Home and business owners on Perdido Key, Fla. off the northwest coast of the state near the Alabama state line could wait years before insurance companies and the courts decide how much damage was caused by wind and how much due to flood damage.
What makes rebuilding so complicated here and elsewhere along the Florida Panhandle coast is that destruction came twice — in 130 mile-per-hour winds and as much as a 20-foot storm surge, the Fort Myers News-Press reported.
Wind perils are covered by hurricane policies. Storm surge is the domain of federal flood insurance.
While insurance companies and policyholders battle in court about dividing the losses, claims are paid only partially or not at all, even if they’re not part of litigation.
To rebuild, owners need to collect policy limits. That’s what they believe state law, and a 2004 appeals court decision, guarantees.
Citizens Property Insurance so far refuses to pay anything. Its first adjuster contended the damage was entirely by water.
“Tell me how a house on a barrier island gets no wind damage in a hurricane,” Nancy Kilpatrick, who lost her Pensacola Beach home to Ivan asked the News-Press. “I’m a single mom who has worked two and sometimes three jobs at a time to pay my bills and insurance.”
Even after court decision, payment refused
Hurricane Irene brought both wind and water when it destroyed the Fort Lauderdale house of Zennon Mierzwa in 1999.
Though Mierzwa’s home was insured for $281,000 with the Florida Windstorm Underwriting Association, the state agency offered to pay $68,000 — in part because Mierzwa also was collecting $54,000 from his flood policy.
A South Florida appeals court last summer sided with Mierzwa and ordered the FWUA, now a part of Citizens Property Insurance, to pay the policy limit.
Despite the ruling, Citizens refuses to pay policy limits to 2004 hurricane victims caught in similar multi-peril binds. The insurer contends it is unfair to force it to pay for any share of damage caused by something excluded in its policy — flood.
“You get to the question of, are you running a charity or are you operating a business,” said Ed London, a member of Citizens’ board of governors.
Citizens seeks a more favorable ruling in a different court. Barbara and Ralph Perkins, whose home on Grande Lagoon Boulevard was devastated by Hurricane Ivan, were sued in Escambia County after demanding full payment on their $140,000 wind policy.
New lawsuits filed
This month, lawsuits began flying in the opposite direction. More than a dozen cases were lodged against Citizens in Escambia and Santa Rosa counties the past week, along with lawsuits against other insurers.
Among those also facing litigation are Allstate Floridian, USAA, Florida Select, Vanguard, Universal Property and Casualty and Southern Family Insurance.
In Leon County, the attorney who won the Mierzwa case has filed what he hopes will be a class action case against Citizens to stop the debate over wind and water.
“When a house is destroyed, how are you going to determine how much is wind and is flood?” said attorney Stuart Michelson.
He estimated as many as 15,000 policyholders would be affected by the class action.
Citizens would not reveal how many claims it refuses to pay in full. The losses represented are “very, very substantial,” an attorney told the insurer’s governing board last week.
Citizens has told state officials more than 2,400 claims from Hurricane Ivan remain open. Some, such as Kilpatrick, have been told they will get no money at all, because they ostensibly had no wind damage.
Other policyholders said they have been told their cases will remain in limbo until the Mierzwa-related court cases are settled.
“The arrogance of Citizens expecting citizens to sit around by their mailbox, waiting for them to get back to them on a court ruling, is mind-boggling,” Pensacola attorney Charles Beall, who has half a dozen lawsuits pending against the insurer told the News-Press.
Beall said Citizens’ refusal to pay claims while it files a court case is akin to saying “we’re going to wait around and see if we can get the law changed in our favor.”
Legislative committee requests clarification
A legislative committee on Thursday recommended “clarifying” state law to require insurers to pay only a portion of policy limits, based on the perils covered.
Insurance settlement delays, coupled with contractor shortages, can confound the recovery of an entire community. A hotel that doesn’t reopen means lost jobs, less business in the community and lost sales tax revenue for schools.
“What you have is the cumulative commercial impact,” said Monte Blews, general manager of the Santa Rosa Island Authority, which oversees storm-ravaged Pensacola Beach.
The tourist spot provides a third of the sales tax revenue for the two-county Pensacola metropolitan region, Blews said.
The outcome is equally critical for Citizens Property Insurance.
Its coffers emptied by $1.6 billion in hurricane payouts, Citizens has indicated it will need a $400 million bailout from property policyholders in the state.
Losing in court a second time would add to the red ink and could trigger more surcharges, London said. The company has not set up a reserve fund to pay claims in case it loses the litigation.
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