Insurance Journal Florida Supplement 2015-11-16 by Insurance Journal

FOCUS ON FLORIDA Report: Strength of Florida Insurers Citizens Update Florida Taxi/DMV Lawsuit Heats Up

FOCUS ON FLORIDA

Inside This Issue

November 16, 2015 • Vol. 93 No. 22 • Focus on Florida

FLORIDA COVERAGE 4

Florida Regulators ‘Encouraged’ by Insurers’ Catastrophe Stress Test Results

Florida Businesses Sue City Over ‘Racial Bias’ in Beach Drinking Ban

Citizens Update 10 Florida Approves First Take-Out Offers of 2016 10 Citizens Expanding Clearinghouse to Condo Unit Policies 12- Insurance Commissioner Kevin McCarty Talks Florida’s Accomplishments, Challenges

14 People 15 Florida Drops Doctors Co. Order to Raise Rates

16 Florida Rideshare Insurance Debate Heats Up 18 Florida Issues Data Call for Water Claims, Assignment of Benefit Costs 18 NCCI Requests Review of Florida Workers’ Comp Rate Filing

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November 16, 2015 INSURANCE JOURNAL-FOCUS ON FLORIDA | 3

FOCUS ON FLORIDA

News & Markets Florida Regulators ‘Encouraged’ by Insurers’ Catastrophe Stress Test Results By Amy O’Connor

lorida property insurers are well-capitalized and able to handle a 1-in-100 year storm event if and when it occurs in the state, according to the Florida Office of Insurance’s 2015 Data Call and subsequent stress test report. The annual Reinsurance Data Call conducted by OIR is part of its efforts to routinely monitor the financial strength of Florida property insurance companies. In an effort to “bolster consumer confidence levels,” Florida Chief Financial Officer Jeff Atwater asked Florida Insurance Commissioner Kevin McCarty to strengthen the financial stress tests insurers in the state are put through and to share the results with Florida’s policyholders, a statement from Atwater’s office said. OIR released its findings last month in its “2015 Report of the Catastrophe Stress Test.” “Florida has the unique characteristic of having the largest exposure to catastrophic hurricane risk of any state in the U.S. This characteristic puts Florida’s property insurance companies at a heightened level of risk and requires that Florida insurance regulators take a more in-depth look at the financial condition of insurance companies in this context,” the report said.

‘All 112 insurance companies that participated in the Data Call demonstrated they are adequately reinsured.’ Data Call OIR’s criteria for which property insurance companies participate in the Data Call is based on the Annual Financial Statement and Quarterly Supplement Reporting System – Next Generation (QUASRng) and includes: • Any property insurance company, excluding Citizens Property Insurance Corp., that ranks in the top 50 in terms of policies in force. • Any Florida-based property insurance

company that ranks in the top 100 in terms of policies in force. • Any company whose Florida written premium in the property lines of business exceeds 25 percent of the company’s surplus (property lines of business means Fire, Allied Lines, Homeowners Multiple Peril, Inland Marine, and Commercial Multiple Peril for the purpose of the report). • Any property insurance company whose Florida total insured value as filed in QUASRng exceeds 300 percent of the company’s surplus. • Any newly licensed Florida-based property insurance company. • Any property insurance company with significant Florida exposure or operations that justifies inclusion in the Data Call. Parts 1, 2 and 3 of the Data Call were conducted between April and August and started with the estimate of what insurance companies plan to purchase for reinsurance (Part 1). Companies then submitted the actual amount of reinsurance purchased (Part

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2) by July 15. The final call, also due by July 15 (or August 15 for July 1 renewal) included information about the reinsurance companies that were used on the insurance company’s program. OIR reported that 112 companies were directed to participate in the 2015 Data Call but the Office ultimately reviewed 90 programs because of companies’ participation in consolidated programs. According to OIR’s report, of the 112 insurance companies that participated in the Data Call, all demonstrated the purchase of reinsurance to a 1-in-100 year level or higher, which indicates they are adequately reinsured for a 1-in-100 year catastrophe event. Stress Test In an effort to provide additional information about Florida insurance companies’ abilities to withstand catastrophic storm losses, OIR developed the Catastrophe Stress Test in consultation with insurance companies, reinsurance brokers and economists. It was designed to be submitted by the selected continued on page 6 www.insurancejournal.com

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FOCUS ON FLORIDA

News & Markets continued from page 4

insurance company at the same time as Part 2 of the Data Call. The stress test examined each of the participating property insurance company’s ability to respond to the impact of historical storm scenarios. In order to pass the test, companies had to carry a post-event surplus greater than a minimum set in Florida law. Arriving at the required post-event surplus is a combination of an insurance company’s existing surplus, as well as the reinsurance program the company has in place to protect that surplus amount. This year, three historical storm scenarios were used: the 1947 Fort Lauderdale hurricane; the 1921 Tampa Bay hurricane; and the four hurricanes of 2004, Hurricanes Charley, Frances, Ivan and Jeanne. Insurance companies were required to model expected losses from each of the three storm scenarios using the hurricane model employed in its most recent rate filing. After determining the modeled loss, insurance companies were required to apply the reinsurance program purchased for the 2015 hurricane season to calculate the net loss associated with each storm scenario.

