June 7, 2022 | Chris Dawson
The Florida Legislature convened in special session on May 23 to address the state’s ongoing crisis related to residential property insurance. The Governor called the Legislature back to Tallahassee to find a way to shore up the market as premiums continue to rise and options for coverage continue to dwindle - just as an expected above-average 2022 Atlantic hurricane season kicks off. In recent months, several high-profile insurer liquidations have added fuel to the fire and elevated the calls for reform in the market to a fever pitch.
Over the course of approximately 72-hours, the Legislature accomplished passage of significant reform legislation that has proven elusive over the last several years of regular legislative sessions. Further, with overwhelming support from legislators, the special session expanded to address reforms sought in the aftermath of the Surfside Condo Collapse during the summer of 2021. The Legislature’s efforts to pass condominium inspection standards and accountability reform failed during the waning hours of the regular 2022 Legislative Session. Ultimately, lawmakers reached, introduced, and passed a compromise position over 24 hours during special session. Read our summary of both pieces of significant reform legislation, signed into law by Governor DeSantis.
SPECIAL SESSION BILLS
Property Insurance: HB 1D by Rep. Jay Trumbull (R – Panama City) and SB 2D by Sen. Jim Boyd (R – Bradenton)
Property Insurance; Creating the Reinsurance to Assist Policyholders program to be administered by the State Board of Administration; requiring certain property insurers to obtain coverage under the program; revising homeowner eligibility criteria for mitigation grants; requiring claimants to establish that property insurers have breached the insurance contract to prevail in certain claims for damages; requiring the Office of Insurance Regulation to aggregate on a statewide basis and make publicly available certain data submitted by insurers and insurer groups, etc. APPROPRIATION: $150,000,000 Effective Date: Except as otherwise expressly provided in this act, this act shall take effect upon becoming a law
Notes:
- Reinsurance to Assist Policyholders (RAP) Program - authorizes a $2 billion reimbursement layer of reinsurance for hurricane losses directly below the mandatory layer of the Florida Hurricane Catastrophe Fund. Specifies that insurers do not pay premiums for RAP coverage, but must reduce rates to reflect savings.
- My Safe Florida Home Program - appropriates $150 million to program to provide hurricane mitigation inspections and matching grants for the performance of hurricane retrofitting on homestead single family homes with a value of $500,000 or less. The funds appropriated are allocated as follows:
- $115 million for mitigation grants.
- $25 million for hurricane mitigation inspections.
- $4 million for education and consumer awareness.
- $1 million for public outreach for contractors and estate brokers and sales associates.
- $5 million for administrative costs.
- Contractor Solicitation of Roof Claims - prohibits contractors from making written or electronic communications that encourage or induce a consumer to contact a contractor or public adjuster for the purposes of making a property insurance claim for roof damage unless the solicitation provides: that the consumer is responsible for the payment of any deductible, it is insurance fraud for a contractor to pay or waive an insurance deductible, and it is insurance fraud to intentionally file an insurance claim containing false, fraudulent or misleading information.
- Separate Roof Deductibles - allows property insurers to include a separate roof deductible and an option to decline said deductible by signing documentation approved by OIR. If a roof deductible is added to the policy at renewal, the insurer must provide notice of change in policy terms and allow the policyholder to decline the separate roof deductible in favor of replacement value coverage (RCV). A permissible roof deductible under this provision is the lesser than of 2% of the Coverage A value of the policy OR 50% of the replacement value of the roof. The roof deductible may not be applied if the loss is:
- A total loss to a primary structure which is caused by a covered peril.
- A roof loss resulting from a hurricane.
- A roof loss resulting from a tree fall or another hazard that damages the roof and punctures the roof deck.
- A roof loss requiring the repair of less than 50 percent of the roof.
- Roofs-Insurer Underwriting - prohibits an insurer from refusing to issue or refusing to renew a homeowner's insurance policy because the roof is more than 15 years old. For a roof that is at least 15 years old, the bill requires an insurer to allow a homeowner to have a roof inspection performed by an authorized inspector at the homeowners’ expense before requiring a homeowner to replace a roof as a condition of issuing or renewing a homeowners’ insurance policy. Additionally, if an inspection of the roof performed by an authorized inspector shows that the roof has at least 5 years of useful life remaining, the insurer may not refuse to issue or renew a homeowners’ policy solely because of roof age.
- Insurer Claims Handling - requires property insurers to conduct any physical inspection of the property related to a claim within 45 days of receiving proof of loss statements. This deadline does not apply to hurricane claims.
- Bad Faith Civil Remedy - requires a claimant to establish a property insurer breached the insurance contract in order for the claimant to prevail in a bad faith claim for extra-contractual damages.
- Attorney Fees - Assignment of Benefits (AOB) - prohibits assignment of the right to obtain attorney fees in suits arising out of a property insurance policy to persons other than a named or omnibus insurance or a named beneficiary under the policy. Assignments may occur, but the assignee vendor may not recover attorney fees in suits against the insurer.
