Citizens Property Insurance may be open to “bad faith” lawsuits in the future
Rates for homeowners insurance policies through Florida’s Citizens Property Insurance could be on the rise once again. The Florida Supreme Court is weighing a decision on whether or not the state-funded insurance company is liable for “bad faith” lawsuits. The 1st District Court of Appeals believes that the insurer should be open to such lawsuits, but Citizens argues that it should be exempt due to the way the company was formed. Citizens Property Insurance was created by the Florida Legislature in 2002 and, by law, is required to have enough capital to cover claims from its policyholders.
State-backed insurer has had problems with several organizations in the wake of natural disasters
This issue is linked to a problem with a condominium association, which claims that Citizens underpaid claims related to damages caused by Hurricane Ivan in 2004. The insurer has had many problems with natural disasters over the years and has often been criticized for its slow claims process and financial problems. In recent years, the insurer has been working to depopulate itself of policies, allowing private companies to take on policies it had once been responsible for.
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Rates are not guaranteed to increase in the event of a lawsuit
A lawsuit does not guarantee that homeowners insurance rates will go up, of course. If legal issues detract from the insurer’s funding, however, it will have to take steps to ensure that it remains solvent and has enough capital to manage claims in the event of a natural disaster. Insurers often raise their rates in the wake of a significant catastrophe in order to recover from the financial losses that they experience.
State’s Supreme Court will rule on the issue in the coming months
The Florida Supreme Court is expected to make a ruling on the issue within the next few months. If Citizens can be open to bad faith lawsuits, the company may face more financial stress. Citizens may be able to cope with this stress, however, as it has managed to satisfy much of its outstanding debt obligations to the state.