Understanding Your Insurance Policy
How familiar are you with your homeowners insurance policy?
What type of insurance policy do you have?
Do you know what perils are covered if your home was ever damaged and in need of repair?
Unsure where your policy is and need a copy? Request one from your insurance carrier or your insurance agent. Ask for a certified copy to ensure that all sections are included.
An informed policyholder is the best policyholder!
HO1 – Basic Form Homeowner Policy
A basic policy form that provides coverage on a home against 11 listed perils; contents are generally included in this type of coverage, but must be explicitly enumerated. The perils include fire or lightning, windstorm or hail, vandalism or malicious mischief, theft, damage from vehicles and aircraft, explosion riot or civil commotion, glass breakage, smoke, volcanic eruption, and personal liability. Exceptions include floods, earthquakes. Most states no longer offer this type of coverage.
HO2 – Broad Form Homeowner Policy
A more advanced form that provides coverage on a home against 17 listed perils (including all 11 on the HO1). The coverage is usually a “named perils” policy, which lists the events that would be covered.
HO3 – Special Form Homeowner Policy
The typical, most comprehensive form used for single-family homes. The policy provides “all risk” coverage on the home with some perils excluded, such as earthquake and flood. Contents are covered on a named peril basis. (Note: “All Risk” is poorly termed as it is essentially named exclusions (ie, if it is not specifically excluded, it is covered))
HO4 – Renter’s Insurance
The “Tenants” form is for renters. It covers personal property against the same perils as the contents portion of the HO2 or HO3. An HO4 generally also includes liability cover for personal injury or property damage inflicted on others.
HO5 – Premier Homeowner Policy
Covers the same as HO3 plus more. On this policy the contents are covered on an open peril basis, therefore as long as the cause of loss is not specifically excluded in the policy it will be covered for that cause of loss. (can also be achieved by endorsing an HO15 to the HO3)
HO6 – Condominium Policy
The form for condominium owners.
HO8 – Older Houses
The “Modified Coverage” form is for the owner-occupied older home whose replacement cost far exceeds the property’s market value.
For each policy, there are typically 5 classifications of property coverage. These are based on standard Insurance Services Office or American Association of Insurance Services forms.
Coverage A – Dwelling
Covers the value of the dwelling itself (not including the land). Typically, a coinsurance clause states that as long as the dwelling is insured to 80% of actual value, losses will be adjusted at replacement cost, up to the policy limits. This is in place to give a buffer against inflation. HO-4 (renter’s insurance) typically has no Coverage A, although it has additional coverages for improvements.
Coverage B – Other Structures
Covers other structure around the property which are not used for business, except as a private garage. Typically limited at 10% to 20% of the Coverage A, with additional amounts available by endorsement.
Coverage C – Personal Property
Covers personal property, with limits for the theft and loss of particular classes of items (e.g., $200 for money, banknotes, bullion, coins, medals, etc.). Typically 50 to 70% of coverage A is required for contents, which means that consumers may pay for much more insurance than necessary. This has led to some calls for more choice.
Coverage D – Loss of Use/Additional Living Expenses
Covers expenses associated with additional living expenses (i.e. rental expenses) and fair rental value, if part of the residence was rented, however only the rental income for the actual rent of the space not services provided such as utilities.
Additional Coverages
Covers a variety of expenses such as debris removal, reasonable repairs, damage to trees and shrubs for certain named perils (excluding the most common causes of damage, wind and ice), fire department changes, removal of property, credit card / identity theft charges, loss assessment, collapse, landlord’s furnishing, and some building additions. These vary depending upon the form.
Exclusions
In an open perils policy, specific exclusions will be stated in this section. These generally include earth movement, water damage, power failure, neglect, war, nuclear hazard, septic tank back-up expenses, intentional loss, and concurrent causation (for HO-3).
REPOSTED FROM EAST COAST PUBLIC ADJUSTERS BLOG
Citizens to Defy Legislation and Remove Rate Cap for New Policies
Stymied by lawmakers who have balked at larger premium increases for Citizens Property Insurance Corp., advocates for higher rates at the state-run insurer are proposing a backdoor plan that skips legislative approval.
A proposal to stop capping rates for new policies will go before the Citizens board Thursday, setting the stage for a potential political “firestorm,” one expert predicted.
