Backlash grows against Citizens Property Insurance inspections

Executives at the state’s last-resort insurer Citizens acknowledge a massive building reinspection campaign is “under fire.” They insist on one thing: no one is instructing inspectors to jack up customer bills by denying credits for storm-resistant building features.

An inspector who spoke on condition of anonymity told The Palm Beach Post a different story. He said he performed dozens of inspections in 2012 and nearly half his reports were rejected by supervisors. In each case, he said, it just so happened the company or its contractors wanted changes that raised customer bills.

Showing his badge, inspection manual and other records, the Palm Beach County man said getting reports rejected meant his pay was delayed or reduced and it was hard to miss the message.

“I quit because of what I considered to be unethical practices,” he said. “I don’t think it’s the inspectors’ fault on this. Inspectors are being told how to inspect it.”

As 74 percent of more than 225,000 homeowners visited lose discounts — and some see premiums double — claims are mounting that the program is hardly as neutral or fair as advertised:

— A lawsuit by customers in Palm Beach and Broward counties calls the campaign a “subterfuge” to increase premiums. Among other things, it alleges coordinators withheld payment to inspectors until they changed their reports to deny credits.

Citizens denies the allegations, has filed a motion to dismiss and the case is in the process of being moved from South Florida to Tallahassee, officials said.

— Letters to state officials from Palm Beach County residents plead for help. Citizens is acting on a “preposterous loophole which is costing homeowners unfairly and unnecessarily,” Juno Beach resident Len Gilman wrote in a letter to the state’s Chief Financial Officer Jeff Atwater.

“The $11,000 I spent for hurricane shutter protection in 1998 is disregarded as protection by Citizens Insurance Company only because my shutters do not carry an imprinted stamp which would indicate they meet the Miami-Dade Hurricane Shutter Code,” Gilman wrote. “Yet they are the same as the code imprinted shutters being sold and accepted as full protection today.”

— The state’s insurance consumer advocate said at a Citizens committee meeting July 26 that something is wrong with the program. Some inspectors “either aren’t doing it correctly or are doing it under instructions to take the credit away,” Robin Westcott said.

An example she gave: Three South Florida villas shared a roof that was rebuilt in 2007. Two different Citizens inspectors denied discounts to two of the villas. A third Citizens inspector examined permits showing the third villa qualified for roof-related credits, meaning they all should have received credit.

“I’ll be honest with you,” Wescott said. “I think that’s the mission here, to generate premium.”

Bristling at what he took to be a “suggestive comment,” Citizens chief insurance officer Yong Gilroy said “the character of Citizens’ organization is very solid.” No management or leadership team at Citizens has instructed that taking away credits is a primary goal of the program, he said.

Gilroy said it is “difficult to balance all the things” demanded of Citizens “from all directions.”

Gov. Rick Scott has pushed Citizens to raise rates, reduce coverage and shrink itself, a goal insurance industry groups support because they say higher rates are necessary to attract private competition. State-run Citizens is Florida’s largest insurer with 1.4 million customers, including 140,000 in Palm Beach County.

But as Westcott pointed out, there is no other option but Citizens for many customers, particularly in parts of South Florida. Such customers can feel hammered and helpless when bills spike. They don’t believe they are being treated fairly. Hardening homes against hurricanes is about the only way they have any control over the “beast” of insurance costs in Florida, she said. Now they see it being taken away.

Westcott mentioned examples of hurricane-resistant windows or openings where a certifying sticker or emblem has fallen off, been painted over or is otherwise not visible. In some cases etchings in the glass can help determine if homeowners qualify for discounts, she said — but not if inspectors make no effort to pursue it or point it out to homeowners.

Even Citizens board member Carol Everhart said she lost $1,800 in annual credits because a company-paid inspector said he couldn’t get into her attic to inspect roof features. She found another contractor who managed to get up there, but three months later she still has not seen credits restored.

If it chose, Citizens could tell customers far more helpful information in letters announcing inspections, Westcott said. It could tell consumers what documentation, photos or other information could be useful in allowing them to retain credits. But it doesn’t do that.

The results are clear enough: Reinspections have raised consumer premiums by $135 million for three out of four of more than 225,000 homeowners visited.

Consumers are 10 times more likely to see bills go up rather than down after visits, records show. Seven percent of homes inspected saw bills go down. The rest stayed the same.

Citizens has netted more than $100 million after paying inspectors.

