Citizens Claims Committee Meeting Report: June 15

The Citizens Property Insurance Corporation (“Citizens”) Claims Committee (“Committee”) met via teleconference on Monday, June 15, 2009.

In a follow-up to a discussion held during the Committee’s March 31, 2009, meeting, member Lance Malcolm presented an update of the non-catastrophe water loss review.  In 2008, there was a total of 21,800 non-catastrophe water loss claims.  Of those, 4,500 were closed without payment.  The primary cause was plumbing and appliance leaks, accounting for 40 percent of the claims reported.  Roof and wall leaks were the second-most common cause, accounting for 26 percent of loss claims.  Citizens Staff performed a manual review of the water loss claims and created a questionnaire to establish a credible sampling.  Mr. Malcolm noted that there was public adjuster representation in a larger-than-expected portion of undisputed water loss claims.  This is Citizens’ first water loss review and Staff will explore where additional analysis of data can be useful.

Citizens’ short-term goal is to develop a water-loss mitigation program by the fourth quarter of 2009.  Long-term goals include continued development of claims adjuster training and consideration of expanding the number of external water mitigation audit vendors.  Regarding the latter, Committee members emphasized the need to set clear standards and a vendor qualification process, as well as establishing the process for a mitigation program.  Committee members asked to be kept apprised of progress on the program.

When the water-loss program is complete, Citizens will begin a review of fire losses.

The Committee briefly discussed Chinese drywall claims.  Citizens has received nine first-party claims.  Of those, seven have been investigated and denied for lack of physical damage.  One claim is currently in mediation.  There has been one third-party claim, in which a homeowner said that the home’s previous owner, who was a Citizens policyholder, knowingly sold the home with defective Chinese drywall.  A Committee member questioned whether Florida law provides that damage to air quality constitutes physical damage.  Citizens Staff will research this, and whether it might have any application with regard to claims that noxious fumes from Chinese drywall cause illness.

Committee member Jay Adams presented an overview of Citizens’ Catastrophe Plan.  He said that Florida will be divided into catastrophe zones and categories in order to dispatch claims to independent adjusters.  Claims assignments will be made based on a “severity matrix” that rates damage on a scale from one to five, with one being the least severe.  Low-severity claims rating one and two will be handled by Citizens adjusters unless they prove too complicated, in which case they will be sent out to an independent claims adjuster.  Claims rating between three and five will be assigned directly to independent adjusters in the field.  The severity level will be assigned when the first notice of loss is taken, and will be in place when the claim reaches Citizens.

Mr. Adams said a Citizens Quality Assurance Team will monitor independent adjusters.  Each Citizens adjuster will supervise up to 20 independent adjusters, under one of the following assignment models:

• Task Assignment – an independent adjuster does an initial claims assessment and then gives it to Citizens adjuster; or
• Managed Claim – Citizens assigns the entire claim to an independent adjuster.

The Committee approved a motion to request that Citizens’ Board of Governors ratify an emergency extension of Citizens’ Xactware contract, which expired in May 2009.  The software, used to estimate claims, costs $839,000 a year.  A five-year contract is valued at approximately $4.2 million.

Committee member Yong Gilroy presented an update on key performance indicators.  The quarterly report examines both new and existing claims.  With the onset of hurricane season, a concerted effort to lower the number open claims has been successful.  There are now about 4,000 new claims per month.  There are no business trends to report other than claims for appraisals.  To see the Claims Operations Quarterly Report, click here.

Should you have any questions or comments, please contact Colodny Fass.

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