Florida Insurance Commissioner Kevin McCarty has come out full force in support of property bill SB 2044, passed in the final hours of the 2010 Florida legislative session.
In a four-page letter today to Gov. Charlie Crist, McCarty declared that the legislation offers benefits to "consumers, the Office's regulatory oversight, and the viability of the insurance marketplace." He further noted that it "strikes an appropriate balance that will have lasting benefits for the people of Florida."
McCarty outlined his reasons for support by citing several specifics in the omnibus legislation.
He said that continuing the prohibition of "use and file" rate filings will help prevent "excessive rate increases from being implemented." He also reiterated his previous statements concerning the much-reported "automatic" 10 percent rate increases, noting that SB 2044 allows for rate changes only upon review by his office.
He had praise for the increased surplus requirements, which raise the minimum capital requirements to $15 million for new property insurance companies and at least $10 million by 2015 and $15 million by 2020 for existing companies. The failures of several property insurers in the past year has been a hot topic of conversation among all stakeholders.
During the recent legislative session, many insurers were adamant that any new laws address the issue of cost drivers within the property insurance system. A major topic of that discussion was the role of public adjusters, a fact McCarty noted in his letter to Crist. "One of the biggest factors impacting insurance companies has been the rapid rise in claims initiated by public insurance adjuster," he wrote. SB 2044 institutes a three-year filing limitation for submitting hurricane and windstorm claims to an insurer.
He also said that the statutory changes to "replacement cost" methodologies "strikes an appropriate balance" between policyholders and insurers.
McCarty's strong support of the far-reaching bill will be welcomed by insurers. Whether it will have a positive impact on Gov. Crist's decision to sign the bill remains to be seen.
WASHINGTON - This year's numerous disasters have tapped the Federal Emergency Management Agency dry, even as hurricane season fast approaches.
The House agreed March 24 to give the agency an extra $5.1 billion for the fiscal year ending Sept. 30. But the Senate hasn't acted, despite recent flooding in Tennessee.
Hurricane season begins June 1.
"We've got projects that are starting to be held up," said Sen. Mary Landrieu, D-La. "The jar is empty."
FEMA Administrator Craig Fugate said while visiting Tennessee on Thursday that "there's an urgency" to approving the funding. He said the agency could respond to emergencies as they occur but couldn't help rebuild afterward.
"We are not going to be delayed in helping individuals in the emergency response costs," Fugate said. "But as this flood is going to show, we already have almost $1 billion in outstanding projects from previous disasters that we cannot move forward on."
Senate Majority Leader Harry Reid, D-Nev., tried to win unanimous Senate approval of the FEMA money on Friday. But Republicans won't cooperate unless spending is cut elsewhere in the budget.
"We will continue to work on this issue until it is resolved," Reid said.
Reid attempted to lump the FEMA money in with other spending items, including $1.25 billion for black farmers who were denied equal access to loan programs and additional funding for Haiti earthquake relief, for a package that could reach $50 billion.
Sen. Joseph Lieberman, the Connecticut independent who heads the Homeland Security and Governmental Affairs Committee, said disaster relief enjoys bipartisan support, but he wasn't sure which path FEMA funding might take.
"The only thing I know is that they need more money in disaster assistance," Lieberman said.
The Senate has spent two weeks on legislation to overhaul how financial institutions are regulated and will spend another week on it. Reid said other priorities include separate bills to extend tax breaks, create jobs and improve food safety.
Meanwhile, natural disasters keep stacking up. Sixteen states experienced a combined 18 disasters this year before the House voted to give FEMA extra funding in March.
Since then, major disasters have been declared for winter storms or flooding in Maine, New Hampshire, West Virginia, Rhode Island, Massachusetts, Delaware, New Jersey, Pennsylvania, New York, Minnesota, North Dakota, Nebraska, Connecticut, Mississippi, Alabama, Tennessee and Maryland.
Record flooding in early May in Nashville killed at least 20 people and caused an estimated $1.5 billion in damage.
FEMA's disaster fund provides temporary housing and counseling for disaster survivors and repairs or replaces public buildings, roads, bridges and utilities. The agency gets about $2 billion a year for disasters, but also routinely asks for additional funding, peaking at $43 billion in 2005 and nearly $11 billion in 2008.
FEMA is still paying for disasters dating to Hurricane Katrina in 2005. For example, the agency is still rebuilding schools in New Orleans, and an arbitration panel ruled in January that the agency must pay $474 million to rebuild Charity Hospital.
"While we can meet the immediate needs of survivors in these declared disasters, and we can support state and local government in the immediate response, we do not have the ability now to fund permanent work," Fugate said. "And that's going to be a key factor in this recovery as well as previous disasters going all the way back to Katrina."
Tampa was a small village when a major hurricane blew through in September 1848, pushing a massive storm surge into Tampa Bay and flooding the entire city.
