The clients of Citizens Property Insurance Corp. benefit from a higher rate hike than initially proposed, due to a change in state law that was partially blocked by a federal judge.
Citizens expressed disappointment at the July 11 ruling, in which U.S. Chief Justice Mark Walker found the new law, approved by lawmakers this spring, violated entrepreneurs’ rights of expression In front page.
But Citizens’ board took advantage of another part of the measure (SB 76) to approve further rate changes at a meeting on July 14.
“These necessary adjustments reflect the Florida legislature’s efforts to restore Citizens to its role as a residual insurance company,” Citizens Chairman Carlos Beruff said in a press release. “Unfortunately, we have become the first choice, or the only choice, in too many parts of the state.”
Since October 2019, Citizens has seen its policy count grow from 420,000 to over 640,000 and is now experiencing an increase of over 5,000 new policies per week. At this rate, company officials expect the number of policies to exceed 750,000 by the end of 2021, the company reports on its website.
Described as an amendment to increases previously approved in February, the changes mean that the average rate increase for new and renewed policies after August 1 will be 5.2%, while renewals after February 1 will increase by 7. 6%.
Increases vary by location and always require approval from the Office of Insurance Regulation.
The new law, which took effect on July 1, partially amended a 2011 law that caps annual increases for citizen customers at 10%, meaning many have not paid actuarial rates.
The law, signed by Governor Ron DeSantis last month, also allows citizens to factor estimates of additional reinsurance costs when calculating rates.
Brandon-based Gale Force Roofing & Restoration LLC last month filed a lawsuit challenging the new law, arguing that a provision prohibiting roofing contractors from advertising is unconstitutional.
Siding with the hedging company, Walker issued a preliminary injunction preventing the application of parts of the law. The judge found that the new law violates First Amendment rights by directly penalizing protected speech.
Walker’s decision focused on part of the law that prevents contractors from soliciting homeowners to file insurance claims through “prohibited advertising,” which could include such things as emails, door hangers, flyers and brochures.
“It is also clear that the injuries threatened to the complainant to bar the complainant’s truthful commercial speech outweigh the state’s interest in preventing fraud, protecting consumers from exploitation and stabilizing the market. insurance, ”Walker wrote in the decision.
Lawmakers passed the insurance measure on April 30 as property insurance rates skyrocketed and insurers abandoned policies in Florida.
Citizens President and CEO Barry Gilway said he was “not surprised, but disappointed” with Walker’s decision.
“I understand the logic behind the order,” Gilway said. “But ultimately, in my opinion, the solicitation rate is significantly influenced by the solicitation and aggressive solicitation of claims.”
The new law also takes steps to limit attorney fees and reduce the time to file claims.
The law is seen as a second recent legislative victory for citizens and the insurance industry.
In 2019, lawmakers placed restrictions on the ability of policyholders to assign claims – called assignment of benefits – to contractors, who then demand payment from insurers. Yet rates are rising and policies are shifting from private hands to state-backed citizens.
This year’s law increases the 10% citizens’ cap on annual premium increases of 1% per year over the next five years to make the state-backed insurer’s rates more competitive against coverage private insurance.
The law also requires Citizens to factor into its rates the reinsurance costs needed to protect its surplus from a 100-year storm and directs policyholders to private insurance companies if a private policy premium is less than 20. % of a comparable Citizens’ policy premium.
Citizens’ officials noted that state lawmakers may address Walker’s decision during the 2022 legislative session that begins in January.
However, they acknowledged that any positive signs that other parts of the law are working as intended may not be noticeable until the end of 2022.
“I know we will have data, hopefully over the next year or so, to really understand the impact of this on the incoming barrage of litigation that we are seeing,” said Christine Ashburn, chief communications officer, legislative affairs. and external Citizens.
As part of the lawsuit, Gale Force Roofing and Restoration said it is urging homeowners to contact the company for inspections of storm damage to roofs.
“The plaintiff (Gale Force Roofing and Restoration) will then honestly communicate to the owners the nature and extent of the damage,” the lawsuit said. “The claimant will then encourage homeowners to contact their insurance company to make a claim under their home insurance policy and sign a contract with the claimant to assign the benefits available under the homeowner’s insurance policy to the applicant.”
Gale Force argued that the law limits its rights under the First Amendment because it requires the company to stop its written advertising that encourages consumers to contact it for the purpose of filing an insurance claim for roof damage.
The company also argued that the new law was aimed more at reducing insurance claims than at preventing fraud, saying the law served as a “thinly veiled attempt” to prevent homeowners from getting outside help to do so. valid insurance claims for home repairs.
Supporters of the bill and insurance industry officials, however, have argued that dubious and even fraudulent claims for roof damage have played a major role in the rising costs.
In court documents, attorneys representing the state have challenged that the restrictions in the law violate First Amendment rights, arguing that the “prohibited advertising” provision should be viewed as a reasonable restriction on anti-commercial speech. exploitation and consumer fraud.
But Walker disagreed.
While the state has the right to regulate entrepreneurs and protect Floridians from fraud, Walker wrote in the ordinance, “it must do so within the limits set by the Constitution.”
“Here, the legislature did not do it accordingly,” added the judge.