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Judge Blocks Florida Property Insurance Law

A person repairing a roof.
Kathy Krinke/Kathy images
Florida lawmakers passed the property insurance bill in April as premiums are climbing and insurers are shedding policies in the state.

A federal judge has blocked the state from enforcing a key part of a new property insurance law designed to combat fraud that prohibits roofing contractors from advertising to potential customers.

Chief U.S. District Judge Mark Walker supported the call for a preliminary injunction from Brandon-based Gale Force Roofing & Restoration LLC, which argued the law signed by Gov. Ron DeSantis on June 11 violates First Amendment rights by directly penalizing protected speech.

“It is also clear that the threatened injuries to plaintiff from banning plaintiff’s truthful commercial speech outweighs the state’s interest in preventing fraud, protecting consumers from exploitation, and stabilizing the insurance market,” Walker wrote in a ruling issued Sunday.

Lawmakers passed the insurance measure on April 30 amid spiraling property insurance rates and insurers dropping policies in Florida.

Gale Force managing partner Alex Dewey hailed Walker’s decision.

“Gale Force absolutely stands against insurance fraud of any kind, and agrees that the state should punish fraudulent actors, but that is no excuse to impose draconian restrictions on companies like Gale Force who follow the rules and simply help property owners recover when Mother Nature strikes,” Dewey said in a press release.

Representatives of the Florida Department of Business and Professional Regulation could not be immediately reached for comment on Tuesday. Department Secretary Julie Brown was a named plaintiff in the lawsuit.

The new law, which went into effect July 1, allows larger annual rate increases for customers of Citizens Property Insurance Corp., prevents contractors from soliciting homeowners to file insurance claims through a “prohibited advertisement,” takes steps to limit attorney fees, and reduces the time to file claims.

Walker’s order focused on provisions in the law related to communications by contractors. The new law would prevent contractors from soliciting homeowners to file roof-damage claims through a “prohibited advertisement,” which could include such things as emails, door hangers, flyers and pamphlets.

While the state has the right to regulate contractors and protect Floridians from fraud, Walker wrote, “it must do so within the bounds set by the Constitution.”

“Here, the Legislature failed to do so accordingly,” the judge added.

In the lawsuit, Gale Force Roofing and Restoration said it advertises to homeowners to contact the company for inspections of storm damage to roofs.

“Plaintiff (Gale Force Roofing and Restoration) will then truthfully convey to homeowners the nature and extent of the damage,” the lawsuit said. “Plaintiff will then encourage homeowners to contact their insurance company to make a claim under their residential insurance policy and execute a contract with plaintiff to assign the benefits available under the homeowner’s insurance policy to plaintiff.”

The company also argued that the new law is more about reducing insurance claims than preventing fraud, saying the statute serves as a “thinly veiled attempt” to keep homeowners from getting outside help in making valid insurance claims for home repairs.

The bill’s supporters and insurance industry officials argued that questionable, if not fraudulent, roof-damage claims have played a big role in driving up costs.

The state disputed that the law’s restrictions violate First Amendment rights, arguing that the statute should be considered a reasonable restriction on commercial speech combating consumer exploitation and fraud.

Under the law, “targeted digital advertisements or e-mails, door hangers, or brochures handed out in person are prohibited if, and only if, they encourage a homeowner to make a roofing insurance claim,” the state’s lawyers wrote.

“Radio and television advertisements are allowed because they do not target ‘a specific person,’” they argued.

But Walker disagreed.

Under the new law, licensed contractors “are not allowed to encourage, instruct, or induce any consumer to contact a contractor or public adjuster for the purpose of making an insurance claim for roof damage by written or electronic means --- and neither is any ‘unlicensed person,’” Walker wrote.

In-person, oral communication of the message “does not appear to violate the law as written,” the judge noted.

“However, this law effectively bans this specific message by contractors --- licensed or not --- in written or electronic form in the state of Florida,” he added.

Gale Force argued that the law chills its First Amendment rights because it forces the company to stop its written advertising that encourages consumers to contact it for the purpose of filing an insurance claim for roof damage.

“Accordingly, plaintiff is engaging in self-censorship by refraining from advertising that arguably runs afoul of the new law,” Walker wrote, adding that the facts are sufficient to support a preliminary injunction to block the law from going into effect.

The state tried to bolster its argument that the new law advances the state’s interests by including an anecdote about “how a ‘direction-to-pay agreement left a homeowner with a ‘gutted home,’ work that was never completed, and a $100,000 lien.”

But Walker called the state’s evidence “lackluster.”

Instead “of banning protected speech, could the Legislature not directly regulate agreements between homeowners and contractors or impose liability for incomplete performance?” he wrote in Sunday’s 44-page order, which detailed a list of other flaws in the state’s arguments.

“In short, this court is not satisfied that the challenged law directly advances any of the state’s interests. Instead, defendant seems to suggest that because the law bans advertising that exists within the same universe as the state’s asserted interests, it directly advances those interests. But the (U.S.) Supreme Court has already rejected such a broad pronouncement,” he chided. “To recap, defendant has identified legitimate, substantial state interests. But none of those interests are directly implicated by contractors advertising their roofing repair services to homeowners and informing homeowners that they may have storm damage that may be covered by insurance.”