State Farm Reverses Course, Stays In Florida

The Office of Insurance Regulation of the State of Florida released a statement about State Farm Insurance Company’s intent to leave the State of Florida. Commissioner Kevin McCarthy issued a consent order that ends the pending litigation between State Farm and the Insurance Commissioner’s office concerning State Farm’s plan to leave Florida’ property insurance market. State Farm will now continue writing business in Florida’s residential insurance market, and Citizens Property Insurance dodges a bullet that could have been fatal.

The Florida legislature established Citizens Property Insurance, the high risk pool, in 2002, in response to insurance companies that either went bankrupt, cancelled or pulled out of Florida because of repeated hurricanes. So, Citizens Property Insurance places the Florida taxpayers at risk for residential losses. Since 2002, storm after storm have struck Florida, nearly bankrupting Citizens. And Citizens is only one big storm away from ruin. So, when State Farm, the largest residential property insurer in Florida announced that they were leaving the state, the Insurance Commissioner’s office panicked.

This allowed State Farm to figuratively bend the Commissioner over the couch and have its way with him. Prior to State Farm’s announcement that they were leaving Florida, the company requested a rate increase of over 65% which was denied by the Commissioner. But rather than wave goodbye to Florida’s largest insurer, the Commissioner has granted the smaller...yet generous...rate increase of 14.8%. And, it is allowing State Farm to get rid of 125,000 policies that are arguably the highest risk policies they have on the books.

So, not only does State Farm get a rate increase on all policies, but it gets to keep its most profitable business and shove the riskier business off onto the taxpayers of the State of Florida. And for Citizens, 125,000 risky policies is better than 860,000.

You’ve got to admire that kind of moxy. State Farm, being the largest insurer in Florida, took full advantage of their market position and finally showed the State of Florida who is the boss. The regulators and the Florida legislature had little choice and no options but to give in to State Farm’s demands. The press release issued by the Commissioner’s office was a pitiful attempt to save face and spin the story to look like the Commish’s office was protecting Florida’s property owners.

Don’t you wonder if the terms of the consent order was what State Farm wanted all along?

Hurricane Preparedness: Prune Your Losses

Hurricane preparedness goes beyond making sure your insurance policies are up to date. There are some practical things you can do around your property, whether home or business, that can lower the risk of storm damage.

The National Climactic Data Center published statistics for 2007 that showed property damage from storms at over $7.4 billion. 2008 totals were higher with the Texas hurricanes. I imagine that you do not want to be part of the 2009 storm statistics.

Let’s concentrate on the simplest remedies. When storms arise, the exterior of your home can be damaged by those high winds and heavy rain. So, roofs, siding and windows are the first line of defense in a storm scenario.

Here are some tips for lowering your risk exposure:

• Make sure that your roofing is in good repair. Well-installed roofs are less susceptible to damage.
• Make sure that your siding is tightly attached to the building.
• If a storm is heading your way, consider boarding up your windows to protect them from being broken by flying debris.
• Caulk windows and doors to prevent wind-driven rain from entering around the openings.
• Cut down unhealthy trees on your property.
• Prune tree limbs that overhang your home or power lines, or overhang your neighbor’s property.
• Clean out roof gutters so rain doesn’t back up and cause interior water damage.
• Move your outside furniture and other personal property into inside storage so it is not blown against your building or a neighbor’s building.

With these tips accomplished, your property has much less exposure to damage from wind and rain. Of course, if your area is struck by a Category 4 or 5 hurricane, missing shingles and siding will be the least of your worries.

At that point, you’ll be glad you updated your insurance policy.

You DID update your policy, didn’t you?

Hurricane Season 2009: Seven Tips To Be Ready

Today marks the beginning of the Atlantic hurricane season, and early predictions by NOAA suggest that this will be an average season with as many as four to seven hurricanes.

The National Hurricane Center says there is a 70 percent chance of having 9 to 14 named storms, of which 4 to 7 could become hurricanes, including one to three major hurricanes (Category 3, 4 or 5).

Hurricane season runs from June 1st through November. Tropical systems all get names, and the first one will be named “Ana” when it reaches sustained winds of at least 39 mph. Tropical storms become hurricanes when winds reach 74 mph, and become major hurricanes when winds increase to 111 mph.

