By Insurance Journal Staff Reports 

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McCarty, who was commissioner from 2003 until 2016, was referring to letters and comments that Florida’s chief financial officer and current insurance commissioner offered in July, after Demotech told carriers about the pending downgrades and rating withdrawals.

Current Commissioner David Altmaier said that Demotech had failed to adhere to its own standards and methodologies. CFO Jimmy Patronis sent letters to secondary lenders Fannie Mae and Freddie Mac, urging them to stop relying on Demotech to rate insurers for homes with mortgages. The Florida Association of Insurance Agents also weighed in, slamming Demotech for inconsistencies in its ratings.

McCarty

The missives sparked a hot debate in the Florida insurance arena, with some arguing that Demotech has outlived its usefulness. Others, including the Insurance Information Institute, said that the rating firm is spot-on and is correctly highlighting the deep problems in Florida’s property insurance market.

Other rating firms, including AM Best and KBRA, have said they are willing to rate Florida carriers’ financial stability, but critics have said that struggling insurers won’t fare any better with those organizations. The state Office of Insurance Regulation announced in August that it had found a temporary work-around, making Citizens Property Insurance Corp. a partial reinsurer for carriers that may be in danger of insolvency. The move could obviate the need for ratings, if Fannie and Freddie agree to it.

McCarty, now a consultant, is in the camp that Demotech and its president, Joe Petrelli, are simply performing the service the firm was asked to do, years ago.

“Right now, that’s exactly what we need. The reality is that many Florida insurers are currently at risk of being downgraded,” McCarty wrote. “That would be true regardless of which rating company was evaluating their financial condition.”

Demotech does a “thorough and professional job, using sound actuarial principles and a detailed methodology to determine financial stability ratings for hundreds of companies doing business in Florida,” McCarty added.

The commentary piece did not say what prompted McCarty to write it. And he did not offer alternatives to the rating conundrum and did not provide specific solutions to the insurance crisis.

“Creating stability in Florida’s insurance market will require ongoing efforts to develop creative solutions to these complex challenges,” he noted. “Florida has done it before. We just need to focus on the task at hand, not shooting the messenger.”

Still, lawmakers may be moving ahead with a plan to explore other rating options. The Joint Legislative Budget Commission meets today to consider a request that it allocate $1.5 million to hire a consultant to analyze alternatives to the Demotech ratings.

TOPICS FLORIDA

South Florida attorney Scot Strems built his law firm suing insurance companies — and built the insurers’ case for reining in lawyers.

Mike Vogel

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 year out of law school, Scot Strems left his job as a public defender in 2008 to hang out his shingle. His days had been spent in county court on traffic and misdemeanor cases. Strems figured once on his own, he would start in criminal defense work and eventually move into civil litigation.

He did — in a big way. Nine years later, Strems was filing more suits than any other lawyer in Florida against home insurance companies. The Strems Law Firm P.A. grew to 30 lawyers and 120 support staff at its home office in Coral Gables and outposts in Tampa, Fort Lauderdale, Orlando, Jacksonville, Georgia and California.

The high-flying firm, though, became known statewide for more than just its prolific filing of suits. Complaints began to accumulate of flouting court rules and procedures as did allegations of improper practices in dealing with homeowners — some of them elderly or with limited or no understanding of what the firm was doing. In 2020, Strems’ meteoric rise came crashing down, and Strems faced disbarment as Florida’s property insurance market sat in tatters. “The environment we’ve got in Florida statutes has allowed this business model — public adjusters, contractors and attorneys — to go into business together to take over an insurance claim. The whole goal is litigation,” says state Chief Financial Officer Jimmy Patronis, who oversees the Department of Financial Services, which includes anti-fraud efforts.

Industry and state leaders hold up Strems, 41, as an example of Florida’s struggle to rein in the lawsuits they blame for skyrocketing homeowners’ premiums and insurance company instability. A business group, the Consumer Protection Coalition, said Strems’ case “shines a glaring spotlight on systemic litigation abuses that Florida’s elected leaders must curb or eliminate to protect the public.”

After more than two years, the case against Strems is moving toward resolution; at press time the suspended attorney and the Florida Bar, which initiated action against him, awaited a ruling from the Florida Supreme Court on whether he should be disbarred. Efforts to obtain an interview with Strems for this article were unsuccessful. Information attributed to him in this report came from the record of the Florida Bar proceedings against him.

Strems’ start

A student out of Miami-Dade, Strems studied political science and business administration at the University of Florida, where he was an honors grad, and studied law at the University of Miami. He seemed to fall into the insurance lawsuit game by happenstance. After opening his own firm, he was hired by homeowners in a “handful of matters” against insurance companies. He liked the work.

