Quote Online NOW at www.gicunderwriters.com
March 7, 2022 • Vol. 100 No. 4
Contents
News & Markets
Courts & Torts
Condos & Climate
Rough Seas: More Florida P/C Insurers Struggling to Stay Afloat
Insured Also Has Some Responsibility in a Claim: Federal Appeals Court Finds GEICO Did Not Act in Bad Faith in Fatal Florida Crash
New Inspection Law and Lending Rules Could Stifle Loans, Insurance for Florida Condos that Need Repairs
4 5
Sign of the Times: Six Carriers Stop Writing or Non-Renew in Florida
Fraud Report
6
State Farm Goes After Chiro Clinics, Charging Fraud in Gaming Florida's No-Fault Auto Insurance System
16
8
17
10 Florida Courts Seeing
UN’s Global Climate Change Report Shows Irreversible Changes Already Disrupting Florida
Things Insurers’ Way in Recent Cases
12
Florida Lawsuit Charges United P&C With RICO Violations in Widespread Claims Denials
13
After Months of Decline, Litigated Claims Spiked in January
13
Insurers for Law Firm, Engineers in Collapsed Condo Settle with Victims’ Families
Departments 14 People INSURANCEJOURNAL.COM
15 Business Moves
18 Declarations & Figures MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 3
News & Markets
More Florida P/C Insurers Struggling to Stay Afloat By William Rabb
J
ust as many Florida insurance industry veterans had predicted, a major property insurer has faltered into insolvency, and five others have stopped writing new business in the Sunshine State’s darkening insurance arena. St. Johns Insurance Co., one of the larger property/casualty insurers based in Florida, will soon be liquidated. It’s the first insurer to fail this year but the fifth in the last 30 months. The Florida Department of Financial Services posted a notice in late February that a judge in Leon County, Florida, had appointed the department as receiver for the company. DFS will now take steps to 4 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
liquidate the carrier’s assets. The news comes less than two weeks after the Demotech rating agency withdrew St. Johns’ financial stability rating, citing a lack of adequate reserves. Slide, an insurtech company based in Tampa, has agreed to take on many of the St. Johns policies in Florida, and policyholders will be moved to Slide starting this week, DFS said.
“The department has motioned the court to approve a transition plan that would provide transition policies to Slide Insurance Company and provide policyholders with continuous coverage starting on March 1, 2022,” DFS said on its website. The liquidation order means that the Florida Insurance Guaranty Association will cover existing claims. St. Johns also wrote policies in South Carolina and that state’s insurance guaranty association will take action to cover existing claims. St. Johns announced earlier this month that it would stop writing new business in Florida on Feb. 15. Five other carriers have announced similar plans and a sixth will not renew thousands of policies. The insolvency is the surest indicator yet of the state’s worsening insurance market — a market that some longtime industry experts have said is now in meltdown, thanks in part to hurricane losses, fraudulent roof claims and excessive claims litigation. Adding to the concerns was the fourth quarter financial report from Universal Insurance Holdings, parent company of Universal Property & Casualty, Florida’s largest private carrier. The company announced a $64.5 million loss, before taxes, for Q4 2021. The firm’s combined ratio, considered a key measure of profitability, also rose significantly for the quarter, to 131%, seven points above Q3 in 2020. Universal’s financial report attributed that to a strengthening of its reserves, the result of inflationary pressures and higher reinsurance costs. For the year, Universal’s combined ratio improved over 2020’s number, but was still above 100%. St. Johns is smaller than Universal but still significant, with some 160,000 policyholders. The head of Demotech said recently that the assumption of policies by
In the Red: Florida P/C Insurers in Liquidation Since 2019 Company
Date of Liquidation Claim Filing Deadline
St. Johns Insurance Co. Gulfstream Property and Casualty American Capital Assurance Corp. Windhaven Insurance Co. Florida Specialty Insurance Co.
February 2022 July 2021 April 2021 January 2020 October 2019
Feb. 27, 2023 July 28, 2022 April 14, 2022 Jan. 6, 2021 Oct., 20, 2020 INSURANCEJOURNAL.COM
Slide, led by Slide CEO Bruce Lucas, formerly with Heritage Insurance, may have been enough to help St. Johns survive. But the insolvency news ended those hopes. Insurance industry leaders are hoping that the state Legislature will now come to
the rescue for other insurers swimming in troubled waters. Senate Bill 1728, by state Sen. Jim Boyd, was expected to reach the Senate floor before the legislative session ends March 11, but it was not clear if it could also pass the House of Representatives by then.
The bill would attempt to limit some solicitation by roofers promising “free roofs” and would allow more insurers to pay the actual cash value for damaged roofs, not full replacement value, as is now the case for many homeowner policies.
