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Citizens Property Insurance

State-run Citizens Property Insurance Corp. moved a step closer toward capping coverage for non-weather-related water damage repairs for customers who refuse to use the company's handpicked contractors.

Its Board of Governors unanimously approved the company's plan to impose a $10,000 limit on permanent repairs, including $3,000 for emergency repairs, unless policyholders agree to let Citizens send a member of its new managed repair contractor network to perform the work.

The coverage caps would take effect Aug. 1 for new and renewing policyholders, pending final approval by the state Office of Insurance Regulation.

Citizens insured 118,468 home and condo owners in Broward, Palm Beach and Miami-Dade counties and 194,088 statewide at the end of 2017, according to data compiled by the state.

No caps would be in place for consumers who use Citizens' network. Contractors would be local companies dispatched by Crawford & Co., a global claims management solutions provider hired by Citizens.

Citizens' officials said the changes are necessary to stop shady contractors from coercing policyholders into signing over the benefits of their claims, then performing unnecessary work and suing if Citizens refuses to pay. Abuses have resulted in thousands of suits every year, driving up legal costs and resulting in higher premiums for large numbers of customers, Citizens says.

This problem started in South Florida but has spread across the entire state, Citizens president and CEO Barry Gilway said Wednesday.

At the Board of Governors meeting on Tuesday, Citizens officials portrayed the changes as a benefit for its customers.

"We must address the abuse related to non-weather water claims, while always ensuring every single Citizens' policyholder has access to full coverage," said board chairman Chris Gardner. "Rather than simply restricting coverage, our proposed solution seeks to protect our customers and provide customer-friendly options."

But the change imposes a hard $3,000 cap on emergency damage repair and removes an option for the policyholder to request additional money. That $3,000 would count against the $10,000 limit on permanent water damage repair, while currently no $10,000 limit exists.

Customers of other insurance companies likely face similar caps if Citizens' changes are approved. Citizens worked with state insurance regulators to develop language the regulators would approve, and industry officials predict other companies will adopt Citizens' revisions as their own.

One company with a managed repair network, Heritage Property & Casualty Co., told shareholders it might be interested in adopting similar restrictions, but first it was working with state regulators to ensure the contract language did not include loopholes that could be exploited by "bad guys."

Other major insurers with managed repair networks are Florida Peninsula and People's Trust. A spokeswoman for People's Trust last month said her company would explore Citizens'; revisions, while Florida Peninsula's CEO said it would be premature to discuss "future actions we may or may not take" related to the Citizens changes.

Jeff Grady, president and CEO of the Florida Association of Insurance Agents, called the coverage caps "regrettable" but understandable.

"These are coverages that are called upon quite often," he said. "It's a common thing for homeowners to walk into their home and find water on the floor."

As the state-owned insurer of last resort, Citizens is barred by law from increasing rates more than an average of 10 percent a year. So the company must find a way to absorb increased costs, and reduced coverage is about its only option, Grady said.

Paul Handerhan, vice president of public policy for the Florida Association for Insurance Reform, predicted the change would lead to one of two outcomes. One is that "over time [costs of the repairs] will be higher than Citizens thinks it will be," he said. "Citizens can't leave until the property is properly repaired. They're going to have to pay the full indemnity every time this is exercised."

If a year from now, Citizens' average cost per water claim increases as a result of the managed repair program, that could be an indication the company was not offering enough money for claims — which would be a reason for increased lawsuits, he said.

Another possibility is that finding out about the $3,000 and $10,000 caps would shock policyholders into seeking outside advice — and hiring lawyers. That would defeat the whole purpose, Handerhan said.

Jimmy Farach, president of the Florida Association of Public Insurance Adjusters, called the changes "really bad for Citizens' policyholders."

Farach predicted that Citizens' contractors would cut corners to save money for the company.

"Citizens will hire contractors that will do the cheapest repairs possible, without regard to the quality of the repair," he said. "If the contractors hired by Citizens don't make the repairs cheaply, Citizens won't continue to hire them. This is really bad for Citizens' policyholders."


Make sure you're protected. Contact Prestige Insurance Group, Inc. for more information on flood insurance options.

(Article Courtesy: South Florida Sun-Sentinel)

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