Q&A of the Day – Why Will a Special Session to Address Florida’s Property Insurance Crisis be any Different this Time?
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Today’s Entry: Brian...why should anyone think another special to address the property insurance crisis will be any different this time? We’re heard it all before but all that ever happens is that the attorneys get paid, unscrupulous homeowners get new roofs and the rest of us get screwed.
Bottom Line: Today’s note comes on the back of the announcement of the Florida Legislature scheduling a special session to address the state’s property insurance crisis for the second time this year. While official confirmation from the governor’s office has yet to occur, the Legislature has scheduled December 12th-16th for a session indicating a proclamation from Governor DeSantis, who’d already expressed the need for the session is imminent. Now, to your expressed frustration, I hear you and understand. Your frustration is completely justified in my view. The allowance/persistence of Florida’s property insurance crisis is what I’ve often said is the biggest and most consistent failure of the Florida Legislature in recent years.
Florida is far and away the highest risk state in the country for property insurance risk, so there’s only so much that can be done to mitigate the inherent risk of natural disasters and related damage. That said, we’ve consistently known that the series of half measures taken by the legislature in recent years hasn’t been effective at meaningfully addressing the crux of the crisis, assignment of benefits and subsequent litigation. And that’s been clear almost immediately after each of the laws have been passed, including what passed in this spring’s special session. Which as an aside, what did pass earlier this year wasn’t a complete loss. Here’s a refresh as to what happened.
Legislation passed which...
- Significantly limited attorney fees
- Lawyers not able to receive direct financial incentives from contractors who’ve been assigned benefits
- Created an optional roof deductible
- Insurers not able to refuse coverage if a roof is under 15 years old (inspections may be requested by insurers for roofs older than 15 years)
- Amended Florida Building code to state that whole roof repairs aren’t required when damage is present in one section of the roof
All of these were and are helpful. Less financial incentive for attorneys makes fewer of them willing to engage in the behavior of suing insurance companies. Lawyers only being able to be compensated directly from legal findings as opposed to essentially receiving kickbacks with contractors who’ve been assigned benefits likewise helps limit the financial incentive for attorneys. Additionally, it marginally helps rein in the AOB practices/abuses by many contractors. And by creating a separate roof deductible, there’s greater insurance flexibility for carriers allowing those who don’t file roof claims to benefit from lower costs. The ability for insurers to make partial roof repairs is progress as well. As many, including those behind the bills which passed earlier this year said, it’ll take time for the reforms to begin to work and help fix the system. That’s true. But as I’ve said throughout the course of this saga, if we continue to hear and see attorney’s advertising to sue insurance companies, we haven’t done enough. If we still have sketchy contractors going door-to-door promising new roofs, we haven’t gone far enough. All of that’s still happening and so the need for a much bigger swing at reforms to finally end that stuff is needed.
As Florida’s CFO Jimmy Patronis recently told me when speaking about this issue...it’s time for the hogs to get slaughtered. That suggests a willingness from the highest levels to do what needs to be done to put the legal lobbyists in their place. And that takes me back to what’s different this time. Had Florida made it through hurricane season unscathed this year, maybe the case could be made that the insurance situation would improve heading into next year. However, the devastating impact of Hurricane Ian, and to a much lesser extent Nicole, ensured that wouldn’t be the case. What’s more is that with record numbers of Floridians being jettisoned to Citizens without other insurance options, the state’s financial stability is being placed at risk in the future should claims exceed the ability for Citizens to pay. And that takes us to the biggest change of all. Leadership.
Former House Speaker Chris Sprowls, an attorney himself, was the largest obstacle to meaningful litigation reform. He wasn’t on board with “slaughtering the hogs”, because in a manner of speaking he’s related to them. New House Speaker Paul Renner just recently said it’s time for “systemic change”. That’s the more politically correct way of saying the hogs should be slaughtered. And it's precisely what’s needed to finally put an end to Florida having only 8% of the country’s property insurance policies but 78% of the litigation – which as I recently illustrated, costs the average Florida property insurance policy holder $680 annually.