The Florida Legislature created state-run Citizens Property Insurance Corp. to serve property owners who couldn't find coverage elsewhere, but also to ensure the vitality of the state's real estate market. Now a $6.5 million contract with an outside legal firm that developed a one-size-fits-all sinkhole settlement strategy raises questions about whether the company will try to close off avenues of redress for customers. Given the insurer's recent back-door rate increases and takeout campaign, Citizens customers have reason to be leery, and lawmakers should be watching. • The Citizens board voted 4-1 last week to hire Ackerman, Link & Sartory P.A. of West Palm Beach for three years to handle all its claims litigation — from sinkholes to other property claims. The contract comes as the law firm's previous $1.5 million contract with Citizens was exhausted as it worked to develop a sinkhole settlement strategy.
Citizens announced the Ackerman strategy earlier this month, saying it was mailing settlement offers to all sinkhole claimants proposing to directly pay contractors to fix the problems — with multiple caveats. Customers would have to drop litigation, absorb legal bills and fees, and accept Citizens' preferred repair method of putting grout or pressurized cement in the ground. Some homeowners don't like that procedure, favoring methods such as pinning, or driving steel pins deep into the ground. This conflict came to light most recently in Dunedin when a sinkhole opened up under a Citizens-covered home where cement was being pumped in the ground after the owner finally acquiesced to Citizens' repair plan.
Yet even before this firm's prescriptive solution to sinkhole claims has had time to be implemented, Citizens is doubling down, hiring the same firm to develop settlement strategies for other kinds of claims and to eventually train Citizens staff to handle the claims in the same vein.
To be sure, Citizens needs a cost-effective method for dispensing of frivolous or fraudulent claims. And its track record on settling valid claims needs work. But the challenge remains to ensure that in the process, Citizens' customers don't see their options unduly proscribed. Citizens may be the insurer of last resort, but that should not mean it has the right to run roughshod over customers who have paid a premium for protection they may now find harder to collect.
Citizens officials say the new strategy will allow them to save as much as $97 million in future legal defense fees, and they claim a statewide, uniform approach to cases is needed.
That may be a good business decision, but it remains to be seen what it means for consumers and their right to the insurance protection they have paid for. If Citizens goes too far, the Legislature should step in.