For plaintiff attorneys like Strems, there was much to like. Florida law has worked well for attorneys suing insurers. Going back to the 1890s, the Legislature allowed homeowners fighting insurers to recover attorney fees if they win. They also recover if the insurer settles. State Sen. Jim Boyd, R-Bradenton, an insurance agent and the Senate insurance committee chair, says of $15 billion ordered to be paid in damages over a 10-year period in Florida, 71% went to claimants’ attorneys.

Strems focused his firm exclusively on suing insurers. His business strategy was to have a high volume of smaller claims, according to an expert who later examined the firm. From 2016 into 2020 as the firm grew with attorneys, it handled 17,000 to 18,000 cases in Florida. At any given time, it had 10,000 active cases. One attorney formerly with the firm, Christopher Aguirre, testified the average demand in his cases was closer to $20,000 than $40,000. All but a fraction of cases settled before trial.

Eventually, Strems said, he personally handled only a handful of cases. But his name was stamped onto suit filings. The insurance industry compiled a chart based on state data of the most prolific attorneys filing suits against insurers. In 2017, according to that chart, Strems ranked first in Florida among lawyers suing property insurance companies, with 1,679 suits.

Clients came through word-of-mouth, social media and by referrals from companies that specialize in damage cleanup and by adjusters who make their living helping homeowners make claims against their insurers. “The firm spends upwards of a king’s ransom on marketing,” a law firm practice management consultant wrote in a letter to Strems in 2018. Strems at one point paid $75,000 a month for marketing.

Aguirre, the former firm lawyer, told the Bar that after joining in 2016, he handled 700 cases at a time. Aguirre said Strems lawyers would be double-booked for litigation proceedings. Clients trying to reach the firm reported being stuck on hold for 35 minutes to an hour.

Insurers said more was going on at the Strems firm than lawyers with too many cases. Insurance attorneys accused the firm of filing multiple suits over damages at the same house. Industry attorneys also complained that the firm missed deadlines, didn’t comply with rules and orders on turning over information necessary to litigate cases and delayed proceedings. In 2016 and 2017, Aguirre said, judges were hitting the firm with sanctions totaling $5,000 to $15,000 a week over violations, and eventually a few judges reported Strems to the Bar for investigation.

Hillsborough Circuit Court Judge Gregory Holder, who at the time had 40 Strems cases before him, gave the Bar an affidavit saying, “Mr. Strems engages in dilatory tactics in virtually every case.” Holder, now retired and a mediator with Zinober Diana & Monteverde, a firm whose work includes representing insurance companies, said Strems and Strems’ firm “engage in mendacious, bad-faith conduct.” Several judges dismissed Strems cases for attorney misbehavior, more such dismissals — the Bar later would say — “in a few years than many large firms experience in (sic) lifetime.” Another judge raised concerns that Strems himself had put false information in an affidavit and directed Strems be referred to the Florida Bar, saying in court, “I’m flabbergasted that a lawyer would risk his or her career to make false claims.” Aguirre said in a deposition that he discovered that the firm’s billing records for one case included meetings that never occurred and charged for his presence when he wasn’t there.

The Strems firm worked on contingency. Strems Law generally took 30% from the lawsuit settlements but it also could hit insurers for its fees and costs. In one case, according to the Bar, the firm claimed $300,000 in attorney fees from an insurer on a case that ended with a $10,000 award for the client. In another, the firm wanted $22,500 of a $45,000 settlement.

Strems did well enough to be generous. In addition to supporting community groups, UF Gator Boosters annual reports from 2015 through 2021 list him at elite Bull Gator status for donations of more than $15,000 annually. His name also is listed in reports among those who contributed $10,000 to have their names on a bollard outside Ben Hill Griffin Stadium, where there’s also a “Strems Gator Party Zone” club room. On June 5, 2020, the university’s board of trustees recognized his generosity by voting to name for him the “Strems Gator Deck” at the new Florida Ballpark baseball facility. That same day the Florida Bar filed an emergency petition with the Supreme Court to suspend Strems from practice.

Bar fight

The Bar accused Strems of aggressively marketing his firm to maximize client count without the staff to support it or weed out bad claims from good. He pushed litigation because he could turn small disputes into “substantial” fees and made a practice of filing multiple suits over a single property when one would do, the Bar said.

Strems, the Bar alleged, “sits at the head of a vast campaign of unprofessional, unethical and fraudulent conduct that now infects courts and communities across the state.”

The Supreme Court in 2020 ordered Strems’ suspension, forcing him to sell the firm, renamed Property Advocates. Terms weren’t disclosed. Hunter Patterson, who leads the firm now, declined an interview.

Strems faced trouble in other venues. In 2021, state-run Citizens Property sued him, the firm and two companies who were involved in tens of thousands of claims with Strems’ firm — Contender Claims Consultants and All Insurance Restoration Services — and their presidents, in Miami-Dade Circuit Court alleging civil racketeering, fraud and conspiracy. Efforts to obtain comment from the company presidents weren’t successful.

