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Insurance Bills Take Another Storm Hit

Tribune photo by COLIN HACKLEY

Gov. Charlie Crist and Chief Financial Officer Alex Sink decided the hurricane fund surcharge should be extended for two years.

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By JEROME R. STOCKFISCH and CATHERINE DOLINSKI

The Tampa Tribune

Published: June 11, 2008

Updated: 06/11/2008 12:11 am

TALLAHASSEE - The bills for the wicked hurricane seasons of 2004 and 2005 are still coming in, and Floridians with insurance policies covering everything from autos to boats to homes will have to dig deeper to cover the tab.

Gov. Charlie Crist and Chief Financial Officer Alex Sink voted Tuesday to allow the state's Hurricane Catastrophe Finance Corp. to issue $625 million worth of bonds to pay claims resulting from 2005's Hurricane Wilma.

To cover the debt, the 1 percent assessment now on virtually all insurance bills in Florida to replenish the cat fund will be extended by two years. It was slated to end in 2012.

That will cost a typical Tampa Bay area homeowner with an annual insurance bill of $1,500 to $2,000 an additional $30 to $40. The same surcharge hits premiums for auto, motorcycle, boat and other lines of insurance as well.

The Florida Hurricane Catastrophe Fund is a backstop covering damages from storms that insurance companies cannot. Typically, private insurers pick up the tab for storm damage until the total exceeds $6 billion; once that threshold is passed, state money becomes available to pay claims.

Jack Nicholson, director of the Hurricane Catastrophe Finance Corp., said that Hurricane Wilma's claims of nearly $11 billion have well exceeded the state's expectations.

"This is the largest state payout expected of any storm that Florida's ever had," Nicholson said.

Part of the problem, said Bob Milligan, interim head of the State Board of Administration, is that in the absence of recent hurricane activity, adjusters are "shaking the bushes" to file new claims and reopen thousands of old ones from the 2005 storms. "Insurance companies are seeing a lot of reopened claims," he said.

Whether those claims are valid is unclear, he said. "We really don't know how many of these claims are being settled properly, or if, for some reason the insurance companies feel they can pass it on to the cat fund and don't have to do their due diligence in adjusting claims."

Nicholson said that in the case of Citizens Insurance alone, only 234 claims resulting from 2004's Hurricane Charley were reopened, compared with nearly 6,200 reopened claims associated with Hurricane Wilma. Charley was a Category 4 storm; Wilma was a Category 3 that plowed west to east across the southern end of the state, pummeling the populous regions of Fort Lauderdale and West Palm Beach.

"I think there is a problem because of the independent adjusters and the legal profession and all these people that are reopening the claims and milking the system," Nicholson said.

Sam Miller, executive vice president of the Florida Insurance Council, also blamed the situation on shady public adjusters who are not affiliated with insurance companies and might encourage already-satisfied customers to reopen claims.

The Legislature passed public-adjuster reforms in this spring's legislative session to address those issues, Miller said.

"Nobody's done anything wrong" on the industry side, he said.

Crist and Sink voted on Tuesday as the State Board of Administration and as the cat fund finance board, two of the many hats they wear as members of the state Cabinet.

Crist questioned the need to approve the bond issue at all on Tuesday, with such questions looming about illegitimate claims.

"I don't have a lot of confidence in the property insurance industry making representations to us for $625 million worth of bonds, you know - and when I start to hear that maybe it's illegitimate, or some monkey business is going on here, it gives me less confidence," Crist said.

However, Sink and Milligan said it was necessary because the state literally would run out of money to pay the claims, none of which are actually known to be fraudulent. The state has about $187 million left to cover the claims, which are costing about $13 million a week on average.

Milligan said the cat fund does audit a sample of claims to ensure that they are legitimate, though he urged Crist to consider asking a group such as the state's Citizens Insurance Task Force to investigate the issue further. Sink noted that the state can recoup payout money if claims are audited and found to be illegitimate.

Reporter Jerome R. Stockfisch can be reached at (813) 259-8402 or jstockfisch@tampatrib.com. Reporter Catherine Dolinski can be reached at (850) 222-8382 or cdolinski@tampatrib.com.

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