Andrew depletes state fund for insurers

Published Nov. 17, 1992|Updated Oct. 12, 2005

Insurance claims from Hurricane Andrew will soon wipe out the fund that ensures payments to homeowners whose insurance companies go bankrupt.

Insurance Commissioner Tom Gallagher on Monday appealed to the Legislature to call a special session to shore up the fund with up to $500-million. In the meantime he recommended the Florida Guaranty Insurance Association begin making limited payments on claims in order to stretch the rapidly shrinking pot of money until the Legislature can act.

Lawmakers initially planned to meet in special session this week to deal with hurricane recovery issues and other business. But a 20-20 deadlock in the state Senate has delayed the choosing of a Senate president and forced postponement of a session until next month at the earliest.

South Dade homeowners, already devastated by the hurricane, are now being slammed by the inability of the Legislature to act, Dade legislators said.

"I think it's very urgent," said Rep. John Cosgrove, a Miami Democrat whose home was destroyed by the storm. "I'm very distressed that the Legislature is paralyzed and unable to act."

Nearly 16,000 claims totaling $467-million have been filed with the guaranty fund, which is financed by a 2 percent assessment on insurance companies that write homeowner policies. Six insurance companies have gone bankrupt under the weight of property damage claims from the costliest natural disaster in U.S. history. The storm did more than $20-billion worth of damage, about $11-billion expected to be covered by insurance industry.

Policyholders whose companies went under have waited outside the Insurance Department's claim centers all day to get help, said department spokeswoman Jill Chamberlin. One couple in their 80s had no money, no home and nowhere to go. Another couple had a disabled child and no home. They are getting help, slowly, sometimes after sloppy records from the insolvent insurance companies are reconstructed.

Gallagher proposes selling bonds to raise $500-million. The bonds would be repaid by doubling the insurance company's assessment from 2 percent to 4 percent. He said that may not increase homeowners' policy premiums everywhere in Florida, depending on the market. Competition could keep the increase down.

But if the insurance industry has its way, the extra money to cover the claims on insolvent insurers would come directly from homeowners. Insurance companies favor a Hurricane Andrew surcharge on policies, which would come out of homeowner's pockets. Gallagher opposes that approach.

"The immediate outlook is grim," Gallagher said in a letter to Rep. Bolley L. "Bo" Johnson, who takes office today as House speaker. "At the current rate of payments, FIGA will be out of money by Thanksgiving weekend."

The insurance guaranty association is paying claims at the rate of $6-million a day, the association said, and the $106-million paid so far is more than the FIGA has paid over the past 20 years.

Gallagher has some oversight over the emergency fund but no direct authority over its operation.

He recommended the association slow payment of non-essential claims, concentrating on living expenses for those in most urgent need.

"Instead of saying yes to consumers, FIGA will be forced to say no," he said. The slow-down of payments should extend the FIGA coverage until the first or second week of December, when the Legislature is expected to hold a special session. Gallagher said lawmakers should act quickly.

The approaching crisis for emergency insurance coverage highlighted the coming political battle over Andrew relief.

Dade leaders want the Legislature to act quickly on a series of recovery issues. They want to set aside increased sales tax money that will be collected during reconstruction of the South Dade area. Analysts project that amount to be $203-million by July 1 and $298-million the following year.

Andrew relief, Dade lawmakers said, has come from the cities, from Congress, from charities and from people all over the country. Now, thanks to the Senate deadlock, the state can't respond.

"The frustration I have is the House is ready and the governor and Commissioner Gallagher are ready to work," Cosgrove said. "It's the political paralysis that is suffocating the ability of the state to respond to the greatest catastrophe in the history of the United States."