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Excerpts from the Florida 'Homeowners Bill of Rights'

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Sponsored by Senator Jeff Atwater (R-Palm Beach)

Co-sponsored by Senator Don Gaetz (R-Niceville)

The “Homeowners Bill of Rights” (Senate Bills 2860 and 1196) grew out of a series of hearings conducted this year by the Senate Select Committee on Property Insurance Accountability.  The Select Committee subpoenaed insurance company chief executives and actuaries and placed them under oath and asked them questions to which Floridians wanted answers.  Senator Atwater chaired the Select Committee.  Senator Gaetz was a member appointed by the Senate President.

After more than twenty hours of testimony under penalty of perjury, the evidence was clear and troubling.  Some insurance companies have cynically and purposefully taken advantage of policyholders, cancelled coverage without adequate notice or reason, failed to pay claims on time, generated unapproved hurricane risk models as justification for skyrocketing rates, used savings which were supposed to go to consumers to engage in internal stock buybacks, and boosted their profits to historic highs while poor-mouthing to the public and regulatory agencies.

Insurance companies are private corporations.  While there is a legal and constitutional limit to what the state legislature can and should do to control them, Senators Atwater and Gaetz, joined by other senators, introduced Senate Bills 2860 and 1196 to level the playing field between insurers and insureds.  This legislation, which has come to be called the “Homeowners Bill of Rights,” passed both houses of the legislature with the support of both Republicans and Democrats.

Here are some of the major provisions of this legislation:

 1.     Homeowners have the right to rates that are based on real, not manufactured risk.

Insurance companies use “risk models” to predict probable maximum loss from hurricanes.  The Select Committee found that some “risk models” were devised primarily to justify high rates and weren’t based on valid, reliable assumptions.  Thanks to this new law, self-serving “models” are now illegal.  The models and assumptions behind them must be publicly available and approved in advance by the State of Florida.

2.     Homeowners have the right to choose among competitive insurance companies with a reduced dependence on Citizens Insurance.

The state is eliminating anti-competitive barriers to new insurers entering Florida.  The legislature has provided incentives for more companies to enter the market.  In return for these incentives, companies must agree to write at least 15 percent of their policies for consumers transferring out of Citizens Insurance, a state-owned insurer.  Over time, this will “de-populate” Citizens and reduce the insurable risks which could be passed along to all Floridians in case of a year of devastating storms and losses.

3.     Homeowners have the right to fair trade practices and prompt payment of claims.

The bill requires insurance companies to pay undisputed amounts of partial or full claims within 90 days.  Insurers are prohibited from withholding payment on a partial claim until a full claim has been settled.  Violations subject companies to penalties under the law.  

4.     Homeowners have the right, through their state government, to stop insurers from unreasonable, unjustified rate increases.

Under current law, if the state’s Office of Insurance Regulation denies a rate increase, insurers can appeal the denial to an arbitration panel.  Arbitrators don’t have to be familiar with insurance law, or rate setting or even live in Florida.  Some arbitrators are even chosen by insurance companies.  The result is that rate increases denied by the state are often approved by arbitrators who “split the difference.”  The new law eliminates insurers’ ability to use arbitration to overturn rate denials.

5.     Homeowners have the right, through their state government, to severely punish insurance companies that violate the law.

The law, as it stands now, only allows the state Office of Insurance Regulation, to issue what amounts to a slap on the wrist if insurance companies commit an unfair trade practice.  The result is that some insurers thumb their noses at the public.  Now, companies that break the rules are subject to stiff penalties of up to $200,000. 

6.     Homeowners have the right to know how insurance companies make their decisions.

Companies are required to make public their claims-handling procedures and are forbidden from using “trade secrets” as an excuse to cover up unfair, unreasonable or illegal practices.  The Office of Insurance Regulation can now release a document marked as a “trade secret” to the public under certain circumstances.

7.     Homeowners have the right to know in advance if insurers are planning cancellations.

If an insurer plans to nonrenew more than 10,000 policies within a 12-month period, the company must inform the state at least 90 days before issuing any notices of nonrenewal.  After any policy is non-renewed, consumers must have at least six months notice before they lose their coverage.

8.     Homeowners have the right to be protected against excessive profits by insurance companies.

The new law allows only “a reasonable margin for profit and contingencies.” The current practice has permitted insurers to reap historic profits while telling the public that they are still recouping losses.

9.     Homeowners have the right to be protected from insurance risks dumped on them by irresponsible actions of others.

Under current law, policyholders could experience an expensive assessment to fund deficits incurred by the state-owned Citizens Insurance Company.  The new law reduces by 40 percent any assessments persons who are insured by commercial carriers might have to pay to fund deficits in Citizens.  The law also requires new structures built within 2,500 feet of the coast to meet the higher standards recently included in the Florida Building Code. 

10.   Homeowners have the right to know the windstorm risk when buying a new or different home.

Right now, purchasers have no documentation of the windstorm rating of a home they’re purchasing.  The Homeowners Bill of Rights requires disclosure of a home’s windstorm mitigation rating for any home located in a wind-borne debris region and insured by Citizens for $500,000 or more. 

11.    Homeowners have the right to lower premiums if they mitigate risk to their properties.

The Office of Insurance Regulation is required to develop a method of tying discounts for property insurance to the numerical rating of a structure based on the uniform home rating scale.  Floridians can go to www.mysafefloridahome.com to arrange inspections of their property, a numerical risk rating and advice on how to take specific actions to reduce risk.  Persons with modest-priced homes in wind-borne debris areas can obtain state grants to help with putting on shutters and making other improvements that mitigate or reduce risk.

In addition to this “Homeowners Bill of Rights,” the state is also providing free help in finding insurance companies and comparing rates.  By going to www.shopandcomparerates.com , owners of homes and businesses can learn about all the insurance companies, old and new, that are willing to write policies in each county.  Information is provided on this website that will help you find the coverage you need and compare prices among insurers.

The “Homeowners Bill of Rights” takes important steps toward leveling the playing field between insurance companies and policyholders.  But Senator Atwater and Senator Gaetz believe these are just steps and are committed to expanding and improving homeowners’ rights in the next session of the Florida Legislature.