By Charles Elmore, Palm Beach Post
HOW TO DISPUTE A CITIZENS INSPECTION
• Customers can ask for a free, one-time follow-up inspection up to 12 months after an initial Citizens inspection under conditions the company lists at citizensfla.com.
• The second look can be for upgrades at the home, to review disputed features or check inside an attic where access was previously blocked.
• The company says it will evaluate reports from a qualified inspector hired by the homeowner who submits a properly completed form.
Florida’s largest insurer Citizens admits in documents obtained by The Palm Beach Post that the state-run company and its contractors made errors in more than 1,500 inspections as part of a huge campaign that raised customer bills by more than $200 million a year.
Inspectors hired by the company stripped premium credits for shutters, roof joints and other features they said didn’t meet the standards for resisting hurricanes. Citizens cleared more than $150 million after paying inspection companies and related costs.
The consequences have been serious for many families around the state.
Retiree John Minnoch, of Jupiter, who is caring for his wife, who has dementia, says he can’t afford Citizens insurance anymore. It is his only choice for wind insurance, he says, but he’ll go without it this hurricane season.
“About a year ago, Citizens conducted, through a third party, a dubious reinspection that would have raised my rate 230 percent,” Minnoch wrote in a July 24 letter to Citizens President Barry Gilway. “While I cannot do anything about your rate, what irritates me is that Citizens is supposed to be the carrier of last resort to protect otherwise uninsurable folks like me. Yet here I am, left without any protection.”
Company officials said the number of errors Citizens acknowledged was comparatively small in a campaign that targeted about 400,000 homes and businesses.
“The reasonable conclusion is the vast majority of policyholders accepted that the reinspections, which were conducted by independent, licensed professionals, were fair and accurate,” Citizens spokesman Michael Peltier said.
But records show mistakes were exposed after only a tiny minority of customers fought back.
Just 3 percent of Citizens customers challenged the results and requested follow-up inspections. Yet when customers did contest the inspections, 58 percent of challengers were successful in getting their bills lowered.
“If more than 50 percent are winning challenges, there’s a significant chance a lot of other people are getting ripped off,” said William F. “Chip” Merlin, president of the Merlin Law Group, which has offices in Tampa, West Palm Beach, Coral Gables and seven states. His firm represents policyholders in disputes with insurers, and he has served on statewide panels on issues involving Citizens.
The problem is, most people aren’t experts at mitigation credits, he said. Merlin has a tough time imagining a lot of the state’s many retirees, or busy working people for that matter, climbing up into attics and digging up municipal permits and manufacturers’ certifications to make sure the Citizens-paid inspectors were getting it right.
“When we’re disenfranchising people and shutting them out of insurance because they can’t afford it, that’s really bad,” Merlin said, noting if people can’t rebuild after a storm it has serious economic consequences for communities and the state as a whole. “It is another ethical problem in a long line of questionable activities in which Citizens has been involved. Why should we trust that they did these mitigation reinspections honestly and in good faith given their track record?”
Minnoch is well aware he is risking the investment in his paid-off home if a severe storm hits, though he believes it is about as well-protected as he can make it. At least two neighbors are dropping Citizens and self-insuring too, he said.
He suspects many customers never challenged the inspections because the reports are hard to understand and the bills are coming from a state-run insurer.
“Most people think when you’re dealing with the government, you’re dealing with some integrity,” Minnoch said. “They’re going to take it at face value.”
After months of obtaining documentation to show various features at his home did qualify, he whittled the bill down substantially before deciding last month to cancel.
“I’m sure Citizens can come up with reasons for wanting more money, but where is the money being spent?” he wrote to the company. “Apparently my rate is going up to pay for waste, misuse, and abuse (deluxe hotel rooms, first-class air travel to Europe).”
A state inspector general’s report criticized weak cost controls at Citizens and cited such expenses as $600 per night hotel rooms in Bermuda. Company officials defended the costs at the time as necessary to arrange reinsurance contracts, but have supported revisions in company travel policies designed to hold down expenses.
As for 3 percent of its customers challenging inspections,” the flip side of that is more than 97 percent of policyholders who had reinspections did not choose to have a re-evaluation,” spokesman Peltier said. “We sent letters to all affected policyholders and there was a lot of media attention regarding the ability to have us come out and take another look.”
The state’s insurance consumer advocate, Robin Westcott, said last year she thought the “real mission” of the reinspections was to generate premiums and the company frequently failed to make clear why consumers were losing credits and what they could do about it. Something as simple as a worn-off sticker on a shutter panel or boxes blocking attic access in a closet could cost homeowners a huge amount, though they might never know it.
Complicating matters further, state officials have changed the rules for the discounts more than once amid heavy lobbying by the insurance industry. Gov. Rick Scott last year called for Citizens to find ways to raise premiums, reduce coverage and drive customers to private competitors where possible to reduce its risk exposure.
Regular rate increases for Citizens are capped at 10 percent a year under state law, but the multi-year inspection campaign has raised customer bills by an average of $521.10, or 21 percent.
Citizens spent more than $60 million to pay inspectors and related expenses. Policyholders more than covered those costs as their annual premiums increased by $212.1 million as of May 31. Net gain for the company: $151.8 million. Inspections increased premiums for 72 percent of customers visited, with 10 percent seeing a decrease and the rest unchanged.
Company officials have denied they pressured inspectors to remove discounts, but The Post reported last year Citizens and its contractors rejected more than 90,000 reports from inspectors in the field. The revised reports were overwhelmingly likely to raise consumer bills, by an average of $660.
Citizens is Florida’s largest property insurer with more than 1.2 million customers.
One inspector in Palm Beach County who spoke on condition of anonymity told the newspaper nearly half his 2012 reports were rejected and his pay was reduced because of it. In each case the company wanted changes that were bad news for the customer. He said he quit because of what he considered “unethical practices.”
The records show consumers have challenged more than 11,000 inspections, about 3 percent of the total. Close to 7,000 got credits restored for a variety of reasons. Some cleared access to an attic. Others provided new documentation or made home improvements. In at least 1,510 cases, Citizens admitted errors by contractors or itself.