With property insurance described as a “hidden tax” on homeowners, the Florida House on Wednesday gave final approval to a plan aimed at stabilizing the state’s troubled insurance market.
The Republican-dominated House voted 84-33 along party lines to pass the bill (SB 2-A) on the final day of a special legislative session. The Senate approved the bill Tuesday, meaning it is ready to go to Gov. Ron DeSantis.
The 105-page bill includes wide-ranging changes that supporters acknowledge would not immediately lower insurance rates. At least for some homeowners, such as customers of the state-backed Citizens Property Insurance Corp., the bill could increase costs.
But after two years of private insurers seeking hefty rate increases and dropping hundreds of thousands of customers because of financial losses, Republican lawmakers said the bill is designed to bolster investment in the market, spur competition and, ultimately, bring down costs.
“Florida’s homeowners insurance is extremely expensive, and the market is deteriorating,” Rep. Ralph Massullo, R-Lecanto, said. “It’s literally falling apart. In some places, there’s not even a market.”
Democrats blasted the bill, saying it would help insurers while doing little for residents struggling to pay insurance premiums.
“We are giving a gift to the insurance companies, and we are punishing the homeowners,” Rep. Patricia Williams, D-Pompano Beach, said.
Legislative leaders and the DeSantis administration negotiated the bill before the special session started Monday, leaving little question that it would pass. Republicans flatly rejected numerous attempts by Democrats to amend the bill.
The bill seeks to reduce lawsuits that insurers blame for driving up costs and move homeowners from Citizens into the private market. It also would set aside $1 billion in tax dollars to help provide critical reinsurance to insurers.
The insurance system’s problems stem from a combination of issues, but a large part of the debate this week focused on efforts to curb lawsuits against insurers. Rep. Tom Leek, an Ormond Beach Republican who helped sponsor the bill, said Wednesday that litigation costs have led to carriers leaving the state.
But Democrats and other critics said the changes in the bill would effectively make it harder for homeowners to fight insurers over claims, with many saying it would create a “David and Goliath” situation.
The bill, in part, would eliminate what are known as “one-way attorney fees” in property-insurance cases. Under one-way attorney fees, insurers pay the attorney fees of policyholders who successfully file lawsuits. Insurers contend one-way attorney fees create an incentive for litigation.
“Eliminating one-way attorney fees is a benefit to every consumer and every taxpayer,” said Leek, who described property insurance as a “hidden tax” on homeowners.
But Democrats said the elimination of one-way attorney fees and other changes in the bill would hurt homeowners whose claims get denied or delayed by insurers. With the elimination of one-way attorney fees, homeowners likely would have to pay attorney fees out of whatever money they might receive in lawsuits.
Rep. Dotie Joseph, D-North Miami, said lawmakers should address “bad actors” in all parts of the insurance system and not “buy into this bogeyman of litigation.”
The bill also would make a series of changes to Citizens, which was created as an insurer of last resort but has ballooned during the past two years to about 1.13 million policies as private carriers have dropped customers. State leaders have long sought to limit the number of policies in Citizens, at least in part because of financial risks from hurricanes.
To try to move people out of the state-backed insurer, the bill would prevent Citizens 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. Citizens officials say the state-backed insurer typically charges less than private insurers, creating a disincentive for policyholders to get coverage in the private market.
But Rep. Jervonte Edmonds, D-West Palm Beach, said Citizens is “one of the best options for residents” in places such as Palm Beach County and pointed to high housing costs.
“A potential increase of 20 percent is make or break in my county,” Edmonds said.
The bill also would phase in a requirement that Citizens customers buy flood insurance. Typical homeowners’ policies do not include flood coverage, though mortgages require people to buy the extra coverage if they live in designated flood zones.
Rep. Bob Rommel, a Naples Republican who helped sponsor the bill, said many Citizens policyholders who sustained damage in Hurricane Ian did not have flood insurance. As a result, they might not have coverage for water damage — or could become embroiled in disputes about whether their homeowners’ policies should cover the damage.
But Democrats said the flood-insurance requirement would lead to cost increases for Citizens customers.
“Right now, you are just pushing Citizens’ customers into the danger zone with very
high rates,” Rep. Anna Eskamani, D-Orlando, said. “You’re putting flood insurance on them, which you are not requiring for private (insurance) customers, which seems weird to me. I’m just worried that when you do that, you are going to push people into dire economic situations.”
Another major part of the bill would create a program that would seek to temporarily help insurers obtain adequate reinsurance, which is backup coverage. Private reinsurance prices have increased, while the coverage has become harder to buy, with the higher costs reflected in homeowners’ rates.
The bill would essentially offer additional levels, known as “layers,” of reinsurance funded through $1 billion from the state and premiums paid by insurers.