Monday, February 28, 2005

Last Day to Apply for FEMA Aid

Today is the deadline to apply for Federal Emergency Management Agency disaster relief funds. There are 3 ways to do it:

1. Apply by phone: (800)621-3362.

2. Go on-line:

3. Apply in person: at one of the area "Disaster Recovery Centers" --

  • 33 Brent Lane (Pensacola);

  • 6001A Industrial Boulevard (Century);

  • 13390 Perdido Key Drive (Perdido);

  • Santa Rosa County Auditorium, 6051 Old Bagdad Highway (Milton).

Saturday, February 26, 2005

Insurer's Profits Rise 90% in 2004

Wipe away those tears you've been shedding for State Farm Insurance. Friday, the carrier announced that 2004 was a banner year for profits -- even for its property casualty business.

As the Kansas City Star reports:
State Farm Insurance Co. posted a $5.3 billion profit in 2004, up nearly 90 percent from the year before despite four hurricanes that pounded Florida and other southern states last year.

* * *
Overall, State Farm's claims dipped about 5 percent last year even though payouts for hurricanes and other disasters were up 13 percent, spokesman Dick Luedke said. The net decline helped the company post an underwriting gain of about $2 billion, compared with a loss of $281 million in 2003.

Luedke also said the company saved nearly $630 million on hurricane claims through a special fund in Florida that protects insurers against weather-related losses. Insurers pay into the fund, then draw from it as needed.
In a State Farm company press release, it was revealed that the "underwriting gain" from its subsidiary property casualty group that includes State Farm Florida Insurance Company was $700 million -- compared with only $13 million the year before. Overall profits from the group totalled 31 percent of the company's 2004 profits.
"The 2004 underwriting results include losses and loss adjustment expenses totaling $2.9 billion (after reinsurance) related to the four hurricanes that made landfall in August and September."

* * *
Total revenue for State Farm, which includes premium revenue, earned investment income and realized capital gains (losses), was $58.8 billion for 2004 compared with the 2003 figure of $56.1 billion. State Farm reported an after-tax net income from all sources of $5.3 billion in 2004 compared with a net income of $2.8 billion in 2003.
According to State Farm, thanks to 2004 profits, the company's "net worth for the State Farm group increased by $6.0 billion to $46.3 billion."

Now, what was it you were saying about the insurance crisis?

The Black Hole Memo

No comment - yet.
Routing of Mierzwa, Wind/Flood and 50/50 Claims


DATE: January 25, 2005
BULLETIN #21: Routing of Mierzwa, Wind/Flood and 50/50 Claims

In circumstances in which a Citizens policyholder:
• Has flood damage;
• Has made a demand for policy limits (whether or not they mention the Mierzwa case or Section 627.702, Florida Statutes, as the basis for the demand);
• Has a 50/50 claim; or
• Has received a “substantial damage”, or equivalent, letter from a municipality or county requiring compliance with current code or flood elevation, then

Immediately forward file to Bill Ellis with the attached cover sheet.

This Bulletin does not alter the existing claims adjusting rules regarding payment of any undisputed portion of a claim:

The undisputed portion of the claim should be tendered to the policyholder; with a statement that the disputed portion has not been denied and is under review.

Any questions should be directed to

This rule applies to the adjustment of claims related to Hurricanes Charley, Frances, Ivan and Jeanne and does not affect the
adjustment of other Citizens claims.
[emphasis added by the blog]
Mierzwa Routing Form
Deliver to: Citizens Property Insurance Corporation
Attn: Bill Ellis
2110 Centerville Rd.
Suite A
Tallahassee, FL 32308
(850) 521 8600

Date: ______________
Claim #: ____________
Named Insured: ________________
Date of Loss: __________________

Thursday, February 24, 2005

Un-sweet 'Charity'

"You get to the question of, are you running a charity or are you operating a business."-- Ed London, board member of Citizens Property Insurance, (February 23, 2005).
Ed London, a real estate broker from Miami-Dade County, made those deeply offensive remarks the other day while defending the lawsuit Citizens Property Insurance filed against a Perdido Key couple. The lawsuit filed by the company manifestly is a last-ditch effort to avoid the law as laid down by the Fourth District Court of Appeals in Mierzwa v. Florida Windstorm Insurance.