Sign of the Times: Six Carriers Stop Writing or Non-Renew in Florida
S
ix property/casualty insurers, including one of the largest in Florida, recently announced they would stop writing new business in the state. These include St. Johns Insurance, United Property and Casualty, Florida Farm Bureau, Lighthouse Insurance, Avatar and TypTap. And Progressive Insurance said it would not renew thousands of policies in the state. Insurers and industry analysts said it’s a sign of the times and warned that more Florida companies are likely to pull back or fail altogether, thanks to hurricane losses, fraudulent roof claims and what they call excessive litigation that continues to drain carriers’ resources. United Property and Casualty Insurance Co., which has ranked in the top 10 homeowners insurers in Florida with more than 180,000 policyholders, stopped writing new policies in Florida this year, according to a recent memo the carrier sent to agents. “Following the unprecedented 2020 storm season, the significant increase in reinsurance cost, and the worsening litigation trends within many of our markets, UPC has made the difficult decision to suspend new business with effective dates of January 1, 2022 and later,” for homeowners, condominiums and for rental or non-owner-occupied properties, reads the bulletin. The bulletin was sent last November, but word only recently spread across the Florida insurance landscape. Also in November, Progressive Insurance said it would not renew HO-3 and DP-3 policies for homes with shingle roofs that are 16 years old or older. Notices to policyholders were to be sent INSURANCEJOURNAL.COM
last month. The memo did not indicate how many policies would be affected, but agents said the number could be as high as 56,000. “Unlike other home and property carriers who have left the Florida market, Progressive Home remains committed to the state, and we’re taking this difficult step now to ensure we can deliver on our long-term vision and continue to support agents like you for years to come,” reads the emailed memo to agents. Some state officials and industry advocates have said the pull-backs, along with major rate increase requests from other insurers, are the latest indications that Florida’s insurance crisis is worsening, likely leading to a market with only a handful of carriers left standing in years to come. “All of these companies suspending writing should be the canary in the coal mine for lawmakers,” said William Stander, director of the Florida Property and Casualty Association. Officials with the St. Petersburg-based United could not be reached for comment. But a filing made with the state Office of Insurance Regulation shows that the carrier is also asking for a 14.7% rate increase on its Guardian program for DP-3 policies, effective March 1, 2022 for new business, and April 1 for renewals. UPC blamed hurricane losses, higher loss-adjustment expenses and reinsurance costs for the rate hike. “There has been a material shift in late claim reporting patterns stemming from weather events in the last six years,” UPC wrote in an explanatory memo filed with OIR. The recent steps appear to be part of a larger strategy for United. In December,
the company announced it had agreed to sell UPC’s personal lines in Georgia, North Carolina and South Carolina to HCI Group Inc. The transaction will enable UPC “to reallocate capital from its personal lines portfolio to its fast growing commercial specialty property portfolio, which is underwritten by American Coastal Insurance Company,” United said in a statement. American Coastal is also moving to stem potential losses. A condominium in Bradenton Beach, south of Tampa, reported in November that American Coastal said it would not renew the condo’s property coverage late last year because the roofs were 13 years old. That forced the condo complex to seek new coverage, which ended up costing about 42% more in premiums, according to a Bradenton newspaper report. Most carriers that have suspended or reduced writing have been tight-lipped about their plans. Some have tried to put a positive spin on things. TypTap, founded in 2016, announced in November it would make an initial public offering in 2022. But in January, the company postponed the IPO because current market pricing “does not accurately reflect TypTap’s value.” Then, in late January, TypTap sent a memo to Florida agents: “TypTap experienced unprecedented growth in 2021. We credit our agents with this success,” the bulletin reads. “As a result of this growth, we are pausing our Homeowners (HO-3) new business for the entire state of Florida effective February 28, 2022.” Lighthouse Insurance also had stopped writing new business. Lighthouse said it would honor any policies quoted Feb. 15 or before, with effective dates on or before Feb. 28.
MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 5
Fraud Report
State Farm Goes After Chiro Clinics, Charging Fraud in Gaming Florida's No-Fault Auto Insurance System
I
n a federal lawsuit filed in February, State Farm Insurance accuses a chiropractor and his string of Florida clinics with widespread fraud by regularly and falsely claiming that car accident victims needed emergency care, so that the clinics could take advantage of the maximum reimbursement allowed under Florida’s no-fault insurance laws. “When the bills and supporting documentation across all claims at issue are viewed together do the patterns emerge, revealing the fraudulent nature of all the bills and supporting documentation,” reads the complaint against Ronald Utter, a Daytona Beach chiropractor who had his license revoked in 2020. The license revocation also means that Utter cannot legally continue to operate his 13 clinics, and many of the pending bills sent to the insurer are not reimburseable, the lawsuit said. Utter continues to hold himself out as a licensed doctor, according to the complaint. Altogether, State Farm was defrauded of more than $3 million, said the lawsuit. Florida’s statute governing no-fault accident insurance, also known as per6 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
sonal injury protection, allows victims of automobile accidents to have quick access to medical care for their injuries, without determining who may be at fault in the crash. Auto insurers are required to reimburse health care providers 80% of reasonable expenses, up to $2,500 in most cases. If the provider determines that the patient needs emergency care, the reimbursement limit rises to $10,000. The suit, filed by attorneys with the Holland and Knight law firm in West Palm Beach, argues that Utter’s chiropractic clinics followed a protocol designed to fraudulently upcode the treatment needed. Most patients were given strikingly similar evaluation procedures, treatments and diagnoses, despite wide variations in injuries, ages and circumstances. The clinics almost never ordered X-rays, but usually prescribed the more expensive magnetic resonance imaging (MRI), the complaint alleges. The clinics, in the Orlando, Daytona Beach and Tampa areas, advertised Utter as the “auto injury doctor.” Utter started one clinic under the name of No Utter
Way, but some now operate under the name Preferred Injury Physicians. The clinics paid selected physicians to certify patients as needing emergency care, the complaint notes. But many of these evaluations appear to be simply rubber stamps for the chiropractor’s initial exam. In many cases, it’s unclear that physicians actually checked the accident victims. Some reports from the initial chiropractor and the emergency evaluating physician are nearly identical, the suit said. Utter also cultivated injury lawyers to refer accident victims to his clinics, State Farm contends. “Defendants’ scheme is centered on cultivating, building, and maintaining a network of personal injury attorneys and other medical providers throughout central Florida to ensure a constant stream of patient referrals to the Defendant clinics,” the suit argues. Utter could not be reached for comment. He does not have an attorney listed in the case file in the U.S. District Court for the Middle District of Florida, and his company has not yet filed an answer to the complaint. INSURANCEJOURNAL.COM
YOUR PEACE OF MIND IS OUR PRIORITY www.stjohnsinsurance.com
St. Johns Insurance customers entrust us to protect what is dearest to them: their homes, their families and their futures. We believe every customer deserves the peace of mind that comes with knowing their largest investment is secured.
Westwood Center Three, 6675 Westwood Boulevard Suite 360 Orlando, Florida 32821 Phone: 866.304.7779 | Fax: 866.216.7749
St. Johns Insurance Company offers homeowners insurance in the states of Florida and South Carolina.
