Ken Schurr, a Miami lawyer who also spends much of his practice representing Citizens customers, said his clients frequently resort to lawsuits because the company will only pay for part of the damage.
“They say: ‘We think only the kitchen was damaged so we’re willing to go to appraisal for the kitchen’ but they don’t want to talk about the living room, the roof, or the bathroom,” he said. “If I can’t agree to appraise the entire loss, we don’t go through the appraisal. We go through litigation.”
The result, several lawyers told the Herald/Times, is an explosion in litigation and an increase in the number of homeowners who are forced to swallow their losses.
Sean Shaw, who served as the state’s consumer advocate for insurance issues under former Chief Financial Officer Alex Sink, now works for the Merlin Law Group in Tampa, one of the companies that has collected some of the highest amounts in attorneys’ fees from Citizens in the last three years.
Since 2011, Citizens has paid his firm $502,539 in attorney fees for representing policyholders. But, he said, “even we would rather have appraisal.”
“It’s more efficient and better for consumers,’’ he said. “There are tons of cases that we and other firms can’t take because the amount at issue is too low. Without appraisal, those cases don’t get brought, despite the fact that they should.”
In 2009, Citizens argued that it needed to shift away from appraisals because the system was flawed, devoid of standards, and could be abused by third-party stakeholders.
But several lawyers told the Herald/Times they believe the existing system is abused by law firms and other vendors working for Citizens.
“Many law firms are consistently giving them poor legal advice,’’ said Rep. Carlos Trujillo, a Miami Republican whose law firm specializes in insurance law.
For example, he is currently representing a client whose property was extensively damaged when a burglar broke into the apartment while she was in the hospital. The floor of the home was flooded when the burglar tried to rip out the refrigerator. Citizens’ adjusters refused to pay the $5,000 claim, accusing the policyholder of neglecting the property. The case has gone before a hearing officer, is now in mediation and is scheduled for trial next week.
Trujillo said he has racked up $20,000 in attorneys’ fees so far and believes that Citizens has been billed at least $35,000 from their attorneys. If Citizens loses, it will have to pay fees by Trujillo and defense lawyers.
“They are pennywise and dollar foolish,’’ Trujillo said.
Schurr, a Miami attorney, said that because Citizens controls nearly one-fourth of the property insurance market in the state, a cottage industry of closely-knit companies of appraisers and adjusters has emerged to handle the work as contractors.
“They all know each other and they horse trade all their cases, and, if you are the homeowner that doesn’t know anybody, you get screwed,’’ he said.
To avoid that, he advises clients to get the case before a judge who can protect the property owners’ interests, Schurr said. “Litigation is a more expensive way to resolve the case, but it’s fairer.”
Several lawyers told the Herald/Times that they believe that Citizens uniformly attempts to low-ball claims because, as a quasi-public corporation, it is not subject to so-called “bad faith” laws that apply to private insurance companies.
Under that law, if a policyholder can prove that an insurance company intentionally refused to negotiate the claim fairly, he can recover damages.
Without that law, “it gives Citizens a green light to be irresponsible,’’ Trujillo said. “They delay, deny and defend because, at the end of the day, you can only collect what they want to pay.”