- Attorney Fees - Fee Multipliers - attorney fee multipliers may only be awarded under “rare and exceptional circumstances” standard with evidence that competent counsel could not be hired in a reasonable manner.
- Attorney Fees - Dismissal for Failure to Provide Notice - A defendant insurer may obtain attorney fees and costs associated with securing a dismissal without prejudice for failure to provide the required notice of intent to initiate litigation at least 10 days before filing a suit against a property insurer.
- Assignment of Benefits (AOB) - makes new requirements to language and assignments to increase clarity and transparency.
- Regulation of Insurers and Insurer Transparency - establishes a series of new reporting requirements for the Office of Insurance Regulation (OIR) and creates a Property Insurance Stability Unit to monitor the market, collect data and provide support to struggling insurers.
Building Safety: HB 3D by Rep. Jay Trumbull (R – Panama City) and SB 4D by Sen. Jim Boyd (R – Bradenton)
Building Safety; Providing that the entire roofing system or roof section of certain existing buildings or structures does not have to be repaired, replaced, or recovered in accordance with the Florida Building Code under certain circumstances; requiring condominium associations and cooperative associations to have milestone inspections performed on certain buildings at specified times; authorizing local enforcement agencies to prescribe timelines and penalties relating to milestone inspections; revising the types of records that constitute the official records of a condominium association; prohibiting certain members and associations from waiving or reducing reserves for certain items after a specified date, etc. Effective Date: Upon becoming a law.
Notes:
- Requires the Florida Building Code to provide that when 25% or more of a roofing system or roof section is being repaired, replaced, or recovered, only the portion of the roofing system or roof section undergoing such work must be constructed in accordance with the current code in effect at that time. This new exception to the current 25% Rule applies to roof systems and roof sections built, repaired, or replaced in accordance with the requirements of the 2007 Florida Building Code or subsequent editions.
- Establishes a statewide structural inspection program for aging condominium and cooperative buildings to ensure that such buildings are safe.
- Establishes that any condo unit, three stories in height or more, must have a "milestone inspection" by December 31st of the year in which the building reaches 30 years of age, based on the date the certificate of occupancy was issued. If the building is within 3 miles of the coastline then the first milestone inspection must be done within 25 years of when the CO was issued.
- In both instances, inspections must be repeated every 10 years after the initial one.
- It will be up to local jurisdictions to provide written notice to the condo association that a milestone inspection is due by certified mail, return receipt is requested.
- The milestone inspection must take place within 180 days of receiving notice.
- A milestone inspection takes place in two phases. The first must be completed by a licensed architect or engineer and must include a visual inspection of habitable and uninhabitable areas including major structural components. The second takes place if any substantial structural deterioration is identified during phase one.
- The bill establishes details of how the findings of the inspection are delivered and shared by the architect or engineer.
- The bill establishes details, deadlines and requirements of how quickly repairs to a building must take place if and when structural issues are identified as part of the inspection process.
- Notice requirements to condo leadership along with policies and penalties are established.
- The Florida Building Commission shall review the milestone inspection requirements and make recommendations to the Legislature to ensure the inspections are sufficient to determine the structural integrity of a building.
- Defines structural integrity reserve study to mean a study of the reserve funds required for future major repairs and replacement of the common areas based on a visual inspection of the common area.
- Establishes rules and regulations between how studies are conducted and how long they must be maintained.
- Establishes items where maintenance may not be deferred.
- Establishes that, effective December 31, 2024, the members of a unit-owner controlled association may not determine to provide no reserves, or less reserves than required by this legislation for any of the following items - roof, load bearing walls or other primary structural members, floor, foundation, fireproofing and fire protection systems, plumbing, electrical systems, waterproofing and exterior paint, windows, and any item that has a deferred maintenance expense or replacement cost exceeding $10,000.
- Before a developer turns over control of an association to unit owners other than a developer, the developer must have a structural integrity reserve study completed for each building on the condo property that is three stories or higher in height.
- Establishes a series of new reporting requirements from deadlines, to notices, to copies kept on hand, to make public and readily available, etc.
CONCLUSION
Property Insurance has been a dominant topic of conversation in Tallahassee in recent years and has become a top issue on the campaign trail statewide. The actions taken during the 2022 Special Session are unlikely to provide significant, immediate relief to policyholders but in the long-term should stabilize the residential property insurance market in Florida. Insurers, too, will have to wait for many benefits promised by the reform efforts, though there will be immediate availability of reinsurance coverage through the RAP program and attorneys’ fee reform will take hold quickly. Industry experts expect most desired outcomes from the legislation will take at least 18 months to cycle through the market and yield benefits. In the interim, Floridians continue to face a perfect storm of skyrocketing rates, diminishing options for coverage in the private market, and a ballooning of the state-backed Citizens Property Insurance Company.