Citizens Implements $1.8M Estimate Review Program for Florida Water Loss Claims

Florida’s insurer of last resort, Citizens, has expanded its efforts to curb increasing water loss claims with a new Water Mitigation Estimate Review Program.

Citizens Chief Claims Officer Jay Adams said the new program will provide Citizens with “certified and trained professionals to assess contractor expenses and/or invoices related to restoring residential and commercial properties due to water damage.”

Citizens’ Board of Governors awarded a contract of up to $1.8 million for three years to insurance claims servicing firm Lynx Services LLC, which will examine whether claim invoices associated with water damage are reasonable and adhere to industry standards. The actual amount of the contract will depend on the number of claims reviewed.

“The goal is to identify inflated or excessive charges on invoices from contractors that have performed water damage restorations for Citizens’ policyholders and to contest or adjust invoices so it comports with industry standards,” Adams said of the action item presented to the Board on July 19.

Citizens, as well as other Florida insurers, allege that unscrupulous contractors and water mitigation firms are taking advantage of the assignment of benefits (AOB) provision on insurance policies and inflating water damage claims. The problem has been dubbed by Florida industry and consumer advocates as an “insurance crisis” and has led to statewide rate increases for homeowners from multiple insurance companies, including Citizens.

The Lynx contract was approved unanimously by the five of eight board members who called in for the teleconference. The yearly spend for the contract is $365,813 and the estimated cost is a budgeted expense that is paid as an “Adjusting Expense” under the claim file. The contract also features two optional one-year renewals after the three-year base term.

Michael Peltier, Citizens Media Relations manager, said the disturbing rise in both the frequency and severity of non-related water loss claims led the insurer to launch a pilot review program in Sept. 2015 to see if it could help the company get a handle on the issue.

“After seeing success, we decided to go forward and award a contract. We think this will allow us to protect our policyholders while ensuring that repairs are reasonable and reflect industry-recognized standards,” Peltier said.

Citizens sought vendors capable of providing invoice and estimate reviews by certified IICRC (Institute of Inspection Cleaning and Restoration Certification) experienced and professional staff, the company said.

Citizens notified Lynx Services on June 9 of its intent to award the contract, and listed Paul Davis Restoration as the contingent contract.

Fort Myers, Fla.-based Lynx will provide objective analysis of estimates, invoices, and related documentation submitted to Citizens by third parties with respect to water mitigation and mold remediation services, as stated in the contract description.

According to Citizens’ contract stipulations, Lynx will perform a “comprehensive review of a third party estimate and assess whether it reflects services that are reasonable and customary, and in adherence to IICRC standards, practices and guidelines for water mitigation and mold remediation…”

Lynx will be responsible for providing to Citizens individual written reports of each assessment that compares its findings to the third party estimate. Lynx will also negotiate directly with the third party vendor who submitted an estimate to reach an agreement as to the total fees payable to the third party. If there is a savings based on the negotiated price, Citizens will compensate Lynx a percentage of the negotiated savings. The contract stipulates that Lynx must maintain contact with the assigned Citizens adjuster throughout negotiations with the service provider.

Citizens other recent efforts to address AOB abuse included policy contract wording changes regarding emergency services and notification requirements approved by the Florida Office of Insurance Regulation (OIR). The new wording took effect on all new and existing Citizens’ policies on July 1. At least two dozen other insurers in the state have also filed for policy changes with OIR because of a rise in water claims using AOB.

Just last month, Citizens’ board also approved an overall nearly 7 percent rate increase statewide because of AOB abuse for water loss claims, which has been particularly rampant in South Florida.

OIR is expected to hold a public hearing for the proposed Citizens rates at some point this summer.

“Without significant reform, Citizens policyholders must brace themselves for continued rate hikes as water losses and increased costs surrounding assignment of benefits eat into surplus and force Citizens to repeatedly raise rates to fulfill its statutory obligations to set actuarially sound rates under the glide path,” the company said in June.