The Impact of Insolvent Property Insurers on Policyholders in Florida

When an insurance company goes out of business, it can leave policyholders in a difficult position. This is happening quite a bit in Florida, and it’s leading to higher costs for all policyholders. The Florida Insurance Guaranty Association (FIGA) is adding a 1% assessment to policyholders starting in October to cover claims for insolvent companies. This means that policyholders who have never filed a claim could end up paying more for insurance simply because their insurer went out of business.

For some homeowners, the consequences are more severe. A Seminole County couple has lived without a fully functioning kitchen for three years because their insurer went out of business. Sandra Braga Alfonso said what started as a leak under her sink has turned into a three-year nightmare. She said there was already a fight with her insurer to pay out the claim, but then the company went under and it got worse.

Alfonso has a fridge and an oven but is missing lower cabinets, a stove, her normal sink, and a dishwasher. “It has been a total nightmare,” Alfonso said. She and her husband have tried to settle, go to mediation, and file a lawsuit, but none of it has worked. After two years of hearings and motions and waiting for a court date, her insurer went out of business. She was left with a check for $4,800, not nearly enough to replace her kitchen.

In the last year, Florida lawmakers have had three special legislative sessions to deal with Florida’s property insurance crises. But Alfonso doesn’t believe anything is being done in Tallahassee to help consumers with their insurance issues. One of the biggest moves made in Tallahassee over the last year is the legislature doing away with what is referred to as “one-way attorney’s fees.” Without it, Alfonso said she would never have been able to sue her insurer even though in her case, it didn’t do any good.

Alfonso has now turned to FIGA, which handles the claims of insolvent property and casualty insurance companies. They are still negotiating the amount it will take to fix her kitchen — more than three years later. “I owned my first home when I was 20-something years old,” Alfonso said. “I’ve been paying my insurance premiums since I’m like 25, never filed a claim and look where I am now.”

The situation in Florida is a reminder of the importance of choosing an insurance company with a good financial rating. It’s also a reminder to be cautious when buying insurance from smaller companies, as they may not have the financial stability to weather a crisis. Finally, it’s important to understand what your insurance policy covers and what it doesn’t, and to seek legal advice if necessary.