Courts & Torts Insured Also Has Some Responsibility in a Claim: Federal Appeals Court Finds GEICO Did Not Act in Bad Faith in Fatal Florida Crash
I
n a case that went all the way to the federal appeals court level, a panel of judges found that GEICO General Insurance adequately investigated a Florida claim after an insured motorist killed a cyclist, and did not act in bad faith. Driver Jonathan Ellis, who fled the scene after slamming into the bicycle in 2014, argued in a lawsuit that GEICO’s delay in addressing the claim and paying out on his insurance policy caused the victim’s family to reject the settlement offer, ultimately resulting in a $479,000 judgment against him. The 11th U.S. Circuit Court of Appeals said in an opinion posted in February that some delays did occur, partly due to slowness by the police in providing an accident report, but also because Ellis did not respond to repeated calls and letters from GEICO adjusters. The plaintiffs were Ellis and Joyce Brobeck, the wife of the deceased cyclist. The attorney for the plaintiffs contended that the adjusters could have done more to find Ellis and to uncover
8 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
information about the accident, including scouring his car while it was in a tow yard. The circuit judges disagreed, pointing out that GEICO offered to pay the limits of the policy as soon as it obtained the accident report — six weeks after the fatal crash. “Ellis overlooks the efforts GEICO did take to investigate the claim and confirm coverage,” the Circuit Court opinion noted. “Given the undisputed facts of this case, we agree with the district court that no reasonable jury could conclude that GEICO operated in bad faith under the totality of the circumstances.” The court further explained that an insurer “is allowed a reasonable time to investigate a claim; no obligation exists to tender policy limits in advance of a settlement offer without time for investigation.” The decision also gives some insight into what obstacles insurers and their adjusters face after an accident, and the grounds that some lawyers will use to argue that insurers may be guilty of acting in bad faith. After Ellis struck cyclist Timothy Brobeck on Sept. 7, 2014, Ellis immediately
left the scene, the court explained. He was arrested three days later and remained in jail for two weeks. Ellis later said that the police kept his cell phone, forcing him to get a new one with a new number. He also moved into the home of a friend or relative, and, on the advice of his lawyer, would not discuss the case with anyone, including his insurance company, he told the court. One GEICO adjuster said she was unable to reach Ellis or the attorney for the victim’s family. GEICO also said it never received a letter from the lawyer. Another adjuster said she attempted to find Ellis at his place of employment, but did not feel safe entering the windowless building. Ellis’ lawyer made that a key point in the bad-faith claim, and said the woman should have tried a little harder. The adjuster said she also went to Ellis’ apartment but no one was home. Finally, on Oct. 29 that year, GEICO obtained the accident report from the state police. The adjuster and her GEICO supervisor immediately decided that Ellis, GEICO’s policyholder, was 100% at fault.
INSURANCEJOURNAL.COM
GEICO quickly dispatched an adjuster to hand-deliver a check for the limits of the policy. The policy provided $10,000 in coverage per person and $20,000 per accident. Two weeks later, the family rejected the offer, saying it was a week too late. Hyram Montero, the Fort Lauderdale attorney for the Brobeck family, held the opinion that “GEICO did not act in good faith towards Ellis and did not treat this case with the urgency it required because it failed to follow up on leads that would have enabled it to make a timely tender of policy limits,” the Circuit Court recounted. Brobeck had a 16-year-old daughter with cerebral palsy. She and her mom had moved to Argentina before the accident so that the mom could care for her ailing mother. Florida insurance attorneys have long complained that some plaintiffs’ lawyers are too quick to file bad-faith claims, and that Florida law sets a low bar to bring such cases. In this case, the federal judges acknowledged that Florida courts have long recognized the good-faith duty that insurers owe to their insureds in handling claims. “Because the insured ‘has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement, the insurer must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured,’” the court wrote, citing a 2018 Florida case that also involved GEICO. Some cases are considered “ticking financial time bombs” due to the threat of a lawsuit, and delays in making offers, even when there’s no guarantee that the settlement will be accepted, could be viewed as evidence of bad faith, the circuit judges said. But the court said it also had to look at the totality of the circumstances. The key question is whether the insurer diligently — and with the same haste and precision as it would if it were in the insured’s shoes — worked on the insured’s behalf to avoid any excess judgment. GEICO did, in fact, act diligently, and INSURANCEJOURNAL.COM
immediately began an investigation into the claim after the accident, the judges said. The insured also has some responsibility, the court noted. “GEICO’s efforts in timely confirming coverage were frustrated by Ellis’s lack of communication,” the per-curiam opinion
reads. “While GEICO’s actions, not Ellis’, are the focus of the bad-faith case, Ellis’s lack of communication with GEICO can be considered when determining the totality of the circumstances.” The three-judge panel included Adalberto Jordan, Kevin Newsom and Susan Black.
100+ creative thinkers. 1,500 hours of brainstorming. 2,426 cups of coffee. 147 dry erase markers.
IT’S INSURANCE REIMAGINED. We’ve retooled, rewritten and redefined what an insurance company can be. First, we challenged
ourselves to provide industry-leading, lightning fast customer service and superior claims handling. Then we developed our proprietary Deductible Installment Plan. But that’s not all... We knew we could be even better, so we created our new, customizable bundles with broadened coverage limits, equipment breakdown coverage, service line coverage and expanded water backup – all of which add up to a lot more peace of mind at a much lower cost. We made these changes with you in mind. THE RELATIONSHIP AND RESOURCES YOU CAN RELY ON.
