Pending Wilma Claims Legitimacy Determination, Cabinet Defers Florida Hurricane Catastrophe Fund Bonding Approval

As part of its regularly scheduled agenda today, February 24, 2010, the Florida Cabinet deferred several items relating to additional bonding authority for the Florida Hurricane Catastrophe Fund (“FHCF”). In reviewing these items, the Cabinet members engaged in significant discussion about the involvement of public adjusters in claims paying practices.  

Initially, State Board of Administration (“SBA”) Executive Director Ash Williams had sought approval for $710 million in bonds to pay claims from the 2005 Florida hurricane season that were primarily related to Hurricane Wilma.

In response to an inquiry for clarification from Florida Governor Charlie Crist on the reasons for the amount,  Mr. Williams explained that: 1) Floridians are facing difficult economic times; 2) Florida law has many consumer friendly statutes that allow individuals to be overly aggressive in recovering insurance payments; and 3) there have been significant recent increases in public adjuster involvement in these claims. Governor Crist commented that, if claims are not legitimate, then he is not willing to put legitimate policyholders on the hook for illegitimate claims.

Florida Attorney General Bill McCollum spoke about the importance of passing the public adjuster reform bills that are currently filed in the Florida Legislature for the 2010 Session (House Bill 1181 by State Representative Janet Long and Senate Bill 2264 by Senator Mike Bennett). 

Mr. Williams added that legitimacy of the claims is the key question, because certain pending claims may be illegitimate (i.e. claims for replacement of entire tile floors). 

Noting her opinion that this legislation must be passed quickly, Florida Chief Financial Officer Alex Sink stressed the importance of reducing the deadline for filing these types of claims from five years to three.  She also commented that insurance companies are passing claims directly to the FHCF and that insurers need to be more aggressive in their prosecution of insurance fraud, as well as informing the State of fraudulent activities.

FHCF Chief Operating Officer Jack Nicholson discussed the auditing of claims, explaining that it would be impossible for the FHCF to evaluate all individual claims prior to their respective payment. 

Governor Crist commented that it was clear to him that this issue is a problem and suggested that the authorization for FHCF bond issuance be deferred until more data is available to determine legitimacy of pending claims.   Attorney General McCollum concurred and seconded the Governor’s motion.  As a result, all the related agenda items were deferred.

Mr. Williams reminded the Cabinet of the urgency for the bond issuance.

Next, Dr. Nicholson presented the Florida Hurricane Catastrophe Fund Finance Corporation agenda.  Following approval of the minutes from the previous FHCF Finance Corporation meeting, two agenda items related to the FHCF bond issuance also were deferred.

With no further business before the Cabinet, the meeting adjourned. 

To view today’s complete Cabinet meeting agenda, click here.

Blog coverage of the meeting from the South Florida Sun-Sentinel is reprinted below.

 

Sun-Sentinel “House Keys” Blog

Florida Cabinet tables insurance fee for hurricane claims: Fraud suspected

The Florida Cabinet postponed approving insurance policyholder fees to raise up to $710 million to help pay claims costs from the 2005 hurricane season until there is better scrutiny of the claims to ensure they’re legitimate. “Every legitimate claim should be paid, no question,” Gov. Charlie Crist said. But “there is the suspicion that there are illegitimate claims being made. And we do have a tough economy so who knows what’s going on specifically.” The Florida Hurricane Catastrophe Fund, which sells catastrophe backup coverage to insurers, already borrowed nearly $2 billion for 2005 hurricane claims. All automobile and property insurance policyholders in the state pay a fee to pay the money back. Fund managers proposed extending the fee by up to two years and increasing it from 1 percent of premiums to 1.3 percent, which amounts to about $3 more for every $1,000 in premium. State Board of Administration Executive Director Ash Williams said some of the claims may be fraudulent and they may be driven in part because of the growth in recent years of public insurance adjusters, who are often hired by policyholders to fight insurers on claims. “There’s a legitimate role for consumer advocacy but there can also be abuses,” he said. Jack Nicholson, the chief operating officer of the Catastrophe Fund, said sample audits are done of the claims after they’re paid. But Crist said state law should allow the fund’s managers to do those audits before paying claims. Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum expressed support for bills proposed by Sen. Mike Bennett and Rep. Janet Long that would create new restrictions on how public adjusters operate, including how they advertise and how long they have to open hurricane claims. (It would require them to open claims within three years after a storm.) McCollum said some of hurricane claims policyholders filed in the past year may be legitimate but “there is reason to suspect many of them may not be.” Sink criticized public adjusters advertisements for being too aggressive. “Do you have a leak in your roof? Call us. We may be able to prove it’s a leak related to Wilma,” she said, recalling an ad. “It’s hard to prove one way or another…Three years is plenty of time to know whether you’ve had damage from a hurricane.” Lawmakers have floated legislation aimed at reducing fraud and claims costs, as well as allowing insurers to boost homeowner insurance premiums. Insurers say they have lost money recently and haven’t been able to grow claims-paying reserves despite four hurricane-free years.

 

 

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