St Augustine Real Estate Information

TALLAHASSEE, Fla. – April 21, 2008 – Headed into the final two weeks of the legislative session, several property insurance bills winding through the state House and Senate are like the hurricanes they’re preparing for.

They’re moving slowly, gaining speed and could hit homeowners hard.

Some may divert cash from your wallet to protect the state’s future financial health. But others could save you from looming rate increases.

The House and Senate both want to slice $3 billion from the state Hurricane Catastrophe Fund, leaving it with $25 billion to help insurers pay claims after big storms. This would reduce the state’s storm risk, a good long-term move for everyone. But there’s a downside.

Insurers would have to buy pricier backup coverage elsewhere, which could bump up your rates from roughly 2.3 percent to as much as 8.6 percent in South Florida, according to state actuaries.

Those opposed to shrinking the catastrophe fund, including Senate Minority Leader Steve Geller, say if a major hurricane doesn’t strike, residents still would have to deal with rate increases.

And Geller said that’s not smart in a year in which the economy is souring and the subprime mortgage meltdown has put a record number of Floridians on the brink of losing their homes in Foreclosure.

The good news is several bills still on the table offer hope of rate relief.

Legislation in the House and Senate would exempt sales tax on certain products that help make homes more hurricane-proof, such as shutters and ground anchor systems. In addition to the sales tax savings, this might prompt more homeowners to safeguard their homes, which could help bring rates down.

The Senate passed a bill that would freeze Citizens Property Insurance Corp.’s rates for six months longer, from January to July 2009. For Citizens’ 1.2 million policy holders – about half concentrated in South Florida – that’s favorable.

But all homeowners policies in the state are subject to assessments to offset Citizens’ deficits if a big enough hurricane strikes and drains the state-backed insurer. So postponing a rate increase for the state’s largest property insurer could mean everyone pays more later. And we’re all paying for Citizens’ shortfall in 2005.

However, another part of the bill would reduce the maximum assessments for certain Citizens policy holders from 90percentto 30 percent of annual premiums and reduces the maximum assessment for everyone else from 10 percent to 8 percent of annual premiums.

Another possible perk for homeowners in the same Senate bill is a requirement that the state develop a system that rates how hurricane-proof homes are. Insurers would be required to offer discounts based on the ratings, which could save homeowners big bucks. The rating would also have to be disclosed when selling a home, which could make it easier for consumers to find homes that qualify for insurance discounts.

Some provisions in the Senate bill won’t lower most homeowners rates, but they could keep rates from increasing. Rates dropped by a statewide average of 15 percent last year because of a sweeping property insurance law passed last year. Parts of the law were temporary and the Senate’s bill would make them permanent.

If the bill, written primarily by Sen. Jeff Atwater, R- North Palm Beach, and Geller, D- Hallandale Beach, fails to pass in the House, the savings could vanish and your rates could shoot back up.

For instance, the Senate legislation would make permanent a requirement that insurers get state approval before raising your rates and it would end their ability to have an arbitration panel settle a disagreement with state officials about rates. The panels often pick a rate halfway between what the state and insurers ask, so companies have an incentive to ask for more than they need. Take Nationwide Insurance Co. of Florida, which asked for a 72 percent rate increase in 2006. An arbitration panel approved a 54 percent increase and the state had no recourse after the decision.

Another part of the legislation broadens laws insurers are subject to and beefs up penalties for insurers that violate the laws. That appears consumer-friendly, but opponents say the provisions could indirectly raise rates since state laws don’t explicitly prohibit insurers from passing fines or legal costs to consumers.

Not so, say insurance regulators. “Our actuaries dissect every aspect of a rate filing, and would never allow a company to pass through or recoup an administrative fine received for violating Florida law,” Office of Insurance Regulation spokesman Tom Zutell wrote in an e-mail.

The Senate bill would prohibit Citizens from selling new policies that only provide windstorm coverage. Critics say that would eliminate an option – buying state windstorm coverage and using a private insurer for other risks – that’s often cheaper.

But Citizens’ Board Chairman G. Bruce Douglas said that’s impossible to know and the bill prohibits insurers from cherry-picking: “We should no longer allow insurance companies to make easy money on the more profitable theft and fire coverage in Florida while dumping all the wind exposure to Citizens and to all Floridians.”

A bill that’s got momentum in the House and Senate would use $250 million from Citizens for loans to insurers that agree to take policies from the public property insurer. The idea could expand competition and in turn, help lower rates in the next few years.

Another proposal that’s popular in both chambers would provide businesses with more property insurance options, but the benefits may end there. The bills would allow insurers to offer businesses a new type of property coverage with rates that aren’t fully regulated by the state and that are exempt from fees to offset Citizens’ deficits. The unregulated rates may be higher on average but businesses that opt for the new insurance would save on assessments to bail out Citizens if a major storm hits.

That would also mean a smaller pool of policies to tap for assessments, which could mean fewer homeowners and businesses would shoulder the burden of replenishing Citizens with cash.

