June 2022


By William Rabb |

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Starting July 1, Sea-Level Rise Studies Required for Florida Gov’t Coastal Structures

By William Rabb | June 29, 2022

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Starting Friday, July 1, state and local governments will have to conduct a sea-level impact study if they build anything near Florida’s coastline, the result of a state law passed in 2020.

Although the law applies only to government entities using state funds, it could have an impact on neighboring private properties and their insurance premiums. It’s possible that insurers could use the studies to help determine risk from floods, pollution and other hazards in some coastal areas, attorneys said.

The Florida Legislature in 2020 approved Senate Bill 178, sponsored by then-Sen. Jose Javier Rodriguez, D-Miami. He left the Senate in 2020 and has been nominated by President Biden to be assistant U.S. secretary of labor.

Rodriguez

The rules to implement the bill were finalized last year by the state Department of Environmental Protection. The law, considered one of Florida government’s first acknowledgments of rising seas and their complications, requires the sea-level impact project study, or SLIP study, to be done for all government structures built in the coastal building zone using state funds.

The statute defines the building zone as most of the beach areas in Florida: the land from the high-water line to an area 1,500 feet landward of the coastal construction control line. The control line is determined by the Department of Environmental Protection, and the new law and rules appear to go well beyond that line.

Government-built structures in that area must now undergo an assessment of the potential damage over the next 50 years from higher seas, flooding, storm surges and wave action. Some analyses predict as much as 8.5 feet of sea-level rise by the year 2100. The DEP requires the use of the National Oceanic and Atmospheric Administration’s projections.

“By implementing these risk-based assessments, infrastructure in Florida will be able to tangibly prepare for flooding risks and sea level rise,” Alexandra Kuchta, press secretary for the DEP, said in an email.

The studies, to be signed by a professional engineer, must also analyze the risks and costs of maintaining, repairing and building the structure, along with public safety and environmental impacts. Those include the potential release of pollutants and the exposure of electrical and explosion hazards, according to a legislative analysis of the law.

Sponsored by Florida Surplus Lines Service Office (FSLSO)

Builders must also examine alternatives for the coastal structure’s design and location, the Holland & Knight law firm said in bulletin about the law. The studies will be made public, accessible on the DEP’s website. Although not mandatory until Friday, some 30 projects already have submitted SLIP studies. For the Caledesi Island Marina & Bathhouse off Clearwater, for example, the study notes that “the high wind risk in this project location may contribute to a higher risk of explosion due to potential downed powerlines.”

DEP lists a number of strategies project owners can use to mitigate the impact of sea rise, including building in elevated areas, employing flood barriers and planting more shrubbery.

The 2020 law has some teeth in it to ensure the studies are done.

“If a state-financed constructor begins construction of a coastal structure without first submitting a SLIP study as required, then DEP is authorized to institute a civil action for injunctive relief to cease further construction on the coastal structure and seek recovery of all or a portion of state funds expended on the structure,” the firm explained.

DEP has created an online tool that helps users visualize future sea levels and coastal flood hazards.

Holland & Knight attorneys could not be reached for comment this week, but the June 24 email alert noted that two bills were introduced in the regular 2022 session of the Legislature, which would have expanded requirements of the law. Those bills did not pass but could be brought up again in 2023, the firm said.

TOPICS FLORIDA

By William Rabb

Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant  about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business  & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com

Florida insurers may have another weapon in the war over assignments of benefits in insurance claims, thanks to an appeals court ruling that went against one of the insurance industry’s most visible and active foes.

In Kidwell Group and Air Quality Assessors vs. United Property & Casualty Insurance, Florida’s 4th District Court of Appeal this month upheld a lower court’s dismissal of a breach-of-contract suit. In what may be the first appellate ruling on this aspect of the 2019 Florida statute that aimed to limit AOB claims, the appeals courts held that the assignee-contractor did not provide an itemized, per-unit cost estimate of the services to be performed in the restoration, as required by law.

Insurance attorneys said that hundreds of AOB agreements have been signed since Florida lawmakers in 2019 allowed the new policy restrictions that are designed to deter AOB agreements and litigation, and many do not contain the itemized estimates. That could give insurers fertile ground to challenge the claims and to fend off breach-of-contract lawsuits.

“The court is taking a strict enforcement view on policy provisions,” said attorney Patrick Carleton, of the Groelle & Salmon law firm, who has represented insurers in other cases against Kidwell.

