Citizens Property Insurance withdraws lawsuit in exchange for $1M settlement agreement

A trio of Florida companies accused of working together to artificially inflate the severity of insured damage, and the costs to fix the alleged damage, agreed to pay Citizens Property Insurance Corporation $1 million.

In return, Citizens has agreed to withdraw a lawsuit filed in 2020 against the Strems Law Firm, Contender Claims Consultants, and All Insurance Restoration Services. Four individuals — Guillermo Saavedra of Contender Claims Consultants, Cesar Guerrero, Derek Parsons of All Insurance Restoration Services, and Scot Strems — were also named defendants in the lawsuit.

There has been no concession from the defendants that fraud occurred. The Florida Supreme Court suspended Strems from practicing for two years. The firm was restructured and is now doing business as The Property Advocates, P.A.

Citizens, meanwhile, has not backed off its contention that the companies have been bilking the state-supported insurer of last resort since 2014, and that the fraud is a driving factor behind insurance premium increases.

Chief Financial Officer Jimmy Patronis announced the settlement agreement at a press conference in Tampa where he was joined by Citizens Property Insurance Company President CEO and Executive Director, Barry Gilway.

Patronis praised the work of a special investigative unit Citizens launched after detecting what has been described as a suspicious pattern between the law firm, the public claims adjuster and the water mitigation company.

The Citizens SIU combed through 5,000 claims, eventually sending more than 400 cases to the Division of Investigative and Forensic Services in the state Department of Financial Services (DFS). The division subsequently launched its own criminal investigation.

“Had this fraud been left unchecked, it could have cost policyholders $16 million a year,” Patronis said, noting that DFS, the agency he heads, will continue to work to ferret out insurance fraud.

“As criminal investigations continue, this action sends a loud signal that if you’re ripping off customers, we’re going to find you and hold you accountable,” he said.

The settlement agreement was executed in March but not announced until May 12, days before legislators are slated to return to Tallahassee for a Special Session on property insurance.

Gov. Ron DeSantis issued a proclamation late April setting the dates for the Session from May 23-27. The proclamation notes the industry has experienced two straight years of at least $1 billion in underwriting losses, and several companies have gone bankrupt or refused to renew hundreds of thousands of policies. That has led to massive increases in rates, which have hit homeowners at the same time as rampant inflation in pinching pocketbooks.

The message states the exclusive purpose of the Session will be to consider bills regarding property insurance, reinsurance, changes to the Florida building code, the Office of Insurance Regulation, civil remedies and appropriations.

Citizens spokesperson Michael Peltier said Citizens thought news of the agreement would nicely “dovetail” with a press conference on insurance fraud.

“And the fact that the Special Session is so close, we thought it would get better play,” Peltier said.