If approved, the plan would leave Florida’s largest property insurer with a multi-tiered rate structure. Price increases would still be capped at 10 percent for existing customers, but new policies could jump substantially.
Proponents contend that increasing Citizens’ rates could make private insurers more competitive, potentially luring companies back to Florida’s beleaguered insurance market.
But critics say the proposal is legally questionable and likely to be challenged in court. They worry the plan would hurt the real estate industry in areas such as Sarasota County, where Citizens is a dominant carrier.
Homeowners might be hesitant to move if it means a big spike in insurance costs. Buyers from outside the region could also think twice if insurance becomes too expensive, said Sen. Mike Fasano, R-New Port Richey, a frequent Citizens critic.
“You will see future home buyers that will not be able to afford a home if they put these new rates in place,” Fasano said Tuesday. “How does that help our economy?”
Fasano successfully rallied his colleagues in recent years against legislation backed by Gov. Rick Scott and many top lawmakers designed to allow larger rate increases than the 10 percent cap established in 2009 and to move customers out of Citizens.
As a result, Scott has urged a Citizens board that includes a number of his appointees to make administrative changes that shrink the company without legislative approval.
During a visit to Sarasota earlier this month, Scott told local business leaders that “we are focused on depopulating Citizens.”
Questioning the legality
Even some insurance industry experts who generally support efforts to reduce Citizens’ market influence say the latest proposal goes too far.
Jeff Grady, president of the Florida Association of Insurance Agents, said Citizens’ rates need to more realistically reflect the company’s liabilities after a major disaster. But he questioned the legality of lifting a rate cap without legislative approval.
State laws says Citizens’ annual rate increases shall “not exceed 10 percent for any single policy issued by the corporation.”
Citizens lawyers are now making the case that the language applies only to existing policies and that the company can charge higher rates to new customers. But that is not how Citizens has operated since the rate cap was passed.
“It’s going to be questioned whether this interpretation is the right one, particularly if Citizens has a precedent of acting one way and then starting to act another,” Grady said.
Insurance agents already are angry with Citizens because “they don’t understand why the consumer who has been put into the situation of having no other choice but Citizens is being beat up,” Grady said.
Removing the rate cap for new policies could breed more resentment and create a backlash if it appears the agency is skirting the proper legal channels and “doing things some might think are not in the light of day.”
“People start to question your motives and develop constituencies that make something that might be a problem before an even bigger one,” Grady said. “I worry that if people start to challenge these things the real progress that might be made could be stunted.”
Citizens board member John Rollins said in a brief email that the proposal to uncap rates and other new efforts to shrink the company’s exposure “have been vetted by Citizens general counsel as not requiring legislative actions.”
Rollins did not offer his thoughts on the policies, noting “we’ll all have more to say” on Thursday. Citizens spokeswoman Christine Ashburn did not return a phone message.
The latest round of “exposure reduction initiatives” also includes a requirement that insurance agents submit documentation to Citizens certifying that no private carriers were willing to write a policy. There also is a proposal to increase minimum deductibles, meaning customers could be paying more for less coverage.
“The idea is just to make the policy really ugly,” so people will find another insurer, Grady said. “I kind of like it. I think it’s a clever idea except where there is really no other choice but Citizens.”
If Citizens is truly the only option, higher deductibles do not seem fair, Grady added.
A financial risk?
Citizens was created as the state’s insurer of last resort. It has become the largest property insurer in Florida with more than 1.4 million policies.
The company has the power to levy a tax on insurance policies throughout Florida if it runs out of cash to pay claims after a major disaster, leading Scott and many lawmakers to argue Citizens is a huge financial risk for Florida residents.
But with nearly $6 billion in reserves and a strong backstop of cash from the Florida Hurricane Catastrophe Fund, Citizens has the resources to pay claims without resorting to assessments in all but the most catastrophic hurricane.
Sarasota real estate broker Dave Beachy said the state should consider incentives for private insurers that take policies away from Citizens, but he worries about raising rates during a fragile economic recovery.
Beachy wrote in an email that most of his clients have no other option but Citizens and there could be fewer home sales if they are faced with larger insurance bills.
“Real estate is still trying to rebound from the bubble burst and raising the rates could slow down our recovery,” Beachy wrote.