The lawsuit alleged the defendants defrauded Citizens out of $112 million and would have cost the insurer another $16 million a year. Separately, a suit brought by Orlando attorney Lee Jacobson seeks class-action status against Strems on behalf of people who say they unwittingly signed to retainer agreements with Strems’ firm. According to the suit, Orange County homeowner Sonia Ortiz in 2017 asked Contender to come to her house to provide a damage estimate she could file with her insurance company. She said she was told that to get assistance, she needed to sign an agreement presented on a tablet. She signed not realizing she actually was hiring Strems on contingency, she said. Later, she got a letter saying her insurer would pay $8,626.82, of which Strems would claim $2,156.71. Her suit alleges fraudulent misrepresentation, unjust enrichment and violation of her homestead rights. The defendants denied wrongdoing. The case is pending.

Meanwhile, the Bar went after one of Strems’ salaried associates, Gregory Saldamando, alleging he enriched himself at client expense over a sinkhole claim on a house in Broward County. The clients agreed to settle the claim for $100,000 with the Strems firm taking $35,000, the Bar says. Saldamando then settled the case for $157,500 without telling his clients and, the Bar alleged, wanted $92,000 for attorney fees. The couple netted just $55,250. Saldamando’s attorney told the state Supreme Court that the fight over the fee became “contentious” because of the Bar’s “fixation” with Strems. The court in March suspended Saldamando for 91 days. He declined an interview.

The Bar filed four discipline cases against Strems. An appointed referee, Miami-Dade Children’s Court Judge Dawn Denaro, heard the evidence to make recommendations to the state Supreme Court. Strems denied intentional wrongdoing and attributed his problems to shortcomings in scaling his law business, saying he stayed within Bar rules on acquiring clients and other matters. He said he only had problems in a fraction of cases. “I think we’ve done a decent job,” he said. “It certainly had some deficiencies that we were able to identify and correct.”

Strems’ lawyers accused the Bar of carrying the insurance industry’s water. “The insurance industry is pushing this case,” one of his attorneys, Scott Tozian, wrote. The Bar replied it was not a “patsy” for the industry.

In two cases, Denaro found the Bar failed to prove Strems guilty and faulted him in a third case, recommending a public reprimand.

But in the case that led to his emergency suspension, she found him guilty of 10 of 15 violations, though not of the allegations that he had improper relationships with remediation companies or a duplicate-suit filing scheme. She faulted him as a managing attorney for not dealing with growth issues in a timely way, for failing to communicate with clients and for misconduct, false information and for the cases thrown out for attorney misconduct. She recommended the Supreme Court suspend him for two years followed by a year of probation. Both sides took exception. The Bar asked for Strems to be disbarred permanently. Strems’ attorneys asked for leniency. Tozian said the evidence showed Strems never told attorneys to violate rules and made an extensive effort to improve the firm.

Citizens this year settled its racketeering suit by taking a $1-million payment from Strems’ firm, AIRS and Contender Claims to reimburse it for investigation costs. Neither Strems nor the presidents of the two companies personally contributed to the settlement and each side maintained it was right. “Our chief concern was to stop this ongoing fraud, and we did so,” e-mailed Tim Cerio, Citizens’ general counsel. “We had a strong case, but you can prevail at trial and still not recover a dime. However, Scot Strems has been suspended from the practice of law, his law firm has been dissolved, a criminal investigation is ongoing, and Citizens expects to save $16 million year. We think that’s a win for Citizens’ policyholders and the taxpayers of Florida.”

Patronis took the settlement as an opportunity to publicize a letter he wrote to the Bar saying it needed to do more about litigation problems. “This was ambulance chasing on steroids,” Patronis wrote. “We are all paying for these misdeeds through rate hikes and a collapsing private market.”

As of early August, the state Supreme Court hadn’t ruled on Denaro’s recommendations. One of her recommendations: That the clock on a two-year suspension start in June 2020, when the Supreme Court issued its emergency suspension. If the recommendation stands, Strems completed his suspension in June.

Strems, at a 2020 hearing, said he plans a comeback: “I understand that if I have to start over from scratch, I will do that.”

Who’s at Fault?

Without a hit from a major hurricane, annual underwriting losses from property insurers in Florida eclipsed $1 billion in 2020 and in 2021. Five companies have failed as of late summer. Those still standing are shedding policies, avoiding new ones and raising rates. The average Florida home insurance premium will hit $4,231 this year, up from $2,505 in 2020 and almost triple the national average, says the Insurance Information Institute. Citizens Property, the insurer of last resort, is expected to exceed 1 million policies by the end of 2022 — up from 463,247 in 2020. Without a viable insurance market, says insurance agent and state Sen. Jim Boyd, R-Bradenton, chair of the Senate banking and insurance committee, “Realtors can’t sell houses, bankers can’t make loans, people can’t pay their bills. It can cripple the economy pretty quickly if we don’t do something to fix that problem.”