Phone: 877-560-5224 | www.cypressig.com
MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 9
Courts & Torts Florida Courts Seeing Things Insurers’ Way in Recent Cases
F
rom attorneys’ fees to water damage to reimbursement limits in no-fault auto insurance, Florida appeals courts have sided with insurers in several cases in recent weeks. Here’s a look:
Attorneys' Fees and Another ‘Ambiguous’ Settlement Offer
Attorneys' fees and the wording of policies and settlements continue to be significant legal issues for insurers and for plaintiffs. In many cases, insurers have lost claims disputes all because of a poorly worded policy or endorsement. But in Tower Hill Signature Insurance Co. vs. Alex Kusch, Florida’s 4th District Court of Appeal reversed a trial court and found that a settlement offer was not ambiguous. The Broward County Circuit Court must now reconsider the amount of fees and costs owed to Tower Hill lawyers. One judge on the court also called for a new procedural rule that would require plaintiffs to give early warning about perceived ambiguity, to reduce unnecessary legal maneuvering. In the case, the homeowner had sued Tower Hill over an unpaid claim. He then rejected a settlement offer from the insurer. The trial court later found in favor of Tower Hill on the claim dispute, but decided that the settlement offer was ambiguously worded on attorney fees. The policyholder’s lawyers had argued that the settlement proposal noted that it resolves any and all damages, but said it was exclusive of attorney fees. It also stipulated that a court should decide reasonable fees to be awarded. The Broward Circuit judge said the wording was unclear, but the appeals court overruled him. “When read as a whole, the homeowner was required to release all claims against the insurer arising out of this claim and litigation, except for those relating to attorney’s fees and costs,” 4th DCA Judge Spencer Levine wrote in the Feb. 16 opinion (emphasis by the court). He added: “Both the homeowner and
the trial court were ‘nit-picking’ the insurer’s proposal by finding the proposal ambiguous with respect to attorney’s fees.” Judge Jonathan Gerber concurred but wrote that this is the latest in a long line of cases that have examined whether a settlement proposal was ambiguously worded. He cited from his own opinion in a 2011 decision, noting that Florida rules of civil procedure do not require the offeree to notify the offerer when a proposal appears to be ambiguous. Another judge at the time called the latent ambiguity argument a “gotcha” tactic and a waste of judicial resources. “More than eleven years have passed, during which no amendment (to the rules) has occurred,” Gerber said in his concurring opinion. “Thus, history repeats itself yet again in this case, as it has in many other cases, and will likely continue to do so into the future.” He again urged the Florida Bar or the state Supreme Court to revise the rules and mandate that if the party that is offered a settlement does not identify an ambiguity within a fixed time frame, an ambiguity objection should be deemed waived.
"History repeats itself yet again in this case, as it has in many other cases..."
Water Damage Excluded
In two other cases in February, the 4th DCA decided that homeowners’ policies excluded at least some types of water damage. In Geovera Specialty Insurance vs. Craig Glasser, the policy attempted to make it clear that, if ambiguity could be found between the policy and its endorsement, the endorsement controls. The policyholder had filed a claim after a water pipe burst in a bedroom wall. Geovera denied the claim, citing the exclusion for any type of water damage. Glasser sued over breach of contract and bad faith, arguing the policy covered loss from plumbing system discharges of water.
10 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
The Broward Circuit Court granted partial summary judgment for the homeowner, citing previous court rulings. But the appeals court pointed out that while the policy appears to cover plumbing system leaks, the endorsement bars coverage for water damage in any form, including “water that exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure.” While the policy required the reading of multiple policy provisions, "it is unambiguous and simply does not cover the water loss suffered by the insured,” Judge Melanie May wrote for the majority. Judges Gerber and Levine concurred. In an assignment-of-benefits case, the 4th DCA found that a Citizens Property Insurance policy clearly excluded losses from leaks that happened over a long period of time. In Projekt Property Restoration vs. Citizens, the assigned contractor sued after Citizens declined to pay an invoice for restoration services needed after a water leak in a shower. The policy excluded damage from leaks occurring over a period of two weeks or more. Citizens’ experts testified that the leak had existed for some time — more than two weeks. The restoration company produced an expert who suggested that the insurer’s expert opinions weren’t valid because additional testing was needed to show the cause of the leak. The appeals court noted that the contractor’s expert did not opine on the actual length of time of the leak, only that there was little evidence that the damage happened over several months. The plaintiff also cited a 2018 case, Hicks vs. American Integrity Insurance, which examined a similar policy exclusion. The 5th DCA had irked some insurers in that case when it found that the policy should cover at least the first two weeks of the leak. But in the Projekt Property case, the 4th DCA said that the contractor did not raise the “first two weeks” argument at trial. The court upheld the trial court. INSURANCEJOURNAL.COM
Appraisal Required
Again, a plaintiff argued that a policy was ambiguous. But the 1st District Court of Appeal didn’t bite. First Call 24/7 vs. Citizens originated in Bay County, home of Panama City and Tyndall Air Force Base, which were hit hard by Hurricane Michael in 2018. The restoration company had been assigned benefits by the homeowners, Kole and Meghan Rhodes, and the firm performed emergency mitigation services after the storm. First Call sent Citizens a bill for $40,253. After investigating the claim, Citizens paid just $8,196 and notified the contractor that an appraisal process was needed to resolve the dispute over the difference. First Call did not participate in the appraisal process and filed suit for breach of contract. The company argued that the appraisal procedure does not apply to mitigation services, which must be done quickly to prevent further damage to the home. The Bay County Circuit Court disagreed and ordered the parties to proceed with the appraisal. First Call appealed to the DCA, arguing that the policy was ambiguous about the scope of the appraisal process. The appeals court upheld the trial court. In its Feb. 16 opinion, the judges found that the Citizens policy was not ambiguous and that the appraisal process applies to emergency mitigation work. “Each of the arguments it (First Call) offers in support of its interpretation is either contrary to the plain language of the policy, focuses on isolated words or phrases rather than the policy as a whole, or otherwise lacks merit,” DCA Judge Stephanie Ray wrote in the opinion. The appraisal process, as described in the Citizens policy, does not define the type of disputes subject to appraisal and does not exclude mitigation services, the court noted. First Call also argued that mitigation services cannot be fairly appraised because they do not involve replacement costs or actual cash value and that an appraisal panel cannot accurately inspect the damage once it’s been buttoned up and repaired. INSURANCEJOURNAL.COM
The appeals court found that the policy states that Citizens would pay for “reasonable and necessary costs … not just any costs.” The appraisal process is the method to be used to determine which costs are reasonable and necessary, the court said. This is not the first time First Call and Citizens have crossed swords on AOB disputes. In 2021, the 4th District Court of Appeal found in a similar case that the appraisal clause does not apply only to existing property damage and does, in fact, apply to mitigation repairs. The 1st DCA opinion in the Rhodes case noted that “we align ourselves with the holdings of our sister courts” in First Call vs. Citizens in the 2021 case and a similar case from the 3rd District. Bay County Clerk of Court records show that First Call has filed eight lawsuits against property insurers in that county in the last three years.
