Citizens Post Losses After Non-Weather Related Claims Soar

What Is Contributing to The Spike in Water Damage Claims in South Florida?

Citizens Property Insurance Corp. recently announced that it will post a $27.1 million loss for 2016. The company attributed the loss to rising legal costs and soaring claims stemming from nonweather-related water claims such as burst pipes and sudden dishwasher leaks.

As we previously reported in this blog, these claims have been a longstanding controversy that has drawn the attention of Florida lawmakers, mostly due to steadily rising insurance rates. Citizens is a non-profit, tax exempt entity was created over a decade ago to cover Floridians who could not get insurance after private insurers retreated from the market in the wake of a series of devastating hurricane seasons.

The company contends that the rate hikes were justified due to the surge in water-damage claims. Moreover, the insurer argues that a common practice known as “assignment of benefits” has been a key factor in the number of water-damage claims that have been filed by homeowners. This practice involves homeowners signing over insurance benefits to contractors who have been hired to perform repairs. Although the practice is legal, and designed to ensure claims are properly paid, the practice has been abused by scrupulous contractors who submit false claims.

Citizens previously said that this practice prompted the company to propose additional rate hikes. However, it is clear the rate hikes will not stem the losses the company incurred in 2016. In particular, Citizens saw a surge in water damage claims related to linking pipes in Miami-Dade, Broward and Palm Beach Counties, areas that private insurers have been shying away from since the Hurricane Matthew struck in 2005 – the last year that Citizens posted a loss, coincidentally.

The problem is compounded by the fact that many nonweather water damage claims lead to litigation, which ultimately drives up the cost of an average claim by $20,000 or more. While it is unclear whether the Florida legislature will take action to curb assignments of benefits, homeowners will invariably be forced to foot the bill in the form of higher rates. Citizens intends to add another 50,000 customers this year, and the company believes rate hikes will continue for the foreseeable future.

In the meantime, if you are a homeowner who is involved in a dispute with an insurer over nonweather related water damage or any other property insurance claim, this ongoing controversy may be in play. Now more than ever, it is crucial to engage the services of an experienced property claims attorney.