HomeMy WebLinkAboutHandouts_Regular_Communications from Council_01/10/2013_Okun Y t�1�1 ��� � - ����r it �c��r
Florida homeowners improperly denied
insurance discounts, judge rules
By Toluse Olorunnina, Times/Herald Tallahassee Bureau
Published Monday, November 26, 2012
TALLAHASSEE — The forms used by property insurers across the state to calculate insurance discounts for homeowners
are seriously flawed and must be completely thrown out, an administrative judge has found in a potentially groundbreaking
ruling.
The decision could have far-reaching implications for homeowners who receive wind-mitigation discounts for hurricane-
resistant measures in their homes — and specifically for those who lost discounts during a mass home reinspection
program by Citizens Property Insurance Corp.
Because of a flawed study commissioned 10 years ago by the Office of Insurance Regulation, Florida homeowners may
have been denied several million dollars in discounts for their garage doors.
"There are tens if not hundreds of thousands of people who are impacted by this," said Jack Stumpff, a Plantafion small-
business owner who successfully took on OIR in court and got the mitigation forms thrown out.
While the impact of the ruling could be widespread, no homeowner will see any changes any time soon because the legal
battle is still playing out in court. OIR recerrtly appealed the Oct. 19 ruling in circuit court, and is downplaying its poterrtial
impact.
"I don't think that people need to be concemed that they have lost a substantial amount of discounts for this,° said Belinda
Miller, the agency's general counsel.
A spokesperson for Citizens said the insurer of 1.5 million would await the results of OIR's appeal.
For the past several years, Florida homeowners have received billions of dollars in discounts on their property insurance
bills for strengthening their homes against hurricanes.
Window shutters, hurricane-resistant roofs and impact-resistant glass doors are some of the improvements that have
helped homeowners save hundreds — or thousands — of dollars on their insurance premiums. Insurance companies also
benefit because homes with stronger features hold up better in hurricanes.
Property insurers across the state use the same forms to help calculate the proper discounts for homeowners. Last month's
ruling by Administrative Law Judge Robert Meale found that the forms — written by OIR — are invalid because they failed
to provide separate discounts for homes with wind-resistant garage doors. Those discounts are required by law.
Because discounts are dependerrt on each other, one flaw in the form can impact the size of every other discount. As a
resuft, the judge nullified the entire mitigation form for all homes built before 2001, when the more comprehensive Florida
Building Code was enacted.
"Due to the interdependency of loss relativities and discounts, these omissions and understatement also raise the real
possibility of distortion among the other loss relativities and discounts,° wrote Meale, hinting that homeowners across the
state may have received incomplete discounts in recent years. n �
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� Stumpff, who sells a garage-door strengthening product called "Secure Door,' said the lack of discounts for retrofitted
garage doors has hurt his business. He filed a suit to get the discount forms changed.
°We did what we thought we had to do for our business and for all the homeowners out there who are not getting their
discounts," said Stumpff, whose product is sold at Lowe's hardware stores for about $150. Installing the Secure Door
product on an older garage door offers many of the same benefits as buying a new garage door, which can cost more than
$1,000.
Wind mitigation discounts have been in the headlines this year as Citizens has embarked on a controversial campaign of
reinspecting more than 250,000 homes across the state. Three out of four homeowners inspected by Citizens have lost
discounts that they had previously been receiving, leading to an average premium hike of $800.
Citizens and other insurers recently began reinspecting homes under the premise that homeowners were receiving
discounts they didn't deserve. Meale's ruting indicates that the reverse may be true.
The inspectors who fanned across the state this year to scrutinize homes were using deficient forms that omitted check
boxes for discounts homeowners deserved, according to the ruling.
Allan Schwar�, a New Port Richey homeowner, said he speM $2,000 on a new, state-of-the-art garage door, but didn't get
an insurance discount for it because his windows weren`t also fortified. "This thing looks like Fort Knox," said Schwartz, who
is covered by Citizens and recently had a reinspection. °They say if your garage door goes, your house goes.°
Meale called OIR's omission of separate discourrts for garage doors "arbitrary" and °illogical."
Studies conducted by state and federal agencies after Hurricanes Andrew and Charley found that many homes were
destroyed when winds overpowered weak garage doors and rushed through homes. The pressure caused by the rush of
wind caused roofs to cave in and walls to crumble.
As a result, several studies have found that fortifying old garage doors is one of the best ways to preverrt wind damage
during a hurricane.
However, homeowners who strengthened their garage doors were not rewarded with insurance discounts.
OIR said that even as it appeals the ruling, it will likely change the forms to account for garage-door discounts.
It's too early to say how much a homeowner might save by doing a retrofit, though Meale's ruling indicated the savings
could be substantial.
According to OIR, the ruling does not require restitution for those homeowners who have been given incomplete discounts
for the past few years.
Any lawsuits filed in attempt to recoup those lost discounts would be "frivolous," said Miller.
"A homeowner should mitigate their home, whether or not they're getting a discount from their insurance company, in order
to protect their family and to prevent loss," she said.
Toluse Olorunnipa can be reached at tolorunnipa�MiamiHerald.com or on Twitter �To/use0.
Gl& A
Status of insurance discounts
What does this development rr�en for my insurance premium?
http://www.tampabay.com/news/business/banking/florida.-homeowners-improperly-denied... 1/10/2013
, Nothing yet. The legal fight over insurance discounts in still playing out in court as the Office of Insurance Regulation
appeals the judge's ruling to toss out the discount forms. In the future, you may have a new opportunity to reduce your
insurance premium by strengthening your garage door.
What if I've already strengthened my garage door?
You may be eligible for a new insurance discount, but you will have to wait for OIR to calculate new discourrts for garage-
door mitigation.
Will I receive backdated discour�ts for past y�rs when the flawed forms were in use?
The Office of Insurance Regulation has indicated that there will be no retroactive restitution, but you may contact your
insurance agent or an attomey for more information.
What is the best way to strengthen my garage door?
There are several options, including replacing the door. Retrofitting products, like the Secure Door, offer a cheaper
altemative.
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SEPTEMBER il, 2012 j aarbaae-w�o-dumced-ex-wl January 10
, State drematicatly revises Medicaid exoansion
Citizens Insurance's controversial reinspection I �imate amid criticism utioasicne-tuzz-narida-
p rogram sparks another lawsuit � ooli[its/conrent/state-d2maticallv-revises-medicaiA-enansion-
, estimateamid-criticisml January 09
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—� Facebaok 8 m�m��m..coMC� i_ +1 0 � Email � Share � 8 � Insurance comuanies doctors oreoare for another
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Another homeowner has filed a tawsuit over Citizens Property Insurance Corp.'s controversial campaign i OOIItiWcontent/Insurance-comoanies-doctors-oreoare-another-
i hattle-overdrua-tlisoansinal ]anuary 09
to raise insurance costs beyond the SO-percent op on rate hikes. g��� Nelwn and Vern Buchanan's su000rt for NASCAR
Stephanie Ritchie, of Tequesta, took her case to federal court this week, arguing that a Citizens' home ��x break shows rouah road ahead for tax refnrm
� Ublaas/the
reinspection that resulted in an insurance premfum hike was a viotation of Florida's Deceptive and Unfair
; bucha�ns
Trade Pradices Act.
refo anuary 09
Her class action lawsuit targets Mueller Services, one of three companles responsible for carrying out ! No home state mojo for Wasserman Schultz? Alan
i Clendenin aainina around for Fla Dem chair Unioasiwe-
Citizens' COntfOVEf5i71 �21n5D2CtlOn �fOO�dm. (htto•//www.miamiherald.com/2012/08/11/2947408/citizens-insurance-a
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-storm-oveahtmlJFStorvlink=misearchl CiY1ZE05 IS f10Y 110RIEd III thE SUIY. i schullz-alan-clendenin-aainino-araund-Fla-dem-chalrl Jd0U0ry 09
I HosniWls that serve Florida's neediest oatients
"TO rnurrter the impact on revenue of Wind Mitigation Credits, and effectively raise Its premium rates at I �oncerned about or000sed chanae to Medicaid
a time when the same were capped, Citizens and Mueller began re-inspecting homes that had not i�yments (/bloas/the
materially changed since the homeowner wbmitted Yhei� Inspection Form," reads Rltchfe's lawsuit, i
which was filed in a West Palm Beach federal courthouse Tuesday. I meaicaid-oavments) ]anuary 09
'.; Richard Blanco, Miami raised son of Cuban exiles.
