This proposed rulemaking proceeding is necessary to address the invalidity of a portion of Rule 69O-166.031 “Mediation of Property Insurance Claims” as the result of the ruling in State Farm Florida Ins. Co v Unlimited Restoration Specialists, Inc., ...

 

DEPARTMENT OF FINANCIAL SERVICES

OIR – Insurance Regulation

RULE NO.:RULE TITLE:

69O-166.031Mediation of Property Insurance Claims

PURPOSE AND EFFECT: This proposed rulemaking proceeding is necessary to address the invalidity of a portion of Rule 69O-166.031 “Mediation of Property Insurance Claims” as the result of the ruling in State Farm Florida Ins. Co v Unlimited Restoration Specialists, Inc., 84 So. 3d 390 (Fla. 5th DCA 2012). The rule is also further amended to eliminate redundant language contained in the DFS rule governing the Mediation program.

SUMMARY: The rule governs the administrative requirements of section 627.7015, F.S. regarding the mediation of residential and commercial property insurance claims. The Department of Financial Services administers the program and has adopted Rule 69J-166.031, F.A.C. This rule comprehensively addresses all aspects of the mediation program. OIR Rule 69O-166.031, F.A.C. at one point was identical to the DFS rule. Over time, the DFS rule has been amended and is not identical to the OIR rule. Much of the OIR rule is redundant and is not necessary. The revised rule is being amended to merely cross reference the DFS rule and maintain the penalty for an insurer’s failure to appear at the mediation conference.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Agency personnel familiar with the subject matter of the rule amendment have performed an economic analysis of the rule amendment that shows that the rule amendment is unlikely to have an adverse impact on the State economy in excess of the criteria established in Section 120.541(2)(a), Florida Statutes.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 624.308(1), 627.7015(4) FS.

LAW IMPLEMENTED: 624.307(1), 624.418(2)(a), 624.421(1)(a), 624.4211(1)-(3), 626.9541(1)(i), 626.9581(1), 627.7015 FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW (IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: August 12, 2015, 9:30 a.m.

PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Stephen Fredrickson, Office of Insurance Regulation, E-mail: [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Stephen Fredrickson, Office of Insurance Regulation, E-mail: [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69O-166.031 Mediation of Property Insurance Claims.

(1) All insurers subject to Section 627.7015 F.S. shall comply with Rule 69J-166.031, F.A.C. administered by the Department of Financial Services. A violation of Rule 69J-166.031, F.A.C. is a violation of this rule and accordingly a violation of a rule of the Commission. Purpose and Scope. This rule implements Section 627.7015, F.S. The program established under this rule is available to all first-party claimants and insurers prior to commencing the appraisal process set forth in their policies or commencing litigation. The program is also available to litigants referred to the Office from Circuit or County court. For claims which have not already been mediated under Rule 69O-166.030, F.A.C., the mediation procedures described in this rule are available to claims which arise from damage occurring in Dade or Monroe Counties as a result of Hurricane Andrew, as well as the unnamed March 13, 1993, storm wherever the property is located in the State of Florida. This program applies to personal lines claims but not to commercial coverages, or to private passenger motor vehicle insurance coverages, or to disputes relating to liability coverages in property insurance policies. This program does not apply to policies issued under the National Flood Insurance Program established under the National Flood Insurance Act of 1968. Before resorting to these procedures, insureds and insurers are encouraged to resolve claims as quickly and fairly as possible.

(2) Definitions. The following definitions shall apply for purposes of this rule:

(a) “Approved”, as used in this rule with regard to approval of a mediator, means to designate based upon successfully meeting of the criteria set forth in Section 44.106, F.S., and the Florida Rules of Certified and Court Appointed Mediators which is incorporated by reference in paragraph (6)(a) of this rule, or Section 627.745(3)(b), F.S. Only approved mediators may mediate disputes under this rule.

(b) “Claim”.

1. “Claim” refers to any dispute between the insurer and insured relating to a material issue of fact other than:

a. A dispute as to which the insurer has a reasonable basis to suspect fraud, or

b. A dispute where, based upon agreed facts as to the cause of loss, there is no coverage under the policy.

