Angry Florida Homeowners See Shocking Increases in Costs Over the Last Year

20 Nov

Angry Florida homeowners have seen shocking increases to their homeowner insurance costs over the last year and are now putting pressure on state lawmakers to step up and help lower the sky-high cost of property insurance in the Sunshine State. 

Property owners have seen premium hikes as high as 30% to 40% at policy renewal. Industry insiders are hoping that policyholder anger will prompt lawmakers to pass reform that limits litigation. 

“We support legislative changes to address the litigation environment in Florida. That’s the single greatest cost driver we face,” said Michael Carlson, president of the Personal Insurance Federation of Florida, a lobbying organization that represents major property insurers in the state in a recent Sun Sentinel article. 

These are a few areas to be addressed:

  • Abuse of coverage to repair or replace roofs
  • Long deadlines to file hurricane and non-weather claims
  • Public adjusters who inflate claims costs

Insurance companies will be working with the legislature, but the questions remain as to if they have enough votes to beat out state legislators who fall on the side of plaintiffs’ attorneys who want to retain the status quo.

“Prospects for meaningful enactment are good because we’re at a critical condition,” said state Sen. Jeff Brandes, a Republican from St. Petersburg and leader of previous efforts to curb fraudulent claims and reduce costs for homeowners in the Sun Sentinel article. 

Here are a few of the major issues that need to be addressed:

Attorney fees

As insurance costs have been rising for years, insurance companies have blamed the skyrocketing cost of litigation for much of the increases. As less than honest attorneys work with contractors on Assignment of Benefits (AOB) claims to charge legal fees that far exceed the cost to repair damages to homes insurers pass those costs on to policyholders via higher rates. 

Attorneys on the other hand, claim that the majority of the insurance industry proposals will actually erode coverage for policyholders. 

Their argument goes as follows:

New legislation would be unnecessary if insurers would simply properly pay out claims. They claim that insurers refuse to cover claims, low ball policyholders on claims and fight customers who turn to public adjusters or lawyers. 

According to Amy Boggs, chair of the property insurance committee for the Florida Justice Association, a trade group for plaintiffs’ attorneys it is the insurance companies that are driving up claim costs. “They think the cost driver is the attorney’s fee. We think it’s unnecessary litigation over claims that should be paid. When [insurers] underpay by $30,000, $40,000 or $50,000, where is the homeowner supposed to get that money from? When carriers have to pay exorbitant legal fees, it’s because they lost the case,” Boggs said in the Sun Sentinel article.

Increasing Litigation

While there is plenty of blame assigning going on, it is an undeniable fact that litigation in the insurance industry has exploded over the last few years. State data shows that the number of lawsuits filed against insurers in Florida has more than doubled from January 1st of 2015 to November 13th, 2015. The numbers climbed from 131,667 lawsuits to over 336,029 during that period.

The state senator, Brandes, expects that insurance costs for consumers will double over the next two or three years if state legislators do not act. In the short term, even if they do act, he feels cost will rise 30 percent next year before stabilizing. 

While reforms were passed in 2019 in regards to AOB claims, data complied since the laws were passed show that while those reforms cut “assignment of benefits” lawsuits by roughly 50 percent,  attorneys have simply switched their focus to representing policyholders directly, bypassing the AOB. 

Roof Repairs and the Cost of a Policy

Roof repairs have been a big issue and are a main driver of lawsuits so addressing this is of interest to lawmakers. Brandes proposes making changes that would lower costs for policyholders while also making their policies less attractive to attorneys looking to sue. The downside is reduced coverage. 

As an example, premiums could drop lower if policyholders opted for an actual cash value policy on their roof instead of a replacement value policy. An actual cash value policy takes deprecation into account when determining the value of a roof.

According to Brandes, many consumers have been getting free roofs from their insurers because they allow their repair contractor to find or even create damage while blaming it on a recent hurricane or hailstorm. In reality, the roof is actually at the end of its life and should be replaced at the homeowner. “People have to recognize that insurance is there not for home maintenance but for protection against catastrophic loss,” he said in the Sun Sentinel article.

On the other side of the argument Boggs said in the Sun Sentinel article that the proposal would leave homeowners without substantial savings unable to replace roofs destroyed by hurricanes. “They need to know if their roof is ripped off, they’re not going to be compensated for that.”

Claim deadlines

Long deadlines for claims are also a driver of higher premiums and should be addressed according to industry allies. Policy costs could drop if homeowners agree to shorter deadlines for filing claims after a loss. 

One reason reinsurance costs have increased so dramatically is that roof repair claims related to the 2017 Hurricane Irma are continuing to be filed up to the three-year deadline in September according to Brandes in the Sun Sentinel article. 

Current laws allow non-weather water loss claims up to five years after the incident that caused the damage. “As the years go by, you get more fraudulent claims,” he said.

“To say that you don’t know after a year that you have hurricane damage is a little crazy,” said Carolyn Johnson, the chamber’s director of business economic development and innovation policy in the Sun Sentinel article. 

Boggs on the other hand argues that homeowners may not discover hidden hurricane damage for years after storms. In addition, some homeowners ignore damage because they feel the claim would exceed their hurricane deductible.

“Sometimes people with a little bit of damage might not realize it’s significant,” she said in the Sun Sentinel article. “Roof damage, is often hidden and unknown to homeowners until it creates problems.”

Fee multipliers are also a problem

Current law allows plaintiffs’ attorneys to be awarded up to three times the legal fees they bill insurers for work on cases they win. This means that judges can multiply an attorney’s fee if they are convinced that the case was particularly challenging. 

Insurers claim that judges have been too generous in awarding multiplied fees in cases that end in settlements. “I’ve seen policyholders get $40,000 for their claim while their attorneys get $700,000,” Brandes said in the article. “Who ultimately pays the $700,000? Customers do, in the form of higher rates, he said. “Insurers want the law to allow multiplied fees only in “rare” and “exceptional” cases “as it is in 49 other states,” Brandes said.

Opponents on the other side argue that multipliers aren’t awarded as often as insurers claim. In addition, the threat of a multiplier persuades insurers to continue working toward a resolution rather than delaying or denying claims.

Public Adjusters

The final issue that needs to be addressed is notification of a lawsuit and the role of public adjusters. Many industry allies would like to see a law that requires notification to insurers before lawsuits can be filed. This gives insurers have an opportunity to address and hopefully resolve claim issues before going to court. The law would stipulate that failure to provide notice could make homeowners’ attorneys ineligible to collect legal fees.

Public adjusters are independent agents that policyholders hire to represent their interests in negotiations with their insurer. Currently, state law caps compensation for public adjusters at 10% of the claim paid for hurricane damage and 20% of claims paid for non-catastrophe damage. According to insurers and their allies, this type of pay scheme creates an incentive for adjusters to overestimate damages. 

Insurers would like to see public adjuster pay based on the additional payment that an adjuster secures over what was the initial insurer offer. As an example, if an insurer offers $1,000 for a repair and the adjuster negotiates a $1,500 payment the public adjuster would only be paid a percentage of the additional $500, they negotiated. 

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