FOCUS ON FLORIDA Agents Tell Hurricane Irma Stories Handling Irma Claims Florida Fraud Round-Up
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November 20, 2017 • Vol. 95 No. 22 • Focus on Florida
Florida 5 Florida’s Hurricane Irma Recovery: The Cost, The Challenges, The Lessons 6 Weathering Florida’s 2017 Storms: Irma, AOB, Workers’ Comp 8 The Intersection of Humanity & Law in Dealing with Hurricane Irma Claims 12 Florida Insurance Agents Recount Hurricane Irma’s Personal Impact 18 Florida OIR Names New Chief of Staff, Deputy Commissioners
WEATHERING FLORIDA’S 2017 STORMS: IRMA, AOB, WORKERS’ COMP
THE INTERSECTION OF HUMANITY & LAW IN DEALING WITH HURRICANE IRMA CLAIMS
19 How to Help Policyholders After the Storm
10 Florida Fraud Round-Up • Miami Insurance Agent Arrested Over Assisted Living Facility Fraud Scheme • Workers’ Comp Scam Leads to Arrest of Miami Construction Company Owner • Unlicensed Contractor Arrested by Florida Disaster Fraud Strike Team • Florida Construction Company Owner Arrested for $1M Workers’ Comp Scam • Miami Agency Owner Charged With Creating Fake Policies, Stealing $276K in Premiums • Florida Woman Hires Someone to Drive SUV into Lagoon for Insurance Money
12 FLORIDA INSURANCE AGENTS RECOUNT
HURRICANE IRMA’S PERSONAL IMPACT
19 HOW TO HELP POLICYHOLDERS AFTER THE STORM 4 | INSURANCE JOURNAL | FOCUS ON FLORIDA NOVEMBER 20, 2017
Florida’s Hurricane Irma Recovery: The Cost, The Challenges, The Lessons By Amy O’Connor
he Florida hurricane season is officially over, but it didn’t go by without leaving a major mark on the state and insurance industry. Hurricane Irma, a name most in the state won’t soon forget, first hit the Florida Keys as a category 4 storm on Sunday, Sept. 10, with 130-mile per hour winds. It then worked its way north passing over the east and west coasts. Loss estimates from Hurricane Irma have ranged between $25 billion to $65 billion by catastrophe modelers. The Florida Office of Insurance Regulation (OIR) reported total estimated insured losses at more than $5.5 billion as of Nov. 3, with INSURANCEJOURNAL.COM
more than 672,000 residential property claims and almost 49,000 commercial property claims. Business interruption claims have reached more than 3,700, and that number will likely continue to rise. In the immediate aftermath of the storm, 6.7 million homes and businesses — about 65 percent of the state — were without power. The Florida Hurricane Catastrophe Fund said the state fund that provides backing to private insurers would pay about $5.1 billion in claims. Florida estimated it had spent nearly $650 million on emergency resources and clean up from the storm. Florida’s state-run insurer of last resort, Citizens, expects $1.23 billion in insured losses and 70,000 Hurricane Irma claims
over the next 18-24 months. The damage to Florida crops was also epic. According to The Associated Press, Florida Agriculture Commissioner Adam Putnam said Irma’s path couldn’t have been “more lethal” for Florida agriculture, with few crops spared. More than half of the state’s iconic orange crop is estimated to be lost.
