Citizens Property Insurance customers face bigger rate hike due to change in new Florida law

Citizens Property Insurance Corp. customers are seeing a larger rate increase than originally proposed due to a change made in a state law which was partially blocked this week by a federal judge.

Officials expressed dismay at Sunday’s ruling by Chief U.S. Circuit Judge Mark Walker, who found that the new law, which was approved this spring by legislators, violated the speech rights of roofing contractors.

But the Citizens board of directors took advantage of another part of the measure (SB 76) to approve new rate changes during a meeting on Wednesday.

“These adjustments reflect the efforts by the Florida Legislature to restore Citizens to its role of a residual insurer company,” Citizens Chairman Carlos Beruff stated in a press release after Wednesday’s action. “Unfortunately, our company has become the only or first choice in many areas of the state.

The changes are described as a modification to increases approved in February. They mean that the average rate rise for renewing and new policies will be 5.2% after August 1, while renewals after February 1, 2022 will go up 7.6%.

These increases can vary depending on where they are located and require approval by the Office of Insurance Regulation.

The new statute, which took effect July 1, partially amended a 2011 law which capped annual increases at 10% for Citizens customers. This means that many aren’t paying actuarially sound rates.

Governor Ron DeSantis signed the law. Ron DeSantis signed the law last month. Citizens can also factor in additional reinsurance costs estimates when calculating rates.

Gale Force Roofing & Restoration LLC, based in Brandon, filed a lawsuit last month challenging the new statute. They argued that a clause prohibiting roofing contractors advertising was unconstitutional.

Walker, siding with the roofing company issued a preliminary order prohibiting certain sections of the law being enforced. Judge Walker ruled that the new law infringed First Amendment rights because it directly penalizes protected speech.

Walker’s ruling was focused on the part of the law that prohibits contractors from soliciting homeowners for insurance claims via “prohibited advertisements,” which could include emails, door hangers or flyers.

Walker stated in the ruling that “it is also evident that the threatened injuries for plaintiff from banning plaintiff’s truthful commercial speech outweighs state’s interest to prevent fraud, protect consumers from exploitation and stabilize the insurance market.”

The insurance measure was passed by lawmakers on April 30, amid rising property-insurance rates, and Florida’s insurers dropping policies.

Barry Gilway, Citizens CEO and President, said that he was not surprised but disappointed by Walker’s decision.

Gilway stated that he understood the logic behind the order. “But, the bottom line was, I believe that the solicitation and aggressive solicitation are driving the solicitation rate substantially.”

New law reduces attorney fees and the time it takes to file claims.

This statute can be viewed as a second legislative win for Citizens and the insurance sector.

2019 saw legislators place restrictions on policyholders’ ability to transfer claims (known as an assignment of benefit) to contractors. Contractors then seek payment from the insurers. Despite this, rates continue to rise and policies are moving faster from private hands to the state-backed Citizens.

Citizens’ annual premium increase cap of 10% is increased by 1% per year under this law. This will make the state-backed insurer’s rates competitive with private coverage. Citizens must also include in its rates the reinsurance cost necessary to protect its surplus from an 1-in-100 year storm. Citizens can direct policyholders to private insurers if their private premium is less than 20 percent of a Citizens comparable policy premium.

Officials from the Citizens Association noted Wednesday that Walker’s ruling could be addressed by state legislators during the 2022 legislative session, which begins in January. They acknowledged, however, that positive signs of other law parts working as intended might not be evident until 2022.

Christine Ashburn, Citizens’ chief communications, legislative, and external affairs, stated, “I know that we’ll have data,” she said.

Gale Force Roofing and Restoration claimed it is encouraging homeowners to call the company to inspect storm damage to their roofs.

The lawsuit stated that “Plaintiff, Gale Force Roofing and Restoration), will then truthfully inform homeowners about the nature and extent the damage.” Plaintiff will encourage homeowners to call their insurance company and file a claim under their homeowner’s policy. The contract will also be executed with plaintiff to transfer the benefits under the homeowner’s policy to plaintiff.

Gale Force claimed that the law restricts Gale Force’s First Amendment rights. It forces Gale Force to cease its written advertising encouraging consumers to contact the company for roof damage insurance claims.

The company also claimed that the new law was more about reducing insurance claims and preventing fraud. They said the statute is a “thinly disguised attempt” to prevent homeowners from obtaining outside assistance in filing valid insurance claims for home repair.

However, the bill’s backers and officials from the insurance industry argued that roof-damage claims, even if fraudulent, played a significant role in driving up prices.

The state’s attorneys argued that the restrictions were in violation of First Amendment rights. They argued that the “prohibited advertising” provision should be considered reasonable to prevent consumer exploitation and fraud.

But Walker disagreed.

Walker stated that while the state is allowed to regulate contractors and protect Floridians against fraud, it must do so within the limits of the Constitution.

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