Advocates for a Citizens rate hike say the company artificially holds down prices, stifling competition. As Citizens becomes more expensive, they say, private companies will become more attractive in markets currently dominated by Citizens.
But Sean Shaw, the former consumer advocate in the state Office of Insurance Regulation, said there is little evidence of that so far.
“That’s the great promise,” Shaw said, noting such theories “sound great in a textbook” but may not play out as expected in Florida’s complicated insurance market.
Insurers have collected unprecedented sums in premiums while Florida has gone a record six consecutive years without a direct hurricane strike. Yet rates continue to rise.
Shaw predicted a political “firestorm” over uncapped rates.
“There’s actuarially what you can charge and then there’s what people can actually stand,” he said. “There’s just a question of fairness that is a lot of times missing in these discussions when you’re reducing people to actuarial figures.”
Fasano believes consumers are at a breaking point with insurance costs. He expects a court challenge if Citizens’ board approves lifting the rate cap.
“The law is clear; they are not to raise rates as they are suggesting or moving towards,” he said. “They need to hold off until the Legislature takes action.”
Zac Anderson
email or call (941) 361-4836. Make sure to “Like” HT Politics on Facebook for all your breaking political news.
Severe Weather Has Home Insurers Rethinking Coverage
As weather disasters strike with more frequency, U.S. homeowners first get hit with the destruction or total loss of property. Many are then hit with the unexpected loss of homeowners insurance policies as insurance companies re-evaluate their financial liabilities.
After a tornado ripped through Springfield, Massachusetts, last year, R. Paula Lazzari’s home was badly damaged. The retired teacher found broken windows, missing siding and a damaged roof. Her insurer offered to fund repairs for one broken window and some of the siding. It took nine months — and mediation services from an independent adjuster and the Massachusetts Division of Insurance — to get her bills paid, according to the parties involved.
“Insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes like hurricanes, tornadoes and floods in recent years,” the Consumer Federation of America said in a statement after studying industry data.
The industry concedes that it is trying to avoid getting trounced by those same punishing weather patterns.
“Last year (2011) was an extraordinary year for natural disasters,” said Michael Barry of the Insurance Information Institute (III), an industry trade group. “Insurers have taken a step back to assess whether or not they can absorb severe losses.”
STATES LEFT IN THE COLD
Some insurance companies have pulled out of weather-challenged states — meaning they will not write new homeowners policies and may not renew contracts with current policyholders.
In the wake of Hurricane Irene last summer, for example, Allstate informed some 45,000 North Carolina policyholders that it would not renew contracts that were not bundled with auto insurance.
After a spate of tornadoes last April caused $11 billion of property damage in Alabama, Alfa Mutual Group announced it would not renew 73,000 Alabama property insurance policies.
“The increased frequency and severity of storms over the last decade have highlighted the need for Alfa to review its overall property portfolio,” Alfa President Jerry Newby said in a statement.
Florida, where insurers have been dropping coverage since Hurricane Andrew in 1992, is a good example of where this can lead. With an annual average of $1,460 per home, homeowners’ premiums there are second-highest in the country (Texas, at $1,511, is first), according to the most recent data available, a 2010 report from the Insurance Information Institute.
“Florida’s off the charts when it comes to pricing,” said Mike McCartin, an Ashton, Maryland, independent insurance agent.
The state has stepped in to cover some 1.5 million properties via its Citizens Property and Insurance Corp. as insurers drop more and more homes.
“You simply have major private insurers that are unwilling to write policies in Florida,” said Robin Westcott, the state’s insurance consumer advocate.
“It’s just a tough market to be in,” said Phil Supple, a spokesman for State Farm, which was once Florida’s largest property insurer. It stopped writing new homeowners’ policies there in 2007.
CHERRY-PICKING OF CUSTOMERS
Even though companies are not abandoning states at will, many opt to drop coverage on individual homes or customers that may seem prone to file claims. Insurers generally work on three-year contracts with homeowners, Barry said. At the end of those contracts, insurers can decide to raise rates or not renew.