During the 2015 season, each of the 67 participating companies ultimately passed the test (only domestic insurers, Citizens and four other non-Florida domestic companies with significant market share were directed to participate). “Successful completion of the Catastrophe Stress Test does not guarantee the performance of any insurance company,” the report states. “But it is a reasonable indicator of its ability to withstand catastrophic losses.” OIR states that although the hurricane loss projections in the report are only estimates, the results of the Catastrophe Stress Test “are nonetheless encouraging.” “Based on the information provided by insurance companies and the review and analysis conducted by the Office, each insurance company in the Catastrophe Stress Test demonstrated an ability to pay for losses associated with a 1-in-100 year event as well as the capacity to successfully withstand three specific storm scenarios,” the report states. In an exclusive interview with Insurance Journal (see page 12) McCarty said the stress

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test results highlight how the state has acted in a “responsible manner” since the 2004 and 2005 hurricane seasons accelerated the departure of many national insurance companies from Florida. Efforts by the legislature, incentives for national companies to come to Florida, and state insurers tested experience in the state, have made Florida a “success story,” McCarty said. “It was a very significant stress test that we put the companies through…The Florida marketplace is strong,” he said. CFO Atwater said policyholders in the state should be reassured by the results and plans to work with McCarty in developing “an even better test next year.” “Companies large and small go through annual financial tests to make sure they are well-managed and able to deliver and remain viable when the next hurricane hits Florida’s shores, but the results have not been made public in a way that’s meaningful to the consumer,” Atwater said. “Consumers deserve to have confidence in their carrier, and we’ll continue to share information that shows the processes that are undertaken to test their financial strength.” www.insurancejournal.com

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News & Markets Florida Businesses Sue City Over ‘Racial Bias’ in Beach Drinking Ban By Melissa Nelson-Gabriel

anama City Beach, Fla., nightclub owners are fighting with city officials over a spring break ban of beach drinking issued earlier this year, according to a report from the Associated Press. Several Panama City Beach businesses filed a lawsuit Oct. 30 stating local officials violated their rights and showed racial bias when they approved a series of new ordinances designed to curb spring break mayhem. The club owners, other businesses and eight other anonymous plaintiffs, described as representative club patrons of various races, claim city officials deprived business owners of their property rights and unfairly targeted events frequented by black spring breakers. Panama City Beach officials deny the allegations. The new regulations were prompted by a series of problems that included three men charged with alleged sexual assault on a crowded beach and a shooting at a spring break house party this year. Bay County Sheriff Frank McKeithen is mentioned several times in the lawsuit, but is not listed as a defendant. “Just when you think you’ve seen it all, it’s pretty obvious that money trumps morals and public safety. It’s disturbing these businesses would attempt to extort Panama City Beach by using inflammatory racial bias claims in an effort to distort the truth and mislead the court merely for personal greed,’’ McKeithen said in a statement emailed to AP. Attorney Luke Lirot, who represents the business owners, said the city passed ordinances that are unfair to the businesses. “The appropriate response to the incidents is not telling clubs what bands can play or where they can serve alcohol, especially when so many people’s livelihoods

depend on the short spring break season,’’ he said. In the federal lawsuit, the plaintiffs allege a crackdown by local officials began with the arrival of more black visitors. “Beginning in 2014, the attendees at Spring Break began to include a larger number of African Americans,’’ the lawsuit states. “Panama City Beach and Bay County officials have suggested that spring break is now rife with `predators’ and other `interlopers,’’ the lawsuit states. The club owners say they were told by local officials not to host hip-hop shows because the events would attract too many black spring break attendees. In the lawsuit, the club owners also state that they have worked with local law enforcement in past years to control crowds and curtail underage drinking and that the new regulations were a response to larger number of black spring break attendees. “The legislation at issue in this complaint was supported by the stereotype of race and the specter of racial attacks,’’ the lawsuit states. The ordinances include restrictions on beach drinking during spring break, limiting the clubs’ hours of operation, requiring additional approvals to hold special events and regulations that target loitering in some areas of the beach and beach parking lots. The lawsuit claims the new regulations unfairly restrict the club owners’ ability to do business and will hurt the local economy. Liort said the club owners want the city to compensate them for their financial losses. He said they will request an expedited hearing on the lawsuit with the goal of resolving the issue before spring break 2016. The lawsuit also takes issue with McKeithen’s statements to news organiza-