Here are seven tips on getting ready for hurricanes or tropical storms:

1. If you have property in a hurricane-prone area, seriously consider buying flood insurance from the National Flood Insurance Program. Buy the coverage now, not when storm clouds gather. Go to www.floodsmart.gov for more details.
2. Dig out your property insurance policy and read it. If there is anything you do not understand, call your agent and get your questions answered.
3. Make sure that you are insured 100% to replacement value. In this economy, market value has dropped, but replacement value is still high. A good average for replacement value is $80.00 per square foot.
4. Make sure that you have the replacement cost endorsement on the building and the contents.
5. Be sure what your deductible is. In many hurricane-prone areas, the insurance companies assess a deductible which is a percentage of the building policy limit, such as 2%, 3% or 5%.
6. Contact a Public Adjuster (PA). Have a conversation about the services a PA can perform for you when you have a major loss. Knowledge is power, but knowledge can also get you a lot more money at claim time.
7. Remember that if a civil authority issues an evacuation order, your homeowners policy will cover your Additional Living Expense while you’re out of your home. Read the policy for the details.

Let’s hope that this hurricane season will pass without even one storm striking land!

Texas Windstorm Insurance: Insanity in the Texas Legislature

Representative John Smithee, (R) Amarillo, has introduced HB911, which would, if passed and signed by the governor, cause the price of windstorm insurance - required of all coastal property owners - to soar by as much as 60 percent. Additionally, it wouldn’t cover nearly as much and for certain properties, it would not be available at all.

Smithee is the Chairman of the House Committee on Insurance. He cites a need to replenish the Texas Windstorm Insurance Association, the state risk pool, after the onslaught of Hurricanes Katrina and Rita in 2005, and Ike in 2008. The Association became the only insurer available for millions of coastal Texans after many insurers pulled out of windstorm coverage after the hurricanes.

The Texas Windstorm Insurance Association currently carries 215,537 policies totaling $58.6 billion in exposure. According to a December 2008 Texas Windstorm Insurance Association status statement, 43,079 of those policies are in Nueces County, with a total exposure of $11.4 billion.

House Bill 911 would, among other things:*
• Assess windstorm insurance rates based on geographical location, meaning coastal residents would pay more than inland residents. Rates could go up 60 percent for current coastal policy holders.
• Require coastal homeowners to purchase federal flood coverage.
• Cap windstorm insurance coverage at $250,000 per residence (homestead), well below the current $1.7 million cap, leaving thousands of homes uninsurable to their current value.
• Exclude coverage for rent houses, second homes, condominiums, apartments or other multi-family units.
• Decrease the maximum coverage for commercial buildings from $4.1 million to $1 million.
• Decrease the maximum coverage for government structures, such as schools and courthouses, from $4.1 million to $2.1 million, meaning those entities would have to use tax dollars to purchase more expensive, private insurance, if it’s available, to make up the difference.
• Create a 60-day waiting period before losses could be sought, as opposed to current policy, which prevents new coverage once a hurricane is in the Gulf of Mexico.
*Source: House Bill 911 and an analysis from the Galveston Windstorm Action Committee Inc.

I have no problem with higher premiums for coastal policyholders. That is simply accurate underwriting. Happens in all types of insurance. But don’t be fooled. If rates go up at the coastal states, they will rise state-wide. Texas is a windy state.

But that’s where my agreements end. The rest of this bill is trash.

Here are the elements of the bill I oppose:

Caps on windstorm coverage - Don’t cap coverage, charge the proper premium amount for the risk.

Requiring coastal property owners to buy Federal Flood insurance - it’s tyranny to force a property owner to insure for flood. If the owners want to remain uninsured, it is their right. That doesn’t mean a lienholder could not require flood insurance as a requirement for a mortgage. But that is a collateral protection issue. The federal government does not have a security position in a homeowner’s property without some mortgage in place (Freddie Mac, Fannie Mae, VA loans, etc.) To require flood insurance is a violation of property rights.

Excluding coverage for non-homestead dwellings, rental homes, apartments and condos - what kind of idiocy is this? There are millions of second homes, rental houses, condos and apartment buildings in the 14 coastal Texas counties. How would making them uninsurable help the situation?

The 60-day “deductible.” Texas law now states that, once a hurricane or named storm enters the Gulf of Mexico, new coverage cannot be purchased. But those storms usually make landfall, if at all, within a few days. In addition, in the peak of the hurricane season, storms are seldom 60 days apart. Look at Katrina and Rita, about 30 days apart. This proposal hurts Texans.

Smithee is from Amarillo, a city over 650 miles from the Texas Gulf Coast. That’s a distance equal to the distance from New York to Charlotte, North Carolina. I know that’s somewhat obscure, but this nut case is a long way from the water. It illustrates just how far out of touch with reality he is.

