In insurance limbo

There is a Citizens-like plan for businesses, but many can't afford it.

By Tom Zucco
Published December 6, 2006

Craig Butler is exactly the kind of person the state of Florida wants to help. And it doesn't look like he's going to get it.

Butler owns Computer Helpers on Fourth Street N in St. Petersburg and shares the 52-year-old building with a shipping company owned by his parents, Harvey and Nancy Butler. The Butlers have owned the building since 1989.

After being dropped recently by their commercial property insurance company, the Butlers shopped around for other coverage. Their broker found only one company that would insure the building - but not for wind.

Finally, they checked with the state. And in the ultimate irony, they found they were eligible for wind coverage, but the cost would put them out of business.

So they bought a basic liability policy, and left the rest to chance.

"If the building gets destroyed," Butler said, "we'll probably just bulldoze what's left and leave the lot vacant until somebody buys it.

"What else can we do? We're just little guys."

Help is supposed to be there. When the Florida Property and Casualty Joint Underwriting Association opened for business Sept. 15, it was designed just for little guys like the Butlers.

But so far, it has written about 245 policies, a tiny fraction of the number of small businesses in the state.

The PCJUA is sort of a "Citizens Lite." The association writes commercial wind-only policies anywhere in the state except the few coastal areas where Citizens Property Insurance is available. Coverage for structures is limited to $1-million, and business owners must prove they can't find wind insurance in the private market, including surplus lines.

And that coverage doesn't come cheap. Like Citizens, the PCJUA's rates must be high enough so as not to compete with the private market.

The original plan for the PCJUA was to keep its focus narrow and not allow it to balloon into the monster Citizens has become.

But those same tight parameters, and intentionally high premiums, are pushing away many businesses that desperately need help.

PCJUA board member Ronnie Duncan, who is also vice chair of the Pinellas County Commission, acknowledged that even though the association did an admirable job starting from scratch, the initial numbers are troubling.

"If there was truly a need for wind-only policies for commercial properties under $1-million," Duncan said, "it is surprising we didn't have more quotes and more bound policies? ... That says to me, 'Is this the market that's needed?' "

The PCJUA's $1-million cap doesn't seem to be the biggest concern. Limiting policies to wind-only is.

"They don't need just wind," Duncan said, "but multiperil policies.

"If they small businesses had a one-stop shopping to buy multiperil, is that not a better service?"

But until the Legislature changes the guidelines, the PCJUA will remain limited. One thing lawmakers fear is expanding the PCJUA's exposure to risk, which would be an automatic consequence of writing more business.

Citizens' exposure is now at a record $400-billion, a figure that puts the company, and Florida, in a perilous position should major storms strike the state in the next few years.

Also, private insurers could take a hit if the state muscles in on the more lucrative fire, theft and liability lines that the PCJUA would write.

"Frankly, I don't care about that," Duncan said. "(Small businesses) are teetering on the edge of defaulting on mortgages and loans. We have to uncover every stone."

One of the recommendations made by Gov. Jeb Bush's Insurance Reform Committee is to roll the PCJUA into Citizens, something that Citizens would have to do, if asked.

Lawmakers have called a special session for mid January, but most of the focus seems to be on the residential property crisis. Where the commercial crisis fits in is unclear.

And not everyone is convinced the PCJUA is floundering.

"It's absolutely working," said Dan Sumner, the PCJUA's interim director. "Wind-only was an appropriate starting point. We want policyholders to get competitive market rates for the nonwind policies."

Sumner agreed that 245 policies is a small number compared with the legions of small businesses.

"But as we grow and our exposure increases," Sumner said, "the board can always look into whether it's more financially prudent to look at multiperil policies."

While the state decides what course to chart, business owners like the Butlers struggle on, simply trying to stay afloat.

"If we had a mortgage here, we'd already be dead," said Nancy Butler, "because we can't afford hurricane insurance and we'd have to have it.

"We don't have a product that we can raise the price on. We have services. I can't charge a customer $10 to pack a box. ... We work six to seven days a week for what? To be paying this?

"No. We can't, and I don't see how any small business can."

Tom Zucco can be reached at zucco@sptimes.com of (727) 893-8247.


The state requires a business owner go through an application process, and only a state-approved insurance agent can write
a  Property and Casualty Joint Underwriting Association policy. Go to www.pcjua.com or call toll-free 1-866-416-4728.

Property and Casualty Joint Underwriting Association

What it is: A state-run insurer, somewhat like a smaller version of Citizens Property Insurance, that provides wind-only commercial property insurance to small-business owners who can’t find coverage in the private market.

Who qualifies: Any property owner who owns a commercial structure valued at $1-million or less.

How much it costs: Like Citizens, the PCJUA must charge rates higher than those found in the private market. The average base rate is $1.78 per $100 of coverage.