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Proposed Legislation Would Leave FL Homeowners High and Dry
Proposed bill leaves Florida's homeowners at risk.

House Bill 245, passed in the House in early February, would allow state-run Citizens Property Insurance Company to give some of their customers to surplus line insurance companies in an attempt to reduce its hurricane risk. Doing so could put Florida homeowners in a precarious position come hurricane season.

Citizens Property Insurance Company is the insurer of last resort for 1.5 million Floridians unable to purchase private insurance due to the state’s hurricane risk. Many of the companies that used to insure Floridians have left the state due to the risk of becoming insolvent after paying out claims for hurricane damage.

According to the bill, the state-run company would be able to pawn off customers to surplus line insurance companies. Opponents of the bill believe that this move would put homeowners in a dangerous financial position if a major hurricane devastates their area.

Surplus line insurers are not included in the Florida Insurance Guaranty Association, which handles claims from insolvent companies. This means that if a surplus line insurer becomes insolvent due to a high volume of claims following a storm, homeowners may be left to cover damages on their own. The state Office of Insurance Regulation also lacks the power to regulate surplus line rates. State Senator Mike Fasano, R-New Port Richey, warned Floridians of these risks in his letter to the editor of the Tampa Bay Times. The proponents of the bill make a contrary argument.

Governor Rick Scott believes the rates of the Citizens Property Insurance Company are kept artificially low by state regulation, a situation that also puts homeowners in danger of being left “holding the bag” if a major storm hits Florida and the company runs out of funds.

Unfortunately, the bill would leave homeownerswith few options for how they insure their property. Since it is the insurer of last resort, if Citizens Property Insurance Company spins off a customer, that policyholder has little—if any—choice in what company will insure them. Surplus line insurers, given the lack of oversight and regulation, are a risky bet for homeowners, as they are able to raise rates at will and are at risk of becoming insolvent in the aftermath of a natural disaster.

Florida’s homeowners should pay close attention to the progress of HB-245 to stay abreast of changes that may occur in the coming months. If you or a loved one believe you may be in danger of being spun off if HB-245 becomes law, please contact an experienced insurance litigation attorney.

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