Dave DeMott's Stories About Florida Insurance

Dave DeMott is President-Elect of The Florida Surplus Lines Association, Chair of the Legislative committee and sits on the national Wholesale & Specialty Insurance Association committee.
Most importantly for today, Dave DeMott is a real, legit, on-the-ground insurance practitioner in Florida. He gets into the real details and war stories about insurance claims in Florida. 

Dave’s introduction to the Florida insurance market. 0:00
What is a lodestar fee multiplier? 5:23
The problem with AOB 12:29
What work is being done to curb predatory behavior by carriers? 19:03
Water damage and leaky roofs  23:15
What’s the distinct about Florida? 29:28
Lobbyists have their golden opportunity.

youtube: https://youtu.be/G7iGuLLZNwk
show notes: https://notunreasonable.com/?p=7654

More on Florida: 
Mark Friedlander on the Florida Insurance legislation of Dec 2022
https://www.buzzsprout.com/126848/11907447
Gary Mormino on Social History of Florida: https://www.buzzsprout.com/126848/11848870
Mark Friedlander on Problems with Insurance in Florida: https://www.buzzsprout.com/126848/11582094
Joe Petrelli on Rating Florida Insurance Companies: https://www.buzzsprout.com/126848/11547382

Twitter: @davecwright
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Transcript

David Wright: 0:00

My guest today is Dave DeMott, president of gridiron insurance underwriting organization selling a variety of insurance products in Florida, and also president elect of the Florida surplus lines Association and Chair of its legislative committee. Dave is here today to help us understand what it is really like on the front lines of the wacky in Florida, Florida insurance market. Dave, welcome to the show.

Dave DeMott: 0:20

Thanks so much for having me, Dave.

David Wright: 0:22

So the first question is, in my conversations with Joe Petrelli with demo tech, and Mark Friedlaender, of the Insurance Information Institute, they complained about rampant fraud in Florida. Neither of them sell insurance, however. So their information is really anecdotal. You do sell insurance and actually do manage insurance claims and insurance. What are they talking about?

Dave DeMott: 0:46

Big Question, where to start? It's certainly a question of some history behind it. And we jokingly like to say that it's fraud and a really, really, really nice dress, or a really, really fancy suit, if you prefer. But it's, it's certainly very multi layered and kind of different than what your traditional thought of fraud would be in the insurance marketplace. You know, everyone thinks about fraud, and you kind of think of, you know, somebody, you know, with a with a thing of kerosene and a packet matches at this is certainly a very, very different different type of fraud. I think it's easy to illustrate it through a simplistic example, and then kind of take a deeper dive into the wormhole. Okay. You know, I think, you know, a basic understanding of the complexity kind of allows you to kind of create a bigger picture. So, Florida, has had some recent legislative changes, but I'll kind of go back to circa 19, and 20. Right before COVID. The Florida has a one way attorneys fee statute, and it also has an assignment of benefits assignment of benefits capability, which is, which has been somewhat ratified through the courts. And what that means is essentially, you know, say you have a bunch of damage to your to your to your property or a leaky faucet or something like that, you can assign a portion and all the benefit your policy to the remediation contractor who will come in and do the work, okay. So

David Wright: 2:21

it's designed to be they get the value of the claim. So when you say assignment, you're saying assignment, what are the words assignment and the word benefit me.