2008 South Florida Sun-Sentinel, Julie Patel. Distributed by McClatchy-Tribune Information Services

A powerful citizens panel culminated a year of work on Thursday and put a plan to swap some property taxes for sales taxes on the November ballot, despite weeks of intense back-room lobbying by business groups that wanted to kill it.

The measure would cut most property-tax bills by at least 25 percent, revamp the way the state pays for schools and order the Legislature to replace the estimated loss of $9 billion with new, expanded sales taxes or other revenue.

The Taxation and Budget Reform Commission voted 18-7 for the amendment – one more than needed to get it on the ballot.

Proponents hailed the tax swap as the salve needed to stimulate the ailing housing market, revive the economy and prepare the state’s tax system for the next 20 years. The tax cut would take effect Jan. 1, 2010.

“With virtually the stroke of a pen, or the support of the people, this ballot initiative will create approximately $80 billion of wealth in Florida,” said commission member John McKay, a Bradenton developer, former Senate president and sponsor of the amendment.

He said an analysis done for the commission by economist Hank Fishkind predicts the amendment “will spur retail sales. It will accelerate the recovery of the housing industry. People will be able to qualify for mortgages with less difficulty . . . Then, the construction industry will kick back in.”

But opponents warned the proposal – which would eliminate the property taxes the state now requires school districts to collect – is “wrong-headed” and “foolhardy” because it relies on the Legislature to find other means to fund education.

“We know that is not going to happen,” said commission member Randy Miller, a vice president of the Florida Retail Federation and a former state Department of Revenue director. “Where are we expecting to get this?”

The tax-swap idea received preliminary approval from the panel three weeks ago.

But mounting pressure from a stream of business and trade groups, and a one-man campaign by Senate Finance and Tax Chairman Mike Haridopolos, the lone legislator to speak out against the plan, led three commission members – Susan Story, Brian Yablonski and Mike Hogan – to switch sides and vote no.

Story, the chief executive of Gulf Power, said her main concern was that legislators will have few options but to raise some taxes on services that are now exempt. She said that will hurt small businesses and lead to job losses.

“I would love to have property tax relief, but I am very concerned,” she said. “It’s one thing to have relief, but it’s another thing not to have a job.”

But most commission members held true to the tax swap, considered by many to be the hallmark reform of their yearlong review of the state’s tax system that involved what commission chairman Allan Bense said was “hours and hours and hours and hours of public hearings.”

The Florida Constitution mandates that the panel meet every 20 years to recommend constitutional changes to improve the state’s tax and budget system.

“If we don’t vote this out, I don’t think we will just disappoint the people. I think we will fail the people,” said Roberto Martinez, a commission member and Miami lawyer. “I think people want to have an opportunity to vote for a property-tax proposal and while this is far from perfect, it is the best and wisest proposal we can present to the people.”

McKay said he will raise money to promote the amendment he championed.

The Florida Association of Broadcasters, a trade group opposed to taxing advertising, is already mounting a campaign against it, Miller said.

“The good thing is it still has to go on the ballot. It still has to survive a campaign and the voters still have to hear the pros and con,” said House Speaker Marco Rubio, who said Thursday he supports the amendment. “I have a feeling the cons are going to be much better funded than the pros.”

Rubio said that while he understands the concerns of Haridopolos, he is confident the Legislature can find enough budget cuts, coupled with sales tax increases and economic growth, to stave off creating a sales tax on services.

“People need to know that a ‘No’ vote dooms us inevitably to property tax increases in the state,” Rubio said. “If we keep this current system in place, you will be forced to raise property taxes in the future in order to fund education at a level where people want it.”

The Miami Herald, Mary Ellen Klas.

TALLAHASSEE, Fla. – April 23, 2008 – Allstate Corp. is preparing for both favorable and unfavorable rulings on its ability to conduct new business in Florida after an appeals court erroneously released a decision late Monday that could have meant trouble for the insurer.

The 1st District Court of Appeal late Monday appeared to uphold state Insurance Commissioner Kevin McCarty’s order in January suspending Allstate’s business licenses. McCarty accuses Allstate of failing to cooperate with subpoenas issued by the Office of Insurance Regulation, which is investigating homeowners insurance rate-setting.

But the court quickly withdrew the order. On Tuesday, court clerk Jon Wheeler stated that a “clerical error” led to the release, and according to court procedures, the earliest permissible release date is next Tuesday. The court will now take “its full time authorized by court rules to consider the motion,” Wheeler wrote in a statement, and “a new order ... will be released at a later time.”

That doesn’t mean the result will be the same, said Allstate spokeswoman Amy Moore.

“It’s really hard to speculate on what the outcome of the ruling will be before it is issued,” she said. However, “we have to look at both outcomes at this point.”

Moore said Allstate is cooperating with the Office of Insurance Regulation to produce the documents the agency says it needs.

2008 Tampa Tribune, Fla., Jerome R. Stockfisch.