Hurricanes in recent years have devastated both Florida homes and the insurance companies covering them. Several insurers have even gone insolvent trying to pay for claims because of the billions of dollars in damages caused by these storms. And because insurers went bankrupt, many policyholders were left high and dry without payments, while others struggled to find new coverage.
But new legislation made effective earlier this month could ensure that policyholders’ claims get paid, even if their original insurer went out of business.
Effective July 01, 2023, the Insurer Accountability Act (also known as Senate Bill 7052) changed how insurers do business. A previous blog discussed how the bill would require insurers to make detailed records of any changes they make to damage estimates, but it does more than improve transparency.
The bill also requires Citizens Property Insurance Corporation to cover properties with open claims handled by the Florida Insurance Guaranty Association (FIGA). Under the new rules, Citizens must cover the properties for 24 months after FIGA starts servicing the claim or 24 months after FIGA closes the claim, whichever comes first.
The relevance of the bill’s changes to Citizens/FIGA claims
Citizens is Florida’s insurer of last resort, designed to provide property and windstorm insurance to homeowners unable to obtain insurance from the private market. Meanwhile, the FIGA handles the claims of insolvent insurance companies. When several insurers went bankrupt in 2022 and this year, the two insurers were busy trying to mitigate the fallout.
Previously, Citizens could determine that certain risks were ineligible for coverage because they caused damage for losses filed with FIGA. This meant that any policyholder who filed a FIGA claim would’ve been ineligible to receive coverage from Citizens, even if FIGA denied their claims. But the new rules now prohibit Citizens from avoiding having to pay for claims.
An insurer trying to avoid paying for a claim engages in bad faith. Policyholders that experience this might want to consult with a legal professional to check if they can sue their insurer for breach of contract.