Citizens Insurance slow to pay, and lowballs settlements, critics charge

Years after damage from hurricanes, 2,000 households still have unresolved damage claims against state-run Citizens insurance
By Julie Patel | South Florida Sun-Sentinel
September 19, 2008

Although the hurricanes of 2004 and 2005 are but a fading memory, Citizens Property Insurance Corp. still has almost 2,000 unresolved homeowner damage claims in Florida.

And in the past two years, the state-backed property insurer has logged 2,422 complaints about how claims are handled. That's far more than the number filed with the state's two largest private insurers. In the same period, State Farm received 142 and Allstate 218.

Citizens delays paying claims and lowballs storm damage, according to public adjusters, attorneys and former Citizens employees. They blame a loophole that has allowed the state's largest property insurer to argue it's not subject to Florida's negligence and bad-faith laws that help keep other insurers in line.

"What we've seen in hundreds of cases with Citizens is that they're just as bad as all the other insurance companies except worse because ... they claim they're the government and you can't sue the government," said Alan Garfinkel, founding partner of the Fort Lauderdale law firm Katzman Garfinkel.
Citizens spokesman John Kuczwanski noted that fewer than 1 percent of the 311,000 policyholders who filed 2004 and 2005 hurricane claims complained about the process. With 1.2 million policyholders, "a few dozen who have commented negatively could easily be countered by thousands, if not hundreds of thousands, of satisfied policyholders," Kuczwanski wrote in an e-mail.

Citizens policyholders James and Anita Sokolowski, and their daughter, Terrill Friedrich, are reminded of Hurricane Wilma every time they walk into their West Palm Beach home with its leaky roof and the stench of mold so strong they get headaches.

The family is among 1,634 Citizens policyholders who sued the insurer over claims disputes from 2004 and 2005 storms. In numerous cases, Citizens was slow or failed to respond to requests for information or meetings, and as time passed, the damage in many homes worsened, policyholders say in court papers.

"They should be held to a higher standard than the private industry, especially because that's where some of our tax dollars go and some people don't have any other choice," Friedrich, 32, said.

Citizens must strike a delicate balance between paying claims fairly and spending money responsibly because all Florida policyholders pay fees on their homeowner insurance to help offset Citizens' deficits after the 2004 and 2005 hurricanes.

The state formed the insurer as a last resort for homeowners to help cover the higher-risk areas of the state that private insurance companies were reluctant to insure. Those locations tend to suffer greater damage and, therefore, generate more disputes, said Martin Grace, professor of risk management at Georgia State University. Citizens paid $6 billion for 2004 and 2005 hurricane claims, compared with about $5 billion paid by State Farm and more than $2 billion paid by Allstate.

Consumer advocates said Citizens'benefits outweigh its flaws.

"The government is known for bureaucracy, not customer service. But itdoes have a low price," said Bill Newton, executive director of Florida Consumer Action Network. The Legislature has frozen Citizens' rates until 2010.

Policyholder suits over the bad-faith issue have been settled or resolved, so state court judges have yet to make a final ruling on the central question of Citizens' immunity as a government entity. Last year, the Legislature amended one of three state laws dealing with the bad-faith matter, but the company's status remains unclear because the statutes are conflicting.

"Bad-faith laws typically are designed to ensure that for-profit companies do what is right, and Citizens is a governmental, not-for-profit entity without any motive to act in bad faith," Kuczwanski said.

Robert Klein, director of Georgia State's insurance research center, said that belief could affect how Citizens handles claims.

"If Citizens believes it's immune ... that reduces the pressure to pay some claims that private insurers would," he said.

John Novak, a former Citizens contractor hired by the insurer from 2006 to 2007 to defend its estimates of claims, said he often knew the damage estimates wouldn't cover repair costs.

"In almost all the situations, it couldn't be done" for the amount Citizens estimated, said Novak, who now represents policyholders in claims disputes.

Adrian Acosta, a former Citizens claims coordinator who cut checks to policyholders until 2006, said there was an unspoken understanding that policyholders would be paid as little as possible.

"It makes you look better by paying less," Acosta said.

Kuczwanski said Citizens employees aren't evaluated or compensated based on how much they pay out in claims.

Troy Norris, a Citizens policyholder who works as a construction contractor, said he knew his Lighthouse Point home couldn't be repaired for the $39,000 that Citizens offered. Hurricane Wilma tore off parts of the roof, and the ceiling caved in, damaging the bathroom, air conditioning system and walls.

Norris sued in 2006. The insurer settled the claim in August 2007 and paid $359,000, the policy limit.

The cost of construction, legal and storage fees and renting an apartment while his home is being rebuilt has surpassed $480,000. But the settlement "sounded like it was enough to get me through, and I was just tired of fighting at that point," Norris said.

The Sokolowskis, retired cafeteria workers, were told by their insurance agent the damage to their home was not hurricane-related. After Wilma, water began leaking into a wall in their kitchen. They hired an attorney in 2006. By 2007, the home's musty smell was unbearable and they moved to a mobile home park in Leesburg. Their daughter moved in with her boyfriend in West Palm Beach.

The family settled with Citizens in June for $31,000, after attorney's fees. But it might be too late. As relocation expenses mounted, the Sokolowskis fell behind on their mortgage payments last year and now are on the verge of losing their home.

"It screwed up all our plans and split up our family," Friedrich said.

Julie Patel can be reached at 954-356-4667 and jvpatel@sunsentinel.com.

 

Four years after Hurricane Wilma battered South Florida, some homeowners are still dealing with claims

Some say insurance companies delay payments and slow investigations. But some homeowners don't know they can reopen claims when damage reappears.
Windstorm insurance
September 18, 2009|BY Julie Patel, South Florida Sun-Sentinel

Marta Ayala's colorful artwork is showcased throughout her immaculate Parkland home. Every room also features vivid reminders of 2005's Hurricane Wilma: cracking paint and yellow water drip marks, some as long as 10 feet.
Weeks after the storm, Ayala and her husband, Carlos, got $12,700 from their insurer, The Hartford, to repair their roof. In 2006 and 2007, they paid for more repairs. Still, they needed buckets to catch dripping water during heavy rains.
Earlier this month, the Ayalas broke ranks with the thousands of Floridians waiting for Wilma insurance settlements. The Hartford agreed to pay $39,000 for a new roof.
"It has been a battle," said Carlos Ayala. More than 2,000 homeowners are trying to get payments from their insurers to repair damage from the Oct. 23, 2005, hurricane. An exact count of outstanding claims is hard to get because the state doesn't track such cases and some insurers will not tell.

Insurers say most of the 400,000 claims from Wilma have been settled.

Reasons for the unsettled claims vary. Some homeowners, like the Ayalas, learn years later how extensive the damage was and that they can ask their insurer for more money, in a process called reopening a claim.

Homeowners have five years after a hurricane to file an insurance claim or lawsuit. With more than a year until the Wilma deadline, lawyers and public adjusters, are advertising that they can help homeowners pursue claims against their insurers.

Some claims remain unsettled because the homeowners aren't happy with their insurers' offers. These homeowners have been in negotiation, mediation or arbitration for months or years. Some have hired appraisers, lawyers or both in efforts to win settlements.

Insurers say they need time to deal with lingering claims. Some claims are for damage that policies don't cover, such as wear and tear. Others are fraudulent, insurers say, and must be investigated. Industry critics say some insurers fight, delay or underpay claims.

"If you delay, some people will just go away and you don't have to pay," said J.D. Howard, who worked for insurance companies for 15 years. He is now an independent adjuster and executive director of the Insurance Consumer Advocate Network.