Could Have Been Worse
Hurricane Irma will go down as one of the top hurricanes in Florida history, but experts say it could have been worse. As the storm tracked towards Florida in early September, some estimates put the cost of damage from Irma as high as
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| News & Markets
Weathering Florida’s 2017 Storms: Irma, AOB, Workers’ Comp
t the Florida Chamber of Commerce’s Annual Insurance Summit held in early November, insurance executives, legislative leaders and political insiders converged upon the two-day event in Orlando to discuss the issues of critical importance to Florida’s families and businesses. The keynote speaker for the event – dubbed “Weathering the Storms: Irma, AOB, Workers’ Comp and the Work That Lies Ahead” – was Florida’s Chief Financial Officer Jimmy Patronis. He discussed the rising challenges Florida faces, saying chief among those challenges is an increasing number of fraudulent claims. Speaking directly about assignment of benefits (AOB) lawsuits, Patronis said that “fraudsters” were out in droves to try and take advantage of Floridians suffering damages from Hurricane Irma. “There were creatures that came out to try and take advantage of these vulnerable folks that are overwhelmed, don’t know up from down or how to recover – the people I was out to make a difference for,” Patronis said. “The games they play in order to try and get that credibility are troubling. We have to take that information straight to the customer.” AOB contracts transfer a policyholder’s benefits over to a third party in the case of a loss – in most instances, contractors for home repair. The contracts allow for these vendors to bill insurance companies on behalf of homeowners, or more commonly, sue the insur-
er directly. In 2006, there were 405 AOB lawsuits filed in Florida. Last year, the number was up to an astounding 28,200. State Rep. Jay Fant, who spoke on a legislative panel addressing insurance industry challenges, said taking on the issues facing insurers the past few years has been tough because each is a battle between pro-business legislators and trial lawyers. “We’ve got obstacles and they are fairly immovable in some respects,” Fant said. “AOB is the pits and it is because of corrupt attorneys.” The property and casualty insurance market have been most affected by AOB lawsuits. Especially in Miami-Dade, Broward and Palm Beach County, where the highest concentration of these lawsuits appear. Republican Sen. Anitere Flores, also an insurance summit panelist, told the audience that in the aftermath of Hurricane
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Irma, property insurance will be key this legislative session. “I made some promises to myself over the summer that I was going to have a much calmer session this year, and not be in the middle of too many fights,” Flores said. “But Mother Nature had different plans.” Workers’ compensation also took center stage. Compared to 2016, workers’ comp rates are up 14.5 percent this year, which equates to a $1.5 billion impact to Florida’s business community. The National Council on Compensation Insurance (NCCI), the rating agency for the majority of insurance carriers in Florida, pointed out that the rate decrease of 9.3 percent it proposed, and the 9.8 percent decrease just approved by Florida regulators, does not take into account the fallout from the 2016 Florida Supreme Court Castellanos decision. Republican Sen. Doug Broxon, who participated on the legislative panel, expressed his concern. “The reality is we are going to see rate
increases and the reality is you are going to find a way to pass those increases on in a form of rate charge,” Broxson said. “That concerns me because many of my constituents simply are not in the position to deal with additional rates without considering other options.” Rep. Danny Burgess followed Broxon by addressing how legislators will have another opportunity to tackle the workers’ comp issue during the 2018 Legislative Session after failing to do so in previous years. Burgess said that while he is pleased to see a short-term decrease in rates, there is a storm on the horizon. “We have a temporary decrease, but make no mistake that it is temporal in nature,” Burgess said. “I’d like to think we would absolutely be able to get something done before we experience another
increase. I also recognize the difficulties that we faced last year in getting a meaningful reform passed when we had a real palatable increase at 14.5 percent.” Reinsurance issues were addressed by Andy Marcell, president of Aon Benfield, and Justin O’Keefe, senior vice president and chief underwriting officer at RennaisanceRe. Marcell gave a reinsurance market perspective of the catastrophe losses of 2017. He said Aon Benfield collected more than $800 million in ceded losses, and claims spent an average of only six days in collections after Hurricane Irma. “The reinsurers responded incredibly well and we thank them all for our clients,” Marcell said. “They have been supportive in prefunding claims, as they have in the past, but they are better at it now.”
“Florida has been, and still is, the largest insured risk in the world”
O’Keefe said that Florida is one of the top priorities of reinsurers because of the amount of risk the state incurs. “Florida has been, and still is, the largest insured risk in the world,” O’Keefe said. “It’s larger than any other country outside of the state in and of itself. That’s why reinsurers care about it.”
The Florida Chamber of Commerce is the voice of business and the state’s largest federation of employers, chambers of commerce and associations aggressively representing small and large businesses from every industry and every region. The Florida Chamber works within all branches of government to affect those changes set forth in the annual Florida Business Agenda, and which are seen as critical to secure Florida’s future. The Florida Chamber works closely with its Florida Political Operations and the Florida Chamber Foundation. Visit www.FloridaChamber.com for more information.