As Paige St. John explained last week, under the Mierzwa case, Citizens based its premiums on, and therefore is required to pay, declared policy limits pursuant to the Florida "value policy" law if an insured's dwelling is so badly damaged by a combination of hurricane winds and water that it must be torn down to satisfy local ordinances. Those same local ordinances, incidentally, require raising ground-based dwellings above the flood zone once they are more than 50% damaged -- all in an effort to limit future insured losses.

Citizens lost a subtantially identical attempt to evade its responsibilities last summer in the Fourth District Court of Appeals. Unhappy with losing the case, which involved a post-Andrew hurricane claim, the state-owned insurance company is now shopping around for some judge --any judge -- who will come to a different decision in the wake of Hurricane Ivan. (Believe it or not, in the Perdido Key case, Citizens is challenging the first judge assigned to the case because she has a relative whose home suffered hurricane damage. As who in Northwest Florida does not?)

Mr. London has some nerve asserting that premium-paying customers of Citizens are seeking "charity." The customers he and other Citizens board members have sued are asking only for what they paid high premiums for -- and what a Florida court has said they are entitled to under the law and the very terms of the insurance policy Citizens itself drafted.

Expecting what you've paid for is not 'charity." Implying that Citizens' customers are looking for "charity" is no way to run a business, either.

When Citizens board members like Mr. London engage in that kind of name-calling, it only adds to the mounting evidence that the state-owned insurance company is willfully engaging in a "bad faith" refusal to settle legitimate claims.

Sunday, February 20, 2005

Willie Sutton's Rule

Willie Sutton robbed banks, he said, "because that's where the money is."

Property insurance companies will continue to write policies across Florida, despite last year's hurricane losses, because "that's where the people and money are."

That's the point of Matt Reed's incisive piece in today's Southwest Florida News-Press, titled Net Gain After The Pain: Insurers Make Money Despite Four Storm Payouts.
You might have assumed — if you've dickered with an adjuster or fretted over your windstorm deductible — that property insurers must double their rates to survive.

Or that insurers will drop policies and leave the state. Or that a state fund must cover a bigger share of disaster claims for companies to remain solvent.

But none of that is true.

In fact, Florida's major property insurers managed to earn profits during the period that included hurricanes Charley, Frances, Ivan and Jeanne, securities filings and earnings reports show. Even as the industry announced record losses and called for higher rates, company executives told analysts they were strong enough to pay claims and still make money. And that's before any changes.
However, Reed points out, insurance company lobbyists often downplay or deny the reality of the highly profitable Florida casualty insurance business when working to scare legislators into approving rate increases.

Case in point? Allstate Insurance.
After the storms, the numbers still looked solid for Allstate Corp. On Oct. 21, chief executive Ed Liddy fielded questions from industry analysts during the company's third-quarter earnings conference call.

"Does the storm activity impact your decision to buy back stock in the near term?" a Merrill Lynch analyst asked.

"No. We're generating good amounts of free cash flow," Liddy said. "We have more than enough capital to pay the claims and repurchase our shares."

His thoughts on the Florida homeowners market?

"We like Florida," he told an analyst from Deutsche Bank. * * * Three weeks later, Allstate told the news media that the hurricanes had wiped out a decade of profits in Florida. The company would stop selling homeowners policies until the Legislature decided whether to share more of the risk, Liddy said.

It's a proven posture for Florida's insurance industry: plead hardship to state politicians while still earning profits, or "surpluses" in the case of mutual insurers.
"Millions" in entertainment, food, and campaign contributions are spent in Florida by insurance industry lobbyists every year to persuade "state officials to grant rate increases or improve access to public catastrophe money," Reed reports.

With the legislature set to open its 2005 session next month, the noise you're likely to hear will be the surge of lobbyist money sloshing around Tallahassee. In such a flood, is there any doubt that it will be the customers of insurance companies who will be drowned?

A Dozen Lawsuits

"More than a dozen cases were lodged against Citizens in Escambia and Santa Rosa counties the past week, along with lawsuits against other insurers," according to Tallahassee bureau chief Paige St. John of Gannett News Corp.

