As Florida's insurer of last resort, Citizens Property Insurance Corp. has dual responsibilities -- to provide coverage to those who cannot find it in the private market and to prudently manage our business to reduce the risk of assessments for all Floridians.
The challenge of paying claims fairly while acting as prudent stewards of the funds entrusted to us is one we embrace every day.
Recent articles have contained harsh words from critics who contend Citizens is not meeting this challenge. They complain litigation costs are too high and demand that Citizens pay claimants whatever they want, regardless of whether a claim has merit.
This contention is either willfully misguided or intentionally aimed at undermining Citizens' ability to act as a responsible public entity.
My 44 years in the insurance business tells me this: to indiscriminately pay claims would be a fiscally irresponsible course that would subject our policyholders to substantial rates increases and the people of this state to ever higher assessments.
While most claimants are hardworking individuals seeking to repair their homes and businesses, it is an unfortunate fact that too many seek to exploit the system by inflating damages on legitimate losses, avoiding repairs or fabricating claims.
In Florida, a cottage industry of adjusters, trial lawyers and contractors has grown up to support and even solicit such activity. This is especially true for sinkholes.
Prior to 2012, Citizens and many other insurance companies paid sinkhole claims by writing checks. Repairs often went unmade as claimants used the money to pay off credit cards, make major purchases or even take family vacations. The result was that homeowners remained at risk, property values plummeted, neighborhoods suffered and future buyers couldn't get insurance because homes had unrepaired sinkhole damage.
In response to this crisis, the Legislature required that insurers pay only for approved, completed repairs. No more blank checks.
Those with an interest in protecting property values and keeping homes and neighborhoods safe applauded the change.
Others, who had profited off the checks written to sinkhole claimants, responded with litigation. The best way to guard against insurance fraud and abuse is to make it crystal clear that we will go to the mat on inflated or meritless claims.
Citizens therefore established a coordinating counsel program to identify and quickly repair homes with legitimate claims while taking meritless or fraudulent claims to court. That decision ruffled the feathers of those with much to lose if we succeed. Coordinating counsel has already started us on the path to repairing homes. Of approximately 2,000 open sinkhole lawsuits, approximately 1,300 are disputes over repair methods.
Last year, Citizens offered a settlement directly to over 800 claimants and in February reached an agreement with counsel for 300 claimants to repair their sinkhole damage. Under the settlements, stabilization repairs will be made according to the recommendations of a qualified engineer, and, if disputes arise, Citizens will abide by the rulings of a neutral evaluator.
Homeowners will choose their contractor from a list of qualified companies, which Citizens will pay directly. Following sinkhole repairs, Citizens will pay homeowners directly for any related cosmetic repairs.
Everybody wins. Homeowners get their homes fixed by competent contractors; their attorneys get paid, and Citizens saves approximately $30 million in legal and repair costs. Interpreting this as anything but positive defies logic.
Such success has encouraged us to expand the coordinating counsel program to include all litigated claims.
We are particularly concerned about water-loss claims, which have risen dramatically. This disturbing trend is concentrated in Broward and Miami-Dade, which account for 33 percent of Citizens policies but 87 percent of our litigated nonsinkhole claims.
The severity of this problem was underscored by the February arrests of a 22-person insurance fraud ring operating in Miami-Dade.
Despite increased costs upfront, I am convinced that developing a consistent and effective legal strategy that streamlines litigation and achieves faster resolution for policyholders with legitimate claims is the right thing to do, both from a business standpoint and as a service to our customers.
Because Citizens is a not-for-profit organization, the long-term savings we realize will directly help mitigate the need for future rate increases and decrease the risk of assessments for all Floridians.
Barry Gilway, is the president and CEO of Citizens Property Insurance Corp.