Fumbling Over Insurance

As of today, Citizens Property Insurance has stopped writing builder's risk insurance (sometimes known as "under construction" insurance) against wind damage suffered during construction.

The company said the decision to stop writing builders risk policies came after the Office of Insurance Regulation asked it to justify its authority for doing so.

News that Citizens was discontinuing builders risk policies has developers and insurance agents scrambling for a solution, since many banks will not loan money to development projects without the insurance.

* * *Yesterday, the Florida subsidiary of Allstate Insurance announced its 'good hands' will be canceling another 120,000 customer policies just as soon as it can. But as Paige St. John points out:

Taxpayers could lend a hand to the pullout.

Lobbyist and former lawmaker Locke Burt has asked for a $25 million taxpayer-backed loan to let his Royal Palm Insurance assume more of Allstate's business.

Burt is taking advantage of a program he helped create two months ago - the Jacksonville insurance executive wrote the first draft of the legislation setting up Florida's $250 million insurer loan program.

* * * Meanwhile, lawyers for and against homeowners were arguing earlier this week over the Mierzwa doctrine in the First District Court of Appeals, as St. John reported in the Pensacola News Journal.

It's the second wind-versus-flood insurance case to reach Florida's 1st District Court of Appeal. A three-judge panel has yet to rule on a similar appeal made in May by lawyers for Florida Farm Bureau Casualty.

In both cases, lawyers for hurricane victims argue Florida law requires insurers to pay policy limits for a home destroyed by wind, even if floods caused some or most of the damage. Panhandle victims of Hurricane Ivan figure in both cases.

The case is important to some 300 Pensacola area homeowners who are still trying to settle old Ivan insurance claims. But it means nothing for the future, thanks to the shameful decision of the 2005 Florida state legislature that eliminated the century-old Value Policy Law for all losses after mid-2005.

A month ago, the St. Petersburg Times asked of the four major-party candidates for governor this year,"Where are the bold solutions to the homeowners' insurance crisis?" Two of them have begun to answer the call, as a July 3 report in the Orlando Sentinel suggests.

• Democratic candidate for governor Rod Jim Davis proposes reversing the incumbent legislature's shameful amendment to Florida's Value Policy law.
• Democrat Rod Smith this week unveiled his own proposal. Essentially, as the Orlando Sentinel reports, he proposes treating property insurance "similarly to other necessities, such as electricity or water."

Or, he might have added, fire and police protection. The intriguing feature of Smith's plan is he would have the state insurance agency sell homeowners "up to $100,000 of wind damage and then would obtain coverage for the additional value of their property from private insurance carriers."

As for the Republican candidates, they're still stuck on the sidelines. Charlie Crist is busy ducking scurrilous implications of his single-man life style. Tom Gallagher is being kept busy arguing with individual voters over his miserable performance as state CFO. And, as the Associated Press is reporting, both are consumed with sparring over who is more anti-abortion, anti-gay, and more "Christian."

When it comes to property insurance, one of Gallagher's problems is that he's been the man in charge for eight years. So with any and every one of the small reforms he has proposed the question naturally arises, "Why didn't you do this when you had the chance?"

Gallagher's other problem is the company he keeps. "Upset about Allstate's raising of your insurance rates or, worse, dropping your coverage?" asks Orlando Sentinel columnist Scott Maxwell this week. "Well, Tom's intimately familiar with Allstate -- seeing as how one of his campaign leaders used to lobby for the company. You're in good hands with Tom."

Then there is the matter of Gallagher's ethics.

Charlie Crist is no better. His "boldest plan to date is a demand that insurers writing auto policies in Florida also provide homeowners' coverage," as the Sentinel reported several days ago. Even fellow Republicans deride the idea "as likely unconstitutional" and "ineffective."

None of the candidates has yet developed a compelling and comprehensive insurance reform plan, although Smith and Davis are farther along than their Republican counterparts. That, we think, largely can be attributed to the fact Smith and Davis are not glued to mindless ideologies that fly in the teeth of reality.

"Privatizing" hurricane insurance is no longer an option in Florida. As Allstate's scramble to leave the Florida catastrophe market illustrates, the private market simply doesn't want us. Even when some lesser company takes us on, they demand millions in taxpayer subsidies with no guarantee they'll be around when we need them.

That's not capitalism. That's a scam.

Rod Smith has the right idea. Hurricane insurance in Florida should be treated as a public utility or public safety service. What all the candidates need to do is figure out a way for the State of Florida to do what it's supposed to do: provide a public service not available at reasonable prices elsewhere.

One thing we haven't seen any candidate talk about is sharing the risk with the many other states that are in the same boat -- or soon will be. As Sentinel reporters wrote two weeks ago:

[O]ne of the few "solutions" all four candidates offer is a vow to lobby Congress for a national catastrophe fund, which could be used to help bail out states that suffer devastating natural disasters or terrorist attacks. But that's something every Florida governor has called for since Hurricane Andrew leveled much of Dade County in 1992, and it still hasn't happened.

If the current crop of Republicans in Republican-dominated Florida can't get the current crop of Republicans in Republican-dominated Washington D.C. to create a national solution, there's not much reason to pin our hopes on a new set of Republicans.

We need a solution now.

So, why not an Interstate Compact among all the coastal states, setting up a multi-state hurricane insurance pool? It works for the multi-state lottery (and a whole host of other, more serious cross-border problems).

It ought to be part of the solution as Allstate and other insurance companies continue to fumble us away.