With a special session to address Florida’s collapsing property insurance market slated for May, lobbyists for insurers, trial lawyers and other interest groups seized the opportunity to get face-to-face with lawmakers last week as they gathered in the state capital to vote in redistricting maps. The meetings generated immediate buzz about how the session will likely shape up. Almost everyone with skin in the game acknowledges that any path to real progress will pass through House Speaker Chris Sprowls, who has long been known to be a skeptic of some of the more aggressive reforms pushed by insurance companies.
With each passing day, two opposing data sets are being carefully monitored by Sprowls and his insurance reform point man, State Rep. Jay Trumbull: mounting bad news about Florida’s property insurance market, versus the slow but steady reduction in Florida’s out-of-control insurance litigation.
But the market failures keep mounting, and with them, pressure on state lawmakers.
This week, FedNat Insurance Company, which serves more than 152,000 policyholders in the state and another 96,000 in other states, acknowledged in a federal filing that there is “substantial doubt regarding its ability to continue as a going concern under generally accepted accounting principles.” That news came on the heels of six other Florida companies going out of business since 2017, and some of the state’s remaining insurers reducing their risk exposure in Florida by either pulling out of the state, refusing to take on new policy holders, or in some cases, dropping some existing policyholders.
Litigation is the top problem, but Sprowls is urging patience
The statistics comparing litigation in Florida with the rest of the nation are staggering: Florida accounted for 76.45 percent of all homeowners’ suits opened against insurance companies in the United States
despite only accounting for 8.16 percent of homeowners claims across the country. That much has been known for a while, and lawmakers have already taken action to address the issue.
Another eye-popping statistic, this time from State Senator Jim Boyd, who as an insurance agent by trade, has led the charge for reform: of the $51 billion paid out in insurance claims over the last 10 years, Boyd says, “Seventy-one percent of those dollars went to plaintiffs attorneys. Only eight percent went to homeowners for the actual losses they sustained. Something’s wrong with that.”
Yet Boyd and others acknowledge that many of the reforms already passed in recent years just need more time to take hold. In 2021, Boyd introduced and helped pass lawsuit reform with Senate Bill 76 (SB76), and he says insurers are already starting to see an impact.
“I’m happy about that…companies are starting to see lessening of lawsuits that are coming into their doors,” Boyd told Bay News 9 in an interview earlier this month. “However, as we said last year, it’s going to take a little bit of time for that to play out in the market.”
Any residual resistance from Sprowls toward more drastic action right now can be directly laid at the feet of insurance company advocates who promised that last year’s reforms would make a positive impact on the number of lawsuits within about 18 months, but that deadline hasn’t passed yet. Sprowls, insiders say, is carefully weighing the speed of the collapse of Florida’s insurance market with the reductions in litigation that are slowly, but surely starting to manifest themselves thanks to those already passed reforms.
And besides, others say, trial lawyers aren’t the problem anyway. They’re just a symptom.
That’s the argument of Jerry Theodorou, Director of the Finance, Insurance and Trade Policy Program at R Street Institute, a Washington D.C. public policy research organization.
“Although excessive litigation is the proximate cause of Florida’s property insurance issues, it’s not appropriate to blame the lawyers,” Theodorou wrote. “Lawyers litigate—that’s their job.”
Roof repairs in the spotlight
Theodorou points to other structural problems within Florida’s insurance market, including loopholes that allow contractors, lawyers and homeowners to inflate the number and the value of claims payments. And one of the largest areas of abuse are roofing claims.
While homeowners insurance was never intended to be a way to replace an aging roof with a brand new one for free, many homeowners are easily lured into bad faith litigation by the promise of having an insurance company foot the bill even when the problem is mostly routine wear-and-tear. The national average for replacing a worn roof is over $7,000, a sum of cash anyone would be happy to pocket if their insurance company is footing the entire bill. Barring a storm that causes actual damage to the roof that is covered under the homeowner’s policy, replacing a roof is part of the cost of homeownership.
One of the major fault lines emerging ahead of May’s special session will be roof repair policies and costs. Insurers argue that roof damage claims should be valued on the age of the roof, rather than the total replacement cost. It’s unfair to insurers if a homeowner has gotten 15 years of use out of an aging roof and then files a claim for the full cost of a total roof replacement because of some evidence of storm damage.
As Theodorou points out, “A homeowners’ insurance policy is not a maintenance agreement. The natural wearing out of a roof is not a covered cause of loss.”
But Sprowls has staked out the position that swinging the pendulum too far, too fast could leave insurers with too much power to deny claims and leave homeowners struggling to foot the bill for expensive repairs while they could be reeling from other storm impacts.
And with the 2022 hurricane season just around the corner, and the 2021 reforms already starting to have some impact, the real question facing lawmakers next month will be whether or not those reforms were too little, too late.