CITIZENS

“It can be difficult for [policyholders] to find qualified contractors.” Paul Handerhan, Florida Association for Insurance Reform

on non-weather-related water claims, such as discharges from broken pipes, appliances andwater heaters.

But the new policy language does not specify that, leaving open the option to provide the service for any covered peril.

Policyholders have the right not to consent to use Citizens’ contractors, and even to terminate consent afterwork has begun.

Yet the new language reminds customers that if they choose not to participate, Citizens has the right to repair the damaged property anyway “in lieu of payment and at our option.”

That last phrase, “in lieu of payment and at our option,” will be added to Citizens homeowner policies in conjunction with the rollout of the new managed repair program.

Attorneys who specialize in suing insurance companies contend the program aims to deprive customers of their right to choose who repairs their home.

The new language “seems to nudge policyholders into having their homes fixed by the carrier rather than receiving a payment,” said Anthony Lopez, a Coconut Grovebased plaintiffs attorney who has filed hundreds of lawsuits against Citizens.

Ely Levy, a Hollywoodbased plaintiffs attorney, said it sounds like Citizens is hanging a “Sword of Damocles” over policyholders: “Either have Citizens repair the damage or having a contractor affiliated with Citizens do the repair. That’s really the same thing.”

But Paul Handerhan, senior vice president for public policy for the Fort Lauderdale-based watchdog group, Florida Association for Insurance Reform, said the program could benefit policyholders if it provides qualified contractors who apply for appropriate permits, avoid filing liens against homeowners, and restore homeowners’ damaged properties to “pre-loss condition.”

“It can be difficult for [policyholders] to find qualified contractors,” he said.

Handerhan pointed out that home insurance policies have for years included a clause giving insurers the “right to repair.” Insurers rarely exercise the right, he said, because once they begin repairs, they are liable to complete them no matter what unforeseen costs arise along the way. By dispatching contractors to perform repairs, insurers can cap their liability at the coverage limit chosen by the policyholder.

He says right to repair is typically exercised if, for example, a repair contractor

drops a hammer on a tile floor and damages it, provoking the homeowner to demand $250,000 to replace the entire floor and all of the kitchen cabinetry. An insurance company will invoke its right to repair if it can replace the single damaged tile for $500, he said.

With the managed repair network and new policy language, Citizens is “clearly wanting to preserve their right to do the repairs but there’s a lot of liability. Most carriers are very careful before invoking the right to repair,” Handerhan said.

Peltier said thecompany does not intend to exercise its right to repair option when policyholders agree to use the program and then change their mind.

“The purpose of the managed repair [program] is to utilize the right-to-repair concept as a mutually agreed-upon arrangement,” he said.

As to whether its new affiliation with the contractor network will cause the company to exercise its right to repair more often for policyholders who initially choose not to use the program, Peltier said, “I don’t know the answer to that question.”

Insurers that most often exercise the “right to repair” use it as part of their business model, including People’s Trust and Florida Peninsula, Handerhan said.

People’s Trust, based in Deerfield Beach, created its own repair company, called Rapid Response Team, that customers agree to use in return for paying a discounted rate.

Florida Peninsula operates similarly, but uses Contractor Connection, the same network contracted by Citizens. Like People’s Trust, Florida Peninsula customers are obligated to use their insurer’s preferred contractor.

Those companies have experienced increases in lawsuits recently challenging the quality of work performed by their managed repair companies, Handerhan said.

“Litigation rates are dramatically higher for companies invoking the right to repair,” he said.

A common criticism by attorneys is that affiliated repair companies cut corners to save money for insurance companies so they’ll secure more referrals in the future.

ImranM alik, a plaintiffs attorney based in Orlando, said those relationships amount to “an inherent conflict of interest” that will lead to more, not fewer, suits against Citizens.

“The damages in this type of litigation is not limited to the policy limits in insurance policies andmay far exceed the policy limits in some cases,” Malik said. “How does this approach save taxpayer money?”

The new program is intended to help Citizens keep claims costs down and prevent costly litigation that the company says has skyrocketed over the past seven years.

Costs stemming from water damage claims in South Florida have increased, Citizens says, because contractors convince policyholders to sign over benefits of their claims, then submit inflated bills and file lawsuits when Citizens balks at paying the full invoice.

Citizens and other insurers point to a dozen or so law firms, mostly in South Florida, that specialize in representing contractors on “Assignment of Benefits” claims. Attorneys are motivated because they can collect legal fees from insurers if suits are settled for more than the insurer initially offers to pay.

Citizens CEO Barry Gilway first proposed creating a managed repair network to fight Assignment of Benefits abuses in late 2015.

Initially, Gilway said he envisioned the program as mandatory for all Citizens customers, but last year said he changed his mind after determining it would be too difficult to convince the state Legislature to go along.

Citizens had 224,911 residential and commercial policies in the tricounty region and 446,506 statewide at the end of 2016, according to state insurance data. The new program will be made available for policies insuring owner-occupied homes and rental homes, according to documents Citizens filed with the state Office of Insurance Regulation.

Another element of the new program provides emergency water removal services at no cost to policyholders, regardless of whether the underlying cause of the flooding is covered.

That part of the program is welcome even if the managed repair element does not appear consumer friendly, said Nancy Dominguez, managing director of the Florida Association of Public Insurance Agents.