New Florida Law Impacts Roofing Contractors

The new law states that insurers cannot deny coverage for roofs that are less than 15 years old.

By Trent Cotney.

Property insurance premium hikes. Canceled policies. Failing insurance companies. You can barely read the news in Florida these days without hearing those phrases.

In response to growing concerns related to homeowners’ insurance in the Sunshine State, legislators were recently called back to Tallahassee for a three-day special session to rectify the problems. In the end, House members approved new legislation by a vote of 95-14, and the Senate agreed with a 30-9 vote. Then, Gov. Ron DeSantis signed SB 2-D into law on Friday, May 27. But there is disagreement about what issues were resolved and which ones remain.

Understanding the challenges

Over the last two years, the insurance industry has experienced annual losses of more than $1 billion. Such losses have resulted in some insurance companies being placed in receivership. These include Avatar Property & Casualty Insurance Co., Lighthouse Property Insurance Corp., and St. Johns Insurance Co. Others have canceled policies, have stopped writing new policies, or are in liquidation. With private insurers facing insolvency, many property owners have had to use Citizens Property Insurance, a state-run agency intended to be a last resort.

What the bill addresses

The new law creates the Reinsurance to Assist Policyholders program. This $2 billion tax-funded initiative is aimed at insurance carriers who need to purchase insurance, which will reduce their risk, but are unable to secure it in the private market. To access the reinsurance fund, they will have to reduce policyholders’ rates. In addition, the program provides grants (up to $10,000) to make homes less vulnerable to hurricanes, but such homes will have to meet specific criteria to be eligible.

There has been much debate about homeowners’ insurance and roofing claims, with many parties pointing fingers at roofing contractors for exploiting insurance policies and driving up rates. Insurers have responded by threatening not to cover claims for older roofs or pay for only partial coverage. The new law states that insurers cannot deny coverage for roofs that are less than 15 years old or undergo an inspection that determines they have at least five more years of life.

Along with the coverage stipulations, the law allows insurance carriers to add new roof damage deductibles to their policies. The deductible amounts are 2 percent of the insured home’s overall value or 50 percent of the roof replacement costs. Note that deductibles would not be applicable in the case of roof damage resulting from falling trees or hurricanes.

The law provides more protections for insurers by seeking to limit some attorney fees in insurance-related lawsuits. Many insurers claim that these legal fees are one reason they have had to increase rates for their customers. In fact, according to some reports, of all the insurance claims in the United States, Florida accounts for only 9 percent. However, the state accounts for nearly 80 percent of property insurance claims.

What issues remain

While the new law helps ensure that property insurance companies will not shutter their businesses, many lawmakers have criticized it for not helping consumers. In most cases, property owners will not see lower rates, which is a disappointment to policyholders who have seen steep increases in recent years. Lawmakers suggested more than a dozen amendments to the bill before it was passed, but few were considered. Those who fully supported the bill pointed out that real change will have to come in the next regular session.

Some lawmakers see this new law as nothing but a corporate bailout. However, others argue that it will help stabilize the market for now. In the meantime, roofing contractors and their attorneys should take note of the new law and its provisions.

Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and NRCA General Counsel. For more information, reach out to Trent at trent.cotney@arlaw.com.

The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.