Florida’s small P/C insurers have withstood losses from Hurricane Irma and a legal environment that’s dubbed a “judicial hellhole” by the American Tort Reform Association, a recent article in S&P Global Market Intelligence reports.
The financial ratings firm Demotech affirmed the financial strength of over 50 companies in late March, a decision found “encouraging” by the CEO of the state-run Citizens Property Insurance Corp, Barry Gilway.
Gilway said that Demotech’s March actions is evidence of the resilience that smaller carriers showed during a year in which Hurricane Irma caused insured losses of about $8.61 billion, according to the latest Florida Office of Insurance Regulation tally.
Florida insurers face both weather-related risk and costs stemming from litigation on non-weather-related water-loss claims with an assignment of benefits (AOB) and other legal matters. To combat the AOB problem, Citizens has drawn-up changes in policy language, increased efforts to fight fraud and grew its managed repair program. In January, Citizens said it expects AOB and litigation costs would account for about 23 percent of its 2018 operating expenses, up from 16 percent in 2017 – an increase of $17 million.
The frequency and severity of water-loss claims over the past 2.5 years shows “extremely negative trends,” and that deteriorating trends have begun to spread northward within the state, said Gilway.
Citizens is reopening approximately 37 percent of claims related to Hurricane Irma as part of its ongoing work to help its policyholders, who have been frustrated by a shortage of contractors, the Insurance Journal reported. A spokesperson for Citizens said that it’s common for claims to be reopened, and that the majority of those reopened are non-AOB Irma claims.
Florida is unique in that it has no objective bad faith standard, defining it as more than “mere negligence” without calling for a showing of evil intent. As a result, carriers need to watch for common pitfalls to reduce costly bad faith awards.
On March 14 Gen Re is offering its clients a webinar called Navigating the Bad Faith Minefield. Here are some of the bad faith related problems specific to Florida the webinar intends to cover:
- The unique problems posed by “time limit” demand letters and how a missed deadline and/or failure to meet a key term “open up” the policy limit
- Bad faith in a clear-liability case with a likely judgment exceeding a policy limit. Do carriers have an affirmative duty to offer the policy limit in such cases, even in the absence of a demand?
- The tender traps that might be used to “set up” carriers for bad faith. How should carriers respond when presented with a serious injury case that involves low limits?
It was hard to miss the recent Florida story of a sinkhole fatality. This tragic event made news headlines in part becauseÃ‚ fatalities due to sinkholes areÃ‚ such a rare occurrence.
The story also prompted questions about sinkholes and insurance coverage.
Over at Straight Talk, the Insuring Florida blog, a post by Lynne McChristian explains that Florida has a sinkhole law requiring every property insurer to provide coverage for Ã¢â‚¬Å“catastrophic ground cover collapseÃ¢â‚¬ .
This is defined as:
1. Abrupt collapse of the ground cover,
2. A depression in the ground cover clearly visible to the naked eye,
3. Structural damage to the insured building, including the foundation, and
4. The insured structure being condemned and ordered vacated by the governmental agency authorized to do so.
However, a separateÃ‚ optional comprehensive sinkhole policy is needed to cover any other type of sinkhole damage.
Florida is one of only two states that require home insurers to offer sinkhole coverage. The other is Tennessee.Ã‚ In other states most homeowners insurance policies exclude coverage for sinkhole damage.
The Insuring Florida blog hasÃ‚ further background info on sinkhole insurance here.
MoreÃ‚ info on sinkhole claimsÃ‚ is inÃ‚ the I.I.I. facts+stats on homeowners and renters insurance.