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tions about what he described as a gang rape on the crowded beach behind one nightclub. “It was clearly with malice and the intent to inflict great reputational harm that the official Bay County Sheriff’s Office press release contained the specific terminology `gang rape’ without further elaboration and/ or explanation of what had actually occurred,’’ the lawsuit states. Three men have been arrested and are awaiting trial on charges of sexual assault by multiple perpetrators. Officials in Florida’s Panhandle have disputed the allegations that racial bias was behind the ordinances. Panama City Beach Mayor Gayle Oberst told The News Herald that she’s comfortable that the city passed laws that were legal based on their attorney’s advice, and she denied racial bias played a part in the council’s decisions. “We were following the recommendations and the input of our citizens, and that’s what we did,’’ Oberst said. “We thought we were doing things that were best for the community as a whole.’’ Councilman John Reichard also said there was no racial bias behind the laws, and Councilman Keith Curry said the lawsuit was motivated by greed. “We’ve worked with businesses for over three years to try to correct problems they were creating during Spring Break,’’ Curry said. Copyright 2015 Associated Press. www.insurancejournal.com

FOCUS ON FLORIDA

News & Markets Florida Approves First Take-Out Offers of 2016

he Florida Office of Insurance Regulation (OIR) has approved the removal of up to 127,266 personal residential policies and 3,268 commercial residential/ non-residential polices from Citizens Property Insurance Corporation. The announcement represents the first take-outs for 2016. The following five companies have been approved to participate: • Anchor Property & Casualty Insurance Co. – approved to remove up to 20,000 personal residential policies (16,030 Personal Lines Account and 3,970 Coastal Account) • Heritage Property & Casualty Insurance Co. – approved to remove up to 55,000 personal residential policies (35,000 Personal Lines Account and 20,000 Coastal Account) and up to 1,500 commercial residential policies (1,300 Commercial Lines Account and 200 Coastal Account)

• Safepoint Insurance Co. – approved to remove up to 20,000 personal residential policies (12,000 Personal Lines Account and 8,000 Coastal Account) • Southern Oak Insurance Co. – approved to remove up to 15,000 personal residential policies (10,000 Personal Lines Account and 5,000 Coastal Account) • Weston Insurance Co. – approved to remove up to 17,266 personal residential policies (all Coastal Account), up to 719 commercial residential policies (Commercial Lines Account) and up to 1,049 commercial non-residential policies (Commercial Lines Account) Citizen’s Personal Lines and Commercial Lines Accounts are primarily non-coastal properties and the Coastal Account is

coastal properties. The take-out periods are January 19, 2016 for personal residential impacting both the Personal Lines/ Coastal Account policies and January 12, 2016 for commercial residential/ non-residential impacting both the Commercial Lines/Coastal Account policies. This is part of the state’s ongoing depopulation effort to reduce the number of policies in the state-created Citizens and transfer them to the private insurance market. In 2015, the total number of potential policies approved for take-outs was 1,321,193 and the actual number of policies removed from Citizens as of September 23, 2015 was 172,351. Policyholders who receive a take-out offer may choose to remain covered by Citizens through the opt-out process.

Citizens Expanding Clearinghouse to Condo Unit Policies

tarting in December, Citizens will expand its Property Insurance Clearinghouse to condominium unit owners, many of whom will now have immediate access to multiple private alternatives, the company said in its November newsletter. Beginning December 14, new applications for condominium unit policies will be shopped through the computerized system that attempts to match customers with offers of coverage from private insurance companies. Existing Citizens condominium policies automatically will be shopped through the clearinghouse to identify private market offers before Citizens can renew the policies. With this addition, the clearinghouse will work to identify private market coverage options for the three most numerous policy types—homeowners, dwelling-fire and condominium units—which combined rep-

resent 57 percent of Citizens personal lines policies, Citizens said. “Over $4.7 billion of exposure, and the commensurate assessment potential for Florida consumers, has been avoided or eliminated because of the clearinghouse,” said Adam Marmelstein, Citizens director of Market Services, who oversees the clearinghouse program. “The recent addition of two more companies, for a total of 14, helps ensure that the clearinghouse is expanding its ability to help consumers find policies in the private market.” Launched in 2014, the clearinghouse helps homeowners seeking to purchase new or renewal coverage with Citizens identify private market options that may provide equal or, in some cases, more comprehensive coverage at comparable premiums. Under the legislatively created program, policies are shopped through the clearing-

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house to determine if they are eligible for Citizens coverage. New customers are deemed ineligible for Citizens coverage if a private company offers a comparable policy at a premium not more than 15 percent higher than Citizens. Existing Citizens customers are ineligible for Citizens coverage if a private offer of comparable coverage is received at a premium equal to or less than the Citizens renewal premium. www.insurancejournal.com

