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Issue 13: May 19, 2008
Topic 1: Allstate Back In Business
The battle between Allstate Insurance Company and the Office of Insurance Regulation (OIR) hit its peak last week. Insurance Commissioner Kevin McCarty enforced a ban that prohibits the company from writing new policies for failure to provide documents during a state investigation aimed at uncovering why the company's rates had not dropped following the insurance reforms passed in early 2007.
Allstate was initially issued a subpoena for documents in October of 2007. In January of 2008, OIR suspended Allstate's ability to write insurance policies in the state, but the company was able to continue writing policies, pending an April ruling by the First District Court of Appeal, which held that OIR has the authority to suspend Allstate from conducting new business in Florida for failing to produce documents under subpoena.
Commissioner McCarty enforced a ban which extended beyond home insurance policies, preventing Allstate's 1,100 agents in Florida from selling any of the company's products, from boat and car insurance, to life and property.
On Friday, Allstate signed an affidavit certifying it had fully complied with the state's request for documents. In response, the state lifted the ban with the understanding that a future failure to produce documents would bring another ban.
Bottom Line: The production of documents and lifting of the ban are positive steps toward determining the ultimate issue of whether Allstate has failed to lower rates as required by last year’s law. This issue will not be resolved until regulators believe Allstate is acting in good faith.
Topic 2: New Cost of Nuclear
The Wall Street Journal this week reported on the rising construction costs associated with the production of new nuclear power plants. There are currently 104 functional nuclear reactors in the United States, 75 of which were built between 1966 and 1986. Now profitable, these existing plants cost on average $3 billion when built. Today, new nuclear power plants may cost anywhere from $5 billion to an upwards of $12 billion per facility.
The Journal attributes increasing construction costs to the high cost of commodities as well as a lack of skilled labor at a time when the country's need for alternative and renewable energy is on everyone's mind.
Federal and State officials have been proactively working with the Nuclear Regulatory Commission to streamline the licensure process. At the same time, the industry has become more standardized in an effort to reduce costs. In Florida, the process is further aided as utilities can pass along construction and development costs to consumers who will benefit from the facilities.
Earlier this year, the LeMieux Report discussed the Florida Public Service Commission's (PSC) approval of Florida Power and Light's bid to build two nuclear power plants at its Turkey Point power station, south of Miami. The project is the first of its kind in over twenty years, one of the largest, and with a projected cost of $6-$9 billion per plant, also one of the most expensive projects ever undertaken by an electric utility. This week the PSC will consider a proposal by Progress Energy to build two nuclear facilities in Levy County.
Bottom Line: Despite high start up costs, with fuel prices continuing to rise, nuclear power provides a less expensive and cleaner avenue to meet Florida and America's growing energy needs. State and Federal officials should work together to further expedite permitting to avoid further inflation in construction costs.
Topic 3: Lake Belt Mining Ban Lifted
Last week the U.S. Court of Appeals for the 11th Circuit lifted a 10-month ban on mining in the 78-square-mile Lake Belt Area located east of Everglades National Park and northwest of metropolitan Miami.
Mining of the Lake Belt Area produces close to half of the limestone and one-fourth of the cement used for a variety of construction purposes across the state.
The Sierra Club brought a suit against the Army Corps of Engineers for granting mining companies Clean Water Act permits to mine in the area. Prior to issuing permits, the Corps had to follow procedures required by the National Environmental Policy, Endangered Species, and Clean Water Acts. The Sierra Club brought suit, accusing the Corps of acting arbitrarily and capriciously in granting the permits.
A lower court found in favor of the Sierra Club, however the 11th Circuit Court of Appeals vacated the district court's grant of summary judgment and remanded the case to the district court to apply the proper standard of review to the Corps' environmental analysis.
Bottom Line: Although litigation will continue in the lower court, mining will resume for at least the time being. Locally mined aggregate keeps road, home and commercial construction costs in Florida down at a time of rising prices worldwide, and should be encouraged when done in an environmentally safe manner. In the instant case, mining companies pay for a two-mile buffer in order to protect Everglades National Park.
Topic 4: Embraer Expands In Florida
Brazilian-based Embraer announced plans to build a $50 million manufacturing facility at the Melbourne Airport, a project discussed during Governor Crist's trade mission to Brazil last fall.