He said that he has seen other AOB agreements that do not include itemized estimates. “This will definitely be helpful in other cases we have,” Carleton added.

Matt Scanlan, insurance attorney with Dunlap and Shipman in Tallahassee, said that his client insurers have denied almost all claims from Air Quality Assessors if the company did not include the itemized estimates. But the contractor has learned quickly and has added the per-unit costs to invoices in recent months, after the initial court decision went against it.

“I would say they are constantly evolving, trying different things, but the courts keep holding their feet to the fire,” Scanlan said.

The Kidwell Group and Air Quality Assessors is headed by Winter Park contractor Richie Kidwell, who has made headlines for his involvement in a number of high-profile actions against insurance companies. This month, Kidwell and his Restoration Association of Florida filed a suit challenging the constitutionality of a law approved by the state Legislature at its special insurance session in May, which bars assignees of benefits from being awarded attorney fees in court.

In the United Property & Casualty case, the Kidwell Group and Air Quality Assessors argued that they had, in fact, included an invoice as an attachment to the lawsuit complaint. But the 4th DCA judges said the invoice was unexecuted and was dated five days after the assignment agreement was signed.

“As such, the trial court properly concluded the assignment did not contain a written, itemized, per-unit cost estimate of the services to be performed by Appellant as required by sections 627.7152(2)(a)1. and 627.7152(2)(a)4,” reads the 4th DCA opinion, written by Judge Burton Conner.

The statutes cited were those approved by lawmakers in 2019 in an effort to curb AOB claims, which have resulted in hundreds of lawsuits per month.

Kidwell testified at the legislative session, urging lawmakers to vote down the package of reform bills. He has become well known in the Florida property insurance arena, but court rulings have not often gone his way.

The United P&C decision, handed down June 15, came eight months after the same appeals court ruled against the Kidwell Group and Air Quality Assessors in a breach-of-contract suit against Geovera Specialty Insurance Co. That decision held that the suit should be dismissed because both spouses had not signed the AOB agreement, as required by the policy. The Florida Supreme Court declined to hear an appeal of that decision, said Carleton, who represented Geovera in the case.

Kidwell and his attorney, Chad Barr, of Altamonte Springs, could not be reached for comment Tuesday, but Kidwell agreed to talk later this week.

Kidwell, the Restoration Association and Air Quality in May filed another high-profile suit, this one against Florida Insurance Commissioner David Altmaier and two insurers. The suit argues that the commissioner exceeded his authority in allowing American Integrity Insurance Co. policies to require arbitration in claims disputes, in exchange for premium discounts for homeowners. Heritage Insurance also was approved for a policy endorsement that bars payments to anyone except the homeowner, a move that violates state law, which allows for assignments of benefits, the suit reads.

Attorneys and a Florida law professor said the suit and Kidwell’s challenge to the 2022 reform law are unlikely to succeed in court.

TOPICS CARRIERS LEGISLATION FLORIDA

June 28

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Florida Gov. Ron DeSantis has appointed three insurance defense attorneys to the state’s workers’ compensation bench.

  • Jacobs (Linkedin)Jill Jacobs has worked as deputy city attorney for Palm Beach for the last seven years, handling many workers’ compensation claims from city workers. She was in private practice for 25 years before that. She is a board-certified workers’ comp attorney who has handled complex, catastrophic comp claims, according to her Linkedin web page. Jacobs, who earned her law degree at the University of Miami, will fill one of the vacancies in the Orlando office of the Judge of Compensation Claims, DeSantis’ office said Friday.
  • Sanceri (Facebook)Also filling a vacancy in the Orlando district is Lourdes Sanceri, of Gainesville. Since 2013 she has been with Moore, Ingram, Johnson & Steele, a law firm with offices in Orlando, Jacksonville, and in three other states. Before that, she was with McConnaughhay, Duffy & Coonrod, one of the largest comp defense firms in the state. Sanceri gained her law degree from the University of Florida.
  • Case (Linkedin)Barbara Case, of North Palm Beach, has been in private practice for a number of years, primarily practicing workers’ comp defense, from mediation through appeal. She will fill the open spot in the West Palm Beach office.

The lawyers were three of several nominated for the bench by the state’s judicial nominating commission. They are appointed to four-year terms.

The new judges come into a comp court that is undergoing a slight reorganization, including a pay raise for the jurists. The Legislature this year, after several years of failed attempts, approved a salary increase of as much as 24% for the comp judges, bringing them in line with county court judges.