2. Unless the parties agree to mediate a claim involving a lesser amount, a “claim” involves the insured requesting $500 or more to settle the dispute, or the difference between the positions of the parties is $500 or more, either of which is notwithstanding of any applicable deductible.

3. A policy must have been in effect at the time of the loss to qualify as a “claim.”

(c) “Complainant” refers to the party requesting mediation.

(d) “Office” means the Office of Insurance Regulation.

(e) “Respondent” refers to the party not first requesting mediation.

(f) “Service office” means a designated office of the Bureau of Consumer Outreach and Education, Division of Insurance Consumer Services, Department of Financial Services.

(3) Computation of Time. In computing any period of time described by this rule, the day of the act or event from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday. All time periods specified in this rule refer to the number of calendar days, not business days, unless otherwise specified in this rule.

(4) Service Offices. For disposition of mediation conferences, the State of Florida shall be divided among the following designated service offices:

(a) Daytona Beach Service Office shall be composed of the following counties: Flagler, Marion, Putnam, and Volusia.

(b) Fort Lauderdale Service Office shall be composed of Broward county.

(c) Fort Myers Service Office shall be composed of the following counties: Charlotte, Collier, DeSoto, Glades, Hendry, Highlands, and Lee.

(d) Jacksonville Service Office shall be composed of the following counties: Alachua, Baker, Bradford, Clay, Columbia, Dixie, Duval, Gilchrist, Hamilton, Lafayette, Levy, Nassau, St. Johns, Suwannee, and Union.

(e) Miami Service Office shall be composed of Dade and Monroe counties.

(f) Orlando Service Office shall be composed of the following counties: Brevard, Citrus, Lake, Orange, Osceola, Seminole, and Sumter.

(g) Pensacola Service Office shall be composed of the following counties: Bay, Calhoun, Escambia, Gulf, Holmes, Jackson, Okaloosa, Santa Rosa, Walton, and Washington.

(h) Largo Service Office shall be composed of the following counties: Manatee, Pinellas, and Sarasota.

(i) Tallahassee Bureau of Consumer Assistance Service Office shall be composed of the following counties: Gadsden, Franklin, Jefferson, Leon, Liberty, Madison, Taylor, and Wakulla.

(j) Tampa Service Office shall be composed of the following counties: Hardee, Hernando, Hillsborough, Pasco, and Polk.

(k) West Palm Beach Service Office shall be composed of the following counties: Indian River, Martin, Okeechobee, Palm Beach, and St. Lucie.

(5) Claim Settlement.

(a) At the time an insured files a first-party “claim” which falls within the scope of this rule, the insurer shall notify the insured of their right to participate in this program. Notification shall be in writing and shall be legible, conspicuous, and printed in typeface no smaller than any other text contained in the notice. The notice shall include detailed instructions on how the insured is to request mediation and indicate that the parties have 21 days from the date of the notice within which to otherwise resolve the dispute. The notice shall include the insurer’s address and phone number for requesting mediation. The notice shall describe the mediator selection process and shall state that if either of the parties so desires the Department of Financial Services will select the mediator. The notice shall refer to the parties’ right to disqualify a mediator for good cause and paraphrase the definition of good cause as set forth in paragraph (7)(e) of this rule. The notice shall also indicate that the insured is to notify the insurer before the mediation conference if the insured will bring counsel to the conference, unless the insurer waives the right to the notice of counsel. After the 21 days, a request for mediation by the insured may be made either in writing to the insurer or by telephone call to the insurer. The date of request shall be documented in the insurer’s claim file. Every 6 months the insurer shall request from the Department of Financial Services a list of mediators qualified to mediate disputes under this program. For a copy of the current list, the Department of Financial Services may be contacted at its Mediation Section, Bureau of Insurance Consumer Assistance, 200 East Gaines Street, Tallahassee, Florida 32399-0322 or at telephone number [phone].

