Windstorm panelists: Carriers hesitant to write policies in Florida

A panel of eight insurance experts agreed unanimously that carriers are closely scrutinizing Florida and are hesitant to renew homeowners policies. Bill Bailey, director of the Hurricane Insurance Information Center, moderated the panel during the Seventh Annual Windstorm Insurance Conference in Orlando, Fla.

The panelists agreed that two tumultuous hurricane seasons play a role in carriers’ hesitancy to write policies in Florida but that two other factors will weigh just as heavily, if not more-so on insurance companies’ decisions to continue to write policies in the state.

Panelists participating in the discussion included: Bailey, moderator; Tony McCarty, Florida Family Insurance Co.; William F. ‘Chip’ Merlin Jr., Merlin Law Group; Janet L. Brown, Esquire, Boehm, Brown, Fischer, Harwood, Kelly & Scheihing P.A.; John J. Pappas, Butler, Pappas, Weihmuller, Katz, Craig LLP; Gary A. Poliakoff, Becker & Poliakoff P.A.; James Shortley, Depart-ment of Homeland Security/FEMA; and Charles R. “Dick” Tutweiler, Charles R. Tutweiler & Assoc.

Panelists said insurers are raising premiums, limiting new policies and struggling with a “lack of certainty” about how the limitations they have in their policies will fare in protecting them, particularly in Florida.

“As CEOs and actuaries, how do you determine your rates?” Pappas asked. “A Florida appeals court ruled in 2004 that insurance companies can be liable for claims for ‘flood’ damage under the legal theory of efficient proximate cause, even though the policy excludes floods and technically is for ‘wind’ coverage only.”

Florida’s Legislature rewrote the law last spring to clarify that and to protect insurance companies against such claims.

“You have no idea how the judges and judiciary will interpret the [new] language,” Pappas said. “This lack of predictability is the problem.”

The two factors the panelists attributed most to concerns about Florida’s market were an unfavorable legislative and judicial climate and uncertainty about how much they will have to pay for reinsurance.

McCarthy said carriers taking a close look at their expenses and how to minimize them. He said they expect to see major increases in reinsurance costs.

They said that ever since Florida’s Fourth Circuit Court of Appeals valued policy law decision, carriers have felt the judicial system is against them.

Brown pointed out that recent decisions that effect policy limits for wind and water and especially those made in the Mierzwa Case, are making carriers hesitant to write policies in Florida. She said the decision made it possible for policyholders to recover two policy limits for one claim.

In a ruling from the bench, Leon County Circuit Judge Kevin Davey granted the plaintiffs’ motion for summary judgment in the case, Scylla Properties LLC vs. Citizens Property Insurance Corp., effectively upholding the Mierzwa decision, which requires insurers to pay policy limits for homes with both wind and flood damage from the 2004 hurricanes, even if flood losses were excluded from coverage.

Poliakoff said that after Davey’s decision, carriers became hesitant to write new policies in Florida, or renew them, because the decision means that in case there is a claim, contracts can not be enforced and in such cases the company has no choice but to pay, with homeowners often able to collect twice for the same damage.

Merlin said that in the present legislative environment in Florida, carriers often have to rewrite their policies soon after each legislative session, every year.

“Carriers are unsure how difficult it is going to be to obtain reinsurance, and how much they will have to pay,” Bailey said. He said new capital is flowing into reinsurance markets because they feel that the reinsurance market will be profitable in coming years.

According to Tutweiler, the mediation program worked well in Mississippi and Alabama. “We had good experiences with every case,” Tutweiler explained. “Mediators are good at what they do.”

McCarthy disagreed, saying that from a carrier’s point of view, he didn’t feel mediation brings closure, because even if an insurance company pays a claim, under usual mediation terms, if a policyholder finds other damages, a second claim can be made later.

“That’s why policyholders feel comfortable with mediation,” Bailey said, “if they find significant unreported damage after the settlement, the door is still open and they can file a claim for that damage.”

Bailey pointed out that in 1993, to the best of his recollection around 18,000 mediation claims filed in the aftermath of Hurricane Andrew, and about 18 cases went unsettled and had to go on to court.

Topics Florida Catastrophe Natural Disasters Carriers Windstorm Flood Reinsurance Hurricane