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State Farm to Cancel Condo Association Policies in Florida By Ostrow,

South Florida Sun-Sentinel

Knight Ridder/Tribune Business News

Jun. 29--A day after Insurance Commissioner Tom Gallagher denied State Farm

Florida Insurance Co.'s request for two hefty rate increases, Florida's

largest property insurer said it will cancel its more than 4,800 condo

association policies as they come up for renewal.

State Farm also said it will no longer sell new homeowners insurance

policies in the state starting Monday.

Notices will be sent out in the next 10 days to the condo association

policyholders telling of the cancellation. Most of the condos are located in

southeast Florida as well as the Tampa-St. sburg area.

Thursday Gallagher blocked State Farm's request for an increase averaging 22

percent statewide for homeowners insurance, which includes individual condo

unit owners, and a 132 percent increase for condominium associations. The

rate hikes were scheduled to begin July 15.

State Farm said it needs the increases because it lost $231 million between

January 2001 and May 2002 in part due to an increase in claims from

non-catastrophic events including burglary, mold, water damage and

sinkholes.

State Farm also said it has seen an increase in construction, building

materials and medical costs, which has made the insurance more expensive.

The company said it was also stopping the sale of new homeowner policies and

pulling out of the condo association market because the state is requiring

them to cover claims from mold, said State Farm spokesman Tom Hagerty.

" We cannot responsibly continue to offer products without [the rate hike], "

Hagerty said. " These steps are necessary to improve our financial

stability. "

State Farm still has about three weeks to appeal Gallagher's decision to

deny the increases. The company has not made a decision on whether to

appeal.

Hagerty said it would be premature to say whether State Farm would consider

changing its plans should Gallagher back down from his decision to deny the

rate hikes.

Tami , a spokeswoman for the state Department of Insurance, said the

department is " disappointed " by State Farm's decision.

" State Farm was fully aware that the department was not supportive of a 132

percent rate hike, " she said. " When it came to the third rate request for

homeowners, we worked with them to achieve a reasonable resolution. We were

hopeful that State Farm would have been more sensitive to what a third rate

increase would have meant to homeowners especially in South Florida. "

said State Farm could file a new request for rate increases.

State Farm hasn't sold new homeowners insurance policies in the tri-county

region since 1995. But it had allowed State Farm customers from other parts

of the country to obtain policies with the company if they relocated to

Florida. Now those customers will have to find insurance elsewhere, Hagerty

said.

The insurer has already raised homeowners insurance rates twice before -- an

average 14.3 percent in January and 6.4 percent in 2001.

Condo associations have seen rates rise 4.4 percent in 2000 and 17.5 percent

in 2001. But State Farm agents have said those rate hikes weren't enough and

the company's policies are priced thousands of dollars below what

competitors are charging.

" Even after [Hurricane] , rates didn't rise more than an average 25

percent in a given year, " said.

State Farm is one of Florida's top five condo association insurers, she

added.

If condo associations and homeowners cannot find insurance through another

company, they can purchase it through the state's insurer of last resort --

the Florida Residential Property & Casualty Joint Underwriting Association,

which will become Citizens Property Insurance Corp. on Aug. 1.

State Farm Insurance Co. -- the parent company of State Farm Florida -- said

earlier this week that it will stop selling new homeowners insurance

policies in 17 states, including Texas and California. State Farm Florida is

a separate company created after Hurricane .

Staff researcher Barbara Hijek contributed to this report.

-----To see more of the South Florida Sun-Sentinel, or to subscribe to the

newspaper, go to http://www.sun-sentinel.com.

© 2002, South Florida Sun-Sentinel. Distributed by Knight Ridder/Tribune

Business News.