Lawmakers also dissolved the requirement that the Office of Judges of Compensation Claims maintain 17 districts in the state and 31 judges, allowing the consolidation of some district offices. Mediators also will no longer be assigned to specific judges but will be assigned on a statewide basis and may conduct sessions remotely via videoconferencing, according to information from the OJCC.

TOPICS LEGISLATION WORKERS’ COMPENSATION

By William Rabb 

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Two more Florida property insurers have stopped accepting new business in the state. One of them blamed it partly on unfair and unexpectedly large price increases from reinsurers this year. The other carrier said that, despite reinsurance issues, it will likely resume writing in a few months.

“We will accept new business applications with effective dates in the fourth quarter and beyond, and we anticipate opening up to process those applications starting in August,” reads a statement from Centauri Insurance, part of Applied Underwriters. “However, we do expect that new business capacity targets for the fourth quarter will also fill up quickly, and we might then have to stop the inflow of new business again for a while.”

Centauri, which includes Centauri National Insurance and Centauri Specialty Insurance, along with Bankers Insurance, part of Bankers Financial Corp., both sent bulletins to Florida agents in mid-June, announcing the suspension of new business. Centauri said the moratorium was for personal lines and commercial business, effective June 15. All pending quotes should have been bound by the close of business on that date.

Centauri said it took the step “to avoid surpassing reinsurance purchases.”

“This is a temporary measure in direct response to a volatile market and targeted at ensuring continued fiscal responsibility to our agent partners and customers,” the Centauri memo reads.

Centauri Speciality held 26,000 policies in force at the end of 2021 with $79 million in total written premium, the Florida Office of Insurance Regulation has reported. Centauri National is not listed in the OIR quarterly report.

Bankers, based in St. Petersburg, has 27,000 policies in Florida, and also writes in Louisiana and South Carolina. It said it was suspending only personal lines in Florida, effective June 15, but would remain open for commercial lines, builders risk and flood insurance.

“We did not make this decision lightly,” the Bankers bulletin reads. “We understand the impact that this decision may have on our agents, and we appreciate your loyalty to Bankers over the last 46 years.”

The announcements bring to 10 the number of Florida insurers that have stopped writing new business in the state this year. Some of those have become insolvent. One of the larger carriers, Southern Fidelity Insurance Co., suspended new business in Florida in May, then was declared insolvent in mid-June. People’s Trust, another large property insurer, announced in May it would suspend new homeowner and dwelling-fire policies. Chief Operating Officer Tom Gallagher said recently that the company would resume new business “soon.”

Other carriers have not formally stopped writing, but have encouraged agents to avoid writing new policies in much of the state.

Both Bankers and Centauri maintained an “A Exceptional” stability rating from the Demotech rating agency, as of late March. Bankers is also rated by AM Best rating service. It currently lists the firm’s financial stability as “B++” with an outlook of “negative.”

It remains to be seen how the writing suspensions may affect the companies’ ratings going forward. Demotech was expected to release new grades this month, perhaps signaling that as many as five Florida carriers could be downgraded or lose their ratings altogether if they couldn’t complete their reinsurance programs.

Demotech President Joe Petrelli said the reviews are on the way, if a bit later than expected.

“Although the (Florida Legislature) special session on property insurance strung out the reinsurance renewal negotiations a bit, we are on track to review, affirm or revise all FSRs no later than month-end June,” he wrote in an email last week.

Centauri received a shot in the arm in February 2021 when it was acquired by Applied Underwriters, which is headquartered in Omaha, Nebraska, and operates in the United States and Europe. Centauri has offices in South Carolina and Florida and serves policyholders in Alabama, Florida, and Hawaii.

Menke

Bankers, founded in 1976, is one of the oldest continuously operating property insurers in Florida. Bankers President Rob Menke, in a lengthy interview last week with the Insurance Journal, said he hopes the company will be around for at least another 46 years. But the insurer has been losing money on Florida homeowners policies for the past five years and Menke said the company’s board of directors is ready to pull out of the state.

Menke, like a number of Florida insurance executives, blamed claims litigation, exaggerated roof claims and one-way attorney fees in the state for stacking the deck against carriers and multiplying loss expenses. But he said that despite that, Bankers, with multiple rate rate increases in the last two years, felt like it may be able to “eek out some profit” in the homeowners line this year.

