In a reversal of a law to Senate Bill 2A, which was signed by Governor Ron DeSantis on December 16, 2022, the Florida legislature has now given Citizens an unfair advantage over Policyholders as lawmakers aim to stabilize the Sunshine State's troubled property insurance system. Under the new law enacted in SB 2-A, Policyholders will face tighter scrutiny at the onset of reporting losses, expect nothing, but be prepared for anything as Citizen's quick response teams will call to follow up within one hour of reporting your claim, and set an appointment for Citizens contractor's and specialists to arrive at your property within four hours of that call.  While Citizens promotes these services as absolutly free and at no cost to its customers or their deductibles, make no mistake, this is where we have seen answers and decisions result in a quick claim denials. 

Here are the key issues that Citizens intends to address: 

AOB's - Despite a slew of regulatory changes and lack of enforcement, Citizens has implemented is own Managed Repair Program by offering Emergency Water Removal Services for free and a Managed Contractor Repair Network that is being offered with a five year guarentee.  What you need to know, is that while Citizens offers these services as "optional," the Policy conditions have strict limits for Policyholders who decline.              

Policyholders can the claim handling process, new dispute resolution guildines, changing policy language, and mandating a Managed Repair Program that requires Policyholders to use Citizens preferred contractors.     

Florida public adjusters the full ability to help Citizens policyholders with their insurance claims when help is needed most, which is during the earliest stages of the claim when mistakes can cause settlement issues and denials. Many policyholders contact us because they find dealing with Citizens in their attempts to resolve their insurance claim is often a very arduous and extremely time consuming process.  This is the main reason why many turn to public adjusters for professional assistance.

Unlike all other private insurance carriers in Florida, public adjusters were prohibited from collecting any fees until an initial offer was made by Citizens and then could only charge 10% of the new money generated above the initial offer. This wasted time, promoted gamesmanship by Citizen Adjusters, made it uneconomical for public adjusters to invest their time and promoted more expensive litigation. The law also discriminated against Citizens policyholders who felt they needed professional help and representation with their claims; exactly why the State created public adjusters.

Under the new law enacted in SB1770, public adjusters can charge up to 10% for any initial claims made in the first year and up to 20% for claims made in subsequent years. The 20% fee will also apply to all reopened and supplemental claims. The law also prohibits public adjusters from receiving compensation from any source over the new statutory fee schedule. Public adjusters also must meet with the insurer and try to settle the claim as opposed to refusing to meet the insurer and forcing the claim into court. In addition, Public adjusters also are prohibited from acquiring any interest in a totaled property unless a policyholder agrees.

Another issue Citizens policyholders must deal with is Assignment of Benefits (also known as AOB). This is a practice where water clean-up restoration contractors and general contractors put clauses in their contracts that assign all the benefits of a policyholder’s insurance claim over to them. The pitch used by contractors for this practice is that it guarantees payment and eliminates the need for the policyholder to pay out of pocket. Unfortunately, the practice is being abused with water and fire claims where the contractors are making repairs without the insurance companies OK, increasing costs and then suing the insurance carrier when they won’t pay. This puts the policyholder in a terrible predicament and we would tell policyholders to think twice before signing such a contract. If a plumber wants to refer a restoration firm to you, ask them how much of a referral fee they are getting. It’s a common practice.

In trying to combat this, Citizens (in 2019) has changed the coverage in their policies for non-weather water losses. Now the limit is $10,000 unless you use one of their managed repair companies. Unfortunately, AOB abuse and the resulting spike in litigation have prompted these restrictions further putting the insured at risk and lessening the value of their coverage. Keep in mind that there will still be older policies out there that have not changed based on renewal dates. But going forward be aware of this limit for water losses with Citizens. Also note that Citizens aggressively pursues questionable water losses. If you are a policyholder, make sure your claim is legit and don’t be pushed into a claim by an overly aggressive restoration company or public adjuster.

In some policies, Citizens also requires policyholders to spend up to 1% of their coverage or a maximum of $3,000 to mitigate their damage. Citizens must inspect the actual damage and approve any repairs above that amount before any additional repairs can begin. Citizens can deny reimbursement for any permanent repairs that begin 72 hours after the loss is reported to Citizens, unless they inspect or give written approval to make the repair. Other insurance companies are instituting what are called managed repair programs where they send the insurance company’s contractor. This acts to save the insurance company money but not necessarily provide the best repair option for the policyholder. Remember, policyholders have the right to hire their own contractor unless they have opted into a managed repair program. So, we would recommend getting independent quotes from reputable contractors who work on your behalf. 

We would encourage Citizens policyholders to confer with a public adjuster to determine if their claim warrants assistance.

Will you receive a fair offer?

