Florida Enjoys 8th Year with No Hurricanes, but no Break for Homeowners Insurance

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Florida has survived some of the biggest hurricanes in U.S. history, but this year marks a record eight hurricane-free seasons.  No one seems to be enjoying this good fortune more than Florida property insurance carriers.

Despite escaping payment for hurricane claims for the last eight years and a 20 percent reduction in the cost of reinsurance this year, 69 percent of the rate requests that insurance companies filed with Florida Office of Insurance Regulation (OIR) were for rate increases.

State Farm, for one, hiked its rates by 6.3 percent in October although in the third quarter it reported $126 million in underwriting profits.  State Farm says it uses its rate increases to purchase additional reinsurance.  According to state regulators, Florida insurance companies must maintain all appropriate insolvency standards.  Why continue to raise premiums to cushion reinsurance reserves that already exist instead of passing on savings to policyholders?

Florida’s Chief Financial Officer, Jeff Atwater, requested answers from state Insurance Commissioner, Kevin McCarty on why homeowner insurance rates have not seen a reduction, generally, when costs to insurance companies have gone down.  McCarty’s report was due to be released on Dec. 18, but he asked for an extension until Jan. 15.

Not only are Floridians paying more in premiums when there have been no major storms, they are paying the highest rates in the country.  A recent report by the National Associate of Insurance Commissioners (NAIC) showed that the average rate for a Florida homeowner’s insurance policy is $1,933.  Louisiana is the second-highest, with an average $1,672.  The national average rate is $978.

The NAIC’s annual report contains insurance rates from 2011, which was the most recent year with data available.  Notably, the average rates do not reflect the more recent insurance increases Floridians faced in the last two years.  The trend of state regulators consistently approving rate hikes does not show signs of slowing down.

The Truth About Insurance Companies

A True Story:

Back in 2006, a friend of mine and his wife were moving to Florida from the Midwest, and decided to purchase a home in Central Florida.  To their surprise, although a number of carriers offered coverage, only one was willing to offer coverage to include hurricane damage.  When he asked his insurance agent, “Why won’t anybody offer me hurricane coverage in Florida?” the response he received was, “Simple; because there’s hurricanes in Florida.”

Although humorous, this anecdote is representative of the powerlessness many homeowners feel in both purchasing insurance and reporting covered losses.  On one hand, residential insurance is a social institution, a public necessity that anyone who purchases a home through a mortgage must obtain.  There is no choice.  On the other hand, insurance companies are profit-driven businesses, not public organizations, and as such their ultimate loyalty lies with stockholders, not policyholders. 

Insurer Advantage:

Likewise, the insurance policies themselves are equally dictatorial.  The contract terms are non-negotiable.  The pricing for various coverage’s are non-negotiable.  The decision by insurance companies to admit coverage, deny coverage, or issue payment in full for repair work is absolute (outside of litigation).  The contract itself, a voluminous document riddled with legal jargon and often vague meanings even experienced attorneys dispute, is virtually incomprehensible to homeowners.  And to exaggerate the already-uneven playing field homeowners’ face, private insurance companies are fundamentally driven by profit incentives, whereby the less homeowners are paid, the more the company benefits.

So if an insurance company decides to deny or underpay a homeowner’s claim, what are their options?  In most states, their only choices are to hire an attorney or public adjuster who will work on a percentage contingency basis (where the attorney takes a percentage of any amount the homeowner recovers), or hire an attorney who bills based on their hourly rate; either way, the homeowner will likely sacrifice thousands of dollars in the hopes they might recover insurance benefits which they should have provided already.  The general result is, if a smaller claim is either denied or underpaid, the homeowner has no practical way to recover what they’re owed or otherwise contest the insurance company’s decision.

Sunshine State Levels Playfield:

Fortunately, in my home state of Florida, the legislature has provided homeowners with a few mechanisms which help even the playing field between homeowners and insurance companies.  One of the most significant of these is Florida’s “fee-shifting” statute.  Under Florida Statute Section 627.428, if a homeowner recovers money from their insurance company for a wrongfully underpaid or denied claim, there are entitled to have their attorney’s fees and costs paid in addition to any amount they recover for their loss.  Such laws are essential to empowering homeowners to dispute a wrongly denied or underpaid claim, and stand up for their contractual rights.  As such, our firm strongly encourages other states to join Florida in enacting fee-shifting statutes to help empower homeowners to have their voices heard by the insurance industry.

Providing homeowners with litigation fees and costs when they recover against an insurer is empowering in multiple ways. Homeowners have the opportunity to obtain top-notch legal representation without having to sacrifice benefits they’re properly owed.

Legislative Action Helps Close the Gap:

Likewise, insurance companies have an incentive to consider their coverage decisions a little more thoroughly, with the knowledge that improper payment or denial could result in paying additional thousands of dollars in the homeowner’s legal costs and fees.  And, of course, from a Plaintiff attorney’s perspective, there is nothing that makes us happier than being able to recover the full amount our clients are owed without having to take a penny of their actual benefits.

In sum, although the playing field between insurers and homeowners is far from level, states that choose to adopt similar “fee-shifting” laws are providing an essential tool for homeowners to defend themselves, their homes, and their families from insurance companies who otherwise have insurmountable money and resources at their disposal.  In a time when homeowners insurance is not merely a product to be purchased at leisure, but an essential, necessary, and mandatory institution of our society, “fee-shifting” laws may be the most effective path to rectify the clear power imbalance between insurers and homeowners.

By attorney Michael Grossman

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Are You Prepared for a Hurricane?

Even as we are nearing November, Florida is once again reminded that hurricane season is still upon us. The escalation of Hurricane Sandy to a Category Two storm is a grim reminder of how quickly these storms can intensify. If you have lived in Florida through one of these storms you have undoubtedly witnessed the damage they can cause. A crucial part of hurricane preparedness is protecting your home and your business.

Homeowners should make sure their insurance polices are up to date and review coverage for the various damages that their homes can incur. Business owners need to be sure their equipment and facilities they need to operate are protected. Contractors want to have Assignment of Benefits (AOB) forms ready to be signed before beginning any jobs. While most claims go smoothly, insurance disputes still arise and have to be legally addressed. Our firm provides professional Insurance Dispute legal representation and has represented thousands of individuals, contractors and business owners in their insurance claims.

When extreme weather conditions arise throughout Florida, so do “Bad Faith Tactics” of insurance carriers. When insurance companies refuse to pay legitimate claims, try to settle for less than a claim is actually worth or deny a claim altogether call an experienced Insurance Dispute Attorney at Cohen Battisti for a free confidential case review.

“It’s About Justice”

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