- November 21, 2024
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Maybe he realizes it. And maybe he understands that if he doesn’t get this right, this could wipe out his chances of being elected president.
While Florida Gov. Ron DeSantis is riding high as the nation’s leading crusader against woke-ism and a potential white knight presidential candidate for the nation’s Republicans, long after he is gone from Florida politics, his legacy here will be tied to the issue Florida legislators were addressing this week in Tallahassee: property insurance.
Ugh. Talk about a subject that makes your eyes glaze over, gives you headaches and ranks up there with root canals. That’s property insurance, for sure.
But at this moment in Florida history, the issue of property insurance is a catastrophic economic disaster worse in scope than the damage from Hurricane Ian.
While Ian wiped out and damaged an estimated $47 billion in insured property in Southwest Florida, the rising and increasingly prohibitive costs of homeowners’ property insurance affect every inch and corner of this wonderful state. Anyone who has a roof over his/her head has seen his/her property insurance premiums rise from year to year faster and higher than Joe Biden’s inflation.
On Longboat Key, a property owner told us last week not to expect to see his annual Christmas lights because he is “hardening” the outside of his bayfront house. “I’m tired of paying $37,000 a year for insurance,” he said.
When a homeowners association on Longboat had its policies canceled this past summer, some of the residents in the development took what they could get for their $1 million single-family homes — a $50,000-a-year policy.
Those are top-end examples. But everyone knows the story: The standard in Florida for has been increases in the range of 25% to 33%. Pardon the cliché, but property insurance has gone through the roof. And the rates are expected to keep climbing next year regardless of what the Legislature does now.
Florida is by far the worst property insurance market in the nation. And that’s primarily because of how Florida’s trial lawyers cajoled lawmakers in years past. By legislation, they created a legal framework that has allowed about 100 clever lawmakers and their partners (adjusters and contractors) to extract more than $1 billion in legal fees over the past three years — all connected to property insurance claims.
You’ve read and heard the stories: In 2020, Florida homeowners filed 8.8% of the insurance claims for all of the U.S., but Florida accounted for 79.1% of the property insurance lawsuits filed in the U.S. Those percentages have held each year going back to 2016.
You don’t have the patience to read all of the reasons behind this costly tragedy (a tragedy for all property owners who pay for insurance), but these lawsuits have brought a cascade of consequences: Insurance carriers keep raising rates to account for the costs of the lawsuits. They then must buy more reinsurance, but the reinsurers have been raising their rates, too, to prohibitive levels because of the unpredictable costs of litigation (on top of the damage costs from storms).
More effects from this disaster: Since 2019, 10 Florida-based insurers went bankrupt — brought on by not having enough capital that would allow it to cover its policyholders’ claims from storms and the ever growing number of lawsuits they must defend.
Ok, enough of the Death-Bed state of Florida’s property insurance market.
Gov. DeSantis, a few legislators (most of them don’t know a thing about insurance) and everyone in the industry knew at the beginning of 2022 the industry was on the verge of total collapse. Former Sen. Jeff Brandes likened it to being in the emergency room on the verge of bleeding to death. To stay alive, the industry would need triage and hours upon hours of open-heart surgery in 2022.
The emergency triage occurred in May, seven months before the November election. DeSantis knew his gubernatorial opponent Charlie Crist would blame him for doing nothing. So that brought on the first special legislative session.
The triage helped. In the scheme of things, the changes adopted were minor adjustments that stanched the gush of blood and allowed the industry to hang on for surgery.
Once DeSantis’ re-election was complete, the governor turned his attention to scheduling the open-heart surgery. That’s what occurred this week — five-day surgery.
As before, Sen. Jim Boyd, R-Bradenton, is the governor’s point man in the Senate. He, Senate President Kathleen Passidomo, Speaker Paul Renner and the governor’s staff crafted a bill that they would distribute to their Republican colleagues with one simple message: “The governor wants this.”
The bill was a monstrosity — described as the “kitchen sink” bill. It was 105 pages of legislative and insurance lingo that few normal human beings would understand, probably even fewer legislators. But it didn’t matter. Nor did any of the public testimony at committee hearings. It was a done deal.
