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Florida Enacts Property Insurance Overhaul for Benefit of Policyholders

Fort Lauderdale, Fla. (June 13, 2023) – On June 1, 2023, Governor Ron DeSantis signed into law CS/SB 7052 (the Act), increasing consumer protection and insurer accountability in Florida. The newly enacted and amended statutes under CS/SB 7052 bolster policyholder protections and impose greater insurer oversight, including heightened penalties for insurer misdeeds in the state under a new law that will take effect on July 1, 2023 (this legal alert does not address all of the statutory revisions associated with the Act). As House Speaker Paul Renner noted, “The insurance legislation signed by Governor DeSantis today . . . not only empowers homeowners, but also cultivates market-driven competition, ultimately leading to lower costs.”

Statutory Revisions Regarding Insurance Coverage

The Act prohibits authorized insurers from cancelling or nonrenewing a property insurance policy for a residential property or dwelling that was damaged by any covered peril until the earlier of: (a) when the property has been repaired; or (b) one year after the insurer issues the final claim payment. The Act also expands current law prohibiting authorized insurers from cancelling or nonrenewing a residential property insurance policy until 90 days after repairs are completed for damages resulting from a hurricane or wind loss that is the subject of a state of emergency declared by the Governor and for which the Office of Insurance Regulation (OIR) has issued an emergency order. See Fla. Stat. §627.4133(2)(d)(1)(a) and (b) (Notice of cancellation, nonrenewal, or renewal premium).

The Act further provides that, if a roof deductible is applied, the insurer cannot apply any other deductible under the policy to any other loss caused by the same peril. See Fla. Stat. §627.701(Liability of insureds; coinsurance; deductibles.).

Finally, the Act tolls the period for filing a property insurance claim during a named insured’s term of deployment to a combat zone or combat support system. See Fla. Stat. § 627.70132 (Notice of property insurance claim).

Statutory Revisions Regarding Regulatory Oversight

The Act increases the maximum administrative fines that may be levied by the OIR on insurers by 250%, generally, and 500% for violations stemming from a state of emergency. See Fla. Stat. §624.4211 (Administrative fine in lieu of suspension or revocation.). The Act sets forth the following maximum fines:

  • Fines for each non-willful violation may not exceed $12,500 (up from $5,000) and fines for each willful violation shall not exceed $100,000 (up from $40,000). Fines may not exceed an aggregate amount of $50,000 (up from $20,000) for all non-willful violations arising out of the same action, or an aggregate amount of $500,000 (up from $200,000) for all willful violations arising out of the same action.
  • Fines for a violation related to a covered loss or claim caused by an emergency for which the Governor has declared a state of emergency may not exceed $25,000 for each non-willful violation and may not exceed $200,000 for each willful violation. Such fines may not exceed an aggregate amount of $100,000 for all non-willful violations arising out of the same action or an aggregate amount of $1,000,000 for all willful violations arising out of the same action.

Statutory Revisions Regarding Claims Handling

The Act requires residential property insurers to create and use claims-handling manuals that comply with the Insurance Code and comport with industry standards. The OIR may request a claims-handling manual from a property insurer at any time, and the Act requires property insurers to attest that their claims manuals comply with Florida law and that they are able to properly implement their manual. See Fla. Stat. §627.4108 (Claims-handling manuals; submission; attestation).

The Act also strengthens the Unfair Insurance Trade Practices Act in the following ways:

  • Prohibits alteration or amendment of an adjuster’s report without providing a detailed explanation as to why any change is made that has the effect of reducing the estimate of the loss. (The insurer must also either create a list of changes and identify who made the changes or retain all versions of the report.); and
  • Prohibits officers and directors of impaired or insolvent insurers from receiving a bonus from that insurer or other entity under common ownership with that insurer.

See Fla. Stat. §626.9541 (Unfair methods of competition and unfair or deceptive acts or practices defined.).

Statutory Revisions Regarding Rate Discounts

Effective October 1, 2023, the Act amends Section 627.0629, (Residential property insurance; rate filings) and requires insurers to provide information on their websites describing the hurricane mitigation discounts available to policyholders. This information must be accessible on, or through a hyperlink located on, the homepage of the insurer’s website or the primary page of the insurer’s website for property insurance policyholders or applicants for such coverage in Florida.

On or before January 1, 2025, and every five years thereafter, the OIR must re-evaluate and update the fixtures or construction techniques demonstrated to reduce the amount of loss in a windstorm and the discounts, credits, other rate differentials, and appropriate reductions in deductibles that reflect the full actuarial value of such fixtures or construction techniques. The OIR also must adopt rules and forms necessitated by such re-evaluation.

Conclusion

Due primarily to excessive litigation, Florida’s insurance market has become increasingly volatile, leading many property insurers to insolvency and many others to reducing or eliminating their commitment to writing new policies within the state. In the past two years, the Florida legislature has taken steps to solve this problem, including enactment of Senate Bill 2-A in December 2022, which, among other things, eliminated Florida’s one-way attorneys’ fee statute and prohibited assignments of benefits. Unlike prior legislative reform, the Act is designed to moderate the claims-handling process and provide greater insurer oversight by the OIR.

For more information on this legislation, contact the authors of this alert. Visit our Insurance Coverage & Bad Faith Litigation Practice pages for more alerts in this area.

Authors:

Laura Farrant, Partner

Bradley S. Fischer, Partner

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