Florida’s Citizens Accuses Embattled Law Firm, Others of Sham Lawsuits, Racketeering

By | July 6, 2020

Florida’s state-run Citizens Property Insurance Corp. has joined a chorus of insurance companies accusing the Strems Law Firm of lawsuit abuse. Citizens says it has lost millions of dollars due to an alleged scheme of “sham” claims by the law firm, a public adjusting company and restoration company.

Citizens also alleges a “pattern of racketeering activity in violation of [the Racketeer Influenced and Corrupt Organizations Act] RICO.”

The allegations came in a civil complaint filed against Fort Lauderdale-based The Strems Law Firm; attorney Scot Strems; public adjuster Guillermo Saavedra and his public adjusting firm Contender Claims Consultants (CCC) of South Miami; and All Insurance Restoration Services (AIRS) of Miami, its president Cesar I. Guerrero, and its operations manager Derek Parsons.

Citizens Spokesperson Michael Peltier said the lawsuit details concerted actions by the parties to abuse the claims process.

“These abuses have made it virtually impossible for Citizens to handle claims efficiently and effectively. We believe we had no choice but to file this suit to address the costs of these abuses that are shouldered by all Citizens policyholders through higher premiums,” he said.

Citizens filed the complaint in the Second Judicial Circuit Court for Leon County, Fla., on June 16. The 26-page document details Citizens’ allegations of how Strems, his firm, CCC and AIRS acted individually and in concert to defraud the insurer into paying for “sham first-party property insurance claims.”

Representatives for Strems, CCC and AIRS did not return Insurance Journal’s request for comment.

The complaint by Citizens comes after a June 9 emergency suspension ordered by The Florida Supreme Court against Scot Strems, who, with his firm, has filed thousands of lawsuits against insurance companies. The suspension was granted in response to a petition from The Florida Bar, which alleges that Strems and his firm have engaged in “mendacious, bad-faith conduct” and are “causing great public harm.” Strems has denied the bar’s claims through his attorney.

Citizens is seeking damages in excess of $30,000, exclusive of interest, costs, and attorneys’ fees, and asks for a jury trial. The filing details four parts of the “scheme” that the insurer says began in 2014 when the parties “secretly set out and engaged in a criminal conspiracy to defraud not only Citizens, but many other insurers in connections with claims made on behalf of Florida homeowners.” Citizens says it discovered the scheme in 2019 and claims it is still taking place today.

According to the complaint, the four parts of the “Scheme to Defraud Citizens” by the named parties are: Part one – improper solicitation and referral of business to one another; Part two – obstruction of Citizens’ investigation; Part three – submission of inflated or fraudulent claims; and Part four – vexatious litigation.

The alleged scheme begins with CCC’s adjustment of claims where it has homeowner insureds sign Strems contingency fee agreements, often without their knowledge that they have signed a contract for legal representation, Citizens said. The Strems Law Firm thereafter retains CCC adjusters as “loss consultants” while CCC also continues to provide public adjusting services, which Citizens claims is done to avoid limitations on public adjusters’ recovery and to claim their fees as part of litigation costs rather than being paid out of proceeds from the homeowners recovery. Over the course of the claims, Citizens says Strems or CCC contacts AIRS to provide water remediation services, where AIRS then will “convince the homeowners to execute assignment of benefits contracts necessary to perpetrate the … scheme.”

Working together, Strems, AIRS and CCC refer business to one another, “securing each other’s involvement in thousands of first-party property claims–often without full disclosure to, or knowledge by, the insureds,” according to the complaint.

Citizens also alleges the parties have thwarted the insurer’s investigations of claims, impeded direct in-person contact with the insureds, presented inflated or fraudulent claims of damages, and failed to photograph or take video footage of the purported damage in the homes. Additionally, Citizens says the accused parties have worked to “deceptively increase attorney’s fees claims” by filing different lawsuits for the same event or for damages covered by the same policy and engaging in “egregious dilatory tactics, serving the purpose of multiplying proceedings and expenses.”

“This conduct resulted in great harm to Citizens, which was compelled to defend this often-spurious litigation brought in bad faith,” Citizens said in the complaint.

Over the years, the Strems Firm, AIRS and CCC “actively took measures to conceal their fraudulent scheme from Citizens, resulting in millions of dollars in actual losses” to the insurer.

Citizens alleges multiple violations of Florida law and rules such as: CCC using its public adjuster position to solicit clients for Strems, and CCC acting as an agent of the Strems firm, circumventing state regulations including adjuster limitations on fees and licensure requirements.

Additionally, Citizens claims homeowners have been left in the dark as to CCC’s agreements with the Strems Firm, another violation of law. Citizens says CCC has used misleading retention and solicitation practices, in violation of the Florida Rules of Conduct of Public Adjusters, and advertised its services as “free remodeling,” “suggesting a wrongful practice of using insurance for voluntary remodeling rather than repair of damage resulting from a covered occurrence, and ignoring insurance deductibles.”

All of the actions allowed the parties to submit claims with “inflated values or outright sham claims,” Citizens said, with examples of such claims including: invoices from CCC for repairs to parts of the home that were not reported to have damage; invoices from AIRS overstating the amount of work performed and equipment used; water damage claims for parts of the home that had exhibited no moisture damage and were supported only by fraudulently-obtained moisture meter readings; and claims for damage that was caused by AIRS itself, among others.

Citizens’ complaint also details how the Strems firm repeatedly engaged in behaviors to delay cases by failing to comply with court orders, failing to appear at depositions, failing to appear at hearings or examinations under oath and failing to provide adequate discovery responses, all as a means to inflate attorneys fees. The insurer notes that the described conduct is also the subject of Strems emergency suspension petition by the Florida Bar granted by the state supreme court.

RICO Charges

Citizens says the named parties in its complaint “knowingly participated in conducting the activities of an enterprise whose activities involve or affect interstate commerce through a pattern of racketeering activity in violation of RICO, and Citizens was injured as a result.”

Citizens details six federal and state RICO counts against “The Enterprise” of Strems Law Firm, Scot Strems, CCC, Saavedra, AIRS, Cesar I. Guerrero, and Derek Parsons, that it says represented a pattern of racketeering activity.

Citizens says it is entitled to recover threefold its actual damages and its costs and attorneys’ fees, and seeks an award of damages in compensation for “the millions of dollars it paid in claims as a result of the defendants’ scheme and the expenses it incurred in defending spurious claims.”

The insurer requests it be awarded compensatory damages, pre-judgment interest on the damages from the fraud and scheme, and any other relief determined by the court, as well as the potential to seek an award of punitive damages.

“The unlawful actions of defendants, and each of them, have directly and proximately caused and continue to cause injuries to Citizens in its business,” the complaint states.

About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor

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