Battered by natural disasters and the man-made peril of frivolous and sometimes fraudulent litigation, Florida’s property insurance industry now finds itself burdened by financial losses and seeking rate hikes.
The average homeowner’s insurance policy in Florida has increased in cost from $2,000 in 2015 to $2,500 this year as companies seek to deal with the one-two punch from reinsurance rates and litigation costs, according to a recent blog post from Scott Johnson, president of a Florida consulting firm that specializes in the property and casualty insurance field.
After sustaining hundreds of millions in losses in 2019, many property insurance firms are seeking double-digit rate hikes to deal with the cost of reinsurance, which transfers a share of a company’s risk portfolio to other parties. Companies also need help from state lawmakers to get a handle on the litigation costs, according to Johnson.
“It would be quite alarming to me to know that part of the rate increase that is controllable by Florida’s lawmakers is so often difficult to get reform,” he told the Florida Record.
Johnson also published a list of the 25 attorneys who are most prolific in filing Florida property insurance claims. It shows that attorney Scot Strems was only 11th on the list. The Coral Gables lawyer is facing suspension after the Florida Bar accused Strems of violating more than a dozen bar rules and mishandling multiple cases.
In total, the 25 attorneys are responsible for 43 percent of the total number of 2020 property lawsuits filed in the state through Sept. 30, the data shows. It’s not certain that Strems is the tip of the iceberg in terms of the extent of questionable litigation filed against insurers, Johnson said, but that’s something lawmakers need to address.
“My suspicions are that there are many attorneys doing some of the things that (Strems) was doing, and those things may not be technically illegal,” he said. “But it doesn’t make them right.”
With the private insurance market under financial pressures, the not-for-profit Citizens Property Insurance Corp. will likely be taking on more and more policies, according to Johnson. Citizens was set up by the state legislature to help property owners with insurance when they can’t find coverage from private insurers.
“Citizens is both a blessing and a curse,” Johnson said, noting that though the company helps property owners get affordable coverage, taxpayers are on the hook for deficits created by its rate-cap structure.
The assignment-of-benefits (AOB) reforms enacted last year have had positive effects in the industry, he said. That’s because now homeowners can now get out of such attorney-driven third-party agreements that promise hurricane repairs but can lead to frustrating delays and upward pressures on rates, according to critics. The reforms also changed the one-way attorney fee provisions that can increase claim costs.
“Things are getting worse because in my opinion the AOB insurance reform does not apply to the rest of property insurance,” Johnson said.
He stressed that only state lawmakers can do something to reduce excessive litigation that permeates the current system.
“Perhaps that will be the greatest legacy of the Strems episodes, a realization of how much Florida’s runaway fraud and litigation is costing the system and consequently how much legislative inaction is costing consumers,” Johnson said in a recent blog post.