Richard
Graulich
A former
inspector in a Citizens reinspection program holds a
wind mitigation inspection training manual.
Richard
Graulich
Supervisors can deduct pay to inspectors by rejecting
their reports, says a former inspector.
Executives at the state’s last-resort insurer Citizens
acknowledge a massive building reinspection campaign is
“under fire.” They insist on one thing: no one is
instructing inspectors to jack up customer bills by
denying credits for storm-resistant building features.
An
inspector who spoke on condition of anonymity told
The Palm Beach Post a different story. He said he
performed dozens of inspections in 2012 and nearly half
his reports were rejected by supervisors. In each case,
he said, it just so happened the company or its
contractors wanted changes that raised customer bills.
Showing
his badge, inspection manual and other records, the Palm
Beach County man said getting reports rejected meant his
pay was delayed or reduced and it was hard to miss the
message.
“I quit
because of what I considered to be unethical practices,”
he said. “I don’t think it’s the inspectors’ fault on
this. Inspectors are being told how to inspect it.”
As 74
percent of more than 225,000 homeowners visited lose
discounts — and some see premiums double — claims are
mounting that the program is hardly as neutral or fair
as advertised:
— A
lawsuit by customers in Palm Beach and Broward counties
calls the campaign a “subterfuge” to increase premiums.
Among other things, it alleges coordinators withheld
payment to inspectors until they changed their reports
to deny credits.
Citizens denies the allegations, has filed a motion to
dismiss and the case is in the process of being moved
from South Florida to Tallahassee, officials said.
—
Letters to state officials from Palm Beach County
residents plead for help. Citizens is acting on a
“preposterous loophole which is costing homeowners
unfairly and unnecessarily,” Juno Beach resident Len
Gilman wrote in a letter to the state’s Chief Financial
Officer Jeff Atwater.
“The
$11,000 I spent for hurricane shutter protection in 1998
is disregarded as protection by Citizens Insurance
Company only because my shutters do not carry an
imprinted stamp which would indicate they meet the
Miami-Dade Hurricane Shutter Code,” Gilman wrote. “Yet
they are the same as the code imprinted shutters being
sold and accepted as full protection today.”
— The
state’s insurance consumer advocate said at a Citizens
committee meeting July 26 that something is wrong with
the program. Some inspectors “either aren’t doing it
correctly or are doing it under instructions to take the
credit away,” Robin Westcott said.
An
example she gave: Three South Florida villas shared a
roof that was rebuilt in 2007. Two different Citizens
inspectors denied discounts to two of the villas. A
third Citizens inspector examined permits showing the
third villa qualified for roof-related credits, meaning
they all should have received credit.
“I’ll
be honest with you,” Wescott said. “I think that’s the
mission here, to generate premium.”
Bristling at what he took to be a “suggestive comment,”
Citizens chief insurance officer Yong Gilroy said “the
character of Citizens’ organization is very solid.” No
management or leadership team at Citizens has instructed
that taking away credits is a primary goal of the
program, he said.
Gilroy
said it is “difficult to balance all the things”
demanded of Citizens “from all directions.”
Gov.
Rick Scott has pushed Citizens to raise rates, reduce
coverage and shrink itself, a goal insurance industry
groups support because they say higher rates are
necessary to attract private competition. State-run
Citizens is Florida’s largest insurer with 1.4 million
customers, including 140,000 in Palm Beach County.
But as
Westcott pointed out, there is no other option but
Citizens for many customers, particularly in parts of
South Florida. Such customers can feel hammered and
helpless when bills spike. They don’t believe they are
being treated fairly. Hardening homes against hurricanes
is about the only way they have any control over the
“beast” of insurance costs in Florida, she said. Now
they see it being taken away.
Westcott mentioned examples of hurricane-resistant
windows or openings where a certifying sticker or emblem
has fallen off, been painted over or is otherwise not
visible. In some cases etchings in the glass can help
determine if homeowners qualify for discounts, she said
— but not if inspectors make no effort to pursue it or
point it out to homeowners.
Even
Citizens board member Carol Everhart said she lost
$1,800 in annual credits because a company-paid
inspector said he couldn’t get into her attic to inspect
roof features. She found another contractor who managed
to get up there, but three months later she still has
not seen credits restored.
If it
chose, Citizens could tell customers far more helpful
information in letters announcing inspections, Westcott
said. It could tell consumers what documentation, photos
or other information could be useful in allowing them to
retain credits. But it doesn’t do that.
The
results are clear enough: Reinspections have raised
consumer premiums by $135 million for three out of four
of more than 225,000 homeowners visited.
Consumers are 10 times more likely to see bills go up
rather than down after visits, records show. Seven
percent of homes inspected saw bills go down. The rest
stayed the same.
Citizens has netted more than $100 million after paying
inspectors.
Company
records show credits were restored after consumers
complained in at least 1,300 cases through the end of
2011, and in at least 200 instances the company admitted
errors by inspectors or in its own processing. But that
amounted to a small percentage in a big program,
officials said.