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"She lost all her discounts," said Ritchfe's attorney, Brian Smlth, of Smtth & Vanture, LLP. 'They gave
her seven days notice to pay." I named-2013-inauaural-ooep Jalluery 09
� ABOUT THE BLOG
Ritchie's story mirrors one told by thousands of frustrated homeowners across the state, as Citizens and ! For florida political news today, the Buzz is your
Gov. Rick Scott have pushed for a massive overhaul of the insurance industry. � can't-miss-it source. Tampa Bay Times writers offer
� the latest in Florida politics, the Florida Legislature
; and the Rick Scott administratfon. Keep in mind:
In May of 2011, Ritchie paid for an inspection of her home, and received several discounts on her ' This Is a public forum sponsored and maintafned by
insurance remium after the certified ins ector a � the Tampa Bay Times. When you post comments
p p ( pproved by Citizens) found that she had taken steps to i here, what you say becomes public and could appear
fortify her home against a storm. ! in the news a er. You are not en a i
p p g g'ng in private
The ins ection was su ; communication with candidates or 7imes staffers.
p pposed to be good for up to five years, but in ]anuary 2012, Ritchfe leamed she ;
would lose all af her wind mitigation discounFS if she dld not undergo a second reinspection. j E-mail Times political editor Adam Smith:
! asmithCaltamoabav.com rmaiico:asmimcrosocimes.coml
After that reinspection. Ritchie's insu2nce premium soared, as the Mueller inspector decided that the
dismunts approved by the first inspector were not valid. ppyE�Ep�E�rc
Ritchie's lawsuit claims that Mueller withheld payment to inspectors wha failed to find that a homeowner � ���
should lose insurance discounts.
� ADVERTISEMENT
http://www.tampabay.com/blogs/the-buzz-florida-politics/contendcitizens-insurances-cont... 1/10/2013
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. One former inspector tolil the Herald/Times Tallahassee Bureau that the Inspectfon rnmpany he worked Mo57 PoPUU►R CnrEGOrtIes
for (not Mueller) failed to pay him and several colleagues for their work, regularly rejecting their I Ada m C. Smith
(/blaos/Me
findings. A � eX
- I oolitics/cateaorv/buu-Was/adam-c-smithl
"Everything they do is to hide their shadiness," said Mauricio Mesa, a former inspector of Citizens ' Lea ry (/bloos/the-buu-Florida-oolltla/careoorv/Guzz-
homes. "Smoke and mirrors." ; caasiaiex-�eam AI2X Sink Ubloas/the-buzz-Florida-
Citizens has rnnducted more than 250,000 reinspectio�s, and In three out of 4our cases homeowners u°iic�icaceaorviouzz-caas�a�-s;nki Barack
have lost discounts. That has resulted in more than $150 million in premium increases for homeowners, OI�afYla !/bloos/the
an average of $810 for those who lose credits. I taasiba�cic-ocamai Bill McCollum nnioasi�,e-bua-nonaa-
� oolltics/cateaorv/bun-taas/hill-maplluml gl�� Nelson
Homeowners and consumer advocates have derided the inspection program, but Citizens has denied ! �ibioasirne-n�::-no��aa-poue�i�eeaoNinuzz-raas�nni-�eiso�i
repeatedly that its inspection program was intended M raise rates ! Clldl"I12 CI'ISt (/bloos/the-buzz-floHEa-
Last week, Citizens board member John Rollins said that many people were losing discounts because of 0°°�'���9oNin�::-r�asi�na��e-cdso-oi
rule changes instituted by the state, many of which make it harder to qualiry for lower premiums. Dell'lOCratS umoasiene-bua-rronda-
��, oolltlWnteaorv/bua-taos/Aemocratsl Elections
He called Citizens simply "the bearer of bad news."
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Still, after immense publlc outcry about the pocketbook impact program, CttFiens announced last montfi
that it would make the reinspections more consumer friendly. The state-run insurer of 1.4 million j taas/erMarsements) FIOI�Ida HOUSE (/bloos/the-
Bf1f1011f1CBd DIBI75 t0 (h[[o�//www miamiherald com/2012/OB/17/2956165/followina-ouhlic-ou[crv-citizens htmll R10k21Y '� 6uzz-FlOrida-oolitics/ca[eaorv/buzz-[aas/florida-hausel
easier for homeowners to dispute the findings of their Inspection. � Florida Legislature Ublous/[he
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Ritchie is hoping homeowners who dispute the inspections will Join her class-action lawsuit, one of many , Senate (/bloos/the
spurred by Citizens' rate hikes.
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Another class action lawsuit filed earlier this year targets CRizens directly for the reinspection program, ooun�ca�eaorvibua-�aasirunara�s��ai Georqe Lemieux
calling it a"subtertuge" to raise rates beyond the 10 percent legal cap. ��, nmoasrtne-n�zz-nor�da-oout�ioteaorvin�z:-�a�aeome-
I Ismieuxi Gov. Riek Smrt Uhloos/the
Two New Port Richey homeowners filed a lawsuit in February against Citizens, claiming that the insurer ' oainwwceoorvinua-raasiaov-r�ck-sconi Governor's
was using a home valuation software to overvalue their homes and hike thefr premiums. ; RaCe (/hloas/the
� taas/oovemors-rare) ]eb Bush (/h�qps/the-buzz-florida-
Citizens has denied the allegations. i oollti6/mteaorv/buzz-taas/ieb-bushl ]ohn McCain
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UPDATE: Homeowners interested in the class action wse may contact Ritchie dLt0�f12y BC BOO-443- i taus/kendrick-meekl Ma rco Rubio Ubloas/the-bun-
4529. He is also investigatlng re-inspection reports from the other two companies - Inspection Depot, i Florida MIL"C
Inc. and Quick Built. i� Romney (/61oas/the-buzz-Florida-ooliHa/cateaorv/buzz-
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Citizens raised insurance based on false report, woman's lawsuit claims - Sun Sentinel Page 1 of 3
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Citizens raised insurance based on false
report, lawsuit claims '
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Florida Health Plans September 11, 2012 � By Paul Owers aod Ariel Barkhurst, Sun Sentinel ��� �' —
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H28nh If1SUf3f1C8 R3t2S Ifl FlOfldB. resort revoked her insurance discounts — and raised her premium — based on a false report.
FL.GoHealthlnsurance.com In the ongoing controversy over how Citizens Properly Insurance Corp. handles its home reinspection
program, Stephanie Ritchie accuses Mueller Services of improperly flagging problems with her roof and
garage door, among other issues.
