The Florida insurance deadfall: Factors working against homeowners and buyers make it easy to see that reform is needed

An "insurance emergency" has been declared by the citizens and local governments of Florida since Hurricane Ian, and there are few homeowners who would disagree with that term. Nine months later, many people still don't have their repairs done, which has led to a battle with their insurance companies … companies that they have been paying a lot of money to each month for situations just like Ian.

It isn't easy to be stuck in a corner by an insurer that wants to issue only a fraction of the money it will take to fix a home, particularly when the option of hiring an attorney seems to be the only one left. Some public adjusters have done good work for their clients, and others have not, but either way the client is left to pay them 10 percent of recovered money. Knowing that, many homeowners pick up the phone to call an attorney and skip that middleman.

But Gov. Ron DeSantis has called out "frivolous lawsuits" many times when it comes to insurees, so if you are a person who normally would never consider that, what are you supposed to do?

New legislation regarding insurance passed recently appears to many as a direct threat to homeowners, so much so that many people are questioning whether or not they should just self insure or, in many cases of homeowners who have no mortgage but no wiggle room at all in their personal budget, to not insure at all.

It isn't easy to be in the insurance business right now and, to be fair, there are some good changes that have been made in our laws. For instance, new legislation challenges an insurance company's inability to alter a field adjuster's report without giving good reason as to why that change was made, if it reduces the loss estimate.

Within 45 days of receiving proof of loss statement the insurance company must conduct a physical inspection of the property … except it doesn't apply to hurricane claims. You will also be able to get a copy of your field adjuster's report in a prompt manner. New legislation also reduces the time it takes for insurance companies to pay or deny a claim from 90 to 60 days.

There is also the "My Safe Florida Home" program that will match a homeowner $2 on the dollar for participating.

But there are some things that homeowners don't understand. We tried for several weeks to get some answers from local insurance companies, but no answers were forthcoming. So we did some research and, to the best of our abilities, provided answers to some of the common questions that people seem to have right now.

Why have so many insurance companies lowballed homeowners on their Hurricane Ian claims?

We've heard a lot of people ask about this, and in comparison to claims from Hurricane Irma a few years ago. Back then there were a few notorious insurance companies that didn't come through with proper payouts, but after Ian it was almost across the board.

In March, Gov. DeSantis said he was launching an investigation following a report by The Washington Post detailing insurance companies' efforts to cut payouts to Hurricane Ian victims in Southwest Florida. His statement at that time was: "The reports of people getting shortchanged or getting unlawfully dropped because someone was looking to make more money, the [Office of Insurance Regulation] is investigating that, the Chief Financial Officer is investigating that, and I think anyone should be held accountable who is not meeting their obligations that they owe." There is no word as to how that investigation is going or what has been found out so far.

In May of last year the governor signed bipartisan legislation implementing the most "significant and comprehensive property insurance reforms Florida has seen in decades," as he put it, to provide short- and long-term relief to Floridians to combat skyrocketing insurance costs. He called out more than 20 Florida insurance companies for using their clients' money to diversify their portfolios and spreading themselves too thin, which in turn created a situation where they couldn't sufficiently cover claims if a hurricane were to hit Florida. Which it did.

As Ian hit the state, several large insurers were in the process of claiming insolvency. Many clients didn't even know their carriers were going through this until they had to file claims and work with two different companies.

The bottom line answer for this question is the most logical: Insurance companies that had already doubled many homeowners' premiums before Ian lowballed payouts hoped that their clients would cover the rest of the damage. Many people did, but many people couldn't, which resulted oftentimes in those "frivolous lawsuits" being filed by people who couldn't live in destroyed houses that their insurance wouldn't pay for.

If homeowners are lowballed by the insurer to the point where their money doesn't come close to being enough to fix the house, why will they have to pay extravagant attorney fees to take their insurance company to court on top of that?

According to Gov. DeSantis, he supported legislation that would allegedly decrease the aforementioned "frivolous lawsuits" by making both parties pay their own attorney fees.

Here is an example of how that can go. A standard situation between an insurance company and a litigator hired by a client is usually settled out of court. The average percentage an attorney charges if they don't have to file suit is 20 percent (the percentage goes to 33 1/3 percent if they go to court). That means if the clients received $510,000, their attorney will receive close to $150,000. On top of that, if the clients first tried to use a public adjuster and were referred to the attorney by that company, they still have to pay the public adjuster 10 percent. Out of that same claim, that's $30,000 more out of the clients' settlement, reducing it to about $350,000.

For a claim of that size there's also a good chance the house will have to be torn down or lifted to meet FEMA's 50 percent rule. The chances the clients will still have enough to fix their house after adhering to the FEMA rule have dwindled substantially.

So is it worth it to hire an attorney? It varies from case to case, but having to pay 20 percent (at the least) to fight for money that the clients have already paid into is frustrating, to say the least.

Why are there going to be separate roof deductibles, and can homeowners opt out?

First of all, this doesn't apply to hurricanes, to a house that is a total loss, a roof that is less than 50 percent damaged or damage from a tree.

So what is it for? It allows property insurers to include in the policy a separate roof deductible of up to two percent of the Coverage A limit of the policy, or 50 percent of the cost to replace the roof.

The policyholder must also be offered the option to decline the roof deductible by signing a form approved by the Office of Insurance Regulation. If a roof deductible is added to the policy at renewal, the insurer must provide a notice of change in policy terms and allow the policyholder to decline the separate roof deductible.

When a roof deductible is applied, no other deductibles under the policy may be applied. A roof deductible only applies to a claim adjusted on a replacement cost basis. The insurer has to limit the claim payment for a roof to the actual cash value of the loss to the roof until the insurer receives reasonable proof of payment by the policyholder of the roof deductible.

The key to this is that if you want to opt out of the separate roof deductible, you have to ask for the form. They may not supply it for you otherwise.

What's the best way for homeowners to deal with their insurance company, particularly if they have received a payment that doesn't come close to covering the cost of repairs?

If you think you can work with your insurance company after you file a claim and get a lowball settlement, know that they are at least half expecting you to dispute it. The more photo documentation you have, the better. The more estimates you get for every aspect of the project, the better.

After big disasters like Ian, it's common for your insurer to rotate adjusters, which means you will have to work with multiple adjusters before your claim is resolved. Document everything – every name, every call and the date and time it takes place, as well as everything that is said.

Insurance company claim adjusters are supposed to be trained on your state's laws and claim handling regulations, but the truth is, you could be talking to a 1099 employee who has only been working there for a few weeks. These are tricky waters to navigate, and you will often feel like you're the only one on your side.

Quite often, that is the case.