Tightening & rate increases expected
Another issue that arose in last week’s meeting of the Miami-Dade County government multi-agency panel on the Surfside disaster was condo association reserve funds for needed building maintenance – and that many times, the reserves aren’t there, forcing costly multi-million dollar assessments on residents. I had the privilege of sitting down recently with two experts, one on the legal side and the other on the underwriting side, to discuss some of these same issues, along with presuit settlements. We recorded it as the newest episode of The Florida Insurance Roundup podcast.
Michael Monteverde, an insurance defense attorney with the Zinober Diana & Monteverde law firm, noted that past catastrophes, such as hurricanes, have revealed that some condo associations are not keeping statutorily-required reserves for basic functions. “If I were advising a carrier, I would say look at your underwriting processes, make sure that people are properly reserving, and make sure that the maintenance funds are going where they’re supposed to be because they’re turning the insurance policies in some instances into maintenance contracts. And that’s not what they are,” he said.
The insurance companies that provide commercial residential insurance on these high-rise buildings are taking notice, according to my other guest Brian Squire, Managing Executive Senior Vice President at Hays Companies, a national insurance consulting agency. He said there’s a systemic issue at play with how condo buildings are maintained and how their associations are governed.
“You have a board of directors that make decisions on behalf of the association, but then the condominium association’s governing documents allow its members to veto the board’s decision. These decisions made regarding the maintenance of these associations, on a lot of cases, are based on cost first, then life safety. This mindset needs to change,” he said, noting there have been multiple associations who’ve had decisions levied against them recently.
As a result, Squire said insurance companies are looking to tighten their underwriting requirements on Florida condo association policies. Policy renewal premiums are expected to increase up to 25% for those that can’t show a good building maintenance record. He shared the many potential new underwriting requirements now under consideration from his conversation with carriers, so you’ll definitely want to listen to the podcast or review the show notes or both!
Florida’s homeowners insurance market is going through an upheaval of its own. One insurance litigation reform measure passed into law under SB 76 is now coming into play in court: presuit settlements. I had a chance to pick Michael Monteverde’s brain and vast litigation experience and find out how those settlements are actually working.
With the elimination of Florida’s one-way attorney fee statute that encouraged inflated claims, the new law “creates more of a chess game, to try to get everybody to a place where there is a reasonable number,” said Monteverde, who manages the firm’s Fort Lauderdale office. “Because of the way that the fee provision kind of shifts under the new statute and SB 76, what the insurance carriers can do is they can set up the offers in response to the demands in a way that really kind of dares the plaintiff attorneys to reject the offer, because now we are setting up a situation where the fees are either limited or completely done away with and each party to bear its own fees and costs depending on what you are ultimately able to recover in the lawsuit.” While encouraged with some initial encounters, Monteverde said there is confusion on the law’s application that he explains in the podcast. We hope you’ll check it out!
LMA Newsletter of 9-7-21
