Citizens' proposal alarms Key condominium owners

Although the board of directors of Citizens Property Insurance delayed until Feb. 4, 2012, a decision regarding a new limit for wind coverage for coastal condominium complexes, Key condo owners remain concerned they may face much higher premiums in the future.

In a Dec. 10 memo sent to every Florida legislator representing Sarasota County, the Siesta Key Condominium Association stated the proposed change in wind coverage could lead to an increase between 400% and 500% in insurance premiums for condo owners in complexes in which more than 25% of the units are rented.

Noting the association represents 105 condos on the Key, the memo asks the legislators for their help.

The association included with the memo a copy of a summary of the situation written by Michael Clarkson, president of All Lines Insurance of Clearwater. That summary states, “Buildings identified as having short-term rentals (25% or more units on the rental market) will no longer be eligible for full wind limits through Citizens’ Commercial-Residential Program.”

Instead, the summary adds, the condominium complexes will be allowed to purchase maximum wind-damage coverage of $1 million per building.

Material prepared for the Dec. 14 Citizens board meeting (www.citizensfla.com) states the change would reduce the company’s exposure in coastal areas by $17 billion.

Citizens’ argument, the summary states, is that during the past three years, the Florida Hurricane CAT Fund stipulated it would reimburse the company for full losses only if fewer than 25% of the units in a condominium complex in a coastal area were rented annually.

The summary states it would be difficult to identify all of the complexes that fall into the category of 25% or more rentals, because many association boards are unsure of the number of their rental units.

The summary also asks, “Can our beaches handle premium increases up to 450% during a recession?”

“If the rates go up 400%, that’s such a major increase that many places are going to have to have a special assessment,” said Helen Clifford of the Siesta Key Condominium Association Board of Directors.
A number of condo owners buy their units as beach houses, Clifford said.

“During season, they’re trying to make money” by renting the units Clifford said. “If the wind-insurance premium goes up dramatically, (many owners may decide they) can’t handle this anymore.

“I think it’s going to be a major hit throughout Siesta Key,” she said.

Walt Olson, vice president of the Condo Association, said his complex, the Excelsior, has seven buildings with a total value of about $7 million. If Citizens limited its total wind coverage to $1 million, he said, that would be a significant increase for owners to handle.

“If there’s enough upheaval (among owners), perhaps we could get (Citizens’ proposal) overturned,” he said.

The association has sent letters to all the complexes on the Key, he added, asking the boards of directors to send letters to their legislators.

In response last week to an email from Clifford, Sarasota County Commission Chairwoman Nora Patterson informed her fellow commissioners about the issue. She agreed with Clarkson’s memo to the association.

“I don’t know exactly how (Citizens is) going to measure (the number of rental units in a complex),” she said.

Patterson added that for a number of years in the city of Sarasota, homeowners had been forced to use Citizens for wind coverage because private companies are not allowed to write those policies.

“I have to say, Citizens’ (policy costs are) going to go up anyway,” she said, even if the new wind coverage proposal fails to win approval.

One email Patterson received about the matter came from a Gulf & Bay Club condo owner who was worried about their insurance coverage going up to $2,000 a year.

“But I can tell you, single-family homeowners pay more than that for comparable-value properties,” she said.

Still, Patterson said: “It’s going to be a problem, and hopefully these (condo owners) won’t have … a humongous increase visited upon them, because you’re going to have problems with the value of all Siesta Key condos, for sure, because they’re all heavily used for rental.”

Commissioner Jon Thaxton responded: “The need for Citizens to become actuarially sound is clearly very important. We can’t lose sight of a very obvious and necessary goal.

“I could see, with a hazard insurance policy, changing a premium for a non-owner-occupied unit, (but) I don’t see how wind pays any difference to whether or not it’s a leased property or owner-occupied property,” he said.

Commissioner Christine Robinson said she understood the initiative came from Gov. Rick Scott’s office, which was determined to see Citizens reduce its costs. In reading the proposed change in policy writing, she added, “I’m not really sure this will trigger as much (change in expense) as we think it will trigger for folks.”

“I have conflicting feelings about (the proposal),” Patterson said. If the state suffered major hurricane damage, she said, and Citizens was under-funded, the expense of covering the losses “would be made up by huge increases on everybody, anyway.”

The Pelican Press was unsuccessful in seeking comments from state Sen. Nancy Detert, of Venice, and Rep. Doug Holder, of District 70, which includes Siesta Key.