The tide rose 15 feet above normal. Water covered all the islands in Tampa Bay and Tampa's Interbay Peninsula. Only the tops of trees could be seen near the flooded Hillsborough River. Most structures were swept away and huge oak trees were blown down. The massive change in topography the storm wrought rendered navigation charts almost useless.
It may have been the strongest storm ever to strike Tampa Bay.
I say may have been because it's not easy to know for sure how many hurricanes have hit the region, since most of Florida was uninhabited until the early 1800s .
After the September 1848 hurricane - big storms weren't named then - another hurricane hit a few weeks later, in October. It wasn't as big but it was strong enough to create a 10-foot storm surge in Tampa, resulting in more flooding for settlers still recovering from the first hurricane.
Some people left and never returned.
The last hurricane to hit Tampa Bay roared through in October 1921, causing widespread damage and a storm surge of 10.5 feet. The center of the storm came ashore in northern Pinellas County, near Tarpon Springs. In Tampa, water swept across DeSoto Park and over the seawall along Bayshore Boulevard. There were numerous reports of debris high in treetops the next day.
Many hurricanes have come close to Tampa Bay but have stayed far enough away to spare the area from severe damage. The Labor Day storm of 1935 struck the Florida Keys as a Category 5 (156 mph and above) but just missed Tampa Bay. Still, it caused a storm surge of 5.3 feet.
An October 1946 hurricane hit Bradenton but lost intensity as it made landfall, so damage was light.
In September 1950 Hurricane Easy moved on a slow path west of Tampa but pushed a storm surge of 6.5 feet into Tampa Bay. Water washed away roads and homes close to the waterfront along the Pinellas beaches. The storm came to a standstill west of Tarpon Springs and then intensified dramatically, with winds up to 125 mph. Easy made a small loop just off the coast before making landfall near Cedar Key. The storm then made another loop, reentered the Gulf of Mexico, and came ashore again near Homosassa Springs. In northern Citrus County, the storm dropped a record 38 inches of rain.
In September 1960, Hurricane Donna passed well east of Tampa, producing wind gusts of 120 mph in Manatee County and 150 mph in Polk County.
In October 1968, Hurricane Gladys made landfall between Bayport and Crystal River. Hurricane-force winds were reported from Pinellas to Citrus counties. A storm surge of 6 to 7 feet produced extensive damage.
In 1985, Hurricane Elena provided a perfect example of how chaotic storms can be. Elena was moving directly toward Citrus when it stopped, turned around, and headed directly for Biloxi, Miss. Still, high seas eroded Tampa Bay area beaches. Eight-foot waves caused two barges in Tampa Bay to break free from their moorings and slam into the Gandy Bridge and streets flooded in low-lying areas of Tampa, such as Davis Islands.
In recent memory the 2004 season was very busy with Hurricanes Charley, Frances, and Jeanne all moving through the area. Polk County was hit hardest in our area, with all of those storms sparing Tampa Bay from the worst weather.
It's common for our area to see a tropical storm in the early part of the season.
This is because the Gulf of Mexico is usually warm and small low pressure areas can intensify enough to produce a tropical storm. These events are not always a bad thing because they can provide our area with beneficial rains in the early part of summer. Large hurricanes are rare from June to the first part of July because water temperatures are just starting to warm up in the Atlantic.
September is the peak of the hurricane season but not for the Tampa Bay area. Our area can be hit in September but it usually comes from a weakening storm coming across the state from the east. October is actually the most dangerous month for Tampa Bay. The water temperatures are still warm enough to produce a large hurricane in the Caribbean and the wind patterns are much more conducive for a storm to move north into the Gulf and then be pushed eastward into our coastline.
Tropical activity typically drops off dramatically in November as water temperatures cool and wind patterns work against any developing storms.
There is a message in all this history: We've been lucky. Areas to the east, south, and northwest of Tampa Bay all get hit more often, yet we can't predict when the next big hurricane will strike.
One thing in Florida that is less predictable than the upcoming hurricane season is whether Gov. Charlie Crist will sign an omnibus property insurance bill endorsed by the state's insurance commissioner, a group of domestic insurance company executives, trade associations, and a consumer advocate.
Industry experts were not about to make any bold predictions about Crist's actions, as of May 21. Now an Independent Senate candidate, Crist has Senate Bill 2044 on his desk. Crist has until the start of hurricane season June 1 to sign or veto SB 2044.
"I don't think anyone can say if he (Crist) will sign it but there are a lot of people who worked hard to make it something he could sign," said William Stander, regional manager for the Property Casualty Insurers Association of America. "We did what we could do. We think this bill takes some measurable steps toward fixing the problems insurance companies are having in Florida."
