Citizens Property Insurance Corporation Claims Committee hears monthly claims updates

Mar 13, 2013


At its meeting on March 8, 2013, Citizens Property Insurance Corporation (“Citizens”) Claims Committee (“Committee”) members heard updates on various types of claims.

To view the meeting materials, click here.

Citizens’ Vice President of Claims Operations Lance Malcolm opened the meeting, noting that over the course of 2012, the State-run insurer received 74,089 first notice of loss reports, which included 11,147 claims from Tropical storms Beryl, Debby, Isaac, and Sandy.

Those claims represented a 12.2 percent increase over 2011.  Approximately 93 percent of the 2012 claims were handled by independent adjusters, Mr. Malcolm stated.  The end result was an overall closing ratio of 99.2 percent.

He said litigation and appraisal closed claims increased by 12.8 percent in 2012.

He further noted that changes to Citizens’ organizational structure and workload were implemented in 2012 in an effort to bring continuity to the claims process by aligning appraisal handling with front-end claims management.

“We have seen ongoing reductions in the percentage of claims complaints and realized improvements in our customer service survey results at a score of 3.53 out of 4.0,” Mr. Malcolm said.  “We have seen a continued narrowing of the gap between Citizens’ average paid indemnity and that of the industry in Florida as evidenced by the Insurance Services Office’s fast-track data.”

He also reported that Citizens’ claims recovery team exceeded its gross subrogation target of $5.1 million, receiving $5.4 million in gross recovery-a 16 percent increase over 2011 recoveries.

Citizens is preparing for the commercial release of CORE on April 27, and will then focus on development of the Personal Lines CORE system, he added.

During Mr. Malcolm’s presentation, it was asked if there has been any progress on water remediation issues.

Citizens’ Chief Insurance Officer Yong Gilroy said that most efforts have instead been focused on the CORE system implementation related to building the proposed clearinghouse.  Mr. Gilroy said that water remediation issues were not one of Citizens’ top priorities.

Citizens’ President and CEO Barry Gilway noted that water remediation claims account for about 41 percent of Citizens’ claims volume.

Citizens’ Board of Governors Chairman Carlos Lacasa said he would like to eventually see a triage program on water and fire damage claims.  Under such a system, claims would be adjusted once the water leaching and proliferation of mold and mildew issues were taken care of, he said.

“It frustrates me to see we are not making progress on something like that,” Mr. Lacasa said.  “I understand we have to invest time in the CORE program . . . but before we embark on a managed repair program full-scale anyway, I would hope we would give serious attention to concept of triaging water and fire claims.”

Sinkhole Update

Jeff Lambert, Citizens’ sinkhole assistant director, noted that three teams are currently handling sinkhole claims for Citizens.   Two of those have completed the transition in moving to a field-based adjustment model and handle claims from beginning-to-end in a field-based system.   A third team soon will also complete the adjustment to a field-based adjustment model, Mr. Lambert noted.

New sinkhole claim volume and non-litigated pending claims are both down:   2012 new reported sinkhole claims have decreased 29.8 percent in total volume from 2011; total pending sinkhole claim inventory is approximately 5,422 claims, Mr. Lambert stated.

Non-litigated sinkhole claims pending inventory of 3,712 represents a reduction of 14.3 percent from year-end 2011.

Litigated sinkhole claims pending inventory of 1,710 represents an increase of 79.4 percent from year-end 2011.

It was noted that the primary driver of new sinkhole litigation is insureds filing lawsuits after Citizens has confirmed sinkhole activity and tendered initial claim benefits per s. 627.707, F.S.

Citizens also has been able to close 6,542 sinkhole claims through 2012 to date, compared with 4,112 through year-end 2011.   These totals represent a 59.1 percent year over year increase in closures.

The year-end 2012 sinkhole loss ratio for Citizens’ Personal Lines Account is 316.84 percent, compared with 873.88 percent at year-end 2011, representing a reduction of 63.7 percent, he added.

Drivers of the improved Loss and Loss Adjustment Expense Ratio are as follows:

  • 23 percent reduction in year-end 2012 number of sinkhole endorsements
  • 14.2 percent overall increase in direct earned premium
  • 58.6 percent decrease in calendar year incurred losses
  • 48.2 percent decrease in calendar year incurred allocated loss adjustment expense liabilities

It was noted that 1,097 new litigation assignments were received through year-end 2012 compared with

655 through year-end 2011, representing an increase of 65 percent.

Commercial Claims

Jeff Handy, Citizens’ assistant director of commercial claims, explained that Citizens’ commercial claims represent a rather small percent of overall policies in force, but a significant amount of exposure.

