January 2014

Yesterday, a large sinkhole opened up in the driveway of a Pasco County homeowner.  I attached a picture of the sinkhole – which I’m sure was quite a surprise to the homeowner when she began to back out of her garage yesterday morning!  The question now arises – would this issue be covered under your policy of homeowner’s insurance?  One would THINK so, but….welcome to the fantasy land that property insurance has become in Florida.

First, the most obvious analysis would be whether this issue would be covered under the “sinkhole loss” portion of the homeowner’s insurance policy.  Actually, thanks to the recent changes in the sinkhole statutes enacted in Florida, this loss would most likely not be covered as a “sinkhole loss”.  A sinkhole loss is defined under most policies of insurance as structural damage caused to the home by sinkhole activity.  Clearly, the attached picture reflects sinkhole activity, but does it reflect “structural damage” (as now defined in your policy) to the residence?  Pursuant to the recently enacted laws, in order for your home to have incurred “structural damage”, your house pretty much has to be reduced to a pile of sticks (the statute has a slightly more technical definition, but you get the point).  So, even though the subject house is clearly being affected by sinkhole activity, since the damage to the house does not arise to the new definition of “structural damage” = No Coverage!

But there is also a portion of your insurance policy which provides coverage for Catastrophic Ground Cover Collapse.  It is this coverage that the insurance company lobbyists touted as being available to cover situations where an “actual” sinkhole opened up and destroyed your house.  BUT – this Catastrophic Ground Cover Collapse coverage only applies if ALL of the following conditions are met: (1) An open hole you can clearly see with the naked eye (check!); (2) Damage which is sudden and not gradual (check!); and – here comes the kicker – the home must be condemned and ordered vacated by a government entity.  Well – since the subject home does not appear to by destroyed and therefore has not been condemned, all of the required elements have not been met and therefore = No Coverage!

Unfortunately, this homeowner is about to experience the Sinkhole Loophole mess which our Florida Legislature has created for us.  As always, when confronting a complex insurance claim issue, it is wise to contact a qualified insurance claim lawyer to help guide you through the process and to explain the rights you have under your insurance policy.

 

During the 2012 Florida Legislative Session, insurance company lobbyists pushed for the passage of HB 119, which greatly overhauled the Personal Injury Protection portion of your automobile insurance policy.  As part of their sales pitch, proponents of this bill stated that the passage of this Bill would GREATLY REDUCE the cost of automobile insurance in the State of Florida and cut down on “fraud”.

As we learned years ago, “cutting down on fraud” is just another way of saying “severely reducing a policyholder’s chance of ever getting paid on his claim.”  But what about the claimed reduction in the cost of auto insurance premiums?  Surely insurance companies have lowered their automobile insurance rates in exchange for HB 119’s severe limitation of the rights of policy holders…..right?

Well, the Office of Insurance Regulation announced this week that the cost of Personal Injury Protection coverage is expected to drop an average of 13.2 percent in Florida.  Great you say!!!  But then the fine print – since this “no fault”/ Personal Injury Protection coverage accounts for such a small percentage of your overall automobile coverage, the overall decrease in your overall policy would be about 1.2 percent!!  Not a very good reduction in exchange for the severe limitations this new law places on the rights of policy holders.

Once again, it appears Florida’s elected officials have fallen for the insurance companies’ old yarn of “Allow us to restrict coverage today, and we promise to reduce premiums…..tomorrow….maybe.”

 Sadly, although we knew that Citizens Property Insurance Corporation is overrun with corruption, recent news reflects that even we did not know how bad the situation has gotten.  Although the formation of Citizens Property Insurance may have initially been a good idea, it has since morphed into merely a “cash grab” for cronies of Governor Rick Scott and others who know how to work the “system”.

Charles Elmore of the Palm Beach Post recently wrote an excellent article regarding Citizens’ hiring of a West Palm Beach Lawyer and agreeing to pay him $6.5 million dollars – despite the fact that he has no property insurance experience, has by far the highest billable rate, and came in third in all objective rankings.  We have provided the article, in its entirety, below and recommend you read to the end in order to fully appreciate how “insiders” laugh as they bilk the policyholders of Florida:

West Palm lawyer’s fees soar above Citizens rivals

Critics say ties to state officials, costs don’t pass ‘smell test’

By Charles Elmore – Palm Beach Post Staff Writer 

No competitor came close to the $525 per hour fees of a West Palm Beach lawyer whose firm won a contract for more than $6 million from state-run insurer Citizens in December, bidding records examined by The Palm Beach Post show.

The next highest hourly fee, among nine firms bidding from as far away as California: $360.

Citizens executives say the money is well spent if Scott Link and colleagues help the company settle or fight 13,000 claims lawsuits more efficiently without necessarily setting foot in a courtroom, by directing strategy for other lawyers the company already pays. In an interview with Citizens, Link said his role is like “the mover of the chess pieces.”

Not everyone thinks Citizens has check-mated wasteful spending with this deal.

