The Future of Florida Homeowners Insurance Is Bright

The profitable underwriting results of Florida’s homeowners insurance companies came to an abrupt end on Sept. 10, 2017, when Hurricane Irma struck southwest Florida and caused insured residential property losses of more than $20 billion.

Hurricane Irma was followed by five years of underwriting losses that totaled more than $5 billion dollars and resulted in the liquidation of nine companies. The underwriting losses of Florida’s homeowners insurance companies were caused by a combination of poor weather, increased costs of reinsurance, a flood of frivolous litigation, and fraud. Today, the Florida companies that survived and are still writing homeowners insurance in a state that continues to add 1,000 new residents a day are reporting underwriting profits and, in many cases, are requesting rate reductions.

So, what changed?
The first and most obvious answer to that question is an increase in the average rate per $1,000 of coverage and the total annual premium paid by the average Florida homeowner. And it increased a lot since Hurricane Irma. The average Florida owner of a single-family home now pays $3,600 annually for a home with a total insured value of $700,000. That annual premium is 85% higher than those homeowners paid in 2017.

Secondly, the Legislature made transformational changes to the statutes governing property insurance claims:

1) The Legislature eliminated the right of a homeowner to assign their property insurance claim to a third party. These assignment of benefits (AOB’s) resulted in a cottage industry of litigation for claims involving mold testing, water mitigation, roof damage, and other causes of loss which were encouraged by unscrupulous contractors, public adjusters and attorneys who had no interest other than generating fees.

2) The Legislature eliminated the right of an attorney to receive an unlimited fee if they were able to convince a jury to award an insured just one dollar more than the amount offered by the insurance carrier (the statute was commonly called the “one-way” attorney fee statute and was the only one of its kind in the United States).

3) The Legislature reduced the time limit for filing a property insurance claim from three years to one year.

4) The Legislature required that attorneys provide insurance carriers with at least 10 days’ notice prior to filing a lawsuit. This pre-suit notice allows the insurance company to reinspect the damaged property, reconsider its decision regarding coverage or the price and scope of repairs, and provides for mandatory mediation when requested by either party.

5) The Legislature strengthened the statutes regulating public adjusters and added penalties to contractors or other third parties that were performing the services of public adjusters.

6) The Legislature eliminated the rule that required full replacement of roofs that were more than 25 percent damaged by a covered peril.

7) The Legislature allowed one offer of judgment to be made to joint tenants.

8) The Legislature required a judicial determination of a contractual violation prior to beginning the process of filing an action for bad faith.

9) The Legislature limited the award of attorney fee multipliers to cases involving rare and unusual circumstances. This overturns the Florida Supreme Court decision of Joyce v. Federated National Insurance Company.

These legislative changes have reduced the number of lawsuits filed against Florida homeowners insurance companies from 21,430 in the first four months of 2021 to 9,417 in the first four months of 2024. That’s a reduction of 56 percent.

It should be noted that, because of poor claim handling by some carriers and independent adjusters after Hurricane Irma, the Legislature has adopted new rules for handling property insurance claims in Florida. The new statute requires that:

1) The insurance company start their claim investigation within 7 days (previously 14 days).

2) The insurance company conduct a physical inspection of the damaged property within 30 days (previously 45 days).

3) Customer correspondence be answered within 7 days (previously 14 days).

4) The insurance company provide the insured with a copy of the damage estimate prepared by the adjuster within 7 days of the estimate being completed.

5) The insurance company make a coverage decision within 60 days (previously 90 days).

To enforce these new statutes, the Legislature has authorized the hiring of additional staff at the Office of Insurance Regulation and mandated that market conduct exams be conducted for companies with a large number of complaints after a future hurricane.

The third significant change that has improved the underwriting results of Florida’s homeowners insurance companies is the change in the men and women who have been appointed to the courts in Florida.

All nine Justices of the Florida Supreme Court have been appointed by Republican governors. Fifty of the 71 judges that serve on Florida’s District Courts of Appeal have been appointed by Republican governors. And hundreds of the 700 judges who serve as either County or Circuit judges have been appointed by Republican governors.

These newly appointed jurists are much more likely than the judges they replaced to be “strict constructionists” in the sense that, more likely than not, they will interpret the law as the legislature intended. These new judges are also more likely to strictly interpret and enforce the language in a property insurance policy.

I believe that this change in the judiciary is at least partially responsible for the court victories that have been achieved in the cases involving the legislative changes made since Hurricane Irma struck:

1) Two victories in the cases that challenged the constitutionality of the new laws. Those trial court victories were not appealed. That means the new statutes are the law in Florida today.

2) Two appellate court victories in cases regarding the effective date of the pre-suit notice (Notice of Intent to Initiate Litigation) stature. One of the appellate cases, Universal Property Insurance Company v. Rebecca Hughes, is pending before the Florida Supreme Court (SC2024-0025).

3) Five trial court victories regarding the effective date of the repeal of the one-way attorney fee statute. Security First believes the repeal prohibits the award of one-way attorney fees on any lawsuit filed after Dec. 16, 2022, and five trial judges have agreed with that interpretation of the law. One of those cases, Denise Blumberg v. Security First Insurance Company, has been appealed to the Fifth District Court of Appeal (case number 5D2024-1214).

4) The Third District Court opinion in the case of Security First Insurance Company v. John Czelusniak upholding the validity of the anti-concurrent causation language in Security First’s insurance policies. The Florida Supreme Court refused to review that decision. This is the opposite of the decision the Florida Supreme Court reached in the case of Sebo v. American Home Assurance Co.

The combination of increased rates, favorable legislative changes, and a new judicial environment have joined to return the Florida homeowners insurance industry to profitability after some very difficult years.

Now is the time for all components of the insurance ecosystem to come together for the sake of all Floridians and build a homeowners insurance model we can take pride in. Carriers, contractors, public adjusters, attorneys and regulators need to be laser-focused on taking care of the consumer and bringing them back to pre-storm status. If disputes arise, they will put the homeowner at the center of the resolution. There is room for all participants in the claim process to make a reasonable profit and deliver outstanding customer service. It’s time to move on from the past disputes and infighting and to start delivering solutions for our fellow Floridians.

Locke served in the Florida Senate for 12 years (1991 to 2002) where he helped write the laws that created the Florida Hurricane Catastrophe Fund and Citizens Property Insurance Company. Locke served in the Florida Senate in 1992 when Hurricane Andrew made landfall. In the aftermath of the storm, Floridians lost more than $26 billion in insured property, which crippled the insurance industry and greatly affected the residents of the state.

After leaving public office, Locke created Security First Insurance. Locke was recognized by Florida Trend Magazine as one of the 500 most influential business leaders in Florida in 2018 and 2019.