Citizens: We weren’t ready for major impact from Hurricane Matthew

June 17--As Hurricane Matthew threatened South Florida last October, Citizens Property Insurance Corp. sought to reassure policyholders that all was well.

An Oct. 5 news release declared: "Citizens is ready for Hurricane Matthew, Are You?"

Months later, Citizens -- with 225,000 policyholders in Broward, Palm Beach and Miami-Dade counties -- revealed it was not ready to respond to a major storm in South Florida.

Companies Citizens had hired to provide independent claims adjusters for post-storm damage assessments supplied far fewer adjusters than Citizens requested.

Now, nearly three weeks into the current hurricane season, Citizens is unveiling a new strategy it says will make the insurer ready to respond to the next big storm.

Contracts with the companies responsible for the adjuster shortfall have been terminated, and Citizens on Monday plans to seek approval from its Board of Governors for its new plan:

Adjusters working on the company's day-to-day claims will be reassigned to catastrophe work as needed, and newly called-up catastrophe field adjusters will be assigned to the field immediately, skipping a requirement that they first get trained in Citizens' internal claims management system

The new strategy, which would take effect Aug. 1, will help the company overcome the reduction in recent years of the number of state-certified independent adjusters, Jay Adams, Citizens chief claims officer, told the company's Claims Committee on Thursday.

According to the state Department of Financial Services' database, 11,948 independent adjusters are certified in Florida to work for insurance companies, down from 29,022 in 2011.

All property insurance companies rely on the ability to summon independent adjusters after catastrophes or when hurricanes loom, says Peter J. Crosa, president of the National Association of Independent Insurance Adjusters and owner of St. Petersburg-based Peter J. Crosa & Co.

That's because in normal times, companies don't need to directly employ large numbers of adjusters. But when a major hurricane comes, everyone competes for the same pool of certified adjusters, Crosa says.

In the four weeks after Hurricane Wilma struck South Florida in October 2005, Citizens dispatched nearly 2,000 adjusters to respond to more than 123,000 claims. Still, hundreds of homeowners complained to the state about delays.

Last October, when Hurricane Matthew threatened to make landfall near West Palm Beach, Citizens estimated the storm would generate 75,000 claims. Citizens asked four claims adjuster management firms to deploy 624 adjusters, Adams told the Board of Governors last year.

The firms committed just 279 adjusters, forcing Citizens -- which employs only 64 year-round, full-time adjusters -- to revise its preparations and hope for the best.

Fortunately for South Florida and for Citizens, Matthew veered north and hit areas with fewer Citizens customers. Just 3,500 Citizens claims came in statewide.

Adams told Citizens governors that the company dodged a bullet. If 75,000 claims had been filed, "we would have certainly failed as a claims operation," he said.

Citizens terminated its catastrophe response contracts with the four adjuster firms and forced them to pay $226,920 in fines and refunds. In addition to finding the firms in breach of contract, Citizens barred them from bidding on future catastrophe and non-catastrophe claims adjusting contracts.

The terminated firms are CIS Claims Services of North Richland Hills, Texas; National Catastrophe Adjusters Inc. of Fishers, Ind. [acquired in 2015 by Worley Claims Services]; BrightClaim LLC of Atlanta; and Bradley Stinson & Associates of Fort Lauderdale.

The Sun Sentinel emailed executives of all four firms requesting comment about the terminations, but none responded.

In emails to Citizens after the hurricane, executives of the firms offered varying explanations:

One said it misunderstood Citizens' request. Another said adjusters were unwilling to give up steady work with other companies.

Two companies cited issues with Citizens' requirement that adjusters be certified to work in its claims management software system. One company couldn't find enough Citizens-certified adjusters, while another said adjusters were unwilling to take certification training because they perceived Citizens as difficult to work with compared to other companies.

That's been fixed under the new plan, Adams said.

This year, independent adjustment firms bidding for Citizens' new adjuster contracts have agreed to commit 1,500 adjusters, including up to 496 exclusively for emergency deployment after a catastrophe. When storms hit, up to 800 contracted to adjust everyday non-storm related claims would be pressed into catastrophe service, as would up to 200 committed to lawsuit-related adjusting.

About 320 adjusters normally work for Citizens on a day-to-day basis, in the field and in Citizens offices, and they would be among the first shifted to storm duties, according to the new plan.

Adjusters contracted for catastrophe-only work would be brought in only if needed in a major storm.

"There is no hard and fast trigger" as to when and how the deployment would take place," Citizens' spokesman Michael Peltier said. "That would be a judgment call ... As [everyday claims] adjusters reach maximum output, we would bring on resources as needed."

Unlike the old contract, Citizens won't require catastrophe adjusters to become certified in its claims management system. Instead, they will be dispatched directly to damaged properties and file their work using an industry-standard software system, XactAnalysis, that they likely already know.

Adjusters who work for Citizens day to day and are certified in the company's system would process reports uploaded from the field and work with policyholders to settle claims, Adams said.

The strategy would enable catastrophe field adjusters to start work right away, Adams said.

"This aligns better to what a [catastrophe] adjuster really likes to do," Adams said Thursday. "[They] do not like being in the claims management system and handling the full adjustment of the claim. They really like to go out and appraise the losses."

The Sun Sentinel takes a look at some of South Florida's worst hurricanes, as well as ways to weather the storm.

The Sun Sentinel takes a look at some of South Florida's worst hurricanes, as well as ways to weather the storm.

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rhurtibise@sun-sentinel.com, 954-356-4071, twitter: twitter.com/ron_hurtibise

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