Florida: Investigation into insurance clauses that prohibit independent experts

Florida Attorney General's Investigation into Anti-Adjuster Clauses in Insurance Policies

The Florida Attorney General, James Uthmeier, has launched an investigation into contractual clauses that prohibit the use of public adjusters in insurance policies. On October 21st, Uthmeier's office issued a subpoena to Velocity Risk Underwriters, a managing general agent controlled by Ryan Specialty. This action follows a civil lawsuit filed by public adjusters against Velocity, currently ongoing in the Miami-Dade County court.

Uthmeier stated that the investigation aims to verify whether Velocity and other insurance companies have collaborated to prevent homeowners from using public adjusters, in order to reduce the amounts of claims payouts. According to the attorney general, homeowners who use these independent professionals can receive up to 30% more in their claims settlements.

Quick Answer

Uthmeier's statement refers to a 2010 study conducted by the Florida Office of Program Policy Analysis and Government Accountability. This report, based on claims filed with Citizens Property Insurance between 2004 and 2005, found that claims handled by public adjusters had settlement times four times longer and higher average amounts: 19% more in 2004 and 747% more in 2005.

Velocity Risk responded by affirming full cooperation with the attorney general's office and confidence in a positive outcome. The company specified that its policies with the controversial clause are intended for commercial clients, not residential homeowners. Additionally, Velocity emphasized that its policies comply with the regulations of the Florida Office of Insurance Regulation.

Political and Legal Implications

The action by Uthmeier has been described as "surprising" by a director in the insurance sector, considering that Uthmeier was appointed by Governor Ron DeSantis, known for his critical positions towards public adjusters. Furthermore, the current Florida Chief Financial Officer, Blaise Ingoglia, has initiated several legal actions against public adjusters for fraud and theft in recent years.

Some observers in the insurance sector suggest that Uthmeier's announcement may have political motivations, occurring two weeks before the November 3rd elections. Polls indicate a tight race between Uthmeier and his Democratic opponent, Jose Javier Rodriguez. Rodriguez has promised stricter oversight of insurance companies and a more active role for the attorney general's office in consumer protection.

The Civil Lawsuit and the Contested Clauses

Uthmeier's investigation follows a civil lawsuit filed against Velocity Risk Underwriters by the Florida Association of Public Insurance Adjusters (FAPIA) and the National Association of Public Insurance Adjusters one year ago. The complaint accuses Velocity of including a clause in its policies that prohibits owners from using public adjusters, violating antitrust laws and unfair trade practices laws.

The contested clause reads: "It is understood and agreed that a condition of this policy is that the named insured shall not employ, engage, contract with or otherwise use the services of a public adjuster, whether or not licensed in the state in which the property is located or in any other jurisdiction to inspect, evaluate or adjust any loss covered by this policy."

Some insurance companies have considered introducing similar clauses. American Integrity Insurance, for example, offers premium discounts if owners waive the use of public adjusters. Other companies like Orange Insurance Exchange, Safe Harbor Insurance, and US Coastal Property and Casualty Insurance Co. have considered the option but never implemented it.

The Insurance Sector's Reactions

Lisa Miller, former vice commissioner of Florida insurance now a consultant, stated that these clauses offer consumers a choice and a way to reduce premiums. "It's positive for consumers to have a choice on how their claims are handled," said Miller. "They have a choice: use a public adjuster or get a lower premium."

Jonathan Zachem, the general of FAPIA, stated that Uthmeier's investigation will not influence the ongoing civil lawsuit, but together they might represent only "the tip of the iceberg". Some elected officials in Florida have recently signaled a new focus on consumer protection, despite the 2022 legislative changes that reduced litigation costs and led to lower insurance rates for many homeowners.

The Investigation's Requests

The subpoena requires Velocity to provide documents related to its membership in trade groups, communications with other insurance companies, and any agreements to prevent owners from using public adjusters. The attorney general did not provide details on which laws or regulations might have been violated by Velocity or other parties.

Surplus lines insurance companies operate with lighter regulation in Florida, and state regulators might have little power to address Velocity's clauses. Additionally, insurance policies are often considered contracts, with parties free to refuse to sign agreements, said industry lawyers.