The lawsuits follow Citizens' preemptive attempt to find a friendlier court who will overruled the 2004 Mierzwa decision of Florida's 4th District Court of Appeals. As this blog described earlier:
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.
St. John reports that because of Citizens's litigation tactics "home and business owners with 2004 claims for total losses may have to wait years for insurance companies and courts to decide how much damage was wind, how much was water and who must pay."
While insurance companies and policyholders battle in court about dividing the losses, claims are paid only partially or not at all, even if they're not part of litigation.
St. John also writes that "among those also facing litigation are Allstate Floridian, USAA, Florida Select, Vanguard, Universal Property and Casualty and Southern Family Insurance."

The Leon County attorney who won the Mierzwa case estimates that "as many as 15,000 policyholders would be affected" by a class action he has filed against Citizens for policy holders who have not settled their claims. In that regard, St. John unearths an interesting paradox. Although Citizens tells the public it has only 2,400 open claims left from Hurricane Ivan,
"Citizens would not reveal how many claims it refuses to pay in full."
Hey! Wait just a minute! If Citizens is telling the public that it has settled all but 2,400 Ivan claims, in how many of the 'settled' cases did the company ignore the Mierzwa decision, pay nothing, close the case, and kiss off the customer?

Apparently, the company won't say.

The Color of No Money

"Everyone wonders why the beach is not rebuilt. No one is getting any money," said John Pinzino, president of the Sans Souci homeowners' association and owner of three condominium units on Pensacola Beach."
Brown. That's the predominent color of Pensacola Beach's famed "sugar white" sand these days. In all but a few areas outside the commercial core, dirty sand is piled as high as four stories waiting to be mechanically cleaned and spread along the eroded beach.

Black. That's the common color of condominium walls, like those at Regency Towers where once gleaming-white 8-story walls were so badly damaged by high winds they look, even now, like something left standing after the London blitz.

Gray. That's the color of the faces of Northwest Florida property owners whose personal assets are being drained away while property insurance companies drag their feet instead of promptly paying casualty loss claims.

The News Journal's Kimberly Blair reports Sunday on the extensive damage still visible right here on the ground in the Florida panhandle and its negative impact on the tourist economy. The cause lies with Citizens Property Insurance and other companies who aren't paying for covered flood and windstorm damage.
Regency Towers and Sans Souci Condominiums on Pensacola Beach as well as Sun Dunes on Navarre Beach usually are teeming with snowbirds this time of the year.

But rather than gearing up for spring break in March -- the kickoff to the area's peak tourism season -- the buildings are vacant because Hurricane Ivan's assault was so severe they are uninhabitable.

The same is true for other resort condominiums between Perdido Key and Navarre Beach.

Many of the buildings that traditionally generate lucrative incomes for condo owners will remain vacant through peak tourism season - and possibly through next snowbird season, the winter months when residents leave the North for warmer weather in the South. Some condominiums won't be ready to house tourists until 2007.
Blair interviewed a number of prominent condo association officers about the slow progress in re-building on Pensacola Beach, Navarre Beach, and Perdido Key. What she found (although she doesn't articulate it this way) raises the question of whether Citizens Property Insurance is lying about its claims history.

The many insureds who are having problems in rebuilding, she reports, are "blaming their insurance companies -- which, in a majority of the windstorm cases, is actually a single insurer: the state-operated Citizens Property Insurance... ."
"Everyone wonders why the beach is not rebuilt. No one is getting any money," said John Pinzino, president of the Sans Souci homeowners' association and owner of three condominium units on Pensacola Beach.
Blair dutifully repeats the assertion from the state-owned insurance company that "Citizens has 15,825 Ivan claims. As of Feb. 3, the company reported 13,296, or 84 percent, had been closed." But the anecdotal evidence she collects casts doubt on those numbers.
Judy McCabe, community association manager for JME Property Management, which manages condo associations and beach properties up and down the coast, finds it hard to believe that Citizens has closed nearly 85 percent of Ivan claims.

"No one is getting money," she said.

She attended a recent workshop in Destin with about 100 condo managers from Perdido Key to Panama City. When attorney Jay Newman, workshop organizer, asked members of the crowd how many had received settlements, "five raised their hands and said they had received little-bitty payments,'' McCabe said. "None had full settlements."

