(This story has been updated with new information.)
The leader of the state-backed insurance company, Florida’s largest, pushed back against what he called a “campaign” to undermine legal reforms that industry officials insist have eased the insurance crisis and made the Sunshine State more attractive to new insurance companies.
“The fact is that the conduct of the lawyers who do engage in … fraudulent litigation … drove up policyholder premiums and helped create Florida’s insurance crisis,” said Tim Cerio, CEO of Citizens Insurance Corp., the state’s insurer of last resort, during a meeting of the insurers’ governing board on Sept. 24 “And these voices cannot now be allowed to cry foul and undo all the good work that’s been done simply because they’re not earning the fees that they did prior to the reforms.”
The “good work” that’s been done includes constraints on policyholders ability to sue insurers when they feel they are being stiffed on a claims check to repair insured damage to their home. Insurance industry officials blamed the state’s litigious past for the woes in the market, while consumer advocates said the lawsuits resulted from insurers’ unwillingness to treat their customers fairly.
In the case of Citizens, which also insures property no other insurer will, the company was given the authority in 2023 to steer policyholders disputing settlement offers into arbitration in administrative court.
But now this, and other changes that made it more difficult for policyholders to sue insurers in civil court, are under attack, Cerio said.
Rolling back these legal reforms could mean a return to the situation in 2023 when the insurance market was teetering on the brink of collapse, Cerio warned. That year, private insurers, battered by storms and litigation, were exiting the state’s insurance market, compelling Citizens to carry nearly two-thirds the number of policies they expect to have by the end of 2025.
“These latest attacks on the fairness of (the administrative court hearings) are simply one part of a larger strategy to undermine the legitimacy of reforms that, without question, brought Florida’s property insurance market back from the brink of collapse,” Cerio said.
Insurance market improves, but what about policyholders?
Much of the Sept. 24 meeting of the Citizens’ board was spent hailing the insurer’s decreasing lawsuit costs, the increasing pool of private insurers entering the market to reduce Citizens’ liability, and the diminishing cost of capital reserves Citizens buys to shield the company from catastrophic claims resulting from the state’s vulnerability to hurricanes.
Citizens’ liability — and thus state residents’ exposure to paying a surcharge should catastrophic costs overwhelm the insurer’s reserves — has gotten notably smaller. The policy roster has plunged 63% from the 1.4 million-policy peak in September 2023.
The 10 insurers that went insolvent during the state’s crisis have been replaced and then some. On Sept. 19, the state’s insurance regulator announced the entry of the 16th and 17th insurers approved to compete in Florida since reforms were passed.
And, after a number of years that saw double-digit increases, insurance rates have largely remained flat, or decreased slightly, although the inflationary cost of replacing a home means many policyholders have not seen their premiums decrease as a result.
Consumer advocates, however, say these changes have come at a cost to policyholders in the state who are still paying some of the highest insurance rates in the country and now have a diminished chance of contesting insurers’ estimates of legitimate damage costs.
Joanne Doroshaw, an attorney who is executive director of the Center for Justice and Democracy, based in New York City, and cofounder of Americans for Insurance Reform, said that the tort reform the Florida Legislature enacted puts the blame for the state’s problems in the wrong place.
Insurance companies “created an insurance crisis and are dishonest about the cause,” Doroshow said during a recent panel that faulted weak regulation, insurers’ financial instability and climate risk as the culprits.
Doroshow, who worked with consumer advocate Ralph Nader on insurance issues, denied insurance claims that end up in court involve fraud.
“Policyholders are forced to go to court against insurance companies because these companies fail to pay legitimate claims, or they are receiving lowball settlement offers,” she said.
Court action impedes binding arbitration
A Hillsborough County judge Aug. 2 halted Citizens’ ability to take settlement disputes to the Division of Administrative Hearings, called DOAH, where judges act as arbitrators and issue rulings that bind. She found that a Hurricane Milton victim, Martin A. Alvarez of Tampa, has a substantial chance of succeeding in his case that Citizens should not be able to decide their dispute over damages in DOAH, and that the procedure that Citizens started using in 2024 violates his constitutional right to a trial.