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The Intersection of Humanity & Law in Dealing with Hurricane Irma Claims
By Maria T. Santi
urricane Irma, the most intense hurricane to strike Florida since Hurricane Andrew in 1992, hit the Florida Keys in the early morning of September 10 as a category 4 hurricane. All 67 Florida counties were impacted. Homes, businesses, loved ones and livelihoods were lost. Ongoing challenges in Irmaâ€™s aftermath include dealing with insurance claims, legal issues and FEMA assistance, and the insurance industry is being
called upon to help people navigate this process. There is an estimated $5.5 billion in reported economic damages sustained by policyholders and insureds in Florida. The economic aspects of the aftermath will dictate the proportioning of resources through insurance claims. Residents may prefer human values of humility and compassion to guide the decisions of insurers to repair homes and lives, but economic and legal forces will undoubtedly be the guiding force. Insurers must protect their economic health while providing insureds adequate insurance benefits. There are several strategies insurers can keep in mind to balance competing interests and ultimately stem their own losses. According to the Florida Office of Insurance Regulation, 809,306 claims had been filed as of Nov. 3; 672,106 are residential property claims. Agents and brokers can serve as edu-
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cators to insureds by advising them on how to manage claims expediently during the claims process. However, guidance should be limited to ministerial administrative duties, as explaining rights under an insurance policy can delve into the unauthorized practice of law. Further, an agent or broker should not advise insureds about whether to pursue a claim or whether a claim exceeds a deductible. This can expose agents and brokers to liability if the insured files a claim that is later denied due to late reporting. Another ongoing issue is that new claims filed in the wake of Irma have added to existing claims. Insurers face a tedious task of scrutinizing prior claims to determine overlaps between old and new Irma claims. Insurers will need to decide how the overlap relates to the cause of loss in prior claims. One of the greatest issues that plagues Florida for overlapping claims is the history of insurance fraud and abuse. Actuaries can calculate the costs of most catastrophes, but one variable that can never be accurately accounted for is the cost and extent of fraud. Insurance agents, brokers and insurance adjusters should assert adequate controls to prevent fraudulent claims. Public adjusters claim to represent the best interest of insureds, but some seek a maximum payout for their own benefit. The benefit of having a public adjuster is the insured doesnâ€™t need to be involved in the claims process. The downside to a public adjuster is a percentage for the services rendered is charged, which reduces insurance benefits paid
to insureds. Public adjusters may also include assignment of benefits language in contracts with the insured. This can increase expenses faced by insurers. When an insured assigns a benefit to a mitigation company or public adjusting company, those companies can file lawsuits against the insurers for the same loss, increasing legal costs. One way of preventing this is for agents and brokers to develop a vetting system to identify quality adjusters and mitigation companies to help insureds avoid predatory practices by unscrupulous public adjusters and mitigation companies. Agents and brokers need to pay attention to assignment of benefits issues. In assessing damages, insurers must distinguish between total losses and small losses. Losses are governed by policy provisions and endorsements that need to be closely examined. The resources needed for total losses may be squandered away by public adjusters seeking to inflate prices for unnecessary repairs or aesthetic purposes for small losses. The ultimate goal is to bring insureds to their pre-loss condition. For some, this will happen quickly. For others, there are months of rebuilding. The relationship between agents/ brokers and insureds should include an element of humanity to guide insureds through the claim process and to the right resources and help insurers save money on losses. Maria T. Santi is an Attorney in the Fort Lauderdale office of Kelley Kronenberg, a diverse business law firm, where she handles first party property matters. She can be reached at (954) 370-9970 or firstname.lastname@example.org. INSURANCEJOURNAL.COM
FOCUS ON FLORIDA
| News & Markets
Florida Approves Nearly 10% Decrease in Workers’ Comp Rates
lorida Insurance Commissioner David Altmaier issued a final order granting approval to the National Council on Compensation Insurance (NCCI) for a statewide overall rate level decrease of 9.5 percent and premium level decrease of 9.8 percent. The decrease applies to both new and renewal workers’ compensation insurance policies effective in Florida as of Jan. 1, 2018. “I am pleased that [the] approval of NCCI’s rate filing will translate into a decrease in workers’ compensation rates for many Florida employers,” stated Commissioner Altmaier. “The Office will continue to monitor the marketplace and support reforms that provide additional cost savings for Florida’s businesses.” The rate decrease is especially welcome after last year’s increase of 14.5 percent.
