2015 Legislative Update
Fred E. Karlinsky, Esq.
Shareholder, Greenberg Traurig
Florida Hurricane Catastrophe Fund Participating Insurer Workshop
Overview
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Florida Insurance Update– Florida Political Landscape
Election Cycle Legislative Session Special session – Florida Legislation Successful bills Governor Veto
Overview
> Florida Insurance Update Cont.
– Florida Regulatory Developments FHCF bond purchase
Citizens Update
Holding Company Statute Revisions Enterprise Risk
Price Optimization
– Florida Litigation Update Workers’ Compensation Assignment of Benefits Citizen’s Bad Faith
2014 General Election Cycle Results
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Executive Branch– Republican Control
– All Termed out in 2018
– Future Aspirations
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Legislative Branch– Republican Control
House Gains Seats
2015 Florida Legislative Session
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Governor’s Recommendations– Tax Cuts, Education Increases
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Joint House and Senate Agenda– Tax Cuts, Water Resources, Jobs for Special Needs Students
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Health Funding Impasse– Early Sine Die
2015 Insurance Issues that Passed
> General Insurance
– Countersignature Requirement – SB 252
– Division of Insurance Agent & Agency Services – HB 1133
– Electronic Commerce – SB 222
– Florida Insurance Guaranty Association (FIGA) – SB 836
– Fraud – HB 157
– Insurer Notification – HB 273
Countersignature Requirement
– SB 252
> Sen. Chris Smith (D-Fort Lauderdale)
> Absence of a countersignature does not affect the validity of a property, casualty, or surety insurance policy or contract.
> Amends the definition of financial guaranty insurance
> Allows a foreign or alien insurer applying for a COA to submit a copy of the report of the most recent
examination that is up to five years old as of the date of the insurer’s application.
Division of Insurance Agent & Agency
Services
– HB 1133
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Rep. Jay Fant (R-Jacksonville)>
Bill advanced by DFS>
Amends various provisions of the insurance agentand agency licensure laws
Electronic Commerce
– SB 222
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Sen. Dorothy Hukill (R-Port Orange)>
Creates the “Computer Abuse and Data RecoveryAct” (CADRA)
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Included in CADRA is a civil right of action withcivil remedies and attorney’s fees
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Relief provided under this bill is available as asupplement to other remedies under state and federal law.
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Signed into law on 5/15. The bill will take effect onFlorida Insurance Guaranty Association
(FIGA)
– SB 836
> Sen. Jack Latvala (R-Clearwater)
> Creates a uniform assessment percentage to be
collected from policyholders to cover the cost of claims when a property and casualty insurer becomes
insolvent
> Streamlines the reconciliation of collections and eliminates a regulatory filing with the OIR
> Codifies the OIR’s interpretation of an admissible
asset for purposes of statutory accounting treatment of FIGA assessments
> Exempts regular assessments from the insurance premium tax
Fraud
– HB 157
>
Rep. Kathleen Passidomo (R-Naples)>
Makes it unlawful for a person to falselyimpersonate or represent another person if, while doing so, he or she receives any property
intended to be delivered to the party so
personated, with intent to convert the property to his or her own use.
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Requires the release of identity theft documentsand creates protections for business entities
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Creates additional prohibitions and increasesInsurer Notification
– HB 273
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Rep. Keith Perry (R-Gainesville)>
Allows personal lines insurers to deliver policydocuments, including policies, endorsements,
notices, or other documents, by electronic means in lieu of delivery by mail if the policyholder
affirmatively elects electronic delivery
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Allows an insurer to send the notice of changeseparate from the renewal notice as long as the notice is sent within the policy nonrenewal time limits.
Intrastate Crowdfunding
– HB 275
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Rep. David Santiago (R-Deltona)>
Authorizes intrastate crowdfunding as amechanism for small businesses to raise up to $1 million annually in crowdfunding securities,
subject to certain requirements under the Florida Securities and Investor Protection Act.