(b) Upon receiving a request for mediation, the insurer shall randomly select from the Department of Financial Services’s list a mediator to conduct the mediation conference. The insurer shall immediately notify the mediator in writing of his or her selection and indicate the names and addresses of the parties and their known representatives, their phone numbers (if known), the date of the request for mediation, and that the mediation is to occur within 45 days of the request. If a mediator is disqualified, then the insurer shall randomly select another mediator. Failure of an insurer to abide by this procedure and to notify the insured as required above shall subject the insurer to revocation, suspension, or fine as set forth in sub-subparagraph (9)(a)2.b. of this rule.

(6) Rejection of Mediation. An insurer may elect to reject mediation in situations where the dispute does not meet the definition of a “claim.” If the insurer desires to reject mediation, the insurer shall reference this mediation process and specify in writing to the insured the reason(s) for the rejection. The insurer shall also notify the insured of the insured’s right to contest the rejection. To contest the rejection, the insured or the insured’s representative must write to the Department of Financial Services at its Mediation Section, Bureau of Insurance Consumer Assistance, 200 East Gaines Street, Tallahassee, Florida 32399-0322, within 60 days of the date of the insurer’s rejection notification. In the insured’s letter contesting the rejection, the insured must specifically state the reasons why the rejection is asserted to be improper. The insurer shall also indicate that the insured should include a copy of the insurer’s rejection letter with the insured’s letter to the Department of Financial Services. The Department of Financial Services shall determine whether the claim shall be mediated. The parties may elect to voluntarily mediate any dispute regardless of whether the cause of loss or policy status may be in question. In the event that a “claim” falls within the scope of this rule, the insurer shall follow the process set forth in paragraph (5)(b) above.

(7) Mediators.

(a) Mediator Approval. The Bureau of Agent and Agency Licensing, Department of Financial Services, shall approve as mediators those persons who meet the qualifications set forth in Section 627.745(3)(b), F.S. Persons wishing to be approved as mediators shall submit their qualifications to the Bureau of Agent and Agency Licensing, Department of Financial Services, 200 East Gaines Street, Tallahassee, FL 32399-0319, on Form OIR-591, “Application for Appointment as a Mediator”, which is adopted and incorporated by reference in subsection 69B-211.002(30), F.A.C.

(b) List of Approved Mediators. The Bureau of Agent & Agency Licensing, Department of Financial Services, shall maintain a list of all approved mediators, which list shall include the mediator’s name, address, telephone number, social security number, a listing of counties in which each mediator is willing to mediate, and date of entry to the list.

(c) Grouping of Assignments. Requests for mediation will, if feasible, be grouped together and assigned to a single mediator. A mediator will be assigned a maximum of four mediation conferences under a single assignment.

(d) Procedure and Conduct. All mediation conferences shall be conducted in accordance with this rule, the Florida Rules for Certified and Court-Appointed Mediators as set forth in Rules 10.020-10.290, Florida Rules of Civil Procedure, as incorporated above, and other consistent rules of conduct as promulgated by the Supreme Court of Florida. Mediators shall have the same responsibilities to the Department of Financial Services as they have to the courts under the Florida Rules for Certified and Court-Appointed Mediators. The Florida Rules for Certified and Court-Appointed Mediators shall be read in a manner consistent with this rule and any conflict between this rule and the Florida Rules for Certified and Court-Appointed Mediators shall be resolved in favor of this rule. The mediator may meet with the parties separately, encourage meaningful communications and negotiations, and otherwise assist the parties to arrive at a settlement. For purposes of this mediation program, mediators shall have the immunity from suit provided to mediators in Section 44.107, F.S. All communications with the mediator shall be confidential. All statements made and documents produced at a settlement conference constitute settlement negotiations in anticipation of litigation. The mediation proceedings are confidential and inadmissible in any subsequent adversarial proceeding.

