One Step Forward, Two Steps Back: Roofers, Insurance and Commercial Speech

July 14, 2021

On July 11, 2021 Chief Judge Mark Walker of the U.S. District Court for the Northern District of Florida entered an order enjoining the Secretary of the Florida Department of Business and Professional Regulation from taking any steps to enforce subsections 489.147(2)(a), (3), and 4(b), Florida Statutes as they pertained to “prohibited advertisements,” until otherwise ordered. The preliminary injunction binds “Defendant and her officers, agents, servants, employees, and attorneys – and others in active concert or participation with any of them.”

On June 11, 2021 Florida Governor Ron DeSantis signed SB 78, creating section 489.147, Florida Statutes.  Subsection 489.147(2)(a) prohibits any contractor from directly or indirectly soliciting a residential property owner by means of a “prohibited advertisement.”  “Prohibited advertisement” is defined as “any written or electronic communication by a contractor that encourages, instructs, or induces a consumer to contact a contractor or public adjuster for the purpose of making an insurance claim for roof damage. The term includes, but is not limited to, door hangers, business cards, magnets, flyers, pamphlets, and e-mails.” § 489.147(1)(a), Fla. Stat. However, in-person, oral communication of this same message does not appear to violate the law.  Subsection 489.147(3) subjects a contractor who violates this section to disciplinary proceedings and up to a $10,000 fine for each violation. Subsection 489.147(4)(b) provides that any unlicensed person who engages in prohibited speech is guilty of unlicensed contracting, and subject to civil penalties through Department disciplinary action and fines up to $10,000 per violation.

Ten days later, on June 21, 2021, Plaintiff, Gale Force Roofing & Restoration, LLC, filed a complaint and a motion for preliminary injunction.  After procedural issues were addressed, the court set Plaintiff’s First Amended Complaint and Amended Motion for Preliminary Injunction for an expedited briefing and hearing schedule.  The hearing was held on July 9, 2021.  The Plaintiff argued the new statute interfered with its business practices and barred it from providing truthful information to consumers.  Plaintiff further alleged the law chilled its First Amendment rights because, under pain of disciplinary action, it forced Plaintiff to cease its written advertising that encourages consumers to contact it for the purpose of filing an insurance claim for roof damage.

The court found that the statute was subject to intermediate scrutiny as outlined in Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 561 (1980).  Under that standard, if the speech at issue is false, misleading, or concerns unlawful activity, the speech is not protected by the First Amendment and the government has free rein to regulate it. If not, the governmental interest in regulating the speech must be substantial.  Should the government advance a substantial interest, the regulation must directly advance that asserted interest. Even if it does, the Court is required to determine if the governmental interest could be served as well by a more limited restriction on commercial speech.

The court noted that while the State may ban commercial expression that is fraudulent or deceptive without further justification, the Defendant in this case had conceded that speech simply encouraging consumers to contact a contractor or public adjuster for the purpose of filing an insurance claim for roof damage is not false or misleading, and does not concern illegal activity.   Addressing the next prong of the test in Central Hudson, the court found that Florida had a substantial interest in addressing the conduct of predatory contractors who exploit consumers by engaging in unlicensed public adjusting and who induce homeowners to assign their insurance benefits, and then fail to complete the work despite being paid in full by the homeowners’ insurance company.  The court also noted the State’s interest in addressing the danger to Florida’s insurance market from the asserted onslaught of insurance litigation brought about by these practices. 

However, the court questioned whether the ban on commercial speech that was not false, misleading, or concerned with illegal activity directly advanced the interests asserted by the State.  The court advised it was unclear why a homeowner would be wittingly or unwittingly “herded down a path towards supporting insurance fraud” by simply learning their insurance might pay for roof repairs from a contractor’s advertisement, instead of during a conversation that occurs once the contractor has already inspected their roof.  The court found that the Florida Legislature overstepped the boundaries of the First Amendment when it determined that the proper remedy for speech it considered “evil” was “enforced silence,” as opposed to “more speech.” According to the court, the State attempted to enforce silence where the downstream effects of speech – rather than the speech itself – were what was considered “evil.”   The court noted that Florida’s Insurance Consumer Advocate’s “educational initiative” was already in place to offer “more speech” to combat the “evil” that purportedly flows from contractor advertising that encourages consumers to contact contractors or public adjusters for the purpose of making insurance claims for roof damage. 

Finally, the court noted that the same bill that contained the provision at issue contained additional measures that address licensed contractors acting as public adjusters, pre-suit notice requirements for potential plaintiffs, and restricting attorney’s fees in insurance claim litigation. The Court observed that, setting aside the State’s ban on certain advertisements, the remaining provisions appear to directly target the ills visited upon Florida’s insurance market.  These targeted laws directly address the conduct contributing to Florida’s insurance ills and belie Defendant’s assertions that the ban on “prohibited advertisements” is a reasonable fit to advance the substantial interests identified by the State.

While the court’s order is only a preliminary injunction, the court’s detailed opinion indicates the Florida Legislature will have to address this component of Florida’s insurance crisis a different way.

For any further questions, please contact John Garaffa.