  • 80 percent are wind-only policies
  • Average residential exposure is $5,346,255
  • Average non-residential exposure is $606,305

“With 78 percent wind-only exposure in commercial at Citizens, we really have two speeds – a slow crawl and wide open,” Mr. Handy said.

Florida’s greatest concentration of commercial exposure is in Southeast Florida, the Tampa Bay area, and the Florida Panhandle, he noted.  These areas all include highly concentrated condominium development and high exposure to hurricanes.

Citizens’ commercial catastrophe plan was developed as part of a larger initiative, he explained, adding that Citizens’ commercial team is prepared to hire a large number of adjusters should a storm strike within a short period of time.

A plan has been developed to utilize Citizens’ field underwriting team to quickly complete large damage assessments for the largest commercial exposures within the county of landfall.  Following a storm, all commercial non-claims calls will be directed to a special unit prepared and equipped to handle the expected spike in phone traffic from Citizens’ commercial policyholders.

Citizens’ team adjusting program is outlining the handling procedure for losses and is responsible for determining which multiple adjusting resources are needed.

The plan also includes a “no-damage inspection program,” which provides that all insured buildings will be inspected.  If damages are found, they will be included in the losses.  If there are no damages, this also will be documented.

Mr. Handy noted that Citizens has contracted commitments from 647 commercial adjusters.  Of those, 624 adjusters in the system are in an “approved” status and an additional 438 adjusters are in a “not approved” status, meaning they could be missing a background check or a training certification.  He said more of those adjusters should move into the “approved” status as the 2013 storm season nears.

The 10 general adjuster and executive general adjuster firms being used provide Citizens with 1,062 adjusters available for commercial use, Mr. Handy said.  Citizens has also provided desk adjuster training for commercial adjusters, and has run 37 training sessions to date.  So far, 205 adjusters have completed the training.

Litigated and Disputed Claims Unit

Anne Olson, assistant director of litigated and disputed claims unit (“LDCU”) noted that 2012 new LDCU claims increased by 22.63 percent from 19,739 in 2011 to 24,207 in 2012.

Drivers of these types of claims include:

  • Water losses: 50.14 percent in 2012, compared with 49.83 percent in 2011
  • Weather-related losses: 18.61 percent in 2012 compared with 15.96 in 2011
  • Sinkhole losses 13.72 percent in 2012 compared with 14.19 percent in 2011

Top litigation drivers include:

1.       Long-term leakage:   24.21 percent in 2012, up slightly from 23.21 percent in 2011

2.       Value dispute:   9.76 percent in 2012, up slightly from 9.74 percent in 2011

3.       All sinkhole-related disputes:   13.66 percent in 2012, down slightly from 14.16 percent in 2011

Ms. Olson noted that:

  • Overall combined LDCU paid indemnity decreased 16.67 percent from $251,180,697 in 2011 to $209,305,905 in 2012.
  • Litigation paid indemnity decreased by 19.77 percent, from $141,095,350 in 2011 to $113,192,481 in 2012.
  • On a per-claim basis, the average paid litigation indemnity was reduced 32 percent, from $69,550 in 2011 to $47,288 in 2012.

Special Investigations Unit

Citizens’ Special Investigations Unit (“SIU”) manager Joe Theobald noted that SIU referrals increased 20 percent in 2012 to 1,154 claims, with SIU referrals amounting to 1.45 percent of new claims.

He further noted that Florida Division of Insurance Fraud (“DIF”) referrals increased to 218 for 2012, a 23.9 percent jump over 2011.  As of December 31, 2012, 91 of the 224 cases are currently open and awaiting review.

The DIF made three arrests between January 1, 2013 and March 1, 2013 based on Citizens’ SIU referrals, Mr. Theobald reported.  One arrest involved a fraudulent sinkhole claim.   Another involved a water mitigation claim and the “assignment of benefits” to a water mitigation provider.  Yet another was related to a two-year long investigation of organized fraud activity involving burglary and theft claims.

Catastrophe Operations

Jimmy Johnson, Citizens’ assistant director of catastrophe operations, noted that Citizens’ 2013 Catastrophe Enterprise Plan will be finalized in May.

The plan, which is in the process of being tested, is designed to ensure overall readiness for a catastrophe. 

Mr. Johnson said the preparedness exercises are progressing as planned.

“We are early in the season and in the process of doing some additional credentialing. We have over 3,700 resources that are ready to hit the ground force today, but again by storm season we expect to have an additional 1,000 resources so we should be in a good shape,” Mr. Johnson said.

After discussion on various purchasing-related items,  the meeting was adjourned.


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