Company records show credits were restored after consumers complained in at least 1,300 cases through the end of 2011, and in at least 200 instances the company admitted errors by inspectors or in its own processing. But that amounted to a small percentage in a big program, officials said.

Citizens president Barry Gilway said in recent public meetings the reinspection program is “under fire” and that some criticisms have merit. But he concluded “the continued implementation is absolutely essential.” And despite being on the job only a few months, he said was 100 percent comfortable “no direction” was being given to inspectors to write the reports so as to raise premiums.

Company officials have defended the program as eliminating discounts improperly granted in the past or no longer consistent with state rules, which have been revised periodically.

But the Palm Beach County inspector cited several examples where his initial findings in support of credits were overturned. He said he reported to Jacksonville-based Inspection Depot, one of the companies helping Citizens to carry out the program.

He described one Palm Beach County home as “overbuilt” with approved protection on every window and door except for three small unbreakable plastic windows on a garage door. The garage door itself was approved for hurricane winds, but the company wanted him to report not all openings have verified protection, he said. That left the customer to pay for insurance as if no windows or doors had any protection, he said.

His initial report granting credits was rejected and $17 was deducted from his $85 fee, he said.

Another example: A small concrete block and steel home with shutter tracks and panels for every opening ultimately got no credit for any wind or impact protection because the obviously appropriate panels had no verifiable rating receipts or labels, he said.

After accounting for gas, expenses and their own time, inspectors are often hard-pressed to make the work worthwhile at the regular fee, much less at a reduced rate, he said. As a result, incentives were strongly aligned for inspectors not to get reports rejected, he said — and in effect to tell the company what it wanted to hear.

Any rejection of an inspection report “would be due to missing or incorrect information,” Citizens spokeswoman Christine Turner Ashburn said. She confirmed rejection of a report could involve a 20 percent reduction in pay.

“Citizens Inspection Program does allow withholding payments for specific reasons relating to deficiencies in performing the inspection,” Ashburn said. Reasons could include reports were incomplete, incorrect or inconsistent with known features of the property, she said.

The company says it is just following rules set by the state.

“With opening protection, if there is one unprotected opening, the house does not qualify for a credit,” Ashburn said.

Regular Citizens rate hikes are capped at 10 percent a year by law, but reinspection offers a way to collect far more in a single swoop. The average increase after reinspection has been nearly $600, or 23.5 percent, but some bills have soared much higher.

Janet Helfand of Boynton Beach called “monstrous” her bill that more than doubled past $3,000.

Katherine Livesay, a Citizens customer in Palm Beach County, said her annual premium skyrocketed after a reinspection in December to $4,246 from $1,956 — a 117 percent increase.

Livesay is one of two named plaintiffs in a suit against Citizens seeking class-action status that was filed initially in Broward County Circuit Court this spring. Citizens and its contractors set up incentives for inspectors to deny credits, the suit alleges.

“In fact, inspection program coordinators have withheld payment to inspectors for re-inspections until the inspection finds the home is not entitled to Wind Mitigation Credits, despite the inspector’s independent judgment that the homeowner was entitled to Wind Mitigation Credits,” the suit says.

A Citizens contractor, Mueller Services, whacked credits that had been approved at one Broward County home by a different inspection just months earlier — one paid for by plaintiff Kenneth Babbitt — that was supposed to be good for up to five years, the suit said.

Citizens created its inspection program as “a subterfuge to generate greater revenue without directly raising raising its premium rates,” the suit asserts.

“If you look at Citizens’s website, it leads you to believe inspectors are neutral folks who are going to sort out what’s going on,” said Gregory Weiss, a Palm Beach Gardens plaintiff lawyer in the suit. “In reality, they aren’t neutral. What we’re seeing is that they’re looking for ways to deny credits.”

The ongoing reinspection plan, which affected 90,000 customers in 2011, is scheduled to hit 219,000 homes this year.

Those awaiting their turn fear the consequences. At Crossings of Boynton Beach, which has 280 condo units, as many as 7o units have recently been in foreclosure. Residents wonder how many people will be pushed over the edge if insurance bills — some passed along through association fees — now take a big jump.

“I will tell you right now this will force more people into foreclosure,” said Kathleen Carroll, president of the condo association.

Here’s how she perceives what Citizens is doing: “They’ve hired these people who they’re going to pay to find reasons to raise the premiums.”