It’s hard to say. Every claim is different and has its own set of circumstances. What we do know is that insurance policies contain many grey areas open to interpretation that can impact the value of your settlement. The most important thing is to understand what your claim is really worth before you receive an offer from the insurance company. Changes in the way Citizens estimates and reimburses policyholders can greatly impact your initial and final settlement. You can learn more about this by reading a recent article we wrote on Depreciation / Holdback RCV vs. ACV.

Historical Background & Analysis: Understanding Citizens Insurance Claims

Citizens Property Insurance Corporation was created in 2002 by the Florida state government to provide property insurance for homeowners who could not obtain insurance elsewhere. It is a government-owned insurer of last resort that has become the largest homeowner insurer in the state with over 1.145 million policies in force as of the end of 2022. In some high risk coastal areas private insurance companies will not cover, Citizens is the only option. Recent legislation is requiring policyholders to accept private rates that are up to 20% higher than a Citizens policy. This is an attempt to shed policies to the private market and bring Citizens rates up to actuarial realistic levels. Citizens also requires flood insurance coverate (a separate policy). They also can elect to patch rather than replace a roof if it is more than 25% damaged. If a large storm endangers the financial viability of Citizens, they have the power to raise rates for policyholders by more than 40 percent and assess residents covered by other insurance companies up to 16 percent greater than their current premium in order to recoup their losses. These financial issues have caused Citizens and the legislature to make ongoing coverage changes to homeowners’ policies and how policyholders are reimbursed.

In 2011, the Florida Legislature set out to create laws preventing Citizens policyholders from retaining the services of a public insurance adjuster for the most part due to a 2010 study conducted by OPPAGA, where the Florida state agency found that Citizens policyholders with public adjuster representation received appreciably higher compensation on average than those who may not have been aware of their rights to hire a public adjuster. Specifically, the Office of Program Policy Analysis & Government Accountability (OPPAGA) found that Citizens policyholders with public adjuster representation resulted in payments that were 747% higher in catastrophe claims and 574% more in non-catastrophe claims. To be “fair and balanced,” we should also point out that the public adjuster represented claims also took longer to reach final settlement (132 to 296 days longer than claims without public adjuster representation depending if they were new or reopened claims.) This statistic is no surprise given the time element needed to “negotiate” with Citizens for more money. But the fact remains that the OPAGGA study provides a detailed accounting of how much money Citizens policyholders may be leaving on the table. 

The OPAGGA study also fueled the fire for State lawmakers influenced by the insurance lobby to limit the role of public adjusters in helping policyholders. In 2011, a new law strictly limiting the ability of how a public adjuster could represent a Citizens policyholder was passed. This created an unfair disadvantage for those who sought to engage a public adjuster at the onset of a claim, leaving many without a knowledgeable advocate to represent their best interests. This caused much undue hardship especially after the passing of Tropical Storm Debby in 2012.  During this time, our firm was contacted by numerous Citizens Policyholders seeking assistance that we simply could not provide because we were unable to cover costs for time, estimating expenses, filing or managing the claim during the initial stages of the claims process when much of the best assistance and advice is needed the most.

The new law created unintentional consequences as many policyholders seeking professional services for insurance claim help had no choice but to hire an attorney which according to a Citizens report extended the life of the average claim, increased claim costs, and caused tremendous litigation costs for Citizens far beyond any cost or data related to public adjuster involvement. In 2022 Citizens saw roughly 4,500 lawsuits filed per month against the largest 16 insurance carriers, according to CaseGlide, a litigation management software firm. This generated over $100 million in legal fees for Citizens. New legislation has eliminated the ability of policyholders to recover their legal fees if they bring suit and is now forcing policyholders to solve disputes thru arbitration in front of state administrative judges and thus limiting the abiltiy to use attorneys as advocates. 

At some point we hope state lawmakers realized Citizens has a better deal working with public adjusters rather than working against them. The injustice to Citizens policyholders was actually undone during the 2013 legislative session when lawmakers changed the law yet again approving a provision allowing public adjuster’s to assist a Citizens policyholder at the onset of a claim. Ultimately, we feel this decision is a step in the right direction. Allowing Citizens policyholders to utilize the services of a public adjuster without marginalizing the adjusters ability to earn their fees, will allow those seeking professional assistance with their insurance claim to obtain the full benefits which they are entitled, especially in the wake of a disaster when resources and adjuster experience is needed the most.

Tutwiler & Associates continues its dedication to helping policyholders, regardless of who covers their property or what obstacles are in the way. We encourage you to read the Citizens Claim FAQ below to learn more details of why it makes sense to engage professional claim representation by a public insurance adjuster. If you would like help with your Citizens property insurance claim and understand your options, give us a call at 813-412-8357 or contact us.