A month old but I did not see it posted here so…
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Miami (March 11, 2015, 1:55 PM ET) – A Florida appeals court on Tuesday affirmed the dismissal of a putative class action claiming state-backed insurer Citizens Property Insurance Corp. violated hundreds of thousands of policyholders’ contracts through a reinspection program that rescinded upward of $190 million in premium credits.
Florida’s First District Court of Appeal agreed with the trial court’s determination that the plaintiffs in the suit could not bring their suit until they had exhausted the administrative remedies available to them under state law.
“Appellants have failed to persuade us that they cannot proceed in the manner provided for in section 627.371 in seeking a resolution of the issue as to whether, pursuant to their policy with appellee, they are entitled to overpaid premiums as a result of appellee’s inspections,” the appeals court said.
Florida statute requires insurers to provide discounts on premiums to policyholders who agree to have their homes inspected to prove they have certain construction features to protect from windstorm damage. But in an effort to drum up revenue, lead plaintiff Patricia Asseff alleged Citizens improperly applied new standards to existing policies and, after conducting inspections under the guise of targeting fraud, unfairly took away rebates from homes that had undergone no structural changes since their rebates were approved.
Since implementing its reinspection program in 2010, Citizens has reviewed 360,000 homes and eliminated wind mitigation rebates for 266,000 of them, according to data obtained by Assef’s attorney Gary Farmer Jr. and the Florida Association for Insurance Reform, which is supporting the suit.
The average premium increase for those homeowners was $800, and at a cost of $70 million for the reinspection program, Citizens realized a $120 million gain in revenue, Farmer said.
Asseff argued that section 627.371, which sets up an administrative review process for anyone challenging rates issued by an insurer, does not apply in this case because it is not about ratemaking but about premium credits.
But the First District disagreed, relying on a 2010 decision by the Fourth District in Serchay v. State Farm Florida Insurance Co., which involved a dispute between a homeowner and his insurer over a discount for a windstorm-mitigating hip roof.
“As the Fourth District in Serchay explained, an insured who claims to have been wrongly deprived of a premium discount is essentially claiming to have been aggrieved by the rate charged by the insurer,” the First District said.
Asseff, a Hollywood city commissioner who has had a policy with Citizens since 2009, saw her premium jump from $4,500 for windstorm coverage to $12,700 after the inspection, according to Todd Stabinski of Stabinski & Funt PA, another of her attorneys.
The suit sought declaratory judgment and injunction against Citizens, as well as damages and attorneys’ fees on counts of contract impairment, violation of due process and illegal taking. Citizens was created by the Florida Legislature in 2002 as a residual market insurer and is considered a state entity, not a private insurance company, according to the complaint.
To receive a wind mitigation premium, policyholders have to fill out a mitigation form, pay for an engineer to certify the form and agree that Citizens can conduct its own inspection. According to the complaint, Citizens in most, if not all cases, had not carried out its own inspection and had approved the rebates based on the certified forms.
The plaintiffs are represented by Gary M. Farmer Jr., Steven R. Jaffe and Mark S. Fistos of Farmer Jaffe Weissing Edwards Fistos & Lehrman PL, Todd J. Stabinski of Stabinski & Funt PA and Elliot B. Kula, W. Aaron Daniel and Daija M. Page of Kula & Associates PA.
Citizens is represented by Karen D. Walker, Stephen H. Grimes and Matthew H. Mears of Holland & Knight LLP.
The case is Asseff et al. v. Citizens Property Insurance Corp., case number 1D14-1822, in the First District Court of Appeal of Florida.