Litigation costs could add between $10 billion and $20 billion to insured losses from Hurricane Ian, adding to the woes of Florida’s already struggling homeowners insurance market, said Mark Friedlander, Triple-I’s director of corporate communications.
Early estimates put Ian̵7;s insured losses in excess of $50 billion.
“Based on the past history of post-hurricane lawsuits in Florida and the state’s highly litigious environment, we expect a large volume of lawsuits to be filed in the wake of Hurricane Ian,” Friedlander said in an interview with Insurance business.
Most suits are expected to mean the difference between flood and windstorm losses. Common homeowner’s policies exclude flood-related damage from coverage, but distinguishing between wind and flood damage in the aftermath of a major hurricane can be challenging.
Flood insurance is available from FEMA’s National Flood Insurance Program, as well as from a growing number of private carriers.
Trial lawyers are “already on the ground” seeking business in some of the hardest-hit areas, Friedlander said. “This will be a key element in the solvency of struggling regional insurers already facing financial challenges.”
Six Florida-based insurers have already failed this year. Florida accounts for 79 percent of all U.S. homeowner claims disputes despite representing only 9 percent of insurance claims, according to figures shared by the Florida governor’s office. Litigation has contributed to double-digit home insurance premium increases in recent years, with Florida’s average annual home insurance premium of $4,231 among the nation’s highest.
“Floridians are seeing homeowner’s insurance become more expensive and scarcer because for years the state has been home to too many lawsuits and too many fraudulent roof replacement schemes,” said Triple-I CEO Sean Kevelighan. “These two factors contributed enormously to the net insured losses incurred by Florida homeowners’ insurance companies cumulatively between 2017 and 2021.”
Trevor Burgess, CEO of Neptune Flood Insurance, a private flood insurance company based in St. Petersburg, Fla., said the percentage of homes covered by flood insurance in all locations affected by Ian is lower than five years ago. Friedlander said Fox Weather that although more than 50 percent of properties along Florida’s western Gulf Coast are insured for flood, “inland … flood insurance utilization rates are below five percent.”
While Florida is at particularly severe and persistent risk of hurricane-related flooding, the protection gap is by no means unique to the Sunshine State. Inland flooding from hurricanes is causing increased damage and loss across the country – often in areas where homeowners tend not to purchase flood insurance.
In the days after Hurricane Ida made landfall in August 2021, massive amounts of rain fell inland, flooding subway lines and streets in New York and New Jersey. More than 40 people were killed in those states and Pennsylvania when basement apartments suddenly filled with water. In the hardest-hit areas, the take-up rate for flood insurance was below five percent.
Damaging floods that hit eastern Kentucky in late July 2022 and left 38 people dead were also largely uninsured against. Only 1 percent of properties in the counties most affected by the flood have federal flood insurance.
“We’ve seen some pretty significant changes in the impact of flooding from hurricanes, very far inland,” Keith Wolfe, Swiss Re’s president of U.S. property and casualty, said in a recent Triple-I Executive Exchange. “Hurricanes have just behaved very differently in the last five years, once they make landfall, from what we’ve seen in the last 20.”