Flood Requirements, Condo Inspection Rules Revised in Fla. Bills Sent to Governor

Article Courtesy of The Insurance Journal

By William Rabb

Published April 15, 2023


When a bill passed at a December special session of the Florida Legislature required all Citizens Property Insurance policyholders to buy flood insurance, many owners in high-rise condominiums were outraged. Already facing soaring premiums on HO-6 policies, now they were expected to pay hundreds more for flood insurance they couldn’t imagine ever needing.

Last week, lawmakers signaled that they had heard the outcry – and rolled back the flood insurance requirement for condos. Legislators also amended and clarified some of the landmark condominium inspection and reserve funding measures required by the much-heralded Senate Bill 4D, approved during last summer’s special session.

In short, the 2023 regular legislative session cleaned up some bills approved during the three-day-long special sessions held last year. The regular session adjourned May 5. It’s now up to Gov. Ron DeSantis to sign the changes into law.

Here’s a look at the bills.

Senate Bill 154, sponsored by Sen. Jennifer Bradley, R-Fleming Island, and House Bill 799 both address the condo market. They would allow condominium buildings’ master flood coverage to suffice and would no longer require individual unit owners to purchase separate policies.

Florida lawmakers approved the flood requirement for all Citizens policyholders in Senate Bill 2A in December. The rationale was that it would help avoid litigation over whether the damage to a property was from wind or water, and might even force Citizens consumers to seek more-affordable wind coverage in the primary market.

And even though thousands of condo unit owners are on upper floors, far from storm surge and cresting rivers, they would have benefitted, advocates of the requirement said. Some policies, for example, cover association assessments that might be levied on all units if there’s damage to common areas in a flood.

But many people didn’t get it. State Sen. Jason Pizzo, D-Miami, called the flood requirement for high-rises “nuts,” Tampa TV news WFLA reported.

“It’s difficult to explain why people on upper floors need flood coverage,” acknowledged Scott Johnson, a longtime Florida insurance industry educator and consultant who had advocated for the flood coverage mandate

To add insult to the perceived injury, the cost of flood insurance this year has dropped for some properties, but has doubled or tripled for many under a new federal risk-rating program.

The flood requirement hit condo owners especially hard, because most of them now have little choice except to insure their units with Citizens, the state-created insurer of last resort. A number of primary market carriers pulled back from the Florida condo market after the Champlain Towers South collapse in 2021.

“There’s really no admitted market for condos anymore. It’s all Citizens,” said Travis Moore, a consultant and lobbyist who represents condo associations and owners in Florida.

And the flood requirement was practically impossible to achieve, in some cases, he said: The National Flood Insurance Program does not allow policies to be “stacked.” If the association or condo building has a master flood policy, usually covering up to $250,000 per unit, the unit owner can’t buy another policy on top of that, Moore noted.

HB 799, if signed into law, will also require that, for insurers that do require flood coverage, the carrier must verify the policy. Otherwise, the insurer cannot later deny a wind claim solely because the insured does not have flood insurance.

The bill could raise insurance costs for some Florida property owners: It provides that the Citizens glidepath, which currently limits premium increases to no more than 12% per year, does not apply when Citizens assumes policies from an insurer that was deemed to be unsound or insolvent.

On condominium inspections, SB 154 seeks to settle some confusion and allow condominiums some flexibility.

The Legislature in December mandated more structural inspections, in the wake of the 2021 collapse, which killed 98 people. All condos above three stories have to be inspected 30 years after construction and regularly thereafter. Those within three miles of the coastline would have to be examined more frequently. And condo associations could no longer defer maintenance and funding for major repairs.

But Moore said the three-mile limit was not always clear and arbitrarily exempted some populous areas like Tampa, home to hundreds of aging condominiums. The new bill, if signed, will eliminate the three-mile line and require the 30-year inspections for all residential community high-rises.

The measure also authorizes local jurisdictions to extend the deadline for inspections if engineers and architects cannot complete their reports on time, due to high demand for their services. The inspections may also be handled by other professionals, as long as an engineer or architect is in charge of the team. Unit owners may also vote to waive or reduce reserve funding for nonstructural items.