Said Pinzino of the lack of settlements: "It's causing a lot of pain for condo owners. People are really stressed out. It's financially devastating for some people.''

The situation is not unique to beach condo owners.

Thousands of residents and businesses across Escambia and Santa Rosa counties also are waiting on settlements to begin repairs.
If "thousands" are waiting, as Blair writes, and Citizens really has settled 84% of the claims made, then virtually every open claim must be from Pensacola area beaches. That, we know, is not true. There are plenty more open claims from the mainland and elsewhere in Florida.

Blair dutifully gives equal time in her article to Justin Glover, the designated flack-catcher for Citizens Property Insurance. Predictably, he repeated the usual talking points of the state-owned company:
  • "One of our immediate goals is to get advance payments to them so they can have enough to enter into contracts with repair contractors"
  • "Citizens and the association may be in a dispute over the wind damage"
  • "We are paying undisputed claims."
  • '...there likely are legitimate reasons that some of these associations have not received settlements yet' [Glover] said.
But locals like John Pinzino aren't buying the Citizens line. With each passing month of insurance company delays, "condo owners are struggling with expenses associated with condos they can no longer live in or rent."
Displaced condo residents are paying rent to live elsewhere in addition to mortgages on their condos. They still have to pay lease fees, condo fees and other costs involving condo ownership.

Many of them also are paying thousands of dollars in special assessments levied after the hurricane to pay the associations' deductibles and damage not covered under insurance policies.

Pinzino is feeling the pinch.

In addition to his residence at Sans Souci, he owns two investment properties at Clarion Suites on Via de Luna. That condominium/hotel property has yet to receive any insurance money. It's so devastated that the 70 owners of the 86 units have decided to sell the property instead of rebuild.

* * *
Ira Mae Hewitt, who manages and owns condo units on Navarre Beach, said the situation is financially devastating for many condo owners.

"The problem is two-fold. The insurance companies are not responding," she said.

"Once you finally do get money, owners have to send the money to their mortgage companies and they decide what percentage they will pay them to start repairs," said Hewitt, who owns Century 21 Island View in Navarre and a unit at Sugar Beach.

"It appears that insurance and mortgage companies are keeping the money as long as they can. The people who are getting hurt are the people who have in good faith paid insurance and mortgages over the years," she said.

* * *
"There are people who are down to their last nickel waiting on a check," [Steve Lashley, a Regency condo unit owner] said.

As Lashley waits on his own insurance settlements he knows he can't reconstruct the units that have been stripped to the bare metal studs until Regency completes its work.

[Ken] Turk, Regency Association manager, said the building won't be ready for residents or tourists until the end of the year or even the first of 2006.

Regency's recovery hinges on when it receives the remainder of its insurance settlement.

"We were able to get $1.2 million advance out of our windstorm policy to get started," Turk said.

An estimated $14 million to $16 million is needed to repair and bring the two eight-story, Gulf-front buildings up to code.

Bills are starting to stack up for the work being done: removal of sand and debris, restoring electricity to the buildings and contracting the service of a water damage restoration and mold clean up company.

"I have millions of dollars in bills sitting on my desk that I cannot pay until we get a settlement," Turk said.
Take a drive around the Pensacola area. Read the propaganda from Citizens Property. Then ask just who should you believe? Citizens Property or your own eyes?

Someone ought to conduct an independent survey of just how many of those 'claims' Citizens alleges it has paid in actuality remain open, are contested, or are unresolved. Remember, this is the insurance company that admits it doesn't even know how many cases it took back from bad adjusting firms or where those files are now.

Wednesday, February 16, 2005

News? Not.

Citizens Property Insurance Co. is broke, according to breathless news reports coming out of yesterday's board meeting of the state-owned property casualty insurer.

Paige St. John of Gannett News Service writes--
Officers of the state-run insurance company told Citizens' Board of Governors on Tuesday that 2004 hurricane losses exceed cash reserves by $400 million, pending a financial audit expected by the end of February.
In another version of the same report on February 16 the Pensacola News Journal adds:
Unlike some other insurance companies, Citizens is paying the full tab for its 2004 hurricane claims. It chose not to buy backup coverage on the reinsurance market, and its losses did not trigger relief from the state's Hurricane Catastrophic Fund.

