• Secure Door Litigation Over Florida Windstorm Mitigation Discount Forms' Validity Continues
  • April 4, 2013 | Author: Sharlee Hobbs Edwards
  • Law Firm: Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb, P.A. - Fort Lauderdale Office
  • Litigation over the validity of forms used to afford windstorm mitigation discounts to Florida homeowners' insurance policyholders continued on March 15, 2013 with the Florida Office of Insurance Regulation's ("OIR") filing of an Initial Brief with the First District Court of Appeal, in which it is seeking review of the Final Order issued by the Florida Division of Administrative Hearings in Secure Enterprises, LLC v. Office of Insurance Regulation.

    In support of the OIR, the Personal Insurance Federation of Florida ("PIFF") filed an Amicus Curiae Brief the same day.

    Both documents are attached for review.

    In its Initial Brief, the OIR argues that the Administrative Law Judge ("ALJ") erred in ruling that Secure Enterprises, LLC ("Secure") had standing to initiate the Rule challenge in the underlying matter. Secure, the Appellee in the case, manufactures and distributes the Secure Door® residential garage door bracing system.

    The OIR further asserts in its Initial Brief that Secure did not establish that it was substantially affected by the regulatory omission of a windstorm mitigation discount for fixtures and construction techniques similar to the Secure Door® bracing system. In order to be "substantially affected," the OIR argues, Secure must prove: (1) it suffered a real and sufficiently immediate injury in fact; and (2) that its alleged interest is within the "zone of interest" to be protected or regulated by section 627.0627(1), Florida Statutes.

    In the underlying matter, the ALJ had held that the OIR's adoption of Rules 69O-170.017 and 69O-170.0155, Florida Administrative Code (collectively referred to as "Rules"), which incorporated Form OIR-B1-1655 (Notice of Premium Discounts for Hurricane Mitigation) and Form OIR-B1-1699 (Windstorm Mitigation Discounts; Single Family Residences) constituted an invalid exercise of delegated legislative authority.

    Section 627.0629(1), F.S. requires homeowners' insurers to provide windstorm mitigation discounts to insureds that install or implement fixtures and construction techniques that meet Florida Building Code ("FBC") minimum requirements. The statute requires the OIR to determine windstorm discounts that insurers may use in their rate filing.

    Accordingly, the OIR adopted Form OIR-B1-1699 ("Form 1699") to establish actuarially reasonable windstorm mitigation discounts that insurers are required to provide to their policyholders. Additionally, pursuant to section 627.711, F.S., the OIR adopted Form OIR-B1-1655 ("Form 1655") that insurers are required to provide to their policyholders as notice of the fixtures or construction techniques that would qualify for a windstorm mitigation discount.

    In the Final Order, the ALJ found that the Secure Door® bracing system strengthens weak garage doors if installed onto a non-glazed garage door and meets the requirements of the 2001 FBC for wind resistivity. However, the portion of the Wind Mitigation Discount Form that addresses mitigation discounts for existing pre-2001 construction does not provide a discount for the installation of a garage door bracing system like the Secure Door® bracing system.

    In its March 15 Initial Brief, the OIR asserts that Secure's alleged injury-in-fact - that it lost potential customers and would likely suffer economic injury due to the absence of windstorm mitigation credit for the Secure Door® bracing system - was not "real and immediate." Further, the OIR maintains that Secure did not prove that its alleged injury was caused directly, immediately, or in reality by OIR's promulgation of Form 1699.

    The OIR also argues that Secure was not within the "zone of interest" to be protected or regulated by section 627.0629(1), F.S., nor the Rules. The legislative intent of section 627.0629(1), F.S. is that insurers provide savings to consumers. The OIR contends that Secure's ability to sell additional units of its product is not a protected interest.

    Moreover, the OIR asserts that many of the findings of fact made by the ALJ were not supported by competent substantial evidence. Specifically, the OIR alleges that there was no competent substantial evidence to support the ALJ's finding that Secure suffered an economic injury; Secure was substantially affected by the Rules; or that a windstorm discount installation of Secure Door® bracing system would increase the sales of Secure Doors.

    Furthermore, the OIR contends that Secure did not present any evidence that a fixture or construction technique that strengthens the wind resistance of a pre-2001 non-glazed garage door should entitle a homeowner to a wind mitigation discount. The OIR maintains that section 627.0629, F.S. does not mandate a credit for every feature or construction technique that meets the Florida Building Code. Accordingly, a discount for the Secure Door® bracing system should only be given if there is some measureable credit associated with its use. The OIR alleges that Secure did not present any evidence identifying an "actuarially reasonable" discount that can be associated with the Secure Door® bracing system. Also, it alleges that the ALJ did not make any findings of fact on whether an "actuarially reasonable" discount could be calculated for a garage door bracing system similar to Secure Door.

    The OIR maintains that it did not engage in an invalid exercise of delegated legislative authority by adopting Form 1699. In 2006, the Florida Legislature amended section 627.0629(1), F.S. and directed the OIR to re-evaluate the wind mitigation discounts based upon "actual experience or any other loss relativity studies available to the office." The OIR argues that the only loss relativity study that was in existence at the time the Legislature amended section 627.0629(1), F.S. in 2006 was the 2002 Applied Research Associates ("ARA") Report, so therefore, the Legislature must have intended for the OIR to use the 2002 ARA Report to calculate the windstorm discounts and credits. However, the ALJ found that the 2002 ARA Report relied upon by the OIR erroneously omitted from its study the strength of windows and doors. The OIR further contends that if the Legislature believed that Form 1699 did not carry out the goal of section 627.0629(1), F.S. it has had ample time and opportunity to instruct the OIR otherwise.

    The Amicus Curaie Brief filed by PIFF reiterates the arguments made by the OIR. PIFF also emphasized that the that the ALJ's decision to relax the traditional standing requirements necessary to bring rule challenges will lead to an increase in rule challenges, more uncertainty, and longer delays.

    Secure is required to file its Answer Brief on, or around April 4, 2013.