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� More information "I was very upset," said Ritchie 43, of Tequesta, who saw a premium increase of $1,771. "It was a big
burden. What makes me so upset is that I had everything to get the discounts.'
Ritchie's suit, which seeks class-action status, claims that Mueller did not pay inspectors until they
Related Articles determined that a homeowner did not qualify for the discounts "despite the inspector's independent
judgement that the homeowner was entitiled' to them.
House takes step to shrink Citizens insurer
February 7, 2012 Citizens was not listed as a defendant, though a Pembroke Pines man filed a similar suit against the state
Fla. irisurance changes would raise most rates
insurer earlier this year.
Apri13, 2009 Officials from Mueller and Citizens could not be reached for comment Tuesday. Citizens issued a brief
How safe are new insurance companies? statement, saying it is not a defendant in the Ritchie lawsuit, which was filed in U.S. District Court in West
January 13, 2009 Palm Beach.
Caizens, Florida's insurer of last resort, can drop you Both suits say Citizens is trying to make up for lost revenue because of state-mandated discounts and
March 21, 2012 capped insurance rates.
Sharp rise in insurance to hn some cond� Citizens has a surplus of more than $6 billion but says it may not have enough money to pay claims after
Feb�uary 14, 20i2 a major hurricane. The insurer has raised rates and reduced coverage, hoping to push some of its 1.4
million policyholders into the private market.
But many cusYomers say they have no other options for insurance.
"CRizens is only focused on numbers and raising rates, not real people,' Sean Shaw, founder of
Policyholders of Florida, said in a statement. "One year they tell policyholders to harden their homes to
reduce rates, now they want to change the rules in the middle of the game."
Citizens' reinspection program, started in 2010, was designed to reward homeowners for bolstering their
homes against stortn damage by upgrading roofs, doors and windows. But it has faced increasing
http://articles.sun-sentinel.com/2012-09-11/business/fl-citizens-20120911_1_sandy-teich-i... 1/10/2013
Citizens raised insurance based on false report, woman's lawsuit claims - Sun Sentinel Page 2 of 3
scrutiny because customers have last discounts as a result of a reinspection and saw their premiums rise
. � _ .
original inspection. She said Citizens raised her premium from $3,700 to $4,565.
Tech said the report misstated the way her roof is attached to her home and said that her front door was
not hurricane safe because painters had painted over a sticker saying it was. She had documents proving
it, but said the inspector didn't want to see them.
"What they were telling me, the reasons they were giving me for raising my rates, were not justified,"
Teich said. "I'm not an insurance agent, but I have a pretty hurricane-safe house, and it does not make
sense for me to have to pay $4,500 a month."
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She said Citizens refunded her more than $500 she had already paid toward the higher premiums. She
said Citizens offered her a new rate that, while still higher than the rate she had before the reinspection,
was lower than $4,565. But Teich switched to Universal Property and Casualty instead.
Weston Homeowner Linda Buczyner also said she found problems with her reinspection: The garage
photographed in the report was someone else's, and the photos of her attic didn't seem to actually show
anything important about her roof attachment, Buczyner said.
She said she challenged the report, and Citizens sent a third inspector and refunded her $780.
"It scares me, because I was smart enough and had enough time to look at my report," Buczyner said. "Not
everyone is. And if this woman who did my inspection got that stuff wrong on mine, how many other people
did she do that to?"
Because of the outcry, Citizens announced last month that it is revamping the program, giving homeowners
who lost discounts an opportunity to have another inspection, paid for by Citizens. The insurer said it also
will give homeowners more avenues for disputing the results.
But Brian Smith, Ritchie's attomey, said the changes don't go far enough.
"I have not heard that Citizens will refund all the money they've overcharged homeowners through the
removal of their credits," he said.
Officials from Mueller and Citizens could not be reached for comment Tuesday. Citizens issued a brief
statement, saying it is not a defendant in the Ritchie lawsuit.
In the suit, Ritchie says she received the discounts after a 2011 inspection that was supposed to be good
for five years.
But she lost the credits after a May reinspection by Mueller, the suit says. The report improperly noted,
among other things, that the roof failed to meet Florida building code requirements and that the garage
door was unrated for impact resistance, the suit alleges.
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Citizens raised insurance based on false '
report, lawsuit claims f�� � e ,
State Farm� Official Site
September 11, 2012 � By Paul Owers and Ariel Barkhurst, Sun Sentinel � �� �
Retail Insurance Coverage From State
Farm�. Apply Online Today! Ritchie did not make any material changes to the home or file a claim between the two inspections, the
www.statefarm.com/retailinsurance suit says.
More than 100,000 Florida homes reinspected by Citizens have lost windstorm discounts, resulting in
average premium increases of $600 a year, according to data released by the insurer in May.
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Most i�keiy ca�ses: Until You Compare Free Online Quotes from $30 / Month!
• This website requires you to Discount-Home-Insurance.org
What you can try:
� Go back to the previous page.
� More information At the time, Citizens said it offers $1 billion annually in credits for shutters and other windstorm
protections. But it started cutting back after learning of "significant' errors on the fortns submitted by
homeowners.
Related Articles The required documentation can be confusing, and the insurer isn't accusing homeowners of lying to get
the credits, a Citizens spokeswoman said in May.
House takes step to shrink Citizens insurer
February 7, 2012 In February, Pembroke Pines' Kenneth Babbitt filed suit against Citizens over the lost discounts.
Fla. insurance changes would raise most rates After having an inspection and getting a discount, Babbitt received a letter from Citizens, which required
April3, 2009 another inspection, the suit says.
How sate are new insurance companies?
January i3, 2009 The insurer removed discounts as a result of the inspection and added $253 to his $1,029 annual
premium, according to the suit, which also seeks class-action status.
Citizens, Florida's insurer ot last resort, can drop you
March 21, 2012 The suit was moved from Broward to Leon County, where Citizens is based. The insurer has filed a
motion to dismiss, which is expected to be heard in November, said Gregory Weiss, Babbitt's lawyer.
Sharp rise in insurence fo hR some condas
Febniary 14, 2012 PowersC�?tribune.com, 561-243-6529orTwitter �paulowers
The suit filed Tuesday alleges an inspection company prepared a report that made the following false
statements:
• The roof failed to meet Florida building code requirements.
• The roof-to-wall attachments were 'tce nails."
• The garage door was unrated for impact resistance.
• The storm shutters did not have an impact rating.
http://articles.sun-sentinel.com/2012-09-11/business/fl-citizens-20120911_1_sancly-teich-i... 1/10/2013
Citizens raised insurance based on false report, woman's lawsuit claims - Page 2- Sun Se... Page 2 of 2
• The reinspection findings were inconsistent with the inspection findings.
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Florida extended through 2013 survivors new shot at mobility,
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�����.�������� � -
Posted on Fri, Aug. 17, 2012
Following public outcry, Citizens announces plans to
revamp reinspections programs
By Toluse Olorunnipa
HeralcUTimes Tallahassee Bureau
�� =x .�.:<; Citizens Property Insurance Corp.
.._._
-- announced major changes to its home
reinspection program Friday, following an
outcry from consumers and recent media
�;:_ .� __ coverage about a staggering $137 million in
' premium increases tied to the unpopular
_ - - program.
Under its new plans, homeowners who lose
insurance discounts due to a reinspection
can receive a second inspection free of
charge and will have new tools to dispute
- the first inspectors' findings. There will also
- _ be a stronger effort to educate homeowners
about what they need to prepare for a
reinspection.
