Thousands of South Florida homeowners are scrambling to find new insurance coverage after state insurance regulators dissolved Florida Specialty Insurance Co. for allowing its surplus to fall below the state’s minimum threshold, among other issues.
Florida Specialty was one of small number of companies operating in Florida that catered to mobile home owners.
All of the company’s policies will be canceled at 12:01 a.m. Nov. 1.
The company was ordered into receivership “for purposes of liquidation” by a Leon County Circuit Court on Oct. 2, according to the Florida Department of Financial Services, which was appointed as receiver.
For the next few weeks, existing policies will be underwritten by the Florida Insurance Guaranty Association. Claims for damages incurred until the company was dissolved can be filed until Oct. 1, 2020.
As of June 30, the company had 93,770 policies statewide, including 35,804 multiperil, dwelling/fire and wind-only mobile home policies, according to a database maintained by the Florida Office of Insurance Regulation. The company insured 9,223 homes in Broward, Palm Beach and Miami-Dade counties, including 1,974 mobile homes.
Policyholders began receiving letters on Oct. 2 from the state Division of Rehabilitation and Liquidation advising them to contact their insurance agents as quickly as possible to ensure their coverage is not interrupted.
State law allows mortgage lenders to “force place” high-cost insurance coverage when homeowners with mortgages fail to maintain continuous coverage.
Agents, companies and policyholders are “scrambling” to get Florida Specialty’s customers placed with other carriers, said Jay Neal, president and CEO of the Fort Lauderdale-based insurance watchdog organization, Federal Association for Insurance Reform.
Some customers likely will end up going to the state-owned insurer of last resort, Citizens Property Insurance Corp., Neal said. Others might be pursued by other companies that market to mobile home owners, including American Traditions Insurance Co., which had 75,880 mobile home policies as of June 30.
State insurance regulators sought the dissolution of Florida Specialty Insurance after learning of a number of reporting irregularities, according to an affidavit by the Office of Insurance Regulation’s chief assistant general counsel.
Although the company’s second-quarter financial statement reported holding a surplus of $10.03 million – about $30,000 over the required $10 million – state regulators determined the company misrepresented a $1.5 million deferred tax asset. It also listed $8.6 million it said was recoverable from a reinsurer as a receivable, but the reinsurer told the state that it disputes owing the money, the affidavit said.
The company also violated state law by continuing to sell policies after it knew or should have known that it was insolvent, the affidavit said.
But in a motion filed Tuesday, Florida Specialty challenged the state’s determination that it was insolvent and asked the court to reconsider appointment of a receiver and order the state to immediately rescind notices of cancellation.
Neal said it appears the state rushed to judgment on the dissolution and could have saved all of the company’s policyholders a lot of trouble by letting another insurer take over the remainder of their policy terms, or finding another company to take over Florida Specialty. Similar solutions have eased customers’ transitions from failed companies in the past, he said.
“There are a lot more questions than answers,” Neal said. “There has to be a pretty good reason why this had to slam to a halt by Nov. 1. The Legislature needs to find out what happened and why.”
State Insurance Commissioner David Altmaier, in a prepared statement, said regulators worked with the company for more than a year to try and help it develop a viable business plan. “While we never want to see an insurer go into receivership, the good news is that we have a safety net in place to protect consumers,” the statement said.
© 2019 the Sun Sentinel (Fort Lauderdale, Fla.), Ron Hurtibise. Distributed by Tribune Content Agency, LLC.