The problem, the industry and some state leaders maintain, is the state’s litigation structure and some attorneys who abuse it. The answer, they say, is to rein in the lawyers. That requires a trade-off. Historically, Florida delegated to attorneys the job of safeguarding the rights of policyholders against insurers.

Those attorneys, as represented by the Florida Justice Association, say they aren’t the cause of the problem. St. Petersburg-based attorney Amy Boggs, chair of the association’s property insurance section, says she opposes high-volume “robo-filing” but says there’s a parallel on the industry side: Carriers who en masse underpay claims.

Some carriers underpay claims knowing a significant percentage of policyholders will accept it, she says. For most claimants, “they’re in litigation because the insurance company has failed them not by a little, but by a lot,” Boggs says.

The two sides dispute a key statistic. According to the state’s Office of Insurance Regulation, Florida accounted for 8% of homeowners’ claims nationally in 2019 but 76% of suits against insurers. But the plaintiffs lawyer association says the stat is suspect. The national database involved doesn’t include data from New York or the Texas windstorm association, said a consultant for the association, former Texas insurance department chief economist Birny Birnbaum. He also said the data indicate that Florida insurers are an aberration nationwide in being slow to pay claims, which leads to lawsuits.

Boggs says the state already had remedies it could take against bad actors. “We can’t legislate for the outliers,” she says. “We have the Florida Bar and the CFO’s office. We have the court system, and we have insurance carriers who can fight them.”

Boggs says she wonders whether the industry likes having a “poster child” because “they can pass legislation saying they have to fix that.”

The Legislature in 2019 and this year restricted the awarding of attorney fees in insurance cases. It also took steps to de-incentivize the assignment of benefits market. Assignment of benefits transfers a homeowner’s insurance claim and benefits to a third party, such as a roofing company or water damage repair company. The companies, without further homeowner involvement, file the claim and can sue the insurer for both the claim and attorney fees.

Boggs says the number of lawsuits filed after the 2019 restrictions are down 22% but rates have increased. “From a consumer perspective, the insurance is becoming more expensive and worth less and difficult to use.“

Even among those seeking to restrict the plaintiff attorneys, opinions are mixed on whether the most recent reforms were successful. State Chief Financial Officer Jimmy Patronis says consumers remain protected — they can still sue. All sides have been “wearing the legislators out,” he says. “If everybody feels pain, who usually wins is the consumer.” He expects the legislative changes will bring relief over the next 18 months but more is needed. “Every single year you’ve got to stay on top of the environment because the bad actors stay on top of it,” he says. State Sen. Jeff Brandes, R-St. Petersburg, says the Legislature did “basically too little, too late. The state needs major surgery, and we ended up treating it for flu.”

In contrast, Boyd, the Senate insurance committee chair, says, “I believe we went a long way to fixing the problem.” He says it will take at least a year to see results.

The changes “are going to have a positive impact on the litigation environment in Florida, but it’s going to take awhile,” says Paul Handerhan, president of the Federal Association for Insurance Reform in Fort Lauderdale.

Tags: InsuranceFeatureInsurance Crisis

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Fresh on the heels of massive reinsurance price increases in June, which helped send some property insurers into insolvency or out of the Florida market, reinsurers are now likely to raise premiums again in the next few months.

Analysts with financial ratings firms said this week that pressures from inflation, the war in Ukraine, climate change and capital market volatility will lead to new price hikes, Reuters news agency reported.

“We do expect rate rises to continue,” S&P Global lead analyst for insurance Ali Karakuyu told a media briefing. “Depending on the segments that you are looking at, the rate rises will vary, but on average, I’d say mid-single digit (percent).”

A survey of reinsurance buyers published by ratings agency Moody’s on Tuesday showed most respondents expect reinsurance rates to rise next year. Reinsurers such as Swiss Re, Munich Re and the Lloyd’s of London market have been busy raising rates in the past few years to recoup losses from natural catastrophes such as hurricanes and wildfires, the COVID-19 pandemic and from sanctions on Russia and countermeasures due to the Ukraine war. But more is needed.

Property rates in the United States and Caribbean market – exposed to natural catastrophes – were expected to rise particularly strongly, in the “high-single to low-double” digit percent range, the survey showed.

But pressure on reinsurance premiums in the energy sector may lessen as reinsurers have pulled back from underwriting Russian firms due to sanctions, Helena Kingsley-Tomkins, senior analyst at Moody’s, told Reuters by phone.

“Demand from Russian companies is obviously disappearing from the market.”