="In response to policyholder and agent
feedback, Citizens is implementing changes
to its inspection program to address
-- concerns about the implementation and
� WILFREDO LEE/AP quality of the program as well as provide
Citizens Insurance is still deciding whether to apply the better education on the importance of
changes retroactively. That decision could impact more protecting homes against storm damage
than 175,000 property owners, who have lost an average said Citizens board chairman Carlos
of $800 in credits after their inspections.
Lacasa at a press conference.
Citizens is still deciding whether or not to apply the changes retroactively. That decision
could impact more than 175,000 property owners, who have already seen their premiums
go up by an average of $810 after an inspection. Whether those homeowners will be able
to reverse the premium hikes is "a question that we need to take a look at," said Barry
Gilway, president of Citizens.
The announcement comes less than a week after the HeralcUTimes Tallahassee Bureau
published a series of stories documenting how hundreds of thousands of Floridians have
seen premiums soar as the state-run insurer intensifies its plans to raise rates through
reinspections and reduce coverage.
http://www.miamiherald.com/2012/08/ 17/v-prind2956165/following-public-outcry-citizen... 1/10/2013
Consumer advocates have complained about inspectors who do not check thoroughly for
evidence that support the homeowner, often ruling quickly that homes do not qualify for
discounts.
On Friday, Gilway acknowledged that several inspectors have failed to adequately check
homeowners' attics to see if they were not completely clear of obstruction. Property
owners have lost thousands of dollars in discounts because their attics were blocked by
boxes or insulation.
"The inspector is not required to wait while you move property that is restricting attic
access," a Citizens letter to policyholders reads.
Under the new changes, homeowners will have one year to clear their attic and receive a
follow-up inspection, before any premium increases.
Consumer advocates said the changes sounded positive, but more details were needed.
"Citizens has a long way to go to mitigate public opinion, but free second inspections and
enhanced dispute resolutions seem like a step in the right direction," said Sean Shaw,
founder of Policyholders of Florida. "Without more concrete details, policyholders need to
take a trust-but-verify approach."
Created a decade ago to be a safe haven — the so-called "insurer of last resort"—
Citizens has ballooned to become the state's largest insurer, with about 1.4 million
policies. Most of its risk is concentrated in South Florida and the Tampa Bay area, hazard-
prone regions where many homeowners cannot find coverage in the private market. Its
actions — including rate increases — affect the entire insurance market, impacting the
cost of housing for nearly every Floridian, including those with private insurers.
The initial reinspection program began in 2010, with Citizens sending thousands of
inspectors to review the homes of policyholders. About half of all homeowners receive
wind-mitigation discounts for hurricane-resistant features on their homes. The reinspection
program targeted those features, as inspectors have found that thousands of homeowners
did not deserve the discounts they were receiving. The result has been more than $137
million worth of premium increases for homeowners.
The program was ramped up recently, with more than 200,000 inspections completed in
the last year. Nearly 90,000 more are yet to be completed. In about three in four cases,
homeowners have lost their discounts, leading to average premium hikes of more than 30
percent.
Consumer advocates have accused Citizens of using the inspections program to raise
rates on homeowners. Citizens denied the charge, saying that it is simply trying to get
accurate information about the homes it insures.
Gov. Rick Scott has been pushing for the state-run insurer to reduce its size and risk,
leading to rate hikes and coverage reductions for hundreds of thousands.
The company also said Friday that it would be doing a full operational review to find areas
where it could improve, focusing on customer service, administrative expenses and better
communication.
http://www.miami.herald.com/2012/08/17/v-prind2956165/following-public-outcry-citizen... 1/10/2013
"We want to make absolutely sure that Citizens will be run in the most fiscally prudent and
efficient manner," said Gilway. "And it's going to require a top-to-bottom approach."
Toluse Olorunnipa can be reached at tolorunniqa@MiamiHerald.com and on Twitter
�Toluse0.
O 2012 Miami Herald Media Company. All Rights Resenred.
http://www.miamiherald.com
http://www.miamiherald.com/2012/08/17/v-prind2956165/following-public-outcry-citizen... 1/10/2013
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P-osted on Sun, Aug. 12, 2012 '
Floricla Legi�lature turn� blir�c! eye to �rop�rty
insurance r�f�rr� � .
By Toluse Olorunnipa � ��
Herafd�mes Tallahassee Bureau �
� �x r���tt��� ��� " Property insurance reform was nowhere to
�;��
� ,� �� � = 4
���• ` be found among Gov Rick Scott's
= "tegislative priorities" during this year's
- - lawmaking session in Tallahassee.
_ ,,�
r.3 y .. •
But even as Scott pushed publicly for .
lawmakers to pass bills on car insurance .
- reform, job creation incentives and " .
�
=R�;�_ ; education funding, he was working behind
� the scenes on another significant project: '�
ca�.,us� � nnu►aa� HeRa�4 sraFF A massive overh�ul of Citizens Property �
_ . _ _ _ _ : tnsurance Corp. '
The goal? Shrink Citizens drasticafly without involving the Legislature, which
historically has set policy guidelines for the state-run insurer. �
"We have to have real solutions, and I, along with everybody else up here, we �
expect the Citizens board fo find them," Scott told. then-Cifiizens president Scott �
Wallace during a meeting of the Florida Cabinet last November.
Wallace had told Scott and other members of the Cabinet that Citizens would need
"guidance" from the Legislature in order to make major headwinds. Scott did not
address the request, instead telling VVallace and the board to "solve the problem by
June of next year before the next hurricane season." '
Wallace resigned a month fater, and was replaced by Tom Grady, Scott's neighbor-�
_ and political ally. �
In the months since that tense meeting and Grady's appointment, Citizens' eight- ,,
member board has intensified an unprecedented campaign to remake the .
state-owned insurer in ways typically reserved for the Legistature. For homeowners,
1 of 4 1/8/1310:44 AM
••.••••••�••••y..•..•••••••.••.•....••••..•..�..•.. na��vsi��rr�r.��naum�a�cua�
. it has meant drastic rate hikes, reduced coverage and a rapidly changing insurance �
marketplace. The insurer r►ecen�y unveiled — and ultimately abandoned — a plan to
unilaterally stop applying the Legislature's 10-percent cap on rate increases to new
customers. �
Grady — who supported the ptan despite sigrficant pubfic outcry — was forced out
by the board in June.
- "To comply with their mar+ching orders from Tallahassee, the board is looking for any
way possible to raise rates that they can without going befo� the Legislature," said
Sen. Mike Fasano, R New Port Richey, implying that the govemor's offioe is
dire�ting Citizens from behind the scenes. "They've gone way beyond what they .
should be dealing with.� .
Scott did not respond to a request for comment. �
Aside from Fasano and a few other etected o�icials, most iawmakers have �
remained on the sidelines as the Cifizens board has taken on more responsibility
and pushed insurance casis higher. •-
The govemor's decision to reform Citizens without invotving the Legistature reflects
many of the politica! realities of goveming in Florida during an election year. .
Several lawmakers in Scott's own party — particularly in South Florida — have
openly disagreed with the govemor and other Republicans over property insurance,
a contentious podcemook issue for voters. �
Despite an overwhelming Republican majority in the Florida I�egislature, lawmakers
have had a hard time reaching a consensus on property insurance reform, which �
many see as a political minefield in an ele�#ion yeac '
In some parts o# the state, voting to raise Citizens' insurance rates can be
tantamount to political suicide, and severaf candidates for offic�e are already facing
negative campaign ads highlighting their insurance-relat�d votes. �
In the Tampa area, a political group has sent out mailers bashing Rep. JefF Brand�s,
R-St. Petersburg, for a vote he cast in favor of a controversiaf bill to allow ,
unregulated companies to �ke over Citizens policies.
