Florida’s Citizens Claims Committee Reviews Dramatic South Florida Water Damage Data; Sinkhole Managed Repair Program To Substantially Expand

 

Eye-popping water damage claims data emanating from South Florida–particularly Miami-Dade County–was the focus of Florida’s Citizens Property Insurance Corporation’s (“Citizens'”) Claims Committee (“Committee”) meeting today, September 10, 2015.  

“It’s crazy,” said Citizens’ Chief Risk Officer John Rollins. “We’ve never seen this (level of activity) before.  It’s a challenge.”

Particularly notable has been the increased level of lawyer involvement at claimants’ first notice of loss.  

“One law firm filed 72 assignment of benefits lawsuits in one day,” Mr. Rollins added.

In December 2014, Citizens’ water damage “Triage Team” reported that, of 562 new lawsuits reviewed, water damage claims represented 91 percent of those cases (513).  Miami-Dade, Broward and Palm Beach counties accounted for 549 of the overall total, with lawsuits originating in Miami-Dade County representing 71 percent of that subtotal (98 percent).  Attorneys were already representing Citizens policyholders at First Notice of Loss in 479 of the 562 lawsuits.

Statistics were similar for Citizens claims involving assignment of benefits (“AOB”).  It was noted that allocated loss adjustment expense severity for a litigated AOB claim is typically 60 percent higher than a litigated claim that does not involve AOB. 

Citizens recently held a “Water Summit,” at which it brought together legal, underwriting and policy experts to develop strategies to counter the growing problem of South Florida water damage claims.

To view the “Water Summit” report and strategy recommendations presented at today’s meeting, click here.

Prior to recently increased focus on water damage claims through its new “Triage Team,” Citizens did not segment non-litigated water-related claims.  Heretofore, under its managed claims model, there could have been as many as 600 independent adjusters that could receive a water-related assignment.  Citizens’ complex policy coverage interpretations and adjusters’ lack of understanding of Institute of Inspection, Cleaning and Restoration Certification guidelines often made it difficult to determine the scope of damages, Citizens’ Claims Vice President Jay Adams explained during his presentation today.

Now, all non-weather-related water claims are segmented to a dedicated water team currently comprising staff members and independent adjusters who have received revised training on adjusting best practices and estimating guidelines.  Strategy development now takes into account the differences between litigated and non-litigated claims.

With the success of Citizens’ Sinkhole Managed Repair Program, the State-run insurer is now launching a similar water damage claims emergency services and contract to repair program with credentialed vendors that will initially be offered to policyholders on a volunteer basis.  Additional staff adjusters will be hired to focus on water claims.

In response to a question by Committee Member Freddie Schinz, Mr. Adams said that, once the water damage managed repair program is operational, Citizens will be able to provide better comparative data on actual indemnity paid versus its litigation cost for a claim–essentially determining the cost of a litigated claim versus a non-litigated one. 

“We can’t deduce exactly what the makeup of that difference is at this point,” said Citizens President and CEO Barry Gilway.  “A significant part of it would likely be attorney cost.”

Citizens’ 2014 re-organization of its Legal Department resulted in a significant decrease in pending lawsuits and an increased closed file ratio.  Nevertheless, new litigated claims continue to pour in.

Ironically, many litigants never even express displeasure at Citizens’ initial offer before filing their lawsuit, Mr. Rollins related.  

“But we’re well on our way to getting our arms around (the litigation influx),” he added.

Meanwhile, Citizens is using data mining to identify claims trends in order to mitigate its future legal vulnerabilities.  While no significant patterns have yet emerged, ” . . . the analytics do paint a strong picture of what’s coming in that space,” Mr. Rollins said.

To view Citizens litigated claims update, click here.

Committee members also voted to extend Citizens’ Sinkhole Managed Repair Program to address another potential 2,000 stabilizations, inasmuch as Citizens has been able to enter into a greater number of sinkhole settlement agreements than originally anticipated.  Program expenses will quadruple to $250 million from the previous $50 million, which had served as the initial project cost basis.

“Each settled sinkhole claim will produce a reserve offset on Citizens’ financials,” Mr. Gilway explained.  “These are indemnity dollars associated with claims payment not additional dollars.”

The Committee also approved a list of vendors for Citizens’ commercial adjusting services program, a statewide mobile home demolition vendor and a mailing processing service provider.

To view today’s complete meeting materials, click here.

 

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