Citizens insurance grapples with lawsuits

Gov. Ron DeSantis and Florida lawmakers this spring approved a plan to overhaul the controversial insurance practice known as “assignment of benefits” --- and put new restrictions on lawsuits against insurers.

But the state-backed Citizens Property Insurance Corp. will continue grappling with thousands of lawsuits, including many stemming from disputes about claims from Hurricane Irma in 2017, according to numbers detailed Wednesday.

As of April 30, Citizens faced 14,091 pending lawsuits, a nearly 14 percent increase from the 12,363 cases pending a year earlier. During the first four months of 2019, the insurer averaged 833 new lawsuits a month. That was down 22 percent from the same period in 2018, which was in the aftermath of Hurricane Irma.

In an indication of the volume of litigation, the Claims Committee of the Citizens Board of Governors on Wednesday approved adding 12 law firms to a list of firms that can help defend the insurer in claims disputes. Citizens, which had about 420,000 policies as of March 31, already contracts with more than 100 defense firms, according to information provided to the committee.

“However, despite having firms currently under contract to provide these services, a need to retain additional law firms has arisen due to the current volume of pending litigation resulting from the influx of new lawsuits associated with recent catastrophic events that directly impacted various parts of Florida,” the information said. “Those firms currently under contract are presently able to meet Citizens’ needs, albeit in a capacity that has placed significant strain on their resources and capabilities; however, further catastrophic weather events (not necessarily requiring a similar sized impact as recent storms) would jeopardize Citizens’ ability to effectively manage claims litigation due to a likely significant shortage of qualified outside counsel to handle the anticipated additional volume of litigation.”

The move to overhaul assignment of benefits, or AOB as it is almost universally known in the Capitol, was the highest-profile insurance issue of this year’s legislative session. While the bill (HB 7065) that DeSantis signed last month involved a series of issues, a key for insurers was to clamp down on AOB lawsuits.

In assignment of benefits, property owners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies. Insurers have complained for years that the process is riddled with fraud and excessive litigation and has driven up insurance premiums.

But plaintiffs’ attorneys and other groups have argued AOB helps make sure claims are properly paid. They accuse insurers of often trying lowball amounts paid for work.

To try to curb litigation, the bill effectively limits attorney fees in lawsuits filed by contractors against insurers. The fee changes would not apply to lawsuits filed by policyholders.

Much of the AOB debate has focused on claims filed for water damage to homes. The debate has generally focused on claims for damage caused by such problems as busted pipes, rather than storms.

The information presented to the Citizens Claims Committee on Wednesday said water-damage claims have continued to pile up.

“The majority of new incoming lawsuits continue to arise out of Hurricane Irma but are trending down as we move farther away from the event,” the information said. “We are experiencing a rising trend in AOB lawsuits that have reached pre-Irma levels of litigation. This is an expected trend as Hurricane Irma claims have been trending down and non-weather water claims have been trending up.”

Jay Adams, chief of claims for Citizens, indicated during a conference call of the Claims Committee on Wednesday that it could take time to see how the new AOB law affects such water-damage claims.

“We’re just going to have to wait to see what the bad actors do in the market,” Adams said.

The News Service of Florida contributed to this report.