Resumption of Citizens Insurance alternative dispute hearings ordered

Ron Hurtibise, South Florida Sun-SentinelSouth Florida Sun Sentinel

State-owned Citizens Property Insurance Corp. may continue to process more than 400 claims through an alternative dispute system that critics say produces rulings favorable to the insurer.

A circuit judge from Leon County, Jonathan Sjostrom, signed an order on Friday saying that state law authorizes the company to send pending lawsuits to the Department of Administrative Hearings rather than the court system.

The ruling requires DOAH to move forward on more than 400 pending arbitration cases that have been stalled since Aug. 1.

The ruling by Sjostrom overturns a statewide injunction issued by Melissa Mary Polo, a Hillsborough County circuit judge overseeing Citizens policyholder Martin Alvarez’s challenge of Citizens’ right to divert a claim to the DOAH panel.

Alvarez and other plaintiffs have argued that Citizens’ diversion of the cases — permitted under a 2023 law and required by a policy provision that cannot be declined — violates policyholders’ constitutionally guaranteed access to the courts.

Citizens appealed the injunction and declared that it could not remain in effect while the appeal was being considered. Polo rejected that argument and reinstated the injunction, prompting Citizens and DOAH itself to seek emergency orders to resume the DOAH hearings.

A legal analysis in Sjostrom’s ruling says the arbitration provisions “are explicitly authorized by statute,” that arbitration is favored by state law, and all participants are protected by the Florida Arbitration Code. It also points out that the plaintiff in the case was not coerced into accepting a Citizens policy and therefore accepted its arbitration requirement.

Sjostrom issued his ruling in another case filed by Alvarez’s attorney, Lynn Brauer, representing Elmber Lombana. He rejected Brauer’s argument that the Alvarez injunction prevented Lombana’s case from moving forward as “unavailing.”

Brauer told the South Florida Sun Sentinel on Monday that the court’s ruling did not consider “the real life application of the process,” nor did it consider the constitutionality of the arbitration agreement. She and her client are considering appealing the order, she said.

Although Citizens’ appeal of the injunction is still pending, Brauer said she received a notice dated Friday that Citizens dropped its order transferring Alvarez’s case to the DOAH panel about nine minutes after Sjostrom’s order was entered.

“I believe they withdrew the Alvarez arbitration request because they believe that it makes the litigation and the appeal moot,” she said.

But she said the appeal is still pending “and still has consequences.” She added, “There is case law out there that says that litigation can proceed even if the defendant does something to resolve the issue if it can be repeated.”

Seeking to reduce the time and expense of litigating claims, Citizens began enforcing the DOAH policy clause last year and by this year had moved more than 1,300 claims to the panel.

Plaintiffs attorneys began objecting to Citizens’ use of the DOAH system last spring, saying their clients’ rights were being violated. While the policy provision allows either Citizens or a policyholder to request arbitration, only Citizens pursued the option, they pointed out.

Citizens settled most claims out of court for $250 or $500 because plaintiffs who refused the offers risked having to pay Citizens’ legal fees if they lost their cases or withdrew prior to hearings, the attorneys said.

Citizens prevailed in 47 of 51 cases that advanced to final hearings by July 10, according to an analysis by the South Florida Sun Sentinel.

In September, Citizens CEO Tim Cerio said that the accusations of unfairness were actually an effort to overturn reforms that have returned the insurance industry to profitability.

A Citizens spokesman said it pursued only cases it was confident in winning, while plaintiffs attorneys said that DOAH judges tended to side with the company because it funded its participation.

Citizens’ Board of Governors approved paying DOAH up to $19.3 million to administer the program through 2027, though Citizens officials said in September that the actual cost will be lower.

The Citizens spokesman countered that the company willingly increased its settlement offers when additional facts arose during the discovery phase that supported policyholders’ claims.

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 [email protected].