Reinsurers meet in Monte Carlo next week for their annual conference for the first time since 2019, after the event was halted during the COVID-19 pandemic. They will be discussing rates with their insurer clients ahead of the Jan. 1 reinsurance renewal season.

Reinsurers’ capital dropped by 11% in the first half to $647 billion, hurt by financial market declines, broker Gallagher Re said in a report on Tuesday.

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Typ Tap Insurance is opening in S. Florida for a brief month or 2 & this may be an opportunity to get better rates & coverage w/ a solid carrier that does not normally drop people. The rules are simple, Single Family Homes only. No claims last 5 years, you must have proof of prior Insurance currently & no aggressive breed dogs. If you fit this Bill, then you need to Call Lee the IG at ISAssurance starting Monday 9/12 as the carrier opens for new business 10/1 for a limited time

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By William Rabb |

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Recent developments have sparked new debate about the role that Citizens Property Insurance Corp. should play in Florida’s rapidly shifting property insurance market, with potential changes that could affect agents, other carriers and homeowners for years to come.

At a Citizens committee meeting last week, Florida regulator Susanne Murphy revealed that the Office of Insurance Regulation is now considering waiving Citizens’ $700,000 coverage limit for upscale homes, at least in some counties. Agents have said that the change is badly needed: Their options are more limited than ever in parts of the state where home values have soared and primary market carriers have pulled back or have restricted coverage in the middle of hurricane season.

But others warn that such a move won’t help depopulate the largest insurer in the state and could deepen Citizens’ exposure in an era of stronger storms.

“That’s a decision OIR will have to make,” said Barry Gilway, CEO and executive director of Citizens. But, he added, with Citizens topping 1 million policies this summer and continuing to grow, “it’s probably something that should be avoided.”

Gilway

In the last year or so, Citizens has had to terminate some 3,300 policies in the state because home values and coverage exceeded $700,000, Gilway said. And another 14,000 policies are knocking at the door, covering properties that are in the $600,000 to $700,000 range, Citizens’ chief operating officer, Kelly Booten, reported.

Also last week, Florida State University’s risk management and insurance program, in an academic paper soon to be published, revisited the idea of moving all wind policies to Citizens, allowing other insurers to write only the less-costly water and other perils.

“Since hurricane wind coverage is difficult to insure profitably, it might be strategically and economically prudent to intentionally remove it from the primary market,” reads the FSU paper. “With recent legislation (Senate Bill 76, 2021) allowing Citizens to increase rates gradually over the next few years and the ability to assess policyholders in the event of a deficit, Citizens may be in a better position to insure wind than the primary insurers.”

And Florida regulators are also asking for $1.5 million to have a consultant examine new options for property insurers that are facing financial ratings downgrades – an indication that a plan to utilize Citizens as a type of reinsurer for struggling companies may not help stabilize the market.

Raising the Coverage Cap

Murphy, the state’s deputy insurance commissioner, said that state law allows the office to waive Citizens’ Coverage A limit in counties that do not have sufficient competition from private carriers. The state took that step in 2014, raising the cap to $1 million, but only in Miami-Dade and Monroe counties, on Florida’s southern tip.

Proving there’s a dearth of primary carriers in other Florida counties may be more difficult, and Murphy said the OIR is looking for all the data it can find.

“Whether there’s enough data to support that finding is what we’re trying to determine. The last time we did this it was pretty clear, but the data we’ve looked at thus far this year is not as clear,” Murphy told the Citizens Market Accountability Advisory Committee on Aug. 31.

To help, the Florida Association of Insurance Agents plans to work with OIR to develop data points that member agents can help supply.

It wasn’t made clear what data is lacking. The OIR already receives a great deal of information from carriers, including policies in force and exposure per county, even if all of that data is not made public in quarterly reports. The OIR’s Quarterly and Supplemental Reporting System, known as the QUASR, shows a range of information on dozens of Florida carriers. But a number of carriers consider the data to be trade secrets, and have elected not to have it made public.

Murphy said the OIR could have the review completed within six weeks or so.

Some insurance industry experts aren’t so sure about the idea.

DeVriese

“I’m not sure why that’s needed,” said Melissa Burt DeVriese, president of Ormond Beach-based Security First Insurance Co. “We’re open for business and we write up to $2.5 million in coverage.”

“Raising the Coverage A cap would certainly send more policies to Citizens, increasing its exposure” as well as the potential for a surcharge on all policyholders in the state if Citizens faces heavy storm losses, explained John Rollins, an actuary and former insurance company vice president.

And although Citizens officials are quick to point out that an assessment to help cover losses would be placed only on policyholders, not taxpayers, storm losses could ultimately affect Florida’s sparkling credit rating, simply because Citizens in some ways is considered to be a state agency, said professor Charles Nyce.

Nyce is associate FSU professor of risk management and insurance whose doctoral students researched and wrote the paper examining the state of the Florida insurance market.

