Slow to act? No, state was setting trap for builders

July 29, 1993

This week, the Dade State Attorney's Office and the lieutenant governor announced an ambitious plan to crack down on crooked builders.

Gee, what's the big hurry? It's been only 11 months since the hurricane. South Dade residents have only lost millions of dollars to swindlers, licensed and unlicensed, who have taken the money and left the houses in shambles.

But authorities aren't waiting for something really serious to happen. They're leaping into the fray now, four whole weeks before the first anniversary of the storm.

A press conference put out the word. The state attorney is hiring three new prosecutors, an investigator and two secretaries.The state's Department of Business and Professional Regulation is adding a dozen investigators, plus five persons to help take complaints from the public.

Everybody knows the task force that calls itself "We Will Rebuild." This one could be called "We Will Indict."

Lots of folks in South Dade aren't too impressed. They think something should have been done even sooner about crooked builders—before the evidence was trucked off to the dump.

True, Hurricane Andrew's wreckage revealed widespread illegal construction practices and egregious non-enforcement of the building codes. True, these were crimes inflicted on thousands of homeowners, crimes that have caused horrible suffering and financial ruin.

And, true, not one contractor responsible for the damage has lost his license. Not one inspector who approved the shoddy work has been punished.

But that's only because authorities decided to set an ingenious trap, one that required patience.

Sure, it would have been easy to rush in and prosecute a few lousy builders after their Tinker-Toy subdivisions blew apart in the hurricane. It would have been simple to collect the defective trusses and holey shingles, and then show a jury the right way to put on a roof.

It would have been easy, all right. Too easy. And it would have spoiled the secret plan.

Think about it. Indicting crooked builders too soon after Hurricane Andrew might have scared off many of the thieves and con men masquerading as legitimate contractors who stampeded Florida to cash in on the storm.

So authorities shrewdly decided to lie low and pretend they weren't interested in what was happening in South Dade. They knew it would soon be a bonanza of sleaze. They knew that there weren't enough honest builders to go around, that people desperate to have their homes rebuilt would eventually turn to unscrupulous strangers.

And they were right. Each day since Andrew has brought new reports of outrageous rip-offs and incompetent workmanship. Many homeowners have lost all their insurance money to fly-by-night vagabonds. Since August, the DPR's Miami office has logged a 1,800 percent increase in complaints against contractors.

For state investigators, the waiting has paid off. They now have a much larger number of cases to choose from, and therefore a much better chance of actually winning one or two.

Unfortunately, it won't help the thousands of people fleeced by shady operators during the last 11 months. Thousands more won't realize that they also have been conned until another hurricane hits and their roofs fly off like a bad hat.

But don't worry. When that happens, the state of Florida will be there again, ready to swoop in with crack investigators and prosecutors. You might not see them for, oh, the first 10 or 11 months after the disaster, but that doesn't mean they don't care.

No, they're just lying low, waiting for the trap to spring.

Government can't be trusted to enforce codes

December 30, 1993

Finally, thanks to Hurricane Andrew, an insurance company gets wise.

United States Fidelity and Guaranty (USF&G) has announced that it will begin inspecting every home it insures for potential storm losses. In other words, company-paid experts will do the job once entrusted to local building officials.

It makes good sense, given the scandal of Andrew. The wonder is that more insurance companies aren't doing the same thing.

The hurricane tragically confirmed that government cannot be relied upon to enforce building codes, especially in areas of uncontrolled growth. Andrew turned South Dade into a panorama of devastation, much of it caused by lousy construction and a lack of competent code enforcement.

The insurance industry took its worst beating ever, paying out $16.5 billion in claims. We know what happened next: sharp rate increases, and attempted mass cancellations of Florida policies. Most insurers have restricted or even stopped insuring new homes in coastal regions.

That's one way to cut losses, the cold-blooded way. It unfairly punishes people with well-built houses and also punishes honest home builders. The USF&G experiment is more humane and ultimately smarter for the industry: Its own inspectors will rate the houses.

Consider how fussy these firms are about auto insurance. The annual premiums on a new Ferrari are thousands more than those on a 5-year-old Tercel. Why? The sports car is a bigger investment, and statistically a bigger risk.

It seems logical, then, that insurers would view a high-risk house with even greater concern. A house, say, built with no hurricane straps. Or too few nails in the shingles. Or defective gables.

But until Hurricane Andrew, insurance companies seldom asked questions about the quality of construction in most subdivisions. As long as a house passed local inspection, getting a policy was virtually automatic. Everybody made money, everybody was happy.

Andrew spoiled the party. The insurance industry was shell-shocked by the extent of unnecessary destruction, and by its own studies predicting losses would be three times higher if a storm hit Miami directly.

It was evident that Dade County had failed, spectacularly, to make sure its housing was safe from hurricane winds. In several areas, code enforcement had been a costly charade.

One way to avoid future failures is for insurance companies to do the inspections themselves. The advantages are obvious. Private inspectors wouldn't have the ludicrous quotas imposed on county inspectors, nor would they be subject to cronyism and political pressures. Many homeowners would welcome a visit from an independent expert.

Not long after the hurricane, a State Farm executive told me that hiring its own inspectors was a good idea, but too expensive. It's hard to imagine anything more expensive than Andrew.

Say State Farm spent $20 million a year on building inspections.That's only 1/170th of the $3.4 billion that the company shelled out in hurricane claims. In retrospect, inspectors would have been a smart investment.

While USF&G insures less than 1 percent of Florida's homeowners, its new inspection policy covers all customers around the country. If other insurers tried the same program, the quality of coastal construction might improve dramatically. Who's going to a build a house that can't be insured?

The key is incentive. Insurance companies have the most to lose when the next hurricane hits—and the strongest motivation to make sure history doesn't repeat itself. If that means climbing a few roofs and counting a few nails, it's a small price to pay.