For some reason, one of my favorite classes that was not insurance-related in law was none other than constitutional law. Although the field of constitutional law is an area that I enjoy reading and learning about, it is not often that first-party insurances overlap with constitutional issues.
Although there are situations where both areas can and will overlap in practice, there will often be a time when a certain insurance principle and the philosophy behind it will relate to or appear analogous to constitutional principles.
In a recent discussion among several of my colleagues regarding Citizens Property Insurance Corporation, we discussed the immunity for Civil Remedy Notice that Citizens, for one reason or another, was granted. civil law notice filed against the company, you can read more about the subject in Why should citizens make mistakes and get away with it.
Chip Merlin, the author of the post, makes a good point when he questions why Citizens (the largest insurance company in Florida) should be protected from liability for unfair claims handling and bad faith insurance practices:
I can not come up with a valid reason, but this is the sad and current situation. Citizens Property Insurance Corporation may compromise its customers without penalty and demand immunity from consumer protection laws that all other insurers in this state must comply with. Why should citizens have this advantage over all private insurance companies in this state? It does not take a rocket scientist to figure out that an insurer that takes premiums from its customers and then delays or denies full benefits at the time of reporting can make much more money than by being honest and treating customers in good faith.
This topic made me think of one of the most popular constitutional principles in federal constitutional claims: The State Action Doctrine. The state doctrine of action is as follows:
The Bill of Rights in the US Constitution regulates and restricts as a general rule only state measures. It does not include individuals, organizations or companies. This means that a person can only bring an action for violation of his constitutional rights against a “state actor.”; Much of the time, the State Action Doctrine for Federal Constitutional Claims offers clear guidelines for who can be prosecuted in a case that alleges violations of constitutional rights. However, there are many exceptions due to years of decisions by the US Supreme Court. An individual or a company may in certain circumstances become a state actor or the state may be held jointly and severally liable for the actions of a private person or a company.
The state doctrine of action seems simple in the face. The provisions of the U.S. Constitution and its amendments apply to the government and those who act on its behalf, but not to individuals or entities.1
In constitutional law, this doctrine often comes up when one learns about due process and the protection of the United States Constitution. Several cases that are taught to explain the state doctrine of action involve private actors, such as a homeowners’ association, which participates in discriminatory practices against constitutionally protected classes of people. As this area of law developed, the fact that an entity was technically a private entity, and not a state entity or actor, no longer allowed the private actor to be given absolute immunity from liability for violations of the US Constitution.
Several cases began to emerge where it was argued that private companies that receive extensive funding from the state should be considered a state actor rather than a private actor. Eventually, many court decisions later, a new rule of law developed:
Just the fact that a private organization receives most of its funding from the government does not make it a “state actor.” The organization can be considered a state actor, and the state itself can be held accountable, when the state “has exercised coercive power or has provided such significant encouragement … that the choice in law must be considered the state’s.” Blum vs. Yaretsky457 US 991, 1004 (1982).
If you look at the Citizens Property Insurance Corporation website, you will see the following in the “About Citizens” section:
Citizens was created by the Florida Legislature in August 2002 as a non-profit, tax-exempt government agency to provide property insurance to eligible Florida homeowners who cannot find insurance coverage in the private market. Citizens are financed by the policyholder’s premiums; however, Florida law also requires citizens to take assessments of most Florida policyholders if they experience a deficit in the wake of a particularly devastating storm or series of storms.2
While the motivation to create a entity like Citizens is respectable, the characteristics that make up the company are just like most other real estate insurance companies in Florida that are not protected under the guise of being a state entity.
So, just like Chip, I would like to ask a question: Why can citizens – an insurance company whose main “state-like” characteristic used for its classification of “state actor” is anchored in state funding through assessments – avoid the long-term rule of law applied in Blum vs. Yaretsky?
Not only that, but if you look at the company’s website, Citizens also has an entire section where it uses its “good” purpose to explain its mission – which can be found in the section entitled “Purpose-Driven Mission”:
A goal-oriented mission
Citizens Property Insurance Corporation plays a crucial role in Florida’s property insurance market by providing property insurance coverage to people who are in Good faith has the right to receive coverage via the private market but cannot do so. As one of Florida’s leading home and business insurance companies in Florida, we strive to ensure that our customers receive a service that is comparable to the standards of the private market.
Citizens is a non-profit company whose employees are primarily driven by our mission to serve the people of Florida. In addition to providing a quality product and service, we strive to be good managers of the premium funds entrusted to us and are committed to modeling the highest level of ethical behavior.
Our goal-oriented mission informs every action and decision we make, and we are proud of the valuable service we provide to our customers and Florida’s marketplace.3
If citizens can publicly market their efforts for good governance and their commitment to “modeling the highest level of ethical behavior”, then why can these statements not be tested?
The Florida Insurance Civil Remedy Statute was designed to prevent insurance companies from misconduct and misconduct. I see no reason why a company that openly presents itself as the basis for good faith, with a commitment to the highest level of ethical behavior, should be given immunity from the system designed to literally test the validity of that statement.
1 https://www.irglobal.com/article/the-state-action-doctrine-for-federal-constitutional-claims/#:~:text=The%20mere%20fact%20that%20a,significant%20encouragement%E2% 80% A6det% 20valet