The number of lawsuits against Boca Raton-based Edison Insurance Co. have doubled in each of the past three years, and now Edison says it needs all of its customers to pay the price.
The company is seeking retroactive approval for a statewide average 21.9 percent rate hike scheduled to take effect Feb. 2 for new customers and March 2 for renewing customers.
Edison’s residential policyholders — if they choose to renew — face average premium increases of about $30 a month, or about $360 a year.
Under state law, insurers are allowed to impose rate increases and seek approval for them afterward. If state regulators deny the increases, the insurers must refund the difference.
The 21.9 percent rate hike follows an 11 percent hike in 2017, an 11.4 percent hike in 2018, and a 4.3 percent increase that took effect Nov. 1, 2019.
Edison, along with its owner Florida Peninsula Insurance Co., has chosen to shield from public view its county-level policy counts in a market share database maintained by the state Office of Insurance Regulation. On March 31, 2019 — just before Edison went dark — the company had 58,101 residential policyholders, including 12,438 in Palm Beach County and a combined 4,046 in Broward and Miami-Dade counties.
The biggest rate increases will be borne by Edison customers outside of Broward and Miami-Dade counties, company officials said. That’s because pricing was already adjusted for higher rates of water damage claims and litigation from the two counties, while pricing for those risks in the rest of the state was set too low, they said.
Because the latest proposed statewide average increase exceeds 15 percent, state law required regulators to conduct a rare public hearing.
During the hearing, Edison CEO Roger Desjadon blamed the increase request on a number of financial pressures, including increases in claims stemming from non-weather-related water damage, such as broken pipes, appliances and hot water heaters.
The number of water claims filed with Edison increased from 14.5 per 1,000 customers in 2016 to 24.5 per 1,000 customers in 2018, said the company’s actuary, Matthew Purdy of the firm Merlinos & Associates of Peachtree Corners, Ga.
The number of lawsuits filed against the company doubled each year since 2016, according to an online database maintained by the state Department of Financial Services. In 2018, Edison was targeted by 548 suits. So far in 2019, the number of suits increased to 994.
While water damage claims cost Edison $13,600 on average, claims that end up in court cost an average $40,000, according to Edison.
In recent years, insurers throughout Florida have been blaming a steady stream of annual rate hikes on dramatic increases in litigation.
Insurers spent six years telling state lawmakers that the problem stemmed from shady repair contractors convincing homeowners to sign over the ability to bill insurers for their work — a process referred to as assignment of benefits — and suing companies who refuse to pay.
The contractors worked with about a dozen law firms that specialize in suing over insurance claims, insurers argued. Over the past decade, they said, the firms began bombarding insurance companies with more lawsuits than they could defend in order to force settlements and extract legal fees often worth far more than the actual insurance claim.
Last spring, state lawmakers at last enacted restrictions aimed at curbing the number of claims assignments and reducing opportunities for attorneys to collect legal fees.
Consumers hoped the new law would curb the abuses and start to reduce insurance rates.
But in September, Barry Gilway, the CEO of state-run Citizens Property Insurance Corp., told his board of directors that the fight isn’t over.
Plaintiff’s attorneys have figured out that they don’t need the assignment of benefits and are continuing to find more ways to sue — primarily by representing policyholders directly, Gilway said.
As a result, additional legislative curbs might be needed to reduce incentives for plaintiffs attorneys to sue, Gilway said.
At the Edison town hall, executives similarly reported that the new laws restricting assignment of benefits are failing to slow rates of increase in water damage claims and litigation against the company.
Plaintiff’s attorneys have blamed insurers for increased litigation. Insurers too often drag out claims settlement processes by contesting reasonable invoices submitted according to accepted industry norms, attorneys say.
“When insurance companies don’t uphold their contract with consumers, they have no other choice than to pursue legal action,” said Leslie Kroeger of the Florida Justice Association, a trade association for plaintiff’s attorneys. “Attorney’s fees are only paid when the insurance company is proven wrong and the consumer prevails.”
Lisa Miller, a former deputy insurance commissioner who now lobbies the Legislature on behalf of insurance companies, summed up the insurance industry’s likely argument for further legislation when the 2020 Legislature convenes in March.
Regarding the 20 percent of water claims that Edison officials said are filed by third party legal representatives, such as attorneys or public adjusters, Miller said:
“Why on earth would others be filing claims other than the homeowner if it wasn’t driven by the need for fees — and greed?” She added, “We’re out of control in this state. Double-digit rate increases are going to happen again.”