Dave DeMott: 2:29

So essentially, what they're saying is, they're coming in to do the work. So I would just prefer the carrier for you to work with them and pay them so they can take care of the damage and repair everything. Okay. Okay. So the interesting thing about this is, as you think about everything that I'll go through, there is a kind of consumer protection element that was the design of all these items. But then when you really unraveled them, you're gonna see that it was kind of consumer protectionism that was basically taken and run 1000 yards through the endzone and back through 18 different end zones. And that's kind of where you end the story. Essentially, if you take that, if you take that, that example that I just gave, it's, it's the simplest way to do it. So without before we even get to the roof, because the roof, the roof, and roof deck cladding, and those those suits becomes a whole nother a whole nother iteration of this same discussion. So essentially, let's say you have this damage, you had a you had a roof, you had a leaky faucet, there's damage, you know, all over the place. You assign benefits to the contractor contractor comes in, and says, You know what, this is going to be, you know, 40k to 40k 40k, to a to fix. And then the company says, Look comes out of Justin says absolutely not, this is 20k to fix. The remediation contractor will then will then and sometimes it works vice versa as well. Well then say, well, I'm gonna go out and my buddy Rick is a public adjuster. Let me get Rick to look at this. He's, he's, he's he can he can look at this and give give you give you another view and potentially negotiate this better, better for the company. Now important. As soon as the as soon as this has now happened. Now you have two different things going on. One, you have a public adjuster who will now take a percentage of your proceeds, okay, based on what the final amount is, okay? And then you also have your benefit that's been subsequently assigned to this remediation contractor, who is somewhat loosely incentivized, at least economically to kind of hit the pedal a little bit on what the overall damages are on this claim. Okay. So let's stick with the same numbers. Let's let's say, you know, company, let's say the they say 40 company says we've got two quotes. We think it's 20 public adjuster comes in says absolutely not, I actually think it's closer to 50. Okay, so, company says there's no away, it's 40 or 50, we're happy to negotiate in good faith and come up and work with you guys. But we don't think it's 40 or 50, we've got a lot of documentation to say it's not 40 or 50. This is what we have as a scope of work. Okay. At this point, the public adjuster, and the and the, and the and the, sorry, the mediation contractor say, well, this doesn't really make sense. Let's involve our second, our second cousin, Bob, who's an attorney, and Bob is going to file a lawsuit. Because we don't think this claim has been handled properly being handled properly or fairly. Okay. So, you know, the one way or the one way attorneys fee statutes, which, you know, I highly encourage everyone to look at 6748. It's been there's, there's been some revisions to it. And again, so I'm talking about kind of the old days now, essentially what that said, and it was kind of a throwback to bad cleat bad bad faith claims handling. So in other words, the thought process was this is in statute, because you have damaged for 10k, the carrier refuses to pay, it ignores you doesn't respond to anything, you have to go out and get an attorney, and subsequently they're awarded fees. So again, the thought process behind this was somewhat of a consumer protectionist thought process on helping folks for really, really unfair predatory claims practices, which I think generally speaking, most folks could loosely understand. But going back to our example, so now all of a sudden, lawsuit comes in, you know, unfair claims handling practices, bing, bang, boom and tire, you know, an entire lawsuit. And so what ends up happening is, if more than $1 is awarded over what their tender was, in this case, the 20k, then that attorney will get 100% of his fees paid back subjected to a multiplier. So what a lodestar fee multiplier is, is, is if they're taking, if they're taking the job on contingency, they charge, let's say, 20k for the work, then they get an amplification of that. So you could get them running the meter on the claim plus the lodestar fee multiplier, and what should have been 20k of attorneys fees ends up being 75k. So if you run my example, all the way out, now, let's take a look at what happened what's happened in the Florida market times 1000s and 1000s of claims. So it should have been a 20k claim that the care eventually ends up settling for 25k. Okay, now all of a sudden, you have roughly 10% of that fee is going to go to the public adjuster. Okay, so let's call that 2500 to$3,000 right off the top, okay, the homeowner is still going to end up with that 20 to 22k, which a good chunk and or all of it will go to the remediation and remediation contractor. And then at the same time the carrier's going to get a bill for the one way attorneys fee statute back from from from the lawyer from from from this entire claims activity. So what does that mean? Think about these numbers in maths, a 20. A reasonably 20k claim is now going to end up being 25k on the indemnity side and circa 70 to 75k of lawyers fees. So now you have a 20k claim that's dragged on for a year and change and ended up being a roughly$100,000. I mean, this is a very, very, very simplistic example, when you start thinking about complex losses, think about how the math would change.

David Wright: 8:20

So the remediation contractor who gets assigned the claim, if that was all that happened, they would still be able to negotiate a higher settlement than a consumer would. So the assignment of benefits, isolating the different components here. So someone benefits, that's the first thing that

Dave DeMott: 8:39

the answer, the answer, your question is a little bit is straightforward. They answer your question is if the remediation contractor comes in and says it's 20k, and the carrier comes out and says we say we think it's 15, nine times out of 10. Again, nine times out of 10 if you if we all spend time digging around, you're gonna find this crazy example, nine times out of 10 the insurance adjuster will work with the remediation contractor and say, we think we think it's you know, 15 You guys think is 20 Tell you what, we'll we'll give you a check for indemnity for 18. Do we is that agreeable, like we'll split the difference, but we'll find some central and generally speaking, the work should work should go on. If you go to places like Texas and other areas. This is the way it happens every single day. Okay, in Florida. Yeah. So I got

David Wright: 9:26

that was gonna say, Yeah, I was gonna maybe you're gonna get the point in Florida, something is different about this process that becomes more predatory. I mean, without the lawyers yet. So before we touch the lawyers, is there some problem with this process as it's being kind of used or implemented?

