Citizens Property Insurance spent $100 million in the last two years in legal defense fees and attributes the increase in their legal bills to a handful of South Florida law firms – most of which are in Miami Dade County – that have targeted the insurance giant with water claims in a hurricane-free year.
A report released Monday by the company serves as a counterpoint to the allegations by legislators and law firms that have accused the company of using delay tactics as its principle legal strategy in an effort to make the state-run insurer appear to be more profitable. The result, the lawyers say, is that routine claims cost Florida policyholders millions more than if the company had paid the claims without waiting for a lawsuit.
According to the report, Citizens spent $64 million in defense fees in 2012 and has already spent $46 million this year. A public records request of the legal fees paid out to lawyers for policyholders who won their cases found that the company paid out $16 million between January 2011 and June 2013.Download Citizens Litigation Analysis - FINAL - Oct 2013
The 44-page litigation analysis does not evaluate how much the company could have saved had it paid its claim rather than waited until it was sued. It does not analyze how many lawsuits are pending and what the potential cost of those claims, plus legal costs, might be.
It said that the company’s success rate since 2010 in the 42 cases that have proceeded to trial has resulted in 59 percent of the cases siding with Citzens, compared to 41 percent for policyholders. The analysis does not taken into account the cases number of cases Citizens agreed to settle after years of fighting them.
Citizens lost one of the biggest in its history last week – a $15 million verdict against them for a 2008 sinkhole claim brought to them by Windtree Apartments in Tampa. Documents in the case show that Citizens could be responsible for more than $800,000 in legal fees because the company spent so long fighting the case.
The main focus of Citizens’ litigation analysis is to highlight what the company perceives is a growing threat from Miami-based law firms against the company. According to the report, while Miami-Dade represents 19 percent of all Citizens policies in force, “it accounts for 33 percent of all reported claims and 60 percent of all litigated claims statewide” with the bulk of those claims coming from water damage losses."
In addition, 84 percent of all claims in the past five years have originated in Miami Dade, Broward and Palm Beach counties. The report also said 10 law firms are responsible for 50 percent of the lawsuits against the company and 60 percent of those come from Miami-Dade.
“Claims are increasing because Citizens is a target,’’ said Barry Gilway, CEO of Citizens, in an interview last week.
"We want to pay every dime that we owe and we want to pay it as rapidly as we can,’’ he said. “That’s the fundamentally premise that we operate under. However, we should not pay any more than what we owe.”
But lawyers representing many policyholders question why the company has cut its claims staff, refused to pay claims for months or years, and then allowed its lawyers to defend lawsuits for years before paying the claims.
Gilway said the company is working to change the way it handles its litigation and putting a focus on improving the quality of its defense counsel. The company hired West Palm Beach lawyer Scott Link and his law firm to serve as coordinating counsel for all defense lawyers contracted to work for Citizens with the goal of bringing cases to trial more quickly.
“There were performance issues on the part of defense counsel,’’ Gilway said. “They weren’t getting adequately prepared for trial. If they weren’t applying a consistent standard, a Citizens standard, for claims management, then that was an issue. It was a significant issue.”
Gilway said Link has also shifted the company’s defense strategy.
“The other part of his objective is to quickly settle cases,’’ he said. “What Scott and his people are doing is saying, look, let’s take a look at this case. Let’s not drag it out. That kills everybody.”
The report does not provide any details on the number of cases settled versus those that went to trial.