Citizens Property Insurance Corp. has approved a slate of policy language changes designed to protect consumers while addressing rising costs of nonweather water loss claims and related litigation that continue to drive premiums higher, according to a statement from the state-run insurer of last resort.
The policy changes will also address issues that have arisen since the Citizens Managed Repair Program was enacted last year and a subsequent rise in litigation the company says has occurred as a result.
The proposed policy changes, approved by unanimous vote at the Board of Governors meeting on Wednesday, would boost incentives for policyholders to participate in Citizens Managed Repair Program while better ensuring that customers who choose not to participate have adequate funds to make permanent repairs following a nonweather related water loss.
The new policy language would limit payment on nonweather related water losses – a broken pipe, a leaking water heater – to $10,000, including $3,000 for emergency water mitigation services. Additional water mitigation exceeding the $3,000 limit would be completed by Citizens managed repair contractors at no cost to the policyholder. The changes would take effect Aug. 1, 2018, if approved by the Florida Office of Insurance Regulation.
Citizens launched its Managed Repair Program in 2017 and established a $3,000 limit on water mitigation services for those policyholders who didn’t use the insurer program. The $3,000 limit could be exceeded if approved by Citizens. However, Citizens said the “flexible provision has had the unintended consequence of increasing the potential for litigation.”
Under the proposed new language, Citizens said policyholders who choose not to participate in Citizens Managed Repair Program would still have at least $7,000 available to them for permanent repairs while reducing the potential for litigation. Citizens added that most policyholders will not be affected by the policy changes because the costs for emergency water removal and permanent repairs on a nonweather water loss typically do not exceed $10,000.
“Why are we doing this? We know a major cost driver is abuse by disreputable vendors who are inflating mitigation charges well beyond the industry-average, which leaves policyholders less money to complete permanent repairs,” said Barry Gilway, president & CEO of Citizens. “This poses a grave risk for policyholders who choose not to participate in Citizens Managed Repair Program.”
Policyholders who elect to use Citizens Managed Repair Program will not be subject to the policy sublimits and could choose from a group of contractors participating in the program whose work is warrantied for at least three years, Citizens said.
Gilway told the Citizens Board of Directors that these product changes will help contain runaway costs for water claims from vendors while providing a safety net for policyholders who choose not to participate in managed repair.
“We also believe these changes will help encourage our customers to consider Citizens managed repair program,” said Barry Gilway, president & CEO of Citizens.
“We must address the abuse related to nonweather water claims while always ensuring every single Citizens policyholder has access to full coverage,” said Chris Gardner, chairman of Citizens Board of Governors. “Rather than simply restricting coverage, our proposed solution seeks to protect our customers and provide customer-friendly options.”
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