Before Hurricane Season, a Wave of Old Claims Hits Florida
Around the State
A number of new damage claims from storms dating back to 2005 could push Florida to borrow millions of dollars, State Board of Administration officials said Tuesday.
Official numbers on the total amount of claims or their dollar amount were not immediately available, but SBA officials said the increased number of claims at the end of a filing deadline is highly unusual.
“We’re seeing an inversion of the claims experience. We’re seeing a large group of claims coming in years after a storm event, which is very odd,” said SBA executive director and CIO Ashbel Williams.
Williams said that the amount of claims would likely be in the millions of dollars. The state’s catastrophic storm insurance trust fund, or cat fund, may have as much as $615 million to handle the extra claims, but officials want to be prepared to hit the bond market in case they go overboard.
“If we have to issue more debt, we don’t know when or how much,” another SBA official said.
They also want to make sure the correct amount of claims are paid out.
“We don’t want to take the chance of being wrong, either high or low,” Williams said.
The extra claims won't affect the cat funds allotted for the next fiscal year, since they are dedicated on a per year basis.
The Florida Cabinet granted SBA officials an emergency rule extending the amount of time they have to review the late-filed claims, some of which have come through after Oct. 25, 2010. The normal time period of 60 days to review and act on a claim was waived under the rule.
The claims stem from damage incurred from Hurricane Wilma, which struck the southwest coast of Florida as a category 3 hurricane in October 2005, and cut across the state.
“The whole point of (Tuesday’s) exercise is that rather than us being in a position of speculating -- we don’t want to speculate, we want to get it right,” Williams said.
Under current law, there is a five-year window in which to file claims from hurricane damage. Williams said that SB 408, which reduces that time period to three years, will help prevent future back-loading of claims. Gov. Rick Scott signed the bill into law Tuesday afternoon, but it will not take effect until July 1 and would not affect current claims.
“That will definitely run us in the right direction on those claims,” Williams told Scott and the Cabinet.
Williams suspects the harsh economic climate combined with overzealous public adjusters has led to a “moral hazard,” in which claims are filed cynically with a view toward paying down a mortgage instead of repairing damage from a storm.
“A lot of people have been in financially troubled times, and there’s always the potential for some moral hazard,” he said. “That temptation is greater in tougher economic times.”
The majority of late-filed claims, Williams said, have come from condominiums and apartment complexes.
But a pack of hurricanes assaulted Florida in 2004, and there was no similar jump in late-filed claims as time ran down in 2009, when the economy was still reeling from the global recession.
Reach Gray Rohrer at email@example.com or at (850) 727-0859 begin_of_the_skype_highlighting (850) 727-0859 end_of_the_skype_highlighting.