When frozen pipes caused flooding in Phil Berger’s Ijamsville, Maryland, home last year, he got a $6,000 check from Allstate for the damages — and a policy review. Berger said an Allstate contractor told him to make $100,000 in repairs to his home at his expense or he would lose his coverage. He refused, and instead found a less expensive policy with a company that required only one smaller repair before covering the home.
“You just need to be on your toes at all times,” Berger said.
Allstate declined to comment on Berger’s case, but sent an email response to general questions about the company’s non-renewal policies.
“Allstate responsibly manages its risk by opting to not renew policies as warranted,” company representative Kevin Smith wrote. “These actions are carefully considered, and help ensure Allstate’s continued ability to provide a wide variety of insurance products to consumers at a competitive rate, while remaining financially strong in every community we serve.”
PAYING MORE FOR LESS
Even homeowners that renew every year may find new limits buried in their policies. The Consumer Federation report said insurance companies have “sharply hollowed out the catastrophe coverage offered to consumers” by raising deductibles, capping replacement costs, and — significant for folks in the path of tornadoes and hurricanes — removing coverage for wind damage if another non-covered event (usually a flood) also occurs.
Industry groups say this misstates the facts.
“The (CFA) could not be more wrong,” said Dr. Robert P. Hartwig, president of the Insurance Information Institute. “Cities such as Tuscaloosa, Birmingham and others are being rebuilt today because of private insurance companies paying losses — not from ‘hollowed out coverage’ policies.” Insurers have paid “literally billions” of dollars to “hundreds of thousands of claimants” affected by natural disasters, he said.
Hartwig also defended the practice by some insurance companies of leaving certain states or regions.
“If you tell an insurance company that they can’t raise rates despite nine hurricanes in two years, obviously insurers are going to have to reduce exposure,” he said.
But homeowners’ insurance premiums have been rising. They have increased an average 6.33 percent annually between 2002 and 2009, according to the National Association of Insurance Commissioners (NAIC). This year, insurers have asked for rate increases of 18 percent or more in 11 states, according to the Consumer Federation.
Robert Hunter, the author of the consumer report, has questioned whether limit-laden policies are worth the rising costs. But mortgage lenders require homeowners insurance, and anyone who has observed a devastating house fire or storm is unlikely to be willing to go without coverage.
COMPARISON SHOPPING
So how can consumers, who have little choice but to keep their coverage, do as Berger suggests and keep on their toes?
Hunter tells homeowners to shop carefully. “Go on your state’s insurance policy website and look for houses similar to yours to compare prices,” he said.
The NAIC provides a map to all state insurance regulatory offices on its website, and provides information about consumer insurance complaints.
Hunter also recommends checking comparison websites such as insuranceproviders.com— or insweb.com — for companies with favorable consumer reviews for in your state.
Another step is to get a professional agent to help, said Jim Donelon, Louisiana’s insurance commissioner and president-elect of the NAIC.
“I recommend you talk to as many people as you can. Get an independent agent — someone who’s not attached to a specific company — and get in touch with captive agents but know that captive agents can only represent their company.”
The agents can check to make sure no important coverage — like wind — has been carved out of the policy.
Compare what the agents offer with what you can find online, said Randy Moses, South Dakota’s insurance commissioner.
Even after getting coverage, consumers may find they need extra help. Lazzari needed both an independent broker and a public adjuster to resolve her case. Her insurer, Norfolk & Dedham Insurance, not only initially refused to pay for most of her home repairs, but also planned to drop her as a customer, she said.
Francis T. Hegarty Jr., president and CEO of Norfolk & Dedham Group, confirmed her version of events, but said it was not unusual for claims such as Lazzari’s to take time to resolve.
Lazzari contacted an independent broker who worked with Norfolk & Dedham to successfully complete her home repairs. But the broker said switching insurers would increase her payments 185 percent. That’s when Lazzari contacted the Massachusetts Division of Insurance to find a public adjuster, who eventually persuaded Norfolk & Dedham to keep her on its rolls.
“We were eventually able to work things out with Ms. Lazzari,” said Hegarty. “In these kinds of cases with independent adjusters, the claims tend to get strung out and tend to take longer to resolve than they would otherwise. But cases like this case are pretty common and, all in all, we’re pleased with how things turned out with her.”
By Matt Stroud, Reprinted From Reuters.
