Property insurance fraud investigations and
arrests are up but they’re still a drop in bucket
Article Courtesy of The Sun Sentinel
By Ron Hurtibise
July 12, 2023
If you want to know why insurance companies often
take adversarial positions toward homeowner claims, look no further than
the number of fraud cases investigated each year.
From double dipping — filing claims for
the same damage to two different companies — to buying
homeowner insurance for properties operating as assisted
living facilities, there’s no end to schemes some
policyholders, public adjusters, contractors and agents will
employ for financial advantage.
Fraud is one of several reasons that insurance rates in
Florida have skyrocketed over the past five years. But even
as the state increases its fraud-fighting resources and
investigates more complaints each year, the number of
arrests and convictions that result from those
investigations is surprisingly low.
In fact, less than 2% of investigations opened by the state
Department of Financial Services results in a conviction.
Insurers, it seems, can easily deny coverage of claims and
cancel policies when they suspect fraud, but prosecutors
require more evidence to bring criminal charges against
Recent examples of fraud reported this month by state-owned
Citizens Property Insurance Corp. include a May arrest of a
public adjuster, Yoel Sainz Fraga, in Miami, accused of
offering an elderly homeowner a free inspection by telling
her he was a “government inspector,” then filing a $13,000
insurance claim for water damage to the homeowner’s kitchen
sink without the homeowner’s knowledge. The problem, the
report cited, was that the kitchen sink wasn’t damaged.
After hurricanes, the numbers of insurance claims
increase to the point that insurers need to outsource fraud
investigations, Citizens Property Insurance Corp. personnel say in a
request for $1.5 million to hire eight outside investigative firms
for five years.
Yet no immediate arrests were reported in a number of
other cases cited in the same report:
In Palm Beach County, Citizens investigated two separate non-weather
water losses that were reported four days apart at the same property and
determined there was no evidence to show that $20,000 in plumbing work
was performed as claimed by the homeowner’s attorney and loss
In Broward County, an investigation into two unrelated non-weather water
claims found that the policyholder had filed claims with a previous
insurer for the same damage.
In Hillsborough County, Citizens denied a $75,000 claim for theft and
vandalism after determining that the policyholder sold the personal
property on Facebook Marketplace.
In Volusia County, Citizens denied a $20,000 claim for roof damage
attributed to Hurricane Ian after determining that the damage occurred
prior to the storm.
And in six counties, Citizens identified 12 properties that had obtained
homeowner insurance despite operating as assisted living facilities.
Coverage for the properties was voided.
How fraud is investigated in Florida
While dealing with tens of thousands of normal insurance claims per
year, insurance companies rely on a state-funded fraud-fighting unit
operated by the Department of Financial Services.
In 2021, the Florida Legislature approved creation of two new units to
supplement the department’s efforts to combat property insurance fraud.
The resulting Bureau of Insurance Fraud units, totaling 12 people, are
among 90 sworn state fraud investigators working on homeowners and auto
fraud cases. They look into 6,700 property insurance fraud complaints
per year, according to DFS spokesman Devin Galetta.
Citizens, currently Florida’s largest insurer with 1.3 million
policyholders, operates its own fraud investigation unit with 33
employees and contracts with nine private companies to investigate
allegations of fraud, including during increases in claims activity
following hurricanes and other catastrophic events.
But those contracts are expiring this year. According to a document
filed for a June 8 meeting of Citizens’ claims committee, the company is
seeking $1.5 million over five years to contract with eight new
companies. Citizens’ Board of Governors will consider the proposal at
its July 12 meeting.
Citizens’ Special Investigation Unit anticipates investigating 68% more
fraud tips over the next five years, primarily because the number of
Citizens’ policyholders continues to increase.
Yet, despite an increase in Citizens policies from 419,000 in 2019 to
1.3 million in May, the number of cases investigated by Citizens’ SIU
and its outside partners each quarter has remained flat, according to
data presented by the team since late 2019.
That’s because fraud generally follows claims, Citizens spokesman
Michael Peltier said, and claims from Citizens’ recent policyholder
surge are only now beginning to climb. “Also, in prior years we had a
number of active major cases that accounted for a spike in referrals and
those investigations have ended,” Peltier said.
In the fourth quarter of 2019, Citizens’ SIU unit reported accepting 333
investigations, completing 339, and referring 84 cases to the Department
of Financial Services for further investigation and potential arrests.
In the first quarter of 2023, the unit reported accepting 347
investigations, completing 327 and referring 60 cases to DFS.
The quarter with the largest number of investigations accepted — 409 —
was the second quarter of 2021. The largest number of referrals to DFS
was 88 in the third quarter of 2021.
Investigations and arrests by the Department of Financial Services’
investigators, however, have increased from 1,914 complaints and 104
open cases in the 2020 budget year that ended June 30 to 2,585
complaints and 341 cases in the 2022 budget year, according to data
provided by Galetta. The number of arrests by prosecutors increased from
21 to 56 during those two years, while successful prosecutions increased
from 26 to 39.
So far in the 2023 budget year, the unit has investigated 3,114
complaints, opened 265 cases, and presented 113 cases to prosecutors who
made 63 arrests and oversaw 40 successful prosecutions.
Information on how many of those arrests and prosecutions stemmed from
Citizens’ referrals was not immediately available.
When asked why the number of fraud arrests are so small compared to the
number of investigations, Galetta pointed to a fact sheet with
information about the department’s fraud-fighting activities.
It states that if department investigators believe a crime was
committed, can identify a perpetrator and establish criminal intent,
they present the information to local, statewide or federal prosecutors.
“If the prosecutor believes there is enough evidence to pursue charges,
then charges are filed and an arrest is conducted,” the fact sheet
How fraud charges have led to higher rates, less coverage
Losses from fraudulent activity and increases in fraud on organized
levels have led to greater losses for insurers, increases in premiums
for policyholders, and new laws allowing insurers to downgrade coverage
of elements subject to the most abuse.
In July 2021, the state’s Division of Investigative and Forensic
Services announced the arrest of a Fort Myers roofing contractor
employee on charges of intentionally damaging roofs of insurance
customers. A Citizens filed investigator obtained video footage of the
employee in the act using a tool to pry and manipulate roofing shingles
before Citizens’ adjuster arrived.
That and similar reports of door-to-door canvassing by roofing
contractors convinced the state Legislature in 2022 to approve allowing
insurers to downgrade roof coverage in standard homeowner policies, and
require full coverage to be provided only upon request and for an
Prior to that, allegations that contractors and attorneys worked
together to submit fraudulent non-weather water damage claims led the
Legislature and state insurance regulators to approve a long list of
coverage erosions. They included approvals in 2018 by the Florida Office
of Insurance Regulation letting insurers cap non-weather water damage
payouts at $10,000 unless policyholders opt for full coverage or agree
to let their insurer dispatch their repair contractor.
Fraudulent claims submitted by contractors for roof repairs and
non-weather water damage led the Legislature last year to bar
contractors from obtaining “assignments of benefits” from property
While a wide range of laws enacted last year and this spring are
expected to eventually slow down rates of exploitation by contractors
and attorneys, they won’t necessarily prevent policyholders from filing
false claims or submitting false information to get cheaper insurance.
Those activities will hopefully be reduced by increases in investigative
resources and public education efforts, Galetta said.
The state’s new homeowner fraud fighting squads “proactively responded”
to Southwest Florida areas impacted by Hurricane Ian last fall “to
provide contact information and raise awareness against fraud,” he said.
“Although these activities did not always result in opened cases,”
Galetta added, “they play a pivotal role in discouraging fraud and
educating the public.”