Legal costs and soaring claims for water-related damage — not hurricanes — have caused state-run Citizens Property Insurance Corp. to post a net loss for 2016, its first loss in more than a decade.
Staff told Citizens' board of governors Wednesday that the insurer will post a $27.1 million loss for last year. The loss comes despite minimal damage from Hurricane Matthew, which was the first major hurricane to impact Florida in 11 years.
The last time Citizens ended the year in the red was 2005, the year Hurricane Wilma struck and just a year after Florida was still recovering from an unprecedented four major hurricanes in a single season.
Citizens — which covers property owners statewide who cannot find insurance on the open market — and other private insurers have long complained of a spike in nonweather-related water claims such as burst pipes and sudden dishwasher leaks. Many of those claims lead to litigation, which can raise the average claim cost by $20,000 or more, Citizens says.
The insurers maintain that some attorneys and contractors are preying on property owners to take legal action on unwarranted claims in a bid to get settlement money from insurers. Under the practice known as "assignment of benefits," property owners can empower attorneys and contractors to act on their behalf in dealing with insurance claims.
Insurers have called for the Florida Legislature to address the issue in its current session.
Without significant statutory reforms, Citizens will be forced to pass those higher costs on to its customers in the form of higher rates for the foreseeable future, said Citizens board chairman Chris Gardner said.
"Every year, we rely on standardized, accepted actuarial principles to set our rates," Gardner said in a statement. "Last year, the same principles that provided rate decreases to our customers in recent years translated into hikes for 84 percent of our policyholders. Without legislative changes, that trend will continue."