Over the past several years, Citizens Property Insurance Corporation has worked with Florida regulators, legislators and other stakeholders to address rising premiums brought on by increased litigation and claims abuse.
A recent opinion piece, “Stephen Rowe: Floridians need all the facts before AOB reform can begin,” fails to acknowledge those efforts and the mountains of data already released by Citizens, Florida CFO Jimmy Patronis, Florida Insurance Commissioner David Altmaier and others showing the negative impact of higher litigation rates for most Florida policyholders to the benefit, it appears, of a select few.
Citizens’ data show unequivocally that litigation is increasing and claims with an assignment of benefits are more likely to result in litigation. Meanwhile, litigation data submitted to the Florida Department of Financial Services show the number of AOB lawsuits filed against all Florida property insurers rose from 4,613 in 2013 to 17,421 in 2018, a 270 percent increase. These increases follow decades of relatively stable litigation rates.
It’s unreasonable to suggest that insurers got together in 2013 and decided to suddenly underpay claims. Instead, a small but growing pool of law firms, contractors and other third-party vendors have found it lucrative to challenge claims under a Florida law interpreted to guarantee they get paid if there is the slightest discrepancy between the initial estimate and the final award.
Once a “South Florida problem,” litigation rates are rising across the state. In Polk and Orange counties, lawsuits filed against property insurers increased fourfold from 2013 through 2018.
Vendors in these cases may earn a little bit more by litigating, but at what cost to consumers? In 2015, 70 percent of Citizens policyholders received a rate decrease. For 2019, 97 percent will see their premiums go up.
Following Hurricane Irma, Citizens received nearly 69,600 claims. Of those, only 11.4 percent has gone to litigation. In contrast, Citizens’ 2019 rate request is based in large part on the estimate that nearly half of all non-hurricane related water loss claims will result in litigation. How is it that we can pay $1.2 billion in Irma claims with only a minimal number of lawsuits but vendors in water claims contend they are unable to get paid without them? The argument simply doesn’t hold water.
Citizens supports the ability of homeowners to direct payments to vendors following a loss and to seek legal remedies if unsatisfied with how their claim was handled. As the state’s nonprofit insurer of last resort, Citizens cannot support a system that promotes unnecessary litigation, raises costs and delays payment to our customers.
As we work toward a solution, Citizens will continue to provide stakeholders with accurate and timely data while protecting the confidentiality our policyholders expect and Florida law requires. Together we can find a solution that benefits all Florida consumers.
Barry Gilway is President, CEO and Executive Director of the Citizens Property Insurance Corporation.