The First District Court of Appeal has affirmed the agency denial of State Farm's rate increases sought late last year.  The opinion will become final in 15 days, if no motion for rehearing is filed.

“We are very pleased with the District Court’s ruling, said Commissioner McCarty. State Farm knew, or should have known, that the filing it made was contrary to the Legislature’s intent and could not be approved. State Farm’s actions suggest that it intended to use the denial of the filing as a pretext for threatening to withdraw from the Florida Property Insurance Marketplace."

A complete history of the State Farm matter is found at the OIR website.

Just what this decision means for Florida's insurance consumers is uncertain.  State Farm represents a well-capitalized insurer in a marketplace where capital should be viewed at a premium.  If State Farm does exit Florida, then will that mean less choice for consumers, less solvency in our insurance system, and more of a burden upon the State's insurer, Citizen's?  The answer is almost certainly, yes.

Is this another step in the efforts of the major carriers (State Farm, Allstate, Farmers, AIG, Nationwide, and others), to mitigate their Florida risk and assert that rates are too low to stay?  Is the recent Surplus Lines Laws passed in 2009 a back entrance into the Florida market without the administrative limitations on coverage forms and rates?  Will major carriers exiting through the front door re-enter as their surplus lines subsidiaries via this back door?  The answers are almost certainly yes.

Regulators must be wary of allowing the established well-capitalized insurers to avoid the risk of Florida's marketplace, yet be in a position to reap the rewards clothed in the sheepskin of surplus lines coverage.

Stay tuned.

We are officially in Hurricane Season 2009.

It is time to get out your checklists and prepare your business and home for the event of a windstorm.  Most importantly, get out your insurance policies and verify that you have the desired coverages and then put the policies in a safe place.  I recommend that you scan your policies, or at least your declarations pages, and store them electronically.  Send the images to a family member or a friend who can access the information for you if you are displaced by a storm.

One way to stay on top of the season is to subscribe to FEMA's alert system:  https://service.govdelivery.com/service/subscribe.html?code=USDHSFEMA_153

Most of all, stay safe!

Lee Gunn

Representative Janet Long of Tampa is introducing a bill seeking to have the State of Florida pay for a study of public adjuster practices.  We have many demands upon our state's resources.  Florida highly regulates the insurance industry, including the licensed public adjuster, as it must.  There is simply no basis for thinking that the state's limited resources need to be further depleted by another agency stepping in to police public adjusters.  What showing has been made that Florida's Office of Insurance Regulation is not providing any needed oversight and that your money should be spent on more agency investigation?  None.

Spring has sprung in Florida.  Now is the time to review your policy(ies), update your inventory lists with any new purchases, and get your coverage updated, as needed.  Some of you may have received your, "State Farm is leaving notices", and be shopping for a new company.  Others may be considering a premium quote to see if rates are better now that we hear about more new companies entering the market.

When considering a move to a new "start up" Florida carrier, be careful of the size and solvency issues.  Last month Insurance Commissioner Kevin McCarthy told People's Trust Insurance Company, www.peoplestrustinsurance.com, to stop writing policies.  According to the Commissioner, the company wrote more policies that its ability to pay claims.  http://www.baynews9.com/content/36/2009/3/18/449903.html

Consumers can get some background and financial information about a potential insurer at the National Association of Insurance Commisioners' website:  https://eapps.naic.org/cis/ .

As you ready for the season, do consider the size and solvency of the insurer you select.  There may be state-sponsored protection for a failed carrier, but this protection is limited and likely to mean delay in any claim payments if your carrier is underwater after the storm.

A common cry from corporate America is that government regulation chokes corporate growth and reduces America's ability to compete in the global marketplace.  Recently, noted author Bill Black was interviewed by Bill Moyer.  Mr. Black provided his overview of how the deregulation of the financial markets from the late-1980's to now created the climate for the near collapse of the global financial markets.  If you have a moment, you may want to watch the interview:  http://www.pbs.org/moyers/journal/04032009/watch.html

What Black describes I believe to be reasonably accurate. Certainly, the underlying lack of creditworthiness is now obvious and reflects loan underwriting practices which were designed to approve loans doomed to fail. The incentive to write the loans was the up front fees. Since the lender never planned to hold the paper to maturity, there was no incentive to make responsible loans. Ultimately, the individual loans were bundled and sold as "derivatives" or "bonds" or "mortgage backed securities" to pensions, governments, and other global investors who believed that these were very safe investments. Some investors even bought "insurance" against default, thereby setting the stage for the near collapse of AIG's financial and insurance services companies.

Effectively, we stole from the rich at home and all over the world and lent to the poor who too often lied to get the loans. Both the knowing and unwitting participants to the fraud now reside in the mortgaged homes which are far nicer than their social productivity would have otherwise afforded them.  In order to maintain this artificial standare of living, taxpayers are giving more to the "poor" in the form of government backed loan forgiveness and restructuring. In the end, "free market capitalism" and "government deregulation" did more to socialize America's standard of living than Unions and FDR ever could have dreamt to achieve.

Of course, the recent robber barons who took their "commissions" from all of the transactions needed to improvidently move this wealth from rich to poor have taken their bonuses and sailed away with little accountability for their misdeeds. The hard-working, responsible citizens who saved their money and invested in these AAA-rated "safe" securities have lost much of their savings. These citizens played by the rules. They saved, lived within their means, and entrusted their money to pension managers and the "fiduciaries" at financial institutions. They told the truth about their income and used common sense when deciding how much to spend on homes and cars. These are the real leaders in our country. Regrettably, our elected leadership is doing little or nothing to hold the rule breakers accountable. Instead, too soon, these "ordinary citizens" will be taxed and see the dollar's value diminished by the inevitable inflation printing all of the promised money will bring. 