Then came reinsurance renewals.

Most Florida insurers were expecting reinsurance costs to rise, perhaps about 20% this year. In the end, prices were much higher than that for many carriers. Bankers was able to complete its program in June, but at a steep cost and after much uncertainty. Reinsurers said they were waiting to see what the Florida Legislature would produce at its special session before finalizing rates and conditions.

“After that, it just became exceedingly difficult to get (reinsurance) people to commit to anything that was even remotely reasonable,” Menke said. “The terms were sometimes just silly: Some wanted 100% of it up front. We don’t pose a credit risk like some of the others do that are teetering on the edge of going out of business.”

What struck Menke was the level of apparent coordination between insurers, with most echoing the same talking points. He noted that two large reinsurers acted “in a legitimate fashion.” But others were hard to deal with.

The actions seemed illogical in one sense, he said.

“They’ve decided they don’t want to take the risk at the lower level and yet the rate’s so high that they almost can’t lose, so I’m so not sure what the thinking is,” he said. “if I was suspicious, I would think it’s some kind of a collusion to clear the decks, and maybe this will do it.”

He added: “It is interesting how they all came out of the gates after the special session and each had the same talking language, which was, ‘We’ve revised our view of risk and we don’t want to use models anymore, we want to use experience.’”

The actions by reinsurers this year suggest that the corporations, unfettered by Florida insurance regulations, aren’t being exactly fair to struggling Florida carriers – while padding their own profits, Menke argued.

“If you look at Louisiana and Florida, the two states hit the hardest, there’s been a dozen or so insurance companies that have gone out of business in the last two years,” Menke said. “If you look at reinsurers, I don’t know a single one that’s gone out of business.”

Bankers this month participated in the Reinsurance to Assist Policyholders, or RAP fund, created by the Florida Legislature in May. It provides a no-cost, lower level of reinsurance in case of heavy losses after hurricanes. Instead of paying premiums to the fund, insurers must provide a premium break to homeowners, expected to be about 3% to 4%.

Menke said the RAP fund is a start but does not go far enough. He argued for a larger, state-backed reinsurance program that would allow beseiged insurers to avoid the hefty price hikes found in the reinsurance market. The program would not cover all risks, he said, but could take on enough that “it keeps the outside market honest.”

Bankers has asked for rate increases of about 70% in Florida in the last 24 months and has a 40% rate increase pending before the Florida Office of Insurance Regulation.

“But it won’t be enough,” he said. “That’s the reason for the hold on new business. I don’t want to write any business at a rate that doesn’t have that extra amount imputed to it, because we’d just write at a loss. We can’t be in the business to lose money.”

Bankers won’t resume new HO policies in Florida until it “sees a light at the end of the tunnel” and it can reduce costs, including reinsurance, Menke said.

TOPICS FLORIDA REINSURANCE PRICING TRENDS

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WRITTEN BYWilliam Rabb

Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers’ comp insurance issues for a trade publication for a few years.

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Citizens Property Insurance Corp. could spend $100 million this year on attorneys who defend claims litigation against the insurer, a significant increase from previous years.

The Miami Herald reported that the insurer of last resort’s claims committee met Thursday and examined the legal costs. The Citizens Board of Governors in December approved $50 million for outside attorneys to work the thousands of claims lawsuits that Citizens, like other Florida property insurers, face each year. The committee on Thursday recommended adding another $50 million.

During the first third of this year, Citizens was hit with more than 3,800 lawsuits, the committee members were told.

Thomas

“Those are some pretty crazy numbers,” committee member Jon Palmquist said, according to the Herald.

Citizens, soon to be the largest property insurer in the state, contracts with 91 outside law firms to defend claims disputes. In 2020, the state-created corporation spent $82 million on legal fees, followed by $79 million last year. Since 2017, Citizens’ defense spending has topped $405 million.

“It’s because people are suing us, and we have to defend” the lawsuits, Citizens board member Scott Thomas said at the meeting.

At the Florida Legislature’s special session in May, at least two state representatives urged Citizens to consider hiring more in-house attorneys to handle the claims litigation.

Other Florida insurers have reported huge legal costs. R Street, a think tank that has studied the Florida market, reported this year that Florida insurers spend about six times what insurers in other states spend on legal defense costs.

Sponsored by SIAA

The litigation front is expected to improve in coming months, after lawmakers at the special session approved two bills designed to reduce litigation, roof claims and plaintiffs’ attorney fees.