Auto Fee Schedule in PIP
In American Mobile Health Services vs. State Farm Auto Insurance, a personal injury protection case that has been in the courts for nine years, the 3rd District Court of Appeal upheld a Miami-Dade jury verdict in favor of the insurance giant. After a car crash in 2008, Tania Jimenez assigned insurance benefits to American Mobile. The health care firm billed State Farm for $3,220, but the insurer paid only $810.
State Farm’s expert witness, a physician, testified that American Mobile’s charges were unreasonable and were in excess of 200% of Medicare’s Part B fee schedule. American Mobile argued that if State Farm intended to rely on the Medicare fee schedule it should have said so in the policy. The court noted that Florida PIP law requires that insurers reimburse medical providers 80% of reasonable expenses for medical treatment, and allows insurers to adopt a maximum charge based on various fee schedules, including 200% of the Medicare fee schedule for participating physicians. But the 3rd DCA also pointed out that Florida courts have rendered conflicting opinions on the matter. An appeal court in 2014 held that State Farm was barred from doing exactly what it did in the American Mobile case. But Miami-Dade Circuit Judge Lisa Walsh in 2019 found that if the insurer does not elect to use the fee schedule, it can be one of several factors that can be considered when determining if a provider’s fees are reasonable. “We agree with Judge Walsh and hold that the insurer could use the Medicare Part B fee schedule as evidence to argue that the provider’s charges exceed a ‘reasonable amount,’” even though the insurer had not adopted the schedule of maximum charges, the 3rd DCA noted.
MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 11
Courts & Torts Florida Lawsuit Charges United P&C With RICO Violations in Widespread Claims Denials
I
n the war between restoration companies and insurers in Florida, contractors suing carriers in assignment-of-benefits claims is nothing new. And insurers have long argued that some construction firms are colluding with adjusters and law firms to jack up claims and churn lawsuits. A Stuart, Florida, roofing and restoration company has now brought in a new type of weapon: The contractor claims in a federal lawsuit that United Property & Casualty Insurance Co. conspired with adjuster firms to systematically deny and underpay thousands of AOB roof claims after Hurricane Irma hit the state in 2017. The lawsuit, filed in U.S. District Court for the Middle District of Florida, charges United, FKS Insurance Services and Property Loss Specialists with violating the federal Racketeer Influenced and Corrupt Organizations Act, known as the RICO Act, along with fraud, breach of contract and unfair trade practices. The plaintiff, SFR Services, or Southern Florida Restoration Services, said it was assigned benefits on more than 200 claims
that were underpaid or denied, but thousands more policyholders may be victims of the alleged scheme. SFR is represented by attorney Robert Pelier of Coral Gables, and by lawyers based in Philadelphia and Colorado. The Florida Secretary of State’s office lists Ricky McGraw as manager of the company. Shortly after the suit was filed, the judge in the case ordered SFR to revise its complaint, noting that it initially constituted an impermissible “shotgun pleading.” Specifically, U.S. District Judge Kathryn Mizell wrote, SFR Services alleges that United violated multiple laws, but the contractor failed to separate the allegations into individual counts. “Worse still, Count IV speculates that United Property violated other unnamed provisions of Florida law, which patently fails to satisfy the pleading requirements…” Such a vague complaint did not give the defense adequate notice of the grounds for the claims, Mizelle said. SFR Services responded with an amended complaint. “Instead of ensuring that field adjusters
12 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
created honest, accurate reports to confirm that UPC’s insured received an assessment that reflected their loss, defendants specifically instructed desk adjusters to modify the estimates created by field adjusters to decrease estimates in order to ultimately decrease the amount of money UPC pays to its insureds,” the amended complaint reads. United also instructed field adjusters to modify their reports and add false statements, SFR charges. The insurer, which was reportedly considering purchasing the PLS adjuster firm, pressured the firm’s owners to downplay damage assessments, the suit claims. “SFR believes this fraud is widespread,” the complaint notes. The lawsuit shows copies of text messages by an FKS adjuster, purportedly sent at the request of UPC, to avoid estimating roof damages because the insurer would issue blanket denials. Adjusters who played along were paid much more quickly, the suit alleges. The judge has granted United additional time to answer the amended complaint. INSURANCEJOURNAL.COM
After Months of Decline, Litigated Claims Spiked in January
J
ust when insurers saw signs that last year’s reform legislation may be having an impact on claims litigation, bad news appeared in the inbox. CaseGlide, the maker of litigation management software, which also tracks claims disputes, reported that the number of new litigated claims for the 17 largest P/C insurers in Florida was just under 4,600 in January — a 37% increase from December. That followed an almost steady decline from July’s high of 6,633 litigated claims, the company said. “January’s steep increase could be the result of a return to normalcy following the holidays, or it could be that claims are now flowing through SB 76’s new process and into litigation,” said Wesley Todd, CEO of CaseGlide. “It bears mentioning that these numbers alone likely aren’t enough to assess the state of the market.” Senate Bill 76, approved by the 2021
Florida Legislature, aimed to curtail solicitation by roofing companies and to reduce the amount of litigation filed over property damage claims. The law, which took effect last summer, requires plaintiffs to file pre-litigation notice in order to give insurers more time to take other steps to avoid litigation. If those pre-suit notices are included in the count, “insurers may unfortunately still have a similar total exposure to what they had in 2020 when the Legislature first started considering SB 76,” Todd said. “Although actual lawsuit volumes have decreased since Senate Bill 76 became effective, Florida insurers’ litigation exposure is still concerning,” he added. The data also show that assignment-of-benefit cases as a percentage of new litigated claims dropped slightly in January. CaseGlide found that 31% of litigated claims were AOB-related, compared
to 33% in December. That’s a significant increase from the first six months of 2021, when AOB cases were about 17% to 20% of total claims litigation. The assignment-of-benefits cases continue to be driven by a few contractors, CaseGlide reported. The top 10 AOB contractors in Florida represented 35% of all AOB claims dispute litigation, and the top contractor was responsible for 12%. The firm has declined to name those contractors. In October, Todd suggested that SB 76 may be having an impact on the number of lawsuits filed. But in February, he said the jury is still out. “It’s still too early to tell if SB 76 will lead to decreased litigation frequency and severity,” Todd said. “Everyone is investing a lot into the new process to create a better insurance environment for all Floridians.”