"Our capital is eliminated," board member Ed London repeatedly noted during the meeting Tuesday. He said the company has no cash saved to pay potential 2005 storm claims.

Citizens' borrowing ability remains good, London said, because of the legal ability to make up losses with charges against the state's policyholders.
Translated, that means, acccording to various news reports, that the state will be passing along a special assessment of $56 to $61 per insured household this year.

What news reports haven't yet focussed on is that none of this comes as news. Indeed, if anything Citizens' payout rate is about two hundred million less than staff was projecting for the board in December. According to minutes from the December 7 2004 board meeting, Citizens was projecting then payouts totalling $1.8 billion. At the February 2005 meeting, however, reporter Jeff Harrington of the St. Petersburg Times tells us Citizens reported incurring "about $1.6-billion in insured losses from the storms."

Here's an excerpt from the draft minutes of the December meeting:
Mr. Odom asks, You said you paid off $550,000,000 to date, but your estimate of total losses (not audible) Ms. Buss responds, That is $1.8 billion, that is both the model estimate and I will address this when I go over the financial report, but also, as we look at our own development and reported claims, we believe that is probably about where we will end up ironically with the four storms in totality.
* * *

Mr. Odom asks, So, as far as Citizens’ ability to pay claims,we have no issues at all as far as our ability to pay? Ms. Buss responds, That is correct. Currently we still have in just our operating accounts an excess of $1.5 billion in liquid cash. Cash flow will not be an issue for us. If the losses are as the model predicts or even as we sort of re-scope them [as we will go over in the financial report], then we would have to either draw down on the notes which is also money that is liquid and available and then repay through an assessment or levy an assessment timely enough that the money comes in to meet our cash flow needs. We don’t predict any situation where we would have any cash flow issues. We have ample cash on hand.
In effect, then, yesterday's news was no news at all. Citizens has been projecting the same or slightly higher losses for some months. They have ample cash and cash equivalent resources (i.e., "the notes") to pay the projected claims, which may be as much as $200 million less than initially projected.

The 'news' of a coming assessment is no news at all. Citizens told the board two months ago it would "either draw down on the notes...and then repay through an assessment... ."

Saturday, February 12, 2005

Beach Tax Updates

The latest pleadings in the Pensacola Beach tax lawsuit have been posted on the web at Pensacola Beach Tax Lawsuit. Residents who are among the plaintiffs also will find in their individual mail boxes a client letter from their lawyers.

Monday, February 07, 2005

Groundhog Day - Redux

So, according to Citizens Property Insurance spokesman Justin Glover, "the new system works."

That must be because Citizens fired the incompetent adjusting firms, right? Wrong:
Nor is the insurer interested at this time in taking blanket action against a bad vendor. Company officers said they were fearful of antagonizing the very contractors on which they still rely.

"We have to work with these firms for the moment," Glover said. "We don't want to do anything to disrupt the claims while they're still being closed."
Oh, that's right. It's Groundhog Day!

Well, at least the adjusting firms have been disciplined, right? Wrong again. Did you forget so soon? This is Tom Gallagher's Groundhog Day!
Even now the company shies from aggressive intervention. It has not fired a single claims administrator or taken all claims away from proven bad performers, relying instead on "strong words," Glover said.
You want 'strong words'? Try these: It has been four and half months since Hurricane Ivan. Tens of thousands of homes and husinesses in the Florida panhandle remain utterly devastated by the storm. If things persist as they have been, it will be several years before the area recovers. Tens of thousands of customers paid higher-than-market-price premiums for Citizens Property Insurance coverage. Yet--
"What you got was 'phantom adjusters'," said Paul Hulsebusch, an insurance specialist hired by Citizens between storms to launch an emergency catastrophe claims center.
It is past time to hold Citizens Property Insurance accountable. If state CFO Tom Gallagher won't do it, then the state senate of Florida should hold him accountable.

Impeach Tom Gallagher.

Groundhog Day

The Pensacola News Journal headlines today a week-old report by Paige St. John in which the superb reporter for Gannett's Tallahassee bureau reveals that state-owned Citizens Property Insurance has taken back some 7,000 hurricane claim files which subcontractor adjusting firms screwed up.

