New Legislature faces old problem – property insurance

TALLAHASSEE – The new-look Florida Legislature is coming back to the Capitol to take on an old problem – homeowners insurance – which has worsened since Hurricane Ian tore through the state in September.

It was just six months ago that lawmakers attempted to stabilize an overpriced and unreliable insurance market during a special session called by Gov. Ron DeSantis. This time, new Republican leaders elected to the House and Senate in November will tackle what continues to be a statewide crisis.

House Speaker Paul Renner, R-Palm Coast, and Senate President Kathleen Passidomo, R-Naples, now face an even tougher task.

The changes enacted following May's session didn't spawn much improvement. And since then, Hurricane Ian's Category 4 damage has already drawn $10.2 billion in insurance claims, with estimates warning the eventual total will far exceed that, a potentially enormous threat to the finances of Floridians and their insurers.

"We have a long, long way to go," said Passidomo just weeks after the storm. Her Naples home, built in 1961, was destroyed by flooding from Ian.

Renner and Passidomo made the session official Tuesday, formally calling lawmakers to the Capitol for Dec. 12-16, which overlaps with the first regularly scheduled committee week in advance of the 2023 legislative session, which begins in March.

DeSantis and Republican lawmakers, who now hold super-majority control of the House and Senate, are expected again to focus on efforts to prop-up the industry. Renner has already warned that whatever is approved, "will not result in an overnight drop in insurance rates."

Florida homeowners pay the highest premiums in the country, almost three times the national average, according to the Insurance Information Institute, an industry organization. These premiums also are climbing at a rate of about 33% annually, compared to 9% boosts across the rest of the nation.

But as long as the industry is troubled in Florida, high premiums will endure. More than a dozen insurance companies have stopped writing homeowners policies in Florida this year, including a half dozen that have gone out of business altogether.

Industry to get what it wants

Lawmakers have taken the approach that they will give the industry what it wants in a desperate bid to stop them from leaving a high-risk state.

The insurance industry got lawmakers to do a lot of what it wanted in May. And the same theme is expected to dominate next week's session.

While little is known about why Florida insurers become troubled – some analysts say poor investments and bad management are to blame. Yet the industry blames the cost and financial risk of lawsuits, and soaring prices for reinsurance – basically, insurance for insurance companies – for its woes.

Ian's insurance damages are estimated to top $50 billion, making it second only to 2005's Hurricane Katrina as the biggest insurance loss in U.S. history.

While the industry is demanding help, not everyone is convinced.

"It's obvious, the insurance industry wants to maximize profit and take advantage of the political climate it has right now, to look anemic, to scare everyone that they might leave Florida and push through legislation that will have lasting and long-term effects," said Amy Boggs, a St. Petersburg lawyer who leads the Florida Justice Association's property insurance committee.

Similar fears of an industry collapse drove the spring session, when lawmakers steered $2 billion in taxpayer money into a reinsurance fund to provide more available funds for companies.

Other steps included setting aside $150 million for making homes more hurricane resilient, adding a new separate insurance deductible for roof damage, which will make homeowners pay more for roof replacements, and putting new limits on their ability to sue insurers.

Cat Fund took a hit with Ian

This time around, it's likely the Legislature will put more taxpayer money into the state's reinsurance pool, the Florida Hurricane Catastrophe Fund, whose $12.7 billion surplus has taken a hit following Ian.

And another push to discourage homeowner lawsuits against their insurance companies is almost certain.

A report this week by the conservative James Madison Institute echoed industry figures that found 80% of all insurance lawsuits nationwide are from Florida, even though only 9% of all insurance claims are filed in the state. JMI also says 92% of the $15 billion in insurance payouts since 2013 went to lawyers and legal expenses, not policyholders.

The number of lawsuits has eased since limits were enacted by lawmakers in 2021, state insurance officials acknowledge. But the latest crisis will entice the Legislature to act again – possibly by eliminating the requirement that insurance companies pay the attorney fees of homeowners who win lawsuits.

Eliminating such "one-way attorney fees," will make homeowners shoulder more of the costs of suing. Critics say that will put homeowners in a tough spot even if they win a lawsuit, since a large chunk of their settlement would now go to paying their own attorneys' fees.

'David and Goliath fights'

"We have these David and Goliath fights, of an individual homeowner fighting against a multi-billion dollar insurance company and industry, because they all work in lockstep," Boggs said, adding that imbalance will worsen with new lawsuit restrictions.

But some experts say that in a state so hurricane prone, reducing risks in other areas like lawsuits is the only way to convince insurers to stay and write policies.

"You're looking to incentivize new company formation or keeping the companies that actually are here," said Dr. Chuck Nyce, who teaches insurance and risk management at Florida State University. "That won't work until you show companies and their investors that litigation has been reduced substantially.

"You've got to show you've improved the marketplace before you attract new companies to come here," he added.

One easy fix, expected during next week's session, will be a move to provide property tax rebates for Florida residents who've lost their homes in Hurricane Ian.

Lawmakers also will likely approve sending dollars to counties to make up for these tax losses, to ensure that local services continue.

DeSantis already delayed property tax payments in the 26 counties affected by Ian until next June. The Legislature had passed legislation earlier this year providing tax relief for storm-damaged property – but that law doesn't take effect until Jan. 1.

Lawmakers will change that effective date next week, to give Floridians a break on their Ian-battered homes.

DeSantis spent much of the latter stage of his re-election campaign focused on responding to Hurricane Ian and its aftermath. His Democratic opponent, Charlie Crist, called DeSantis, "the worst property insurance governor in Florida history. Period."

DeSantis criticism? Didn't stick

But the state's wide-ranging insurance problem didn't seem to stick to the Republican governor, who won re-election by a landslide 19% margin. He called for next week's session in October, and is widely seen as directing the session's agenda.

Another issue sure to get some attention will be Citizens Property Insurance, Corp., the state-backed insurer of last resort for Floridians. Citizens now has 1.1 million customers, double what it had just two years ago, and the Republican-led Legislature generally bristles at the state being in the insurance business.

Lawmakers may tackle some longer-term steps aimed at prompting homeowners to leave Citizens, once the industry gets better.

In their proclamation announcing the session, Renner and Passidomo included a lineup of aspirational goals they have for next week.

They included improving the "financial stability" of Citizens and to "foster the transition" of these policies to the private market. Other goals are to "reduce the cost of litigation regarding property insurance claims," helping with reinsurance, improving claims-handling and increasing "oversight of property insurance market participants."

A Cabinet member, Chief Financial Officer Jimmy Patronis, has a series of proposals focused on ridding the insurance market of fraud, which he blames for much of the industry's problems.

Patronis wants to tighten oversight of public adjusters, ban the use of Assignment of Benefits (AOB) coverage, which many homeowners rely on to avoid battling directly with their insurers, and creating a statewide prosecutor solely focused on insurance fraud.

But a newly elected Democrat, Rep. Hillary Cassel of Dania Beach, is an attorney who has worked in property insurance for years. She said that, too often, Florida lawmakers put more of the blame on consumers than insurers for the state's problems.

"We've never addressed claims handling, we've never looked at the other side of this issue," Cassel said. "It's always been that those of us who advocate for consumers are on the chopping block of reform, and we turn a completely blind to how these insurance companies respond to these catastrophic losses. And I don't see that changing right now."

John Kennedy is a reporter in the USA TODAY Network's Florida Capital Bureau. He can be reached at [email protected], or on Twitter at @JKennedyReport