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Florida Insurer Retreats In Attempt to Reduce Homeowners' Water Damage Insurance Claims

Will Florida insurers require policyholders to choose from an insurer-approved list of contractors when making water damage repairs?

Florida's largest insurer appears to be rethinking a proposed strategy to reduce the costs of property damage claims from policyholders. Citizens Property Insurance Corp. has announced that the "managed repair" program it has advocated would now apply only to one specific type of claim-accidental discharges from plumbing systems- and not to homeowners' claims more broadly.

Insurer Had Proposed "Managed Repair Program" to Limit Lawsuits from Contractors

Citizens had claimed that unscrupulous contractors and attorneys often inflated water damage claims. Homeowners would assign their insurance benefits to the contractors who would make the repairs. The contractors would then file excessive claims and costly law suits against insurers to receive the policyholders' benefits that had been assigned to them.

Last year, Citizens Property Insurance Corp. advanced the idea of a "managed repair program," in which homeowners would be required to use only contractors pre-approved by Citizens. Instead of seeking out contractors on their own, homeowners would contact the insurer first. Citizens would inspect the damage and give the policyholder a list of selected contractors from which they could choose.

The company had suggested that the program might be optional, and that customers who participated would receive premium discounts and benefits. But some at Citizens felt the program would succeed only if it were mandatory.

Revised Proposed Plan Applies to Just One Type of Property Damage

The plan has since evolved, and the insurer now proposes to use it only for single-family homes that have suffered "water losses caused by accidental discharge from a plumbing system"

At Citizens' discretion, two options could be offered to homeowners, a Managed Repair Program and Emergency Water Removal Services. Customers in the Managed Repair Program would choose from approved contractors. Their repair claims would still be subject to policy deductibles and they would receive no discounts on premiums.

But Citizens would pay for the emergency water removal, and the policyholders' deductible would not apply to those services, nor would the final decision on whether the damage was covered change this commitment.

Citizens would benefit by being allowed to inspect the damage right away. By the time the insurer receives its "first notice of loss," a great deal has already happened, and contractors and attorneys are already involved. Citizens is currently negotiating with a repair management company to handle the program, which they hope will begin in March 2017.

Will Contractors Be Beholden to Insurers that Pre-Approve Them?

The narrow scope of the plan may limit its impact, but homeowners may still wonder whether it will harm their interests in the event of a plumbing discharge. Some skepticism may be warranted for an insurance program in which contractors could be more concerned about catering to the insurers that approved them than to the customers whose homes they are repairing.

It remains to be seen whether policyholders will be able to get the repairs done properly or collect on their claims. If you are concerned that an insurer is placing obstacles before you and pursuing stratagems to avoid paying property damage claims, an expert in property insurance coverage disputes and insurance litigation can help protect your rights.

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