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Sha'Ron James

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Most insurers fail to respond to state advocate's request for water damage data

News Article

December 7, 2015

Sun Sentinel

Just three companies responded to an Oct. 6 request by Florida's new insurance consumer advocate for data to back up assertions that water damage claims and resulting lawsuits in South Florida are out of control.

Among the companies that did not submit data as requested by Consumer Insurance Advocate Sha'Ron James was the state's largest: Citizens Property Insurance Corp., the state-run insurer of last resort.

Citizens spokesman Michael Peltier said his company had to focus on responding to a similar but mandatory request for data from the state Office of Insurance Regulation.

"After Sha'Ron sent out her request, we got a data call from the Office of Insurance Regulation — a mandatory call. We had to shift gears to respond to that," Peltier said Monday.

James, as a state-appointed advocate for Florida insurance consumers, has no authority to require companies to respond to requests for information. And information sent to her office can be requested by anyone under Florida's public records laws.

The Office of Insurance Regulation, by contrast, can require companies to send data and can shield the data from release under a trade secrets exemption.

The fact that James' office can't keep data secret was a strong concern for members of the Florida Property & Casualty Association, an industry trade group, executive director William Stander said by email Monday.

"Because of the very specific nature of the claim file information being requested, our companies did have serious data privacy concerns … that likely was a factor in the companies' decision-making," Stander said.

Citizens, with nearly half of its policyholders in South Florida, has been the most vocal critic of a practice called assignment of benefits. That's when policyholders sign over to repair companies the rights to pursue payment for their insurance claims.

In September, when Citizens hiked average 2016 insurance rates for policyholders in Palm Beach, Broward and Miami-Dade counties, the company blamed those increases on a group of water-damage repair companies, public adjusters and attorneys, particularly in Miami-Dade. Citizens and some other insurers claim attorneys coach companies on how to persuade policyholders to sign over their benefits, then file suit or threaten to sue before insurers are made aware of the claims.

Some damage repair companies, attorneys and public adjusters counter that legal action is justified because Citizens and other insurance companies too often delay investigating claims, then reject them or offer to pay much less than the cost to make proper repairs. Water damage claims are disproportionately high in South Florida, they argue, because the average age of homes is higher here than in other areas of the state and because many were built with cast-iron pipes that have been corroding with high frequency in recent years.

They also contend that the assignment of benefits provision enables work to begin immediately. Otherwise policyholders have to wait for a settlement check or pay a deposit upfront.

During legislative hearings in the spring to consider restrictions on assignment of benefits, some critics noted that insurers presented no statistical analysis to back up assertions that high levels of water damage claims in South Florida were being driven by fraud.

James, appointed in August to replace longtime advocate Steve Burgess, said in October that she requested the data "to find out whether what the insurance companies are saying about water loss claims is actually happening."

After James sent her request to the top 15 insurers and asked for the data within 30 days, several contacted her and told her the Office of Insurance Regulation planned its own data request.

Five companies told her they planned to instead submit data to the state regulators: People's Trust, State Farm Florida, Tower Hill Prime, United Services Automobile Association and USAA Casualty, according to a tracking sheet provided by James' office.

Homeowners Choice said it was unable to produce the information in the manner requested. Universal Property & Casualty phoned James' office with its explanation.

Only three companies — Security First, St. Johns and Federated National — sent James the requested data.

Five insurance companies — Citizens, American Integrity, Federal, Florida Peninsula, and United — did not contact James' office at all in response to the request.

"Would I have liked to have heard from them? Yes," James said in a telephone interview Monday.

But she said she's not disappointed with the lack of response and will be satisfied if the information companies send to state regulators is thorough enough to enable her planned analysis before state lawmakers consider proposed remedies during next spring's legislative session.

"As long as it gets us to where we need to be — analyzing what the trends are," she said.

Monday was state regulators' deadline for the top 25 homeowners insurance companies to respond, according to Amy Bogner, spokeswoman for the Office of Insurance Regulation.

In an email late Monday, Bogner said the regulation office would prepare a summary of the data it receives to give to James, legislators and "other interested parties."

State regulators were already working on their own request when James issued hers, Bogner said. The state's request seeks details about each claim received for water or roof damage since Jan. 1, 2010, as well as names of any water damage companies, attorneys, contractors and public adjusters involved in the claim, the size and age of the home, the insurer's estimate to fix the damage, how much was actually paid, how much the insurer spent on defense costs and where the claim occurred.