NOTE: This is Part III in the series dealing with fraud in Florida’s Property Market. Lawmakers should consider this post carefully.
In an article by Peter Schorsch, and According to data from Florida’s Department of Financial Services’ Service of Process website, it is precisely stated and unrefuted that…
“…for the months of January through March 2021, 22 lawyers and three administrative assistants filed over 200 lawsuits each. Fifteen filed more than 300 each. Eight filed over 400 lawsuits each. And two, Weisser and Lopez, filed over 1,000 each. In three months.”
That’s 27,400 lawsuits filed by just 22 trial lawyers. And…there are another 5,978 out there filing the rest of what will total 100,000 suits by year end. (See: Thousands of Frivolous Lawsuits)
A reasonable person would question why so many “legitimate” suits would be needed—in just one line of business, in just one state, in only 66 business days!
Other than Senator Gary Farmer, who unabashedly proclaimed it’s all “manufactured” …do you know anyone in possession of their faculties who would call this anything other than a crisis? (See paragraph 7 “Did You Know Some Trial Lawyers Don’t Tell the Truth?”)
Whether it’s even possible to file this many suits is easily answered. It’s obviously possible since the suits are being filed. But, in some territories, for some perils, the data proves almost half occur before advising the insurer there’s damage, so as a minimum those are frivolous. But frivolous or not, how is it possible so many policyholder’s are willing to file so many suits, (often multiple suits) and where do they come from?
The answer, I’m sorry to say, is not a pleasant one.
Florida’s property market may be the most fraudulent system in America, (See NOTE #1 below). Each tier of its’ operation is saturated with more bad players doing more bad things to more good people than any venue in the country. Florida stands alone with a system that channels opportunities for frivolous suits to attorneys thirsty for big pay days from those downstream looking for their own, perhaps less significant paydays, which they will continue to have as long as they keep the opportunities flowing upward to the attorneys. It’s a veritable Pyramid of Fraud.
This is why 75% of America’s property suits are filed in just one state…Florida!
The fee’s paid to attorney’s are so overflowing, and so easily replenished by rate increases, that everyone gets sucked into the vortex. Even, and perhaps most especially, a Florida legislature slow to provide relief, in part, because policies go to Citizens where rate increases are capped. In any other state, this “crisis” would’ve been solved long ago.
This could be the worst moral hazard in modern insurance history. To get a better feel for how bad it really is, let’s start at the top and work our way down. Buckle up!
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Trial Attorneys—I believe the testimony from the Strems disbarment hearings speaks volumes—too many attorneys are engaged in too many unethical, illegal and/or fraudulent solicitation schemes. Strems was working 10,000 cases simultaneously. Others are engaged, to varying degrees, in fee splitting arrangements that violate Florida Bar standards of ethical conduct and provide a means for other players to circumvent statutorily prescribed behavior and fee caps–all to the detriment of the public and even their own clients. The ability to get rich from fees under Florida’s one-way-attorney fee statutes and the lure of a fee multiplier metastasizes downward infecting the entire pyramid. (See NOTE #2 below)
Public Adjusters—Again, the Strems hearings revealed complicity between PA’s (both licensed & unlicensed) and attorneys. Some PA’s are pressuring law firms to engage in activities that both parties know violate statutory fee caps for PA’s and attorney fee splitting rules, to the detriment of the client/insured. Florida PA’s have the highest fee cap in America, which according to the National Association of Public Insurance Adjusters (NAPIA) motivates fraudulent claims melding perfectly with the attorney fee moral hazard. Worse, those labeling themselves “Loss Consultants” are too often public adjusters strategically piercing the already highest in America fee caps. (See NOTE #3 below). Too often PA’s are the kingpins in criminal insurance fraud enterprises involving contractors, plumbers, homeowners, arsonists and others and, like too many attorneys are incentivized to inflate invoices due to a contingency arrangement. They are also allowed to act as “disinterested” parties when “appraisal” is invoked, for which they are also paid a percentage.
Roofers/Contractors—Too many are engaging in the practice of public adjusting without a license. Others are intimidating homeowners to sign agreements, not delivering the promised repairs, creating damage to roofs during inspections, promising free roofs, advertising/providing no deductible insurance (a felony), offering illegal inducements to file a claim, inflating losses and over billing insurers—all enabled by the moral hazard present in Florida’s attorney fee system. The number of national, regional or statewide roofing conglomerates and their aggressive, sometimes illegal solicitation schemes, is proliferating. There’s a distinct Florida focus by the larger conglomerates and marketing firms that’s making roofing an area in great need of reform. Local roofers, are often the good guys who get hurt by the competitive crossfire and shabby tactics of the fly-by-nighters.
Water Firms—These firms are unregulated, have no licenses or statutorily prescribed standards. They encourage, even push fraudulent behavior by dangling remodeled kitchens and new floors in front of homeowners. Too many are in direct cahoots with attorney’s to file suits in support of inflated invoices or for services not even rendered. They engage in the practice of public adjusting without a license. They perform work that does not meet industry (IICRC) standards or manipulate drying machines as a means to inflate an invoice or later procure mold remediation business. Some have been convicted of numerous felonies and have numerous corporate names to further their schemes and to fly under the radar of insurers trying to avoid being defrauded.
Plumbers—I have personally interviewed plumbers who say some in their ranks earn up to $30,000 a year in tax free cash payments paid as referral fees from water firms. In one case a recently divorced, financially strapped onsite installer took to loosening pipes and creating small pinhole leaks to obtain call backs for more referral fees. I know from personal experience and informal investigations with others that the plumbing contractor/owner is usually unaware their onsite personnel are being paid referral fees placing the owner on the hook for damages. Most of the people I know don’t know a single plumber that has ever had to sue an insurer. But in Florida, plumbers were among the top ten litigators of AOB.
