Citizens blames hefty county rate hike on questionable lawsuit claims

Aug. 17--Yet a records request by The Palm Beach Post shows Palm Beach County's share of such lawsuits is disproportionately small: 5.1 percent, smaller than the county's 7.1 percent share of the insured risk at state-run Citizens Property Insurance Corp.

Financial losses from water claims-related lawsuits totaled just $4.8 million in Palm Beach County in 2016, dwarfed by Miami-Dade County's $70.7 million in losses.

If homeowners want regulators to take a close look at Citizens' proposed rate hike, now is the time to speak up.

Palm Beach County was also largely spared severe damage from 2016 hurricanes, but that does not let it out of big rate increases, according to Citizens.

Citizens wants not only to raise rates but also to change the way it handles water-damage claims. That means claims not necessarily related to storms but issues like water damage to floors and walls from a plumbing leak. It would cap benefits for such claims at $10,000 unless consumers use contractors Citizens chooses in a managed-repair plan.

That requires a consumer ankle-deep in water to know repairs will conveniently cost less than $10,000 before making a choice, contractors have argued.

"This is a huge problem and is more of the continued effort to have Citizens and the other carriers control the whole restoration process and not allow the free market and the policyholder to make choices," David J DeBlander, president of Pro Clean Restoration and Cleaning in Pensacola, told The Palm Beach Post in June. "There is a reason they cannot push their efforts through the legislature these last six to seven years. The people and the legislators can see the carriers are trying to control everything for their best interests and profit margins."

Florida Insurance Commissioner David Altmaier announced approval of the $10,000 limit this week, though state officials won't act on the rate request until after public comments close Aug. 31.

Citizens officials say water claims are grossly inflated by some contractors and attorneys and they must act.

"It's ironic that our rates for wind coverage are coming down, but Citizens policyholders in South Florida still must brace themselves for continued rate increases," board chairman Chris Gardner said in June. "We don't want to raise premiums, but Citizens is obligated by statute to set actuarially sound rates."

The average premium for an HO3 policy, covering a single-family home, would rise to $2,877 from $2,631 in Palm Beach County under the company's proposal. Floridians already pay the nation's highest property insurance premiums by a wide margin.

Premiums for similar policies would rise 2.2 percent in Martin, 8.9 percent in St. Lucie and more than 10 percent in Broward and Miami-Dade counties, the maximum allowed in a single year for Citizens under a state rate cap.

Company documents state: "The peril of water continues to be the primary driver of Citizens' increased rate need. In particular, litigated water claims in South East Florida (Miami-Dade, Broward, and Palm Beach counties) are driving the water indication."

Still, records requested by the Post show Palm Beach County accounts for only a twentieth of the lawsuits against Citizens statewide associated with "assignment of benefits," or AOB. That's when a consumer signs over control of insurance benefits from a claim to a contractor.

Yet Palm Beach County has almost 10 percent of the company's overall customers. Citizens had 448,802 customers statewide as of March 31, with 41,975 in Palm Beach County. So Palm Beach County has a lower than average share of AOB lawsuits compared to its total customer base.

Citizens officials insist the rate request for Palm Beach County is still justified. They note 31.3 percent of the county's claims in 2016 involved assignment of benefits, up from 8.5 percent in 2014. This did not mean these claims involved lawsuits, however. It can take about a year after a claim is reported to enter litigation, if a lawsuit is going to happen, a company spokesman said.

Arguments about what might happen based on "trends" in water claims, as opposed to actual losses, have not always held up well under scrutiny.

Regulators questioned a proposed 8.1 percent blanket increase for Palm Beach, Broward and Miami-Dade counties by the state's largest insurer, Fort Lauderdale-based Universal Property & Casualty Insurance Co. Universal consultant Kenneth L. Leonard Jr. said "increasing trends in the Tri-County region" create "additional uncertainty" not "captured through techniques traditionally followed to develop individual territory indications."

State officials questioned why a special three-county rate increase based on such vague justification was not "unfairly discriminatory." Universal withdrew the request.

Citizens officials, running the state's second largest insurer, said their proposal does not unfairly lump in Palm Beach County with its neighbors to the south.

"The recommended rate changes for Palm Beach is not a result of being 'grouped' with Broward and Miami-Dade," a company statement said. "The recommended rate changes for Palm Beach are due to the fact that Palm Beach is experiencing similar loss trends as Broward and Miami-Dade."

But there's little question where most of the losses are actually occurring. In 2016 losses associated with AOB lawsuits, Miami-Dade County accounted for $70.7 million and Broward $26.4 million while Palm Beach's total was $4.8 million, Citizens records requested by the Post show.

Miami Dade County has 31.6 percent of the company's total exposure (the potential cost to cover all properties) but 64.1 percent of the AOB lawsuits, according to data provided by Citizens. Broward has 14.6 percent of the exposure and 26.5 percent of the AOB suits.

In contrast, Palm Beach Co. has a lower share of Citizens' AOB suits (5.1 percent) than it does of the company's total risk exposure (7.2 percent).

Citizens officials acknowledged Miami-Dade and Broward counties "are in a class by themselves" and that Palm Beach County shows a "much better result."

But they maintain Palm Beach County is still "worse" than the rest of the state outside the tri-county region, which collectively accounts for 4.3 percent of AOB lawsuits compared to Palm Beach County's 5.1 percent.

Are rate hikes in Palm Beach County justified for reasons other than water claims? Citizens has shed more than 1 million consumers in recent years, and many of its remaining customers, including those in Palm Beach County, are not paying what the company considers full actuarial rates because the 10 percent state rate cap has limited the annual increases it can impose.

If the plan is for premiums to increase for reasons besides water claims, that's another argument -- very different from the clear and direct message in the company's public statements about this rate request in Palm Beach County.

Want regulators at the Florida Office of Insurance Regulation to give this request close scrutiny? Now is the time to speak out.

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