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FOCUS ON FLORIDA

News & Markets Insurance Commissioner Kevin McCarty Talks Florida’s Accomplishments, Challenges By Amy O’Connor

ome might say Florida Insurance Commissioner Kevin McCarty, like the state he serves, is a survivor. In office since 2003, McCarty has presided over the state’s insurance matters through three governors, several devastating hurricanes, and many financial and insurance-related crises. In an interview with Insurance Journal, McCarty talked about how he approaches his position after all these years. McCarty also shared his views on several insurance issues facing Florida now including ridesharing insurance, the state’s insurance market, and his reasoning behind his request for the National Flood Insurance Program’s rate-making data. Insurance Journal (IJ): How has your experience as the Florida Insurance Commissioner shaped your approach to the position now? Kevin McCarty (KM): The way I approach my position is, first, I use three guiding principles. One is that government is here ultimately to serve the people. Number two is the government is to be transparent in its operation and treat its customers fairly and respectfully. That includes insurance companies who are also our customers. Lastly, that we promote a vibrant marketplace by protecting those who are unable to protect themselves. My philosophy is you create a wide berth of competition. You want to put as much products in the common stream and support the profitability of the companies. Capital goes where capital is welcome. On the same side, you have to protect those who are unable to protect themselves. We think it’s important in situations that we respond and protect consumers and, at the same time, promote a vibrant marketplace. You have to wear many hats as an insurance commissioner. I’m very proud to be part of the Florida team.

Tackling the Ridesharing Issue Recently, the Florida Department of Highway Safety & Motor Vehicles responded to a lawsuit from Florida taxi companies saying it is not in its jurisdiction to decide if ridesharing for-hire vehicles are meeting the requirements of the financial responsibility law (see page 16). Insurance requirements for ridesharing entities continue to be a point of contention in the state. IJ: What do you think is the solution to alleviate confusion over the financial and insurance requirements of transportation network companies (TNC’s)? KM: The solution largely lies within the legislative purview. There’s a number of things that can be done… There’s been legislation passed in other states that’s been supported and has been an agreement among the ridesharing community, as well as the insurance community, as ways of dealing with it with a three-tiered approach or three periods. You really would have a hybrid insurance where part of the insurance is your personal insurance that you would have as a car owner. Then you would shift to a commercial policy, depending upon the activity going on. IJ: Taxicab companies have expressed frustration because the state statute says forhire vehicles need a certain level of insurance that ridesharing companies in Florida currently don’t have. So the best way to deal with that is through the legislature? KM: Yes it is and it is crucial to determine amounts high enough to protect persons

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and property in an accident. I mean regulators and legislators can look to other states for guidance on coverage amounts. There’s been some guidance put in there. Having coverage that is comparable to what taxicabs have, is reasonable. IJ: What will OIR’s role be in developing that legislation? KM: [OIR] is consulted on any bill that touches and concerns insurance in the state of Florida and participants…the model bill [developed by TNCs and the insurance industry at a national level] requires primary coverage for periods two and three with liability limits of at least a million dollars. We think that would be certainly sufficient to provide coverage to Floridians who choose to use that. We will work with the bill’s sponsor. We will work with the stakeholders in this to hopefully bring this to a resolution. www.insurancejournal.com

The Future of NIMA The Non-Admitted Insurance Multi-State Association (NIMA) was developed in 2011 in response to the Non-Admitted and Reinsurance Reform Act of 2010 (NRRA). Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010, NRRA allows only the home state of the insured to require premium tax payments for non-admitted insurance in the absence of an agreement among states. NIMA allows participating states, of which Florida is one, to continue to collect surplus lines premium taxes according to state laws consistent with the NIMA Agreement. IJ: How has the NIMA method worked so far in the state? How does it compare to how other state models are working? KM: It’s working – NIMA’s working a whole lot better than Slimpact [another model] because Slimpact never got the required states to become active. What we can say is it’s been successful in large part because of the mechanism behind it [the Surplus Lines Automation Suite that reports policies and revenues that haven’t been reported]… Which has actually resulted in millions and millions of dollars of additional revenue generated by use of this system… I’d say, as a founding member of NIMA, we’re disappointed that we’re not able to get more participation because we believe that if we were more successful at getting more states, that we would have had the opportunity to demonstrate the growth of that pie, and able to share a bigger return. The detractors of NIMA have been successful at making the case that you just make more money if you keep it at home. I think many of the facts and statements that they have made have been misleading. IJ: Do you foresee NIMA staying around long term? KM: It’s hard to say…We haven’t had much traction. We had Mississippi at one point, and they decided not to go. Losing Louisiana obviously is significant [which left NIMA in October 2015]. Gaining Tennessee might be good, but I’m not seeing any traction, frankly, going forward. www.insurancejournal.com

The Florida Insurance Market IJ: OIR recently performed a reinsurance stress test on insurers in the state (see page 4), and that seemed to have positive results. What is your assessment of the Florida insurance market? KM: The insurance market is growing in Florida because Florida is growing… Florida has been the real success story. It has encouraged national companies to come to Florida but the truth of the matter is the Florida marketplace is very different. There’s a higher risk than most other areas. Many of our Kevin McCarty companies have now branched out to other Gulf Coast states because they have an expertise from their experience in Florida in operating in high-risk areas. The stress test was highlighted this year, primarily under the supervision and advice of our CFO, Jeff Atwater, with the purpose of helping build confidence in our marketplace. It was a very significant stress that we put the companies through. …All the companies passed. One company did not pass, and bought additional reinsurance in order to pass, so I think that’s important. It’s an important message…The Florida marketplace is strong. Capital and surplus has doubled since 2010. That’s a remarkable feat. That’s a combination of the resurgence of our marketplace as the result of legislative reforms in the Senate Bill 408, where we address the sinkhole issue. In addition, the cost of reinsurance has dropped dramatically, and that’s been reflected in both the bottom line and the lower rate.