Dave DeMott: 9:41

Well, I mean, David, you're asking you're almost putting the putting the cart before the horse here. Okay. Reason is, we haven't even gotten to this is this everyone. I think listeners can probably understand loosely what's happening here. The issue is think about this. And then think about really aggressive pacts of remediation contractors, pas and lawyers working in conjunction with each other, that are marketing soliciting door to door and actively patrolling neighborhoods and patterns and patterns and suas of homes. And if you I mean, if you want to if you want a stat and this has been thrown around a ton, but 8% of the premium in the industry, and in the in the US marketplace, is Florida homeowners 72% of all litigation is Florida homeowners Yeah, eight and 72 You don't need a ton of math degrees to realize that something's broken.

David Wright: 10:36

So yeah, and that litigation side of things, I mean, that's going to be obviously lawyers. I remember hearing before I for ever heard of when we attorneys fees, and I'm interested to know kind of what your take is on the reforms. But let's take the kind of the simplistic example there. If the lawyer gets $1, more of payment, then they get all their fees paid by the insurance company, plus, as you say, some kind of multiplier, which is kind of incredible, that I can kind of understand print in principle, right? Because, you know, if the lawyer getting a percentage basis, and they only get $1, more, you know, it's not really worth it for them to fight on behalf of the customers. So, you know, how do you incentivize them all you got to get the insurance company to pay for kind of, oh, it's malfeasance of undercutting people. But you know, just even keeping that out with with the with the assignment of benefits of the claims. I've heard that that as also on its own been a problem is that maybe because that's the roofers as opposed to the as opposed to the running faucet is made with the specifics of the example make that kind of more or identify situation with more of a

Dave DeMott: 11:38

Well, the problem with the AOB is when you break problem? it down into steps is the AOB is really the first step, before you go before you run down the rest of that equation, it all starts with AOB and then it starts working laterally. So I think that's why AOB by itself, again, think of this all is broken down into different individual items. AOB the design and AOB is you know, the toilet overflowed in the middle of the night I need someone to come pull out some drywall drive the house before damage gets way worse. And the carrier in good good faith should pay whatever this basic you know remediation and or potential reduction in damage damages that build that they'll provide. So in faith eight in good faith, sorry, a small provision provisioning of AOB is logical. And I know there's folks in industry that will probably gasp when I say that. The problem is that it's a principle that was somewhat logical that has now been, again, sprinted to the endzone and backup and backup backup. Yeah. And so again, it was designed for some degree of basic consumer protectionism. And it was kind of liberalized through the courts through through a few different judgments and protections of AOB in law. And that subsequently really kind of served to almost almost galvanize the practice that I've just done. I've just gone through and in great detail.

David Wright: 13:06

So the it seems to me that there is an incentive for the obviously for the contractor to inflate the job. Because if they can, you know, they're always trying to get more money. But if if the customer isn't the one who has to pay the contractor and the insurance company is their insurance companies probably at a information disadvantage, relative disadvantage relative to the customer on what it really looks like they're not there. And so the contractor can manipulate the insurance company into a larger payout.

Dave DeMott: 13:38

There's an important important important point there, David, and I'm glad you brought up because I kind of glossed over because I was trying to keep it real simple. Part of the other problem with AOB is by the time the company adjuster turns up to adjust the claim, the remediation contractor is already on site and has already begun performing.

David Wright: 13:53

Oh really.

Dave DeMott: 13:54

So you have you have you have some you have some degree of I don't want to say prejudice, because I think it's the wrong word. And I also think it's important to note that what I don't want to do is get caught in kind of a sweeping generalization. I think there are pas that do a good job and I think there are remediation contractors out there that do a great job. You know, obviously from from where I sit, positionally, I've seen some of the work that has been great. And just like that, I think there's some folks that have been, in my mind somewhat predatory.

David Wright: 14:20

Yeah, we'll see. So contract can show up, start the work. And, and then the insurance company comes along, and now they have a hard time seeing what it was that the original problem was. Right?

Dave DeMott: 14:35

Think about it like this, David, and then you can sorry, you can you can move on. We have seen this. Think about your carrier. You're an insurance company in the state of Florida. The first you hear about the loss. The very first time you hear about the loss, you get the you get the notice of loss and to your claims team. There's a notice of loss written by the insurance agent. There's an assigned AOB a public adjusters contract and a notice of a tend to sue all together at once at first loss.

David Wright: 15:03

Okay, right? Bundle? Can you can you tell me kind of like, you know, protect the innocent and guilty areas. But tell me like a specific story about a claim that you were a part of. And you can pick a roofing claim, if that's a way to kind of introduce that topic, or anything you like, about kind of how it started, what you saw? Did it go wrong? Probably what went wrong?

