Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

21 policyholders filed a lawsuit yesterday alleging that State Farm Mutual Automobile Insurance Co. violated the federal Racketeer Influenced Corrupt Organizations Act (RICO) by defrauding them of approximately $4 million in insurance benefits related to Hurricane Katrina claims  by producing false inspection reports.   The 101-page complaint, filed in the U.S. District Court for the Southern District of Mississippi, alleges that State Farm conspired with adjusting and engineering firms to deny Hurricane Katrina claims that should have been paid by the insurer. Read more...

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Throughout U.S. history insurers have routinely discriminated against minorities. Discriminatory treatment included such practices as charging minorities higher rates, offering minorities policies with inferior coverage, not returning calls for information from minority applicants or denying minorities coverage altogether. Homeowners insurance redlining is a form of this discrimination where an insurance agency or agent treats homeowners differently not necessarily because of their minority status, but because of the minority composition of the neighborhood their home is located in.

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According to Florida Today, Gov. Charlie Crist is quietly considering hedging Florida's gigantic hurricane bet, and with it raising the odds homeowners will get socked with a bailout bill. A draft report shows state financial advisers are considering spending $670 million to buy $6 billion in protection for the Florida Hurricane Catastrophe Fund. The state fund sells discount storm coverage to insurance companies and in turn is backed by Florida consumers who would pay for any deficits caused by storm losses. The losses are paid with special charges on insurance premiums.

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Preliminary arguments in a lawsuit brought against State Farm Fire and Casualty Co. by Louisiana policyholders Gordon and Kathleen Schafer, which allege the insurer underpaid Hurricane Katrina claims by colluding with software manufacturer Xactware Solutions Inc. to keep property replacement costs artificially low, were recently heard in U.S. District Court.  The lawsuit alleges that Utah-based Xactware Solutions Inc., also named as a defendant, provided State Farm with assessment and estimating software programs that had a "special profile" which quoted prices for building materials consistently lower than standard market value when adjusting and tallying payment for Katrina claims while using the software.  Read more....

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Back in January, Mississippi's attorney general, Jim Hood, agreed to drop State Farm Mutual Fire and Casualty Company from a lawsuit that his office filed against several insurance companies for refusing to cover damage to homes from Katrina's storm surge.   The dismissal of the orignial lawsuit was part of a deal in which State Farm was to seek certification of a class of some 36,000 policyholders, and settle the class action by setting up a new claims adjudication process that would reexamine the claims of people who had not sued State Farm.  Judge L.T. Senter Jr., reviewed the agreement and rejected it.  Hood has filed suit against State Farm again, saying the company failed to honor the mass settlement agreement.  Read more about it... 

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Despite the well-established principle of separation of power, Judge Peter Beer's motion in the Branch Consultants v. Allstate et al. requests that the U.S. Attorney's Office intervene in the whistleblower case or show cause why they are not.  Read more...

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According to the private insurance industry's Insurance Information Institute (I.I.I.) they do.  In a recent report, "Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice," I.I.I. says that by year-end 2006, total exposure to loss in state-run property insurers is estimated to reach more than $600 billion, well above the $54.7 billion in 1990. As more private property insurers shy away from high risk markets an  enormous financial burden is being placed on state-run insurers, leaving a number of them operating at substantial deficits.  I.I.I. indicates that the rapid growth of state-run property insurers of last resort may shift much of the long-term risk of hurricane-related losses to policyholders and taxpayers, even those who live nowhere near the coast.   Read more from the Insurance Journal

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Florida Chief Financial Officer Alex Sink is convening the third meeting of the legislatively-created task force on Citizens Property Insurance Claims Handling and Resolution. The meeting will be held June 13, from 2 p.m. - 8 p.m. at Hagler Auditorium, Building 2, Room 252 on the campus of Pensacola Junior College, 1000 College Blvd. in Pensacola, Fla. Click here for the schedule of future task force meetings.

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Florida Farm Bureau Casualty Insurance Co. issued a homeowners insurance policy to the Coxes. The policy excluded any losses caused, either directly or indirectly, by flood or water damage of any kind.  The Coxes' home sustained extensive damage caused by Hurricane Ivan and was determined to be a total loss due in large part to flood damage and in lesser part to wind damage. The Coxes demanded coverage, and Florida Farm tendered $12,000 for the windstorm damage. The Coxes declined the payment.