So, if a bunch of insurers have stopped writing windstorm coverage in Texas, and the Texas Windstorm Insurance Association is the insurer of last resort for many Texans, where are they supposed to go to get insured to value?

This kind of legislative nonsense could bring the Coastal economies to a screeching halt. Lenders would stop lending on properties that could not be insured to value. Insureds with losses could lose everything.

Texans, both inland and coastal, need to bombard their elected representatives with their opinions on this very bad bill and demand that it be rejected.

In the film industry, there is the widely known name of Alan Smithee. It is an official pseudonym used by film directors who wish to disown a project because they were so disgusted with the final product. I can only hope that someone paints the name “Alan Smithee” on this horrid bill.

What Will Your Insurance Policy Pay If You Break a Compact Fluorescent Light Bulb?

Everybody's singing the praises of the new compact fluorescent light bulb (CFL). And for good reason...they save tons of electricity.

But what happens if one breaks inside your house or business?

My opinion is that most people will simply sweep up the mess and not give it much thought. But there is a BIG, dangerous component in a bulb called Mercury, and mercury is one of the most toxic substances known to man.

If you break a CFL bulb, you'll likely find that the proper cleanup could be very costly. And you'll likely find that there is NO COVERAGE in your property insurance policy. Most policies have environmental cleanup exclusions. Even if your home is damaged by a tornado, hurricane or fire, the broken bulbs could cause you to incur thousands of dollars in environmental cleanup costs that your insurance policy will EXCLUDE.

Because CFLs contain a small amount of mercury, the Environmental Protection Agency (EPA) recommends the following clean-up and disposal guidelines:(1)

1. Before Clean-up: Ventilate the Room

* Have people and pets leave the room, and don't let anyone walk through the breakage area on their way out.
* Open a window and leave the room for 15 minutes or more.
* Shut off the central forced-air heating/air conditioning system, if you have one.

2. Clean-Up Steps for Hard Surfaces

* Carefully scoop up glass fragments and powder using stiff paper or cardboard and place them in a glass jar with metal lid (such as a canning jar) or in a sealed plastic bag.
* Use sticky tape, such as duct tape, to pick up any remaining small glass fragments and powder.
* Wipe the area clean with damp paper towels or disposable wet wipes and place them in the glass jar or plastic bag.
* Do not use a vacuum or broom to clean up the broken bulb on hard surfaces.

3. Clean-up Steps for Carpeting or Rug:

* Carefully pick up glass fragments and place them in a glass jar with metal lid (such as a canning jar) or in a sealed plastic bag.
* Use sticky tape, such as duct tape, to pick up any remaining small glass fragments and powder.
* If vacuuming is needed after all visible materials are removed, vacuum the area where the bulb was broken.
* Remove the vacuum bag (or empty and wipe the canister), and put the bag or vacuum debris in a sealed plastic bag.

4. Clean-up Steps for Clothing, Bedding, etc.:

* If clothing or bedding materials come in direct contact with broken glass or mercury-containing powder from inside the bulb that may stick to the fabric, the clothing or bedding should be discarded. Do not wash such clothing or bedding because mercury fragments in the clothing may contaminate the machine and/or pollute sewage.
* You can, however, wash clothing or other materials that have been exposed to the mercury vapor from a broken CFL, such as the clothing you happened to be wearing when you cleaned up the broken CFL, as long as that clothing has not come into direct contact with the materials from the broken bulb.
* If shoes come into direct contact with broken glass or mercury-containing powder from the bulb, wipe them off with damp paper towels or disposable wet wipes. Place the towels or wipes in a glass jar or plastic bag for disposal.

5. Disposal of Clean-up Materials

* Immediately place all cleanup materials outdoors in a trash container or protected area for the next normal trash pickup.
* Wash your hands after disposing of the jars or plastic bags containing clean-up materials.
* Check with your local or state government about disposal requirements in your specific area. Some states prohibit such trash disposal and require that broken and unbroken mercury-containing bulbs be taken to a local recycling center.

6. Future Cleaning of Carpeting or Rug: Ventilate the Room During and After Vacuuming

* The next several times you vacuum, shut off the central forced-air heating/air conditioning system and open a window prior to vacuuming.
* Keep the central heating/air conditioning system shut off and the window open for at least 15 minutes after vacuuming is completed.

Man, they are serious, aren't they?


(1) Environmental Protection Agency, www.energystar.com