Dave DeMott: 15:29

I mean, I think the easiest way to look at the easiest one to look at is is is really the roof decking. Okay, so Florida had Florida has a statute that was recently changed in 22. By the way, I'm kind of that's why I keep shaping some of these, because there has been recent amendments, and it changes that in a positive fashion to a lot of what we're discussing right now, then what the overall effect of that is, you know, we could probably cover that later and later and later in the chat, but easiest way to think about this is, let's say a really, really bad thunderstorm comes through in you know, Tampa in the middle of the day, really, really, you know, 40 mile an hour winds, lightning, understanding, all this kind of stuff, tree branch falls on the corner of the roof. You know, maybe you lose a shingle or two, maybe the roofs 20 years old. So you already had some leaks. Now there's more leaks, you know, take your pick, think of this all like you know, in a real world environment. Well, Florida until last year is legislation had a provision in it, where if the roof was constructively more than 25%, damaged, then you must replace the roof. So take the initial example that I just gave. So what happens in this case, take out the water damage from the the leaky toilet, or faucet. So I came up with exactly the exact example was, and now talk about a roof that say 20% damaged. Now change the remediation contractor to a roofing contractor. Do you not think that they're going to do everything they can to get the roofing damage over that 25% quotient. So now they can do a complete reroof? Yeah. So that is a classic example of what you will see. And if you want a great if you want to if you want to do some some individual kind of study, go look at Arma like Hurricane Irma, I think I read this stat and I think someone of the reinsurance that gave to me that Irma with Reopenings, and openings, initial openings of claims and Reopenings had more claims than any storm in US history. Think that. The reason is, it was rampant abuse of the 25% threshold in conjunction with pas and and everything that I've allowed to elaborate and that in the first instance,

David Wright: 17:42

I do want to, I do want to try and drill into some specific experiences that you've had, if we can, and what I mean the story, I mean, conjure up in your mind and actual instance, and kind of walk us through with the detail. And I'll ask you about some detail if you can. Because I really want to know what it's like when you're like, actually, when somebody files a claim, what happens?

Dave DeMott: 18:03

Well, I think it's I think it's easier. And sorry, I was just trying to trying to kind of give you another proxy of what exactly what these claims look like. And you can you can kind of go example by example and kind of draw, draw some parallel to either example that I've given. I think it's first, the first before you get to an exact example, I think one of the things that you want to talk about is really how aggressive the public adjusters are. So you know, for example, you know, I'm fortunate enough to live in Broward County, you know, we really have not had a had a direct hit from a storm sense circle. Wilma, I think we've been glanced a couple of times, but really nothing of what I would call material convective wind field note, you know, over 80 miles an hour, that sort of stuff. I can tell you that. I still get calls, texts, and NPAs that knock on my door soliciting to go go up on the roof, and that they promised me that they can get money from from him I carry really. That's that's just me. And I mean, I could text last week,

David Wright: 19:07

Will it work? Do you think?

Dave DeMott: 19:10

Um, I think it's harder for them to do it now than it was again, going back to that 1920 threshold. But, you know, the data from the carriers and the insolvency and when you look at the loss adjustment expense ratio on some of these folks, and the answer, the answer is simply to your question is follow the data. Yes. I will say, you know, I'm unabashed about telling them that they're committing fraud and that I'm going to report them and they need to find something else to do. But that's obviously someone someone in the industry but the interesting thing about stealing the reason I bring it up is because I could walk around my office and ask them how many of you have gotten How many of you that own home have gotten a either either a letter, a phone call, anything from from from a PA and almost all of them, will will say yes, times two times three prospecting. So, yeah, so I think that's an element that has to be discussed. And I think the legislature is doing their best. You know, I think they tried to put some curtailing and that behavior and there was subsequent there was a subsequent case, which basically said that it's kind of their version of marketing. And in theory, you're, you're obstructing their kind of life, liberty, pursuit of happiness, their commercial interests. And I think I think the I think there's going to continue to be regulatory efforts to try to curtail that kind of what I would call to some degree predatory behavior. Great example. So if you want you want some examples, what a lot of the examples that I like to use are kind of what I like to call low level, low level storm. So first, sort of

David Wright: 20:45

Not Ian, something else?