data from NFIP to evaluate why Floridians are paying such high rates for flood insurance, which you have called unfairly discriminatory. What is the next step? What can OIR do about NFIP’s rates? KM: The goal is to, first of all, not just trust whatever comes out of the federal government rate development process. We believe that there should be an open and transparent process so that we can challenge and we can see how these rates [are developed] and help build confidence in the federal flood program. I think a lot of people had their confidence shaken over the years of administration of that program. We think that some of this risk can be borne in the private sector. We think that the only way we can do that is to get detailed information from the federal program and conduct our own rate analysis and share that information with a broader public. We also think we can take this information and use our Florida developed rate, our FIU (Florida International University) public model, to help us look at rates and develop rates. IJ: Has NFIP responded to your request or do you expect that they will? KM: I expect that they will. I don’t know any reason why they wouldn’t. Some of the information’s going to require some additional study on their part, but we’re willing to wait for that. If anything, our analysis shows that for 35 years, we believe the NFIP rates have been excessive for Floridians. We want to make sure that going forward those rates are appropriate and that we can maximize the private market to the extent we can. Editor’s Note: To hear the extended interview with McCarty, including what he sees for the future of auto insurance, emerging risks for the insurance industry and Florida, and his take on addressing

National Flood Insurance Program IJ: You have requested the rate-making

Florida’s personal injury protection fraud problem, visit InsuranceJournal.tv.

November 16, 2015 INSURANCE JOURNAL-FOCUS ON FLORIDA | 13

FOCUS ON FLORIDA

People Chris Henderson

Robert J. Rose

Bryan Schofield

U.S. Cat Adjusters, LLC, a claims firm in the Florida property and casualty marketplace, has appointed Greg Cornett as director of Marketing. Cornett will be responsible for U.S. Cat Adjusters market expansion strategy and execution and will lead the company’s client communication and social media teams. Cornett will report to U.S. Cat Adjusters President and CEO, Carl Lott. According to Paul Richie, senior vice president of U.S. Cat Adjusters, Cornett will assist with the company’s development efforts as it continues to expand its operations in Florida and expand into additional states. Cornett has more than 20 years of experience in the Florida insurance marketplace and most recently served as claims territory lead at U.S. Cat Adjusters where he was responsible for daily field claims operations in the Tampa Bay area. Prior to U.S. Cat Adjusters, Cornett was president of United Underwriters, Inc. for nine years, where he was responsible for daily agency operations. He was also previously employed by AAA Auto Club South, where he was a project lead and was part of the branch support team. U.S. Cat Adjusters is an independent adjusting company registered to do business in Texas, Louisiana and Florida, with offices located in Houston, Dallas, New Orleans, and Tampa Bay. Berkshire Hathaway GUARD Insurance Companies added Chris Henderson as a senior field representative to promote targeted growth in Florida. The growth in the state includes the addition of the company’s multiline commercial insurance product – BizGUARD Plus – that encompasses workers’ compensation, businessowner’s policy, and umbrella coverage targeted to a wide range of operations. In his new capacity, Henderson is responsible for identifying prospects for appointments while providing information about available resources and new developments to existing members of the distribution network. He also functions as agents’ field liaison with Berkshire Hathaway GUARD’s underwriting, loss control, and claims staff. Henderson has nearly 30 years of experience working with both insurers and independent agents. According to Assistant Vice President of Regional Sales Steve Franklin, “Berkshire Hathaway GUARD is anxious to build on our strong market presence in Florida as well as our new products, and Chris Henderson’s knowledge of the state should help us do just that.” Franklin added the company has agency appointments available and Henderson will assist with filling those openings. In October of 2012, GUARD Insurance Group was

