LEGAL NEWSLINE

TALLAHASSEE, Fla. -- Florida taxpayers are achieving lower insurance premiums by paying the difference in their taxes, an Oregon insurance attorney said Tuesday.

David Rossmiller, a partner at Dunn Carney in Portland, Ore., managing editor of the Insurance Coverage Law Blog and a former reporter at the now-defunct Phoenix Gazette, has been monitoring the situation and says Florida's government, led by Gov. Charlie Crist, is creating long-term problems.

Much of the state's future troubles, Rossmiller believes, start with state-run Citizens Property Insurance, which is now the largest insurer in the state with 1.3 million customers.

"It's not a stop-gap solution program anymore that helps citizens who find themselves suddenly without insurance," Rossmiller said. "It is now the insurer.

"If a government-run company is able to provide services at a price no one else can afford, it's going to drive out other insurers. They can't compete with that."

In fact, a report in Tuesday's Tallahassee Democrat states that four companies have stopped taking new business in Florida. Crist spearheaded a recently approved plan that prohibited insurers from dropping policyholders for 90 days. Combined with recent legislation, no policyholder will be eligible to be dropped until November, after hurricane season.

The Wall Street Journal said Crist, a Republican, and the legislature have created "one of the more un-Republican reforms on Florida's books." Their measures also forced insurance companies to decrease their premiums by five percent in the name of competition, it added.

While campaigning last year, new Attorney General Bill McCollum pledged to lower insurance rates.

"The only reason Citizens can offer what it is offering in some of these cases, which are cheaper than others, is because the taxpayers of the state are guaranteeing this lower rate," Rossmiller said.

"Even people down there in the legislature in Florida agree that Citizens Property is the worst insurer in the state. It's the most badly run insurance company in the state, and why anyone would institute as the largest and most permanent..."

Also, taxpayers are contributing to the Florida Hurricane Catastrophe Fund, a form of reinsurance on the more expensive claims. Florida has told insurance companies that it may draw from the fund in the case of a catastrophe.

The problem, Rossmiller said, is that the state made its plans for how much money will be needed based on the weather patterns of the last 100 years, while the insurance companies are using hurricane models that are based on the previous five years.

"If they are wrong and they have another run of storms like they did in 2004-05, then they currently don't have enough money to pay the reinsurance," Rossmiller said. "Florida would be in debt for it, which could lead to a huge crunch in the insurance market.

"I've heard people down there in the legislature say it wouldn't be a big deal and if the state had to absorb it now, they could do it -- it wouldn't be that much of a problem. I'm not saying that's something Florida couldn't do, but I'm really skeptical about that.

"If they had to take $50 billion to pay reinsurance that it guaranteed to the insurance companies, that's a big gamble on Florida's part that it's all gonna work out."

Rossmiller's blog can be found at http://www.insurancecoverageblog.com