Citizens: Maybe it's time for new law forcing use of approved contractors

Citizens floats "mandatory repair program" to stem water claims losses

Article Courtesy of The Sun Sentinel

By Ron Hurtibise

Published 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 contractors.

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 said.

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 quickly.

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 approved contractors.
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 workable approach.

"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.