Brandes, a Senate candidate, is facing a tough primary race against fellow
Republican, Jim Frishe, of St. Petersburg. The ad features a frustrated man reading�
an insurance bill, and slams Brandes for voting for a measure that would potentially
raise rates on unsuspecting homeowners.
2 of 4 1/��310:44 AM
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�, "VVho's he kidding?n reads the mailer. "Jeff Brandes claims he's for us. But he wouid
- put Bay-area homeowne�s at greater risk while Big insurance podcets mone profits.� �
Citizens' board -- with the btessing of Scatt — has been moving to sidestep that "
kind of political infighting by simply enacting sweeping poi�cy changes on ifis own. '
� "I hope you agree with me as an obsen►er that the legistative process is extremely ��'
unpredictable," John Rollins, a board member appointed by Soott, told th� rest of� ��:
. the board in November. "VUe should agr�ee on a padcage of things we can do absent -
of the Legislature but with the help of the hetp of the [Financial Senrices -��
Commission].� .
The Legislature created Citizens 10 years ago to be the insurer of last resort, and .
elected officials have been responsible for most of the major initia�dves at the
sfiate-run company. In 2007, when a struggling Citizens ne�eded major reform, �
lawmakers convened a special session to addr�ess property insuranc� issues.
Lawmakers voted to o�rhaul Citizens and temporarily ban all rate increases, and
later placed a 10-perc�nt cap on annual rate hikes. �
But because of several policy changes recently enacted by Ci�zens' board, that �
10-percent cap has not stapped homeowners fram seeing premium increases of 50
peroent ta 100 percent this year. � �
Earlier this year, the board unveiled a.plan to stop apptying �e 10-percent cap to .
new customers, allowing rates to increase more aggr�ssively for those who join �.
Citizens next year. ,
Some lawmakers who enacted the 10-percent c�p were outraged by Citi�ens' plan,
and bashed the insurer for not seeking legislative approval. �
Carlos Lopez-Carrtera, the Republican majority teader trom Miami, tongue-lashed �
the Citizens board for cxeating the perception that it can overrule fawmakers'
actions. -
"This board may not ag�ee with the policies that come out of the Legislature, but ��
they are the law, whether you agree with them or not,A Lopea Cantera said during a
contentious Juty meeting with the board. ��
At least two South Flo�ida lawmakers promised to file a bill next year to block
Citizens from removing the cap.
Lacasa, in an interview, denied allegations that the board had overstepped its
boundaries.
3 of 4 1/8/13 10:44 AM
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. "There's absolutely no way that we are attempti�g to bypass the Legislature," he _
said. "Because that would be contrary to the laws that govem us.� �
Some lawmakers have shown support for Citizens as it tries to raise rates and
shrink in size. In June, 25 stafie lawmakers wrote an open letter m support of �
��� Ci�zens' efForts to raise its rates and shrink its rofls.
,"We understand and share the desire for lower homeowner's insurance rates,p the
� group of 22 state Representatives and three state Senators wrate. "However, '� �
Floridians who are currently paying futl-price for their insurance in the private market
. don't deserve to pay a subsidy for those on Citizens.°
Most of the lawmakers who signed the letter are Republicans from inland parts of ,
Idorth and �Central Florida. , �
More and more, the potiticat divide o�r Citizens is taking plaoe not across political
parties, but beiween geographical regions. Poiiticians from intand communities _�' �
c�rnptain they are strbsidizing weaithy coastai dwellers, and thase in South Florida
sa� higM insuraflc�e �ra#es at C�zens afie siammfng ifietr corastituents, who have no'
o#�er op#ior�s.
"The problem we're having.is a civir war menfaGfy �finreen fhe North ar� fhe ��
South," said Rep. Frank Artiles, R-Miami. °The North doesn't want to subsidize the
South, but the South pays the taxes for everything else A ��
With the debate intensifying, a showdown in the state Legislature next year is lik�l�.
But before the Legisiature can act, dozens of changes �nacted u�ilafieraily by :. �
Citizens board this year wilt take hold, leaving customers with higher premiums and
reduced coverage. �
� 2012 Miami Herald Media Company. A!I Rights Reserved.
http:N�rowiw.m�am�herald.c:om
4 of 4 1/8l131�:44 AAA
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�
��e ��ta�ni �e�r�1� � ��' .
Posted _on Safi,_Aug. 11, 2012 _ _ _ _ _
Senior citizens go �evith�ut horneown�rs insurance
arnid soaring premiums
By Toluse Olorunnipa -
Heral�mes Tallahassee Bureau �
'"� ` ' With-fihe cost of insurance soaring, many
��.��: - a;.u�, .;.
senior citizens in Florida are choosing the
- precarious option of dropping insuranc� �
�=`�� altogether and bearing the risk of a
-:, hurricane hit on their own. 4.
�,. �
, . : r '�i �7 �'= , 's� , _�'' 'z � _ �' �:, ,�,, .�.
�' ` ���� ��� Seniors are more likely to own ifieir homes
' ._.- � ,,�-. � ,
�- ��°'� outright, meaning they have the option of-
��a� . -
;�-�. __ going without property insurance. As ��
7" F` l
- Citizens Property Insur-anr-,e Gorp. raises_'
-��
�� . s��� �� � its rates and its post-cfaim deductibles, `
c�a�es r�,��voR.,R ��rAnnr r�ew�►�u sraFF more older Floridians are doing the math �.
Meredith (hAim) Donly has canceled her properiy insurance -�
with Citizens after deadin� it makes more 5nancia! sense an d op ting to do jus t t ha t . '
to go without. She's the landlord at an eight unif building in -
"°"�^"°°�'. Consider AI Jacobs, a Miami Beach retiree
_ r.
.
- who was forc�d to buy insurance with ��
Citizens after aN other insurers declined to cover his waterfront home. ��
Jacobs, 70, pays about $5,000 for windstorm insurance and $2,OQ0 for flood °
' insurance each year. On top of that, his deductible for windstorm coverage is ��
$12,000, meaning if a storm hit he'd have to spend nearly $20,000 in a single year -
before his insurance kicked in to pay for damage. .-
Jacobs, who saw his insurance premiums double this year, said it may be time to -
get rid of insurance and go "naked." _-
"The irony of it is the land is worth more than the house," he said. �If the whole tfiing�:
� blew away.. . � _ � -
His voice trailed off in thought as he weighed the macabre scenario of repairing a_ �
hurricane-damaged home without any insurance. --
1 of 3 1/8Y1310:40 AM
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- But, for Jacobs, the cunent reatity — rising premiums and soaring deductibies —
has become more poignant than the hypothetical nightrnare. ,
"For next year I'm very seriously considering not having the insucance,� he said, �
before pausing again to consider the risk. "Do I take the gambte? t don't knaw.� �
lt's an inner battle weighing on the minds and podcetbooks of several seniors as
_ they compare the rising cost of insurance — along with medication, gas prir�es and
taxes — against their f�xed incomes.
