Few see quick relief in property insurance crisis – InsuranceNewsNet

At the end of May, Florida Legislature was called into special session by the governor to address the property insurance crisis in the Floridawhich creates chaos for homeowners.

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Every month, homeowners across the state are being dumped by insurance companies that are pulling out of the state entirely, or seeing premiums skyrocket for the same coverage, or being unable to find coverage for their home’s roof that was installed more than 15 years ago .

Homeowners are forced to self-insure, meaning they don’t have private insurance and must be diligent about setting aside money to pay for potential storm damage, replace older roofs in good condition, or obtain insurance through Citizens Property Insurance Corporation. This quasi-public private program is known as insurance of last resort.

The problem with the Citizens Property Insurance Program is that many lawmakers and experts challenge the program 3 billion dollars in reserves is insufficient for potential liabilities in the event of a major hurricane that could leave homeowners or taxpayers helpless after a catastrophic storm.

The bill approved by Florida Legislature and the governor addressed long-term issues that could eventually provide relief to homeowners. However, most agree that immediate help is not visible or certain. The bill attempts to stop bad faith litigation by limiting the shifting of benefits, allowing potentially different deductible options for older roofs and creating a reinsurance program to encourage companies to stay out of state.

In addition, the legislation restricts insurance companies from arbitrarily requiring roof replacement and provides homeowners with the ability to demonstrate through independent inspections that their roofs are in good condition. These measures, if not overturned by the courts in the long run, should help ease rates, but overall they provide little relief to the current crisis.

Transferring benefit claims is a huge part of the problem in the state. This is a process where a roofer or contractor performs work for a homeowner for insurance repairs. The homeowner then gives that contractor the right to collect the money owed to him by the insurance company.

Often these contractors would have an attorney file a lawsuit against the insurance company for collection. In many cases, the insurance company would settle rather than fight the claim and be responsible for the contractor’s attorneys’ fees.

Under this new law, the homeowner or insurance beneficiary are the only parties who can file a lawsuit against an insurance company with the prospect of collecting attorneys’ fees, and they cannot assign their benefits to another party.

Many believe that by having the actual insured file the lawsuit, it will stop those who commit insurance fraud. Included in this bill are rules about when to notice and file claims, setting fee amounts, and other statutory guidance that should stop bad faith litigation.

The new bill also allows private insurance companies to have a separate roof deductible, which can be 2% of the home’s value or 50% of the roof’s value. This deductible won’t apply to hurricanes or tree damage, but something like hail will no longer mean a free roof with a low deductible.

With the policy update, many homeowners will see a huge change in this area, especially if they have an older roof. The bill restricts an insurance company from refusing to write or renew a policy based on the age of the roof if the roof is less than 15 years old or an inspection finds the life of the roof to be more than five years old.

The state creates a 2 billion dollars reinsurance program to encourage property insurance companies to stay in the state. This is not a long-term program and many are concerned that the money will be used by companies that do not have the financial ability to stay in business. Savings from the reinsurance program are passed directly to Florida homeowners, and some are skeptical that will happen given the nature of the program.

The bill does not do one important thing, which is to stop abuse of the system by professional claimants. Many are concerned that the bill will bail out marginal insurance companies and allow professional plaintiffs, with the help of aggressive lawyers, to do the same thing in a different way.

Additionally, several commercial industries have already filed lawsuits challenging the bill and challenging the constitutionality of the benefit transfer fee limits. The bill also establishes a 150 million dollars My Safe Florida Home Program grant program that can be used by Florida homeowners with properties valued at less than 500,000 dollars to fortify their homes against hurricanes. The belief is that these improvements should help homeowners and reduce future insurance costs.

What could make it worse? Bad hurricane season in Florida may cause Insurance company for citizens’ property to face debts he cannot pay.

Over time, the new legislation may help property owners, but at the moment it is unlikely to change.

Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc.and host of Around the House, available on AroundtheHouse.TV.

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