Dave DeMott: 20:48

Correct. Yeah, I think and I think that's an important differentiation here, David, and I think everybody, everybody, you know, I'm sure there's a certain amount that's listening to this going now Oh, is this just carriers that are behaved badly and at some of them deserve this? I would say the industry is pretty good, you know, doesn't mean that there's not, there's not one or two folks out there that could have handled claims claims better, maybe they were overwhelmed with claims. Take your pick, but I can tell you and cat five stuff, like even when somebody doesn't have a roof, and, you know, I think you know, being in Florida and live my whole life here. You know, I think certainly certainly more often than not carriers have behaved, you know, on the front foot on this stuff. You know, that being said, some examples we've seen, one of the things that I've that I've seen is, so you get either your afternoon storm, or you get, you know, the hurricane glance where the the, the person's maximum field was maybe 30 miles an hour, and then you get a claim for lab for essentially what is a super duper old roof. In some cases, we've seen we had one where basically the screen and the patio was pretty much already falling apart. This thing got 30 mile an hour winds, they ripped what half half of the screen down, they got a PA they got a they got a they got a attorney said that the screen was attached to the roof superstructure and so now they've got to redo a portion of the roof they've got to redo the entire entire aluminum superstructure it tore up a piece of the concrete so they have to redo the patio and they think the pools got issues now because of it. And do you see how things things like this? Like they they tend to I think the bid at

David Wright: 22:21

work inflate? Does that one work? Did they get what did they get at the end? Do you remember? Do you know?

Dave DeMott: 22:26

Um it's a really good question. I think on that one that the the issue with that with this one why I think that was so conflated because this individual account had a really large one hail deductible. So they were trying to conflate the damage to go up and up and up and up and over over the winter headed up so I think the wind hail deductible ended up holding I think we paid a small sum over the wind hail deductible and it didn't end up being litigated because at the end of the day, the number was so small that there wasn't really much to be gained either way. So

David Wright: 22:58

so it wasn't worth it right like that that whole or the crew probably didn't come out of that one happy

Dave DeMott: 23:06

or they had other or they had other instances which they had much more Gasser which they thought were gonna big returns on that one. I mean, take your

David Wright: 23:12

pick. Right. Okay. Got another story? I like that. Good.

Dave DeMott: 23:16

Um, yeah, I mean, the, the the water damage one is is like kind of almost, like, famous out of Miami Dade County.

David Wright: 23:25

Yeah, I've heard this. Yeah, the water damage.

Dave DeMott: 23:28

Yeah. A lot of it is, you know, we and we've seen it, you know, leaky leaky leaky pipes in the kitchen, to get a PA we've actually seen some where the homeowner after didn't realize he was signing an EOB and the P that pa basically said if you just follow like what I'm gonna do here, you're gonna be able to get a whole new kitchen on this rather than just a whole new you know, Island area. So, you know, after the fact you kind of end up you know, hearing from the, from the, from the claims adjusters on our side, when they sit down explain to them the mechanism and how they're doing all this, a lot of folks actually get pretty upset and they feel like they've been deposed and put into they've been put into a sausage grinder a little bit with with how this how you know, how this process works. From from from the from from the PA and then one of the attorneys fees side. So you see, you've seen we've seen a ton of that kind of kind of small activity. The leaky roof one is another really good you know, we've seen a load of those, you know, you know, Florida your useful life on a roof is really, if you get 20 to 24 years, you've done really, really well that that roof was put on really well. You know, extreme heat, a lot of rain, some degree of convective activity through through hurricanes of severe storms. So you get these you get a lot of folks where you know, there's an old older leak, the older leaky roof, and they gets listened to by a PA and the PA goes up and takes a look at the roof and says oh yeah, you've got damage to this, you know, ridge line and this this was probably from this storm and yeah, let's let's submit something and see and and see if we can get the carrier involved. So a lot of those, you know, I hate to use a phrase but the kind of a little bit of fishing and claims, it's an older roof that just needs to be proactively replaced by it by it by by homeowner as opposed to something that's got genuine, first party real damage, do, how do they finally every example that every example that I just gave you, has happened to us? Three, four times over minimum?

David Wright: 25:22

So how do they find these? How do you know a roof is old? Right? I mean, that the roofing contractors or the adjusters, they have a way of do that, like fly drones over these houses? Or what do they do? How do they part of the prospect?

Dave DeMott: 25:37

So this is where I'm gonna go a little bit kind of off off the rails because I don't I try not to, you know, at the end, the day I'm running a business, what I've heard from my fellows in the industry, and there is some data behind it, is that they tend to work in neighborhoods. So they they think if if if one homeowner they're real successful for he'll talk to us on another, another homeowner, and then they'll hit that entire sector of the neighborhood or that that, like, greater, like, neighborhood neighborhood area.

David Wright: 26:12

And what they're doing is they're knocking on doors, saying I can get you a new roof. Is that what they do?