Citizens for Wind?

On making Citizens the insurer for wind damage in Florida, as suggested in the FSU paper, DeVriese said that, too, is unnecessary.

“Wind coverage is not what is ailing the Florida property insurance market – it’s abuse of assignment of benefits and frivolous litigation,” she said last week.

Nyce agreed that making Citizens the sole wind writer, an idea similar to one considered by lawmakers after Hurricane Andrew, is a departure from a market-based, capitalism system.

“Typically, I’m more of a free-market person, but the large insurance companies have already decided they don’t want to be in Florida,” Nyce said. “So you’re left with smaller companies who don’t have much negotiating power with reinsurers and who aren’t very diversified.”

Nyce

The FSU paper’s suggestion on wind coverage, along with OIR’s exploration of raising the coverage cap, has helped put a new spotlight on Citizens’ function in Florida’s distressed marketplace.

“It’s up to our elected officials now to decide if Citizens is really the insurer of last resort or is it to be a large force in the homeowners insurance market,” DeVriese said.

The Florida State paper examines other aspects of the Florida market, including the growth of claims litigation and fraud and the use of Florida-specific subsidiaries by some national carriers after Hurricane Andrew slammed south Florida in 1992.

One example of those subsidiaries, which the paper calls a “pup” company, is part of Allstate Insurance. Castle Key Insurance is now one of the largest property insurers in Florida, with more than 293,000 policies in force this year, according to the QUASR report.

Ratings Question

On the financial ratings question, the Florida Department of Financial Services recently submitted a proposal to the state’s Joint Legislative Budget Commission, which meets this week, WINK TV news station reported.

The proposal asks for $1.5 million to fund a study into alternatives for Florida insurers, many of which now rely solely on the Demotech rating firm. Demotech has downgraded several carriers this year, which could ultimately mean homeowners with mortgages could have to find new insurance or be force-placed.

TOPICS FLORIDA

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WRITTEN BYWilliam Rabb

Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers’ comp insurance issues for a trade publication for a few years.

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ORLANDO, Fla. — When Nick Helyer and his wife decided to become landlords, the plan was to build for retirement. Now, after more than 20 years of owning rental homes in central Florida, Helyer is facing a pair of headwinds, rising insurance costs and rising taxes.

“We’re getting pounded by raised property taxes and raised insurance,” says Nick. “Insurance has ranged from 50 percent increase to 100 percent increase in a single year.”

These rising costs mean rent must increase as well.

“We are very open with our tenants and tell them in detail why there is an increase and I think that helps,” says Nick.

While an explanation may help soften the blow, it doesn’t bring down the price.

For landlords across the state, the collapsing property insurance market has driven up prices.

In February, United Property and Casualty announced it would stop writing policies for landlords, 5-months later Progressive and Bankers Insurance did the same, discontinuing policies including DP-3 policies, commonly used by property owners.

“Florida homeowners are paying the highest rates in the nation,” says Mark Friedlander of the Insurance Information Institute. “The escalation of Florida’s insurance crisis is increasing, we’re seeing more volatility in the market today than we have in the last two years, and the situation is deteriorating quickly.”

Last month, Citizens Property Insurance, the state-backed insurer of last resort eclipsed 1-million policies. Today it has over 1,020,000 policies, adding another 7,000 in the last week.

“Citizens is supposed to be a backstop, not a place homeowners turn to because they can’t find coverage elsewhere,” says Mark.

Meanwhile, increased value for land and homes is also driving up property taxes, with landlords absorbing some of that cost as well, but passing part along.

“I think there is a misconception that landlords make lots and lots of money, but we’re working on margins of about four to eight percent, so when we get hikes for things like this that we are not anticipating, we do have to pass it on,” says Nick.

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Lawyers who secured a $1.1 billion settlement in the deadly collapse last year of a beachfront Florida condominium building were awarded more than $70 million in fees Monday by a judge.

The total was less than the approximately $100 million attorneys with the 17 law firms had requested, but there were no guarantees initially they would ever be paid in the days after the Champlain Towers South building fell June 24, 2021, killing 98 people.

Miami-Dade Circuit Judge Michael Hanzman said surviving family members and people who only lost units and property got far more in compensation than is typical in such large class-action cases — and this lawsuit was settled in only a year’s time.

“That is a remarkable result. It is unprecedented,” Hanzman said at a hearing. “They are not getting a meager recovery here. They are in essence being made whole, which never happens in these cases.” Hanzman also remarked that the case “could have been an absolute disaster.”

“It had so much potential to go off the rails,” the judge said. “If things had not turned out well, they (attorneys) would have walked away with nothing.”

Still, the judge said the full $100 million in legal fees requested was too much. He noted not only that lawyers were not promised a dime initially when they took the Champlain Towers case but also that their swift settlement meant a reduction in the hours involved.