And CaseGlide, a software firm that tracks claims litigation in Florida, reported that the largest carriers in the state reported a 14% drop in litigated claims, from April to May. The number of suits dropped from 4,702 in April to 4,047 in May for the 16 largest P&C insurers, although notices of intent to sue increased.

TOPICS FLORIDA

Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant  about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business  & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com

A report from the Insurance Information Institute confirms what many Florida homeowners have suspected: Their insurance premiums are some of the highest in the nation.

The annual cost of a Florida homeowners policy this year will jump to $4,231 – almost three times the U.S. average, the Institute said in a new analysis.

“Floridians pay the highest homeowners insurance premiums in the nation for reasons having little to do with their exposure to hurricanes,” Sean Kevelighan, CEO of the Institute, said in a news release. “Floridians are seeing homeowners insurance become costlier and scarcer because for years the state has been the home of too much litigation and too many fraudulent roof replacement schemes.”

Kevelighan

Just two years ago, the typical Florida homeowner paid $2,505 in annual premiums, according to data from the Florida Office of Insurance Regulation, the National Association of Insurance Commissioners and the Institute’s estimates of replacement and rising material costs.

In recent years, though, Florida has been besieged by fraudulent roof claims, extreme amounts of claims litigation, insurer insolvencies, suspension of new business by 10 property insurers, and multiple rate hikes, all of which have contributed to soaring premiums and a Florida market near collapse, Triple-I and a number of insurance industry leaders have said.

Meanwhile, residents continue to move to Florida, which could put more stress on housing markets, reports suggest. The 2022 hurricane season also is predicted to bring an above-average level of storm activity, which some have predicted could push more insurers out of the Florida market.

“With its overabundance of unneeded new roofs on homes, and flashy lawyer billboards at every turn claiming massive settlements on claims, Florida’s insurance market is on the verge of failure,” the Institute said.

TOPICS FLORIDA

By Adriana Gomez Licon and Curt Anderson 

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MIAMI (AP) — A judge gave final approval Thursday to a settlement topping $1 billion for victims of the collapse of a Florida beachfront condominium building that killed 98 people, one of the deadliest building failures in U.S. history.

The decision by Miami-Dade Circuit Judge Michael Hanzman came a day before the one-year anniversary of the Champlain Towers South disaster in the Miami suburb of Surfside. The judge praised the dozens of lawyers involved for averting what could have been years of litigation with no sure outcome.

“It will never be enough to compensate them for the tragic loss they have suffered,” the judge said. ”This settlement is the best we can do. It’s a remarkable result. It is extraordinary.”

The bulk of the $1.02 billion total will go to people who lost family members in the collapse of the 12-story building. About $100 million is earmarked for legal fees, and $96 million set aside for owners who lost one of the 136 units in the building.

No victims filed objections to the settlement or decided to opt out, said court-appointed receiver Michael Goldberg. Several people who lost family members or property said in court Thursday that they are grateful for such a swift conclusion to a horrific experience.

Raysa Rodriguez, who survived the collapse in a ninth-floor unit that was initially left intact, had nothing but praise for the outcome.

“You have no idea what a relief this is to me personally,” Rodriguez said. “I am so exhausted. I just want this to be done. I want these souls to rest.”

The ruling came during what’s called a fairness hearing, in which anyone with objections to the deal could raise them as the judge determined whether the settlement is “fair, reasonable and adequate,” according to court documents.

Sponsored by Loveland Innovations

The money comes from several sources, including insurance companies, engineering firms and a luxury condominium whose recent construction next door is suspected of contributing to structural damage of Champlain Towers South. None of the parties admit any wrongdoing.

A billionaire developer from Dubai is set to purchase the 1.8-acre (1-hectare) beachside site for $120 million, contributing to the settlement.

Champlain Towers South had a long history of maintenance problems and questions have been raised about the quality of its original construction and inspections in the early 1980s. Other possible factors include sea level rise caused by climate change and damage caused by salt water intrusion.

A final conclusion on the cause is likely years away. The National Institute of Standards and Technology, which is leading the federal probe in to the collapse, recently said invasive testing will begin soon on samples of material from the collapse site.

The tests will help investigators find potential flaws in structural elements of the building by looking into things such as density of the materials, how porous they were and if there was corrosion, NIST said.