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Creates an intrastate exemption for securities2015 Insurance Issues that Passed
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Property & Casualty– Citizens Property Insurance Corp Operations – HB 715
– Flood Insurance – SB 1094
– Property & Casualty Omnibus – HB 165
– Sinkhole Repair – SB 1216
Citizens Property Insurance Corp
Operations – HB 715
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Rep. Holly Raschien (R-Key West)>
Removes the prohibition on coverage for anymajor structure that is substantially improved pursuant to a building permit applied for on or after July 1, 2015
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Approved by Governor 6/3. It will take effect onFlood Insurance – SB 1094
> Sen. Jeff Brandes (R-St. Petersburg)> Designed to increase the number of insurers offering private flood coverage to Floridians such as:
– Inclusion in the costal management element of local government plans
– Elevation certificates in accordance with DEM procedures
– Flexible coverage policies for flood
– Provide appropriate return of premium to affected insureds
– certification from OIR acknowledging that a private flood policy equals or exceeds the coverage offered by NFIP
Property & Casualty Omnibus – HB 165
> Rep. David Santiago (R-Deltona)> Comprehensive insurance package
– Enacts a uniform 120-day notification period
– Revises pre-insurance inspection requirements
– Restricts insurer notification to policyholders of the right to participate in neutral evaluation of sinkhole claims
– Clarifies the Medicare fee schedule
– Extends the time insurers can use a hurricane model
– Contains commercial insurance provisions
Sinkhole Repair – SB 1216
> Sen. Wilton Simpson (R-New Port Richey)
> Authorizes local governments to enter into financing
agreements with property owners to finance qualified improvements to property damaged by sinkhole
Title Insurance – HB 927
> Rep. Bill Hager (R-Boca Raton)
> Makes changes to the assessment recovery surcharge administration process
– Removes language limiting the surcharge to one per insolvent company
– “Surcharge” and not premium
– Requires any insurer to collect and remit the
surcharge to the receiver as an excess surcharge
– Establishes an excess surcharge account
2015 Insurance Issues That Passed
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Life & Health Insurance– Right to Try Act – HB 269
– Health Regulation Modernization – HB 731
– Long-Term Care Insurance – SB 520
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Auto InsuranceRight to Try Act – HB 269
> Rep. Ray Pilon (R-Sarasota)
> Establishes a framework in which manufacturers may provide investigational drugs, biological products, or devices to eligible patients without using the Federal Drug Administration (FDA) emergency use expanded access program
> To be eligible, patients must have a terminal condition with a projected life span of one-year if the condition runs its normal course
Health Regulation Modernization – HB
731
> Rep. Scott Plakon (R-Longwood)
> Amends the Florida Employee Health Care Access Act (EHCAA) removing provisions that conflict with the
federal Patient Protection and Affordable Care Act (PPACA)
> Special requirements for small employer stop-loss insurance policies and self-insured health benefit plans
Long-Term Care Insurance – SB 520
> Sen. Denise Grimsley (R-Sebring)
> Creates an additional nonforfeiture protection
provision that long-term care insurers can offer in a long-term care insurance policy in the form of a
return of premium in the event of the insured’s death or upon complete surrender or cancellation of the policy
> Bill signed into law on 5/15 and will take effect on
Auto Insurance Fraud – HB 1127
> Rep. Jennifer Sullivan (R-Eustis)
> Requires PIP clinics that are currently self-exempt
from licensure to obtain a Certificate of Exemption, which would allow the state to track clinic ownership and PIP reimbursements
> Clarifies vague statutory language and clearly
defines reimbursement claims filed by clinics in violation of licensing requirements as criminal violations to enable state prosecutors to
successfully prosecute these cases.
2015 Governor Veto
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Citizens Property Insurance Corp Operations – HB1087
– Would have revised the Citizens depopulation
program in an effort to maximize policyholder options and encourage greater participation by policyholders and agents
2015 Insurance Issues that Failed to
Pass
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General Insurance– Bad Faith Actions –SB 1088/HB 1197
2015 Insurance Issues that Failed to
Pass
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Automobile Insurance– Motor Vehicle Liability Insurance – HB 803/SB 1266
– Personal Injury Protection – HB 679
– Transportation Network Companies (TNCs) – HB
2015 Insurance Issues that Failed to
Pass
>
Property & Casualty Insurance– Assignment of Benefits – HB 669/SB 1064
– Reciprocal Insurers – HB 677/SB 678
2015 Insurance Issues that Failed to
Pass
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Life & Health Insurance– Direct Primary Care – HB 7047/SB 7084
– Health Insurance Exchange/Medicaid – SB 7044
– Step Therapy – SB 784/HB 863
Florida Regulatory
Developments
Florida Hurricane Catastrophe Fund
Update
> Last hurricane was Wilma in 2005 (9 Years)
> Per Advisory Council - fund will have $17 billion for the Atlantic hurricane season beginning June 1st
> Council says the fund could meet maximum claims without having to borrow
> In April, Gov. Scott and the Cabinet voted to add $2.2 billion of coverage to the CAT Fund in a two-part
Florida Hurricane Catastrophe Fund
Update
>
Transaction components:– State will buy $1 billion in reinsurance which will
transfer that risk to the private insurance market
– Another $1.2 billion in coverage will be secured
Florida Trends: Citizens Insurance
> October 2012 Citizens’ had approximately 1.5 million policies
> As of May 14, 2015, number of policies in force is 599,389
Citizens Bond Transaction
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$1.0 Billion Bond Transaction>
$700 million of Series 2015A-1 fixed rate bonds>
$300 million of Series 2015A-2 SIFMA FloatingRate Notes (FRNs)
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Continues to benefit from favorable global pricingto bolster its traditional reinsurance and capital market risk transfer programs
Florida Trends: Holding Company
Statutes
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Amended in 2013>
HCRS now due April 1>
As of January 1, 2015, the “Ultimate ControllingPerson” must file an Enterprise Risk Report, which is due April 1.
