Article by Susan Odess in Today’s Miami Herald: “Clients Must Use Insurer’s Contractor or Face $10k Cap”

Siegfried Rivera
October 16, 2017


The firm’s Susan C. Odess authored an article that appeared as a “My View” guest column in the Business Monday weekly supplement of today’s Miami Herald.  The article, which is titled “Clients Must Use Insurer’s Contractor or Face $10k Cap,” focuses on a new rule from Citizen’s Property Insurance that limits claim payouts to $10,000 unless policyholders agree to use the insurer’s preselected contractors.  The article reads:

Beginning in February, Citizens will be able to force commercial and residential property policyholders who file claims for all non-weather water losses to use the company’s preapproved contractor or agree to limit their total payout to $10,000. This arbitrary figure is artificially low, as many claims involving water losses often cost much more to repair.

It is no surprise that Citizens and other insurance carriers would seek to impose such a measure in order to keep their claim payouts as low as possible. By forcing policyholders to use carrier-preferred contractors, insurers would be able to negotiate deeply discounted rates from their selected vendors, which will always be incentivized to acquiesce to the insurance companies in order to maintain their preferred status.

Property owners with damages in excess of $10,000 will be unable to vet and select the contractor of their choice unless they are willing to pay the additional expenses. Those who have relationships with companies in the construction field will be unable to turn to their most trusted sources unless they agree to the $10,000 cap.

For the policyholders, the fact that the insurance company and the contractor’s goals for keeping costs as low as possible would be completely aligned will create a significant conflict of interest between them and the contractor. This naturally leads to issues involving shoddy work and construction, which could easily leave property owners with no other recourse but to resort to litigation.

Susan’s article concludes:

In their zeal to gain control over repair contractors, the state’s property insurers will become willfully blind to the fact that this new rule will inevitably lead to more litigation. Contractors will cut corners in order to maintain their fruitful relationships with the insurers, and many policyholders will quickly turn to litigation immediately after it becomes evident that their interests and those of the contractor are not aligned. This will delay repairs for property owners, and the carriers will ultimately raise premiums to cover their increased litigation costs.

With the implementation of this new rule for Citizens that will certainly be duplicated by many, if not all, of the state’s private sector carriers, Florida property insurers will reap significant financial benefits at the expense of their policyholders, who will continue to pay some of the highest property insurance rates in the country.

In response, the state’s lawmakers should enact legislation during next year’s session to ban caps for claims by policyholders who choose not to work with their insurer’s preferred contractor. The $10,000 damages cap will effectively green light the underpayment of water-loss claims in an effort to maximize insurers’ profits. Florida property owners should encourage their state senators and representatives to take legislative action against this onerous new insurance measure.

Our firm salutes Susan for sharing her insights into the ramifications of this new insurance measure with the readers of the Miami HeraldClick here to read the complete article in the newspaper’s website.