DFS Public Records Request
March 26, 2012
The Public Records Unit Florida Department of Financial Services 200 East Gaines Street Tallahassee, FL 32399-0307
Dear Custodian of Records,
We write to request copies of all Department of Financial Services (DFS) notes, drafts of proposals, analyses, and other memoranda regarding currently proposed rules changes to 69B-220.051 (Conduct of Public Adjusters and Public Adjuster Apprentices) and 69B-220.201 (Ethical Requirements for All Adjusters) (which were the subject of a Workshop on March 22, 2012) as well as records of all internal and external communications between DFS and representatives of the insurance industry, lobbyists, FL legislative branch, FL executive branch, and any other party regarding the above cited proposed rules changes. These requests are made pursuant to the Public Records Act, Chapter 119 of the Florida Statutes.
These requests include copies of every document related to the matter, regardless of the format in which the information is stored, including records such as emails stored on-line or by computer.
If you refuse to provide this information, Chapter 119 requires you advise us in writing and indicate the applicable exemption to the Public Records Act. Also, please state with particularity the reasons for your decision, as required by Section 119.07(2)(a). If the exemption you are claiming only applies to a portion of the records, please delete that portion and provide photocopies or data storage of the remainder of the records, according to Section 119.07(2)(a).
We agree to pay the actual cost of duplication and/or data storage as defined in Section 119.07(1)(a). However, if you anticipate that in order to satisfy this request, “extensive use” of information technology resources or extensive clerical or supervisory assistance as defined in Section 119.07(1)(b) will be required, please provide a written estimate and justification.
We request that these records be available by April 27th, 2012. If you have any questions or need more information in order to expedite this request, please call 888-745-5551 X112.
Sincerely,
Jay Neal Executive Director
Attorney Amends Citizens Class Action Lawsuit to Include Conspiracy and Fraud
Tallahassee, Fla A class action lawsuit filed earlier this month in state court against the Citizens Property Insurance Corporation was amended yesterday to include new causes of action. Since at least 2010, Citizens has used a modified replacement value model called 360-Value to substantially overstate replacement value coverage for Florida consumers resulting in massive “back door” rate increases not intended by the Florida Legislature or approved by the Office of Insurance Regulation.
Information received after the initial filing clearly shows that executives at Citizens conspired with 360-Value to deliberately defraud policyholders through this replacement value model.
The amended complaint can be viewed here
FAIR is a non-partisan non-profit association advocating for balanced insurance reforms.
Persons harmed by the actions of Citizens will be able to find information on how to join this action by visiting the Citizens Class Action Lawsuit Page Here.
Stop Treating Citizen’s Property Insurance Policyholders Like Second Class Citizens
One of the most controversial issues facing our state is the future of Citizen’s Property Insurance Corporation and its stated role to provide Floridians with affordable homeowner’s insurance. Many policy makers want to find solutions to restore a robust private market and return Citizens to a true “last resort” option. Others, including Governor Scott, want to eliminate Citizens altogether. Either way, Citizens has a huge target on it and is being fired at from all directions.
Unfortunately, Citizen’s policyholders are getting caught in the crossfire. Citizen’s policyholders already have fewer rights and choices than do policyholders who buy insurance through private companies. For example, private companies have a duty to act in good faith when adjudicating claims. When they commit bad acts they are subject to pay punitive “bad faith” damages to dissuade them from future bad acts. Citizen’s is immune from this law. As a result, despite wide spread complaints about controversial claims practices, Citizens can’t be held legally accountable to the same extent as private carriers. Another example of this second-class treatment involves the right of a policyholder to hire a public adjuster during the claims process. A public adjuster is a licensed regulated professional who not only assists consumers in settling claims, but also is the only professional with a duty to protect the policyholder’s interests, not the insurance company’s. This choice costs the insurance company nothing but often ensures that policyholders receive all of the benefits they are entitled to under the policy. Legislation passed last year restricted this choice for Citizen’s policyholders. Legislation proposed this year would take away this choice entirely.
The rhetoric keeps getting worse. In a recent Senate committee hearing, a prominent Senator called the very concept of Citizens “socialist” and suggested that Citizen’s policyholders should have fewer choices because they were in effect “a burden on their neighbors.”
