Are the Board of Directors at Citizens Property Insurance Corporation above Florida Law? Should the Attorney General investigate what is going on with Citizens? Where is Florida’s Insurance Consumer Advocate, and why isn’t she speaking up on issues regarding Citizens’ reduction of coverage and rate hikes? What happened to our Insurance Commissioner? Why hasn’t his office said anything in public about the reduction of coverage when Florida law seems to prevent this?
Some are suggesting that the recent directive to reduce coverage benefits regarding water loss coverage violates Florida law. Citizens’ board is being asked to reduce benefits to $15,000 dollars, which is not what ISO policies limit coverage to. This should raise the interest of Florida’s Attorney General. It should certainly raise concerns from the Florida Insurance Commissioner and Florida Insurance Consumer Advocate.
These are questions and issues I was thinking about following a number of news articles about Citizens and following requests that I do something about the the reduction of water damage coverage provided by Citizens. Here is the relevant Florida law. Anybody can read it to better understand the legal landscape:
627.351 Insurance Risk Apportionment Plans.
(6) CITIZENS PROPERTY INSURANCE CORPORATION.
(a) The public purpose of this subsection is to ensure that there is an orderly market for property insurance for residents and businesses of this state.
1. The Legislature finds that private insurers are unwilling or unable to provide affordable property insurance coverage in this state to the extent sought and needed. The absence of affordable property insurance threatens the public health, safety, and welfare and likewise threatens the economic health of the state. The state therefore has a compelling public interest and a public purpose to assist in assuring that property in the state is insured and that it is insured at affordable rates so as to facilitate the remediation, reconstruction, and replacement of damaged or destroyed property in order to reduce or avoid the negative effects otherwise resulting to the public health, safety, and welfare, to the economy of the state, and to the revenues of the state and local governments which are needed to provide for the public welfare. It is necessary, therefore, to provide affordable property insurance to applicants who are in good faith entitled to procure insurance through the voluntary market but are unable to do so… To that end, the corporation shall strive to increase the availability of affordable property insurance in this state, while achieving efficiencies and economies, and while providing service to policyholders, applicants, and agents which is no less than the quality generally provided in the voluntary market, for the achievement of the foregoing public purposes.
4. It is the intent of the Legislature that policyholders, applicants, and agents of the corporation receive service and treatment of the highest possible level but never less than that generally provided in the voluntary market. It is also intended that the corporation be held to service standards no less than those applied to insurers in the voluntary market by the office with respect to responsiveness, timeliness, customer courtesy, and overall dealings with policyholders, applicants, or agents of the corporation.
6(c) The corporation’s plan of operation:
1. Must provide for adoption of residential property and casualty insurance policy forms and commercial residential and nonresidential property insurance forms, which must be approved by the office before use. The corporation shall adopt the following policy forms:
a. Standard personal lines policy forms that are comprehensive multiperil policies providing full coverage of a residential property equivalent to the coverage provided in the private insurance market under an HO-3, HO-4, or HO-6 policy.
b. Basic personal lines policy forms that are policies similar to an HO-8 policy or a dwelling fire policy that provide coverage meeting the requirements of the secondary mortgage market, but which is more limited than the coverage under a standard policy.
c. Commercial lines residential and nonresidential policy forms that are generally similar to the basic perils of full coverage obtainable for commercial residential structures and commercial nonresidential structures in the admitted voluntary market.
12. May establish, subject to approval by the office, different eligibility requirements and operational procedures for any line or type of coverage for any specified county or area if the board determines that such changes are justified due to the voluntary market being sufficiently stable and competitive in such area or for such line or type of coverage and that consumers who, in good faith, are unable to obtain insurance through the voluntary market through ordinary methods continue to have access to coverage from the corporation. If coverage is sought in connection with a real property transfer, the requirements and procedures may not provide an effective date of coverage later than the date of the closing of the transfer as established by the transferor, the transferee, and, if applicable, the lender.
17. May provide such limits of coverage as the board determines, consistent with the requirements of this subsection. [emphasis added]
The issue is water losses. The ISO form policies do not limit the amount of coverage paid for water losses as to anything less than the policy limit. Water losses are a major risk of loss. Chartis recently ran an article in a magazine that the Board of Directors of Citizens would read, Worth, where it stated:
Homeowners are five times more likely to have an insurance claim related to water damage than to fire damage, and 92 percent of water damage is due to appliance and/or plumbing failure. As an insurer of fine homes, collectibles and other assets, Chartis is on the frontlines of these incidents.
