ORANGE COUNTY, Fla. — For firefighter JJ DePierro, the hardest part of the last two years has been watching his 10-year-old daughter Nicole sleep on an air mattress in the living room that’s become her bedroom.

“She’s been a real trooper about it all, but from basically the ages of 8 to 10, she hasn’t had a bedroom,” DePierro said. 

Two of the home’s three bedrooms have been out of commission for two years since a small patch of roof began leaking two years ago, causing black mold to build up behind the drywall.

DePierro said he and his wife built the home in the Lake Nona community nearly ten years ago after previously owning a different home.

“We’ve been homeowners for 20 years now,” DePierro said. “This was the first insurance claim we ever had to file, and it was denied immediately.”

DePierro said the denial came so quickly, it made their heads spin.

“We were shocked,” DePierro said. “The insurance just didn’t seem to care.”

Digging into the data

Across the state of Florida, many homeowners feel abandoned by their insurance companies, struggling to pay higher premium rates while receiving less coverage in return.

At a recent town hall in Melbourne hosted by Rep. Randy Fine, more than a dozen homeowners shared their woeful stories of denied roof claims and sharply rising premiums. 

“Insurance companies operate in bad faith — they should be punished financially,” said Stephen Long, a Satellite Beach homeowner whose roof damage claim was denied before his carrier’s engineer had a chance to complete an inspection. 

At the same time, insurance companies bemoan the high litigation costs they face whenever homeowners sue them for allegedly mishandling a claim. It’s those lawsuits driving up Florida premiums and pushing carriers out of the state, according to Mark Friedlander, director of corporate communications for the Insurance Information Institute. 

Much of the “runaway litigation,” Friedlander says, stems from fraudulent roofing schemes led by unscrupulous contractors. “There’s no other state that compares to Florida when it comes to property claim litigation,” he said.

According to 2020 data collected by the National Association of Insurance Commissioners, Florida accounted for 9% of all homeowners’ insurance claims — and 79% of all lawsuits over filed claims. But that data point doesn’t tell the full story, according to the Florida Justice Association, a consumer advocacy group of trial lawyers.

First, not all states submit data to the NAIC’s annual Market Conduct Annual Statement (MCAS). New York and North Dakota choose not to take part, according to the NAIC. Data is also excluded from the Texas Windstorm Insurance Association, which provides windstorm and hail coverage for coastal Texan homeowners.

The MCAS evaluates insurers using seven different ratios, including one that compares the volume of lawsuits filed against companies to the volume of companies’ closed, unpaid claims. In 2020, Florida’s ratio on this measure rose above 29 percent — far surpassing any other state for which data is available.

However, a closer look at Florida’s MCAS data shows litigation might not be as widespread a problem as the insurance industry insists. In 2020, most insurance companies in most states, including Florida, only faced a small volume of lawsuits. 

However, a small cluster of Florida carriers faced high volumes of lawsuits: 23 companies out of the 100 total reflected in the data. While that’s far more than in any other state, it suggests Florida’s “runaway litigation” problem may not be industry wide, but isolated to certain insurers. (MCAS data does not identify individual insurers.)

Another area where Florida stands out among states is the time it takes insurers to process claims. Over 42% of Florida claims weren’t paid within sixty days, according to MCAS data. 

For Amy Boggs, the FJA’s property insurance chairwoman, this data suggests it could be Florida’s insurance industry itself to blame, not consumers, or most attorneys representing them.

“If they’re getting sued, if the insurance industry is being sued so much, why is that not an indication that they are doing something wrong? That they are, by and large, not handling claims well?” Boggs said.

A “circular problem”

The “thousands of frivolous lawsuits” pushed Gov. Ron DeSantis to call lawmakers to convene for a special legislative session May 23 to address Florida’s struggling property insurance market. But it’s not a problem that they can easily solve.

Friedlander said Florida homeowners now pay more than double the national average for insurance premiums — an average of $3,600, compared with $1,400. At the same time, carriers are clearly struggling. Three were declared financially insolvent this year, and a fourth, FedNat, recently announced it is dropping 68,000 policies mid-term.

“Companies are barely hanging on,” said Tom Cotton of Hugh Cotton Insurance, a Central Floridian fixture since 1948. “These losses that the carriers have been hammered with, their surpluses have been depleted.”

Those losses can translate into higher premiums for policyholders whenever carriers ask Florida’s Office of Insurance Regulation to approve higher rates, as three companies did this week.

“It’s a real, very circular problem,” Boggs said.

As carriers crack down on fraudulent behavior with stricter standards, Friedlander says, sometimes policyholders get caught in the middle, meaning some legitimate damage claims get denied. That can breed further distrust on the consumer’s part.

When a consumer feels their carrier has mishandled a claim, they can file a civil remedy notice, or CRN: a warning that the carrier is acting in bad faith. Spectrum News 13’s review of data on the Department of Financial Services’ website found that since 2020, the number of CRNs filed against carriers rose by 30 percent, compared with the five years prior.

Since entering the industry back in 2008, FAPIA (Florida Association of Public Insurance Adjusters) President Chris Cury says he’s seen insurers increasingly diminish policyholders’ coverage, and deny legitimate claims.

“Unfortunately, in my history as a public adjuster, I’ve seen a lot of extremely legitimate claims — I mean hurricanes, catastrophic losses where roofs were severely damaged — where insurance companies have not paid those appropriately, not paid them timely, and pushed them into litigation by delaying,” Cury said.

Cury acknowledged “substantial fraud” is happening in the market, largely thanks to unscrupulous contractors who often solicit residents after a major storm, promising to repair or replace their roofs for free. Earlier this year, two roofers in Naples were arrested for allegedly operating such a scheme.

But Cury says while fraud is a problem, it’s not the only one.

“You can look at it from both sides of the coin,” Cury said. “If insurance companies are saying there’s a lot of fraud out there, are they paying fraudulent claims? Because if you’re not paying a fraudulent claim, it’s not really an issue.”

The special legislative session convenes Monday, May 23, and will run no later than Friday, May 27.