Condos say state insurer owes them millions for 2004 hurricane damage

Oct 8, 2008

Orlando Sentinel–October 8, 2008

Ludmilla Lelis | Sentinel Staff Writer

DAYTONA BEACH – It’s been four years since Florida suffered through its worst hurricane season in recorded history — the 2004 quartet of Charley, Frances, Jeanne and Ivan, and a cumulative $42 billion in damage.

Yet Citizens Property Insurance Corp. still has almost 2,000 unresolved homeowner-damage claims from that season and the 2005 storms.

Now, several beachfront condominiums in Volusia, unhappy with claims paid out by the state-run insurer, are taking Citizens to court.

A Volusia jury has started the first of nine trials from beachfront condominiums trying to get Citizens to pay more for 2004 hurricane damage. The condominiums claim the insurer isn’t paying what their policies cover and is shortchanging them millions of dollars.

It’s a refrain heard elsewhere in Florida — that Citizens delays paying claims and lowballs storm damage, according to public adjusters, attorneys and former Citizens employees.

They blame a loophole that has allowed the state’s largest property insurer to argue it is not subject to Florida’s negligence and bad-faith laws that help keep other insurers in line.

The state formed the insurer as a last resort for homeowners to help cover higher-risk areas that private companies were reluctant to insure.Citizens spokesman John Kuczwanski noted that only a small fraction of policyholders filing storm claims have complained about the process and it is rare for such cases to come to trial.

Kuczwanski disputes that Citizens is shortchanging policyholders.

"We have no basis to lowball claims, no policy to underevaluate claims," he said. "We do take the claims evaluation and review process very seriously."

The lawsuits are revisiting the 2004 hurricane season, hoping to prove in court that the insurer failed to live up to its policies.

In this current trial, Sunglow Condominiums, a 10-story, 64-unit building in Daytona Beach Shores, has received $370,000 in claim payments from Citizens, but the damage amounts to more than $5 million, said the condominium’s attorney, Andrew M. Plunkett, in his trial opener.

David Doyle, the attorney for Citizens, countered to jurors that the condominium is asking for more than the policy covers, and the insurer isn’t paying for damage because of years of neglect and lack of maintenance.

On Tuesday, the jury heard two engineering experts testify that Sunglow sustained the kind of damage that only a hurricane, and not age and neglect, can cause.

Gary Hart and Anurag Jain, structural engineers with Weidlinger Associates Inc., testified that the potent winds from a hurricane caused the damage evident at the condominium. Wind pressure and the actual movement of the building caused the exterior stucco to crack and warped the sliding glass doors, which then allowed driving rains to get inside the building.

It will be up to the jury to decide whether Citizens must pay Sunglow any more money. The trial is scheduled to run two weeks.

Past trials against Citizens have been complicated by its unique position as a state-run insurer.

"What we’ve seen in hundreds of cases with Citizens is that they’re just as bad as all the other insurance companies except worse because . . . they claim they’re the government and you can’t sue the government," said Alan Garfinkel, founding partner of the Fort Lauderdale law firm Katzman Garfinkel, who isn’t involved in the Volusia case.

Because policyholders can’t get private insurance, locations ensured by Citizens tend to suffer greater damage and, therefore, generate more disputes, said Martin Grace, professor of risk management at Georgia State University. Citizens paid $6 billion for 2004 and 2005 hurricane claims, compared with about $5 billion paid by State Farm and more than $2 billion paid by Allstate.

Consumer advocates said Citizens’ benefits outweigh its flaws.

"The government is known for bureaucracy, not customer service. But it does have a low price," said Bill Newton, executive director of Florida Consumer Action Network. The Legislature has frozen Citizens’ rates until 2010.

Policyholder suits over the bad-faith issue have been settled or resolved, so state court judges have yet to make a final ruling on the central question of Citizens’ immunity as a government entity. Last year, the Legislature amended one of three state laws dealing with the bad-faith matter, but the company’s status remains unclear because the statutes are conflicting.