Is there a stealthy hope that many may not mention these laws? I bet the Board of Directors, the Florida Insurance Consumer Advocate, and the Insurance Commissioner have insurance that’s covers all water damage without a dollar limitation. They are not ignorant of the benefits they get. So, why do these leaders support or not object to dollar limitations for water damage coverage provided by Citizens if they are looking out for consumers, Floridians, and know they have to follow Florida law? I do not know.
Yet, here are the articles and excerpts I read in the news regarding this issue:
1. Legislators May Decide on Rate Hike for Citizens
"Legislative leadership and the governor’s office are very clear what they expect from us as a board," Lacasa said. (Lacasa is Citizens Chairman of the Board)
Citizens’ board is aggressively working to limit claims….Before the rate workshop, a Citizens board subcommittee took another step towards reducing coverage by recommending a $15,000 cap on water damage claims.
About 35 percent of Citizens’ water damage claims exceed $15,000.
Rep. Frank Artiles, R-Miami, noted legal costs have increased as the company has become more aggressive about fighting claims.
And the workshop at the $229-a-night JW Marriott luxury hotel came on the same day an article appeared in the Tampa Bay Times detailing the lavish spending of Citizens’ former president, Tom Grady.
Grady reportedly spent tens of thousands of dollars on luxury hotels, office furniture and other perks as Citizens’ interim president and director of the state Office of Financial Regulation.
Rep. Carlos Lopez-Cantera, R-Miami, noted that Citizens’ board was debating rate hikes "in a nice hotel" with air conditioning and good food while many struggling homeowners are choosing between paying their electric bills, food or medicine.
Citizens’ spokeswoman Christine Ashburn said the meeting was held at the Marriott because a health exposition created a space shortage in Miami.
Lacasa defended Grady’s spending as reasonable for the executive of a large corporation.
2. Public Workshop in Miami Turns Into Public Outcry Against Citizens Insurance
The board of Citizens Property Insurance Corp. received a tongue-lashing from lawmakers and homeowners during a Monday workshop in Miami after unveiling a plan to raise rates by an average of 7.5 percent next year.
Aside from raising rates, Citizens is proposing ways to chip away at coverage, thus reducing its risks. For instance, the insurer wants to place a $15,000 limit on losses caused by various types of water damage. The company said water-related losses such as plumbing leaks represent the top cause of non-catastrophic and non-sinkhole losses it faces.
The board will also decide next week whether to move forward with a controversial plan to stop applying the Legislature’s 10 percent cap to new customers. Rates for new customers could increase 15 percent, 20 percent or 25 percent.
3. Citizens Insurance Slammed for Rate Hikes, Coverage Changes
Lawmakers, policyholders and others criticized Citizens Property Insurance for raising premiums and lowering coverage limits, among other things, at a meeting in Miami Monday.
Several lawmakers at the hearing criticized the proposal. Florida House Majority Leader Carlos Lopez-Cantera, R-Miami, said it’s "outside the scope and power granted to it by the Legislature." State law says Citizens should increase rates that do "not exceed 10 percent for any single policy issued by the corporation" excluding sinkhole coverage and increases related to coverage changes or surcharges.
The speakers included James Curry, a Fort Lauderdale property owner and developer. He said home insurance costs are rising so much that they’re almost the same as annual property taxes: "It’s crazy…You’re driving ratepayers out of Florida" and hurting the state’s economy.
Oscar Mormeneo, a Miami policy holder, insurance agent, realtor and public adjuster, said he sometimes makes 15 or 20 calls to try to get insurance for himself or clients before ending up at Citizens. If Citizens is reducing coverage and limiting claims, he said, "then why is the premium going up?"
After the meeting, Sean Shaw, a former Florida insurance consumer advocate whose law firm now represents homeowners, said he’s hopeful Gilway "can reverse the culture at Citizens away from rate hikes at all costs…Without affordable insurance options in our state, especially for our most vulnerable policyholders, we will never see a full housing recovery."
So, where is our insurance commissioner on the issue of Citizens Board of Directors reducing water loss coverage to $15,000, while a higher limit is required by law? How come the current Florida’s Insurance Consumer Advocate is not getting headlines for objecting to this or even a small quote raising the issue of this illegal action by Citizens? I know our Attorney General Pam Bondie. I know she respects the law. Maybe her office will rescue Florida consumers once this comes to her attention.
It is obvious to most that the current Board of Citizens does not understand the letter of the law. Maybe it does not care. I am a good Republican and, like most Floridians, believe that we should follow our laws. People who do not should be held accountable. Those in leadership should start an investigation as to why Citizens’ Board is reducing coverage to an amount lower than that mandated by Florida law. The media should ask the same of every leader in Florida.
Why have laws if there is no accountability? Our leaders should follow laws or face consequences, do you agree?