May 2013

Despite no major storms or hurricanes hitting Florida since 2005, Florida property insurance rates have continue to skyrocket over the past few years – with no end in sight.  Shockingly, a recent AP report showed that Florida’s Office of Insurance Regulation has approved more than 100 rate hikes per year since 2009.  Where is the money going – surely not for claims!

The biggest “expense” an insurance company faces is the cost of reinsurance.  Simply stated, reinsurance is an insurance product that an insurance company buys for itself to offset any claims it must pay.  If an insurance company has a large number of claims in a given year, the insurance company submits a claim to its reinsurance company for reimbursement of the amount paid in claims.  The only difference between a policy holder’s relationship with his insurance company and the relationship an insurance company has with its reinsurer is…..the insurance company most likely owns the reinsurance company as well!!!  With this cozy relationship, an insurance company can jack up the rates that it must pay itself – er, I mean, its reinsurer – and thereby create an artificial “hardship”.  The insurance company then squeals to the media and to the legislature that it can’t make any money in Florida unless they are allowed to further increase rates.  Clearly, since an insurance company can set its own expenses (due to the fact that it can manipulate the money it pays to itself as a “cost”), it will never show a profit from its Florida operations!  The Sarasota Herald Tribune wrote a Pulitzer Prize winning article on this concept in 2010.

Where does this leave the individual homeowner who is struggling to pay his ever-increasing property insurance premiums?  Until our representatives in Tallahassee are willing to stand up to the insurance companies and their lobbyists, all Floridians will have to just wait and see what this year’s hurricane season has in store for Florida.  Unfortunately, history has shown us that – whether a storm comes this year or not – we will be facing higher insurance premiums either way.  You know – because of those “reinsurance premiums”….  

 

Recently, the Sun Sentinel newspaper wote an article regarding some of the urban legends, myths and not-quite-accurate beliefs some people have about hurricanes.  Although on initial blush such information may seem like just interesting fodder for conversations at the water cooler, the reality is that the information contained in this article could save a lot of heartache and help avoid an unnecessary loss of property.  The full text of the article appears below: 

Like many catastrophic phenomena, hurricanes have become encrusted with mythology.

From bad advice on how to protect your home to erroneous ideas about the most dangerous regions within a hurricane, meteorologists hear all sorts of lore from the public. Some are harmless baloney, others are genuinely dangerous.

“There are a lot of hurricane myths out there. Many contain a grain of truth. That’s how they got started,” said Steve Letro, a retired meteorologist with the National Weather Service in Jacksonville. “Our challenge is to convince the public that official information is actually going to be more correct than what they heard from the guy standing in line at Walmart.”

Here are some of the myths, according to Letro and Chris Landsea, science and operations officer of the National Hurricane Center. They spoke last week at the Governor’s Hurricane Conference in Fort Lauderdale.

Myth: To prepare for a hurricane, tape up your windows with masking tape. This idea actually appeared in publications of the old U.S. Weather Bureau, and a recent survey by the Federal Alliance for Safe Homes found that 70 percent of people in the southeastern United States believed this is an effective way to protect your home.

Reality: This accomplishes nothing and yields a false sense of security. A wind-born tree branch, coconut or garbage can would smash through glass with or without tape. Use shutters or impact glass.

Myth: When a hurricane is approaching, you should open windows on the side of the house where the wind is not expected so you can equalize the air pressure and prevent your house from exploding.

Reality: Completely unnecessary because the pressure changes slowly and no house is airtight, so it will equalize anyway. Opening windows as a hurricane approaches only invites in blasts of wind, rain and debris.

Myth: The strongest winds in a hurricane can be found in the storm’s northeast quadrant.

Reality: Usually this is the case, but not always. For instance, because Wilma approached Florida from the west in 2005, its strongest winds were in its southwest quadrant.

Myth: If a hurricane’s sustained winds are 100 mph and it’s moving west at 15 mph, it’s packing a wind total of 115 mph.

Reality: Wrong. The National Hurricane Center already did the math for you to come up with the wind speed. It will vary through the hurricane, but you can’t just add the steering winds to the rotating winds and come up with the total.

Myth: The storm surge of a hurricane is primarily a result of the lowered air pressure sucking the water up as if through a straw.

Reality: Although the “barometric effect” is a factor, 95 percent of the cause of the storm surge is the hurricane’s winds pushing the water toward shore.

Myth: Hurricanes turn toward the north because they’re following the Gulf Stream.

Reality: Not completely off base, but still wrong. The Gulf Stream current and the typical paths of hurricanes are both the result of northerly wind patterns along the southeast coast of the United States, which is part of the larger circulation of winds around the center of the North Atlantic.

Myth: This is the 21st century, and we should be able to put our technological wizardry to work to destroy hurricanes. We can accomplish this by towing icebergs from the arctic to weaken them with cold water, using giant pipes to bring up cold water from the ocean depths, seeding clouds to force the rain out of them at sea, coat the ocean along their path with oil to stop evaporating water from powering the storm, erecting giant fans to blow the hurricane back out to sea or breaking up a hurricane with hydrogen bombs.

Reality: All impossible, and a few would make things worse. Like many crackpot ideas, however, they are built around a kernel of reality. It would theoretically be possible to fatally weaken a hurricane with icebergs, but towing enough of them into its path would require all the merchant ships currently in service in the world. Even nuclear weapons don’t have sufficient power to do the job. All they would accomplish would be to create a radioactive hurricane.

Hopefully, the information in the above article will come in handy – if not at the water cooler, than in preparation for an upcoming storm. 

 

Over the past year or so, we have been getting an increasing number of calls from property owners who continue to experience sinkhole damage to their property – even after their property has been repaired by the insurance company!  The factual circumstances are almost always the same – the insurance company mandates that the insured repair the sinkhole damage pursuant to the recommendations of the insurance company’s experts and then, after these supposed repairs are completed, the property continues to incur new damage.  Although sometimes this new damage appears immediately after the insurance company’s repairs are completed, many times the damage appears years later.  In almost every scenario, after the insured contacts the insurance company regarding this damage, the insurance company’s expert issues a quick report saying that the damage – if the expert even acknowledges the damage – is not from sinkhole activity and the claim is then summarily denied.

Many property owners do not realize that if the insurance company repairs the property pursuant to the insurance company’s recommended repair method, the insurance company must stand behind that repair method and must continue to repair the property – regardless of the cost – until the property is fully remediated.  The law on this process is clear – if the insurance company mandates that a property owner perform the insurance company’s sinkhole repairs to the property, the insurance company must continue to pay the cost of the repairs until the property is fully remediated or, if the insurance company gives up on repairing the home after beginning the process, the insurance company must issue a check for policy limits to the property owner without deduction for monies already spent towards the repair! 

Always know that you have rights against your insurance company and that you do not have to accept whatever remedy the insurance company may try to force upon you.  Clearly, it is important to have your claim reviewed by an experienced insurance attorney who can explain your options and, if necessary, zealously pursue your claim against the insurance company.