RON DESANTIS AND THE FLORIDA HOME INSURANCE UPRISING
Even as Governor Ron DeSantis begins to engage his opponents for the Republican presidential nomination, he will be dragged back into a bitter insurgency in his home base of Florida. Compared to Florida’s warring lawyers and insurance companies, the Washington press corps and opposition campaign consultants are just a bunch of kittens waiting to be put in a sack and thrown into the river.
One of the DeSantis campaign’s catchphrases is “Make America Florida”. That is supposed to invoke the recent boom in Florida’s population and economic growth, low state taxes, sunny skies, and little tolerance for corporate “woke-ism” or other challenges to traditional family values.
A fair number of homeowners will have extreme difficulty finding affordable property insurance. No home-owners insurance means no access to mortgage financing supported by the US government’s housing agencies. This is a real wake-up from the Florida Dream. Reasonable people might say this set of problems was not created by Governor DeSantis, but he happens to be Governor right now, this year and next year, when the reckoning is coming due.
And remember, we are not talking about Rational Man. We are talking about Florida Man. There are some downsides to life in an air-conditioned tropical paradise, and among those are tropical storms. If you live within a short driving distance to the beach and the ocean, there will be occasions when the ocean comes to you. Unless you live in a reinforced cement bunker with steel shutters over the windows, expensive damage will be done.
Some people would accept this fate with stoic self-reliance. It would seem not many such people live in Florida. No, in Florida getting paid quickly by your insurance company for (perhaps imaginative) storm damage claims is a basic human right. And there is an extremely active legal community in the state that is willing to enforce that right by litigating home-owners insurance claims that are turned down by the insurers.
According to a 2021 letter to a committee of the Florida state legislature from the commissioner of the state’s Office of Insurance Regulation, “Based on the most recent (national) data available, Florida accounted for 8.16% of all homeowners (insurance) claims opened by insurance companies in the U.S. However, in 2019 Florida accounted for 76.45% of all homeowners (law) suits opened against insurance companies in the U.S. The results for 2019 are not an anomaly…”
In other words, Floridian homeowners with property insurance claims were over than nine times more likely to sue their insurance companies than elsewhere in the country. Were Florida insurance companies nine times more tight-fisted and evil than other insurance companies in the U.S.?
If so, the insurers were not rewarded for it. According to (another) official note from last year on dealing with the Florida property insurance mess, “The profitability of the Florida domestic insurers that write about 70 per cent of the coverage in the state has suffered, and they have incurred net losses exceeding $2 billion in the last two years.”
Now insurance companies are not like lost pets or cute babies—-not many people really care about them. However, by late last year it was becoming very clear to the DeSantis Administration and many in the legislature that many of those insurance companies in Florida that were not close to insolvency were about to just get out of doing more business in the state.
So, in December 2022, just before Christmas, the legislature passed (and DeSantis signed) a “property insurance reform” law that was intended to significantly reduce the litigation of property insurance cases in Florida. Insurance companies in the state and, critically, the international reinsurance markets that share the insurers’ risks in return for a share of the premiums, were encouraged by the new law’s restrictions on litigation.
The annual reinsurance renewal season that wraps up by June has been more orderly than was feared. There was no Floridamegeddon shutdown of the insurance market. But the rollovers of contracts for coverage were far more expensive than in the past, with double digit cost increases for Florida insurance companies and home-owners.
Also, the reinsurance markets are becoming far more selective about what risks they are willing to share. Among the less desired Florida risks are older homes, homes in the most weather-vulnerable areas, and homes in counties without updated building codes.
This all makes sense to objective actuaries and investors in the insurance and reinsurance industry. The problem for Governor DeSantis is that people who live in those quasi-redlined areas include a whole bunch of voters with lawyers.
DeSantis seems to have attempted to respond to the popular unrest over expensive and spotty home-owners insurance. He supported and signed yet another law, headlined in his office’s May 31 press release as “Consumer Protection Legislation to Support Florida Policyholders When Disaster Strikes.
It appears the Governor and his allies have been trying to find some ideal “middle way” between the requirements of the insurance industry and the need for fair treatment of homeowners. Unfortunately for them, the Florida trial lawyers who represent homeowners have already declared total war.
In mid-March, a widely publicized internal e-mail from an officer of Morgan & Morgan, an 800-odd lawyer firm centered in Florida, stated that the firm “will not be giving an inch to (insurance companies) ever again. Under no circumstances will we be agreeing to any continuances… or requests to extend deadlines to answer any complaints. (Insurance company lawyers) work for the enemy who tried to kill us in FL…. The enemy who would like nothing more but for you to be unemployed. We work for the people.”
Morgan & Morgan lawyers have a lot of allies in the state and national political worlds. John Morgan, one of the original partners, was reported to have given President Joe Biden’s Florida-resident brother a ride to the Presidential inauguration in his private jet, just to be nice.
The trial lawyers’ animosity will not make it easy to resolve the hundreds of thousands of Florida homeowners’ insurance claims for damage from past events such as Hurricanes Ian (September 2022) and Hurricane Nicole (November 2022). These claims and lawsuits are not covered by the December 2022 reforms, which means the homeowners and the trial lawyers can continue to litigate them under the old, insurer-unfriendly laws and rules. “That’s the pig in the python”, sighs an insurance actuary, using a very Florida-appropriate metaphor.
Among the trial lawyers’ allies are a group of progressive organizations including the American Federation of Teachers, Florida Rising (a voting rights group), and Hedge Clippers (progressives who really don’t like hedge funds). No, they’re not a majority in the Republican primaries, but they can raise money, promote a lot of anti- DeSantis themes directly and indirectly in national and local media, and channel Florida homeowner discontent back in DeSantis’s original base.
The insurers and reinsurers are aware of the lawyer/progressive/political alliance against the DeSantis-sponsored litigation reforms. That is why they are still reluctant to commit capital and attention to Florida property coverage, even with the more favorable legal environment and higher rates. Capital is a coward, and insurance capital wants to see if the reforms and allowed rates will stay in place for a couple of years.
If the trial lawyers, enraged claimants and anti-DeSantis political groups fail to win the day and the litigation reforms stay in place, rates and availability for Florida homeowners should improve after a year or two. The Florida Growth industry might bubble along, and there could be enough skilled workers and materials to finally finish the post hurricane repairs and build enough new homes for yet more tax exiles and sun seekers.
Otherwise, things might get problematic for DeSantis voters, contributors, and allies. Personally, I hope everything will work out well in Florida; my daughter lives there. Ideally there won’t be any more tropical storms hitting the state and complicating matters even further.
But the continuing homeowner insurance mess and the political timeline will be very challenging for the Governor. He could have difficulties making enough new friends while keeping the old ones. From what I can tell, he has some determined enemies on his home ground.
Florida’s fundamental problem is a coast line subject to increasingly severe storms and a geology susceptible to sink holes . No
Amount of wishful thinking can counter these realities . Not even the fact denying propensities of Trump or De Santis supporters . What is saved in a low tax regime will be eaten up and then some by periodic severe property damage. Fun in the sun? Nope. Which will happen first ? An earthquake which severs California from the continental US or an angry Atlantic which reduces Florida to a permanent flood plain?? Geology rules.
Great piece.