Insurers for Law Firm, Engineers in Collapsed Condo Settle with Victims’ Families
I
nsurers for an engineering firm overseeing major repairs at the collapsed Surfside condominium and for a law firm that advised the condo association have agreed to settle a lawsuit brought by survivors and families of the tragedy that killed 98 people last summer. The Becker law firm, widely known for its work to help condo associations oppose condo law reform efforts, and Morabito Consulting, an engineering firm that performed a structural analysis on the Champlain Towers South, will pay an undisclosed amount, the Miami Herald reported. Attorneys for the families credited a mediator and lawyers for the insurance companies with working out the settlement. Families and survivors of the June 24 collapse had charged that Morabito, while citing major repairs needed in a 2018 report, failed to warn residents about imminent danger. The repairs, postponed by the condo association, were estimated to cost $15 million, and had just begun when part of the building fell. INSURANCEJOURNAL.COM
Morabito officials denied that the Maryland-based firm was responsible. But, it said, "we also firmly believe that the families who have suffered from this tragedy deserve compensation so that they may focus on healing." Morabito’s insurance companies, National Fire Insurance Photo credit: Associated Press ©2022 Co. of Hartford and destruction of property. Continental Casualty Co., initially refused By late February, though, the differencto pay on the firm’s policies, arguing that es appeared to have been resolved. the losses were caused by the engineers’ The Fort Lauderdale law firm, formerly negligence. Morabito sued the carriers. known as Becker & Poliakoff, helped write The insurer for the Becker law firm’s Florida statutes that, critics said, have $10 million professional liability policy, allowed building owners to avoid making Allied World Surplus Lines, also balked badly needed repairs. While Becker had at paying out. Allied last month asked a represented the Champlain Towers assofederal court to clear it of any coverage ciation, it also “had a responsibility and responsibility. The insurer argued that duty to warn" about the imminent risk, a policy exclusion bars coverage for law according to the lawsuit. firm actions that result in bodily injury or MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 13
People Florida
Trustmark Corp., a publicly traded banking and insurance company based in Mississippi, has named Michael King genMichael King eral counsel. King most recently served as vice president and senior legal counsel to Trustmark, and has spent 30 years with the company, according to a news release. King graduated from Belhaven College and earned his law degree at Mississippi College School of Law. He currently serves as secretary of the Board of Directors of Trustmark Investment Advisors, Inc. Trustmark has 179 offices in Mississippi, Florida, Alabama, Tennessee and Texas. The Villages Insurance Partners in Florida has named Nathan Boler a personal lines risk consultant. Boler, who began with an Allstate agency in Florida in 2017, then was with State Farm, is now at the Villages Spanish Springs office, the firm said in a news release. Established in 1985, the Villages
Insurance has nine offices in Florida and provides insurance products to 40,000 people and businesses in the state.
Matt Groenheide, previously with GuideOne Insurance, HDI Global and Zurich, has joined New Paradigm as senior vice president and director of specialty programs. Groenheide will lead a program that matches parametric risk transfer with conventional insurance and reinsurance, the Fort Lauderdale-based company said in a news release. New Paradigm is an insurance holding company whose subsidiaries provide parametric insurance and reinsurance, often for risks that are difficult to insure. The firms focus on rapidly settling claims and providing coverage for hurricanes, earthquakes, catastrophes and terrorism for corporate, municipal and personal-lines clients. Florida Insurance Commissioner David Altmaier announced that communications director Alexis Bakofsky has been elevated to chief of staff.
Bakofsky joined the state Office of Insurance Regulation in 2019 and has also served as deputy chief of staff. Prior to OIR, she worked as deputy communications director for the Florida Department of Highway Safety and Motor Vehicles, leading outreach and education initiatives. Bakofsky has a bachelor’s degree in health sciences from the University of Florida and a master of arts in communication and leadership from Gonzaga University. She is also an AmeriCorps VISTA alumna.
Burns & Wilcox, a wholesale broker and underwriter, announced that Craig Anderson has joined the company’s newly opened South Florida operations. Craig Anderson Anderson will be a commercial insurance underwriter for Burns & Wilcox in the Miami office. He has 18 years of experience in the business, including the last five at One80 Intermediaries in Hollywood, Florida.
Misinformation? Florida Comp Broker Files Defamation Suit Against Competitor
T
alking trash about a competitor may be as old as humanity. But a Floridabased workers’ compensation insurance broker is charging that some bad-mouthing by another broker cost it a long-standing relationship with major insurance carrier. Comp360, with headquarters in Lakeland, Florida, and offices in Kansas, has filed a defamation lawsuit in federal court, alleging that KT Enterprises spread misinformation about the firm to Summit Insurance Co. “Defendants have interfered with plaintiff’s relationship with Summit by spreading falsehoods to Summit regarding plaintiff and plaintiff’s principal’s character,” the lawsuit complaint reads.