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acquired by National Indemnity Co., which is a wholly owned subsidiary of Berkshire Hathaway. In 2013, GUARD unveiled a new identity as Berkshire Hathaway GUARD Insurance Companies. The organization’s carriers include AmGUARD, EastGUARD, NorGUARD, and WestGUARD. Florida-based Orchid Underwriters Insurance Agency, LLC, a specialty underwriter of property insurance focusing on coastal properties, has named Robert J. Rose senior vice president of Underwriting and Programs and Bryan Schofield vice president of Commercial Lines. Both are newly created positions. Rose will be a member of the firm’s executive team and will oversee the strategic development, delivery and evaluation of programs and be responsible for all external relationship management. In addition, he will manage research and development and risk analysis of new products, as well as compliance with government regulations. Schofield will be responsible for developing and overseeing Orchid’s new small commercial excess and surplus (E&S) lines business. Concurrent with Schofield’s hiring, Orchid is entering the small commercial E&S lines business, with the aim of becoming a managing general underwriter in that market. Both Rose and Schofield will be based in Tampa. “Demand in this market has been rapidly growing due to rate flexibility and tightening of admitted markets. We see a significant opportunity for E&S small commercial property-related coverage across the U.S., particularly in the 16 Eastern and Gulf Coast states that complement Orchid’s existing footprint and are most affected by coastal risk,” said Ken LeStrange, director. Rose has 25 years of experience and leadership in various aspects of the industry, including strategy development, operational execution, pricing and underwriting, sales and marketing, and measurement and analytics. Before joining Orchid, he served as senior vice president at International Catastrophic Insurance Managers, LLC (ICAT) for seven years. Schofield has 13 years of experience in the industry and comes to Orchid from Bankers Insurance Group, where he held several positions, most recently vice president of Sales. Earlier in his career, he worked in a variety of capacities at Travelers, Markel Corporation, and State Farm. Founded in 1998 and based in Vero Beach, Fla., Orchid specializes in providing specialty insurance products for homeowners and small businesses throughout the United States and the Caribbean. The company’s product offering for homeowners and condominium property insurance includes wind and wind only, general and excess flood, earthquake, builder’s risk and others. www.insurancejournal.com

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News & Markets Florida Drops Doctors Co. Order to Raise Rates By Amy O’Connor

he Florida Office of Insurance Regulation (OIR) has dropped its Order for The Doctors Co. (TDC) to lower its filed rates by 15 percent. The rate increases proposed by the medical malpractice insurer back in Dec. 2014 will remain the same as filed. The hearing requested by TDC after OIR ordered the California-based company to amend its filing was canceled and a Final Order was issued by OIR on Oct. 15 stating that the rate decrease order was rescinded. TDC’s original rate filing for its “Physicians, Surgeons and Ancillary Healthcare Providers Professional Liability Program” requested no rate changes on both new and renewal lines of business effective June 1. OIR notified the company several months later that the filing was not approved and instead ordered TDC to submit a new filing with the 15 percent rate reduction saying “the trend in the filing appears to be excessive.” TDC subsequently requested a hearing with OIR that was scheduled for November. “[TDC] requested a hearing with [OIR] because, although we followed the same annual rate filing process we have for years and requested a zero increase this year, the OIR recently took the unusual step of ordering The Doctors Company to reduce rates,” Robert E. White, Jr., senior vice president and regional operating officer for TDC, said in a statement to Insurance Journal in July. However, OIR said TDC has since provided evidence as to why the proposed rates are acceptable. “During the discovery phase of the administrative proceeding, The Doctors alleged that report year data is the proper data to use to estimate the severity trend for their rate indication. The Doctors also provided evidence that the closure year severity trend data it provided in the Filings was affected by at least several substantial claims paywww.insurancejournal.com

ments generated from policies that were written before the enactment of the $500,000 cap on non-economic damages. Complete information should have been submitted to

[OIR] in the Filings for [OIR] to determine whether the rates were excessive, inadequate, or unfairly discriminatory,” the Final Order stated.

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November 16, 2015 INSURANCE JOURNAL-FOCUS ON FLORIDA | 15

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News & Markets Florida Rideshare Insurance Debate Heats Up By Amy O’Connor

n a move sure to further frustrate Florida taxicab companies, the Florida Department of Highway Safety and Motor Vehicles (FDHSMV) has asked a judge in Leon County, Florida, to dismiss a complaint requiring the state agency to clarify and enforce insurance requirements for transportation network companies (TNCs) in the state. In an Oct. 27 filing with the Leon County Court, FDHSMV claims the taxicab companies’ interpretation of the laws do not legally justify the court to grant a declaratory judgment and writ of mandamus, as sought in the taxi lawsuit. The state agency also named another state agency – the Florida Office of Insurance Regulation (OIR) – as the agency responsible for enforcement of insurance requirements for the ridesharing entities. The original lawsuit was initiated by taxi companies B&L Services Inc. of Fort Lauderdale, Capital Transportation Inc. of Tallahassee, and individual Jeremy Lynch, as a means to finally get resolution to inquiries on the insurance requirements and regulations of the Florida ridesharing industry. The FDHSMV has previously ignored requests from the Florida taxi industry over whether drivers of Uber, Lyft and other TNCs comply with the minimum insurance required by Florida statutes of for-hire passenger services. “We filed [the complaint] because there needs to be clarification relative to what is required for insurance on for-hire vehicles,” John Camillo, president of B&L Service, Inc., told Insurance Journal of the suit it filed back in September. “These are