Sadly, this rhetoric and intense political pressure has infected Citizen’s management. The recent class action lawsuit against the company by policyholders being gouged by grossly inflated replacement values is the latest example. For years Citizens has been provided with countless certified appraisals showing that, in case after case, actual replacement values were often less than half of what their software calculated. Instead of properly and honestly addressing these legitimate complaints, Citizens not only neglected to properly fix the software but also started to stubbornly refuse to accept these appraisals and correct policy coverage limits. The result was that homeowners, who had no other choice for insurance but Citizens, saw their premiums double. One large insurance company has television ads that remind us that “everyday millions of people choose to do the right thing.” Unfortunately, Citizens stubbornly refused to do the right thing, forcing policyholders to seek redress through the last resort available, the courts.
This legislative session other proposals (S.B. 578 and H.B. 245) would create a loophole that would allow Citizens policyholders to have their policies assumed by unregulated surplus lines carriers. These carriers are not subject to the standards and regulations in place governing how insurance companies set rates, provide policy coverage, or pay claims. In fact, these unregulated carriers can reduce coverage or raise rates at will, with no recourse to the consumer other than to find another carrier, which in Florida is often not an option. Most ominously, policyholders covered by these unregulated carriers are not protected by the Florida Insurance Guarantee Fund, a safety net to pay claims if an insurance carrier fails.
Since at least six such failures have happened in Florida in just the last couple of years, this is plainly dangerous for consumers. Yet, proponents who voted to strip away other consumer choices ironically praise the “choice” this would provide to Citizen’s policyholders. It is a false choice. Citizen’s policyholders would receive a letter informing them that their policy will be assumed by the unregulated carrier. Policyholders who do nothing because they didn’t read the letter or thought it was junk mail or simply didn’t understand their options would automatically be taken out of Citizens and could find themselves with few options in the future. Every state sharply restricts the sale of these unregulated policies to homeowners either outright or by requiring the consumer to sign a detailed notice explaining that they are losing protections, Florida included. But this proposal would side step those existing requirements. Proponents also argue that policyholders hit by huge rate increases and/or reduced coverage could go back to Citizens. Every day our organization receives complaints by people arbitrarily cancelled or non-renewed by Citizens. Do we really trust them to suddenly do the right thing? This bill has already passed the House and is awaiting a vote in the Senate. It’s not too late for Floridians to contact their Senators on this issue, but it needs to be done now, before it’s too late.
We need to remind those legislators who continue to vote against the interests of Citizens policyholder’s about something very important. You and the management at Citizens are breaking your own law. FL Statute 627.351 states that “It is the intent of the Legislature that [Citizens] policyholders receive service and treatment of the highest possible level but never less than that generally provided in the voluntary market.” Take careful note of the use of the word “never”, rarely found in legislation of any kind. Not sometimes, not generally, but never. So follow your own law and quit treating Citizen’s policyholders like second class citizens. These people pay good premiums to an entity you created and are legally entitled to better treatment. You cannot continue to try to solve Florida’s insurance problems on their backs.
Jay Neal is Executive Director of FAIR, the Florida Association for Insurance Reform
FAIR To File Additional Law Suits Against Private Insurance Carriers
Thank You Channel 10 News For Continued Coverage. FAIR is commited To Bringing Balanced Reform For Florida Home Owners. For Information On Joining The Class Action Please Click On the Citizens Class Action LawSuit Button At The Top Of The Screen. Please Subscribe To The Right And Forward This Site To Your Friends Using The Buttons Below.
The 10 News Investigators have learned the group suing Citizens Insurance over its insurance practices will file more lawsuits Monday.
We’ve learned that group — FAIR — will be filing class-action lawsuits against private insurance companies Monday.
Those suits will go along with the cases they’ve already begun against Citizens.
The 10 News Investigators have been leading the way on this. Following reports by 10 News last fall, allegations surfaced.
The claims: insurance companies statewide are setting the replacement costs of some homes extraordinarily high — much higher than they should be.
That means the companies can charge you more to insure your house. The technique lets them make more money and dodge state laws that limit how much they can raise your rates.
That practice is what led the group FAIR – Florida Association for Insurance Reform — to the steps of the state Capitol last week.
FAIR announced it’s suing Citizens Insurance over the issue. Citizens is run by the state and backed up by Florida taxpayers.
