Fla. Policyholders Face 6.8% Fee

A one-time 6.8 percent charge for all homeowner policyholders in Florida has been approved by the board of directors of the Citizens Property Insurance Corp., Florida’s insurer of last resort. The assessment is so Citizens can make up a $515.5 million deficit from 2004 hurricane claims on high-risk wind
policies.

The surcharge will cost the average policyholder with a $1,300 premium, $89. Extra charges are expected to show up on insurance bills within 60 days.

Before the surcharge can be billed, the calculations must be approved by state insurance regulators in the next 30 days and then insurance companies have another 30 days to pony up to Citizens. The companies then pass along that cost to customers.

The four hurricanes last year resulted in $1.8 billion in losses for Citizens’ high-risk accounts.

The board’s action takes care of the 2004 deficit, but Citizens’ high-risk policyholders had $125 million in Hurricane Dennis losses last month; and as this issue went to press, Hurricane Katrina was due to hit southeast Florida, one of Citizen’s major markets.

“We’re cutting it very close. We’ll have sufficient cash flow as long as nothing else happens this year,” Jessica Buss, chief financial officer for the company told the Pensacola News-Journal. “Any more adverse events in 2005 could result in an assessment.”

Palm Beach condo owners file suit

In related news about Citizens, the residents of the Tiara Condominium, a 320-unit, 42-story condominium in Singer Island-Palm Beach County, Fla., have filed suit against Citizens Property Insurance Corp. and Ray Walton, its executive director of claims, to make Florida’s insurer of last resort pay $100 million in claims for damages sustained during hurricanes Frances and Jeanne in 2004.

The condo association wants Citizens to pay $50 million for each hurricane, while Citizen’s maintains it has already paid $50 million for the first hurricane and settled the claim.

Association members claim the hurricanes should count as separate occurrences and Citizens should pay $100 million.

According to William “Chip” Merlin Jr., the Tampa lawyer representing the condominium owners told the South Florida Business Journal that repair costs are estimated at between $115 million and $125 million. The association already owes Southern Construction $64.5 million, with $13.5 million of that unpaid.

Hurricane Frances hit the condo Sept. 4 and 5, 2004, ripping off exterior insulation finish panels and allowing water to pour in. Before repairs could be made, Hurricane Jeanne hit, increasing the damage.

According to the lawsuit, Citizens asked Tiara’s public adjuster to submit one total damage figure for two losses because it would be more costly and timely for Citizens to process two occurrences.

Tiara’s representatives told the Business Journal they understood they would have to pay two deductibles, at $1.5 million each, and two policy limits of $50 million each would apply. Citizens directed building repairs, although the condo association disagreed with the cost and efficiency of the insurer’s plans, according to the lawsuit.

July 28, Citizens sent a $9.5 million payment to the condo association and stated that was the balance of the policy. While this satisfied the first $50 million occurrence, Citizens refused to pay a second $50 million occurrence.

The condo association did not accept Citizens’ final $9.5 million payment because it hasn’t been assured that accepting the money would allow it to recover funds under the second occurrence limit. Citizens spokesman Justin Glover said cashing the check doesn’t prevent Tiara’s residents from filing a claim or seeking additional funds. Although he hadn’t reviewed the case, Glover said the Tiara Condo Association was assessed only one deductible and was covered under a single occurrence, which Citizens paid.

Topics Florida Catastrophe Hurricane