The Legislature will be back in Tallahassee Monday to deal with a property insurance mess that’s largely of its own creation. Will lawmakers meeting in a brief special session be able to accomplish all that needs to be done but wasn’t done during their 60-day regular session?
The odds are about the same as those for the Miami Marlins to win the World Series this year. Instead, what’s likely to happen is half-measures that may avert a looming crisis but will bring to mind Henry David Thoreau’s often-cited remark that “There are a thousand hacking at the branches of evil to one who is striking at the root.”
The special session’s proximity to the following week’s official start of the Atlantic hurricane season contributes to a widespread perception that property insurance premiums are high in Florida because of our vulnerability to hurricanes.
That’s one part of the problem, and it’s certainly a factor in the difficulty some of Florida’s property insurers are now having in obtaining reinsurance, which is insurance for insurance companies. Reinsurance is sold in a global marketplace that’s currently being roiled by multiple natural disasters and man-made crises.
There are worries that some of Florida’s property insurers may not be able to afford reinsurance coverage when their current policies expire on June 1, so lawmakers may be asked to allow the state’s catastrophe fund to fill the void — even if doing so puts the state on the hook for huge financial losses if several destructive storms were to strike in a brief period.
Keeping multiple providers in Florida’s property insurance marketplace is important if the state is to avoid serious economic problems, such as having its extremely important housing market grind to a halt for reasons that are encapsulated in two scary scenarios.
Scenario 1: Your mortgage application was approved, but you can’t find property-insurance coverage, so you’re stuck.
Scenario 2: A storm destroys your home. Your call your insurance company. It responds “Sorry, we’d like to help you, but we’re broke. Contact the state.”
Insurance companies going broke isn’t as unusual as policyholders may assume. Indeed, as reporter Lawrence Mower pointed out in a well-researched May 17 Herald story, “Since 2018, the last time a named hurricane hit Florida, seven property insurers have been declared insolvent — four of them in the last 13 months.”
While there’s no doubt that Florida’s vulnerability to hurricanes is a factor in the state’s high property insurance rates, it’s not necessarily the most important factor, as indicated by the high cost for other kinds of coverage, such as medical malpractice, workers compensation, and car insurance — policies whose costs have little or nothing to do with hurricane exposure.
In fact, only Louisiana residents pay a higher share of their personal income for car insurance than Floridians do. The root cause of this — and many of Florida’s other insurance woes — is evident in the fact that Florida Department of Highway Safety and Motor Vehicles uses the terminology “traffic crashes” rather than “traffic accidents” in its reports.
Why? Because, especially in the fraud capital of South Florida, many collisions are staged, not accidental. For example, imagine that you’re driving along the Palmetto Expressway, obeying the speed limit and keeping a proper distance from the vehicle ahead of you.
Suddenly that vehicle’s driver slams on his brakes. Result: a rear-end crash and a lawsuit wherein the “injured” driver claims that he suffers from severe whiplash, with costly treatments needed from doctors, physical therapists and even masseurs who just happen to be in on the deal.
Often, in calculating the cost of defending against such claims, insurers will settle for an amount that, though large, is cheaper than taking the case to a court. That’s because if the case does go to court and somehow results in a jury trial, the plaintiff’s lawyer will stage a little drama featuring the “victim” in a neck brace retelling his tale of misery.
Sympathetic jurors will be left to wonder why a deep-pockets insurance company is fighting such a claim. Their bias is enhanced by personal-injury law firms’ ads that constantly demonize insurance companies.
Similarly, with property insurance, costs are inflated by blatant fraud, the unbridled power of Florida’s personal-injury lawyers, and “settlement mills.” As researcher Christian Camara noted in a January 2022 study by The James Madison Institute, “In 2019 alone, Florida accounted for 76% of all insurance litigation nationwide, even though the state only accounted for 8% of all insurance claims filed during the same period.”
(Disclosure: From 2005 to 2014, I served as The James Madison Institute’s policy director.)
Florida’s Insurance Commissioner Jimmy Patronis aptly describes the situation as “dire.” However, his ability to control property-insurance rates is limited by the so-called affordability vs. availability seesaw. Set rates too low, and companies will pull out of Florida; set rates too high, and Floridians will revolt.
Meanwhile, a report by the Florida Justice Reform Institute, which has been advocating tort reform for decades, notes that many lawyers are still circumventing reforms the Legislature passed in 2019 and 2021 in an attempt to curb property-insurance abuses linked to “assignment of benefits” and one-way attorneys’ fees.
In the Legislature, overcoming the personal-injury lawyers’ power and influence won’t be easy because all the lawyers need to do is to prevent any meaningful changes from occurring. One roadblock will suffice.
On the other hand, the reformers must run the gauntlet of House, Senate (and the committees therein), plus the governor, and, often in the past, a Florida Supreme Court that, until recently, unabashedly sided with the personal-injury lawyers.
So, for meaningful reforms to become a reality, lawmakers will need to defy the personal-injury attorneys for once and align themselves in support of a series of serious lawsuit reforms and other changes.
The lack of tort reform is driving up the price of insurance, including for property. Litigation is driving up Floridians’ cost of living. For the plaintiffs, filing lawsuits may be free, but everyone else must pay the price.
Robert F. Sanchez, a Tallahassee resident, is a former member of the Miami Herald Editorial Board. He currently writes for the Herald’s conservative opinion newsletter, Right to the Point, in which a version of this op-ed appeared. Click here to subscribe.