Some survivors also questioned the higher amount as too generous given the scope of the tragedy, even as they acknowledged the extraordinary outcome.

“No one should be profiting from the death of 98 humans,” said Marin Langerfeld, who lost his sister and her husband in the collapse.

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“This is the most difficult thing that has happened to our family’s lives,” added Kevin Spiegel, whose wife Judith died. “We will always carry this around.”

The settlement money comes from 37 sources, including insurance companies, engineering firms and a luxury condominium building whose recent construction next door is suspected of contributing to structural damage of Champlain Towers South. None of the parties admit any wrongdoing.

A billionaire developer from Dubai purchased the 1.8-acre (1-hectare) beachside site for $120 million, contributing to the settlement. It’s not clear yet what structure will rise on the site.

Hearings before Hanzman and a second judge on the wrongful-death claims have taken place over the past five weeks. Michael Goldberg, the court-appointed receiver overseeing the case, said checks should be distributed to those families who lost loved ones beginning in mid-September. Those who lost only property will receive the full assessed value for their units, with taxes and other costs forgiven.

One of the plaintiffs’ lead lawyers, Harley Tropin, said the $100 million was the absolute ceiling for attorney fees and that the group was satisfied with whatever was awarded.

“It was an honor to be chosen to try to get a result on behalf of these victims. There’s no victory lap here,” Tropin said. “The victims come first. We’re good.”

Champlain Towers South had a history of maintenance problems, and questions have been raised about the quality of its original construction and inspections in the early 1980s. Other possible factors in the collapse are sea level rise caused by climate change, which could cause damage from saltwater intrusion.

A final conclusion on the cause is likely years away. The National Institute of Standards and Technology is overseeing the investigation.

Copyright 2022 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

By Noor Zainab Hussain and Carolyn Cohn

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Insured losses from floods doubled to $80 billion globally during 2011-2020 compared to the previous decade, while insurance penetration lingered at just 18%, according to Swiss Re Institute’s economic insights report focused on floods.

Climate change has led to an increased likelihood of high-intensity heavy rains and short-duration floods events as well as higher flood-related losses as a consequence, but insurance coverage has remained dangerously low.

This year heavy rains have triggered floods that inundated cities in China and South Korea and disrupted water and electricity supply in India, while drought has put farmers’ harvests at risk across Europe.

Torrential rains and flooding have also submerged a third of Pakistan. The United Nations appealed for aid for the country this week for what it described as an “unprecedented climate catastrophe.”

The United States too has faced floods in recent weeks and months, including in Kentucky and Texas. Such events highlight the insurance gap.

“The recent events in Kentucky, Mississippi and Texas are a sad reminder of how devastating floods can be to our lives,” Keith Wolfe, president U.S. P&C, Swiss Re, told Reuters.

“Despite the private flood insurance market gaining traction over the last few years, too many people are still not covered for flooding and the majority of those impacted by these events are uninsured, leaving them to pick up the pieces at their own expense.”

The potential for insurance cover to grow is huge, according to Swiss Re. Nearly 40% of the U.S. population lives in coastal counties and 10% in floodplains.

Better data and sophisticated risk mapping and modeling are enabling more accurate quantification of flood risk and creating scope for growth of the private sector flood insurance market, the report said.

Copyright 2022 Reuters. Click for restrictions.

TOPICS FLOOD

By William Rabb 

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A former attorney with one of Florida’s top insurance defense firms has been disbarred after the Bar said she engaged in repeated acts of neglect, deception and forgery.

Erika Lynn Muller, until recently a partner with the Cole, Scott & Kissane firm, based in Fort Lauderdale, can no longer practice in the state, the Florida Supreme Court said in an order last week. The court agreed with the Bar’s complaint and a referee’s recommendation that she be disbarred, following months of disciplinary proceedings.

The Bar’s complaint lists several issues, including lack of truthfulness, misconduct and lack of communication, and details one case in particular that unfolded in 2020 and 2021. In a slip-and-fall claim against Rooms To Go furniture company in Miami, Muller offered to settle the claim for $325,000, even though she was not authorized to do so, the Bar said.

She then sent the plaintiff’s attorney a photocopy of a check that she had allegedly fabricated. The plaintiff’s lawyer filed motions to enforce the settlement, which resulted in a court judgment in March 2021 of $425,000, the complaint explains.

Despite garnishment actions against the law firm, the money never materialized. Muller then agreed to send $550,000 to stop the garnishments. She allegedly sent a photocopy of another fabricated cashier’s check, then said she would hand-deliver the check.

But on the day of the planned transfer, she falsely said she was in an automobile accident, the bar said.

Meanwhile, Muller told the furniture company and an adjuster for the insurance company that the case was still in mediation, the Bar said.