“It doesn’t pass the smell test,” said Jay Neal, president and CEO of the Florida Association for Insurance Reform, a Fort Lauderdale-based advocacy group that includes industry and consumer representatives. “You could bring this in-house and save a lot of money. One of the most important things this company has to do is retain public trust.”

Ackerman, Link & Sartory cited no particular expertise in property insurance before applying in 2012 for the first of two contracts that together stand to pay the firm more than $8 million. In its applications, the firm saw no need to disclose ties to former Citizens President Tom Grady, an ally of Gov. Rick Scott, and Florida Chief Financial Officer Jeff Atwater as potential conflicts.

Records show it finished third of nine bidders in initial scoring by a Citizens evaluation panel for the first contract based on written applications, barely making the cut for interviews. Then it soared to the top after an interview lasting less than 30 minutes.

The compensation stands out at a company criticized for weak oversight on spending by, among others, Gov. Scott’s own inspector general.

Scott Link’s projected billing of more than $1 million a year under the contract is more than triple the $300,000 pay of Citizens president and CEO Barry Gilway, who oversees the entire company. Citizens is Florida’s largest property insurer serving more than 1 million customers.

A draft contract, not yet signed, provides for additional billing at $262.50 per hour for Link’s travel time. That is on top of any travel reimbursements such as hotels or meals, a Citizens spokesman said.

The firm’s job is to serve as “coordinating counsel,” overseeing strategy on lawsuits involving claims from sinkholes to water damage, cases in which Citizens already pays other attorneys.

No ethical concerns

In its application, Ackerman, Link & Sartory said it had no ethics conflicts to disclose concerning Citizens. Not mentioned: former Citizens president Tom Grady had a business relationship with the West Palm Beach law firm, which paid him as recently as 2010, according to Grady’s state financial disclosures.

Grady, a friend and Naples neighbor of Gov. Scott, was interim Citizens president in 2012 when solicitation began for the first of two contracts Link’s firm ultimately won. Those contracts were for a high-paying role that had not existed before at Citizens, and they were handled as “expedited” bids in a speeded-up process.

“This is an emergency contract there was no need for,” said state Rep. Frank Artiles, R-Miami, a public adjuster who has been an outspoken critic of the deal. “This was an inside job.”

Citizens executives dispute that, saying the arrangement was properly bid and stands to benefit the company by helping it handle cases better. That can mean settling some cases quickly, fighting more effectively on others or working with front-line employees to avoid future problems, they say.

Benefit to Citizens argued

Information presented in support of the firm’s work coordinating sinkhole claims said the average amount paid per lawsuit dropped to about $120,000 during the firm’s tenure, compared with more than $140,000 in 2011. Citizens General Counsel Dan Sumner said if a third of the 10,000 pending non-sinkhole cases were resolved on terms the company considers favorable, it could save $97 million in litigation costs over the life of the contract.

Artiles scoffed at such claims at a board meeting last month, saying the company was still losing about half of the very small percentage of sinkhole cases that go to trial and estimating it could save $50 million in litigation costs simply by paying the full claims policyholders submit.

Gilway said plaintiff attorneys would love that, but the company has an obligation to other policyholders not to pay for unwarranted claims. The Citizens president spoke out forcefully for Link in company meetings, saying in November, “We need the talents Scott Link is bringing to the table.”

Another partner in the firm, Wendy Link, is projected to bill $50,000 a year under the deal. She serves on the Florida Atlantic University search committee considering candidates for FAU president including Atwater, who interviewed for the university job Friday but was not named one of three finalists. Atwater appoints Citizens board members and, along with Scott and other top state officials, oversees the company’s management.

Wendy Link listed Grady and Atwater as her first two references for an appointment to the Florida Board of Governors in 2011, records provided by the governor’s office show.

Link told The Post last week she disclosed potential conflicts including the reference and the Citizens contract to FAU and state officials, who “encouraged me to continue my service to the Search Committee.”

As for other questions, she said, “Our firm has always had a commitment to our clients not to discuss any issues regarding our clients with the media unless the client specifically requests that we do so.”

Meeting with Atwater

Two days before Citizens approved the contract Dec. 13, Atwater organized a meeting in his office that included Scott Link, records show. The participants included a homeowner advocate and the only discussion was “to make sure Floridians are getting the claims assistance they deserve,” an Atwater spokesman said.

Despite protests from Rep. Artiles, Citizens board member John Wortman, appointed by Scott, made a motion to approve the contract last month, and it passed 4-1 with two abstaining.

Any business relationship with the West Palm Beach firm had ended by the time Grady assumed his role at Citizens, so it wasn’t an issue, Citizens officials maintained. Officials said they were assured Grady received no residual compensation from the firm, and both the 2102 contract and the one now pending forbid paying fees to others firms or lawyers — including, specifically, an “of counsel” attorney.

Grady is listed in records as having served “of counsel” to the Ackerman firm. That term typically means he received compensation for services without being a partner or full-time employee.

Total payments of $6.5 million over four years to the law firm have been approved, though a final contract has not been signed, a company spokesman said.