The filings in the Hillsborough County case note the uphill battle that plaintiffs face against Citizens in DOAH cases and recent media coverage has highlighted that Citizens has won 90% of the cases that ultimately went before an administrative judge.
Justin Cernitz, founding partner of Cernitz Law in Miami, calls the ruling “a step in the right direction.”
“The real question that remains is what has gone on behind closed doors between Citizens, the insurance lobby and the legislature that allowed so many rights to be taken away from policyholders in one fell swoop,” he said. “It seems more like political maneuvering than sound policymaking for the citizens of Florida.”
Citizens’ Cero disagreed with the ruling, however.
“We do believe that the statute expressly authorizing the resolution of claims through DOAH is constitutional, and we believe it does provide a well-established, impartial and efficient process for resolving the disputes of policyholders who no longer must wait two to three years for a decision on their claim,” Cerio said.
Cerio was also unhappy with public comment that Citizens pays the salary of the DOAH judge as was well as DOAH administrative costs, budgeting $19.3 million for through 2027 DOAH to hold the proceedings.
State agencies always pay the base cost of DOAH, that’s how it works, Cerio said. Because Citizens is not a private insurer, but a state-backed entity, it falls under the same requirement, he said.
Cero also lambasted a letter sent to state officials by U.S. Rep. Maxwell Alejandro Frost, an Orlando Democrat. Frost’s letter complained that Citizens’ policyholders are forced to accept a different process for addressing litigation disputes than property owners who have private insurance. Cerio said this option means that policyholders’ issues are resolved more quickly.
“We haven’t seen anybody take the time to pull the records of a specific case to identify any bias, prejudice or unfairness,” Cerio said.
Frost, responding to a statement Citizens released following the meeting, dismissed Cerio’s criticism and noted that he has not received the data he directly asked Citizens to provide regarding the DOAH proceedings.
“Citizens’ defensive and vague statement fails to comfort anyone concerned about the ways their new arbitration policy is shortchanging Floridians,” Frost’s statement said.
Citizens: Stats show a different story
What’s gotten less discussion than Citizens’ 90% success rate in DOAH against policyholders, Cerio said, is that 37% of the cases directed to the arbitration procedure resulted in Citizens reversing their initial claims decision and cutting a check for the policyholder.
“That is a win for the policyholder under any reasonable definition of the word,” Cerio said.
Other stats, Cerio said, are evidence that plaintiff attorneys are engaged in “malpractice:” Almost 52% of the cases were dropped just before a hearing, he said. And some attorneys showed up and refused to participate or didn’t offer any evidence in their case.
“Neither DOAH judges nor Citizens can be blamed for this conduct, which at best is a late realization that the claim lacks merit, or at worst, frankly, it’s conduct amounting to malpractice,” Cerio said.
The case against the DOAH hearings is not the first time that critics of the reforms have tried to unwind the 2019-2023 legal rules for insurers.
Amid reports that insurers were slow to pay out claims on the 2024 storms, hurricanes Debby, Helene and Milton, legislation was introduced earlier this year to again allow attorney fees to be added to litigated insurance settlements — a right that was curtailed with 2022 legislation.
Taking away plaintiff attorney fees decreased the incentive for attorneys to take these cases and the amount of litigation has dropped since the changes. The legislation was passed out of one House committee with bipartisan support. But then it did not move forward. And the Senate did not take up similar legislation.
Anne Geggis is the insurance reporter at The Palm Beach Post, part of the USA TODAY Florida Network. You can reach her at ageggis@gannett.com.Help support our journalism. Subscribe today
This article originally appeared on Palm Beach Post: Citizens’ CEO speaks after judge halts administrative hearings to solve disputes
Reporting by Anne Geggis, Palm Beach Post / Palm Beach Post
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