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TALLAHASSEE, Fla. (AP) -- July 11, 2006 -- All Florida homeowners would be covered by the state for at least part of their property loss in a hurricane, leaving private insurers to cover only the biggest losses, under a plan proposed Monday by Democratic gubernatorial candidate Rod Smith.

In a proposal similar to one pushed unsuccessfully by Democrats in last year's legislative session, Smith said if he were elected he would push to create a trust fund that would provide guaranteed coverage for the first $50,000 to $100,000 of value. Homeowners would pay a premium for the coverage based on risk.

Any loss above the base amount covered by the state trust would be paid for by private insurers, Smith said. He argued that would create an incentive for more insurers to offer property coverage in Florida. The lack of companies willing to cover Florida property is possibly the biggest problem facing the state's homeowners and economy, several state officials agree.

"We've got to do something that will attract and maintain (companies) back into the market," said Smith, a state senator from Alachua. "Insurance is not a luxury in Florida. It's an absolute necessity."

After two severe hurricane seasons and predictions for more, companies have dropped thousands of policies and refused to write new ones.

Smith's main rival for the Democratic nomination for governor, U.S. Rep. Jim Davis of Tampa, has said he would ease the problem of insurance companies bolting from the state by requiring them to give many long-time customers a year's notice before arbitrarily dropping them.

Davis quickly jumped on Smith's proposal, portraying it as just a giveaway to insurance companies.

"We need fewer incentives for insurance companies and more protections for homeowners and business owners," Davis said.

Eventually, under Smith's plan, Citizens Property Insurance Co. could be phased out. But in the meantime, Smith proposed dedicating extra tax money generated by sales on rebuilding after storms to covering the deficits at Citizens. The insurance company was created by the state to provide coverage to people who can't get private insurance.

That's important because when Citizens has a deficit, all Florida homeowners are hit with an assessment to cover the shortfall, which can sometimes mean a huge increase on a homeowners' annual insurance bill. Legislators voted this year for a one-time bailout using extra tax money that came in after last year's storms. Smith's plan would make that annual until no longer needed.

Sam Miller, a spokesman for the industry representative, the Florida Insurance Council, said the idea is one that could be explored, but that industry officials are far from endorsing it.

"There are so many unanswered questions about how it would work and if it would work," Miller said. For example, even if the state covered the first $100,000 of losses, most private insurers would still balk at covering multimillion-dollar beach homes -- something the state would have to address.

Smith also proposed removing barriers to private reinsurance companies, which essentially sell insurance to insurers. A big reason cited by home insurers for premium increases and for dropping policies is the difficulty they have in getting reinsurance. Smith said Florida's law that favors domestic reinsurance companies over foreign ones should be changed.

Smith also proposed an independent regulatory panel to oversee insurers and decide on rate changes and an independent consumer advocate to argue before the panel on behalf of consumers. Currently, the Office of Insurance Regulation decides on rate increases, while there is a consumer advocate under the state's Chief Financial Officer.

Davis has proposed another measure to try to help insurance customers -- arguing that wind insurers shouldn't be allowed to avoid paying for damage by claiming that it was caused not by wind but by water, which must be paid for under state law by flood insurance. Smith criticized that plan Monday, echoing the comments of insurance industry by arguing that would drive up wind insurance rates.

The winner of the Democratic primary will face the winner of the Republican primary in which Attorney General Charlie Crist and Chief Financial Officer Tom Gallagher are the leading candidates.

© 2006 The Associated Press, David Royse, Associated Press Writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.