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Citing water losses, Citizens Property Insurance approves rate hikes targeting south Florida

Barry Gilway, CEO of Citizens Property Insurance Corp., said a hike in rates is necessary because the state Legislature did not address a crisis tied to non-weather related water claims. 
[AP file photo}

Barry Gilway, CEO of Citizens Property Insurance Corp., said a hike in rates is necessary because the state Legislature did not address a crisis tied to non-weather related water claims. [AP file photo}

MAITLAND — Florida's state-run property insurer is moving forward with a rate hike for 2018, but its 62,000 policyholders in Tampa Bay are largely being spared.

The board that oversees Citizens Property Insurance on Tuesday unanimously approved a plan to raise homeowner rates an average 5.3 percent and commercial accounts by an 8.4 percent average. State regulators must approve the hike before it can take effect in February.

After years of relatively few hurricane claims, Citizens has built up its reserves and would likely be cutting rates across the board if not for an issue particularly rampant in south Florida: non-weather related water claims that wind up being litigated.

PREVIOUS COVERAGE: Thanks to non-weather related claims, Citizens Property Insurance board approves 6.8 percent average rate hike

Tampa Bay's rates will either drop or rise less than the state average next year. Hillsborough County's rates will increase by just under 1 percent and Hernando will see a bump of about 2 percent, but Pasco and Pinellas counties' rates will go down. Pasco's rates will dip by almost 3 percent, while Pinellas policyholders will see a nearly 6 percent decrease.

But don't celebrate lower rates just yet.

"We are concerned some of the trends we are seeing in South Florida are spreading to the Tampa Bay area and Orlando," Michael Peltier, Citizens spokesperson, said. "But the rate proposed for 2018 reflects the hard numbers we've seen in the last two or three years."

In fact, as Citizens has built its reserves after a largely hurricane-free decade, Tampa Bay would likely have had even greater rate cuts if not for the water claims issue.

Citizens is the state-run insurer of last resort and the second largest holder of property insurance in Florida behind Universal Property & Casualty. It has more than 451,000 customers, many of them living near the coast or in south Florida.

The rate hikes continue a recent trend with property owners in Miami-Dade, Broward and Palm Beach counties facing the steepest increases.

Homeowners with multi-peril coverage in Miami Dade County, for example, will see an average increase of 10.5 percent, or $359, from 2017 premiums. Broward and Palm Beach county homeowners will see rates rise by 10.4 percent and 9.3 percent respectively.

The proposed rates will mean average rates will decrease in 56 of 67 counties.

"The horizon looks really cloudy out there," Barry Gilway, president and CEO of Citizens, said at a Citizens' board meeting in the Orlando suburb of Maitland.

The cloudy forecast he referred to wasn't the hurricane season ahead, but the myriad of claims and lawsuits for water losses not related to storms.

This abuse of "assignment of benefits" has plagued south Florida in recent years. The problem arises when third party contractors take insurance companies to court over repair bills. During the process of a repair, policyholders can sign over to a third party their right to deal directly with their insurance company for a claim, in this case for water damage. The contractors can then collect expenses associated with the repair directly from the insurance provider.

But if an insurance company refuses to pay the bill, the contractor is allowed to take the insurer to court and be reimbursed for both the balance of the bill and their lawyer fees if they win.

The cost of the litigation, on top of the repairs, has increased the cost of an average Citizens multi-peril homeowner policy from $367 in 2011 to a projected $2,083 in 2017, the company reported.

According to Citizens president Gilway, 50 percent of the water claims in South Florida are litigated, which can make the case five times more expensive to settle. Without litigation, the average cost per claim is $6,000 to $7,000 but if a lawyer takes the case, the cost rise to $30,000 to $35,000 per claim.

Hopes that the state Legislature would address the water crisis in the latest session went unfulfilled — for the third year in a row.

"We were hoping for legislative change and a surgical solution," Gilway said. "Given that this did not occur in 2017, we cannot wait for the trends to worsen and take no corrective action."

Beyond the rate hikes, the Citizens board also authorized the company to ask the Office of Insurance Regulation to also approve changes to the way the company handles claims, in an effort to persuade homeowners to avoid litigation and curb the costs.

None of those moves, however, are expected to solve the crisis.

"In no way, shape or form will this issue ever be resolved without legislation,'' Gilway said. "These are stop-gap measures."

State law limits Citizens to a maximum rate increase of 10 percent a year per policyholder, so the company predicts the cap will lead to a loss of about $124 million this year and $182 million in 2018 in its multi-peril homeowners lines, Gilway said. Profits from commercial lines of insurance will offset some of those losses in 2017, he said, but not in 2018.

Private insurance companies, which aren't under the same restrictions, are seeking rate increases that are even higher than Citizens. Deerfield Beach-based People's Trust, which insured 54,267 single-family homes in South Florida's tri-county asked for 14.5-percent average rate hike for multi-peril homeowner coverage in March. The Florida Office of Insurance Regulation rejected the company's request and instead improved a higher one — an average of 16 percent — to cover their losses.

Contact Mary Ellen Klas at [email protected] and Malena Carollo at [email protected] or (727) 892-2249. Follow @MaryEllenKlas and @malenacarollo on Twitter.

Citizens Property Insurance's board gave the company permission to ask the Office of Insurance Regulation for the following changes:

• Give homeowners a limit of $10,000 in non-weather related water damage repairs unless they voluntarily agree to follow Citizens repair guidelines, in which case they can overcome the cap and get full coverage.

• Require any third party who elects to receive a homeowner's insurance benefits to be subject to the same duties after a loss as the homeowner — something that is not currently required in law.

• Limit coverage to one non-weather loss every two years and two in five years.

• Waive the deductible in water claims if the homeowner agrees to work with Citizens' "managed repair" program — often using the insurers' contractors — when repairing the damage in an effort to avoid litigation.

Citing water losses, Citizens Property Insurance approves rate hikes targeting south Florida 06/20/17 [Last modified: Tuesday, June 20, 2017 6:23pm]
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