When Insurance Companies Go Under - The Fallacy of FIGA
And you thought your claim with Citizens was a challenge? Hope your insurer never goes insolvent leaving you in the hands of FIGA—the Florida Insurance “Guaranty” Association. FIGA is a legislatively created corporation which handles claims after insurance companies become insolvent. The reality of how FIGA works in the field stands in stark contrast to its stated goal of providing “fast, fair and professional claim service.” In my experience, the only things “guaranteed” with this system are roadblocks and delay. No one is immune. No matter how respectable the insured. No matter how severe the loss.
I have a client who is a judge. He, his wife and two little girls literally lost everything in Hurricane Ivan in September, 2004. Their windstorm insurance carrier, Vanguard Fire & Casualty Insurance Company, denied coverage entirely, contending that not a single shingle was blown from the roof, not a window broken by wind in this Category 5 storm, dubbed “Ivan the Terrible.” The coverage denial was apparently based on “word of mouth” that a 15-foot wave had allegedly swept the home away prior to any wind damage occurring. The insurance company failed to hire an engineer or meteorologist to confirm this rumor. While my clients were lucky enough to have their flood insurer tender policy limits, like many, they were woefully underinsured and needed help from their wind carrier.
When FIGA took over the claim in 2007, it was the perfect opportunity to make things right. Instead, FIGA has compounded the misery. Initially, FIGA continued the denial of coverage. Then, last year, FIGA revealed for the first time a January 2007 engineering report acknowledging the home had in fact sustained wind damage before the storm surge came. After that, FIGA changed its tune, admitted coverage, and tendered a small sum based on its expert’s opinion. In keeping with the quality of “service” on this claim, FIGA’s expert has never been to the site and based his opinions on photos of nearby homes. On the other hand, the insureds received an opinion from an engineer who walked the site, inspected an adjacent building, and concluded that the home was severely damaged before the storm surge hit.
Nevertheless, I figured—this is our opportunity to work toward a fair resolution of this claim. The insurance policy provides for an alternative dispute resolution process to quickly and economically dispense with disagreements over the amount of loss—appraisal. I thought, surely an entity funded by assessments on the insurance consumers of this State will want to wrap this up as soon as possible. How wrong I was. Indeed, FIGA’s lawyer has advised me that we can expect this case to be going on for a very long time. FIGA contested appraisal and lost. Then sought to stay appraisal while it appealed—and lost. Now FIGA is seeking a second bite at the apple asking the appellate court to instruct the trial judge to stay the appraisal. Even if the appraisal is allowed to proceed, FIGA tells me the award will not be paid and I can expect more litigation.
What is going on here? I spoke with a lawyer in the Panhandle last week about possibly serving on our appraisal panel. He had a conflict because he has two claims pending with FIGA and can’t even get them to call him back. In another case of mine, FIGA has agreed to go to appraisal, but only if the insured signs a release of all claims upon payment of the appraisal award!
With more and more small companies taking over Citizens policies, there is a real danger these insureds could end up with FIGA in the event of another busy hurricane season. Anyone have ideas on how to fix this? After all, you and I are footing the bill . . .
(Kristi Demers-Crowell is an attorney in the Tampa office of Merlin Law Group and is licensed to practice in Florida and Texas)
Then answer is...............don't be like Simon Cowell and ask a certain large stable insurance company (aka State Farm) to "pack your bag, you're going home."
When I first became aware that State Farm was in the process of leaving the State, I wrote Governor Crist and pleaded with him to reconsider and work out a deal with State Farm to keep them in Florida, as we needed their stability/financial resources to handle the above-average risks of Florida. In a grandstanding way, Mr. Crist exclaimed to the citizens of Florida--State Farm, we don't need you beacuse we have all these new companies who will be happy to take your policyholders at a lower cost.....
Come on! Any half-way intelligent person knows what will happen to these new insurance companies once a big storm hits Florida again....BANKRUPTCY to CITIZENS or FIGA.
In summary, let the free market work! If State Farm's policies do not provide value to its policyholders, they will find another carrier. If given a choice between State Farm or FIGA, I know who I'd choose.
I'm not normally a conspiracy theory nut, but FIGA's poor, slow and obstructionist claims handling practices suggests a deliberate corporate policy, rather than just incompetence. And because they are not legally bound by the code of good faith practices, they operate with impunity.
And I agree wholeheartedly with the post by B. Smith: Let the Free Market work. In other words, let State Farm set the rates they feel they need to conduct business in Florida. Unless Florida's DFS can find evidence of collusion or price fixing by carriers, let policyholders vote with their dollars.
Having adjusted numerous "smaller take out carrier" files all over the Gulf areas since 2004, I can attest to the inadequacy of file handling inside the FIGA game. State Farm vacancies and rewrite of coverage through the inbound take out companies can only expand exposure to our citizens, not shrink it. This confounds human wisdom, so it must be predicated on selfish designs, which I postulate are created behind the scenes with reinsurance contracts and state funding mechanics, which the victimized public will probably never get to know about. Therefore, we need to bolster stalwart and steady lawyers like the Merlin clan to keep hammering away. I long for the day when a Class Action suit is produced and successfully completed in this bell weather state.
Hi Kristi. Great post.
..."Any ideas on how to fix this?" Boy, that's a loaded question(s) that, obviously, deserves a lot of attention and answers.
Like the comments above, because they don't have to follow the rules of "regular insurance companies," it's like they get to "snub" their noses at their claims and claimants.
I agree it's a terrible situation when one gets stuck w/FIGA.
SHIRLEY HEFLIN
I hope this "bad boy" is not riding into the Great State of Texas!
We don't need any other complications and delays.
Interesting reading...Thank you!
Keeping reputable, flush insurance companies in Florida is the way to reduce the exposure of our citizens to FIGA. But enticements to remain must not be at the expense of our bad faith and attorney fee statutes. Efforts are afoot in the legislature right now to chip away at these valuable tools for motivating carriers to actually be "fast, fair and professional." Meantime, FIGA's immunity from these consumer protections won't stop me from continuing to fight cases like the judge's. We're winning 2 and 0 so far! Stay tuned . . .
We prevailed in the appeal, and FIGA will have to go to appraisal.
Next up, umpire dispute.
FIGA's appraiser previously agreed to either a former Florida Supreme Court justice or a seasoned attorney who has done much work for corporate clients--surely neutral candidates. FIGA then pulled the old "bait and switch", changed its appraiser and presented a new proposed umpire list of independent adjusters and insurance company experts.
We are seeking court assistance on selection of an umpire and I will keep all posted on this latest roadblock.
How wrong is this???
Today I succeeded in convincing the Court to appoint a truly neutral umpire--the former Florida Supreme Court Justice. The Court set a deadline of December 15, 2009, for completion of the appraisal. FIGA tells us it has no intention of paying the appraisal award and will appeal again when it is issued. No surprises there.