Citizens president Barry Gilway said in recent public
meetings the reinspection program is “under fire” and
that some criticisms have merit. But he concluded “the
continued implementation is absolutely essential.” And
despite being on the job only a few months, he said was
100 percent comfortable “no direction” was being given
to inspectors to write the reports so as to raise
premiums.
Company
officials have defended the program as eliminating
discounts improperly granted in the past or no longer
consistent with state rules, which have been revised
periodically.
But the
Palm Beach County inspector cited several examples where
his initial findings in support of credits were
overturned. He said he reported to Jacksonville-based
Inspection Depot, one of the companies helping Citizens
to carry out the program.
He
described one Palm Beach County home as “overbuilt” with
approved protection on every window and door except for
three small unbreakable plastic windows on a garage
door. The garage door itself was approved for hurricane
winds, but the company wanted him to report not all
openings have verified protection, he said. That left
the customer to pay for insurance as if no windows or
doors had any protection, he said.
His
initial report granting credits was rejected and $17 was
deducted from his $85 fee, he said.
Another
example: A small concrete block and steel home with
shutter tracks and panels for every opening ultimately
got no credit for any wind or impact protection because
the obviously appropriate panels had no verifiable
rating receipts or labels, he said.
After
accounting for gas, expenses and their own time,
inspectors are often hard-pressed to make the work
worthwhile at the regular fee, much less at a reduced
rate, he said. As a result, incentives were strongly
aligned for inspectors not to get reports rejected, he
said — and in effect to tell the company what it wanted
to hear.
Any
rejection of an inspection report “would be due to
missing or incorrect information,” Citizens spokeswoman
Christine Turner Ashburn said. She confirmed rejection
of a report could involve a 20 percent reduction in pay.
“Citizens Inspection Program does allow withholding
payments for specific reasons relating to deficiencies
in performing the inspection,” Ashburn said. Reasons
could include reports were incomplete, incorrect or
inconsistent with known features of the property, she
said.
The
company says it is just following rules set by the
state.
“With
opening protection, if there is one unprotected opening,
the house does not qualify for a credit,” Ashburn said.
Regular
Citizens rate hikes are capped at 10 percent a year by
law, but reinspection offers a way to collect far more
in a single swoop. The average increase after
reinspection has been nearly $600, or 23.5 percent, but
some bills have soared much higher.
Janet
Helfand of Boynton Beach called “monstrous” her bill
that more than doubled past $3,000.
Katherine Livesay, a Citizens customer in Palm Beach
County, said her annual premium skyrocketed after a
reinspection in December to $4,246 from $1,956 — a 117
percent increase.
Livesay
is one of two named plaintiffs in a suit against
Citizens seeking class-action status that was filed
initially in Broward County Circuit Court this spring.
Citizens and its contractors set up incentives for
inspectors to deny credits, the suit alleges.
“In
fact, inspection program coordinators have withheld
payment to inspectors for re-inspections until the
inspection finds the home is not entitled to Wind
Mitigation Credits, despite the inspector’s independent
judgment that the homeowner was entitled to Wind
Mitigation Credits,” the suit says.
A
Citizens contractor, Mueller Services, whacked credits
that had been approved at one Broward County home by a
different inspection just months earlier — one paid for
by plaintiff Kenneth Babbitt — that was supposed to be
good for up to five years, the suit said.
Citizens created its inspection program as “a subterfuge
to generate greater revenue without directly raising
raising its premium rates,” the suit asserts.
“If you
look at Citizens’s website, it leads you to believe
inspectors are neutral folks who are going to sort out
what’s going on,” said Gregory Weiss, a Palm Beach
Gardens plaintiff lawyer in the suit. “In reality, they
aren’t neutral. What we’re seeing is that they’re
looking for ways to deny credits.”
The
ongoing reinspection plan, which affected 90,000
customers in 2011, is scheduled to hit 219,000 homes
this year.
Those
awaiting their turn fear the consequences. At Crossings
of Boynton Beach, which has 280 condo units, as many as
7o units have recently been in foreclosure. Residents
wonder how many people will be pushed over the edge if
insurance bills — some passed along through association
fees — now take a big jump.
“I will
tell you right now this will force more people into
foreclosure,” said Kathleen Carroll, president of the
condo association.
Here’s
how she perceives what Citizens is doing: “They’ve hired
these people who they’re going to pay to find reasons to
raise the premiums.”
Reinspections hit customers in the wallet
—More
than 225,000 Citizens customers have been visited by
company-paid inspectors
—74
percent lost credits for hurricane-resistant features as
of June 30
—Average premium increase: Nearly $600, or 23.5 percent
—Total
premium increase: $135 million
—Company’s net after paying inspectors: More than $100
million
POST IN
DEPTH
Award-winning Palm Beach Post Staff Writer Charles
Elmore has been following the controversial practice by
Citizens Insurance of inspecting hundreds of thousands
of Florida homes and increasing premiums on 74 percent
of them.