Citizens Inspector General & Public Adjusters

It’s not just law firms that should be added to a Citizens Inspector General’s list of who to oversee or inspect, it’s also Public Adjusters (PA’s)!

Whether you look at the Case of the Yellow Hammer, when PA Jorge Espinosa revealed how threats and intimidation were used to fuel the worst kitchen fire epidemic in Florida history, or;  the case of PA Alina Nunez who organized arson rings of “straw renters” (See NOTE #1 below), the results were similar–millions stolen from premium payers to benefit a greedy fringe.

When deciding the work plan of an Inspector General, the Governor and cabinet need to keep in mind the possibility that Espinosa and Nunez may only be twin tips of a jagged iceberg; one that persistently drives up assessments for everyone by driving up loss costs for Citizens. (See NOTE #2 below)

On a statewide average basis the typical Florida home owner funds nearly $600 in routine, non-catastrophic losses; kitchen fires, dropped objects, water leakage, etc. That’s up from $250 just five years ago.  Without a single wind event of any significance, and adjusted for taxes and commissions, that’s over $400 more for every policyholder in the state, every year! And, much of it comes from areas of high Public Adjuster concentration. (See NOTE #3 below).

While attorney’s get paid “on top of” the claim check, public adjusters get paid “out of” the claim check.  Say what you will, I’ll never believe this doesn’t create at least a small incentive for some to drive up the cost of an otherwise routine claim–that would be in addition to adding a notch or two of incentive to create a claim where, in the absence of insurance, one would not have existed.

I’m just saying!

Public records indicate that during a recent period Citizens had over $46 million in claims involving public adjusters.  The top ten PA’s accounted for nearly half–2,178 claims out of a total  4,917.  That’s 10% of $23 million for ten Public Adjusters or about $230,000 each.

Remember, it’s not an add on, it comes “out of” the policyholders claim check.

See for yourself! Look at the PA’s involved in Citizens claims.

In addition to some startling numbers, you’ll find the names they give their firms to be equally telling.  Some are the same as the law firms on Citizens list of top litigators; like Morgan Law Group.  Other names seem intended to make policyholders think they are with the government; United States Adjusters (USA) or Florida State Public Adjusters, for example.

A few sound like company adjusters for Allstate, Nationwide or Peoples Trust.

And, one name goes right to the heart of my argument that Citizens may be a target. It’s a firm called Citizens Claim Consultants (in Miami, of course) which not only has Citizens listed as a link on its website but,  also touts that it is a “Certified Inspection, Cleaning and Restoration” firm.

Even though the law prescribes a lower PA payment formula for Citizens claims, it seems likely it’s more of a target than private insurers. One CEO told me his company is experiencing a decline in PA involvement and that he believes it’s because private carriers do a better job fighting fraud and have more sophisticated SIU teams.

Heck, one Florida insurer doesn’t allow public adjusters to handle any of its claims.  This was by vote of its policyholders which, under the mutual concept, are shareholders in the company.  Are they somehow being under served?  I’m thinking not!

Isn’t Citizens, which is owned by the state and supported by taxpayers, sort of like a mutual company?  Couldn’t an inspector general at least “inspect” to find out what could be done to lower Citizens costs from frivolous litigation and unnecessary involvement of public adjusters?

Whether it’s the conduct of Citizens employee’s, public adjusters or attorney’s, CFO Atwater’s letter to the Governor requesting the inspector general report to the Financial Services Commission stated it the best

“Citizens stakeholders have a right to know…”

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NOTE #1:  March 16, 2012– Miami-Dade State Attorney Katherine Fernández Rundle stated: “How emboldened could you get? They wouldn’t even get new furniture. They’d take the same furniture they just filed the claim on, rent another house and put the same furniture that’s already been destroyed into the next house”. The ringleaders were Gustavo Adrián Godínez Díaz, 30, and Public Adjuster Alina Núñez, 51. Both face charges of racketeering, conspiracy, organized fraud, arson, insurance fraud and grand theft.

NOTE #2: Make no mistake:  I’m not talking about all public adjusters. In fact, I suspect it’s a pronounced minority including those the public adjusting community would also like to purge from its ranks.  However, several years ago, after a spike in kitchen fires executives at Citizens alerted the State Fire Marshall’s office prompting a review of both carrier and Citizens claims. The results showed alarming similarities, including: the involvement of public adjusters, the geographic area of the occurrence, demographics, and the time of day the fires occurred.

NOTE #3: The number of suspicious insurance claims linked to home arson more than doubled in Florida between fiscal years 2007-2011.  They were mostly in south Florida and according to DFS, 28 cases were reported in fiscal year 2010 in Dade, Broward and Palm Beach counties. In a separate confidential report I received from a private carrier, over 70% of its claims involving a PA’s were in the tri-county area.

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