I have seen abuses of trust by the insurance indutry, but nothing as bad as what our financial system has done to injure our standing in the world as an economic leader or betray the trust of our citizens.  Our economic crisis is a sad reflection of why the inefficiences of reasonable regulatory controls is lesser than the evil of no effective regulation at all.  Thank goodness for the separate regulatory controls of the states' insurance commissioners.  They must remain ever vigilant to assure compliance with the sound reserve practices needed to have the money available to keep the promise of payment.

What happened in the financial markets is not right.  At least, we must learn from this most expensive lesson.

Organizations, business entities, property owners, and recreational facilities oftentimes attempt to limit their liability, or extinguish it altogether, by having their customers, patrons, and members sign contracts with "exculpatory" language that purports to release them from any responsibility for accidents and injuries that may result on their property, and even from their own negligence. Such clauses, which may appear in contracts, applications, release forms, etc. are called "exculpatory clauses". It is unknown what type of chilling effect those clauses may have on those injured by the negligence of others, but who simply don't attempt to pursue their claim under the potentially mistaken belief that their signing of a contract, release, or application with such language bars any claim they may have.

In Florida, exculpatory clauses are certainly valid contractual provisions. However, they are disfavored and will be strictly construed against the party claiming to be relieved of liability. Theis v. J. & J. Racing Promotions, 571 So.2d 92 (Fla. 2d DCA 1990). An exculpatory clause may release a party from liability arising out of its own negligence, but to do so, the clause must clearly state that it releases the party from liability for his own negligence. Whether it so clearly states that it releases the party from liability for its own negligence is something that is battled over frequently in our court system. The clause must manifest a clear and unequivocal intention to be relieved, and the "wording must be so clear and understandable that an ordinary and knowledgeable party will know what he is contracting away." See Southward & McGill, P.A. v. S. Bell Tel. & Tel. Co., 580 So.2d 628 (Fla. 1st DCA 1991).

In Murphy v. Young Men's Christian Association (YMCA) of Lake Wales, 974 So.2d 565 (Fla. 2d DCA 2008), the Second District Court of Appeal recently held that an exculpatory clause that appeared in a membership application, also called a waiver of liability clause, did not clearly and unequivocally release the YMCA from liability for its own negligence. The YMCA membership language, while in one portion did clearly state that by signing it, the member would agree to release the YMCA from liability for "any claims based on negligence," the application also said in another portion that "even when every reasonable precaution is taken, accidents can sometimes still happen..." The court found that the language in the YMCA membership application was confusing because it implied that the YMCA would take every reasonable precaution to prevent accidents from occurring. In that regard, a reasonable reader could reach the conclusion that the waiver of liability clause extends only to claims for injuries that were unavoidable even when every reasonable precaution had been taken by the YMCA. Accordingly, the court ruled that the waiver of liability clause was unenforceable in light of the "every reasonable precaution" language.

The end result was that an injured YMCA member, who in this instance had sustained serious injuries while using exercise equipment at the YMCA, and who had incurred in excess of $200,000 in medical expenses, is now free to pursue her personal injury claims against the YMCA; and that pursuit is no longer barred due to the flawed waiver of liability language in the membership application.

The decision reached by the Second District Court of Appeal in Murphy was certainly the just and proper decision. The wording of the membership application was not so clear and understandable that an ordinary and knowledgeable individual would know what they are giving away when signing a document that contains such language. In many instances, an ordinary and knowledgeable individual may not even be aware that such language is included in a document as seemingly benign as a membership application. The Murphy decision is a significant decision because it holds organizations, business entities, property owners, and recreational facilities (whose exculpatory agreements are undoubtedly crafted by legal counsel and/or liability insurance consultants) to the standard of clearly communicating the fact that by signing the agreement, the party will be releasing the other from its own negligence, without inserting anything to that agreement that is inconsistent with same.

Whether intentional or not, the membership application in Murphy, as a whole, did not contain the required, clear and understandable communication. While one section of the application arguably did clearly contain the waiver language, the other contained language that could lead to the contrary expectation that the YMCA would take every reasonable precaution to prevent accidents. If not for Murphy, a party could conceivably craft an agreement that in one section contains an exculpatory clause, but in another contains language that may give rise to a contrary expectation. The Florida legislature should not attempt to enact any legislation that purports to chip away at the very basic premise pronounced in Murphy, of providing this clear and understandable communication, without ambiguity or deception.

Michael J. Vitoria, Esq.

Gunn Law Group, P.A.

The Windstorm (Conference) has passed and FAPIA’s winter conference is complete. I attended both and spoke to many enthusiastic policyholder advocates.

A common theme – contractors presenting claims to insurance companies. There has been much talk for several years about Public Adjusters engaging in the Unlicensed Practice of Law (UPL) by preparing and submitting Civil Remedy Notices on behalf of their clients. I am told carriers are beginning to report PA’s to the Florida Bar.

So what about contractors posing as PA’s? Are we seeing the advent of “ULPPA” – the Unlicensed Practice of Public Adjusting??? Sure looks that way. Public Adjusting requires a specific license. As far as this author knows there is no statutory exemption for persons holding a contractor’s license in the state.

What does the future hold? Will PA’s begin reporting contractors to the state? Will contractors begin sitting for the PA licensing exams? With today’s economic crunch putting the squeeze on the construction trades, one thing is sure – contractors will continue looking for new markets – and the Contractor/PA combo may well be an attractive marketing mechanism to homeowners.

All of which begs the next question… and how will these Contractor/PA’s be compensated on claims where they are both?

Kelly Gray, Esq.

Gunn Law Goup