Embraer is the world's third largest manufacturer of commercial jets. Florida is already home to the U.S. headquarters for Embraer, established in Fort Lauderdale in 1989, and currently employing nearly 300 workers. In 2006, the company reported $176 million in Florida sales.
The new Melbourne facility will create 200 jobs by 2011, including high-wage, high-value positions related to production planning, logistics and quality, aircraft interior design, corporate administration, certain engineering functions, and delivery and flight testing.
Bottom Line: This project was made possible through a partnership between Embraer, Enterprise Florida, the Economic Development Commission of Florida's Space Coast, the City of Melbourne, and the Melbourne Airport Authority, and is a perfect example of public-private partnerships at work to create jobs and encourage companies to locate and expand operations in Florida. Aerospace, along with industries like life science, are part of the new Florida economy that will help diversify Florida in the future against economic recession.
Topic 5: Hurricane Conference
In anticipation of the June 1st beginning of the Atlantic Hurricane Season, Governor Crist joined 2,600 emergency managers, first responders, and volunteer agencies in the Venice of America, Fort Lauderdale, for the 2008 Governor's Hurricane Conference.
The 22nd annual conference provided a week of training led by the Florida Department of Emergency Management. Florida Hurricane Preparedness Week will be observed next week and marks an important reminder of the importance of preparing for the possibility of severe storms.
Meanwhile, at the national level, despite last week defeating an amendment to expand the National Flood Insurance Program (NFIP) to include windstorm coverage, the United States Senate passed the NFIP reauthorization bill, including a provision that will establish a panel to conduct a nine-month study on how best to establish a national catastrophe insurance program.
The possibility of establishing a national catastrophe fund to dilute the risk of catastrophic loss is increasingly important, especially given the fact that the state may soon levy additional assessments to cover a $600 million increase in the already $1.35 billion debt to the state catastrophe fund due to the 2004-2005 hurricanes. All states are susceptible to such natural disasters, from wild fires to flooding, earthquakes to ice storms.
Bottom Line: Through the Governor's Hurricane Conference, the state of Florida emphasizes individual preparedness. While providing day-to-day necessities is a personal, rather than state responsibility for the vast majority of Floridians, it is the responsibility of state and national leaders to pursue public policy positions, such as a National Catastrophe Fund, to protect the long-term financial security of Americans. If states like Florida can support farm subsidies that mostly benefit non-coastal states, non-coastal states can support their coastal brethren through this important measure. Like the old car repair commercial warned "you can pay me now, or pay me later," national disasters like Katrina are much less expensive to insure against beforehand, than to fund the recovery of after they occur.
Question of the Week
I manage a company that has several offices throughout Florida. Our employees communicate primarily through e-mail, and many of the company's records are created and stored on our computer systems. We just learned that another company we have done business with is threatening to sue us. I think that many of the communications and records relating to this dispute were in the form of e-mail. What should we do about these records? Should we talk to our employees now or wait to see if a lawsuit is filed?
Click here for the answer.
Things to Watch
Water wars ruling favors Florida
On Friday, the United States Court of Appeals for the District of Columbia Circuit denied Georgia's petition for a rehearing of the Court's prior decision that the Army Corps of Engineers overstepped its authority five years ago when it granted Georgia additional water rights that affected rivers in Florida and Alabama.
Everglades Restoration
The South Florida Water Management District voted Thursday to put a hold on an Everglades restoration project, pending the outcome of a lawsuit by environmentalists. The district board anticipates construction could be halted through the end of the year. The board agreed to stop construction as of June 1, and begin paying its contractors $1.9 million for each month the project is delayed. The 25-square-mile aboveground reservoir – the largest of its kind in the world – is estimated to cost up to $800 million and was set for completion in 2010. The district has already spent about $250 million on construction.
If not Hillary, than who?
In its Sunday edition, the New York Times creates the profile for America's first woman president: "That woman will come from the South, or west of the Mississippi. She will be a Democrat who has won in a red state, or a Republican who has emerged from the private sector to run for governor. She will have executive experience, and have served in a job like attorney general, where she will have proven herself to be “a fighter” (a caring one, of course). She will be young enough to qualify as post-feminist (in the way Senator Barack Obama has come off as post-racial), unencumbered by the battles of the past. She will be married with children, but not young children. She will be emphasizing her experience, and wearing, yes, pantsuits."