Meredith Donly, a real es�ate agent who owns renta! properiy in a working-class
neighborhood in Hollywood, decided ta drop Citizens coverage this year after �
receiving a bill that inc�eased her premium and doubled her deductible to $16,800.
nThese are not protected in any way," she said, reaching out to touch one of the .�
windows at the one-story, eight unit renf�al buitding she owns. "1 was so incensed
witt� that n�v deductibte that it was an easy decision.A �
She fears what might happen if a hurricane were to strike, but said the incxeased
deductibte and premium woukf force t�r to pay more than $20,000 before her
Citizens coverage kicked in for any repairs. "Let's say a tree over th�re falts an the
roof and every window blows out,° she said. "! still wou�dn't hit $16,000."
On paper, cases like Donly's are celebrated as sucxess at Citizens, which�is
furiousiy trying to �eduoe its size and shed policies. When customers leave state-run
insuranve — even if they end up in an uninsured no-man's {and -- Citizens counts .
itself one step closer to its ideal size. The state-run insurBr of 1.4 miliion policies
would like to drop as many as 700,0�0 custome�s in the coming years.
Senior atizens covered by the stat�run insurer also have to dea! with limited fixed
incomes, rising healthcare costs and stiffer insurance requirements targeting older
homes.
Car{os Lacasa, board chairman of Citizens, said the company cannot legally favor
senior citizens as it impleme�ts policy.
"V1�'re really constrained from taking into consideration those demographic issues,°
he said in an interview. "As humane as it might be to look at those �ings, we're
simply unable to do that.fl
Property owners like Dvnly said there is no realistic altemative fior coverage in the
private sector. �My rents are lower now than they were soc years ago,n she said. NI
can't raise rent because of the economy. I'm bringing in less, but then I get much
bigger bills, so we're making less."
2 of 3 1/8/131a:40 AM
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- Kirsten Llamas, of Pinecrest, said she received a$2,000 premium hike from �
Citizens just as her household budget was beginning to tighten. The recession '
force.cl her aduit chiidren to move back in with her and her husband, causing her
expenses to increase significantfy, and her 42-year-old home needs several repairs.
She said she would drop her insurance, but can't because she needs to take out a
new mortgage on the home she owns oufiighf. _.
"i am on Medicare so we are squeaking by, but [we) feel we [wrill] have to take a .
mortgage out on our hau� t� �ay forour imp�ending� expenses,"'she said. "Shouid -
we die, our kids couid not afford to take over our house and we can't afFord to seil it
and move into a house at new house rates and t�xes."
Sen. Mike Fasano, a New Part Richey Republican who has spoken out against �.
� insurance rate hikes, said seniors call his office eVery week seeking relief from rising
premiums at Citizens. � �
"Those on Social Security and our senior atizens, I don't think �ey've seen a cost
of living increase in four or five years," he said. "They're barely holding on, and we �.
have those in Tallahassee that think that by raising premiums on homeowners that's�
goi�g to solve the problem. IYs not." :
0 2012 Miami Herald Media Company. All Rights Reserved. ,-
http:/lwww.miamiherald.com
3 of 3 1/S/1310:40 AM
Flores files bill to c�.p ra.tes on Citizens ProperLy Insnrance
Sen. Anitere Flores, R Miami, has t"iled a bill to put a limit on the rate-hildng power of Citizens lnsurance's Baard
o�C�overnors.____ __ __
- — -- ---- ----- -- -- _ -- _ _ __ _ ._ _ _
Flores expressed outrage last year when the board said it would consider removing the traditional 10-�ercent cap on
e'n eases f r ne ic' (State law requires Citizens to limit rate hikes to no more than 10-percent each yeai',
but it's not clear if that also applies to aew policies).
Flores—who called the idea "immoral" and vowed to block attem�ts by tl� board to raise rates on new policies by
mare than 10-percent—filecl a bill this month that would clarify that the cap on rate increases applies to both
existing and new policies.
Flores' SB 96 is the first bill tiled to make changes to Citizens Property Insurance for the 2�13 session, which could
be a pivotal one for property in�
South Florida lawmakers are hearing from their canstituents after perennial rate increases have raade property .
insurance a top pocketbook issue. Insuranc;e industry power brokers aze presswing lawmakers to push for higher .
rates and allow the private market to compete with Citizens. At the direction of Gov. Rick Scott, Citizens' board of
govemors has taken up an aggressive mission of shrinking the size of the state-nm company--leading to rate hikes,
unpopular re-inspections and coverage cut�cks.
Flores' bill seeks to rein in the board by taking off the ta.ble the idea of higher rates for new customers (the board
shelved the idea last year, but has indicatsd that it still may push for higher rates for some new customers).
_ @Toduse0
Read more here: http:!/miamiherald.typepad.com/nakedpolitics/2013/01/flores-fiiles-bill-to-cap-rates-on- �
citizens-property-insurance.html�storylink=cpy
Homeowner snes over Citizens' controversial re-inspection program �
Anotber homeowner has filed a lawsuit over Citizens Property Insurance Corp.'s c�ntroversial campaign to raise
insurance costs beyond the 10-percent cap on rate hikes.
Stephanie Ritchie, of Tequesta, took her case to federal court this week, arguing that a Citizens' home re-inspection
that resulted in an insurance premium luke was a violation of Florida's Deceptive and Unfair Trade Practices Act.
Her class action laws�eit targets Mueller Services, one of three companies respoasible for cairying o�t Citizens'
controversia[ re-inspection pro am Citizens is not named in the suit.
"To counter the imgact on reaenue of Wind ARitigation Credits, and effectively ra'tse its premium rates at a time
when the same were capped, Citizens a.ad Mueller began re-inspecting homes that had not materially changed since
the homeowner submitted tlieir Inspection Form;' reads Ritchie's lawsuit, which was filed in a West Palm Beach
federal cowthouse Tuesday.
Ritchie's stary mirror� one totd by thotrsands of frustrated homeowne� across the state, as Citizens and Gov. Ricg�.
Scott have pushed for a massive overhaul of the inswance industry.
In May of 2011, Ritchie paid for an inspection of her home, and received several discounts on her insurance
premium after the certified inspector (approved by Citizens) found that she had taken steps to fortify her home
against a storm.
The inspection was supposed to be good for up to �ve years, but in January 2012, Ritehie leamed she would lose all
of her wind mitigation discount� if she did not undergo a second re-inspection.
After that re-inspection. Ritchie's insurance premium soared, as the Mueller inspector decided that the discounts
approved by the first inspector were not valid.
Ritchie's lawsuit claims that Muetler withheld payment to inspectors who failed to find that a homeowner should �
lose insurance discounts.
One former inspector told the HeraldJTitnes Tallaliassee Bureau that the inspection compa.ny he worked for (not
Mueller) failed to pay tum and sevetal collea.gues for their work, regulazly rejecting their findings.
"Everytiung they do is to hide their shadiness," said Mauricio Mesa, a former iuspector of Citizens homes. "Smoke
and mirrors.
Citizens has conducted more than 250,(�l0 re-inspections, and in three out of four cases homeowners have lost
discounts. That has resu[ted in more than $150 milIion in premium increases f� homeowners, an average of $810 -.
for those who lose credits.
Homeowners and consumer advocates have derided the inspection program, but Citizens has denied repeatedly that
its inspection program �vas intended to raise rates
Last we Citi zens board member John-Rollins �aid that tnany people were l�ing discounts because of ra(e
-- -- — - ------------ -- --- -- - -- .
changes instituted by the state,-many of-which-make-it harder-to qualify for-lower-premiums. --
He called Citizens simply "the bearer of bad news."
