Citizens: Maybe it's time for new law forcing use of approved
Citizens floats "mandatory repair
program" to stem water claims losses
Article Courtesy of The Sun Sentinel
October 8, 2015
Citizens Property Insurance Corp. wants South Florida
policyholders to cut out the middlemen when filing claims for
non-weather-related water losses.
One strategy involves a friendly public relations campaign urging
homeowners to "Call Citizens First" when making a claim.
Another strategy would be a "mandatory managed repair program" requiring
homeowners that suffer water damages to accept the decisions of
insurance adjusters and contractors pre-approved by Citizens.
The second approach is likely to draw opposition from lawyers and
At a Board of Governors meeting on Wednesday in Maitland, officials of
the state-run "insurer of last resort" repeated their complaints that
South Florida homeowners who experience plumbing breaks too often are
calling attorneys, public adjusters and repair companies first. Citizens
learns of four out of every 10 water-loss claims from attorneys instead
of policyholders, guaranteeing lawsuits and inflated claims, officials
High costs of South Florida water loss claims triggered rate increases
in Palm Beach, Broward and Miami-Dade counties for 2016 while most
policyholders in the rest of the state will see lower bills. In
Miami-Dade, where most water-loss claims originate, rates are increasing
by an average of 8.1 percent.
The three counties make up 47 percent of Citizens' 573,000 policies. Of
562 lawsuits filed against Citizens last December, 98 percent originated
in South Florida. And 91 percent of those 562 lawsuits were over water
damage claims, Citizens said. A big reason is advertisements by public
adjusters and attorneys urging insurance customers to call them first to
maximize their claims.
On Wednesday, Citizens officials proposed a multi-pronged effort to
reduce the cost of water claims.
"Call Citizens First" would be a public relations effort communicated
through mailers, Facebook posts, YouTube videos, billboards, guest
editorials, refrigerator magnets and ID cards.
The company is gradually discontinuing use of contracted independent
adjusters to put price tags on water damage repairs and plans to use
only staff adjusters.
The company also is developing a list of approved contractors that would
be recommended to policyholders who agree to "call Citizens first." The
contractors' work would be warranted and guaranteed to be completed
A voluntary managed repair program would be modeled after programs
offered by some private insurers. Policyholders get a discount on their
policy premiums in exchange for an agreement to let their insurance
companies handle their claims through the companies' own adjusters and
That's similar to an approach the company successfully rolled out to
reduce costs of repairing sinkhole damages. Policyholders agree to let
Citizens manage the repair process in exchange for a warranty on the
work lasting several years.
But if the company doesn't see enough cost reductions through a
voluntary water damage repair program, it might ask the state
legislature to make it mandatory, officials said at the meeting.
Citizens President and CEO Barry Gilway indicated that might be the only
"You need the ability to do this on a mandatory basis," Gilway said. "So
the heavy lifting will be getting agreement [from the legislature]."
Getting a state law forcing policyholders to give up their rights to
seek legal help before filing claims might be a difficult order,
Citizens spokesman Michael Peltier said after the meeting. "I don't know
if it would be feasible or possible," he said.
Nancy Dominguez, managing director of the Miami-based Florida
Association of Public Insurance Adjusters said in an interview that the
proposal "would not be good for policyholders because it would take away
their choice to have their home repaired by who they want." Because
Citizens wants to keep costs as low as possible, "it stands to reason
they would not pay top dollar for these repair companies."
"What if a vendor you've used before and like isn't on Citizens'
approved list? Just pay me my claim and I'll pick who I use," she said.
Citizens' previous efforts to seek a legislative cure for high water
loss claims have failed. Over the past three years, Citizens and other
insurance companies sought a law restricting policyholders' abilities to
sign over benefits of their claims to third parties, such as
water-damage repair companies, because those third parties become
plaintiffs in suits against Citizens. But trial attorneys and their
allies in the legislature have blocked those efforts.
Citizens' latest proposal could spark similar opposition.
Todd Copeland, president of the Florida Justice Association, a trial
lawyers group, said in a statement by email that "any proposal to
require repairs by government-approved vendors by the government-run
insurer is not a solution to unscrupulous water damage repair companies.
"Florida property owners deserve choice in the marketplace for repairs,
not government mandates," Copeland said. "Such a proposal seems to erode
free market principles in favor of government controlling how Floridians
are able to repair the most valuable investment in their lives."
John Rollins, Citizens' chief risk officer, said during the meeting that
the challenge in getting the Legislature to approve the managed repair
program proposal is "tightening your coverage language for water so it's
not permissive in ways that enterprising stakeholders in the system can
drive a truck through, but on the other hand finding the balance; not
making the coverage so restrictive it actually encourages an adversarial
approach to the claim."
Gilway said more details will be unveiled at the company's next Board of
Governors meeting in December.