Crist told a local newspaper he's leaning toward a veto because the bill would make it easier for insurance companies to raise rates. Experts said it looks like Crist has bought into claims the bill is not consumer friendly despite efforts to convince him otherwise. In a letter to Crist, Insurance Commissioner Kevin McCarty tried to correct what he called "a misperception circulating in the several press articles that claims this legislation allows for an automatic rate increase of 10%" without review by the Office of Insurance Regulation. McCarty said the conclusion was wrong and there is nothing in the bill that mandates any rate increases or permits them without regulator approval.
"There is a perception this bill will hurt consumers when, in fact, it will not," said Fred Karlinsky of Colodny, Fass, Talenfeld, Karlinsky & Abate. The firm is general counsel for the Florida Property & Casualty Association, which represents many of the domestic companies that have grown to become a major portion of the Florida marketplace. "Consumers will be hurt if this measure does not pass."
The industry said the bill addresses cost drivers identified by insurers as reasons many companies are experiencing financial woes even without a hurricane in Florida. Two companies last year were liquidated. Here are some highlights of SB 2044:
-- Public Adjusters: "One of the biggest factors impacting insurance companies has been the rapid rise in claims initiated by public adjusters," McCarty wrote to Crist. SB 2044 looks to curtail this by limiting the amount of time a homeowner can file a claim to three years after a storm instead of five years. The bill also limits public adjuster commissions and solicitations following a storm. The provision is "key in stopping the manipulation of people by public adjusters," Stander said. Public adjusters -- independent contractors who work directly for policyholders instead of for insurers -- have quadrupled in Florida since 2004.
-- Mitigation Credits and Replacement Costs: If an insurer shows the aggregate of state-mandated mitigation discounts results in a revenue reduction, the insurer can recover the loss through a rate increase. The replacement cost methodology is also changed to allow insurers to pay actual cash value. After a homeowner hires a contractor, the remaining costs will be paid as repairs are made.
-- Rate Filings: The bill expands an expedited rate filing procedure adopted last year for property insurers to include a rate adjustment for reinsurance costs, financing products, and an inflation trend factor determined by the OIR. Increases are capped at 10% per policy. File-and-use, which was to expire at the end of the year, is to be extended until 2012.
-- Regulatory Oversight: SB 2044 requires residential insurers to $15 million in minimum capital and surplus instead of $5 million. For some time, the OIR has said the current level is insufficient to support an insurer in Florida. To also help the OIR make sure companies are solvent, the measure gives regulators additional oversight of the managing general agents and affiliates of insurers. Companies must report when they suffer a 15% loss on any quarterly or annual statement. SB 2044 allows troubled companies to cancel a portion of its business within 45 days instead of 100 or 180 days, depending on the time of year. OIR spokeswoman Brittany Benner said this part of the bill lessens the impact on the Florida Insurance Guaranty Association.
GALVESTON - A jury awarded a Houston insurance repair company $24 million in damages stemming from a contract to restore four Galveston apartment complexes damaged by Hurricane Ike.
The 15-day trial in Galveston's 56th District Court concluded Friday with the jury awarding Paramount Insurance Repair Service $12 million in punitive damages and $12 million on breach of contract, court documents reveal.
Attorneys Trey Apffel and Lloyd Kelley sued TFT Galveston Portfolio and Walter J. Teachworth, claiming he didn't pay Paramount for 28 days of repairs to four complexes.
The jury found Teachworth and his company, Teachworth Family Trust, committed fraud, court documents reveal.
Craig Lewis, one of Teachworth's attorneys, denied his client committed fraud and vowed to appeal any unfavorable judgment ordered by the court in the coming weeks.
"Teachworth has a proud history in Galveston, and we honestly do not believe Teachworth or his company committed any degree of fraud," Lewis said.
Teachworth owns property in Galveston and a Napa Valley winery in California, Kimberly Ayres, Kelley's legal assistant, said.
Teachworth's properties under contract included The Seasons, 8100 Seawall Blvd.; Somerset Retirement Village, 2828 61st St.; Ebbtide, 100 Market St.; and Château Lafitte, 711 Holiday Drive, Apffel said.
"Paramount gave an estimate of $29 million and was on the job for 28 days," Apffel said. "Then the issue became: Were they fired, or did they quit?"
Some of the buildings needed a total overhaul after Hurricane Ike's Sept. 13, 2008, landfall caused extensive flooding and damaged much of the Upper Texas Coast.
On Sept. 24, 2008, Paramount started work on the projects, Ayres said.
"There was a laundry list of emergency repairs," Ayres said. "Blue tarps, some had to be (demolished), some had to be totally gutted to the studs."
Paramount completed $6.9 million of the $29 million contract, Ayres said.
One of Teachworth's properties, Ebbtide, hasn't been reopened since the storm and sustained vandalism, Ayres said.