5ti11, after immense public outcry about the pocketbook impact program, Citizens announced last month that it
�uould make the re-inspections more consumer-friendly. The state-run insurer of 1.4 million announced �lans to �
make it easier for homeowners to ctispute the finding of their inspection.
Ritchie is hoping homeowners who dispute the inspections will join her class-action lawsuit, one of many spurred by
Citizens' rate l�ikes. -
Another class action tawsuit t'iled eariier this year targets Citizens direc[ly for the re-inspection program, calling it a��
"subterfuge" to raise rates beyond the 10 percent legal cap.
Two New Port Richey homeowners filed a lawsuit in February against Citizens, claiming that the insurer was using
a home valuation software to overvalue their homes and hike their premiums.
Citizens has denied the allegations.
�Toluse0
UPDATE: Homeowrrers inierested in tlae class action case may contact Ritchie's attomey at 800-443-4529. He is ''
also ittvestigatixg re-inspeciion reports from the otJaer rivo companies - Inspection Ilepoi, Inc. and Quick Built.
Read more here: http://miamiherald.typepad.com/nakedpolitics/2012/09/Nomeowner-sues-over�itizens-�
corrtroversial-r�inspection-pmgram.html#storylink�py
Citazens to revarnp reminspection pro�ram
Diana Latzko, a Citizens policyholder in Davie, outside her home. Latzko... (Ginny Dixon,
correspondent...) �
August 17, 2012�By Kathleen Haughney, Tallahassee Bureau
TALLAHASSEE — The state's lazgest property insurer announced Friday that i� plansC�i to completeTy revamp its
home re-inspection program after an outcry from constimers and intense media scrutiny over a$137 milii� rise in
premiums tied to the re-inspections. _
Under the plan announced by Citizens Property Insurance President Barry Critway and Chairman Car[os Iacasa,
]ion�eocvnersGi� who lost insurance discounts because of a re-inspection can have a second one, paid for by Citizens,
and also will have new avenues to dispute the resuits, inciuding a toll-free phone number.
"They'll ha.ve an opportunity to have a second look ixfore that credit is removed from their policy," Gilway said. '
Originatly crea.ted as an insurer of last resort for Floridians who tived in areas where insarers did not write policies
state-run Citizens covers 1.4 million properties, mosdy in the South Ftorida and Tampa Bay regions that ate most at
risk for hurricane damage. Gov. Rick Scol� has asked the board to shrink the program, but consumer advocates have
worried that request may resuIt in high premiums that make home owncrshipG impossible for some.
The re-inspection program, begun in 2010, was supposed to reward homeowners with discounts for "hardening"
their homesC� against storm damage by upgrading roofs, doors and windows. But it has faced criticism because
many customers lost previous discounts as a result of a re-inspection and saw their premiums rise substantially.
The average re-inspeetion had resulEed in a$598 increase on residential properties, aec�rding to a report by Citizens,
in July.
Lacasa, a former state la�vmaker, said one of the problems in the program bas been that standards for re�eiving what
are called "mitigation credits" have become tougher ia rece� years. Since the re-inspection evaluated a home using.
the current, more stringent standards, people lost credits they'd had for years, causing the price to go up.
He added that all insurance companies used those standards, not just Citizens.
The re-inspection would let p�ple make some changes to areas where they may have lost credits, or simply
challenge the original inspection report, the two executives said. The insurer t�as not decided whether the program . _
wiI1 appiy retroactively.
Gilway, who was named president oF the state-backed insurer in June, said he and tris staff had spoken to a numbet
of legislators, Chief Financial Officer Jeff Atwater's office and state insurance advocate Robin Westcott about the
potential changes. He said he plans to meet further with Westcott, who had been openly critical of the i�pection
P►��•
Sean Shaw, who was insurance consumer advocate under former Chief Financia( Ofticer Alex Sink, said that
_. ._approach was-a-good-sign-forconsumers.- _ --- - --
"Citizens 5as along way to go to nintigate public opinion, but free second inspe�tions and enhanced dispute
resolutions seem like a step in the right direction," said Shaw, now a lobbyist "Without more concrete details,
policyholders need to take a trust-but-verify approach. Our economic recovery depends on a healthy, stable housing
market — which is why we need Citizens to finally walk the walk."
kliartghneyC�+?hzbune.eom or 850-224-6214
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Citizens: Most premiums rise wi#h reinspections
By Toluse Olorunniaa, Times/Herald Tallahassee Bureau
Published Friday, August 10, 2012
TALLAHASSEE — Patricia Temple's annual insurance bill soared by more than $2,100 after an inspector knocked on her
door this year. The bill came from Citizens Property Insurance Corp., and the inspector was one of thousands fanning
across the state on Citizens' behalf, often with sudden and jarring results for homeowners.
The state-run insurer is using a massive home inspection program — along with dozens of coverage cutbacks and policy
changes — in an aggressive campaign to bolster its bottom line and reduce its level of risk. The campaign — which has
intensified at the urging of Gov. Rick Scott — has already cost homeowners hundreds of millions of dollars. And the
pocketbook impact could easily reach the billions as more and more homeowners are affected.
For Temple, a 79-year-old retired librarian who lives alone on a fixed income, the premium hike is taking a large bite out of
her limited budget.
"I was shocked and I called my agent,° she said from her three-bedroom home in Coral Gables. "I've never had an
insurance claim on anything.°
Her insurance premium jumped from $4,882 to $7,028.
Temple is one of hundreds of thousands of Floridians who have already been slammed by Citizens' reinspections and other
cost-hiking measures. As the insurer intensifles its plans to raise rates and reduce what it covers, the impact on Florida's
fragile housing market and broader economy is being felt across the state.
A Times✓Herald Tallahassee Bureau series will look at the effect of Citizens' reinspections and price hikes on homeowners,
and the rocky relationship befinreen Citizens' board of directors and the Legislature.
Executives at Citizens say the company is in a bind and has little choice but to raise its rates. It was created 10 years ago
to be a haven — the so-called insurer of last resort — but it has balloaned to become the state's largest insurer, with about
1.4 million policies. Most of its risk is concentrated in the Tampa Bay area and South Florida, hazard-prone regions where
many homeowners cannot find coverage in the private market. Its acfions — including rate increases — affect the entire
insurance market, impacting the cost of housing for nearly every Floridian, including those with private insurers.
"Citizens is too big," Scott has said repeatedly, citing numbers that paint Citizens as a huge potential financial liability for
the state. At a Cabinet meeting last year, Scott told Citizens executives to shrink the company, and to do so quickly.
Citizens' board has responded, vowing to help Florida avoid the "hurricane taxes" that would be levied on most consumers
if a major storm were to slam the state's highly developed coastline, draining Citizens' resources.
°There are things we have to do to make Citizens a strong safety net and not a hammock," said board member John
Rollins, during a meeting last year.
He went on to acknowledge: "Some of it will be painful."
Critics, and a growing crop of litigants, say Citizens is pushing the bounds of what's moral — and what's legal — as it
attempts to slim down. Homeowners in Pasco County filed a(awsuit this year claiming the insurer used a fraudulent
software program to inflate the replacement cost of their homes, thus increasing their premiums. South Florida
http://www.tampabay.com/news/business/banking/citizens-most-premiums-rise-with-reins... 1/10/2013
, homeowners have sued Citizens over the inspection program, calling it a scheme to raise rates. Citizens has denied both
allegations.
