December 5, 2021

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Is Florida’s Matching Statute a Minimum Limit of Required Indemnity or Can Insurers Contract Out of Matching?

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A lawsuit by Olympus Insurance Company challenges Florida’s Office of Insurance Regulation about issues of paying for property that matches following a repair. The lawsuit also challenges whether the Florida matching statute is a minimum limit of indemnity and if insurers can contract out of matching.

A big shout-out from all Florida policyholders should go to Insurance Commissioner David Altmaier and his staff at the Office of Insurance Regulation (OIR) for standing up to Olympus and not approving the policy form. On July 22, 2021, Jamilynn Pettiway, the OIR’s Assistant General Counsel, declared that “the statute provides a minimum acceptable level of coverage that is to be provided.” Insurance underwriters are increasingly making requests for changes to property insurance policy forms that pay less and make greater insurance gaps of coverage for otherwise unsuspecting policyholders. Florida’s OIR staff has a vital role in catching these changes that are not found in standard special form insurance policies.

Here is Florida’s Matching Statute:

626.9744 Claim settlement practices relating to property insurance.—Unless otherwise provided by the policy, when a homeowner’s insurance policy provides for the adjustment and settlement of first-party losses based on repair or replacement cost, the following requirements apply:

(1) When a loss requires repair or replacement of an item or part, any physical damage incurred in making such repair or replacement which is covered and not otherwise excluded by the policy shall be included in the loss to the extent of any applicable limits. The insured may not be required to pay for betterment required by ordinance or code except for the applicable deductible, unless specifically excluded or limited by the policy.

(2) When a loss requires replacement of items and the replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. In determining the extent of the repairs or replacement of items in adjoining areas, the insurer may consider the cost of repairing or replacing the undamaged portions of the property, the degree of uniformity that can be achieved without such cost, the remaining useful life of the undamaged portion, and other relevant factors.

(3) This section shall not be construed to make the insurer a warrantor of the repairs made pursuant to this section.

(4) Nothing in this section shall be construed to authorize or preclude enforcement of policy provisions relating to settlement disputes.

Olympus argues that the “unless otherwise provided” language requires the OIR to approve its form, which would reduce the statute’s requirements and place a 1% limit for matching costs.

In Matching Protections for Hurricane Irma Claims in Florida, it was noted that the National Association of Insurance Commissioners adopted a new section to its model regulations relating to unfair claims practices as it relates to matching:

A. When the policy provides for the adjustment and settlement of first-party losses based on replacement cost, the following shall apply:

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(2) When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all such items in the area so as to conform to a reasonably uniform appearance. This applies to interior and exterior losses. The insured shall not bear any cost over the applicable deductible, if any.

Olympus Insurance Company is asking the Florida OIR to condone what every insurance company should be on notice is an unfair claims practice and giving it a competitive advantage over how other insurance companies pay their policyholders. Cheers to the OIR staff for standing up against this!

Thought For The Day

There is certainly a role for regulation, but regulation should always take into account the impact that it has on markets, a balance that must be constantly weighed.
—Jerome Powell

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