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Customers of Citizens Property Insurance Corp. are getting a bigger rate hike than was initially proposed, due to a change in a state law that was partially blocked by a federal judge.

Citizens officials expressed disappointment in the July 11 ruling, in which Chief U.S. District Judge Mark Walker found that the new law, approved by legislators this spring, violated 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 July 14.

These necessary adjustments reflect the efforts of the Florida Legislature to return 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 only choice, in too many regions of the state.

Since October 2019, Citizens has seen its policy count jump from 420,000 to more than 640,000 and is now seeing increases of more 5,000 new policies per week. At this pace, company officials expect the policy count to exceed 750,000 by the end of 2021, the company reports on its website.

Described as a modification of increases previously approved in February, the changes mean the average rate increase for new and renewing policies after August 1 will be 5.2%, while renewals after Feb. 1 are going up 7.6%.

The increases vary by location and still require approval from the Office of Insurance Regulation.

The new statute, which went into effect July 1, in part altered a 2011 law that capped annual increases for Citizens customers at 10%, which means that many havent been paying actuarially sound rates.

The law, signed by Gov. Ron DeSantis last month, also allows Citizens to factor in additional reinsurance cost estimates when calculating rates.

Brandon-based Gale Force Roofing & Restoration LLC last month filed a lawsuit challenging the new statute, arguing that a provision prohibiting roofing contractors from advertising is unconstitutional.

Siding with the roofing company, Walker issued a preliminary injunction blocking portions of the law from being enforced. The judge found that the new law violates First Amendment rights by directly penalizing protected speech.

Walkers ruling focused on a part of the law that prevents contractors from soliciting homeowners to file insurance claims through a prohibited advertisement, which could include such things as emails, door hangers, flyers and pamphlets.

It is also clear that the threatened injuries to plaintiff from banning plaintiffs truthful commercial speech outweighs the states interest in preventing fraud, protecting consumers from exploitation, and stabilizing the insurance market, Walker wrote in the ruling.

Lawmakers passed the insurance measure on April 30 amid spiraling property insurance rates and insurers dropping policies in Florida.

Citizens President and CEO Barry Gilway said he was not surprised, but disappointed with Walkers ruling.

I understand the logic behind the order, Gilway said. But the bottom line was, in my opinion, the solicitation rate is being driven substantially by the solicitation, and aggressive solicitation of claims.

The new law also takes steps to limit attorney fees and reduces the time to file claims.

The statute is viewed as a second recent legislative victory for Citizens and the insurance industry.

In 2019, legislators placed restrictions on policyholders being able to sign over claims known as an assignment of benefits to contractors, who then pursue payment from insurers. Still, rates are going up and policies are speeding from private hands into the state-backed Citizens.

This years law raises Citizens 10% cap on annual premium increases by 1% a year over the next five years to make the state-backed insurers rates more competitive with private insurance coverage.

The law also requires Citizens to factor into its rates the reinsurance costs necessary to protect its surplus from a 1-in-100-year storm and steers policyholders to private insurance carriers if a private policy premium is within 20% of a comparable Citizens policy premium.

Citizens officials noted that state lawmakers could address Walkers ruling during the 2022 legislative session that begins in January.

However, they acknowledged that any positive signs other parts of the law are working as intended may not be noticeable until later in 2022.

I know well have data, hopefully in the next year or so, to really understand the impact of that on the incoming barrage of litigation that we see, said Christine Ashburn, Citizens chief of communications, legislative and external affairs.

In the lawsuit, Gale Force Roofing and Restoration said it advertises to homeowners to contact the company for inspections of storm damage to roofs.

Plaintiff (Gale Force Roofing and Restoration) will then truthfully convey to homeowners the nature and extent of the damage, the lawsuit said. Plaintiff will then encourage homeowners to contact their insurance company to make a claim under their residential insurance policy and execute a contract with plaintiff to assign the benefits available under the homeowners insurance policy to plaintiff.

Gale Force argued that the law chills its First Amendment rights because it forces 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 is more about reducing insurance claims than preventing fraud, saying the statute serves as a thinly veiled attempt to keep homeowners from getting outside help in making valid insurance claims for home repairs.

The bills supporters and insurance-industry officials, however, argued that questionable, if not fraudulent, roof-damage claims have played a major role in driving up costs.

In court documents, attorneys representing the state disputed that the laws restrictions violate First Amendment rights, arguing that the prohibited advertisement provision should be considered a reasonable restriction on commercial speech combating consumer exploitation and fraud.

But Walker disagreed.

While the state has the right to regulate contractors and protect Floridians from fraud, Walker wrote in the order, it must do so within the bounds set by the Constitution.

Here, the Legislature failed to do so accordingly, the judge added.

Originally posted here:
Citizens Insurance rate hike will be higher than first proposed - Florida Weekly