Citizens Property Insurance, which has delayed a decision on rate hikes for 2019, intends to hold meetings to seek public input about what some insurers claim is a root cause of growing costs of policies.
Citizens President and CEO Barry Gilway announced Tuesday the state-backed insurer is working on the “logistics” for public roundtable discussions as a way to find solutions to the practice of “assignment of benefits.” The announcement came after a request by state Chief Financial Officer Jimmy Patronis.
“The bottom line is AOB abuse and runaway litigation threaten to raise premiums for many Citizens policyholders who otherwise would see their rates remain steady or go down,” Gilway said in a statement.
Assignment of benefits, which involves policyholders signing over insurance claims to contractors, has been highly controversial in recent years, particularly involving water-damage claims.
Citizens and other insurers have contended that fraud and abuse in assignment of benefits has led to costly lawsuits and driven up rates. But contractors and plaintiffs’ attorneys argue the process helps ensure that damage claims are paid properly.
On Monday, Patronis urged Citizens — which has about 442,000 policies — to take public input regarding “skyrocketing non-weather water losses and increased litigation.”
“When used correctly with reputable contractors, assigning your benefits over isn’t a bad practice,” Patronis said in a statement. “However, in the hands of bad actors who want to make a quick buck that could mean skyrocketing insurance rates for everyone.”
Patronis said the number of assignment-of-benefits lawsuits has grown from about 400 in 2006 to more than 28,000 in 2016.
“Shifting the burden to the policyholder is not the solution,” Patronis said. “This deters people from purchasing adequate coverage, and sometimes opting to go without. Insurance should protect Florida families and not be a cost burden. We have to stop the fraud and those who game the system.”
Florida Insurance Commissioner David Altmaier, who has backed making assignment-of-benefits changes, said AOB-associated claims are 85 percent more expensive than claims without assignment of benefits.
Amid heavy lobbying from both sides, the Legislature has not passed changes to assignment of benefits. Meanwhile, court battles continue — with insurers scoring a victory last week in an appeals court.
In that case, a panel of the 4th District Court of Appeal rejected a breach-of-contract lawsuit filed by a contractor against an insurance company in a dispute involving a water-damage claim.
The 4th District Court of Appeal decision, however, conflicted with a ruling last year by the 5th District Court of Appeal in a similar case — which could lead to the issue ultimately going to the Florida Supreme Court.
In June, Citizens Property Insurance delayed until December a decision on 2019 rate increases, after initial proposals of an average 7.9 percent increase for residential policyholders and an average 8.9 percent increase for commercial policyholders, including condominium associations. Officials said they wanted to assess the impact of a new “managed repair” program designed to curb the cost of water claims.
Under the program, Citizens policyholders who suffer water damage from a non-weather event like a burst water pipe or faulty water heater have the option of making regular claims under their policies but with a $10,000 cap for repairs, including a $3,000 limit for emergency services, like water removal.
If they opt to use the managed-repair program, they will have their damage repaired by Citizens-approved contractors. There would be no limit on the repair costs and the work would be covered by a three-year warranty.