Dave DeMott: 26:17

They're knocking on doors, or they're counting on word of mouth, or they're using a lot of, there's a lot of it's text now. Yeah, all of it. All of it together

David Wright: 26:25

To... I mean, they're enticing these customers, right, somehow they're what are they? They're promising them money. They must be right, or new stuff, I guess, from insurance companies.

Dave DeMott: 26:36

I would say they're fairly careful there. Because it's it's, it's phrase, it's, it's phrasing, like, why don't you let us come up and take a look at your roof? And, you know, look, we'll see what we can do for him, we might be able to get you a new roof. That doesn't necessarily that's not a promise. Yeah, that's, uh, hey, let us take a look. Right.

David Wright: 26:51

Right. Okay, so I like I'll say that I am. I'm struck by how this stuff is. It could be benign, right? If these people just weren't around to to abuse these laws and these regulations that are, as we've pointed out, like in principle, like in theory, anyway, not a problem. So what are we doing? Or what is the what is happening in Florida, kind of like the try and fix this? You mentioned, there's some efforts this year, I forget who it was said that they passed some laws last year, which weren't as effective. What's, what's the strategy?

Dave DeMott: 27:34

Well, let me give you this great question. Let me give you a couple stats, and then we'll move to to the question just because I think it's I think it's really interesting. So in preparation for this, I really just want to take a look at some numbers. And I looked at some of the carrier carrier numbers, obviously, Florida's had some insolvencies. What I was, in particular, looking at was what it was hard to extrapolate perfectly David, so I'm gonna I'm gonna use some some leeway here. But essentially, what I want to look at is the separation between indemnity payments, and ALA, which is, which is actual loss adjustment expenses. So that'd be that portion. You pay to adjust the claim, pay lawyers, all that sort of stuff. And essentially, what I found over the last, like, the better part of the last three years, is that ala was roughly 33% of the claims total, for any for any one of these carriers. Now, if you need a rough barometer eylea From our side, it's rare that I see it over 10%. Rare, I mean, really rare. So while 33%, someone may think isn't isn't a big number, it is a massive, massive number. And that's just me doing a quick column eyeball not going through it in great detail. Other things you look at, look at insurance related lawsuits in the state of Florida between 2014 to 2021, they've increased 400%, from over from 16,000 to over almost 77,000. So really just a massive, just a massive, massive increase in those figures. One of the other things that I think is interesting in the data when you look at it, and you can go on case glide and kind of work this backwards, is there's essentially 20 law firms around the state that handle almost 55% of the caseload on this a wide, which kind of tells you that there is some degree of predatory behavior here. But sorry, yeah, but

David Wright: 29:28

I mean, to me it to me there's a specialization component, right to people just like running a business on this and it is possible and you know, if I think about like, what is the distinct about Florida one thing that's distinct about Florida is that it's a it's like sticking out in the ocean and as a huge amount of coastline and massive exposure, hurricanes and gets a lot of activity. And so you have a bigger industry of people who service this stuff. And they need something to do when the wind doesn't blow and so they go around trying to generate business, but by walking the line a little bit or crossing the line. You In some cases, you're gonna have some percentage of them that will do that. Because this is a way to make a buck for them. Is, is that? Does that sound right? Is that kind of what's going on? It's just like an inherent problem in Florida, it's gonna be a bigger industry. And so they're just gonna be better at extracting money from insurance companies, and you need actually more protection for insurance companies as a result in a place like that.

Dave DeMott: 30:23

I think the answer is I think the answer is complicated. The I don't think it's as simplified as as you potentially made it, David, I think there was. I think any I think if you listen to this data, I think it's pretty compelling that there's that that the market is rife with abuse.

David Wright: 30:45

I agree with that. I agree that it's rife with abuse. But I'm wondering, why is it rife with abuse? Like, why is there abuse in Florida, when you have equivalent laws elsewhere? And you don't have the abuse? You know?

Dave DeMott: 30:54

Well, I don't think that's functionally accurate. I don't think you have as equivalent laws.

David Wright: 31:00

Why do you have laws that Florida? You know, so why are the laws? Well, yeah, you know, that's like, I mean, there's, there's a cause for all There's something's going on, right, like, what is it?

