Citizens Insurance settles fraud case

State-owned Citizens Property Insurance Corp. has agreed to a $1 million settlement against a Coral Gables-based The Strems Law Firm, P.A. Insurers claim Strems was one of the biggest drivers of excessive litigation, which they say drives up homeowner premiums.

State records show that over the course of six years, between May 2014 and June 2020, Scot Strems and his firm filed 8,756 lawsuits against property insurers, mostly in South Florida, averaging 1,459 lawsuits per year.

The settlement caps a two-year court battle with The Strems Law Firm, P.A. In a lawsuit filed in June 2020, Citizens accused the firm and several of its associates of running a racketeering operation in violation of the federal Racketeering Influenced and Corrupt Organizations Act.

Co-defendants named in the suit were public consulting firm Contender Claims Consultants, repair contractor All Insurance

Restoration Services, along with Strems and three other individuals who worked for the associated companies.

Citizens alleged that the defendants worked together to inflate or manufacture insurance claims — mostly involving non-weather-related water damage — and that they submitted them through “false and fictitious invoices” on behalf of policyholders.

After the more than 8,000 lawsuits in a six year period, the state Supreme Court suspended Strems indefinitely in response to a Florida Bar complaint. Strems was later suspended for two years and another Florida Bar complaint is pending before the state Supreme Court. His law firm was restructured following his suspension and now does business as The Property Advocates, P.A.

One of the Bar’s complaints accused Strems of targeting thousands of homeowners he and his associates knew wouldn’t ask too many questions “including the elderly, immigrants, and people of humble means and education” who they thought “were unlikely to recognize the impropriety of the scheme.”

Under terms of the settlement finalized on March 21, Citizens will be paid $1 million and will dismiss its case against all of the defendants. Both sides will pay their own legal fees, according to a Citizens news release.

“Strems and the fellow defendants continue to deny wrongdoing in the settlement agreement, while Citizens stands behind the allegations in its complaint,” the release said.

Lawyers and insurance costs

Insurers in Florida have long blamed a small group of litigious plaintiffs attorneys, including Stems, for perpetuating fraudulent claims by working closely with repair contractors that convince homeowners to sign over their rights to pursue their claims, then file lawsuits in the homeowners’ names without informing them.

The practice became widespread in Broward, Palm Beach and Miami-Dade counties in the middle of the last decade. Those abuses mostly involved claims filed following leaks of kitchen or bathroom pipes, appliances and water heaters.

More recently, insurers have claimed that they are suffering heavy financial losses from claims abuses and litigation by roof repair companies and their attorneys. The companies dispatch solicitors who knock on doors and promise homeowners that they can get their insurers to pay for a new roof.

They then file claims for replacement of entire roofs and file lawsuits if the insurers contest their invoice. Roof coverage will likely be addressed in the upcoming special Legislative session on property insurance.

Insurance companies are pushing legislation that would allow them to cover only the depreciated value of roofs in their standard multiperil homeowner policies. Currently, standard policies cover full costs to replace damaged roofs.