Thousands of Florida homeowners buffeted by higher windstorm premiums have sued state-run Citizens Property Insurance Corp. to recover potentially hundreds of millions of dollars in “back-door” rate increases driven by “arbitrary” reinspections of their residences.
The proposed class-action lawsuit, filed in Broward Circuit Wednesday, aims to halt Citizens’ reinspection program, claiming it has illegally stripped discounts from homeowners who had earned them under a 2007 inspection program approved by the Florida Legislature.
Three years later, Citizens violated the due-process rights of homeowners, who had submitted official inspection forms, by arbitrarily reinspecting their properties to boost lost revenue that the agency could not generate lawfully through premium hikes, the suit said.
Lawyers who filed the suit, whose class representative is a Broward homeowner, said Citizens violated the due-process rights of its policyholders, costing each higher premiums averaging upwards of $1,000 — and possibly more — a year.
The collective cost to homeowners throughout Florida exceeds more than $100 million, said attorney Todd Stabinksi, whose Miami law firm filed the suit with Farmer, Jaffe of Fort Lauderdale and Kula & Samson of Aventura. They gathered Thursday for a press conference outside the West Broward County Courthouse in Plantation.
“Since at least 2010, Citizens has used a wind mitigation reinspection program to systemtically deprive policy holders of legitimate wind mitigation credits,” said a nonprofit group, Florida Association for Insurance Reform, which praised the legal action.
Consumer advocates have accused Citizens of using the reinspection program to impose “massive” rate hikes on homeowners. Citizens has denied the charge, saying that it is simply trying to get accurate information about the homes it insures.
Discontent has been widespread among Citizens’ policyholders, who spent large sums of money on roof, window and other upgrades to earn windstorm mitigation discounts while protecting their homes against potential hurricane damage. In response, Citizens unveiled major changes to its home reinspection program last August, after consumers expressed outrage over media reports about a staggering $137 million in premium increases generated by the unpopular program.
Under its new plans, homeowners who lose insurance discounts because of a reinspection can receive a second inspection free of charge and will have new tools to dispute the first inspectors’ findings. There will also be a stronger effort to educate homeowners about what they need to prepare for a reinspection.
Citizens is still deciding whether or not to apply the changes retroactively. That decision could impact more than 175,000 property owners, who have already seen their premiums go up by an average of $810 after an inspection.
Whether those homeowners will be able to reverse the premium hikes is “a question that we need to take a look at,” said Barry Gilway, president of Citizens, said at a press conference in August.
Gilway’s announcement came days after the Herald/Times Tallahassee Bureau published a series of stories documenting how hundreds of thousands of Floridians have seen premiums soar as the state-run insurer intensifies its plans to raise rates through reinspections and reduce coverage.
Consumer advocates have complained about inspectors who do not check thoroughly for evidence that support the homeowner, often ruling quickly that homes do not qualify for discounts.
Gilway acknowledged that several inspectors have failed to adequately check homeowners’ attics to see if they were not completely clear of obstruction. Property owners have lost thousands of dollars in discounts because their attics were blocked by boxes or insulation.
“The inspector is not required to wait while you move property that is restricting attic access,” a Citizens letter to policyholders reads.
Under the new changes, homeowners will have one year to clear their attic and receive a follow-up inspection, before any premium increases.
Consumer advocates said the changes sounded positive, but more details were needed, cautioning policyholders “to take a trust-but-verify approach.”
Created in 2002 as a safe haven, Citizens — the so-called “insurer of last resort” — has ballooned to become the state’s largest insurer, with about 1.4 million policies. Most of its risk is concentrated in South Florida and the Tampa Bay area, hazard-prone regions where many homeowners cannot find coverage in the private market. Its actions, including rate increases, affect the entire insurance market, impacting housing costs for nearly every Floridian, including those with private insurers.
The initial reinspection program began in 2010, with Citizens sending thousands of inspectors to review the homes of policyholders. About half of all homeowners receive wind-mitigation discounts for hurricane-resistant features on their homes. The reinspection program targeted those features, as inspectors have found that thousands of homeowners did not deserve the discounts they were receiving. The result has been more than $137 million worth of premium increases for homeowners.
The program was ramped up, with more than 200,000 inspections completed in 2011. Nearly 90,000 more were yet to be completed last year. In about three in four cases, homeowners have lost their discounts, leading to average premium hikes of more than 30 percent.
Gov. Rick Scott has been pushing for the state-run insurer to reduce its size and risk, leading to rate hikes and coverage reductions for hundreds of thousands.