State Insurance Company Sues Disabled Hurricane Victim

One wonders if Jeb Bush, who's now winging it back to attend his brother's $40 million inauguration celebration, can find the time to do a little 'fact finding' about Florida storm victims of the state-controlled insurance company.

While Florida governor Jeb Bush was planning his whirlwind 3-day tour of South Asia to polish his political image and 'find facts' about tsunami damage anyone can see 24/7 on their television screen, back home the state-owned Citizens Property Insurance Co. -- over which you can be sure Governor Bush has ultimate authority -- was filing a lawsuit against a disabled policy holder who dared to make a claim for wind damage after his house was declared a total loss following Hurricane Ivan.

Citizens Property Insurance was created by the state of Florida, as its web site describes to "more efficiently and effectively [provide] insurance to, and [serve] the needs of, homeowners in high-risk areas and others who cannot find coverage in the open, private insurance market." Now, it says it will be sending hundreds of letters to other premium-paying customers who've made wind claims, telling them of the lawsuit and saying they'll hear from Citizens again if and when there is "a final determination from the courts regarding its obligations... ."

That reads, "Don't call us, we'll call you." As so many have said, dealing with Citizens Property Insurance Co. is 'worse than Hurricane Ivan.'

Amber Bolman of the Pensacola News Journal has the story:

The insurer of last resort for Florida home owners is suing an Escambia County couple, alleging the company should not be required to pay the full wind policy coverage on their destroyed Grande Lagoon home because most of the home's damage was caused by flooding.

In a case that could affect hundreds of local home owners, Citizens Property Insurance Corp. is asking the Circuit Court to nullify an earlier ruling that obligates insurance carriers to pay out full wind policy limits in cases where homes have been deemed total losses, even if only a portion of the damage was inflicted by wind.

Some attorneys are speculating the case could further delay insurance settlements for Panhandle families who have been waiting months for checks to begin rebuilding their homes.

"This thing could take two years to resolve," said plaintiff's attorney Bob Kerrigan. "And in the meantime, these people who have already had their homes destroyed are going to have to sit around and wait some more while the insurance companies try to get the laws changed to avoid paying."

Barbara and Ralph Perkins, whose home on Grande Lagoon Boulevard was devastated by Hurricane Ivan, were notified of the lawsuit last week after having demanded full payment on their $140,000 wind policy from Citizens.

To make matters worse, Bolman reports, in targeting the Perkins couple, Citizens is picking on a disabled Vietnam War veteran. Ralph Perkins not only needs a house, he needs it to be wheelchair-accessible.

What is going on here? In effect, Citizens simply doesn't like the rule of law followed in the Florida case of Mierzwa v. Florida Windstorm Underwriting Assn., 877 So.2d 774 (4th DCA 2004). . It's decided to challenge that existing rule of law by suing one of its customers in another court, sending intimidating letters to the others whose homes have been destroyed by a combination of wind and local ordinances that require the home to be torn down if it's more than 50% damaged, and then use the pending lawsuit as an excuse not to adjust windstorm claims for the next several years.

Ahhh! So that's what Citizens meant when it claimed last month that it would have all claims 'settled' by the end of 2004.

One wonders if Jeb Bush, who's now winging it back to attend his brother's $40 million inauguration celebration, can find the time to do a little 'fact finding' about Florida storm victims of the state-controlled insurance company. Given this latest move by Citizens, it's conceivable that all of South Asia will be rebuilt before hundreds of Florida families like the Perkins' have a home again.

Pensacola attorney Bob Kerrigan, the News Journal reports, is calling on the state's Department of Financial Services to require Citizens to make payments to affected home owners.

"The state-controlled insurance company is suing citizens of the state trying to overturn a law they don't like," Kerrigan said. "The law says home owners in this situation should have their full policy limits paid. It's very clear."

It's important to understand what's going on here. Florida's "value policy law" has been on the books for decades. It applies to all state-regulated property insurers, the state-owned Citizens Property Insurance Co. among them. All of those companies have been setting rates, and collecting premiums, and establishing a competitive market based on a variety of risk factors, the "value policy law" among them.

The "value policy law" simply says that if a structure is effectively totalled and a covered peril (for example, wind) contributed to the damage, the policy owner who has been paying premiums is entitled to the policy limits on which those premiums were based.

The Mierzwa case did not particularly break new ground when the court held that in determining whether a structure has been "totaled" the insurance company must take into account, as well, the impact of local and state building codes. An analogy might be drawn to auto collision policies: if the frame of your car is damaged irreparably, you rightly would expect to collect on the lost value of the total vehicle even if, in theory, the car could be reconstructed on top of the damaged frame. You collect the full "policy value" because you wouldn't be allowed by local law to register or drive the rebuilt vehicle in its unsafe condition.

In Mierzwa, as in the case of hundreds of Northwest Florida hurricane victims, existing local law specifies that if the structure is located in a flood plain and it suffers cumulative damage of more than 50%, then it must be torn down and re-built on pilings.

If Citizens doesn't like the "value policy law" it's free to attempt to convince the legislature to amend or repeal it. But as things stood when Citizens was collecting premiums from policy holders, that was the law. As things stood when Hurricane Ivan destroyed thousands of structures in flood zones around the state, that was the law. As things stand now with tens of thousands of hurricane claims still pending with Citizens, that is the law.

Instead of following the law, Citizens has chosen to sue some customers and send threatening letters to the rest, hoping the courts eventually will retroactively overturn the Mierzwa holding. Beyond the individual hardships this will cause, the tactic virtually guarantees that it will be many, many years before coastal communities throughout Northwest Florida can recover from Hurricane Ivan. Everything from the school property tax base to tourist sales tax revenues will be adversely affected.

The state's property insurer betrays its core mission and the very reasons it was created when it targets its own customers with lawsuits and intimidating settlement practices. Governor Bush and state CFO Tom Gallagher should put a stop to these abusive practices -- right now.