Loss Consultants—Along with roofers and water mitigation firms, these so called consultants are among the main recruiters placing Florida at the top of America’s litigation pyramid. The nomenclature itself is just a way of obfuscating the unsavory field solicitations they perform for attorneys and public adjusters. Under oath testimony proves some act in concert with attorneys and perform all the functions of a public adjuster (except for getting a contingency contract signed) without a license. Sometimes they are also the Public Adjuster, recruiting clients for attorneys then transforming into attorney loss consultants as a means to receive a percentage of the insurers global settlement paid to the attorney–this, in violation of statutory fee caps. In addition to forging signatures, the Strems proceedings and other related pending cases indicate that some target non-English speaking homeowners, using I-pads and other schemes to obtain signatures on attorney contingency agreements.
Fire Chasers—They prowl the streets of Southeast Florida with police/fire band radios so they can be first on the scene to link the homeowner with a PA or attorney and get a referral fee. This is a circumvention of existing prohibition against advertising and ambulance chasing, some of which apply to PA’s as well. As a minimum this practice contributes to Florida’s lawsuit ranking. And even if not specifically illegal in some cases, it’s simply wrong to use a personal tragedy to pressure someone into signing anything. Craigslist ads indicate they can make six figures in their first year of Fire Chasing.
Complicit Homeowners—According to arrest affidavits and official court records too many homeowners know exactly what’s going on–when contacted via an unsavory or illegal solicitation scheme, they use ignorance as their shield. They blame the licensed professional or the “loss consultant” whose contract they signed, who tricked them, or who should’ve told them what was going on. But the truth is they knew and just wanted their pay day. Way too often they’re involved with a PA and together they actually create a water loss or fire as a means to defraud an insurer and make a windfall.
HOA’s & Condo Management Firms—Members of these boards accept referral fees from roofers and water mitigation firms in exchange for referring them to unit owners or homeowners. Condo Management firms urge unit owners to request roof inspections for a free roof, allegedly in keeping with their condo “Agreement.” Unit owners have contacted me complaining that the AOB of the association is allowing a 3rd party to do repairs in their unit, without permission, and to bill the unit owners’ insurer, often with an inflated invoice.
Plumbing Supply Firms—Usually on Monday mornings plumbers show up at plumbing supply houses for the parts needed to make repairs and/or installations. I’ve participated with an investigative team that found solicitations from water firms at the supply houses. Racks of brochures, business cards and other paraphernalia on hand to remind plumbers and their techs of the lucrative opportunity to earn “tax free” referral fees.
Agents & Carrier Employees—I’m incredibly sad to say that Florida’s attorney fee moral hazard is so pronounced and lucrative it has even trickled-down to employees of insurance companies and insurance agencies. I have multiple reports of insurer claims personnel in cahoots with trial lawyers, sharing confidential information used to assist in negotiations with their own employer. I know of cash referral fees paid to agency customer reps, in contravention of their employer’s instructions, accepting referral fees from abusive water firms. And, unbelievable to me, I have documentation showing at least one agent/owner/producer circulated a letter to a condo association pushing them to get roof inspections prior to the three year claim deadline for Irma. The roofer being recommended was then, and currently is, a defendant in two RICO suits for running a criminal enterprise.
Whew!
There’s more, much more but, I’ll stop here by saying the attorney fee moral hazard is bringing down Florida’s property insurance system.
Lawmakers should consider that all the problems above could be solved by just voting for the obvious tort reforms needed and contained in SB-76—reforms embraced by Commissioner Altmaier and supported by reams of irrefutable data. (See NOTE #4 below)
It’s truly that easy.
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NOTE #1: I’d love to hear from you but, before emailing me with a list of insurance markets you believe are more fraud engulfed than Florida’s property system or before you assert that our auto no-fault system is worse than our property system (something I might agree with in another blog) please take time to read the series of articles titled Collapse of an Evil Empire. There are ten Parts beginning with Part I here.
NOTE #2: Read my article about the litigation which exploded beginning in 2015 (over 400%) and doubled between 2017 and 2019. It’s titled Litigation Reality Check and speaks of two attorney fee pots of gold that have caused lawsuits to spiral up, according to incontrovertible data from experts in such matters, through the first half of 2020 and beyond.
NOTE #3: FS 626.854 (19); Except as otherwise provided in this chapter, no person, except an attorney at law or a public adjuster, may for money, commission, or any other thing of value, directly or indirectly:
(a)?Prepare, complete, or file an insurance claim for an insured or a third-party claimant;
(b)?Act on behalf of or aid an insured or a third-party claimant in negotiating for or effecting the settlement of a claim for loss or damage covered by an insurance contract;
(c)?Advertise for employment as a public adjuster; or
(d)?Solicit, investigate, or adjust a claim on behalf of a public adjuster, an insured, or a third-party claimant.
NOTE #4: While space did not permit me to cite all the empirical data and sources for the information provided, I would be happy to respond to any reasonable requests to provide such. Fact is, most of my readers know exactly what I’m talking about—they’ve just maybe never seen it put quite this way. This blog allows you to see what’s going on– two dozen law firms behaving very, very selfishly or worse. Some others, perhaps, doing some of the things Scot Strems has been charged with doing; though maybe not as profusely, for now. The bad behavior of other firms is spurred by the same permissions granted to Strems through legislative inaction. (See: Litigation Reality Check; scroll down to “The Stick and Carrot”)
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