In the coming weeks, the court, with Judge Lonnie Cox presiding, will enter a final judgment in the case. The jury's punitive damages awarded Friday included roughly $6 million against TFT and $6 million against Teachworth.
"Not all the numbers could be entered in the verdict," Lewis said. "No body knows what the judge will eventually put in there. It could be construed as double recovery."
The Florida Governor's Hurricane Conference is here, and hurricane season can't be far behind.
The forum that allows emergency managers, rescue workers, government officials and others to gear up for the storm season starts on Monday in Fort Lauderdale.
Invited to speak on Wednesday, during the conference's main session, are Gov. Charlie Crist; Craig Fugate, director of the Federal Emergency Management Agency, and Bill Read, director of the National Hurricane Center in Miami-Dade County.
Organizers expect the five-day conference at the Broward Convention Center to draw about 1,800 people from 56 Florida counties, 30 other states and three foreign nations, said Ann Rowe, conference spokeswoman.
Participants attend workshops and training sessions on subjects such as hurricane forecasting, tropical hazards, evacuation planning and debris removal.
The Atlantic hurricane season starts on June 1 and runs through Nov. 30.
In North Carolina Farm Bureau v. Sadler (N.C.App. May 18, 2010), the Court of Appeals affirmed partial summary judgment in favor of the insured homeowner in a case arising out of a disputed claim for wind damages. The wind damage, which was alleged to have occurred during a wind storm on May 6, 2005, was finally reported to the insurer four months later, in September. The insurer originally denied the claim outright, but after reconsidering the insured's claim, agreed to pay $3,203.03 for damage to the home's roof. The insured refused to cash the check, and instead wrote to the insurer to demand an appraisal, as allowed under the terms of the policy.
The insured retained an appraiser named Lewis O'Leary. The insurer selected an appraiser named Rick Manning, who ultimately valued the insured's damages at $31,561.39. The trial court appointed an appraiser named Martin Overbolt to serve as umpire, and Mr. Overbolt eventually rejected Mr. Manning's estimate and agreed with Mr. O'Leary's estimate of $162,500. The insurer thereupon filed a declaratory judgment action contending that the appraisal award was not covered under the homeowner's policy. In response, the insured filed counterclaims alleging breach of contract, breach of the covenant of good faith, and unfair claim settlement practices. The trial court granted the insured partial summary judgment on the breach of contract claim, concluding that the insured was entitled to $150,500 plus interest. The trial court certified the order for immediate appeal pursuant to Rule 54.
The insurer began its argument on appeal by contending that the trial court erred in granting summary judgment to the insured. The insurer advanced a three-pronged argument, but the Court of Appeals rejected each one:
(1) The insurer contended that the appraisal process purported to determine causation and coverage issues. The Court of Appeals concluded that appraisers must, under certain circumstances, make determinations as to causation in order to appraise the damages: "It would be impractical for an appraiser to make a value determination for potentially insured damages without acknowledging the cause." (p. 7)
(2) The insurer argued that the insured failed to show a genuine disagreement as to the value of the damages before invoking the appraisal process. The Court of Appeals reasoned that the insured's refusal to cash the original $3,203.03 check, along with the insured's letter requesting that the parties engage in the appraisal process to determine the actual value, sufficed to evidence a disagreement as to the value of the damages.
(3) The insured failed to allow the parties' appointed appraisers the requisite time to jointly select the umpire prior to having the trial court appoint him. As noted by the Court of Appeals, the insured wrote to the insurer on June 5, 2006 to invoke the appraisal process, and the policy allows the parties twenty days within which to designate their appraisers. The insured designated Mr. O'Leary on June 22, but the insurer failed to designate until July 31. In the meantime, the insured wasted no time in obtaining an order from the court on June 30 appointing an umpire without any input from the insurer, although the policy states that the appraisers should have fifteen days within which to agree on a potential umpire before turning to the trial court. Because the insurer failed to disclose its own appraiser within the twenty days allowed by the policy, the Court of Appeals concluded that the insurer waived its right to have fifteen days within which to try to agree on a mutually-acceptable umpire.
The insurer argued further that, even if the insured was entitled to summary judgment on the contract claim, the insurer was still entitled to raise coverage defenses as to the scope of the damages award, and that it was not estopped from enforcing its policy terms and exclusions. More specifically, the insurer argued that there a genuine issue of material fact existed as to whether the damages were caused by wind (a covered cause) or mold (which is not a covered cause). The Court of Appeals rejected these arguments in short order.
Here, the insurance policy states that "[i]f [the appraisers] fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss." (Emphasis added). Farm Bureau does not suggest that fraud, duress, or other impeaching circumstances occurred during the appraisal process; therefore, we hold the trial court did not err in granting partial summary judgment to Sadler for the amount of the appraisal award. Accordingly, we overrule Farm Bureau's assignments of error. (p. 11)