Hurricane and Homeowner’s Insurance Bad Faith Claims

The homeowner’s insurance industry in Florida is unique in many ways. Due to its geographic location, Florida is exposed to a significant amount of risks due to tropical storms and hurricanes that bring devastating winds and flooding. From 2004-2006, the area was hit by many hurricanes including Katrina, Charley, Frances, and Iva among others. This resulted in billions of dollars in homeowner’s insurance claims, which nearly bankrupted many companies serving the area.

Many of these national companies pulled out of Florida, or at least reduced their number of policies in the area. This was done both because of the higher than normal level of risk, and the fact that the state was putting pressure on them not to significantly raise premiums, despite the level of risk. As insurance companies scaled back, the state run, not-for-profit Citizens Property Insurance Corporation, stepped in to fill the void. They quickly became the largest homeowner’s insurance company in the state.

Reduced Hurricane Levels

Over the next decade, the number of hurricanes and their severity has been relatively low. This has allowed Citizens to build up a significant fund available to pay out claims, and also stabilized the market. Small to mid-sized insurance companies began moving into the state, and took many of the policies from Citizens. From 2012 to 2016, the state was able to reduce the number of homeowner’s insurance policies Citizens held from about 1.5 million down to around 520,000.

In order to mitigate the risk of the private insurance companies from collapsing and being unable to pay out claims in the event of a significant hurricane, Florida requires companies to hold reinsurance policies. These policies have an insurance company work with a secondary insurance provider that would agree to step in and pay out claims should it become necessary. This added stability has further helped to attract out-of-state insurance companies to the market.

Potential for Bad Faith Claims

While the previous decade has been relatively mild for hurricanes in Florida, 2017 is clearly  going to be a difficult year. Irma was a record breaking storm, and there are others on the way. Many experts predict that next year will also produce many strong storms. During difficult seasons, insurance companies may be more likely to look for ways to avoid paying out claims, or make insufficient payments to cover the damages. This could lead to a dramatic increase in the number of bad faith claims that will be filed against these companies in the state of Florida. This could look like legitimate claims being unpaid, underpaid, or denied unfairly.

While insurance companies are absolutely obligated to act in good faith, that does not mean every claim is justified. As many customers learn about the potential to file bad faith claims against their insurance provider, the number of illegitimate claims will go up. Having an experienced attorney who is Board Certified in Real Estate Law can help provide Florida insurance holders the protections they need. Contact The Law Office of Ray Garcia to discuss a specific case, or to talk about the potential need for defense against these situations now.