Tightening the Leaky Faucet: Citizens Proposed Policy Changes For Water-Damage Claims
Citizens Property and Casualty, the state-backed homeowner insurance company, should be lauded for its current efforts in trying to save all of its policyholders from another inevitable rate hike by proposing policy changes that would, in our view, curb abusive water damage claims by some policyholders that, ultimately, negatively affect the consumer. Citizens’ Board of Governors has proposed measures that would stymie the gross misuse of the insurance policy: the filing of over-reaching water loss insurance claims designed to replace entire plumbing systems in ageing buildings, rather than just to indemnify to the extent of a covered loss. This misuse is very prevalent in South Florida and is increasing statewide. As the News Service of Florida reports, in Miami-Dade County alone, the frequency of water damage claims have increased from 1 in 12 homeowners with a Citizens policy, with costs below $9,000 in the year 2012, to a current frequency of 1 in 8 homeowners with a Citizen’s policy, with an average cost exceeding $15,000. In other words, the frequency of policyholders with a claim has increased by 50% in only 3 years, whicvle the cost per claim has increased almost 70% in the same time short frame.
The changes to the policy, if approved by the Florida Office of Insurance Regulation, will require water-damage to be reported within 72 hours; impose a cap for the initial payout for emergency services to an amount between $2,500 to $5,000; and limit coverage to repairs and replacement of materials strictly to the area of the insured home affected by the damage.
Citizens also seeks to curb the use of ‘assignments of benefits’, which allow third parties to be proxy for the insured in order to collect benefits. Many of these assignments are made to contractors and public adjusters and have contributed to increased operating and litigation costs and were a factor in the 2016 rate hike.
Citizens’ proposals are sensible to protect the financial soundness of the state’s insurer of last resort for hundreds of thousands of Florida homeowners. Clearly, public adjusters, contractors, and homeowner’s attorneys opposing this change are seeking to re-write the scope of the coverage to make the policy a worry –free maintenance contract, rather than its intended use as indemnification from sudden and accidental peril. We urge the Florida legislature to adopt Citizens’ proposals to stem the flow of the increased water damage claims and maintain a sound system of insurance so that it is there in the time of need for those who unfortunately suffer a covered loss.