TALLAHASSEE — The forms used by property insurers across the state to calculate insurance discounts for homeowners are seriously flawed and must be completely thrown out, an administrative judge has found in a potentially groundbreaking ruling.
The decision could have far-reaching implications for homeowners who receive wind-mitigation discounts for hurricane-resistant measures in their homes — and specifically for those who lost discounts during a mass home reinspection program by Citizens Property Insurance Corp.
Because of a flawed study commissioned 10 years ago by the Office of Insurance Regulation, Florida homeowners may have been denied several million dollars in discounts for their garage doors.
"There are tens if not hundreds of thousands of people who are impacted by this," said Jack Stumpff, a Plantation small-business owner who successfully took on OIR in court and got the mitigation forms thrown out.
While the impact of the ruling could be widespread, no homeowner will see any changes any time soon because the legal battle is still playing out in court. OIR recently appealed the Oct. 19 ruling in circuit court, and is downplaying its potential impact.
"I don't think that people need to be concerned that they have lost a substantial amount of discounts for this," said Belinda Miller, the agency's general counsel.
A spokesperson for Citizens said the insurer of 1.5 million would await the results of OIR's appeal.
For the past several years, Florida homeowners have received billions of dollars in discounts on their property insurance bills for strengthening their homes against hurricanes.
Window shutters, hurricane-resistant roofs and impact-resistant glass doors are some of the improvements that have helped homeowners save hundreds — or thousands — of dollars on their insurance premiums. Insurance companies also benefit because homes with stronger features hold up better in hurricanes.
Property insurers across the state use the same forms to help calculate the proper discounts for homeowners. Last month's ruling by Administrative Law Judge Robert Meale found that the forms — written by OIR — are invalid because they failed to provide separate discounts for homes with wind-resistant garage doors. Those discounts are required by law.
Because discounts are dependent on each other, one flaw in the form can impact the size of every other discount. As a result, the judge nullified the entire mitigation form for all homes built before 2001, when the more comprehensive Florida Building Code was enacted.
"Due to the interdependency of loss relativities and discounts, these omissions and understatement also raise the real possibility of distortion among the other loss relativities and discounts," wrote Meale, hinting that homeowners across the state may have received incomplete discounts in recent years.
Stumpff, who sells a garage-door strengthening product called "Secure Door," said the lack of discounts for retrofitted garage doors has hurt his business. He filed a suit to get the discount forms changed.
"We did what we thought we had to do for our business and for all the homeowners out there who are not getting their discounts," said Stumpff, whose product is sold at Lowe's hardware stores for about $150. Installing the Secure Door product on an older garage door offers many of the same benefits as buying a new garage door, which can cost more than $1,000.
Wind mitigation discounts have been in the headlines this year as Citizens has embarked on a controversial campaign of reinspecting more than 250,000 homes across the state. Three out of four homeowners inspected by Citizens have lost discounts that they had previously been receiving, leading to an average premium hike of $800.
Citizens and other insurers recently began reinspecting homes under the premise that homeowners were receiving discounts they didn't deserve. Meale's ruling indicates that the reverse may be true.
The inspectors who fanned across the state this year to scrutinize homes were using deficient forms that omitted check boxes for discounts homeowners deserved, according to the ruling.
Allan Schwartz, a New Port Richey homeowner, said he spent $2,000 on a new, state-of-the-art garage door, but didn't get an insurance discount for it because his windows weren't also fortified. "This thing looks like Fort Knox," said Schwartz, who is covered by Citizens and recently had a reinspection. "They say if your garage door goes, your house goes."
Meale called OIR's omission of separate discounts for garage doors "arbitrary" and "illogical."
Studies conducted by state and federal agencies after Hurricanes Andrew and Charley found that many homes were destroyed when winds overpowered weak garage doors and rushed through homes. The pressure caused by the rush of wind caused roofs to cave in and walls to crumble.
As a result, several studies have found that fortifying old garage doors is one of the best ways to prevent wind damage during a hurricane.
However, homeowners who strengthened their garage doors were not rewarded with insurance discounts.
OIR said that even as it appeals the ruling, it will likely change the forms to account for garage-door discounts.
It's too early to say how much a homeowner might save by doing a retrofit, though Meale's ruling indicated the savings could be substantial.
According to OIR, the ruling does not require restitution for those homeowners who have been given incomplete discounts for the past few years.
Any lawsuits filed in attempt to recoup those lost discounts would be "frivolous," said Miller.
"A homeowner should mitigate their home, whether or not they're getting a discount from their insurance company, in order to protect their family and to prevent loss," she said.
Toluse Olorunnipa can be reached at tolorunnipa@MiamiHerald.com or on Twitter @ToluseO.