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If the insurance company is part of a holdingcompany system, the report must be filed with the lead state.
Florida Trends: Enterprise Risk
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“Enterprise risk” defined– any activity, circumstance, event, or series of
events involving one or more affiliates of an insurer which, if not remedied promptly, are likely to have a materially adverse effect upon the financial
condition or liquidity of the insurer or its insurance holding company system as a whole, including
anything that would cause the insurer’s risk-based capital to fall into company action level or would cause the insurer to be in a hazardous financial condition.
Florida Trends: Enterprise Risk
> Who is required to file Form F?
– Ultimate controlling person
– 10% shareholders
– Multiple filings?
> Where is Form F required to be filed?
– Lead state v. domicile of insurer
– Conflicts between states
> What must be disclosed?
– Format for Florida is supposed to be the same as NAIC’s model
Florida Trends: Enterprise Risk
The Report must contain information on the following areas that could produce enterprise risk:
> Any material developments
> Acquisition or disposal of insurance entities
> Any changes of shareholders
> Developments in various investigations, regulatory activities or litigation
> Business plan
> Identification of material concerns raised by supervisory college
> Capital resources and material distribution patterns
> Negative movement or discussions with rating agencies
> Corporate or parental guarantees
> Material activity or development which could adversely affect the insurance
Florida Trends: Enterprise Risk
Confidentiality
>
Differs from the NAIC’s model law>
Confidential and exempt>
Not subject to subpoena or discovery directly fromthe office.
>
The OIR may use the report for any regulatory orlegal action brought against an insurer as a part of the official duties
Price Optimization Prohibition
> Software determines how likely a consumer is to shop
around. Rates may vary based on that information
> OIR Memorandum directs insurers using the practice to
submit a filing to eliminate it
> 4th State to ban controversial practice (Maryland, Ohio,
Price Optimization Prohibition
> Insurer concern:
⁻ No universal definition of Price Optimization
⁻ Restricts pricing flexibility that could benefit consumers ⁻ Lower income consumers are more price sensitive,
optimization could help them
Florida Workers’ Compensation
Case
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Jan. 2015: Florida Supreme Court upholds“exclusive remedy” provision in Morales v. Zenith
>
Exclusive remedy: employers agree to providemedical and wage-loss benefits, regardless of who is at fault, in exchange for injured workers forgoing their rights to sue in civil court.
>
One of four Florida court cases involving workers’compensation with potential to upset the traditional workings of the system.
Florida AOB Case
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Florida 4th District Court ruled in against propertyinsurers that argued assignments of benefits were invalid.
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“Assignment of benefits” involves homeownerssigning over insurance-policy benefits to
contractors who do work such as repairing water damage
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Court said issue boiled down to “public policyCitizens’ Insurance Bad Faith
> Citizens Property Insurance Co. v. Perdido Sun
Condominium Association
> Alleged a statutory first-party bad faith action, pursuant to Section 624.155(1), Florida Statutes
– Any person may bring a civil action against an insurer for “not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so. . . .”
> Florida Supreme Court Rulings
– Legislature did not intend for Citizens to be sued for actions under Section 624.155(1)
– A first-party bad faith action did not constitute a “willful tort.”
Contact Information
Fred E. Karlinsky, Esq. Shareholder
Co-Chair, Insurance Regulatory & Transactions Practice
Greenberg Traurig, P.A.
401 East Las Olas Boulevard, Suite 2000 Fort Lauderdale, FL 33301
Tel: 954-768-8278 [email protected]