Florida will require statewide recertification of condominiums more than three stories tall under new legislation Republican Gov. Ron DeSantis signed into law last month in response to the disaster.

The death toll in the Champlain Towers collapse ranks among the highest in U.S. history among similar disasters. The 1981 Hyatt Regency walkway collapse killed 114 people and a Massachusetts mill disaster in 1860 killed between 88 and 145 workers.

About the photo: Ronit Naibryf, right, shows Miami-Dade County Mayor Daniella Levina Cava, the name of her son Ilan Naibryf, Thursday, May 12, 2022, in Surfside, Fla., on a large banner with the names of the 98 people killed in the collapse of the Champlain Towers South condominium. Attorneys for the families who lost relatives or homes in last year’s collapse of a Florida condominium tower that killed 98 people finalized a $1 billion settlement on Friday, May 27, 2022. (AP Photo/Marta Lavandier, File)

Copyright 2022 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

by Lyle Adriano

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The Insurance Information Institute (Triple-i) has released a damning report which has warned that Florida’s current homeowners’ insurance market is “on the verge of failure,” thanks to rampant fraudulent roof repair schemes and excessive insurance litigation.

Triple-I found that thanks to the “manmade catastrophe” of fraudulent roof repair and overabundant insurance litigation in Florida, the annual cost of an average homeowners’ insurance policy in the state is skyrocketing to $4,231 in 2022 – which is almost three times more than the US annual average of $1,544.

It was also noted that while two major hurricanes made landfall in Florida since 2016 – 2017’s Irma and 2018’s Michael – there have been no direct hits over the past three hurricane seasons, from 2019 to 2021. And yet Florida accounts for 79% of all homeowners’ insurance lawsuits filed nationwide, and insurers operating in the state receive only 9% of all US homeowners’ insurance claims, based on data from Gov. Ron DeSantis’ office.

“Floridians pay the highest homeowners insurance premiums in the nation for reasons having little to do with their exposure to hurricanes,” said Triple-I CEO Sean Kevelighan. “Floridians are seeing homeowners insurance become costlier and scarcer because for years the state has been the home of too much litigation and too many fraudulent roof replacement schemes. These two factors contributed enormously to the net underwriting losses Florida’s homeowners insurers cumulatively incurred between 2016 and 2021.”

Using data from the Florida Office of Insurance Regulation (OIR), 3D Supra reported that $51 billion was paid out by Florida insurers over a 10-year period. Of the $51 billion, 71% went to attorney’s fees and public adjusters. The 2020 and 2021 cumulative net underwriting losses for insurers operating in the state totaled over $1 billion each year.

“The state’s homeowners’ insurers have been forced to respond to these unfortunate market trends this year by restricting new business, non-renewing existing policies and even canceling policies mid-term,” commented Kevelighan. “What’s more, four homeowners’ insurance companies have been declared insolvent since February – all while more Americans are moving to Florida than any other state.”

Read more: Another Florida insurer teeters on the brink of insolvency

Triple-I also brought attention to Citizens Property Insurance Corporation, the state-backed insurer of last resort, which saw its policy count rise to nearly 900,000 this month statewide.

Read more: State-backed Citizens Property Insurance hit by surge in lawsuits

The institute also noted that third-party rating bureaus have downgraded the financial ratings of some insurance companies in Florida, which puts even more pressure on the affordability and availability of homeowners insurance in the state.

Read more: Insurer ordered to liquidate

A typical Florida homeowners’ insurance policyholder paid $2,505 for coverage in 2020, Triple-I said. But that amount has jumped to $3,181 in 2021, based on OIR, National Association of Insurance Commissioners (NAIC), and Triple-I’s estimates of what insurers are paying for home replacement costs.

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By William Rabb

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‘Well-to-Do’ Investment Firm Head Charged in $300,000 South Florida Insurance Fraud

By William Rabb | June 23, 2022

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The head of a small, South Florida investment firm has been charged with insurance fraud after he submitted a $300,000 roof-leak claim to his insurer, American International Group, along with allegedly fake photos of mold and other damage to his house.

Michael DeGeorge, 38, of Palm Beach Gardens and Jupiter, Florida, was arrested Tuesday after a months-long investigation by the Florida Department of Financial Services’ fraud bureau. The arrest was announced Wednesday by Florida Chief Financial Officer Jimmy Patronis, head of DFS.

