Citizens Insurance targeted in lawsuits that seek to void forced arbitration rulings

Two new lawsuits have been filed that seek to void all settlements and rulings involving customers of Citizens Property Insurance Corp. who were forced into an arbitration system funded by the state-owned company.

The suits, filed in Miami-Dade and Seminole counties, base their arguments on a Hillsborough County judge’s Aug. 2 injunction that suspended Citizens’ ability to send claim disputes to the Division of Administrative Hearings (DOAH) while a policyholder pursued his claim that the system violated his constitutional right to a fair trial.

The judge in that case, Melissa Mary Polo, found that the policyholder demonstrated that their argument, that the system violates policyholders’ constitutional rights, stands a “substantial likelihood of success” of prevailing. Citizens is appealing the injunction, warning the company would be “irreparably harmed” if the suspension remains in effect.

DOAH, a state agency, contracted with Citizens last year to preside over disputes through 2027. Citizens is paying $19.3 million for the service.

The lawsuits challenge Citizens’ use of a state law enacted in 2023 that allows it to require new and renewing customers to accept the DOAH policy provision. That provision allows Citizens to divert claims disputes from the court system, where judges and juries decide outcomes, to a group of appointed administrative law judges who the lawsuits claim rule overwhelmingly in Citizens’ favor.

One of the class action complaints, filed on Aug. 27 in Seminole County on behalf of lead plaintiff Jamie Alverio, a Sanford resident, seeks to void all settlements agreed to by Citizens customers prior to DOAH hearings.

DOAH’s website shows that more than 1,200 of 1,670 cases diverted to the DOAH court since 2024 have been dismissed without a hearing.

Alverio agreed to settle her DOAH claim after Citizens declined, following Hurricane Milton last October, to cover damage to her home that she blamed on the storm.

The lawsuit claims that policyholders were “coerced” into agreeing to the settlements after Citizens “forced them into the proceedings” and argues that they should be voided because the DOAH process is unconstitutional.

“Contracts or releases obtained through unconstitutional processes are unenforceable,” the suit states.

Citizens spokesman Michael Peltier declined to comment on the lawsuits beyond stating, “State law specifically authorizes the DOAH process, and we believe that the law is constitutional.”

The lawsuit argues that the Legislature amended Citizens’ enabling statute by permitting the company to apply the provision without providing reductions in premiums that private-market insurers must offer.

Citizens told the South Florida Sun Sentinel in July that it settles about 30% of cases with payments of $30,000 or more after the company discovers evidence that supports reversing its initial claim denial or payment offer.

But plaintiff’s attorneys argue that the system is rigged in Citizens’ favor. Unlike Citizens, which has come to rely on the arbitration tool to fast-track dispute resolutions, policyholders rarely invoke arbitration, they say.

“Most of the plaintiff’s attorneys in this industry feel that this [requirement] was just shoved down these homeowners’ throats without any ability to negotiate with Citizens as an insurer of last resort,” Edgar Kelly, founding partner of Kelly Law Offices LLC, one of two law firms behind the class action suits, said in an interview.

Citizens sends disputes to DOAH after a plaintiff files a notice of intent to initiate litigation, plaintiff’s attorneys say. Citizens then proposes settling the disputes with offers of judgment of $250 or $500, according to the attorneys.

If the policyholder refuses the offer, the case advances to a hearing. Policyholders who lose at the hearing could face orders to pay Citizens’ legal fees, often totaling thousands of dollars, DOAH data shows.

Policyholders who refuse offers of judgment but withdraw their complaints before or at the hearing also face orders to pay Citizens’ legal fees, the data shows.

Peltier told the Sun Sentinel in July that the company must file separate actions in circuit courts to enforce DOAH judges’ legal fee orders, which it has not yet done “but reserves the right to do so in the future.” Still, Peltier said the company expects losing plaintiffs to pay fees as ordered by DOAH courts.

The second of the two complaints was filed Monday in Miami-Dade circuit court on behalf of policyholders who lost their cases in DOAH hearings. A Hialeah home owned by the lead plaintiffs, Idelmis and Jesus Martinez, sustained damage during Hurricane Milton but Citizens refused to pay, the suit states, adding that the couple lost in an arbitration hearing.

Of 62 rulings by DOAH judges since 2024, Citizens has prevailed in 59 of them, a review of cases on the DOAH website by the Sun Sentinel shows.

The suit claims that the DOAH system prevents plaintiffs from requesting evidence, raising motions or seeking judicial review.

The two lawsuits, filed by Moreno Perdomo PLLC and Kelly Law Offices PLLC, both of Miami, seek a declaration that the mandatory arbitration law is unconstitutional. They also seek a declaratory judgment voiding all settlements and/or rulings against DOAH plaintiffs, and restoration of their rights to pursue claims in Florida courts.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071 or by email at rhurtibise@sunsentinel.com.

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