PREVIOUS COVERAGE:
- Citizens Insurance not only company under fire; more suits to be filed Monday
- Private companies could be inflating replacement values too
- Citizens reverses controversial policies after 10 News reports
- Sen. Mike Fasano criticizes Citizens’ replacement value policies
FAIR, Announces Class Action Lawsuit Against Citizens Property Insurance
On February 7, 2012 FAIR announced a Class Action Lawsuit against Citizens Property Insurance. Attorney Mark Beausoleil, FAIR Regional Director David Welch, Steve Fingerman Board Member and President E Loans Mortgage Inc and Senator Mike Fasano, Announce FAIR’s Lawsuit against Citizens Property Insurance for their practices of inflating Replacement Cost Values and Overcharging Florida Consumers. Florida Association Of Insurance Reform Announced on Feb 7, 2012 A Class Action Lawsuit Brought Against Citizens Insurance by It’s Policy Holders at The Capital Building In Tallahassee
FAIR Set To Announce Class Action Law Suit Against Citizens Insurance
Thank You Channel 10 News For Covering This Story. News Conference Set For 12:30 Today.
For Details On The Class Action Law Suite Please Visit www.citizensclassaction.com
New Port Richey, Florida — A big class-action lawsuit coming Tuesday accuses Citizens Insurance of dodging state law to create massive “back door” rate increases.
Here’s what the lawsuit will say happened to Citizens customers.
Let’s say the real cost to replace a home is $100,000 dollars.
But Citizens uses its computer software to do an estimate, and decides that amount should be $200,000.
At first, that sounds good. If there’s a fire or disaster, $200,000 will definitely be more than enough to replace the house, and maybe even build a nicer one than before.
But here’s the flip side of that.
Insuring it for $200,000 means as a homeowner, you’ll pay a higher premium — it will cost you more each month to insure the house than if you paid for just $100,000 in insurance.
The groups suing Citizens Property Insurance Corporation say the company did this intentionally with some of the homes it insures.
A computer program called 360Value was used to figure the replacement costs of people’s homes. But the lawsuit says that value was often far more than what is a realistic replacement cost — and that led to higher insurance prices for its customers.
There are a bunch of state laws in place — even a whole state Office of Insurance Regulation — designed to determine what rate an insurance company can charge you.
This lawsuit alleges Citizens has used that 360Value software program to get around all of that regulation and charge homeowners more than their legally-allowed rate.
“If it’s proven that these homes are being inflated — the values are being inflated — just so Citizens can raise rates, that is unconscionable by any, whether it be a government entity like Citizens or a private company,” State Sen. Mike Fasano (R-New Port Richey) told 10 News.
Earlier this month, a Citizens spokeswoman told the Tampa Bay Times, “We do not have any incentive to overinsure.”
She explained if there’s a major disaster, the last thing Citizens would want to do is pay out a whole bunch of extra, inflated damage payments.
Citizens is run by the state, and insures more homes in Florida than any single private company.
It’s the “insurer of last resort” and in many cases people who have insurance through Citizens would have a hard time getting it through any other insurance company.
So, if Citizens is charging you too much, you may not have any option to switch to another company.
The class action lawsuit is set to be announced on the steps of the Capitol in Tallahassee by the two organizations behind it: Florida Association for Insurance Reform or FAIR, and Beausoleil Law Group of Florida.
Florida PIP Reform: The Good Bad and the UGLY
According to the insurance companies and many in our state government, Florida’s Personal Injury Protection auto insurance law (PIP) needs reformed to combat PIP fraud and reduce the acceleration in premiums to consumers. PIP is certainly not a perfect system. However, with roughly a quarter of Floridians without health insurance and thousands more underinsured, it is overall a responsible approach to providing health care access to those injured in an accident, without regard to who was at fault. And to the extent that there is actual fraud being committed, it should be relentlessly pursued and prosecuted.
