TALLAHASSEE — Florida homeowners filed a class-action suit against Citizens Property Insurance Corp. on Tuesday, claiming the state-run insurer is systematically overvaluing properties in order to raise premiums.
Two New Port Richey homeowners claimed Citizens has used a software system called 360Value to inflate the replacement cost of their homes, causing their premiums to skyrocket by more than 100 percent.
"What they've done is a massive tax increase, a backdoor tax increase," said David Welch, a regional director of Florida Association for Insurance Reform, which is pushing the lawsuit. "They've done that by coming in and saying, 'Hey, folks, the appraiser says that your house is worth $70,000. We say that your house is worth $140,000. And therefore, we are going to charge you the rates for that $140,000.' "
Joe Freitas, one of the plaintiffs, said that's what happened to him after he bought his Port Richey home in September. Less than a month after buying the house for $109,000, his agent told him Citizens would insure the property only at a replacement value of $236,700. His insurance premium doubled from $917 to $1,846.
Citizens has denied using its valuation software to achieve rate increases outside the legislative process, which requires lawmakers and the Office of Insurance Regulation to approve large rate hikes.
"Our motivation in establishing an accurate replacement cost valuation is to protect our policyholders and make sure they can restore their home after a catastrophic loss," spokeswoman Christine Ashburn said in a statement. "Any assertion to the contrary is simply wrong."
The state-run insurer of 1.5 million Floridians told agents in November that it would use its 360Value system exclusively to value homes, and would no longer take into account estimates by professional appraisers and contractors.
Last month, the Tampa Bay Times documented cases in which homeowners were battling Citizens over estimates that valued their properties not only far above market value, but also far higher than what independent appraisers said it would cost to rebuild.
A week later, amid consumer outcry, Citizens reversed course on using the 360Value system exclusively.
Still, critics say Citizens — which is exposed to about $500 billion in potential claims — continues to overvalue homes and overcharge homeowners. Ruth Lauro of New Port Richey said her insurance premiums more than doubled after Citizens gave her small two-bedroom house a replacement value of $124,000, although an appraiser found contractors willing to rebuild the home for less than half that.
"They really did me in," said Lauro, who is 82 and looking for a job. "They increased my flood insurance from $400 to $800. I've never had a puddle near my house."
Sen. Mike Fasano, R-New Port Richey, a constant critic of Citizens, joined Lauro and Freitas at a news conference Tuesday to announce the lawsuit, filed in Pasco County.
"Shame on Citizens, shame on the private companies for not going through the process," he said. "For using the ability to circumvent the law and raise their premiums on the backs of the senior citizens like Ms. Lauro."