There is a dangerous trend in the insurance marketplace affecting commercial residential condos. Condo associations are increasingly becoming insured by unregulated, “surplus lines” companies.
By doing so, associations risk forfeiting a host of consumer protections against excessive rate hikes, reduced coverage levels, and good faith claims handling. Moreover, associations forfeit claim payment protection from the Florida Insurance Guarantee Association (FIGA) if the carrier is financially unable to pay claims.
This is unacceptable. Surplus lines insurance was intended for risks that the standard or “admitted” insurance market would not cover. For example, standard companies, regulated by the Florida Office of Insurance Regulation through Florida Statute F.S. 626.916, will not write policies for high risk or unusual situations.
A robust, private market of standard or “admitted” property insurance companies exists in Florida, willing to insure condo associations.
One reason condo associations are choosing surplus lines policies over the standard market could be because of a public policy failure to provide enough FIGA coverage; the existing FIGA coverage limit of $100,000 per condo was set in the 1970s.
Unfortunately, some licensed Florida insurance agents have side stepped F.S. 626.916 and are referring condo owners into the surplus lines insurance market. Thankfully, CFO Jeff Atwater has remained diligent in his efforts to stop insurance agents from going around the statute.
FAIR supports Atwater and urges condo owners to be wary.
We encourage condo associations, agents, and other stakeholders to support Florida’s admitted insurers and our efforts to achieve “condo parity” by increasing the FIGA limit.
founder and vice president of public policy,
FAIR, the Florida Association for Insurance Reform, Fort Lauderdale