questions the DMV has not responded to that have been posed to it by the industry and governmental agencies.” Judge George S. Reynolds III of the Second Judicial Court for Leon County ordered FDHSMV on Sept. 17 to respond within 40 days or he would issue a decision on the matter. The response, however, is not what the taxi companies were looking for and may bring more questions than answers on who is ultimately responsible for regulating and enforcing insurance requirements of TNC companies. The matter may now lie with the judge to decide, who as of press time on November 10, had not issued a ruling. Among its reasons for why the case should be dismissed, FDHSMV said that the taxi companies cannot request a declaratory judgment relating to the rights of another entity “namely, non-party alleged competitors, Uber and Lyft and their drivers,” that are not named in the case. Citing case law that says declaratory judgments cannot be issued in situations where the affected parties are not part of the proceedings, FDHSMV claims the taxi companies and the individual who filed the suit are not “appropriate” parties to request the declaratory judgment. FDHSMV also claims that it is not the agency responsible for compliance and enforcement of insurance and says that is up to OIR, which is not named in the taxi complaint. “Here OIR is the state entity responsible for compliance and enforcement of the statutes and rules related to insurance

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requirements in Florida, including their interpretation. OIR is not party to this proceeding,” the dismissal motion states. “Therefore, this Court should refuse to enter the declaratory judgment requested by Plaintiffs and dismiss this action as being improperly brought by parties whose rights are not in question and whose action fails to include persons whose rights would be affected by such a declaration.” The taxicab companies alleged in their original complaint that FDHSMV had failed to uphold its duty of ensuring a for-hire passenger transportation vehicle is “insured at all times with the requisite commercial coverage,” as stated in Florida Statutes 324.031 and 324.032. FDHSMV claims this complaint does not have merit, saying Florida statutes distinguish between the requirement of motor vehicle insurance and the proof of insurance. FDHSMV’s motion to dismiss states the plaintiffs have misunderstood and/or misapplied the statutes in saying FDHSMV has failed to carry out its duty to “ensure that ‘for-hire’ passenger vehicles comply with the terms” of Florida Statutes 324. The motion also states the plaintiffs have failed to demonstrate any “clear legal right to relief” because their rights were not violated. Florida For-Hire Vehicle Insurance Requirement The taxi lawsuit claims Florida law is “clear and unambiguous” in mandating that a for-hire passenger transportation vehicle be insured at all times with the required insurance limits. The taxi plaintiffs also alleged Florida law does not contemplate that a vehicle may only be an insured for-hire passenger transportation vehicle sometimes, but not at all times, as is the case with TNCs. “Plaintiffs apparently request a [a court order] to compel the Department to follow their interpretation of [Florida Statute www.insurancejournal.com

324],” FDHSMV stated in their response to dismiss. The FDHSMV argued against the taxi companies’ claims that Uber’s James River insurance policy does not provide adequate limits or coverage for when ridesharing drivers are not logged into the app and the complaint that James River is not a member of the Florida Insurance Guaranty Association. The response to the lawsuit cites two policies – the James River coverage and a policy from Old Republic Insurance Co. – to show Uber has provided proof it has met the insurance requirements under Florida law, which is what the agency said it is required to regulate. “Plaintiffs have demonstrated no clear error by the Department – to the contrary, it is Plaintiffs’ interpretation of [the statute] that is erroneous,” the agency said. Both parties await the judge’s final decision on the matter. In the meantime, Camillo says he feels confident their complaint will move forward. “A motion to dismiss is a legal tactic the DMV has engaged in to avoid answering a question of great importance to Florida’s residents and visitors – what limits of insurance are required for vehicles transporting passengers for compensation?” Camillo wrote in a statement Nov. 2 to Insurance Journal. “Ultimately, we are looking for an answer to this question.” He said the DMV’s position that the taxi companies have no standing to bring this case is without merit. “The suit seeks to determine what insurance limits are necessary not just for transportation network companies www.insurancejournal.com

such as Uber and Lyft, but for all for-hire operators including the plaintiff taxicab companies. Likewise the DMV’s position that the Department of Insurance regulates insurance, while correct, ignores the DMV’s responsibility to ensure compliance with Florida’s financial responsibility requirements. Compliance with the financial responsibility requirements is vested with the DMV and not the DOI.” Camillo added that if higher limits are only required when passengers are being transported for compensation, taxicab companies will look for an insurance product that complies with that requirement, and carry lower limits when vehicles are not transporting passengers for compensation. “The Florida Department of Highway Safety and Motor Vehicles is responsible for enforcing any state statute that oversees financial responsibility for motor vehicles under the provisions of the current law, Chapter 324, F.S.,” FDHSMV Press Secretary Alexis Bakofsky said in an e-mail to Insurance Journal. FDHSMV said it could give no further comment on pending litigation. Role of the Florida Office of Insurance Regulation OIR is not involved in this case, despite being named by FDHSMV. Florida Insurance Commissioner McCarty said OIR is reviewing the motion and cannot comment further given the pending legal matter. However, in an interview with Insurance Journal, McCarty said FDHSMV’s motion to dismiss the action because it was brought

