TALLAHASSEE (CBSMiami/AP) — A class action lawsuit has been filed against state-backed Citizens Property Insurance Corp. Florida homeowners involved in the suit claim the state-run insurer is systematically overvaluing properties in order to raise premiums.
Plaintiffs in the suit claim Citizens used a software system called 360Value to inflate the replacement cost of their homes, causing their premiums to skyrocket by more than 100 percent.
“Our motivation in establishing an accurate replacement cost valuation is to protect our policyholders and make sure they can restore their home after a catastrophic loss,” Citizens’ spokeswoman Christine Ashburn said Tuesday. “Any assertion to the contrary is simply wrong.”
Joe Freitas, who is from New Port Richey, is the individual named as plaintiff on behalf of the others in the class action. The plaintiffs are represented by attorneys Mark Beausoleil of Fort Lauderdale and Shane McClelland, who works for a Houston law firm.
The suit said Freitas purchased his home in September for $109,000, slightly below a $117,000 appraisal from his mortgage company, which required property casualty coverage. The premium with Citizens was $917. However, 30 days after closing, Freitas was told by his insurance agent that Citizens would not insure his home for less than $236,700, doubling the premium to $1,846 annually.
“It changed the way we were going to live our lives,” Freitas, 44, said at a news conference in front of the Old Capitol.
Freitas, a service technician for the Icee Corporation, said he tried to talk with Citizens, but was told that Citizens did not accept appraisals and followed the figures provided them by the company’s software program.
Sen. Mike Fasano said independent appraisals came back at about half of the amount Citizens claimed.
Ruth Lauro, 82, also from New Port Richey is also among customers suing the insurer.
Lauro said Tuesday that she isn’t sure how long she’ll be able to remain in her home of 33 years after a $69 increase in her monthly insurance premium. Nearly half of the increase was for flood insurance, which went from $400 to $800 annually. Lauro’s only income is a $637 Social Security check each month.
“Never had a puddle where I live,” Lauro said. “They really did me in good.”
“Ms. Lauro came to our office over a month ago, devastated,” Fasano, R-New Port Richey, said.
“Hundreds and hundreds are in similar situations,” said Fasano, whose district includes Freitas and Lauro. “This unfortunately and sadly is a way for Citizens and the private companies to raise rates without having to get approval from the state.”
Florida requires insurers to receive approval on rate requests from the Office of Insurance Regulation.
Created by the Legislature in 2002, Citizens was designed to provide insurance to homeowners in high-risk areas and those who cannot find coverage in the private market. It was largely an offshoot of an underwriting association formed by the state in the aftermath of Hurricane Andrew in August 1992. Instead of being the insurer of last resort as originally intended, Citizens has become the largest insurer of homes and business in Florida with nearly 1.5 million policy owners. If the company were to fail, virtually anyone in Florida with insurance would be assessed to make up the losses.
Sam Miller, vice president of the Florida Insurance Council, an industry group, said a major judgment against Citizens resulting from Tuesday’s suit would likely result in a statewide assessment on all homeowners, motorists and business owners.
Meanwhile, Freitas heads back to work and Lauro goes home with her fingers crossed.
“I just hope things work out,” she said.
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