Originally published by News-Press | View Story
By Carolyn Johnson, Florida Chamber of Commerce Director of Business, Economic Development and Innovation Policy
Approximately 35% of the $12 billion Florida families spent on property insurance premiums each year is a tax to cover the cost of Florida’s excessive litigation. According to a new report Florida’s [Property & Casualty] Insurance Market: Spiraling Toward Collapse, this tax is unique to Florida policyholders.
Increased litigation between contractors who solicit ‘new roofs’ and insurers has skyrocketed in various parts of the state, causing private insurers to offer less coverage options in Florida and burdening consumers to pay higher prices for limited policy coverage. This Legislative Session, our leaders must commit to curbing property insurance litigation before the damage becomes irreparable.
According to the Florida Building Code (FBC), if more than 25% of a roof is damaged, the entire roof must be replaced. This amendment to the code is intended to persuade homeowners to act quickly on roof repairs, as the risk of damage to homes is higher when infrastructure such as the roof are compromised. However well intended, this part of the FBC has caused an unexpected consequence. Contractors are offering ‘new roofs’ to homeowners, even if little damage has been done to the home.
In 2018, there were roughly 45,000 lawsuits filed against insurers, and the number of cases is expected to rise to 200,000 this year. With insurers facing a $1 billion deficit and the majority of lawsuit-related payouts going toward attorneys (only 8% of litigation-related costs are paid to policyholders), our Legislators have drafted a package to curb litigation costs as originally filed, consisting of HB 305, SB 212 and SB 76.
These bills would impose restrictions on how much money can be paid out to homeowners to repair a roof depending on its age, would adjust the statute of limitations to file a claim with the insurance provider, and lastly, would guarantee policyholders see the majority of money resulting from a lawsuit, instead of the plaintiff’s attorney.
Some have suggested these initiatives would shift more financial responsibility for roof maintenance and repair onto the consumer, but if we do not act quickly to repair the insurance market, consumers will be in a far worse position and will be paying higher premiums for less coverage options. This is an issue we’re already seeing across Florida.
Most would expect the tri-county area of South Florida to be Florida’s most troubled market. However in recent years, insurers have seen increased litigation from parts of Central Florida, including in communities further inland who are therefore more ‘protected’ from severe weather.
With inauthentic lawsuits being filed at a record rate, even in our ‘safer’ regions, insurers have become increasingly eager to pull out of Florida, which is limiting coverage options for homeowners and continuing to increase rates. Even worse, Citizens Property Insurance, the state’s insurer of last resort, is growing by 4,500 policies each week, further demonstrating the property insurance market is in disarray.
If we look at the cost litigation has added to insurance rates, we’d see in 2018 an estimated $656 of each premium went to covering legal costs. For 2020, that amount was estimated to be $800. The bills to be discussed this Session are critical to Florida’s insurance market recovery. Each step the market takes to recovering is a step toward lower rates and better coverage for homeowners.
Florida’s property insurance market is one of the most complex in the world, but the problems we’re experiencing today are curable. We just have to be willing to act and to act quickly.
Carolyn Johnson is the Senior Director of Business, Economic Development and Innovation Policy at the Florida Chamber, in partnership with the Stronger Safer Florida Coalition and the Consumer Protection Coalition.