Reform needed to make property insurance market healthy

Home insurance is not a warranty policy. It is intended to make you whole again after you experience sudden and/or accidental damage to your home. Unfortunately, some unscrupulous contractors are promising “free” roofs to Florida homeowners for “damage” that is simply wear and tear.

Not to be outdone, there are some trial attorneys who file lawsuits for this “damage.” Individually, each of these actions are egregious. Together, they’ve created a toxic environment that has driven Florida’s property insurance market to the brink of collapse and caused rates to skyrocket. Nine Florida Insurance carriers have become insolvent in the last two years, and the average homeowners’ premium in Florida is $4,231 according to the Insurance Information Institute, the highest in the nation. (Almost 2 ½ times the national average.)

Sounds bleak, but because this is a manmade crisis, it can be fixed. We need legislative reform that will end this cottage industry. To achieve complete reform that will make Florida’s property insurance market healthy and viable again, we need the following changes:

Repeal the one-way attorney fee statute: If a customer sues their insurance company and is awarded $1 more than their last pretrial offer, the homeowner will be compensated for all attorney fees at the insurance company’s expense. If the customer does not prevail, neither they nor their attorney has to compensate the insurance company for their attorney fees. With virtually no skin in the game, attorneys are free to file lawsuits at will. This might explain why Florida accounts for 9 percent of property insurance claims in the nation but an incredible 79 percent of the country’s property insurance claims litigation.

Address the fallout caused by the 2016 Sebo ruling: The Florida Supreme Court found that when two or more perils converge to cause a loss, and at least one of the perils is not covered by the policy, the insurance carrier is required to cover all of the damage. Unscrupulous contractors use this ruling to combine a few wind-damaged shingles with wear and tear on an older roof, to get a “free” total roof replacement for their customers. 

Allow insurance companies to offer a roof value schedule in their home insurance policy: Just as vehicles depreciate due to wear and tear, so does a home’s roof. Auto insurance companies are allowed to factor depreciation in when settling a claim for a car. Not allowing home insurance companies to take the age of a home’s roof into consideration when settling claims invites the opportunity for frivolous or even fraudulent roof claims.

Property insurance is designed, and priced, to repair damage or loss caused by a covered peril: fire, theft, hurricanes and other sudden or accidental incidents. It is not priced to pay for wear and tear; in fact, wear and tear is expressly excluded from home insurance contracts. By being forced to replace roofs that are worn due to age and exposure to the elements, insurance has become a warranty in Florida. All homeowners are paying to subsidize the cost of their neighbors’ new roofs.

Florida’s Legislature will be hosting a second special legislative session this December to deal with the property insurance debacle in our state. Let’s hope they will address all the issues that have led to this crisis, so we can finally make the market viable and healthy again.

Ron Assise has nearly four decades of experience in property and casualty insurance in various states throughout the U.S. He has served as an instructor for the Erie Insurance Agent College and as the national program chair at three consecutive personal lines meetings for the Assurex Global organization. He was named director of education for the Council for Insuring Private Clients in March 2014. Ron is also on the faculty of the National Alliance for Insurance Education, and is a board director for the Council for Insuring Private Clients (CIPC). He has earned the “Certified Insurance Counselor” (CIC) and “Certified Personal Risk Manager” (CPRM) designations, and is also a frequent guest expert on WFLA News in Tampa.  A native of the southwest side of Chicago, in Marquette Park. Ron and his wife, Cheryl, currently live in Fort Myers and spend summers in The Midwest.