Dave DeMott: 31:09

Well, I think you have, I think you've got some statutes, which were designed initially for consumer protectionism. And I think you've had some subsequent judgments that have liberalized some of these consumer protection isms, which have then kind of cracked the window open, and people continue to pile for the window. Yeah. And I think the simple answer is carriers in the state of Florida, do need protection should be afforded equal protection to pert to to pursue their economic interest and to adjust claims fairly. And I think right now, the the market is set up in such a way that it's almost a loaded deck against against the carriers. And the shame, the shameful thing is, you know, legitimate claims get kind of truly legitimate claims get kinda get kind of washed up in this mess as well. But I think the answer is like, if you look at Texas, Texas has the same amount of weather standards, has tighter and tighter statutes and legislative codes, and they don't have these issues around roof decking and fraud, and they don't have a they have a one way attorneys fee statute, but the threshold is mega. I mean, you have to you have to climb 18 ladders, and you have to truly have to have a behaved and horrible faith to activate to activate that statute. Whereas I think the bar and this is way too low. But, you know, you asked before about some of the legislative fixes. And listen, I think, from a government perspective, folks know that this is an issue. I don't think it's an issue that, that that that we're not aware of, to get anything passed in, in in the state of Florida, it's going to take three yeses. It's gonna take the governor's office, it's going to take the Speaker of the House, and it's going to take the senate president. And the truth of the matter is, you know, while this issue has been complex, it necessarily has not been able to get all three yeses until the 20 to 22 session, which had some real reforms to the one way or the one way fee statutes, they created a kind of a stair step based on damages. They gave, they put a provision there that you have to file an intent to file a lawsuit and give the company 30 days to cure whatever deficiency there is. There's a couple other things too, I don't want to jump through all of them. But

David Wright: 33:18

those are real. They went to those get enacted. July, okay. Okay. So we're gonna see how they do, I guess, with Hurricane Ian, striking in October,

Dave DeMott: 33:29

well, here's, here's, again, here's the here's the here's the problem with that. If you've, we've already had seven, seven companies go under in the state, and you've had nothing but reading, you know, pretty much from a combined ratio perspective over the last five years. You do end up in this area, David, where you're saying, is it too little too late? Yeah. Well, and I think that's, by the way, I think that's where we are, I'm going to ask the question and answer it.

David Wright: 33:57

Yeah. Well, I mean, we'll, we'll you know, something's better than nothing. Gotta go. You gotta start somewhere. You know, there's all sorts of metaphors we can trade on that. I think that if there's a if there's a real will to improve the problem, and the problem doesn't change, then that will simply wasn't right. Wasn't realized. And so it's gonna keep going. Right. I mean, at least the trend is positive. Right. I mean, there's hope here, because that's the first little bit of hope that I've heard in a few these conversations and then have a couple more. That that actually seems like the political climate in Florida is, is trying is recognizing that this is a problem and it's pursuing this

Dave DeMott: 34:40

Listen I, I would, I would absolutely say I'm massively bullish on this market and, and the folks that are our elected officials in the state of Florida right now. I think we'll see more meaningful tort reform work, but there's going to be a special session in December. The legislature will reconvene in March. I believe the folks in in all in all chambers understand this problem, what it means the long term effects of the state of Florida. You know, you have to think about think about this from an economic perspective, IT folks can't find insurance and citizens balloons out of control. That's basically the state of Florida Holding, holding, holding risk on their balance sheet. You're talking about real estate closings slowing down, you're talking about lack of availability, et al, across the entire state. So I believe the stakeholders and the legislators on the side completely understand this issue. I've had the benefit of interacting with some of them. And I I'm massively bullish on them getting a hold of this, and, and making real meaningful reform now, whether that means returning reform, you know, completely reforming the one way attorneys fee statute or additional changes. And again, I think there has been a solid effort to to attempt to change some of these, but I will say a lot of the changes over the last few years, you know, they needed to go this far. And they kind of went this far. And so that's why it's kind of, you know, it's kind of been the window shutting as opposed to the window shut. And I think what we're gonna see in December and into next year is kind of this kind of a claim to that window.

David Wright: 36:09

How about non property? Maybe you just do property? I'm not sure. But I get the sense that there's problems in the auto space as well, and maybe others. Is that right? Do you know?

Dave DeMott: 36:20

Yeah, yeah, so in particular, auto glass. It's not my biggest area of proficiency. But I know that, you know, kind of auto glass and auto glass repair has been an area that's that's that's had a fair amount of fraud. I know, Pip has had some as has issues with fraud. If you're gonna go deeper on the liability section, you know, letters of protection for folks that are that are injured and personal injury cases. That's an area where the state needs some reform. There's I think there's been a lot of good work behind the scenes done on that by by some of the think tanks, but some of the kinds of tort reform hawks and in groups throughout the state

David Wright: 37:02

lobbyists we can call them

Dave DeMott: 37:05

Yeah, well, I mean, there's there's not just there's they're also as they're also as judicial reform coalition's and tort reform coalition's have the benefit of working with a few of them that are really, really good. But you know, I think there's, there's issues, there's work to be done on that front. But if you're going to talk about, you know, the kind of upfront, you know, most pervasive issue that's got to get fixed, you know, that the homeowner side is kind of the one that kind of stares you straight in the face, but there is other work to be done in the state as well, David that's a good question.

