More than two years after landfall, Hurricane Ian property insurance disputes are now hitting the courts and the first to be heard in the state’s hardest-hit county clashed over a point that could be key in damage disputes from this year’s set of storms.
Is the source of drenching damage the result of wind or water?
It’s an important question because the answer could well determine whether some policyholders get any money at all to fix what nature’s fury flattened or damaged.
If a storm surge during a hurricane caused the water damage, typical homeowners’ policies do not cover the cost of repairs. But, if the water came indoors because high winds or a falling tree limb created an opening where the wet stuff entered an abode, then it’s covered.
Recent storms had lots of flooding
The three storms to hit Florida this year — hurricanes Debby, Helene and Milton — all delivered a significant amount of flood damage, with Debby and Helene both determined to be flooding events, primarily, according to Mark Friedlander, director of corporate communications for the insurance industry-backed Insurance Information Institute.
That means that those without flood insurance might face outright denial of their insurance claim — just 25% of the state’s homeowners are insured for flood, with most policies coming through the National Flood Insurance Program.
“There are still a lot of people that don’t have flood insurance, and so when they don’t have flood insurance, if they have flood damage, they file wind claims, hoping, they’ll say, ‘Well, the wind made the water come up, so it should win, right?’” said Greg Thomas, an official with the Florida Department of Financial Services, which oversees the state’s insurance industry, speaking at a recent Florida Chamber of Commerce insurance summit. “Can’t tell them that one.”
The state’s raw catastrophe data from hurricanes Helene and Milton show that more than 16,000 residential claims on insurance policies from those storms have been denied so far because the damage was deemed the result of flooding, and therefore not covered by homeowners insurance.
Insurer disputes drive legal storms
Tens of thousands of lawsuits were filed in the wake of Hurricane Ian. Making it to an actual trial is a rarity, attorneys agree.
Still, the jury verdicts in both Lee County trials this fall, which judges said were the first in the county where the monster storm made landfall, determined that two policyholders were owed hundreds of thousands under their wind insurance, even though their initial damage claim was denied because their insurers said the damage was from flooding.
After a two-day trial, a jury Sept. 12 awarded $518,225 to the owners of a home on Fort Myers Beach that property records show was demolished a few months after Hurricane Ian made landfall. Attorneys argued — and jurors agreed — the wind alone from the Category 4 hurricane would have caused the total loss of the vacation rental property known as Sun Palace, contrary to what SafePoint Insurance had argued.
After another two-day trial, a jury on Oct. 24 awarded the owners of another home on the same road $248,000 under their wind policy with Homeowners Choice Property & Casualty Insurance Company. Like the first case, the insurance company contended the damage that destroyed a Massachusetts couple’s beach house was the result of a “classic storm surge scenario” and therefore not covered under the wind policy.
Hurricane Ian lawsuits to be the last of a kind
Thanks to a change in the law, however, policyholders who disagree with their insurer’s assessment of the damage from this year’s set of storms will encounter stronger headwinds if they try to drag their insurer into court regarding the wind or water question, or any other issue in a settlement dispute.
Finding a lawyer to litigate a property insurance claim has gotten significantly more difficult since 2022 legislation ended the practice of allowing “reasonable attorney fees” to be added to a jury’s monetary award.
Going to an appraiser if the policy allows, getting representation by a public adjuster or complaining to the state Department of Financial Services are among the remaining avenues left to dissatisfied insurance policyholders, according to Nancy Dominguez, managing director of the Florida Association of Public Insurance Adjusters.
The change was seen as an attempt to bring the state’s laws in closer alignment with most other states and rein in the lawsuit-related fraud that the majority of the legislators believed were responsible for the wobbly condition of the state’s property insurance market.
Proponents say the law’s shift is helping the market
Lawsuits in the first three quarters of 2024 are down 56% compared with the first three quarters of 2021 and, even though Floridians still pay the highest average premiums in the country, the rate of premium increases has slowed significantly in the past year. Since January, the average premium rate increase has been at 5% or lower for seven straight months after years of double-digit increases.
Whether those improvements continue even after 2024’s series of storms is going to be closely watched.
In the meantime, though, plaintiff attorneys say the changes left homeowners who don’t agree with their insurers’ estimate of the storm repair costs with little recourse. Ian was the last storm that the insured could get attorney fees paid to the prevailing party should a storm damage dispute go to court.
Hollywood attorney Michael Cassel, who litigated both Lee County cases, said that it’s going to be the smaller claims denials that are likely to go unchallenged because of the new legal landscape for insurance claims.
A disincentive to sue
“There are always going to be some (property insurance) cases that attorneys can take, because there’s enough meat on the bones (of a claim), but at the end of the day, the clients are going to be the ones that suffer because they’re not fully indemnified,” said Cassel, who is in practice as an insurance attorney with his wife, Democratic state Rep. Hillary Cassel.
Most of the time, attorney fees for litigating in an insurance dispute will have to come out of the award for fixing the damage, he says.
“It’s the smaller cases, like the $15,000 to $20,000 cases to fix a two-bedroom, one-bathroom house where the one bathroom is out of commission, and you know, the people have no place to go to the bathroom.
“They can’t hire an attorney, because no attorney is going to work for two years for a percentage of $15,000,” Cassel added.
Citizens Property Insurance Corp., the state’s insurer of last resort, which also insures the most property in the Sunshine State, attributed a portion of its denials of customer claims in 2023 to people needing a denial from their property insurer to pursue help from the federal government.
But a defense attorney for several insurance companies, said that the wind vs. water argument in insurance litigation has been overblown by plaintiff attorneys and the media. More common insurance disputes, says Stacey Giulianti is an argument about the scope of what insurance should cover.
“For instance, a roof has some damage and the homeowner and roofer think that the whole thing should be replaced,” said the chief legal officer for Windward Risk Managers, comprised of Florida Peninsula and Edison insurance companies and Ovation Home Insurance Exchange. “We’ll look at it and potentially, for example say, ‘Well, it’s only 10 tiles. Just repair it. You don’t need to replace it,’ but people want to get a new roof, and that’s understandable … And, unfortunately, that’s what causes premiums to go up when people start asking for things that are technically and legally not due under the policy.”
Giulianti said the line showing how far the water rose in a storm usually makes it pretty clear whether damage was the result of storm surge or water that entered because of wind damage.
In the courtroom
Transcripts of the Lee County cases illustrate just what an undertaking it is to mount an argument against a claim’s denial.
The juries heard from meteorologists, engineers and the owner of one of the Fort Myers Beach homes who described logging into her Ring camera to hear the sound of wind along with cracking and crunching noises hours before the fifth strongest storm ever recorded in the United States came ashore.
Before the second trial started, Circuit Court Judge Keith Kyle urged the two sides to settle, pointing out that the finish line to these matters could still be far off.
“There’s no guarantees when you go to trial — it’s a form of gambling,” said Kyle, noting the second Ian insurance case to reach a courtroom and his own history as a defense attorney for the insurance industry.
He said that the trial could lead all the way to the U.S. Supreme Court.
The defense side in both cases have indicated an appeal will be underway.
Motions for new trials and attorneys’ fees and costs have been filed in both cases. Cassel estimated cases like this typically consume 400 hours of attorney that could cost hundreds of thousands of dollars in each case.
Anne Geggis is the insurance reporter at The Palm Beach Post, part of the USA TODAY Florida Network. You can reach her at ageggis@gannett.com.Help support our journalism. Subscribe today
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.