Losing discour�ts
The state-run insurer is bound by a 2009 law that limits rate increases to 10 percent annually, but it has found several
creative ways to raise premiums by 40, 60 and even 100 percent this year. A TimesMera/d analysis of thousands of pages
of company records and dozens of intenriews revealed a fast-changing insurance market in which the 10 percent cap is
becoming increasingly futite against a well-organized campaign to raise rates and reduce coverage.
The dirty word among Citizens policyholders — reinspections.
Through reinspections, higher estimates of replacement costs and new sinkhole-related charges, Citizens has raised
premiums far beyond the 10 percent cap, taking in more money than ever before.
Though the company has been collecting billions of dollars in premiums during the past six hurricane-free years, Scott and
Citizens' leaders say it remains severely undercapitalized. If a major hurricane hits the state and Citizens runs out of
money, taxpayers will be on the hook to bail the company out through hurricane taxes.
Temple, and other homeowners like her, feel that they've already been hit with a massive hurricane tax, just without the
hurricane. Citizens' flurry of policy changes has bred hundreds of millions of dollars in rate increases this year alone. Over
time, the pocketbook impact on homeowners will likely reach into the billions.
Though Citizens has rypically been govemed by the Florida Legislature, its current multibillion-dollar campaign of premium
increases and coverage reductions is being administered unilaterally by an increasingly ambitious board of eight unelected
govemors, at the direction of Scott.
Citizens' statewide program of home reinspections has led to an unprecedented stripping of insurance discounts worth
millions of dollars. (Homes with hurricane-resistant features are eligible for "wind-mitigation discounts" on their insurance
premiums.)
The reinspection of more than 200,000 homes has been a boon to the insurer's bottom line. In nearly 75 percent of cases,
inspectors are able to �ind cause for stripping homeowner discounts, producing premium increases of $137 million.
That translates to more than $800 for each homeowner who loses so-called wind mitigation discounts due to a reinspection.
With the money from reinspections flowing in — and the 10 percerrt cap powerless to limit inspection-related premium
increases — Citizens is rapidly ramping up the program.
"The retum investment of this program so far has been about 300 percent," Citizens board chairman Carlos Lacasa told
Scott at a Cabinet meeting in December. °We're looking forward to a very successful reinspection program."
'We have a problem'
Citizens launched the massive reinspection push under the premise that thoasands of homeowners had received
unwarranted discourrts due to widespread ftaud. However, only a handful of cases have been referred to Florida's Division
of Insurance Fraud, and convictions have been scarce. (More than 700,000 policies receive mitigation credits, but onty
three people have been charged with mitigation fraud since 2009, according to state data.)
Allan Schwartz of New Port Richey is convinced the Citizens' inspections are rigged against homeowners. Schwartz said
the inspector who came to his home climbed into the garage attic, spent five minutes looking around, and came down
saying, "We have a problem.°
Though Schwartz had hurricane straps properly spaced in the attic, the inspector said he didn't have access to some of
them because boxes blocked his view.
http://www.tampabay.com/news/business/bank.ing/citizens-most-premiums-rise-with-reins... 1/10/2013
, Schwartz, 63, who recently underwent double-knee surgery, said he wasn't able to go up in the attic. He said he urged the
inspector to move the boxes but was told he wasn't allowed to move anything. Schwariz also shared the favorable results of
a separate roof and wind mitigation inspection that had cost him $125.
But it was a moot point. The inspector had already made his call.
°He said, 'I'm going to put in my report that (the tie downs) weren't readily accessible,' ° Schwariz said. `It was amazing how
lazy the guy was and how criticai he was of everything he looked at."
Consumer advocates are crying foul, too.
"Citizens has gone from incentivizing mitigation discounts to implicating homeowners for virtually nonexisterrt,
undocumented fraud," said Sean Shaw, founder of Policyholders of Florida. "This isnt just inconsistent, iYs harmful to
policyholders and our economy. IYs nothing more than a wild goose chase and another excuse to try to jack up our rates.`
In an intenriew, Lacasa, the Citizens board chairman, defended the inspections program as a necessary initiative to verify
that homeowners who are receiving discounts actually deserve them.
In many cases, inspectors have found discrepancies not because of fraud, but because the state has made rule changes
that make it more difficult to qualify for discounts.
In 2010, the Office of Insurance Regulation changed the definition of a'hip-roof," the pyramid-shaped roof style considered
especially wind-resistant by experts. Previously, a roof whose perimeter was at least 50 percerrt hip-shaped was
considered a hip roof. The rule change — pushed for by the insurance industry — required the roof perimeter to be 90
percent hip-shaped.
Thousands of homeowners have seen their discounts eliminated as a result of the rule change. Fair Insurance Rates in
Monroe, a Florida Keys-based group, has bashed the change as "arbitrary° and 'another end-run around the 10 percent
premium cap increase."
Temple, the retired librarian, said the combination of the roof rule-change and the reinspection resulted in her losing $1,326
worth of discounts.
Temple's roof is mostly hip-shaped but also has a smatl flat portion covering a screened porch between her kitchen and
back yard. She said an inspector came to her house and determined that the roof over the screened porch disqualified her
from receiving a "hip-roof° discount.
She later hired a private inspector to help her appeal Citizens' decision.
'We do find a lot of discrepancies with Citizens' inspections,' said Andres Diaz, an arohitect with A-1 Engineering
Inspection Services, which handled Temple's private inspection. "They're doing about twice as many inspections each day
as you would expect, and there's no possible way they can do it right in that amount of time.°
Citizens' new president, Barry Gilway, said the company has quality assurance measures to make sure reinspections are
done correctly.
"The public perception of this program is critically important to us," he said.
When an inspector cannot find evidence to validate the discount, the onus is on the homeowner to prove that he or she
deserves the previously awarded credit. In many cases, ff a homeowner can't produce decades-old documentation showing
that the home has certain wind-resistant features, Citizens removes the discount, resulting in a premium hike.
Company leaders have openly stated that wind-mitigation discounts — which were doubled in 2007 under Gov. Charlie
Crist — are an impediment to Citizens' efforts to raise revenue. About half of all Citizens' policyholders receive the
discounts, with the aggregate total topping $1 billion per year.
http://www.tampabay.com/news/business/banking/citizens-most-premiums-rise-with-reins... 1/10/2013
t
, "We have $3 billion approximately in direct premium today, but we're leaving $1 billion of potential revenue on the table as
a result of wind mitigation credits,° Lacasa told Scott during a 2011 meeting.
The company recently expanded the inspection program to condo buildings, and plans to inspect thousands of buildings
across the state.
As premiums rise, Cit+zens has also drastically reduced what it covers, leaving some homeowners more exposed.
Citizens has dropped coverage for carports and screened enclosures, reduced its personal liabiliiy coverage ftom $300,000
to $100,000 and is pushing to limit water damage claims to $15,000. Deductibles have also been significantly increased for
several types of coverage.
Those and other changes have slashed billions of dollars from the insurer's exposure load, and will force homeowners to
pay more if a hurricane hits.
Homeowners, like Meredith Donly, are wondering why their rates and deductibles keep going up, while the quality of their
coverage declines.
Donly, who owns property in Hollywood, said the rate increase she got from Citizens this year was the last straw.
"I couldn't even tell you what the bill is for this year," she said. "I took one look at it, and I bumed it.°
Times staff writer Jeff Harrington contributed to this report, which also contains comments from members of HeraldSource,
part of the Public Insight Network. To leam more about the network or to join, visit miamiherald.co�nsight. Toluse
Olorunnipa can be reached at tolorunnipa�miamiherald.com and on Twitter �Toluse0.
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