But unfortunately the fraud problem is being grossly exaggerated and used as a smoke screen to attempt all sorts of sins against consumers and policyholders. The insurance industry and politicians, including the Governor, talk about PIP fraud as a “billion dollar annual cost to Floridians.” They offer absolutely no data to support this. Organizations with scholarly names like the “Insurance Information Institute” and the “Coalition Against Insurance Fraud” are nothing more than insurance industry controlled and funded propaganda tools. With no data or support they spout absurd statistics like “the projected annual cost of fraud per driver is $83.79.” I suppose when you break something down to the penny it seems more credible. When asked by state regulators to provide the raw data so that the true cost of fraud can be evaluated, the industry refused, earning a “failing grade” from Florida CFO Atwater for their lack of cooperation. Other verifiable data suggests that the problem is not nearly as bad. According to a study by Insure.com, Florida dropped from 25th to 29th of the states in 2011 for cost of auto insurance—below the national average. And according to the aforementioned Insurance Information Institute’s own numbers, average PIP claims increased 22% since 2004; less than the 26% increase for medical care overall.
Rep. Jim Boyd (R) Bradenton
Legislation sponsored by Rep. Jim Boyd (R) Bradenton would use this fraud smokescreen to give the insurance industry unfair advantages in handling claims. They would require claimants, including medical providers and their staffs, to submit to quasi legal proceedings called “examinations under oath”. While it may seem reasonable on its face, these examinations can be incredibly intrusive and cause significant hardship to medical providers. These exams can probe into personal finances, past legal entanglements, and even sexual habits. They can typically last a day or even two, time that a medical provider would have to be out of the practice, and interfering with the ability to treat other patients. There are already a number of effective tools insurance carriers can use to evaluate and pay proper claims. This provision would give them a huge hammer to intimidate medical providers to the point which many will simply cease to accept PIP patients.
Another provision would limit attorney’s fees in PIP cases. Trial attorneys are a familiar bogey, but make no mistake, this is nothing more than a move to block citizen access to the courts and encourage insurance company bad actors. Two things must happen for an insurance company to have to pay a plaintiff’s attorney: 1) they refuse to pay all or part of a legitimate PIP claim, and 2) the claimant’s attorney proves it in court. Since virtually all PIP cases are contingency-based, if the plaintiff’s attorney fails to prove the case, he or she does not get paid. How does this have anything to do with fighting fraud? Also, many of the PIP court cases recently have to do with the insurance company not paying the correct contractually established reimbursement rate, then refusing to make up the difference until sued. This is simply bad business involving blatant mistakes in judgment by insurance executives that they now want all of us to pay for.
More ominous is one widely documented insurance industry business model called “delay, deny, and defend.” Designed by large consulting firms like McKinsey & Co., this business model employs sophisticated technique to avoid the prompt and fair payment of claims and to reward employees for denying or underpaying valid claims. PIP claims rarely exceed $8,000 which usually includes several medical procedures and office visits. 
Taking an insurance company to court is already no cake walk. It involves depositions, court attendance, and loss of revenue from being away from a medical practice. Some providers and their attorneys will simply throw up their hands and take the loss and/or stop taking PIP patients, something the insurance companies are counting on. Further tilting the playing field toward insurance companies and against consumers simply encourages this business model and rewards bad actions.
- Chaos in the Emergency Room
Another provision in Boyd’s bill would require that a person injured in an accident visit an emergency room or hospital-owned clinic within 72 hours. In other words, Florida drivers will be forced to purchase PIP coverage as a condition of operating a vehicle, and then be forced to visit an emergency room or forfeit any benefits under the coverage. Besides forcing people into the most expensive source of medical care by far, this bill strips away coverage when symptoms are latent or not appropriate for emergency room treatment. And why would only hospital owned clinics and not doctor owned clinics qualify? For politicians who rail on about the dangers of government interference in private health care decisions, this is bold-face hypocrisy and certainly bad public policy.
Sen. Joe Negron (R) Palm City
Fortunately, there is a more sober PIP reform proposal by Senator Joe Negron (R) Palm City. Negron’s bill would require more detailed accident reporting by law enforcement, tighten licensing requirements for medical clinics, strip providers of their medical license if found guilty of committing fraud, and beef up fraud enforcement capacity. In other words, it fights actual fraud. The bill also requires state regulators to get the real facts on insurance costs so that lawmakers can make a long-term assessment of the feasibility of the overall PIP system over the next 3 years. The bill is a thoroughly considered, narrowly tailored, well drafted proposal. It deserves our support.
Jay Neal is Executive Director of FAIR, the Florida Association for Insurance Reform.
