidations that have taken place, Best said it expects the state’s residual market, Citizens Property Insurance Corp., will continue to grow. “The growth may not be viewed as the best outcome, but Citizens may prove to be well positioned to service disINSURANCEJOURNAL.COM
placed policies while the market makes its way through this tumultuous time. Market pressures are expected to continue in the near term, making more liquidations, mergers, and displacement of insureds a distinct possibility,” Best said. Best said capital may become more exposed to severe events as the price of reinsurance goes up and the total limit of
cover purchased declines. “Insurers must carefully review and use sophisticated modeling to make effective managerial decisions,” Best said. “Developing appropriate risk management programs for current and emerging risks through innovative solutions and efficient use of technology across the organization is vital.”
JULY 20, 2020 INSURANCE JOURNAL | FLORIDA | 15
News & Markets Appeals Court Rejects Florida Hotel’s Coverage Interpretation in Suit Against Insurer
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recent opinion by the Eleventh Circuit Court of Appeals involving a case against the insurer of a Florida By Viviana Loshak, Esq., hotel could clarify an issue of sublimits and have a significant impact on how policies are written in the future, including policy endorsements. In the case, StarStone National Rory Eric Jurman, Esq., Insurance Co. v. Polynesian Inn, LLC, et al., the court affirmed summary judgment in favor of insurer StarStone and against insured, Polynesian Inn, and James Wyman, Esq. LLC d/b/a Days Inn of Kissimmee (Polynesian), and Andrew James Bickford. The Atlanta-based federal court held there is no coverage under StarStone’s policy for the underlying incident involving a murder and attempted murder on the property of an insured hotel. In the opinion, the Eleventh Circuit adopted StarStone’s proposed definition and interpretation of the term “sublimit” thereby providing clarity to insurers, insureds, and the public at large, on a term frequently found in insurance policies, but that Florida courts had never before defined.
Case Background
The underlying incident involved a murder and attempted murder of two men at a Florida Days Inn hotel, operated by Polynesian, resulting in wrongful death 16 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
and negligent security claims. Specifically, in April 2017, “a woman wielding a knife attacked Bickford and Zackery Ganoe while they were guests at a hotel operated by Polynesian in Kissimmee, Florida.” Polynesian was insured under a primary policy with $1 million in limits applicable to each occurrence. However, for assault and battery offenses, the limits were $25,000 per offense, per an endorsement – the “A&B Endorsement.” StarStone insured Polynesian under an excess policy and the policy did not provide coverage for any claims that were subject to a “sublimit of liability” in the primary policy. StarStone argued the $25,000 limit applicable to assault and battery offenses under the A&B Endorsement was a “sublimit” in the primary policy and, therefore, its excess policy provided no coverage. Polynesian and Bickford argued the limit in the A&B Endorsement was not a sublimit, but rather, was a separate standalone limit. The Middle District of Florida granted summary judgment in favor of StarStone, which was appealed to the Eleventh Circuit.
Circuit Court Decision
The Eleventh Circuit held that the definition of “sublimit” advanced by StarStone and adopted by the district court, i.e. that a sublimit caps a carrier’s
exposure, or existing coverage, at an amount less than the otherwise applicable policy limit, is consistent with the ordinary meaning of that term, as reflected in legal and non-legal dictionaries. The Eleventh Circuit acknowledged that “Florida courts commonly adopt the plain meaning of words contained in legal and non-legal dictionaries,” (Hegel v. First Liberty Ins. Corp.) despite Polynesian and Bickford’s arguments to the contrary. The Eleventh Circuit rationalized that the $25,000 limit resulting from assault or battery would typically have been covered under the primary policy’s general $1 million per occurrence limit for “bodily injury.” The operation of the A&B Endorsement is to cap the primary carrier’s liability for that subcategory of loss to $25,000. As aptly noted by the Eleventh Circuit, “[i]n other words, the effect of the A&B Endorsement was to cap existing coverage for a particular subcategory of loss, not to create a new category of coverage that did not exist before the A&B Endorsement.” The appellants argued that if a limit is not subordinate to another limit, it is a standalone or separate limit, even if it is lower than some other limit in the policy. They argued that because A&B Endorsement is not expressly made subject to the $1 million-per-occurrence limit, it cannot be a sublimit of that limit. The Eleventh Circuit dismissed Polynesian and Bickford’s arguments, labeling them as “convoluted.” The Eleventh Circuit stated it “fail[ed] to see why these facts would cause an ‘ordinary person’ to view the A&B Endorsement as something other than a sublimit.” In the court’s words, “Appellants’ own convoluted interpretation of the A&B Endorsement ‘transcend[s] the common understanding of the ordinary person.’” The court further INSURANCEJOURNAL.COM
noted appellants’ proposed interpretation is inconsistent with the policy as a whole. The purpose and effect of the A&B Endorsement as a whole is to cap existing coverage for bodily injury for assault and battery offenses (which would otherwise be subject to the each occurrence limit of $1 million), to $25,000, not to provide additional coverage for that loss. The policy as a whole ensures that StarStone does not take on greater risk with respect to certain subcategories of loss unless there is some additional agreement to cover that loss. Under appellants’ proposed interpretation, StarStone’s excess coverage responsibilities would be triggered at $25,000 for losses resulting from assault or battery, but at $1 million for nearly every other type of loss. That result is “plainly inconsistent” with the intent of the StarStone policy as a whole.
