It is no secret that Florida’s residential property insurance market has experienced a rough past couple of years. Within the past two years alone, several of Florida’s residential property insurance carriers have stopped writing or renewing policies, cancelled existing policies, or requested steep rate increases to deal with the litigation costs related to roof and wind damage claims.
Due to the issues in Florida’s residential property insurance market, Gov. DeSantis called for a special legislative session in December 2022, with the passed legislation scheduled to take effect on January 1, 2023. The 105-page bill dealt with many concerns across the spectrum of insurance in residential real estate in Florida. While immediate reductions in insurance costs may be unlikely, the legislature hopes that the changes passed in the law will stabilize the property insurance market.
How does the Legislation Affect Homeowners?
Last month’s special session — the second such session in seven months on property insurance — resulted in legislation intending to move policyholders away from state-backed Citizens Property Insurance Corp. and into the private market. This eliminated assignment of benefits for property-insurance claims and “one-way attorney fees,” which required insurers to pay attorney fees of policyholders who successfully filed lawsuits.
The new law will prevent Citizen’s insurance policyholders from being able to renew coverage if they receive policy offers from private insurers that are within 20 percent of the cost of the Citizens premiums. This likely will mean an increase in costs to homeowners insured by Citizens in the short term. However, over time, forcing policyholders to use private insurers may increase the number of private insurance options available in the state after years of limited private options. In addition, to the extent the policyholder is kept with Citizens, the policyholder will be required to have flood insurance as well, with this requirement phased in over the next four years.
Also, the law removed the long-controversial practice of assignment of benefits for property-insurance claims. Assignment of benefits involves policyholders signing over claims to contractors who pursue insurance payments. Insurers contend the practice has led to increased lawsuits. Finally, the new law will require policyholders to pay their own attorney’s fees in litigation against the insurance company.
Prospective homeowners should expect significant changes to their options in insurance. Citizens will have required private insurance competition, claims processes will be more policyholder directed with the loss of the assignment of benefits provisions, and litigation will become pricier for homeowners in potential suits against insurance carriers. However, the legislation hopes that these concessions will allow for cheaper policies in the near future as litigation risks for insurance carriers are stymied by the legislation.