Citizens officials expressed disappointment in Sunday’s 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 Wednesday.
Florida Legislature: DeSantis to sign property insurance bill, could mean higher rates for Citizens' customers
“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 following Wednesday’s action. “Unfortunately, we have become the first choice, or only choice, in too many regions of the state.”
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 percent, while renewals after Feb. 1, 2022 are going up 7.6 percent.
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 percent, which means that many haven’t 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.
Walker’s 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 plaintiff’s truthful commercial speech outweighs the state’s 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 Walker’s 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 year’s law raises Citizens’ 10 percent cap on annual premium increases by 1 percent a year over the next five years to make the state-backed insurer’s 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 percent of a comparable Citizens policy premium.
Citizens officials noted Wednesday that state lawmakers could address Walker’s 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 we'll 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 homeowner’s 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 bill’s 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 law’s 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 Sunday’s order, “it must do so within the bounds set by the Constitution.”
“Here, the Legislature failed to do so accordingly,” the judge added.