Judge Denies State Farm Fla. Homeowners Increase

A Florida administrative law judge has recommended against State Farm Florida’s request for a statewide average homeonwers insurance rate increase of 47.1 percent.

Administrative Law Judge Daniel Manry, of the Division of Administrative Hearings, said, “State Farm Florida did not show by a preponderance of the evidence that either the indicated rate or requested rate in the rate filing is not excessive, inadequate, or unfairly discriminatory.”

The rate request was brought before Judge Manry after State Farm Florida appealed Florida Insurance Commissioner Kevin McCarty’s decision to reject the company’s requested increase in August.

State Farm Florida had argued that the increase was needed to “cover the expected costs of loss and operating expenses.” The company cited the cost of reinsurance as well as recent legislation mandating discounts for mitigation efforts to strengthen homes against storms as two of the reasons why a rate increase is needed.

The 47 percent average increase would affect homeowners across the state differently. For example, the increase would be as low as 19 percent for Pasco County beside the Gulf of Mexico, and as high as 88 percent in Flagler County on the Atlantic, which encompasses Daytona Beach.

The OIR responded with 23 reasons for rejecting the increase. Among those reasons, the OIR said, “The rate filing and requested rate fail to reflect a reduction in policyholder premiums consistent with the expansion of the Florida Hurricane Catastrophe Fund coverage…,” and “[the company] has not provided sufficient support that the reinsurance cost in the filing reflecting reinsurance premium amounts and expected recoveries does not result in excessive reinsurance cost related to services rendered….”

State Farm Florida then appealed the OIR’s decision to Judge Manry.

Mr. McCarty now has 30 days from Friday’s decision to issue a final order on State Farm’s request.

The OIR said in a statement it would not comment further on the matter because Mr. McCarty is the final hearing officer.

In a statement, State Farm Florida said, “We believe the facts we presented to the administrative law judge should have led to a different recommendation and that our rate request should be granted.”

The company also urged the OIR to “take into account State Farm Florida’s rapidly deteriorating financial condition” when making its final decision.