If the justification for the contract is to save money over the long haul, is the firm’s pay tied to any specific dollar figures to be saved, or number of cases to be resolved? A draft contract provided by Citizens mentions no particular figures but says, in part, “Anticipated cost efficiencies including demonstrated savings in fees and defense costs will be measured and related to the implementation of specific strategies in order to determine the effectiveness and efficiency of the specific strategies and/or the overall claims litigation strategy in achieving the state objectives.”

‘Hope and a prayer’

Former state insurance consumer advocate Sean Shaw, a Tampa attorney who sues insurers, said, “There’s no evidence this is going to save any money. It’s a hope and a prayer.”

A spokesman for Gov. Scott said before the Dec. 13 vote, “This will be entirely up to the Citizens board and we have every expectation that they will do the right thing to protect Florida taxpayers.”

In an explanation of its ethics policy on its website, Citizens explicitly forbids senior managers from, for example, working for or entering a contractual agreement with a private insurer that receives a bonus to take Citizens customers within two years.

Neither Citizens nor the law firm saw anything in Grady’s situation they regarded as a particular ethics problem, though the company website says determining whether a course of action is ethical involves questions including “How will it look to others?” and “How will it affect Citizens’ status as a trusted decision-making entity?”

Link’s firm claimed no expertise, or even any significant experience, in property insurance or sinkholes when it applied in 2012 to win a newly created $1.5 million contract to become coordinating counsel for sinkhole claims. Instead, it emphasized experience with complex civil litigation involving brokerage and financial firms, auto insurers and phone companies.

The firm was not the initial top choice of a Citizens evaluation committee including Sumner, assistant general counsel Elaina Paskalakis and vice president of claims Lance Malcolm, records show. Based on written applications, the committee scored it No. 3.

No. 1 was Gray Robinson of Tallahassee, followed by Colodny, Fass, Talenfeld, Karlinsky, Abate of Fort Lauderdale. Those firms declined to comment for this story.

“There were others ranked higher for less money per hour?” Artiles said. “Are you kidding?”

But the Ackerman firm rocketed to the top in the interview round. In an interview lasting less than 30 minutes, Sumner told Link he had done a “good job” in the written application distinguishing between the role of coordinating counsel and that of a regular defense lawyer working on a particular case, an audiotape shows. Sumner asked him to elaborate and add “color.”

Sumner asked about fees, saying “you get what you pay for,” but the firm’s fees were high compared to other bidders. Scott Link said he would hesitate to lower fees, which he considered already “discounted” compared to other firms that charge more than $600 an hour doing similar work. That would not be fair to other clients, he said.

Malcolm asked about how the law firm could help the company’s front-line workers process sales and claims. Paskalakis had no questions.

In March, Link’s firm said it reached the limit of its previous $1.5 million contract and Citizens granted it another $100,000 per month.

Citizens emphasized experience as coordinating counsel for the broader contract awarded in late 2013, and by that time the West Palm Beach firm was bidding as an incumbent expanding its prior role.

In his 2013 interview for the bigger contract, Link was again asked if he would consider renegotiating his fees.

“I would certainly increase them if you insisted on it, but I would do it reluctantly,” he said.

People laughed. The moment of levity over, Link then repeated his position the fees were already discounted and lowering them would be unfair to other clients.

 

 

By now you have probably seen the attached video {Click Here to Watch} of the “enthusiastic” (ok, really drunk) Alabama fan who was trying to deliver some frontier justice to an Oklahoma fan in the adjoining section.  Clearly, her activity stands out as a shining example of how fans should act on any given Saturday in the Southeastern Conference and surely there is a co-ed somewhere in Tuscaloosa who is proud to call this fine lady his mom.

But I digress.  The real reason for his post is to discuss whether or not this fine lady would be covered by her homeowner’s insurance policy for any of her extra-curricular activities.  Although most people think of their homeowners insurance as only providing coverage for either property damage or injuries which occur on the insured property (slip and falls, dog bites, etc.), the standard homeowner’s insurance policy also provides coverage for bodily injury or property damage caused by the insured while away from home.  In short, the usual policy provides coverage for: “bodily injury” or “property damage” caused by an “occurrence”… to a person off the “insured location”, if the “bodily injury”… is caused by the activities of an “insured”.  Now, since all those quoted terms are specifically defined elsewhere in the policy, you can rest assured that such coverage is subject to several exclusions and that obtaining coverage for your follies may not be as easy as it seems.  But as least it is a start.

Now, with regard to the specific example posed by our southern belle, there is a specific exclusion to this coverage for, shall we call them, intentional acts.  The exclusion reads, in pertinent part:  Personal Liability Coverage….do(es) not apply to ‘bodily injury” or “property damage”  which is expected or intended by one or more “insureds”.   Oops!  Even though some might say she is a little “cray cray”, her acts look pretty intentional.  Perhaps the better advice would be that, if you plan to get that drunk, maybe you should stay at home and watch the game from the safety of your own home.