“Defendants’ spread of falsehoods has caused Summit to drop plaintiff as a broker.” The lawsuit, initially filed in Polk County Circuit Court in Florida but recently moved to the U.S. District Court for the Middle District of Florida, names Kevin Taban and Eddie Bryant as defendants. They and others with KT Enterprises could not be reached for comment before deadline. Comp360’s president is Fielding Dickey. He launched the company in 2005 after working as a loss consultant with Summit Holdings, the firm’s website shows. He declined comment while the suit is pending. The complaint, handled by Blue Chip Law in Tampa, does not go into detail about the nature of the alleged defama-
14 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
tion, or how widespread such tactics may be in the comp insurance world. But it said that beginning in June 2021, Taban, Bryant and KT began feeding misinformation to Summit about Comp360 and its principal, “in hopes of destroying plaintiff’s relationship with Summit.” The alleged communications may have worked. Comp360 charges tortious interference and claims that Summit dropped Comp360 as a broker shortly after the defamation began. “The Defendants’ business conductshows they have continuously taken action contrary to honest practice in industrial or commercial matters as it relates to their efforts to compete with plaintiff for a common pool of clients and vendors,” the complaint reads. The suit asks for more than $100,000 in damages as well as punitive damages. KT Enterprises has not yet filed an answer to the complaint. INSURANCEJOURNAL.COM
Business Moves
Florida
Risk Strategies, Gehring
Risk Strategies, a national brokerage and risk management firm, announced it has acquired the Gehring Group, an employee benefits and risk consulting firm. Based in Palm Beach Gardens, Florida, Gehring provides risk management and benefits management to the public sector in Florida and the U.S. Virgin Islands, the companies said in a news release. Risk Strategies, which also places reinsurance for property and casualty, has grown over the last two decades with the addition of more than 100 organizations, the company said.
Butler Buckley, Renaissance Alliance
Florida insurance agency, Butler, Buckley & Deets, has joined Renaissance Alliance, a national firm that helps agencies grow. Butler, Buckley & Deets, based in Miami, notes it is one of the oldest insurance agencies in South Florida. It provides insurance to corporate, public, institutional, trade, professional, association and individual clients, according to a news release. Raymond Butler III is president. The membership with Renaissance will help the agency with growth through access to more carriers and new technoloINSURANCEJOURNAL.COM
gy, the agency said. It is one of five Florida agencies to join with Renaissance in recent months. Renaissance Alliance notes that it works with independent property-casualty agency owners to grow premium, maximize revenue and increase value through increased profit sharing and offloading non-revenue generating activities.
Slide, St. Johns
The Tampa-based insurtech startup known as Slide agreed to take over St. Johns’ $400 million homeowners book of business, the company announced. Bruce Lucas is CEO of Slide, a startup that has gained considerable attention after the company announced it had raised $100 million in capital last November. Lucas also is known for his work with Heritage Insurance, which grew rapidly into a super-regional insurer serving 15 states. St. Johns announced in February it would stop writing new homeowners’ business in Florida, and Demotech withdrew the firm’s financial stability rating because of a drop in the troubled company’s reserve funds.
Liberty Co., Strategic
Strategic Insurance Services of Clearwater, Florida, has joined the Liberty
Company’s network of insurance brokers. Founded in 2006 and led by CEO Doug Levi, Strategic Insurance provides business, property, home, auto, health, and life insurance. The Liberty Company is a family-owned insurance services brokerage based in California. The company has said it is one of the fastest-growing privately-held insurance brokerages.
Orchid, Brown & Brown
Orchid Underwriters Agency, headquartered in Vero Beach, a specialty underwriter of catastrophe-exposed property insurance, has agreed to be acquired by Brown & Brown, a rapidly growing insurance brokerage firm. The sale includes all of Orchid’s managing general underwriter and wholesaling business, along with its high-net-worth segment and its CrossCover Insurance Services. Financial terms of the transaction were not disclosed. Orchid was founded in 1998. Its CrossCover firm provides excess and surplus commercial property insurance. Orchid and CrossCover will continue to operate as independent entities and will maintaining principal operations in Vero Beach and Tampa, and in Cypress, Texas.
MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 15
Condos & Climate New Inspection Law and Lending Rules Could Stifle Loans, Insurance for Florida Condos that Need Repairs By William Rabb
J
ust as some insurers have tightened requirements for underwriting highrise condominiums in the wake of the Champlain Towers collapse in Miami Beach last year, now mortgage banks are starkly revising lending rules. And a bill moving through the Florida Legislature this year would require more inspections of aging condo buildings. The changes could make sales of some condo units difficult or impossible, especially if banks determine that major repairs are needed. More required inspections could ultimately make it even harder to place insurance coverage for creaky condos, according to news and insurance industry reports. Freddie Mac and Fannie Mae, the two federally chartered corporations that buy loans from mortgage lenders and help determine lenders’ willingness to issue mortgages, are now requiring banks to evaluate the condition of buildings before approving a loan, the Miami Herald reported. The corporations said they will no longer back condo mortgages in buildings facing critical repairs or material deficiencies, such as water intrusions or even mold, or which have deferred maintenance that has resulted in “advanced deterioration.” Routine maintenance or repairs likely won’t be an issue under the new lending rules, the Herald noted. But buildings that have not set aside sufficient funds to pay for critical work will be ineligible for loans in most cases. Condominium attorneys, real estate brokers, bankers and association leaders say the rules will make it significantly harder for buyers to obtain financing to buy units in certain buildings, or for owners in those condos to refinance, until their associations can show that buildings are sound or repairs are completed and approved. “If there is in fact any outstanding work to be done, the project is ineligi-
ble,” Eric Intihar, mortgage planner with Fairway Independent Mortgage Corp., told the newspaper. “Essentially, it’s kryptonite.” The Fannie Mae rules took effect Jan. 1. Freddie Mac officials said that under temporary rules that will likely become permanent later this year, all mortgages that close after Feb. 28 must comply. Fannie Mae, the Federal National Mortgage Association, buys most of its mortgages from larger, commercial banks. Freddie Mac, Federal Home Loan Mortgage Corp., buys them from smaller banks. Fannie Mae is also requiring that condo boards set aside 10% of operating costs every month in a special reserve to pay for needed future repairs before it will back mortgages in a condo building. And bankers may have to cull through six months of condo board minutes to see if any discussions of maintenance or repair issues have come up and will have to request copies of engineering inspections conducted in the previous five years. To qualify for loans, condo associations will have to answer detailed question-
16 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
naires about inspections, repairs, structural and mechanical issues and fees that have been assessed to pay for repairs. Older condo buildings will be the ones most affected by the new rules, experts said. The Miami area is home to one of the largest concentrations of high-rise condos in the country, many of them more than 30 years old. The Champlain Towers collapse in June killed 98 people and set off a flurry of lawsuits, investigations, recommendations, new concerns by insurers and lenders, and efforts to pass new legislation designed to prevent deferred maintenance. Florida Senate Bill 1702 would require more frequent and more extensive inspections of condos over three stories tall, statewide, not just in the Miami area as is now required. The measure would mandate that multifamily buildings of three stories or more undergo engineering inspections after 30 years and every 10 years thereafter. Within three miles of the coastline, condo buildings would have to be inspected 20 years after construction and every 7 years after that. The bill, sponsored by state Sen. INSURANCEJOURNAL.COM
Jennifer Bradley, R-Orange Park, would also require condo associations to maintain their properties, make needed repairs and to regularly assess reserve funding available for upgrades. The measure also would authorize condo association boards to assess owners or to borrow money without owners voting on the moves, something advocates have said is crucial to maintaining condo safety. As of early March, the bill had passed three Senate committees and was headed to the Senate floor. The potential changes have raised questions for insurers and agents.
