Florida’s Continuing Insurance Debacle

South Florida homeowners are once again feeling the sharp sting of home insurance rate increases, but this time it’s different. A recent poll shows that, at minimum, insurance rates are up 15% over last year. Some policies went up a whopping 100% since 2021. The average is around 30%. The puzzling question is how can insurers get away with such increases. They claim there is extremely high-risk writing policies here, but it is not the risk you might think.

Tamara Mourino is owner of a branch of GreatFlorida Insurance. Each day, she helps people find home insurance or keep insurance, so she sees the pain firsthand. “These days insurance companies are in a disastrous condition and some have gone into liquidation,” explains Mourino. “The remaining companies then have to take on a lot more risk than they bargained for. Even the state-backed Citizens Property Insurance Corporation is in troubled water. In particular, Miami-Dade, Broward and Palm Beach Counties are having the most difficulties getting and keeping people insured.” She added, “Don’t even talk about Monroe County where three main carriers have essentially boiled down to one. No one wants to write policies here.”

The risk insurers are facing is less about damages and the cost to pay claims and more about the incredible costs of litigating the claims. Unfortunately, since Hurricane Andrew, South Florida has become ground zero for insurance fraud. Homeowners are sometimes claiming roof leaks 2-3 years after a hurricane; yet, stating it is hurricane damage. In turn, insurers are fighting the claim. This has created a huge bottleneck, with the only winners in the game being the attorneys hired to litigate.

Florida’s Citizens Property Insurance Corp. was served with 3,881 lawsuits statewide during the first four months of 2022. Of the 3,881 suits, 3,832 involved residential properties. Of that number, 2,880 lawsuits were from Miami-Dade, Broward, and Palm Beach counties alone. The average of 970 lawsuits served a month was about 12% more than the same period in 2021. Citizens Property Insurance also had 18,455 pending lawsuits as of April 30. 

That is a lot of numbers clogging up a lot of court time filling up the coffers of a lot of lawyers. Yet, none of those dollars are going to make homeowners whole after a loss. In fact, it is likely that Citizens Property Insurance Corp. will spend $100 million to defend lawsuits this year!

What is additionally putting this problem into hyperdrive is that Citizens is bursting with new policies. Over the past two years, Citizens went from 463,247 to 883,333 policies, a whopping 90% increase. That’s because the other carriers are leaving the State, or are otherwise failing.

In a move to address this growing crisis, on May 26th, Governor Ron DeSantis signed into a law sweeping property insurance legislation (called the My Safe Florida Home Program) that creates a $2 billion reinsurance fund and rewrites rules on coverage denials and attorney fees. The broad strokes are that (a) insurers would have to reduce policyholders’ rates to access the state reinsurance fund, (b) it offers grants of up to $10,000 to outfit homes so they are less vulnerable to hurricane damage, if the homes meet certain criteria and (c) the legislation forbids insurers from automatically denying coverage because of a roof’s age if the roof is less than 15 years old. Homeowners with roofs 15 years or older would be allowed to get an inspection before insurers deny them coverage. (The My Safe Florida Home Program details are available at myfloridacfo.com/mysafeflhome)

“We are seeing roof leaks and failures in roofs that are less than 10 years old. I can’t say if that is due to materials or workmanship,” adds Tamara Mourino. “But when the homeowner goes to take advantage of the roofer’s warranty, they are more frequently finding a company that has gone out of business or won’t pick up their phone.” The burden then goes to the homeowners’ insurer. What is worse is the growing trend to have homeowners blame any roof problem on an unrelated hurricane. This just clogs up the insurance process, as the carrier won’t pay out unless there is clear evidence that the policy covers the loss.

The Surfside tragedy has brought legislative changes, including more frequent and more detailed inspections. This is having a devastating affect on condominium associations. Insurance carriers are jacking up rates and even dropping coverage all together. It is the perfect storm for condos that have little or no ability to pay for the policy increases without steep assessments.

The Department of Insurance is trying to do its part to curb insurance price hikes, but points squarely back to the root cause: litigation and fraud. Mourino says she gets lots of mailings that encourage people to file for claims that are fraudulent. She reports every one of them and encourages everyone to do the same. “Your neighbor’s ‘free’ roof costs everyone… and that’s the truth.” The Department of Insurance is wising up to these practices and now has a deep database to catch repeat offenders and companies that frequently do suspect work.

I suppose this insurance mess is the price we pay for another day in paradise. Work is being done to address the problem, but do your homework and make sure you have the right coverage for the right price.

If you want to explore your insurance options for your home, you can contact Tamara Mourino at GreatFlorida Insurance, palmettobay.greatflorida.com or 305-256-0616 (9811 Wayne Avenue, Palmetto Bay, FL 33157).