Editorial l New laws show promise for home insurance stability

After failing to address the home insurance issue during the regular session, the Legislature passed major home insurance reforms in a short special session that promise but do not guarantee restoring stability to the turbulent home insurance industry.

The reforms were welcomed by the insurance industry but criticized by some consumer groups for not providing any immediate relief for high rates, criticized by the financial rating agency AM Best as inadequate, and challenged by a contractor group based on provisions in the bill that limit attorney fees.

While the impact of the bills will not be felt for several months, and specific measures have been criticized, in general the reforms passed in the special session appear to offer hope of stability to an industry that has been unstable for years. This instability has led to higher rates, companies pulling out of specific markets or ceasing to operate in Florida and the failure of smaller insurance companies.

The reforms are aimed at controlling attorney fees, addressing roofing issues and roofing scams that have led to much of the litigation, providing a reinsurance fund for companies operating in the state, and helping homeowners make their homes more storm resistant.

One of the major provisions of this legislation was to control attorney fees, which the industry has said are out of control and are a major contributor to the chaos in the home insurance marketplace.

According to Bankrate, Florida has only 9 percent of the nation's home insurance claims, but it accounts for 79 percent of the nation's home insurance lawsuits. This legislation put a cap on fees attorneys can recover in property insurance claims cases.

In addition to containing attorney fees, the legislation commits $2 billion to the state reinsurance fund. Reinsurance is essentially insurance purchased by insurance companies to allow them to share the risk of a catastrophe and lessen the likelihood that they would become insolvent if they are hit with an overwhelming number of claims.

The bills also have provisions to assist homeowners, such as the allocation of $150 million to fund grants homeowners can apply for to strengthen their homes against hurricane damage to reduce the risk of loss and lower their insurance costs.

Another provision of the legislation deals with roofing claims, which have been one of the drivers of insurance litigation. The rules are complicated, but essentially, they keep insurance companies from automatically denying coverage due to the age of a home's roof. If a roof is over 15 years old, it can still be insured if it is inspected and determined to have at least five years of life left.

The legislation also did not address Citizens Insurance, the state-created insurance company of last resort, which is backed by Florida residents and has grown rapidly as companies have failed or pulled out of the market.

We recognize this is a separate issue, but one that ultimately needs to be addressed by the legislature as part of an overall look at the property insurance in the state.

However, despite its shortcomings, the action of the Legislature in the special session is a hopeful sign that stability can be returned to the property insurance in the state and that our legislature is willing to address these complex issues.