Litigation is the root cause of Florida’s property insurance crisis, board members and employees of Citizens Property Insurance Corporation said at a board meeting on Wednesday.
“Unless something is done about this discrepancy in the lawsuits, I’m not sure you will address the root problem,” said a Citizens board member. Scott Thomas.
He was referring to the huge proportion of insurance disputes in Florida. The state accounts for 8% of property insurance claims but 70% of lawsuits.
This has increased costs for insurers, which have lost more than $1 billion a year over the past two years and could lose another $1 billion this year, according to estimates provided by Citizens’ president and CEO. Barry Gilway.
Gilway also cited rampant lawsuits — Citizens’ total lawsuits increased from 9,834 in August 2021 to 12,761 in August 2022 — as the main reason for the rate hikes, coverage cuts and five carriers being insolvent this year.
The litigation and losses have forced reinsurers who provide insurance coverage to insurers to either raise the price of insurance coverage in Florida or cancel insurance altogether in the state.
It strained the Florida market Gilway saidbecause “our market is now dominated by domestic insurers, who tend to be small companies more dependent on reinsurance and capital markets. History shows that these companies tend to be much less stable than national carriers.”
Smaller companies used reinsurance to distribute risk and expand their coverage, but as reinsurance became more costly or impossible, this caused the market to shrink. And with only a few major national insurers like State Farm and Allstate still doing business in Florida, Citizens is the repository for many of the remaining policies.
For Gilway, Florida law allowing a “one-sided” attorney’s fee, which requires the insurance company to pay legal fees for the consumer if the consumer wins in court, provides too much incentive to sue for a claim.
“In my opinion, the unilateral attorney fee law just needs to go,” Gilway said.
The trial lawyers’ lobby is likely to fight any attempt to strike down the law and blame the rise in lawsuits on insurers’ tendency to undercharge consumers or refuse to pay claims.
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