By Tim Pallesen
Citizens Insurance is notifying owners of homes valued over $1 million that their insurance coverage will be cancelled.
Coastal communities are hardest hit, according to data released by the state insurer.
Cancellation notices mailed as the hurricane season began leave south county coastal residents scrambling to find alternative insurance at higher costs.
The mayors of two of the south county’s most affluent towns, Gulf Stream and Manalapan, say the cancellation of coverage for expensive homes is unfair.
“It discriminates against the high-end homeowner,” Gulf Stream Mayor Joan Orthwein said.
Gov. Rick Scott and the Florida Legislature are supporting Citizens’ attempt to reduce its financial exposure of $508 billion. The state insurer with 1.5 million policies has $5.7 billion to pay claims after a hurricane.
Citizens says the lower $1 million coverage limit will allow them to eliminate 7,500 policies statewide and $17 billion in exposure.
“It’s unfair to single out one group,” Manalapan Mayor Basil Diamond said.
“But Citizens is looking for ways to go out of business. The coverage limit is one baby step,” Diamond said. “All this will eventually even out if Tallahassee reaches its goal to fully eliminate Citizens.”
Citizens chose to slash coverage in affluent oceanfront towns because of public opinion, according to Jeff Grady, the president and CEO of the Florida Association of Insurance Agents.
“The argument was that Citizens was subsidizing millionaires to insure what was often their second home,” Grady said. “That was the emotion behind this.”
The purge of expensive homes began last year when Citizens set $2 million as the maximum coverage, sending the first wave of cancellation notices.
Delray Beach City Commissioner Tom Carney was among those who got cancelled. “Anything east of the Intracoastal Waterway lost it,” Carney said.
Coastal homes are hardest hit again by this year’s $1 million coverage limit.
Palm Beach County has the second highest number of cancellations with 1,542 policies valued at $3.7 billion, which equals 22 percent of the state dollar amount.
South county coastal communities with ZIP codes 33431, 33432, 33435, 33462, 33483 and 33487 received 613 cancellations, Citizens said.
The mayor of Palm Beach, which got 299 cancellations, is organizing Palm Beach County coastal mayors to protest the coverage limit.
“The legislation making homes valued at more than $1 million or more not eligible for coverage by Citizens is arbitrary, capricious and discriminatory,” Mayor Gail Coniglio wrote Gov. Scott after Palm Beach residents began getting their notices.
Diamond said Manalapan residents may not know about the cancellations yet. “It’s important for Tallahassee to be aware if there’s a lot of pushback on this,” he said.
The state Office of Insurance Regulation approved Citizens’ request for the $1 million maximum coverage on Jan. 13. Citizens stopped writing new policies for the more expensive homes and began sending out cancellation notices for existing policies in May.
Grady and local insurance agencies say residents who have been cancelled by Citizens now must find alternative carriers such as Lloyd’s of London that aren’t regulated by the state.
“It’s the wild, wild west as far as rates and what is covered,” Grady said.
“We can obtain coverage for everybody for a price,” Gracey-Backer Insurance co-owner Barbara Backer said. “But all affected homeowners will see hefty premium increases.”
Backer estimated increases will range from 100 to 200 percent, depending on construction, location and wind protection. One of her Delray Beach clients now must pay a $17,718 premium to an alternative insurance carrier after paying only a $6,417 to Citizens, she said.
Another south county agent, Plastridge Insurance, predicts alternative coverage will skyrocket to be three or four times the Citizens cost. “This has really hit those homeowners hard,” Plastridge co-owner Brendan Lynch said.
Alternative insurance carriers also are raising deductibles, Lynch and Backer said.
Backer predicted some owners of expensive homes will be forced to sell because they can’t afford the added insurance cost.
“At some point, it becomes unaffordable to buy these high-priced homes,” Backer said. “I suspect this insurance cost will affect the real estate market.”
Citizens says it’s dropping more than 600 Multiperil and Wind Only policies in the coastal area
ZIP Code Policies Affected Total Policies
33431 42 820
33432 217 973
33435 49 1,650
33462 50 775
33483 159 1,428
33487 96 613