If you happen to have the stamina to read through it, here is one conclusion you might make: It’s a classic case of “interventionism.” Or you might call it the Milton Friedman Law of Laws. Legislators first create a set of laws to solve a perceived problem. But the new law creates unintended consequences that cause more laws to fix the new problems created by the first law. Ad infinitum.
The late Austrian economist Ludwig von Mises appropriately described interventionism this way: Whenever government gets involved, it always makes things worse than what existed before.
But, of course, the testimony from Republicans in the Senate and House said otherwise — that the identical Senate and House bills were good for Florida property owners and a big step forward to saving Florida’s property insurance market.
As these kitchen sink types of legislation go, there is something good for everyone. Except in this case, there is nothing good for the trial lawyers, adjusters and contractors who have been milking the system. See the accompanying box summarizing key elements in the legislation.
By the time of the session’s end, which was before our deadline, here is what you likely could expect: Gov. DeSantis, Sen. Boyd and the Senate and House leadership will characterize the legislative changes adopted in SB 2A and HB 1A as better-than-expected, super successful heart surgery. The trial bar, of course, will castigate DeSantis and the Republicans.
As for consumers: Don’t expect any rate relief next year when you renew. If it happens, consider yourself lucky. But lawmakers and insurance industry executives always say it takes at least 18 months for legislatives changes to have effect.
By then, the summer of 2024, Gov. DeSantis will be viewed either as a hero and onto the national scene or have more work to do on property insurance.
Either way, let’s hope DeSantis understands the enormity of this issue — how property insurance costs are so crucial to Florida’s economy and the cost of living. And let’s hope he sees that with the super-majorities in the House and Senate the next two years, this is the time — the most opportune time he and lawmakers will ever have to reshape the most regulated and dysfunctional property insurance market in the nation into one of the most free-market, competitive markets in the U.S.
Wherever DeSantis ends up politically, how he handles this issue will be his legacy. He may be remembered a decade from now for standing up to woke-ism, but if the cost of property insurance in that time is competitive nationally, that will have a made a real difference to Floridians’ quality of life.
Here are summaries of key provisions in Senate Bill 2A and House Bill 1A addressing property insurance:
1. It would eliminate one-way attorney fees. Heretofore, if, say, Morgan & Morgan represented a policyholder in a lawsuit and won a trial or settlement, the insurance company was required to pay the insured’s claim and the insured’s attorney fees, in addition to its own attorney fees. The new law would eliminate the requirement of the loser to pay the insured’s attorney fees.
Opponents of the bill say this will hurt Florida’s middle class and poor, because they will be less inclined to file lawsuits because they cannot afford a lawyer. And the argument also goes that contingency-fee trial lawyers will be less likely to take on small claim cases. They argue this will deprive less affluent Floridians access to justice.
But to be sure, the law will reduce the number of property damage lawsuits.
2. It would eliminate the practice of assignment of benefits altogether. After Jan. 1, 2023, a policyholder can no longer assign whatever benefits he would be eligible to receive from claim to his lawyer or contractor. Insurers and lawmakers have argued the assignment of benefits has been a major cause of litigation — from mostly trial lawyers and contractors who had the consumer’s potential benefits assigned to them.
3. It would give insurers less time to pay or deny claims, intended to speed up the claims process for policyholders. It would reduce the time from 90 to 60 days. It would reduce, among other time frames, the time for an insurer to begin an investigation of a claim from 14 to seven days.
4. It would require the state-owned Citizens Property Insurance Corp. to charge actuarily sound rates. Citizens can no longer charge rates less than what is being charged by other insurers. This is to provide a disincentive for Citizens to grow — and potentially increase the taxpayers’ liabilities to cover Citizens’ losses.
5. Among other provisions addressing reinsurance and the state catastrophe fund, the legislation would transfer $1 billion in taxpayers’ general revenues to help subsidize Florida insurers that need but can’t afford additional reinsurance from the open market.
One issue lawmakers did not include in the kitchen sink bill is an referred to as “Sebo.”
That’s the 2016 Florida Supreme Court ruling — American Home Assurance Co. v Sebo — that requires insurers to pay for damages that may or may not have occurred at the same time.
Say a hurricane rips a roof and causes water damage on a portion of a house. Later, it is determined there is another leak, but it is unclear whether the second leak occurred at the same time.
Regardless, because of Sebo, contractors in recent years have included both leaks in damage claims, driving up roof replacement and litigation costs.