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The House Financial Services Subcommittee on Oversight and Investigations, and the Homeland Security Subcommittee on Management, Investigations and Oversight have scheduled a hearing for Tuesday, June 12, 2007 to discuss the National Flood Insurance Program and the interaction between the NFIP and private insurers and the allocation of wind vs. water insurance claims in light of preliminary findings from Government Accountability Office and Department of Homeland Security, Inspector General reports.

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June 1st was the first day of hurricane season and already the Florida Coast has been hit by its first tropical storm (Andrea).  If predictions from NOAA are correct we are in store for a very busy 2007 hurricane season and preparedness is at the forefront of everyone's minds. Governmental entities throughout the Gulf Coast are making final preparations for implementation of catastrohe plans. In Florida, many are taking advantage of the State's sales tax holiday and purchasing various and sundry items in preparation for the hurricane which may never come. Many policyholders are reviewing their policies to make sure that they have adequate coverage and worrying about what would happen if a Katrina event struck close to home. Last week, a long time client with a nearly $70 million property called regarding a major problem; the property budget would not allow them to purchase enough coverage, including code upgrade coverage and excess flood coverage. They could afford one or the other, but not both.

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There is a split among insurers over a Senate bill (S.40) to create a federal insurance regulator.  The bill would authorize the issuance of Federal charters and licenses for carrying on the sale, solicitation, negotiation, and underwriting of insurance or any other insurance operations, provide for a comprehensive system for the Federal regulation and supervision of national insurers and national agencies, and provide for policyholder protections in the event of an insolvency or the impairment of a national insurer. Opponents of the legislation have some heavy ammunition on their side, including two of the industry's largest political war chests. 

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Facing criticism for thousands of 2004 and 2005 hurricane claims still open, Citizens Property Insurance seeks to rein in the lawyers and freelance adjusters it alleges are whipping up disputes in order to pocket large fees. Chip Merlin, of the Merlin Law Group, warned against limiting the rights of homeowners to contend with what he said are ''statistical issues'' at the state's largest property insurer.  Read more... Is this part of Citizen's ongoing effort to improve policyholder and applicant services?

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Last Friday marked the first day of hurricane season, but the only "storm" guaranteed to be on the horizon is the flawed way government regulators deal with insuring against catastrophes, according to researchers at the Institute for Policy Innovation, a national think tank.  IPI researchers say that "the only way to get people the insurance they need, at a price they can manage, is to get government out of the way." Read more...

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A group of former insurance adjusters filed suit (see full text of the complaint) last year accusing insurers of misrepresenting claims to the National Flood Insurance Program to limit their financial losses in Katrina's aftermath.  The suit was legally required to remain under seal while federal officials reviewed the case.  A federal judge in New Orleans unsealed the suit last week, after U.S. Attorney, David Dugas decided that his Baton Rouge-based office will not intervene. Dean Starkman, Insurance Transparency Project, ties together several great examples of the alleged fleecing of the National Flood Insurance Insurance Program, including compensation for flood damage where there was no damage, 300% charge up for building materials, insurer flood claim additions for items insureds never owned or filed for. Click here for related story....   

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Since the centers of three hurricanes passed virtually overhead in 2004, residents of the sprawling Lakeshore Club Villas condominium complex have lived in a sort of insurance-induced purgatory.  Lakeshore's insurer, Philadelphia Indemnity Insurance, put repair costs attributable to the storms at a few hundred thousand dollars, while the homeowners association put the figure well above $30 million.  This week a team of appraisers, including a representative of the insurer, tabulated total storm damage repair costs at about $40 million.  Chip Merlin, an attorney for Lakeshore, said he is happy with the appraisal, but is concerned about the potential reductions based on interpretation of policy. Read more from Billy Townsend of the Tampa Tribune....

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Insurance is a business based on trust. If the public does not trust that you will pay claims promptly and for what is owed, your business will flounder.  Fair value assessments and prompt payments aren't just expected by policyholders - they are required by every State insurance code. How this is going to happen is rarely open for public debate. Until now. Citizens Property Insurance Corporation is no longer an insurance company under Florida law. It acts like one, is subject to most of the insurance code, but it is the creation of the government and is the government....whatever that means.

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The U.S. District Court in Gulfport has ordered that an electronic document repository be set up for pre-trial records in more than 200 lawsuits against State Farm Fire & Casualty Co.  According to Chip Merlin of the Merlin Law Group, "if we can put our professional jealousies aside, we should be able to help our clients by sharing information." Read more from the Anita Lee of the Sun Herald...  Click here for the full-text of the Judge's CMO

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