“Insurance fraud has no place in the state of Florida and my fraud detectives are working hard on behalf of Floridians to ensure that fraudsters are arrested and brought to justice,” Patronis said in a statement. “Unfortunately, it’s schemes like these that cause insurance premiums to rise and make home insurance unaffordable.”

DeGeorge and his attorney could not be reached Thursday. He appears to be well connected in South Florida. The Florida Secretary of State corporations records show him as president of MDeG Investment Group, headquartered at the home in Jupiter for which the claim was made. And a jeweler that sold him a Rolex watch said DeGeorge belongs to “a very well-to-do family,” according to the arrest affidavit that details the investigation.

DeGeorge also has filed a lawsuit against several contractors who built or worked on the upscale home for which he made the leak and mold insurance claim, court records and the arrest affidavit indicate. The complaint alleges extensive problems with the house and mold, which affected DeGeorge’s child’s health.

Two defendants have asked the circuit court in Palm Beach County to dismiss the suit.

The arrest record explains how DeGeorge made the insurance claim, and how AIG investigators became suspicious. In January 2020, DeGeorge reported the problems to AIG, claiming that mold was present everywhere in his home, due to a roof leak. It was so bad that he said his family had to move out of the home and he had thrown away many of his belongings.

AIG asked him to submit photographs of the contents and mold damage, and DeGeorge provided some 300 pictures, investigators said. The items, which DeGeorge listed on a computer spreadsheet, included furniture, artwork, electronics, clothing, toys, curtains, rugs and more.

But AIG representatives, including an AIG subrogation attorney, noticed that some things weren’t quite right. DeGeorge had filed a similar claim on the property a few years before, had not allowed the contents to be inspected, claimed that he had thrown them out, and submitted photographs of the alleged damage. AIG paid $196,413 on the earlier claim.

AIG’s special investigation unit determined that the 2020 claim included some of the same items listed in the previous claim. And metadata analysis of the photographs showed that some were taken after he said he had discarded the items, while other photos of structural damage were shot as much as 18 months before the alleged date of the loss, the arrest information shows.

Some of the photos were from a real estate website, some appeared to be from other properties, and others were ones that were submitted in the previous claim, investigators reported. Many images showed no water damage.

“Given these facts, Mr. DeGeorge made a material misrepresentation to AIG in support of his homeowner’s claim,” reads the arrest affidavit, signed by DFS fraud detective Kassandra Grimmett.

DeGeorge also claimed the Rolex watch was valued at $35,000 and was so damaged that it had to be thrown away. The investigator interviewed the Boca Raton jeweler who sold him the watch. He said that DeGeorge had brought the watch in to be appraised in 2017, and gave no explanation for why the appraisal was needed. The jeweler appraised it at $25,000 and expressed shock that anyone would throw a Rolex away – the diamonds alone were worth a great deal.

DeGeorge and his wife did not show up for an examination under oath in 2021, and AIG denied most of the claim. It had earlier paid living expenses when the family said it moved out of the home.

AIG referred the case to the DFS fraud bureau in May 2021.

DeGeorge was released Tuesday from the Palm Beach County jail on a $3,000 cash bond.

TOPICS FLORIDA FRAUD

By William Rabb 

Please call  Lee from  USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant  about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business  & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com

A decade ago, it was questionable sinkhole damages that proliferated in Florida property insurance claims. More recently, “free roof” solicitations, roof claims and thousands of lawsuits have rattled the industry.

Now comes cast iron drainpipes, common in homes built before 1975.

The pipe systems have become targets for some of Florida’s largest plaintiffs’ law firms, according to insurance attorneys, adjusters and engineers. It’s possible the pipes could lead to many more claims and suits in coming years, after Florida lawmakers took action designed to reduce roof claims and litigation.

“We’re seeing patterns. Patterns in property claims,” said Cassandra Hand-Gallegos, adjuster and CEO with CCMS & Associates in Dunedin, Florida, who spoke last week at the Florida Defense Lawyers Association claims conference in Orlando.

“The biggest issue is not what’s going on inside the pipes, but what’s going on with the insurance claims industry,” said David Grindley, a forensic structural engineer who also spoke at the conference.

One recent television advertisement from Orlando-based Morgan & Morgan, which calls itself America’s largest injury law firm, for example, flashes large amounts of cash that may be available to homeowners whose dwellings are more than 45 years old and which may have sewage drainage problems. Replacing the drain pipes in a home can cost $20,000 to $100,000, the Morgan & Morgan website notes.

