EDITORIAL: Citizens Property Insurance has lost all credibility [The Palm Beach Post, Fla.]

Nov. 27--The board members of Citizens Property Insurance Corp. can accomplish a lot at today's meeting by acknowledging that the state-run insurer has become a corruption-ridden scam artist that threatens Florida's economic recovery.

Last month, Citizens fired the four employees who made up the company's Office of Corporate Integrity. The cover story was that the employees lacked the expertise to handle internal complaints and essentially police the company from within. In a letter to The Palm Beach Post, Citizens President Barry Gilway said: "Our corporate integrity functions have not been eliminated. They have been realigned under other business units to ensure that we are following best practices for investigating allegations of employee fraud or misconduct."

As The Tampa Bay Times reported, however, the four employees had written a 73-page report detailing scandal and misconduct at Citizens all the way up to the executive level. Among many other things, Citizens reportedly paid $750,000 in severance to get rid of problem employees, even though Citizens has no policy allowing severance payments. Citizens has about 1,000 employees. The report, the Times said, has been "gutted."

This revelation followed a disclosure in August of lavish spending by Citizens employees and board members. On a trip to Bermuda, the chief financial officer upgraded to a hotel room that cost $633 per night. A former president flew first-class to London. Another hired a car and driver to take him to newspaper editorial board meetings. All that happened as Citizens was seeking to jack up rates for policyholders.

That gives a hint of the corruption aspect of Citizens. Reporting by The Post'sCharles Elmore has revealed the scam side.

Since Gov. Rick Scott took office, Citizens has been ordering new inspections of homes, ostensibly to make sure that policyholders deserve discounts for property protection: storm shutters, reinforced garage doors, better roofs, etc. In fact, the goal of the program is to deny discounts as often as possible, even if the discount is justified.

In September, Mr. Elmore reported that of 225,000 reinspection reports the paper surveyed, 90,000 discounts had been denied, even after the inspector recommended approval. In some cases, premiums for those who lost discounts have doubled. Citizens is insisting on standards beyond those of private insurers. Citizens' response was to seek a better "communications framework."

And while Citizens frets about not having money to pay claims after a catastrophic storm, the Citizens board has approved a plan to take $350 million from the company's surplus as an incentive for private companies to acquire Citizens policies. The companies would have to cap rates at 10 percent annually. But the companies might not have to pay back the money, and the rate limit would last just three years.

Last week, Gov. Scott asked the state's chief inspector general to investigate the firings in the corporate integrity office. That's nice, but the governor is part of the problem. His appointees back the plan to soak Citizens policyholders or make them so unhappy that they accept shaky offers from private companies.

Since most Citizens' hurricane policies are in South Florida, the company's approach could kill the beginnings of the real estate comeback. The governor appoints just two of the eight board members. The others serve as the pleasure of the chief financial officer, Senate president and House speaker. All three have expressed concern about Citizens' recent actions. If the board doesn't change Citizens, these elected officials should change the board.

Randy Schultz

for The Post Editorial Board

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