State let insurers underpay hurricane claims, lawsuit says

Apr 3, 2008

Petition says homeowners were not told they could seek mediation.

Anika Myers Palm
Sentinel staff writer
Orlando Sentinel–Apr. 3, 2008

The state’s financial- and insurance-regulation departments are accused in a lawsuit of violating consumer-protection laws and allowing insurance companies to underpay hurricane claims. The suit wasfiled Wednesday by a South Florida homeowner.

The suit alleges that property-insurance providers have deliberately failed to notify policyholders that they can ask for a mediated resolution of their hurricane claims, and that the Office of Insurance Regulation and the Department of Financial Services have allowed the insurers to get away with it.

The petition argues that by not notifying homeowners about mediation, the insurance industry saved about $400 million it would have had to pay in mediation and additional claims-settlement costs.

“We had exhausted every administrative option,” said Paul Berger, managing attorney of the Coral Springs-based Hurricane Law Group, which is representing Joanne Sica, the homeowner. “Our hands were tied; we had no other choice.”

No class-action status

Berger said the Hurricane Law Group is not planning to seek class-action status, but that any Florida homeowner who files a hurricane claim would benefit if the state is clearer about insurers’ responsibilities during the claims process.

Sica’s Broward County home was damaged in October 2005 during Hurricane Wilma, according to the petition. She filed a claim with the Florida Insurance Guaranty Association — her then-insurance provider, Poe Financial Group, is in state receivership — detailing a damage estimate of more than $98,000.

The association’s adjusters in turn provided estimates between $5,000 and $44,000, and ultimately sent her a check for a little more than $5,000.

The suit, which also names Florida Chief Financial Officer Alex Sink and Insurance Commissioner Kevin McCarty, alleges that Sica wasn’t told that she could participate in a mediation program to resolve her claim, a notification required by law.

The lawsuit, filed in the 2nd Judicial Circuit Court, also asks the court to order insurers to be subject to auditing to determine whether they’ve notified policyholders who have filed claims about their right to mediation and keep insurers from interfering in the actions of state agencies related to the mediation program.

The financial-services and insurance-regulation agencies pledge to study the lawsuit thoroughly.

“The office has not yet been served a copy of the lawsuit, but once it is received, Commissioner McCarty and the legal team will carefully review it and determine an appropriate legal strategy,” said Tom Zutell, a spokesman for the insurance regulators’ office.

And the financial-services department says it is ready to do battle over the suit’s charges.

‘Disputes the allegations’

“For the past several years, the Department of Financial Services has been focused on helping homeowners in insurance disputes reach mediation so they may receive a fair resolution,” Tara Klimek, a spokeswoman for the Department of Financial Services, said in a statement. “The Department disputes the allegations . . . and will respond accordingly in court.”

Berger said he hopes the lawsuit will encourage state offices to be more proactive in enforcing the requirement that insurers notify policyholders about their options.

“We have been dealing with them for months on this,” Berger said. “We keep providing evidence of violation after violation after violation, and they’ve just done nothing.”