Most of the files are for Hurricane Ivan victims. That means us, here in Northwest Florida.

The net result is that unfortunate customers of Citizens will have to begin the claims process all over again.
Thousands of Citizens Property Insurance customers are back at square one, more than four months after hurricanes damaged their now-rotting homes.

The state-run insurer has taken control of almost 7,000 claims that had been in the hands of problem private adjusters. In most cases, that means starting the process over for homeowners left without roofs since September and August.
St. John's article first ran on February 2, Groundhog's Day, in the Ft. Myers area News-Press .The Pensacola News Journal doesn't say why editors of our 'daily' paper took five full days before publishing the dispatch on the front page as today's main headline. (So much for the 'synergies' of media mergers.)

If Hollywood ever makes a movie about Florida's 2004 Hurricane Season, Bill Murray should be hired to play two parts -- Doug McCorkindale, CEO of Gannett, and state CFO Tom Gallagher, who supposedly oversees Citizens Property.

A little way down St. John's piece is the admission that "Citizens, which is Florida's largest hurricane insurer, admits to delays in handling 116,000 hurricane claims."
Company officials blame a decision made years ago to rely entirely on third-party adjusters. The problem: Once the cases are assigned to an adjuster, Citizens has no idea what is happening to the claim until the adjuster comes back with an amount of damages or the policyholder complains of inaction.

Since December, Citizens officials have told state officials that they largely have solved the problem by placing a small team of dedicated adjusters on payroll who can move forward once-stuck cases by flagging them for priority action.

The company also has created a customer-service center and has assigned representatives to handle each case that comes to its attention.

Citizens spokesman Justin Glover said the new system works.

He cited the case of a West Palm Beach condominium owner who had complained for months to Citizens. When the company investigated, it found the policyholder's adjuster had left Florida months ago.

Citizens has hired a new adjuster, Glover said.
So, all is well now, right? Not so fast. Remember, St. John's piece ran on Groundhog's Day:
Glover could not say, however, what happened to the other claims assigned to the departed adjuster. Nor could Glover address why the vendor didn't report its missing man because, aside from informal exchanges, Citizens leaves it to vendors to manage their own cases.

Some storm victims say Citizens' improvements have done little good.

Jeff Grady, president of the Florida Association of Insurance Agents, related the case of a Daytona Beach resident now on his fourth adjuster from Citizens "and still no money."

"One adjuster got the claim worked up, then was let go, then the next was with a company that was fired, then, most recently, a guy comes out only to say he now has been taken off the job," Grady said.

"It's all for various reasons, but the end product to the customer is, he hasn't even gotten his claim run up the pole to see if Citizens will pay."
According to St. John, "One of Citizens' major problems appears to be that there is no tracking system for claims, so the system relies on complaint calls from unhappy policyholders to prompt intervention. ... It will be different in 2005, Citizens' officials said."

But, remember, this was a Groundhog Day report. According to St. John, Citizens has identified a Texas claims adjusting company, Universal Risk, as one of the worst.
Records show almost all of Universal Risk's work came from Hurricane Ivan. By the end of December, the adjusting firm still had more than 300 open Ivan claims and almost as many complaint calls to the Department of Financial Services.... the vendor had the highest complaint rate of any company working for Citizens, although records show other contract adjusters with poor records.

Even so, Citizens cannot say how many claims it took away from Universal Risk or any other company. Again, Citizens cannot trace reassigned claims back to their problem adjusters, excepting by pulling case files, one at a time.
Got that? Citizens "took away" the claims from Universal but "cannot say how many claims it took away."

Groundhog Day, indeed.

One small bit was added to Paige St. John's front-page piece for locals in Pensacola:
Pensacola attorney Charles Beall Jr. said more than half his potential client calls involve Citizens Property Insurance, though the carrier has only 10 percent of claims in the region.

"I think the answer for Citizens is about to come in the form of lawsuits," Beall said.
While we're looking for answers, let's ask another question: Is state CEO Tom Gallagher, who oversees the debacle known as Citizens Property Insurance, incompetent or wilfully blind to the state insurance company's defalcations? In Gallagher's case, the answer is likely to come at the polls the next time he runs for office.