Case Implications
In StarStone v. Polynesian, the Eleventh Circuit has squarely held what constitutes a “sublimit” and provided a definition therefore that can be applied to differing circumstances and scenarios. The definition can be used by insureds, agents, and brokers as a guide to assess what limit is a sublimit and assure there is proper excess coverage for the same. Insureds, brokers INSURANCEJOURNAL.COM
and agents should also take a look at their policies in play, applying the definition set forth by the Polynesian opinion, and make sure they have appropriate coverage. If not, sublimits or specific coverages should be endorsed to assure coverage.
“The effect of the A&B Endorsement was to cap existing coverage for a particular subcategory of loss, not to create a new category of coverage that did not exist before the A&B Endorsement” Finally, the opinion provides guidance in what the Eleventh Circuit deems to be a “reasonable interpretation” of a policy provision. While both StarStone and Polynesian provided proposed interpretations for the policy provisions at issue, the Eleventh Circuit unequivocally held that the proposed interpretation of Polynesian was such that no ordinary person would have interpreted the policy in such a fashion. In an effort to garner coverage, insureds aver various proposed interpretations of policy to create an ambiguity in a policy so that the ambiguity is construed against the insurer as the drafter, and in
favor of the insured. The opinion, however, sends a clear message and signal to policyholders, agents, and brokers that not all proposed interpretations of a policy provision will be sufficient to create an ambiguity in a policy; it is only when there are two or more reasonable interpretations of a policy. There are various learning points from the StarStone v. Polynesian opinion that can and will be used in various future claims, cases, and coverage disputes. As discussed above, detail to the Eleventh Circuit’s opinion should be had to determine what coverage was obtained and intended, whether any limits need to be endorsed, and at what point an excess policy’s limits attach.
Editor's Note: Loshak, Jurman, and Wyman represented StarStone in this case. Viviana Loshak is a partner with Hinshaw & Culbertson. She represents clients in commercial litigation, focusing on insurance-related matters. She may be reached at: vloshak@hinshawlaw.com. Rory Eric Jurman, partner with Hinshaw & Culbertson, provides counsel to Fortune 500 companies, insurers, and self-insureds. He may be reached at: rjurman@hinshawlaw.com. James Wyman, counsel with Hinshaw & Culbertson, is an appellate practitioner and board certified by The Florida Bar in Appellate Practice. He can be reached at: jwyman@hinshawlaw.com. JULY 20, 2020 INSURANCE JOURNAL | FLORIDA | 17
News & Markets Florida Congresswoman Requests Longer Hurricane Season
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ven though the six-month Atlantic hurricane season lasts as long as a typical Major League Baseball season, a Florida congresswoman thinks it needs to be longer. Democratic U.S. Rep. Stephanie Murphy sent a letter to the National Oceanic and Atmospheric Administration June 17 requesting that the start of the official hurricane season be in mid-May. The current season goes from June through November, but Murphy said there has been at least one named storm before June 1 in each of the past six years. In 2020, three tropical storms – Arthur, Bertha and Cristobal – formed in midMay and the beginning of June, she said. “This presents a practical problem, because government officials and residents in hurricane-prone states use this season to inform their funding choices, public awareness campaigns, and preparation decisions,” Murphy said in the letter. “Accordingly, an official season that does not accurately predict major storm activity could result in readiness being compromised and people and property being harmed.” NOAA received the congresswoman’s letter and the agency looks forward to discussing the topic with her, spokesman Christopher Vaccaro said. Although several tropical storms have formed in the Atlantic before June
1 in recent years, most of them have been “marginal in their structure” and improved satellite monitoring has likely led to an increase in short-lived, weak storms being named by the National Hurricane Center in recent years, said Phil Klotzbach, a research scientist at Colorado State University. There has been only one named hurricane before June since the satellite era started in 1966 – Hurricane Alma in 1970. “I don’t think there is any reason to lengthen the hurricane seaon, since we haven’t had a hurricane in May in 50
years,” Klotzbach said in an email. Even though Bertha almost flooded Brian McNoldy’s home last May a day before it became a tropical storm, the University of Miami senior research associate does not think the season needs to be extended. “Hurricane season was also never intended to include … all of the activity, just the majority of it,” said McNoldy, who works for the Rosenstiel School of Marine & Atmospheric Science. “Having some outliers is fine.” Copyright 2020 Associated Press.
Florida Residual Workers’ Comp Plan Issues $27.6M in Premium Refunds
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early 13,000 policyholders of the Florida Workers’ Compensation Joint Underwriting Association (FWCJUA) will receive workforce premium refunds totaling $27.6 million over the next few months. According to the Florida Department of Financial Services, FWCJUA, the state’s self-funded residual market, recently authorized a policyholder refund of $6.4 million for the 2013 policy year, as well as a $21.2 million refund to certain policyholders that were covered under policies during the years 2001 to 2007 and 2012. In many 18 | INSURANCE JOURNAL | FLORIDA JULY 20, 2020
circumstances, these refunds were provided in addition to other distributions that were made available in years past. The recent distributions were made possible due to FWCJUA’s accumulated surplus and positive financial position, DFS said. The Florida Legislature created FWCJUA in 1993 as a self-funding plan to provide workers’ compensation and employer’s liability insurance to employers who are required by law to maintain such insurance but are unable to purchase insur-
ance through the voluntary market. The FWCJUA was designed to depopulate the Florida workers compensation residual market and invigorate the competitive or voluntary market. The operation of the FWCJUA is subject to the supervision of a nine-member board of governors, eight of whom are appointed by and serve at the pleasure of the Financial Services Commission. The ninth board member is the Insurance Consumer Advocate, appointed by Florida CFO Jimmy Patronis. INSURANCEJOURNAL.COM
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