by non-parties was an “interesting argument.” He also said the financial responsibility law is not under the purview of OIR. “We have repeatedly stated that the role of [OIR] is to determine if insurance coverage complies with the Insurance Code, not whether it complies with the financial responsibility law,” McCarty said. “It is not within our statutory jurisdiction to express an opinion as to whether or not a given policy satisfies the requirement of the financial responsibility law. That is not under our jurisdiction. That determination lies within the agency authority of the [FDHSMV],” he said. Ultimately, McCarty said, the way to address the issue of the for-hire vehicle definition and insurance requirement lies with the state legislature, who is responsible for developing laws regulating for-hire vehicles in Florida (see page 12). One such law that was introduced last session did not make it through before lawmakers adjourned. McCarty said OIR would work with legislators and stakeholders on any bill that concerns insurance in the state of Florida. OIR has also stated in the past that Uber’s insurance policy is in excess of the state limits required by taxicabs and livery services and provides similar coverage. “The policy appears to follow the typical business auto policies that are used by licensed and admitted carriers in Florida to provide coverage for commercial autos,” OIR Deputy Chief of Staff Monte Stevens said in a memo to the Hillsborough County, Florida, Public Transportation Commission earlier this year.

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News & Markets Florida Issues Data Call for Water Claims, Assignment of Benefit Costs

esponding to concerns over an alarming increase in losses, the Florida Office of Insurance Regulation (OIR) ordered Florida’s largest property insurers on Oct. 23 to submit detailed information on water loss claims, mitigation services, litigation and assignment of benefits. OIR stated the data call would help evaluate the impact that assignment of benefits is having on property claims. OIR is requiring the top 25 HO-3/dwelling fire writers in Florida to submit information for this data call, including Citizens Property Insurance Corp. However, OIR said the data call is available to any personal residential property writer that would like to participate. The deadline for companies to submit this information is December 7. The insurers are required to provide responses on issues ranging from how claims are filed and how much is paid, to detailed claims information, including names and addresses of the water mitigation companies, contractors, public adjusters and attorneys representing policyholders on claims going back to January 2010. OIR also has requested specific geographic information on where

losses are occurring across the state. Citizens, the state’s insurer of last resort, has been vocal about its rapid rise of water loss claims since 2012, particularly in MiamiDade County where the frequency and severity of water loss claims far exceeds any other region in the state, the company said. Citizens President, CEO and Executive Director Barry Gilway welcomed the data call request, saying he’s confident the OIR investigation will provide data from private companies that corroborates Citizens’ analysis that water claims are the leading driver of rates across the state, especially in South Florida. “As the state’s non-profit insurer of last resort, Citizens is doing all it can to keep premiums as low as possible for our policyholders,” Gilway said. “The surprising increase in the frequency and severity of water loss claims, particularly in Miami-Dade

County, over the past several years makes it more difficult for us to control the need for rate increases.” A Citizens analysis of premium costs shows that water loss claims account for 33 cents of every premium dollar paid by its Florida customers. But in Miami-Dade, more than half of every premium dollar goes to pay for water loss claims. “The bottom line is this. Were it not for water losses, most Miami-Dade customers would see a decrease in rates for 2016,” Gilway said. “As it stands, however, the average homeowners’ rate in Miami-Dade will climb by more than 6 percent.”

NCCI Requests Review of Florida Workers’ Comp Rate Filing

he National Council on Compensation Insurance (NCCI) has submitted a request to the Florida Office of Insurance Regulation (OIR) to consider supplemental information in regards to its recent workers’ compensation rate filing that Florida Insurance Commissioner Kevin M. McCarty said would be disapproved if not amended. NCCI’s original rate filing, submitted to OIR in August, proposed a rate decrease for workers’ compensation rates for Florida employers of 1.9 percent. OIR reviewed the request and held a public hearing on the proposed rates in October. At the hearing, representatives of the roofing industry and professional employer organizations (PEO) testified on a variety of issues and expressed concerns about potential fraudu-

lent activity within the workers’ compensation system. OIR notified NCCI Nov. 3 that its rate request as submitted would not be approved and instead ordered NCCI to lower rates by 5.1 percent. OIR said in a statement that if the rate request was resubmitted by Nov. 9 with the required changes, the filing would be approved. “Florida’s workers’ compensation market is both competitive and affordable. This approval would represent a 60 percent cumulative reduction in Florida workers’ compensation rates since 2003 and having competitive rates is a critical element in bringing new jobs to our state,” said McCarty. “It allows Florida’s businesses

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to continue growing economically, while helping injured workers get the medical assistance they need to return to work.” NCCI responded on Nov. 6 with a request for OIR to consider supplemental information related to the expense constant, indemnity trend, and profit contingency factor for its annual workers’ comp filing. “NCCI has not submitted an amended filing reflecting the requested -5.1 percent to the OIR,” NCCI said in a statement. “NCCI responded by submitting supplemental information for the OIR’s consideration… NCCI will provide an update upon further developments.” NCCI files on behalf of approximately 260 workers’ compensation insurance companies with Florida policyholders. www.insurancejournal.com

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