While the state’s regulations allegedly aim to protect policyholders, insurance companies are finding ways to technically comply with the laws, while still navigating around these protections, leaving the insured at a disadvantage.
Insurance Law
By Candise Shanbron
Candise Shanbron of Cernitz Law. Courtesy photo.
The Florida insurance market is facing a growing crisis, driven by a combination of judicial reluctance and insurance companies’ tactics that undermine the intent of consumer protection laws. While the state’s regulations allegedly aim to protect policyholders, insurance companies are finding ways to technically comply with the laws, while still navigating around these protections, leaving the insured at a disadvantage.
One example of how insurers are finding roundabout ways to comply with the letter of the law while evading its true intent is by burying required change notices within large renewal policy packages, sometimes as many as 60 to 100-plus pages long, where the notice is hidden, for example, on the 10th page. The average policyholder, seeing that it’s a “renewal” package, would never think to review the entirety of the package to see the changes that were made to the policy by way of the notice of change in policy terms. Most would assume all they need to review is the renewal premium to see the cost of the renewal policy.
Before 2011, insurance companies were required to cancel or nonrenew an existing policy and issue a new one if they wanted to make changes to its policy terms, in compliance with F.S. 627.4133 (which generally required that the written notice of nonrenewal be given to the insured at least 100 days in advance). Under the ruling in U.S. Fire Insurance v. Southern Security Life Insurance, 710 So.2d 130, 133 (Fla. 5th DCA 1998), the insured was entitled to assume that unless notified, the terms of the renewed policy would be the same as the original. For a policy to be “renewed,” it had to be “based upon and subject to the same terms and conditions as were contained in the original policy.” See Hartford Accident & Indemnity v. Sheffield, 375 So.2d 598 (Fla. 3d DCA 1979). If the insurer failed to provide the required notice, the policy would remain in effect for up to 100 days after the notice was given or until the insured secured replacement coverage.
The purpose of the statute was to provide policyholders a fair opportunity to find alternative coverage elsewhere before their policy expired so they were not left with no coverage. However, this method often caused confusion for policyholders. To eliminate this confusion, the Florida legislature created F.S. 627.43141, which was designed to protect consumers by requiring insurance companies to send a notice of change in policy terms to inform policyholders of any changes to their policies. However, carriers have found a workaround to this statute by burying the notice of change in policy terms within a renewal packet. Very few insurance companies, if any, send the notice of change in policy terms by itself or solely with a renewal invoice, which may provide the most obvious way of alerting a policyholder that changes to the policy are contained within the renewal policy.
Another problem with the statute is that it doesn’t require insurance companies to prove that the notice of change in policy terms was mailed, and once the insurance company receives the premium payment for the renewal policy, it is deemed to be an acceptance of the new policy terms by the named insured.
The statute requires that the notice of change in policy terms be sent to the insurance agent. However, it is unclear whether agents are effectively communicating these changes to their clients. This raises the question of whether the legislature should introduce further consumer protection laws to impose additional requirements on insurance agents regarding how they communicate and inform policyholders about their coverages, including changes to their coverages.
To make matters worse, surplus lines insurers, who are not admitted Florida carriers but are authorized to sell insurance products in the state, are not required to follow the requirements of F.S. 627.43141. This creates an additional gap in consumer protections, where any changes to the policy upon renewal may never be known by the policyholder. Although there is a fair amount of case law that would require surplus lines insurance companies to notify policyholders of any changes to their policies, even without the obligation to adhere to F.S. 627.43141, the courts appear to be overlooking these crucial rulings.
In the current legal climate, Florida courts have been reluctant to address the deficiencies of this statute or to comply with common law notice requirements. Recently, the Fourth District Court of Appeal sided with an insurance company over a policy change involving an endorsement that allowed it to make repairs to the insured’s damages using its own contractors when the policy before the endorsement did not allow the insurance company to even make repairs at all and required the insurance company to pay the replacement cost value of the damages. In its per curiam affirmance decision, the court failed to explain why the insurance company’s changes to its policy, which were neither effectuated by a nonrenewal or cancellation and an issuance of a new policy containing the new terms nor properly notifying the policyholder of the changes, were acceptable. This begs the question: does law exist anymore in jurisprudence, or has politics permeated that sacred space?
This judicial reluctance, combined with insurance companies’ practices of circumventing the statute’s intent, is putting Florida policyholders at a disadvantage in an already struggling insurance market. By skirting the law’s requirements, insurers are not only evading meaningful consumer protections, but they are also contributing to the confusion and harm that Florida policyholders face in the wake of increasingly complex insurance regulations.
About the Author
Candise Shanbron, managing partner of Cernitz Law, has dedicated her entire legal career exclusively to the practice of property insurance law. Shanbron spent the first part of her career representing insurance companies, giving her a unique perspective and advantage in representing policyholders. Since 2008, she has zealously advocated on behalf of policyholders throughout Florida.