Businesses were expecting additional rate increases in response to two 2016 Florida Supreme Court decisions – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg – that led to the double digit increase this year. NCCI said declining loss ratios, with a significant reduction in the lost-time claim frequency between 2001 and 2015, helped contribute to the rate decrease. Still, workers’ comp experts say the
impact of these decisions has not yet been felt by insurers, and workers’ comp reforms are needed. “I’m pleased to see the cost of business going down, and as the Legislature looks at our workers’ compensation system, I will be working with them on proposals to lock in these lowering rates,” said Florida’s Chief Financial Officer Jimmy Patronis. NCCI received this approval after submitting an amended rate filing to OIR on Nov. 7, 2017, which met the stipulations of an order issued by Altmaier on Oct. 31, 2017.
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$200 billion. But something called the “Bermuda High,” threw the hurricane slightly off course, sparing the most populated area of South Florida from the brunt of the storm. Bloomberg reported that the circular system hovering over Bermuda “jostled Irma onto Northern Cuba … where being over land sapped it of some power.” Florida escaped the worst because “Irma’s powerful eye shifted westward, away from the biggest population center of Miami-Dade County,” Bloomberg said. “The fact that it took a left turn at the last minute and didn’t give Miami a punch in the nose was a blessing,” said Marsh US Property Practice Leader Duncan Ellis.
Still, Irma did pack a powerful punch and the recovery will go on for some time. Companies are now working on getting insureds back on their feet. One of the biggest issues in the aftermath of Irma has been a shortage of claims adjusters. The storm came just two weeks after Hurricane Harvey hit Texas and the industry has scrambled to bring in adjusters, leading to delays in resolving claims. OIR reported in its Nov. 3 claims data that about 300,000 of the 672,000 — or 55.4 percent — residential property claims reported to insurers remained open. The percentage of commercial property claims closed was much lower at 26.8 percent. “The biggest challenge is you get a backlog when catastrophes hit like this. [Hurricane Harvey] was so close to what happened in Florida,” said Bobby Raymond, owner of Jacksonville, Fla.based Brightway, The Fort Caroline Agency. “There’s a limited pool of claims adjusters in the universe. We’ve warned clients carriers are doing the best they can, but they [could] take a while to get back to you.” Raymond himself couldn’t get a claims adjuster out for almost a month after Irma caused two trees to fall on homes he owns. “That’s just typical,” he said. Carriers have turned to technology, such as drones, to help with assessing claims. EagleView, an aerial imagery provider, does inspections for insurance companies, including roof and structure damage, and
Source: Florida Office of Insurance Regulation
property damage measurements. Kenneth Cook, SVP of EagleView OnSite Solutions, said its drone technology has handled thousands of Irma claims for insurers. “It’s a new method for them to get their work done. After any kind of a storm event — especially with two major events back to back — insurance adjusters are busy around the country, and insurance companies are always looking for faster more efficient ways to help customers,” Cook said. EagleView contracts with drone hobbyists and provides them with insurance certification training, including how to inspect a home for claims purposes. In some areas of Florida that were impacted by Irma, Cook said drones were not a good solution because of structural damage, but in other areas drones can capture detailed images of damage like missing shingles, fences blown down, or missing roof tiles. “There are thousands of claims that drones are perfect for because in just 25 minutes the pictures are taken and uploaded, saving the carrier a lot of time,” he said. New hurricane policies were also put
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to the test in the aftermath of Hurricane Irma. Policyholders of the new StormPeace product from Assured Risk Concepts (ARC) and California-based Topa Insurance Co. were reimbursed right away for hurricane expenses ranging from $1,000 to $15,000. Alok Jha, CEO and founder of ARC, said as of mid-October about 90 percent of its customers had been paid for Irma losses. The StormPeace product uses mobile technology to alert costumers in declared storm areas so they be paid right away for evacuation costs or damage to their homes. “This product has no exclusions and pays promptly after a hurricane,” Jha said. A contractor shortage has also delayed recovery efforts. Jake Morin, president of Construction for ProSight Specialty Insurance, said demand has surged for contractors in hurricane-hit areas, and so has demand for coverage. The company is working quickly to get contractors insured so they can help with rebuilding. “Homeowners and businesses want to make sure they are working with a licensed and reputable contractor,” he said. “There INSURANCEJOURNAL.COM
is a flood of contractors trying to capitalize; make sure the work they are doing is the work they need to be doing.”
