Florida legislators are heading into a special session next week with several unconstitutional proposals to resolve the state's skyrocketing property insurance costs, an insurance industry official said.

Among the more radical proposals being considered are efforts in the state House of Representatives to pass legislation barring insurers from setting up Florida-only subsidiaries and forcing them to take their national profit picture into account when setting rates.

The proposal would also require companies selling other lines of coverage, such as auto, to also offer property coverage if they do so in another state.

Robert P. Hartwig, president and chief economist at the Insurance Information Institute in New York, said the provision requiring national profits be taken into account would run afoul of insurance laws in all 50 states.

"It means that profits implicitly generated in other lines and in other states would be used to subsidize homeowners' rates in Florida," Mr. Hartwig said. "This is an issue likely to wind up in federal court." he said.

Mr. Hartwig said insurance is regulated by the states and one state cannot impose rate increases in other states.

"This is a constitutional issue," he explained. "It sounds good in the heat of political environment, but it is unlikely to be supported actuarially or legally."

Newly-elected Republican Gov. Charlie Crist promised similar steps when he ran for office. He is now voicing support for these measures, along with proposals in the state House and Senate to reform the state's insurer of last resort, Citizen's Property Insurance Company.

"The House and Senate plans incorporate my priorities and will bring significant relief to the people," Gov. Crist said in a statement today. "It is our duty to find a solution for Floridians, and I pledge to work with legislative leaders to reduce insurance rates and make a real impact on consumers' pocketbooks."

Other groups are seeking more targeted reforms designed to ease the burden of homeowners by better spreading risk. The Community Association Leadership Lobby, an advocacy group representing condominium associations and homeowners' associations, has been lobbying state lawmakers to allow for such associations to band together and purchase insurance.

Under the current laws, according to Donna D. Berger, CALL executive director and a community association attorney with the Ft. Lauderdale-based firm of Becker & Poliakoff, associations can only be formed for reasons other than the purchasing of insurance coverage.

As a result, she noted, associations have typically formed within a small geographic area, whereas CALL's proposal would allow for associations across the state to purchase coverage together.

"Because Florida law has specifically denied them the right to organize to spread their insurance risk across community associations throughout the state, to date these common-interest ownership communities have been unable to effectively act to halt the skyrocketing insurance rates that are wreaking havoc on their community finances," she said.

Ms. Berger said that CALL's proposal has been very warmly received, adding that "everyone can see the value in it." The legislative language put forth by CALL was introduced in the state House by Rep. Julio Robaina, R-Miami Dade, and has been included in a large hurricane reform draft bill in the Senate. Other lawmakers, including Rep. Andy Gardiner, R-Orange County, have also expressed support, she said.

Special Reports /

Fla. Insurance Legislation Unconstitutional?

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