State prevents insurers from dropping customers

Florida’s insurance regulators barred insurers Thursday from canceling policies held by residents of the 12 counties hit by Hurricane Charley.

Citing the disruption of mail service and the inability of many residents to stay in their homes, Kevin McCarty, director of Florida’s Office of Insurance Regulation, ordered companies to refrain from canceling policies in the hurricane-affected area until Oct. 15, unless asked to do so by an affected homeowner.

He ordered that insurers withdraw cancellation notices sent to customers in the period before the hurricane beginning Aug. 3.

The order specifies that insurers may not cancel insurance simply because a homeowner files a claim for damages sustained during Hurricane Charley. Some homeowners have said they’re reluctant to file damage claims for fear they may be dropped as a customer.

“The last thing we want them to worry about is their insurance coverage,” McCarty said.

Tom Gallagher, Florida’s chief financial officer, had sought the order for storm victims in Brevard, Charlotte, DeSoto, Hardee, Lake, Lee, Orange, Osceola, Polk, Sarasota, Seminole and Volusia counties.

“As we work to come to grips with the aftermath of Hurricane Charley, we will need to recognize extenuating circumstances for storm victims,” Gallagher said. “We need to focus on helping our citizens and businesses get back on their feet.”

Bob Lotane, a spokesman for the state’s insurance division, said the order wasn’t based on complaints of insurance companies canceling policies. Rather, it “is simply a proactive step on our part,” he said.

The state’s decision to bar insurers from canceling policies came as Citizens Property Insurance Corp., the state’s insurer of last resort, said preliminary estimates show it faces about $1.2 billion in claims from Hurricane Charley. About 42,150 claims, of which 37,165 are for wind damage only, have been received so far.

Despite the magnitude of Citizens’ loss -- the single-largest amount reported so far by the state’s insurance companies -- officials said they won’t have to touch $2 billion that was raised by selling bonds prior to the hurricane. As a result, the state-backed operation said it won’t have to impose a special assessment on Floridians’ insurance policies to help replenish its funds, a step it is authorized to take under the legislation that created its high-risk insurance pools.

Citizens said its estimated loss would leave about $200 million in its wind-insurance pool at the end of the year. It is adding about $40 million a month to its surplus levels and is now seeking to raise another $750 million.

Citizens was created in 2002 when the state Legislature combined the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association. It insures the state’s riskiest properties -- the ones commercial insurers no longer wanted to cover.

John Schmeltzer is a reporter for the Chicago Tribune, a Tribune Publishing newspaper.