Insurance overhaul aims to protect companies and homeowners, leaving some wanting more

Article Courtesy of The Islander News

By Hillard Grossman

Published June 3, 2022


State lawmakers last week passed sweeping legislation to protect insurance companies and homeowner policyholders, but then expanded their focus to high-rise units on Wednesday.

Some critics, however, still didn't feel it was enough.

"I really thought they would do more, with stricter, tougher restrictions and requirements," said Michele Estevez, the property manager for 14 residential units across Key Biscayne, Coral Gables and Coconut Grove with Michele & Associates. "I didn't lose sleep at all."

But, she said, it was a start.

Listed among the 101-page condo statewide reforms:

  • Condos taller than three stories must be inspected every 10 years after its certificate of occupancy reaches 30 years of age (reducing the original 40-year plan adopted only in Miami-Dade and Broward counties).

  • If the building is within three miles of the coast, the "milestone inspections" would instead begin 25 years after certification (if a building was occupied July 1, 1992, owners will get until Dec. 31, 2024 to fulfill their obligations).

  • Inspection records must be published online and shared with tenants.

  • Developers must maintain an adequate reserve fund to address needed repairs. State law previously allowed developers to waive the fund, which is designed to cover large maintenance expenses.

"They can change (the certification requirement) to 50 years, or 20 years; where they have to really, really look and concentrate is when the building is getting built," Estevez said. "(Some) developers get away with murder. They use cheaper materials to reduce costs and they don't waterproof with a good elastomeric paint -- just a primer and two coats. If a building is not properly waterproofed, the stucco and cement deteriorate. It's like the balconies.

"(Lawmakers) can change a lot of certifications, but in my opinion, they need to actually start when the building is built," she said, pointing to an investigative report by the Miami Herald regarding last year's condo collapse which linked the tragic event, in part, to faulty design.

"I was disappointed (these laws) did not enforce developers to do that so it won't deteriorate," she added. "If the builder built a good product, it likely won't have (structural) problems."

The bill, which Gov. Ron DeSantis' has subsequently signed, creates a new mandatory statewide inspection program and would usher into law a slew of other changes.

"I think they are sensible safety measures," said Fausto Gomez, president of the Key Biscayne Condominium Presidents' Council, although he and Estevez both see the requirement on reserves as a big issue for some property owners and residents who do not currently have reserves in place.

"On the reserve issue, I think every building and property should have reserves," Gomez said.

He explained that every three years a building's financial records must be legally examined by consultants who estimate the "usable life of equipment and the facility, and how much you should reserve."

"I think some (buildings) on Key Biscayne are on over-reserves," Gomez said. "Don't get me wrong, reserves are crucially important, but if you've have exceeded (what they recommend), it makes no sense to keep putting in more (money)."

Gomez said the question now is how the law's parameters would read. In the instance of an association currently having over the recommended reserves, would there still be an annual investment requirement?

"I think the biggest problem will be those in areas who are not conscious in keeping their buildings in shape," he said.

"I live in a building 20 years old," said Gomez, who resides in the Lake Tower at the Ocean Club. "It is super-maintained. We don't fear any inspection protocols, and we have healthy reserves."

Previously, residents could vote whether or not to maintain a reserve fund in case of big projects. Those funds are often folded into their monthly or quarterly association payments.

Estevez does manage a few properties in which those residents decided against having reserves.

"That (law) is going to affect a lot of people," she said. "For those who had been waiving those reserves, it will have a big impact on their payments."

She provided one glaring example.

"Let's say the warranty on the roof is 20 years, and you have three years left, and the windstorm policy requires a special roof inspection or they say they may not renew," she said. "Now, you have three years left and you have to come up with $200,000 to $500,000 because you have not budgeted for the previous 17 years."

And, don't expect financing to be easy. Estevez said banks usually take a hard look at several factors with buildings, including previous financial delinquencies.

"I think the reserve fund (issue) will be very big," she said.

Gov. DeSantis called for the May special session in Tallahassee after at least nine property insurance companies in the state needed to drop out after losing millions of dollars. Some pointed to excessive litigation and others to complete roof replacements after further challenges by adjusters, for example, or threatened legal action.

Surfside condo collapse

Last week's policies marked the Legislature's most substantial action yet in response to last year's catastrophe in Surfside, which resulted in 98 deaths.

"The whole thing was (initially) about insurance," Gomez said. "But there was such a significant pushback as to why they haven't done anything with condos, they had to do this."
Homeowners policies get a look

Lawmakers said their decisions regarding homeowners policies likely would not reduce rates for at least 18 months -- if at all.

Among the items signed into law by Gov. DeSantis:

  • Prohibiting insurers from refusing to insure a home with a roof less than 15 years old solely because of the roof’s age. For roofs 15 years or older, the homeowner can request an inspection to get insured. The bill also allows a roof with more than 25% damage to be repaired, instead of being required to be replaced.

  • Creating a new $2 billion fund for reinsurance — insurance that insurers buy — to help some companies stay afloat ahead of storm season. Companies would then be required to lower rates.

  • Limiting the amount attorneys can collect in lawsuits against insurance companies, which officials say is at least partly to blame for rising rates.

  • Reviving the My Safe Florida Home state program (which existed from 2006-08) that could give homeowners up to $10,000 to harden their homes by replacing windows, doors and roofs to curb insurance rates that some expect to possibly double in the near future.

The Senate passed two bills, 2D (property insurance) and 4D (building safety), both sponsored by Sen. Jim Boyd (R-Bradenton), Chair of the Senate Committee on Banking and Insurance.

SB 2D allows residential property insurers to require a separate roof deductible that may not exceed the lesser of 2% of the policy dwelling limits or 50% of the roof replacement costs. Policyholders who select a roof deductible must receive a premium credit or discount.

The roof deductible does not apply to a total loss to the primary structure that is caused by a covered peril; a loss caused by a hurricane; a roof loss resulting from a tree fall or other hazard that damages the roof and punctures the roof deck; or, a roof loss requiring repair of less than 50% of the roof.

Also under SB 2D, insurers may not refuse to write or renew policies on homes with roofs that are less than 15 years old solely because of the roof age, or for roofs over 15 years old if an inspection shows that the roof has five years or more of useful life left.

In addition, the My Safe Florida Home program, which likely would include a way to get discounts from insurers for replacing shingles or reinforcing garage doors, will be limited to homesteaded homes in a wind-borne region, such as a coastal community, with an insured value of less than $500,000. The median sales price for single-family homes in Miami-Dade County is $565,000. Basically, for every $2 spent, it could get you $1 back in grant funds.

The bill also authorizes $2 billion for a new Reinsurance to Assist Policyholders (RAP) program for insurers, who then would pass those savings on to policyholders.

SB 4D stipulates that roofs that are more than 25% damaged, but already comply with the 2007 Florida Building Code or a subsequent code, may be repaired instead of being required to be replaced.

The Senate decided to transfer $2 billion to the Florida Hurricane Catastrophe Fund as a safety net for the risk that insurers face.

“It is difficult for us to create programs in the legislature that are going to make substantial changes tomorrow,” State Rep. Jay Trumbull, R-Panama City, told reporters. “Just like there are long tails in claims for hurricanes, as an example, and when you can bring a claim, it takes some time."