David Wright: 37:30

I mean, it's such a tremendous irony to me that in Florida, you have this state, that's let's call it individualistic, and you have laws that are designed to protect individuals. And then what happens is you have a spring, you have a expert springing up all over the place to take those advantages, which they probably don't need over the insurance carriers and abused them and exploit them and turn them into a real big problem. And you know, insurance carriers are just past your economic institutions, like all they're doing is taking the amount of premium they get, they're paying it back to people in the form of claims. And if the claims numbers goes up, the premium numbers are gonna go up, and they're not doing anything special behind the scenes, other than giving the money back to Floridians. And so if they're extracting more in claims, they're gonna have to pay more in premium. Unfortunately, over the long term, it's pretty simple math. And the more you protect consumers against those institutions, that means the more that they take out of them, and the more they have to pay in it, it is tremendously interesting to me that the instinct of protecting consumers has like totally backfired in Florida.

Dave DeMott: 38:34

Again, I think it's well intentioned, but if you take any consumer protection item, and then you either liberalize it through some bad judgments and or expansion of and this these, these could be slight tweaks to code that that open doors. So this is not, you know, I would I would very much stop short at saying this is your fault. And, you know, period, full stop. You know, I would say, you know, I think the I think the trial bar does a lot of you know, does a lot of lobbying on the behalf of you know, of this topic. You know, I'll stop short there. But, you know, at the end of the day, this whole thing, this all these examples, and a lobbyist, I'm quite close with quite close with made this remark. It's essentially transfer of wealth. You know, it's not indemnity, it's not insurance. It's it's, it's its use of statute for transfer of transfer of wealth. And I think that's, it's taken long enough, but I think the the folks that run our state are now fully aware of it,

David Wright: 39:37

transferring wealth to the service providers. The lawyers, probably mostly from insurance companies, premium payments into lawyers pockets. Okay, so we'll close on this. David, where can people how can people help with this? Tell me about it? I mean, we're not done yet, probably. So. what can folks do to help you help Floridians?

Dave DeMott: 40:01

Yeah, I mean, I think I think the answer is relatively simple, you know, one, you know, don't engage with third parties, I think the Governor and the CFO of our state got a really good job, especially post insane, folks work with your carriers in good faith, I, you know, I can tell you, I think they're gonna give you fair offers, and really work to indemnify you quickly. You know, I think there is a place for third parties where there's genuine malice and claims, not on every single claim. So I would say, first, first and foremost, work with, you know, work with your carriers in good faith, if you have a legitimate loss, too, would be to really engage with, you know, sorry, to, to not engage in some of this, and some of this, you know, hey, come and let me come out and take a look at your roof. And I, you know, I think I think I can find something, I think if we just stop rewarding that behavior, to some extent, I think, I think it'll go away to, to some extent. And I'd also say, you know, if you get a chance, or if you're if you're, you know, friends friendly, or with with an elected official, you know, just comment and comment to them, you know, some of the some of the premiums where they are now they're, they've 100% gone to this to this level, because of because of this, this predatory behavior. And, you know, I think the more folks that are talking about that, over overall, the better.

David Wright: 41:17

Great. So, Dave, anything you want to kind of how do people get to know you if they want to, like work with you or do something with you? What's your, where, tell us where to find you online or elsewhere.

Dave DeMott: 41:29

So we're a Program Manager, you can check us out at AT AT, AT gridiron INS dot.com. We work with, you know, a combination between wholesalers and some local retailers, you know, throughout the country, and we've got products that work in various states. I did want to give you a quick, just a quick remark. You know, one thing about the state in particular in Florida is, you know, our surplus lines sector has done a really, really good job of being being, you know, kind of alive and vibrant and taking up a lot of the risk as carriers have left the state. So I think that's one section I did want to work in as far as not just the gridiron front, but just in general, I think, I think that sector of the industry, you know, has done a really, really good job of kind of being the safety valve for the industry and really being there. As as as the state challenges with either new exposures, high capacity risks, you know, some of this, some of the issues we've talked about today. But you know, overall, the surplus lines market has been really truly strong and vibrant and done a lot for the state and then as someone that sits in that association, I have to I have to I have to put in a put in a plug from an advocacy perspective. David's I hope you don't mind.

David Wright: 42:33

Yep, more important than ever. My guest today, Dave Mott. Thank you very much.

Dave DeMott: 42:38

Thanks, Dave. Appreciate it.