Citizens Insurance plans to reduce coverage for
repairs it cannot control
Article Courtesy of The Sun Sentinel
March 28, 2018
State-run Citizens Insurance is finalizing a plan
state insurance regulators hope will be copied across the industry:
Beginning May 1, it will cap coverage of non-weather-related water
damage at $10,000 for policyholders who opt not to use Citizens' managed
repair contractor network.
Turning up the heat on the fight against claims abuses and excessive
lawsuits, Citizens Property Insurance Corp. has tweaked its plan to
control home repairs by further reducing coverage for customers who
The state-run “insurer of last resort” plans to limit coverage for
non-weather-related water damage to $10,000 when customers decline to
use its new Managed Repair Contractor Network to fix covered damage such
as broken pipes, flooded cabinetry and flooring, and ruined drywall.
Customers who agree to use a contractor in Citizens’ network would not
be subjected to the $10,000 cap. Other companies with large shares of
South Florida’s market would likely adopt the same changes, based on
recent comments by Florida’s insurance commissioner and the CEO of
Heritage Property & Casualty, a private-market insurer that owns its own
managed repair contractor.
Citizens has been working with state insurance regulators on the pending
changes since last summer, after the state Legislature failed to adopt
reforms sought by Citizens and Insurance Commissioner David Altmaier.
Last summer, Altmaier said he hoped the revisions would be adopted by
private-market insurers. This month, as Citizens and Altmaier’s office
continued to make tweaks, Heritage CEO Bruce Lucas said his company was
working with state regulators on language to ensure Citizens’ provisions
cannot be skirted by “bad guys.”
Under the latest version, the $3,000 for emergency repairs that Citizens
made available two years ago would count against the new $10,000 water
damage cap. For the past two years, that $3,000 was “additional
coverage” and did not count against any other coverage limits.
Citizens spokesman Michael Peltier said the changes would only reduce
coverage for policyholders who refuse to use Citizens’ managed repair
Most consumers who use the repair network would not spend more than
$10,000 for emergency repairs and permanent repairs combined, Peltier
added. The majority of water damages should not cost more than $10,000
to fix, he said.
What drives invoices over $10,000 — and what these changes are meant to
avoid — is when independent water repair contractors show up and start
padding invoices with unnecessary manpower, equipment, labor hours, fees
and billed hours, insurers say.
However, representatives of two entities often at odds with insurers
said the changes would penalize consumers.
Jimmy Farach, president of the Florida Association of Public Insurance
Adjusters, said managed repair programs too often result in inferior
repairs for policyholders. “This change will essentially leave consumers
without enough money to make repairs unless they agree to use Citizens’
contractors, which is an inherent conflict of interest. It’s the fox
guarding the henhouse,” Farach said.
Lee Jacobson, spokesman for the Florida Justice Association, a trade
organization for plaintiffs’ attorneys, called Citizens’ plan a move “to
lessen the amount of coverage and completely destroy the ability of the
insured to choose his/her own vendor.”
The latest version of Citizens’ revisions must be approved by the
company’s Board of Governors and the state Office of Insurance
Regulation. If approved, two loopholes that policyholders can currently
use to get more than $3,000 in emergency repairs would be eliminated: A
provision covering up to 1 percent of the value of homes insured for
more than $300,000 would be eliminated, as would the ability of
policyholders to request additional emergency repair money from
Allowing requests to exceed the limit invites further litigation — which
the changes are designed to avoid, Peltier said.
The cap on emergency repairs was originally intended to stop third-party
contractors from commencing permanent repairs, such as tearing out
floors, plumbing and cabinetry, before the company had an opportunity to
The company said contractors — tipped off by plumbers called to stop an
emergency water discharge — would arrive at a home, persuade the
homeowner to sign over benefits of their claim, and then complete
thousands of dollars of permanent repair work before Citizens would be
notified that a claim was coming. Lawsuits would quickly follow if
Citizens balked at paying for the work.
Along with capping money that could be spent on emergency repairs,
Citizens also created a rule in 2016 allowing it to deny reimbursement
for permanent repairs started within 72 hours after a claim is reported,
unless the company first inspects the property or approves permanent
After state insurance regulators approved those changes for Citizens,
nearly all private market insurers operating in Florida adopted the same
restrictions. The latest changes would most likely be considered by
three companies with large South Florida market shares and managed
repair programs: Heritage, Florida Peninsula and People’s Trust.
Heritage CEO Lucas did not respond to an email seeking comment on
Monday. Amy Rosen chief marketing officer for Deerfield Beach-based
People’s Trust, said the company would explore Citizens’ proposed
Roger Desjadon, CEO of Boca Raton-based Florida Peninsula, said “it
would be premature to discuss what future actions we may or may not take
relating to Citizens’ water claims policy options.
“That said, it’s inevitable that Citizens and others will take whatever
steps necessary to stem the explosive epidemic of [assignment of
benefits] lawsuits, which have had a negative impact on the availability
and affordability of homeowners insurance in Florida,” he added.
Asked whether Altmaier would like to see other insurers adopt the
Citizens revisions, his deputy chief of staff, Erin VanSickle, said by
email the commissioner recognizes not every insurance company has the
capacity to implement managed repair programs.
“It is the Office of Insurance Regulation’s position that legislative
action is the most effective way to create change, but in the meantime,
OIR will continue to work with stakeholders to do what we can
administratively through policy form changes to limit the harm
[assignment of benefits] abuse has on consumers,” she said.
Use of managed repair networks is controversial because contractors in
those networks answer to the insurance companies, which have a vested
interest in keeping costs low, while independent contractors technically
work for the policyholder and should be focused on returning a home to
its pre-damaged condition.
But insurers charge that reforms are needed because the relationship
between contractors and policyholders has been subverted. Rather than
policyholders finding and hiring contractors, contractors are now
aggressively finding policyholders and coercing them to sign an
“assignment of benefits” release that gives the contractors the right to
invoice and sue insurers on a policyholder’s behalf. Not only do
excessive lawsuits drive up claims costs for insurers — which are
recovered with higher rates for everyone — but they can be filed with no
notification to policyholders named as co-plaintiffs, insurers say.
The $10,000 coverage limit was initially approved in August and set to
take effect Feb. 1 along with rate increases for new and renewing
customers. Then in September, Hurricane Irma prompted Gov. Rick Scott to
declare a 90-day moratorium on any effort to raise insurance rates.
Citizens, which had planned to introduce the changes at the same time as
the new rates took effect, used the delay as an opportunity to further
tweak the program. The latest changes, if approved, are now scheduled to
take effect on May 1.