Samari Lakes East, a nondescript condo complex near Miami, was battered by Hurricane Irma in 2017. The storm tore up the roof, causing water damage across Samari’s 635 units, home to retirees and blue-collar workers.
The complex’s insurer, Heritage Property & Casualty Insurance, said the damage was only $22,107. In April, after a lengthy court battle, Heritage paid $17.9 million. The insurer didn’t respond to requests for comment.
“It has been a nightmare…horrible, horrible years,” said Ivonne Avellaneda, a chauffeur and president of the condo association’s board.
Samari Lakes won its fight, but such victories are likely going to get rarer, in part because of climate change. Home-insurance markets are in crisis in some states, due to severe weather, inflation and regulations. Insurers are responding to heavy underwriting losses by driving up premiums and pulling back from writing new policies.
A few hard-hit states are trying to ease the pain on insurers by making it harder for lawyers to sue. Insurers have long complained that aggressive lawyers with dubious claims have led to higher premiums for their customers.
“The pendulum is swinging from being less friendly to insurers to putting them into a position of strength,” said Benjamin Keys, a professor of real estate and finance at the University of Pennsylvania’s Wharton School.
In Florida, insurers have long identified excess litigation and fraud as a prime driver of the market meltdown. Many national home insurers have pulled out of the state. Seven Florida home insurers have gone under since the start of 2022, six of them before Hurricane Ian struck the state that year. “In our opinion, these companies were litigated out of business,” a spokesman for industry body the Insurance Information Institute said.
Lawmakers in Florida have in the past 12 months responded by overhauling the state’s legal system to tackle what Republican Gov. Ron DeSantis called its reputation as a “judicial hellhole.”
The state has axed the requirement that an insurer has to pay the policyholder’s attorney if it loses a case, which was seen as a big incentive for lawyers to take on cases. Florida also has now banned the so-called assignment of benefits, under which policyholders gave roofing contractors or other third parties the right to seek payment directly from their insurer—a right the industry says was abused.
Florida could provide a blueprint for some other states trying to stabilize insurance markets. One is Louisiana, where several insurers have pulled back or gone under following a series of storms. Tim Temple, a Republican who is set to take over next year as the state’s insurance commissioner, supports making it harder to sue insurers to help fix the “broken” market.
In Georgia, the Republican governor and legislative leaders are trying to pass rules to limit lawsuits against insurers.
The nationwide changes aren’t all in favor of insurance companies: In Michigan and Texas, the industry is fighting efforts by lawmakers to ease the rules on lawsuits, the spokesman for the Insurance Information Institute said.
Consumer advocates worry that the Florida changes go too far. They accuse the industry of creating a “false villain” of lawsuit abuse, when the real problem lies in a sharp rise in costs from multibillion-dollar catastrophes, such as last year’s Hurricane Ian.
The changes will make it harder for policyholders to sue insurance companies for acting in bad faith. Simply showing the company was negligent will no longer be enough to win such a case.
Hurricane Irma damaged roofs, windows and doors at the Samari Lakes condos, allowing water to pour in, an independent assessor found. Avellaneda said her ceiling leaked, her floors and walls were damaged and her unit had large black mold stains. She said most of the complex’s elevators stopped working, making it hard for elderly residents.
Heritage’s initial assessment was below the condo’s deductible. After Samari filed suit, the two sides agreed to appoint an independent assessor, who pegged the damage at $14.9 million. Heritage appealed the decision, court filings show.
Heritage Insurance Holdings, which owns Heritage Property & Casualty, is one of the largest home-insurance companies in Florida. It said in a 2018 state filing responding to Samari’s complaints that it “has and will continue to act in good faith.” The Tampa-based insurer at that time defended its assessment that little damage was caused by Irma, saying Samari’s roofs were old and in poor condition before the storm.
It is too early to tell how great an impact the new Florida legal regime will have on the state’s insurance market. Some insurers are already reporting benefits from the new regime. Citizens Property Insurance, the state’s insurer of last resort and biggest home-insurer, said it was on the receiving end of fewer lawsuits, with a monthly average for January through June of 785, down 20% from 985 a month for the first half of last year.
That could help at least some policyholders. The change in the law is unlikely to make a dent in Florida’s steep home-insurance rates, catastrophe-modeling company Karen Clark said in a report this month. But, the report added, without the changes, “premiums would be higher.”