Another claimants’ law firm, Florin Roebig of West Palm Beach, reports that some 76 million U.S. homes have cast iron pipes, “an alarming amount” of which are experiencing problems. This risk is high in Florida, with its high humidity and salt-rich soil, the firm’s website said.

Grindley (LinkedIn)

Grindley and Hand-Gallegos said that many of those assertions are exaggerated. Cast iron pipes don’t often need full replacement, and there are ways to defeat erroneous or spurious pipe claims and litigation, they argue.

“Cast iron in many ways is superior to other types of material,” Grindley said. “The pipes are very rigid. They’re strong, and they don’t break if you hit them with a shovel when you’re digging in the back yard.”

In many homes, the pipes have been in use for more than a century. But they can rust to some degree and may develop deposits on the inside that can constrict the flow of drain water, something that a growing number of claims have attempted to capitalize on, he said.

Grindley said many insurance claims start with a clogged kitchen sink. In a number of cases his firm has investigated, the homeowners, the public adjusters or plumbing contractors have claimed that mold and mildew under sinks is the result of backed-up cast iron pipes.

More likely, he said, the growth is from years of leaks in plastic sink drains or supply lines, or from seepage around the edge of the basin.

One way to tell if the blockage is in the main drain pipe beneath the house or underneath the sink is to see where the overflow began. A backed-up main drain line will force water up through the lowest opening first, Grindley explained. If the sink, 36 inches above the floor, is overflowing – but the floor-level shower drain is not – it means the sink drain is clogged, not the drain lines for the whole house.

For that reason, it’s important for insurance adjusters to quiz homeowners, when possible, on where and when the backup was spotted.

“Always ask: Where was the claimant at the time of the overflow? Where were they standing? in the kitchen? In the bathroom?” Grindley said. “If they say, ‘the kitchen,’ then, we’re skeptical that it’s the main drain line.”

Another rule of thumb: Household drain lines don’t hold that much water. If the entire house is flooded, it’s probably the result of a supply line or an outside source of water – not a clogged drain pipe.

Many homeowner policies exclude water-pipe losses altogether. Others exclude damage due to gradual leaks. Despite the use of those endorsements, though, non-weather water claims and litigation appear to be on the rise in Florida and have resulted in a number of appeals court rulings in recent years – some for insurers, some against. The exact wording of the policy endorsement is often at issue.

To investigate and defend cast-iron pipe claims, Grindley and Hand-Gallegos offered several other rules that insurance companies and their adjusters and experts should follow:

  • Inspect the home carefully. This may require a video inspection inside the drain lines to determine the condition of the pipes and to find any obstruction. Check vent and stack pipes for proper air flow. Map the location of pipes.
  • Request building permits to help determine if plumbing installation and repairs were done correctly. Check the claims history. Report to the carrier all information that was not made available.
  • Determine if the blockage can be easily rectified. In most cases, clogged lines can be cleared with a water jet or with a root-cutting device or a simple auger. (But be prepared to quickly clean up any water that may overflow from the procedure.)
  • And if cast iron pipes are occluded, that doesn’t mean the entire system has to be replaced. Many times, pipes can be cleaned, then lined with polymer sleeves that will last for decades.
  • Be prepared to counter the “hydrostatic test” often employed by plaintiffs’ experts. The test purports to check for leaks in a drain system by stoppering outlet points and filling the pipe with water, Grindley explained. If the water level drops in a relatively short amount of time, it can indicate a leak. Grindley said the test is misleading and will almost always show “leakage” because drain lines are not normally pressurized and don’t face those conditions in everyday usage.
  • Beware of add-on damages or “last-resort” claims, such as “contaminated or damaged soil” around the pipes. “Soil is soil. Is it contaminated just because sewage came in contact with it?” Grindley asked. “You can put some lime on it and 24 hours later you’re good to go.”
  • If it is determined that the drain pipes do, in fact, need replacing, consider rerouting them around the outside of the home, instead of undertaking the disruptive and expensive method of having to cut through the concrete slab in several rooms.

And watch for claimants’ expert plumbers who report that full pipe replacement is necessary, when those plumbers have a vested interest in doing the work. Grindley quoted from one plaintiff plumber’s report that said the system would soon fail simply because it was 66 years old.

“Anyone here 66 years old or greater?” he asked the crowd of insurance defense lawyers and adjusters. “Have you failed?”

TOPICS FLORIDA CLAIMS

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