(e) Complaints; Discipline. At any time a party may move to disqualify a mediator for good cause. Good cause consists of conflict of interest between a party and the mediator, that the mediator is unable to handle the conference competently, or other reasons which would reasonably be expected to impair the conference. Complaints concerning a mediator shall be written and submitted to the Bureau of Consumer Assistance, Office of Insurance Regulation, 200 East Gaines Street, Tallahassee, Florida 32399-0322. The Department shall review the following grounds for discipline:

1. Alleged instances of dishonest, incompetent, fraudulent, or unethical behavior on the part of a mediator;

2. Instances in which the mediator allegedly failed to promptly and completely respond to requests from the Department of Financial Services and instances in which the actions or failure to act on the part of the mediator violate this rule including the standards set forth in this sub-section or are counter to the intent and purpose of this mediation program or this rule;

3. Administrative action by any other agency or body against the mediator, regardless of whether the agency or body’s regulation relates to mediation;

4. The mediator has been found guilty of or pled guilty or nolo contendere to a felony or a crime punishable by imprisonment of 1 year or more under the law of the United States of America or of any state thereof or under the law of any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases.

If the Department of Financial Services determines that any of the above grounds exist, the Department of Financial Services shall institute proceedings in accordance with Chapter 120, F.S., to rescind the approval of the mediator to handle any mediation or arbitration program sponsored by the Department of Financial Services.

(8) Mediation Conference.

(a) Location.

1. The mediation conference shall be held at a reasonable location specified by the mediator within a reasonable proximity of the insured property, unless all parties agree otherwise.

2. The Department of Financial Services will make available conference rooms at its various service offices throughout the state for possible use.

3. Before scheduling a mediation conference the mediator may contact the service office administrator to determine the availability of service office facilities to accommodate the mediation conference.

4. If no facilities are available at the service office for the particular mediation conference then the service office administrator will designate an alternative location, if available, for the mediation conference.

5. If the parties determine that the assigned conference location is inconvenient or impractical, the parties and mediator may agree to conduct the mediation conference at an alternative location.

6. The mediator will notify the parties in writing of the exact time, date, and location of the conference.

(b) Timing and Continuances. The mediation conference shall be held as scheduled by the mediator. Upon application by any party to the mediator for a continuance, the mediator shall, for good cause shown or if neither party objects, grant a continuance and shall notify all parties of the date and place of the rescheduled conference. Good cause includes severe illness, injury, or other emergency which could not be controlled by the party and could not reasonably be remedied by the party prior to the conference by providing a replacement representative or otherwise. Also, good cause includes the necessity of obtaining additional information, securing the attendance of a necessary professional, or the avoidance of significant financial hardship. If the insured demonstrates to the mediator the need for an expedited mediation conference due to an undue hardship, the conference shall be conducted at the earliest date convenient to all of the parties and the mediator. Undue hardship will be demonstrated when holding the conference on a non-expedited basis would interfere with or contradict the treatment of a severe illness or injury, substantially impair a party’s ability to assert their position at the conference, result in significant financial hardship, or other reasonably justified grounds.

(c) Attendance.

1. The complainant and respondent shall attend the mediation conference and be fully authorized to make an agreement to completely resolve the claim. All corporate parties who are complainants or respondents shall attend the conference in the person of a corporate representative who has full knowledge of the facts of the dispute and is fully authorized to make an agreement to completely resolve the dispute. An insurer will be deemed to have failed to appear if the insurer’s representative lacks authority to settle the full value of the claim. The authority to settle the claim includes the ability to disburse the full settlement amount within 7 days of the conclusion of the conference. The insurer will produce at the conference a copy of the policy. The insurer will bring the entire claims file to the conference.

2. The mediation conference also may be attended by persons who may assist a party in presenting his claim or defense in the conference, such as contractors, adjusters, engineers, and interpreters. The parties may not have separate counsel in the mediation conference unless requested by the insured or the parties agree otherwise. If the insured elects to have an attorney participate in the conference, the insured shall notify the insurer of such participation before the conference, unless the parties agree otherwise. A party will be determined to have not negotiated in good faith if they or a person participating on their behalf continuously disrupts or otherwise inhibits the negotiations as determined by the mediator.

(d) Good Faith Negotiation. The participants are to negotiate in good faith to attempt to resolve the dispute, however there is no requirement that the dispute must be resolved in mediation.

