Are reports of Florida property insurance stabilization premature?
Hundreds of thousands of Floridians are still waiting to see their rates go down two years after tort reform.
On May 21, the Florida Office of Insurance Regulation (OIR) published its May 2024 Florida Property Insurance Market Update, claiming “overall market stabilization following the historic legislative reforms of 2022 and 2023.”
Those 2022 and 2023 reforms include Florida Governor Ron DeSantis’ signing of SB 2-A, which eliminated one-way attorneys’ fees for disincentivizing “frivolous lawsuits” to reduce the burden of litigation and bring down costs for Florida homeowners.
Per the OIR, 10 Florida property insurers have filed for a 0% rate decrease to take effect in 2024, and at least eight more have filed for a rate decrease to take effect in 2024. The eight insurers that have reportedly filed for unspecified rate decreases are Safe Harbor Insurance Co., Spinnaker Insurance Co., Southern Oak Insurance Co., American National Property & Casualty Co., US Coastal Property & Casualty, Florida Peninsula Insurance Co., Stillwater Property and Casualty Insurance Co., and American Integrity Insurance Company of Florida.
The 10 insurers that reportedly filed for a 0% rate decrease are Florida Family Home Insurance Co., Florida Farm Bureau General Insurance Co., American Bankers Insurance Company of Florida, Edison Insurance Co., Castle Key Insurance Co., Heritage Property & Casualty Insurance Co., Castle Key Indemnity Co., American Integrity Insurance Company of Florida, American Security Insurance Co., and American Traditions Insurance Co.
Citizens Property Insurance Corp., Florida’s largest property insurer, with 1,222,840 policies in force as of Q4 2023, has not been reported as filing for a 0% rate decrease or any other rate decrease. Policies written by Citizens account for 46.5% of all policies written by Florida’s 25 largest property insurers. Policies in force for other Florida property insurers within Florida’s top 25 amount to 716,740. Of the insurers that reportedly filed for a 0% rate decrease or a rate decrease, only seven fall within Florida’s 40 largest insurers by policies in effect. Assuming that the filed rate decreases are approved, less than 1,000,000 of Florida’s approximately 7,450,000 residential policies will be affected.
While the OIR suggests that Florida’s tort reforms are shaping the market, the OIR’s own data appears somewhat inconsistent with that idea. In January 2024, the OIR released its Residential Property Claims and Litigation Report, examining just under eight percent of all litigated insurance claims closed in 2022. Those claims cost Florida insurers around $580 million, while Florida homeowners paid about $16 billion dollars in premiums in 2022. The OIR’s data is incomplete because insurers, despite being required by law to report data for this study and future studies like it, largely failed to submit data timely or at all. Initially, 71% of insurers failed to submit their data to the OIR while another 18% were late on the deadline to do so.
The data suggests that Florida’s claims of stabilization may be premature. Hundreds of thousands of Floridians, including those insured by Florida’s largest property insurer, are still waiting to see their rates go down two years after tort reform. The OIR’s own data suggests that years of rising premiums in Florida were not driven exclusively by litigation. To the extent that litigation has driven up costs, recent developments call into question to what extent this litigation has been frivolous, as the Florida legislature and the OIR claim.
On May 9, 2024, Heritage Property & Casualty Insurance Co. agreed to pay a $1 million fine for failing to properly adjust Hurricane Ian claims from 2022 to 2023. A March 2024 report commissioned by the OIR examined 324 Hurricane Ian claims submitted to Heritage and found that in 98 of the claims, Heritage failed to acknowledge receipt of the claims in the timeframe required by law, in 70 of the claims, Heritage failed to pay or deny claims in the timeframe required by law, and in 10 of the claims, Heritage failed to maintain complete claims records. The report also found that some of Heritage’s adjusters failed to provide required credentials to homeowners after inspections, Heritage miscalculated interest for certain claims, and Heritage failed to provide some policyholders with a “Homeowners Claims Bill of Rights.”
It remains to be seen how many lawsuits will arise from Heritage’s handling of Hurricane Ian claims, but successive tort reforms in 2022 and 2023 will almost certainly make it more difficult for homeowners looking to bring these lawsuits. While the intent of the new laws may have been to lessen what the legislature determined was problematic litigation, the effect could mean that policyholders like the 78 homeowners wronged by Heritage may be left without recourse.
Traditionally, policyholders looking to sue their insurers for breach of their insurance policies could hire counsel pursuant to a contingency agreement. This was because the lawyer’s fees were legally required to be paid by the insurer upon a judgment in the policyholder’s favor. The client policyholder therefore paid nothing out of pocket to their lawyer. In light of this fee shifting mechanism being removed from Florida law, more lawyers have had to transition to charging their clients an hourly rate to litigate these claims against insurer. In many cases, the lawyer’s hourly fees can exceed the value of their client’s claim. When this occurs, the policyholder is truly without recourse, as they will have already spent more money than their insurer should have already paid out to them to repair or replace their damaged property. This also creates a major issue for policyholders who cannot afford to pay a lawyer by the hour, in the midst of dealing with an insurance claim, as they are effectively unable to bring a lawsuit through counsel. As of April 2024, there were 558,299 residential property claims arising from Hurricane Ian alone. Now, it is unclear how many of those claimants will be able obtain representation if they need it.
There appears to be no way to measure how many homeowners with real claims could be left without representation or otherwise virtually barred from meaningful recovery in light of tort reform. One thing to keep an eye towards is whether the OIR continues to find that Heritage or other insurers have shirked their duties to their policyholders in this new regulatory and legal environment.
This all comes as 11.9% of Florida homeowners told Redfin in a 2024 study that they planned to leave the state due to rising insurance costs. This is nearly double the 6.2% national average of homeowners planning to leave their states for the same reasons. Additionally, a December 2023 study by Harvard, Columbia University, and the Federal Reserve Board (pending peer review) suggests that new insurers appearing in higher risk areas in Florida to replace larger companies that have withdrawn from the state face insolvency at a rate of 20%.
Ultimately, it remains to be seen to what extent Florida’s property insurance market is stabilizing. The OIR may be optimistic, but that optimism appears based more on belief than available data. And, even if rates do lower and stabilize across the board, there are still questions as to whether insurers emboldened by new barriers to suit will engage in more harmful conduct at the expense of their insureds. Florida’s insurance market will remain one to watch moving forward.
Susan C. Odess, a partner with Freidin Brown, leads the firm’s insurance and construction litigation practice. Her team exclusively focuses on high-stakes insurance coverage disputes and claims, representing homeowners, commercial property owners, community associations, and businesses against large insurance and construction companies. Andrew Miller is an associate with the firm.