“As you can imagine, those state-mandated inspections will likely become part of a company’s underwriting process,” Kyle Ulrich, president of the Florida Association of Insurance Agents, wrote in a recent memo to agents. “If carriers know additional information is available on a risk, why wouldn’t they ask for it?” Florida law now requires condo associations to carry adequate property insurance. Even though SB 1702 and other legislative proposals would not directly change statutory condo insurance requirements, they will likely have unintended consequences on the availability
and pricing of insurance for many condo properties, Ulrich noted. If condos are not maintained, the associations may not be able to obtain adequate insurance. If an agent cannot procure adequate coverage, the Florida Department of Business and Professional Regulation (DBPR) probably would not take action against an insurance agent, Ulrich said. But the agency could penalize the condo association if it is in violation of the statute. The FAIA is encouraging agents to have their client condo associations ask DBPR for a declaratory statement on how regulators would handle the situation.
UN’s Global Climate Change Report Shows Irreversible Changes Already Disrupting Florida
A
3,600-page United Nations report on climate change warns that irreversible changes are taking place around the world, but it focuses on Florida to a remarkable degree, highlighting the drastic impact already seen on real estate, low-income neighborhoods and coastal ecosystems. The study by the UN Intergovernmental Panel on Climate Change pointed out that permanent changes have already affected much of Florida, underscoring recent efforts by state and South Florida governments to start raising roads and buildings, build seawalls and install flood pumps, according to a summary of the study and news reports. The UN report also shows that while federal and state authorities have pledged millions of dollars to mitigate the effect of rising seas, billions more will be needed. South Florida, with millions of people and homes in vulnerable areas, and no room to move inland, will soon see widespread displacement as people are forced to seek higher ground. Among the other findings in the report: • Miami-Dade County’s move to elevate roads and build stormwater pumps have raised property values and costs, leading to inequality for vulnerable populations. • Coastal flooding, worsened by sea rise, has already led to almost $500 million in INSURANCEJOURNAL.COM
lost real estate value from 2005 to 2016 in Miami-Dade County, “and it is likely that coastal flood risks in the region beyond 2050 will increase without adaptation to climate change.” • Florida’s coral reefs are bleaching as temperatures rise, and as reefs die, Florida could lose as much as $55 billion in reef-related tourism money by 2100. • Algae blooms along Florida’s west coast spurred by climate change have led to massive economic losses. The city of Miami has secured more than $100 million in federal and state grants to install flood pumps, raise roads and improve drainage in areas threatened by sea level rise, the Miami Herald reported. But the chief resilience officer for the city called that funding “the tip of the iceberg” for the city’s climate needs. Just preventing the worst flooding for the next few decades could cost more than $4 billion, according to the city’s stormwater plan. Broward County, next door to Miami and home to bustling Fort Lauderdale, is also facing huge needs. Officials there hope recent funding will lead to more.
Floodgates to shut off canals during storm surges alone will cost more than $1 billion, said Jennifer Jurado, chief resiliency officer for Broward County. “We’re going to need this and then an enhanced level of funding. Maybe the $1 billion becomes $3 billion,” Jurado told the Insurance Journal.
MARCH 7, 2022 INSURANCE JOURNAL | FLORIDA | 17
Declarations Insolvency Notice
Climate Change Has Irreversibly Altered Florida
“The nearly 2,000-page report had a global focus, but Florida was repeatedly used as an example of a place where the impacts of climate change were already being felt, both economically and environmentally.” — From a recent report in the Miami Herald, about a United Nation’s Intergovernmental Panel study on climate change. The report noted that tidal flooding, worsened by sea-level rise, has led to almost $500 million in lost real estate value in Miami-Dade County alone.
“The referral of this company to the DFS’ Division of Rehabilitation and Liquidation is the first step in a comprehensive plan to provide a seamless transition for all St. Johns Insurance Company policyholders.” — From a letter sent by Florida Insurance Commissioner David Altmaier to the state Department of Financial Services, notifying DFS of the insolvency and liquidation of St. Johns Insurance Co. It’s the first insolvency this year, but the fifth in the last 30 months.
Figures 13 MILLION
CUBIC METERS
That is the amount of debris left by Hurricane Michael, which hit the Florida Panhandle in 2018, according to The Conversation, a report written by university scholars and researchers. The report visualized the volume this way: It’s the same as 13 million washers and dryer units in a pile. The researchers said that storm debris removal is costly, wasteful, and is only becoming a larger and more-frequent problem to deal with. It called for finding ways to recycle and reuse the waste instead of dumping it into landfills.
$64.5 Million That was the loss, before taxes, felt by Florida’s largest market-based property insurer, Universal Property & Casualty, in the fourth quarter of 2021. The loss is seen as another indicator of growing problems in Florida’s insurance market.
18 | INSURANCE JOURNAL | FLORIDA MARCH 7, 2022
INSURANCEJOURNAL.COM
Piecing TogeTher Your commercial needs.
L Li iqu ab o ili r ty
Builders Risk
Commercial Package
Property
Sp Ev ec en ial ts
Vacant Property
General Liability
Quality • Integrity • Pride
®
Westwood Center Three • 6675 Westwood Boulevard Suite 360 Orlando, Florida 32821 Phone: 888.868.7544 • Fax: 888.876.7544 www.sjig.com