(e) Disposition. Mediators or insurance companies shall report to the Department of Financial Services on the status of property insurance (other than commercial) mediation conferences by submitting Form DFS-H0-1159, “Disposition of Property Insurance Mediation Conference and Company Remittance Form” (rev. 8/94), which is hereby adopted herein and incorporated by reference.

(9) Disbursement of Costs.

(a) The insurer shall pay the mediator’s fee which shall not exceed $225. The Office reserves the right to reduce fees based on consumer surveys and cost analysis.

1. Completed Mediation Conference. If the mediation conference is held, the mediator shall receive the mediator’s fee. Upon conclusion of the conference, the insurer shall remit $25 to the Department of Financial Services, Mediation Section, Bureau of Insurance Consumer Assistance, Tallahassee, Florida 32314-6100, along with reference to the claim number, identification of the parties, date of the mediation, and name of the mediator. These funds will be deposited in the Director’s Regulatory Trust Fund to defer Department of Financial Services costs.

2. Cancellation Due To Absence. Failure of a party to arrive at the mediation conference within 30 minutes of the conference’s starting time shall be considered an absence. Payment shall be as follows:

a. If the insured fails to appear at the conference, the conference shall be rescheduled upon the insured’s payment of the mediator’s fee for the conference scheduled to take the place of the conference at which the insured failed to appear.

(2) b. If the insurer fails to appear at the conference without good cause the insurer shall pay the insured’s actual cash expenses incurred in attending the conference and shall pay the mediator’s fee for the rescheduled conference. Good cause here includes severe illness, injury, or other emergency which could not be controlled by the insurer and could not reasonably be remedied by the insurer prior to the conference by providing a replacement representative or otherwise. If an insurer fails to appear at conferences with such frequency as to evidence a general business practice of failure to appear, the insurer shall be subject to penalty, including revocation, suspension, or fine, for violation of Section 626.9541(1)(i), F.S. Such suspension of an insurer’s certificate of authority shall be for a period of 2 years. An administrative fine shall be in the amount of $2,500 per violation in cases of non-willful violation, and $20,000 per violation in cases of a knowing and willful violation. The office will mitigate these penalties based upon the following factors: Solvency of the insurer, best interests of or potential harm to insureds, and willfulness of the violation.

(b) Any disputes regarding the amount of disbursement of funds shall be resolved by the Department of Financial Services.

(c) Except as provided in subparagraph (8)(a)3., any expenses associated with the mediation conference, such as travel, telephone, postage, meals, lodging, facilities, and other related expenses, shall be borne by the party, mediator or other person incurring the expense.

(10) Post-Mediation.

(a) At the conclusion of the mediation conference, the mediator will file with the Department of Financial Services a mediator’s status report indicating whether or not the parties reached a settlement. If the parties reached any settlement, then the mediator shall include a copy of the settlement agreement with the status report. In the event a settlement is reached, the insured shall have 3 business days from the date of the written settlement within which he or she may rescind the settlement provided that the insured has not cashed or deposited any check or draft disbursed to him or her for the disputed matters as a result of the conference. If a settlement agreement is reached and not rescinded, it shall act as a release of specific issues that were presented at the conference.

(b) Any additional claims under the policy shall be presented as separate claims. However, the release shall not constitute a final waiver of rights of the insured with respect to claims for damages or expenses if circumstances that are reasonably unforeseen arise resulting in additional costs which would have been covered under the policy but for the release.

(c) If the insured decides not to participate in this program or if the parties are unsuccessful at resolving the claim, the insured may choose to proceed under the appraisal process set forth in the insured’s insurance policy, or by litigation, or by any other dispute resolution procedure available under Florida law.

Rulemaking Authority 624.308(1), 627.7015(4) FS. Law Implemented 624.307(1), 624.418(2)(a), 624.421(1)(a), 624.4211(1)-(3), 626.9541(1)(i), 626.9581(1), 627.7015 FS. History–New 8-18-94, Amended 5-1-96, 4-6-00, Formerly 4-166.031, Amended __________________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Stephen Fredrickson, Office of Insurance Regulation, E-mail [e-mail]

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: THE FINANCIAL SERVICES COMMISSION

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: June 23, 2015

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: February 2, 2015