On April 7, 2021, Muller informed Cole, Scott & Kissane attorneys that she was resigning.

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In an affidavit, “respondent acknowledged that she made misrepresentations to multiple parties and presented altered documents to plaintiff’s counsel,” the Bar’s complaint reads. “In her affidavit, respondent further stated that she was suffering from a mental health crisis during the time of the misconduct.”

Muller later failed to respond to any of the Bar’s inquiries into the matter. The Rooms To Go litigation, brought by an independent contractor who was injured at an RTG parking lot, was dismissed in June 2021.

A referee judge who reviewed the case against Muller agreed with the disbarment action.

“It is imperative that a clear and unmistakable message be sent that callous disregard for clients, the Florida Bar, and the attorney disciplinary process are serious infractions which may not be committed with impunity,” Judge James Martz II wrote in April of this year.

The state Supreme Court, which in recent years has often disagreed with referees’ recommendations, accepted it in this case and said the disbarment will be effective Sept. 25. Muller must also pay $1,315 to cover the Bar’s costs in investigating the case.

The case made headlines in Florida in 2021 and raised eyebrows around the legal community. Court records show that Muller was listed as an attorney on four cases before Florida’s 3rd District Court of Appeals, including an insurance claim appeal that is still pending.

Muller is a graduate of the University of Miami School of Law and was a member of the Florida bar since 2008. The Cole, Scott & Kissane website notes that she focused on bad-faith litigation, personal injury defense, premises liability and insurance defense litigation. She and the law firm’s leadership could not be reached for comment Wednesday evening and Thursday morning.

TOPICS FLORIDA

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The cap issue has drawn particular attention in counties with high-value home prices.

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  • News Service of Florida

Published Yesterday

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TALLAHASSEE — With homeowners struggling to find coverage, insurance regulators are looking at the possibility of lifting a $700,000 cap on policies sold by the state-backed Citizens Property Insurance Corp.

Citizens is barred by law from providing what is known as a “replacement cost” coverage of more than $700,000 for homes, except in Miami-Dade and Monroe counties, where the limit is $1 million.

But as Florida’s property insurance market has crumbled and home values have soared, many homeowners have been dropped by private insurers and cannot qualify for Citizens coverage because of the $700,000 cap.

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Susanne Murphy, a deputy commissioner at the Florida Office of Insurance Regulation, said during a Citizens committee meeting Wednesday that regulators are analyzing whether they could increase the $700,000 cap in at least some counties.

State law would allow such a move if regulators determine that “there is not a reasonable degree of competition” in the counties. Such a finding is what allowed the $1 million coverage limit in Miami-Dade and Monroe counties.

“Whether there’s enough data to support that finding is what we’re trying to determine,” Murphy told members of the Citizens Market Accountability Advisory Committee. “The last time we did this (with Miami-Dade and Monroe), it was pretty clear … and I think that the data that we’ve looked at thus far is not as clear as it was years ago.”

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Committee member Lee Gorodetsky, a South Florida insurance agent, said “clients can’t even squeeze into Citizens insurance, even though they want to or need to.” That has resulted, for example, in homeowners having to turn to what is known as surplus-lines coverage, which is largely unregulated and can include more conditions on policies.

RELATED: Florida’s latest insurance crisis was decades in the making

Murphy, a member of the Citizens committee, said it will probably take another month before regulators decide on whether to lift the cap.

The discussion about the cap is more fallout from the troubled private insurance market, as carriers have shed policies and sought large rate increases to try to curb financial losses. Since February, five insurers have been deemed insolvent and placed into receivership.

Citizens, which was created as an insurer of last resort, has been flooded with policies during the past two years. As of Friday, it had about 1.02 million policies. By comparison, it had 499,056 policies on Aug. 31, 2020, and 687,079 policies on Aug. 31, 2021, according to data posted on its website.

The coverage cap also is tangled in longstanding efforts by state leaders to have homes insured in the private market, rather than by Citizens. Those efforts, in part, stem from concerns about financial risks if the state is hit by a major hurricane or multiple hurricanes.

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Citizens policies had a $2 million coverage cap until lawmakers in 2013 passed a measure to gradually reduce it, with the $700,000 limit in place since 2017. Murphy said increasing the $1 million cap in Miami-Dade and Monroe counties — and potentially other counties — would require the Legislature to change state law.

Home values vary in different parts of the state, and most do not exceed $700,000. But the cap issue has drawn particular attention in high-value areas such as Broward and Palm Beach counties.

As an example, the metropolitan statistical area that includes Miami, Fort Lauderdale and West Palm Beach had a median sales price for existing single-family homes of $595,000 in July, according to the industry group Florida Realtors. In the area that includes Naples, Immokalee and Marco Island, the median sales price was $748,270.

By Jim Saunders, News Service of Florida