|Date:||July 19, 2016|
State-run Citizens Property Insurance Corp. is hiring an outside vendor to scrutinize water-damage repair estimates from contractors, and to directly negotiate lower invoices with those contractors in exchange for a cut of the savings.
The company's board of governors on Tuesday agreed to a five-year, $1.8 million contract with Fort Myers-based Lynx Services LLC, a third-party claims management firm.
The goal, according to a Citizens document, "is to identify inflated or excessive charges on invoices from contractors that have performed water damage restorations for Citizens' policyholders and to contest or adjust invoices so it comports with industry standards."
The contract is the latest salvo in the company's fight against what it calls claims abuses by shady water restoration contractors and their attorneys, particularly in South Florida. Citizens and other insurers say contractors pressure homeowners to sign over benefits of their claims, then submit inflated claims. If an insurer rejects the claims or fails to pay the full invoice, the companies file suit.
Citizens says the trend is driving up claims costs and has forced it to seek rate increases in South Florida for 2017 close to the 10 percent maximum allowed under state law.
Attorneys who represent clients in suits against Citizens contend the contract could lead to more, not fewer, lawsuits.
Orlando attorney Lee Jacobson said he hopes the contract improves the claims handling process for Citizens customers. But he pointed out a provision in the approved contract with Lynx that pays the company based in part on the difference between a contractor's original estimate and the savings Lynx negotiates. That entices Lynx to challenge the contractor's estimate, Jacobson said.
"This will not end disagreements but will only cause more."
After multiple efforts to restrict "assignment of benefits" failed in the state legislature, Citizens secured approval from state insurance regulators for policy changes intended to curtail abuses. They include capping coverage for emergency repairs at $3,000 or 1 percent of the dwelling coverage limit, allotting 72 hours for Citizens to inspect claims before permanent repairs can begin, and limiting repair coverage to just the broken part of a system, such as a drainage pipe, and not the entire system.
The third-party review will give Citizens a better opportunity "to make sure claims we are paying are reasonable," Citizens spokesman Michael Peltier said. Citizens tested the idea with multiple reviewers beginning last September and decided to create a long-term review program with just one company to ensure review standards are consistent, he said.
Miami-based attorney Joe Ligman asked why the Lynx review contract is necessary in light of the policy revisions. He predicted Lynx' reviews will be "biased and result-oriented and will give any benefit of the doubt to Citizens," adding, "I expect increased litigation costs that will be necessary to protect the homeowner from underpaid [repair] invoices."