Experts are already looking at whether the state was adequately prepared for Irma and what should be done differently next time. “Much hard work and preparation over the last few years has paid off during Citizens initial response to Hurricane Irma,” said Chris Gardner, chairman of Citizens’ board of governors. “However, given the magnitude of reported claims, we are sure to encounter unforeseen challenges. We will continue to learn, prepare and improve our response capabilities with each storm situation.” Agency owner Raymond said despite the adjuster shortage, he’s been impressed with how carriers have improved their cat response and capabilities to process large claims volumes since Hurricane Matthew. “We had less complaints from customers this year about not being able to get through to their carrier,” he said. Marsh’s Ellis says Irma is a reminder of the importance of adequate insurance coverage, and that agents should take the time now to sit down with their clients and evaluate their coverage needs. “People forget how significant these events are. It’s an eyeopener for people, especially in the residential space where flood isn’t covered,” Ellis said. ProSight’s Morin agrees. “Insurance is one of those items that you buy, but you don’t know what you have until you need it. Customers truly rely on their insurance agent to be their counsel and point them in the right direction and make sure they are covered,” he said. Doug Wiles, president of Herbie Wiles Insurance Agency in St. Augustine, Fla., said Irma’s aftermath has highlighted the important work that insurance agents do. For instance, he has spent countless hours keeping information flowing between carriers and customers since the storm. “It can be tough to get through to insurance companies and you are speaking to a different representative each time — it’s
not like talking to an old friend or neighbor. The value of an agent at a time like this is incredible,” he said. He added that the increasing frequency of catastrophes should not be overlooked. “With the change in our climate, I am concerned we are going to see more of this
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activity and I am concerned about what that is going to do to the insurance industry, especially for those companies who have focused their business in Florida,” he said. “I think we need to take a careful look at how we spread that risk — and whatever that means to the companies involved.”
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Florida Insurance Agents Recount Hurricane Irma’s Personal Impact By Amy O’Connor
t’s been just a couple months since Hurricane Irma hit Florida, and it won’t be forgotten by anyone anytime soon, especially not by those in the insurance industry. The powerful storm made landfall first in the Florida Keys as a category 4 hurricane on Sunday, Sept. 10 with 130mile per hour winds. It then worked its way north, leaving its mark on most of the state, passing from the east to the west coasts. In the immediate aftermath of the storm, 13 million residents were without electricity, and for many, it was days or longer before power was restored. Storm damage loss estimates by catastrophe modelers have ranged between $25 to $65 billion. The Florida Office of Insurance Regulation (OIR) reported total estimated insured losses at more than $5.5 billion as of Nov. 3, with more than 672,000 residential claims and almost 49,000 commercial property claims. As it does after a hurricane or other disaster, the insurance industry got right
to work, helping customers recover from the catastrophe, fulfilling the promises for which they paid all those premiums. Many of those responsible for doing that recovery work for insureds were themselves victims of Hurricane Irma, and they faced a significant challenge: How to help their customers when they and their employees also needed help. Insurance Journal set out to find out how these industry professionals juggled responsibilities to their customers, their businesses and their families. These are a few of the stories of those who didn’t let their personal troubles stop them from helping their customers after Hurricane Irma.
he owned just outside of the area so he could work remotely with power from a generator, and he planned to handle customer claims from there. In the early morning hours of Monday, Sept. 11, strong winds caused an oak tree to fall on a rental house Raymond owned next door to where he was staying. Later that day, another oak tree that had been leaning over his house because of the storm fell on top of his roof, sending limbs through the second story of the house. Raymond said for two days, he stayed on the first floor of the house with his son and friends – and a tree on the roof – working with his agency’s affected customers until he lost internet service. That Wednesday, Raymond was able to get a tree service out to his property, but the shortage of claims adjusters in Florida slowed his own insurance claim. His adjuster said it would be a month before they could get out him. “They all have a long list of claims to get to,” he said. The City of Jacksonville, located on
“It’s a good feeling to be able to help your insureds and know you’ve done it right.”
Brightway, Fort Caroline, Jacksonville, Fla. Brightway Agency Owner Bobby Raymond and his staff had evacuated their office in Jacksonville, Fla., on the Friday before Hurricane Irma hit. Raymond brought his laptop to a home
High winds from Hurricane Irma caused an oak tree to fall on top of the home of Brightway, Fort Carolina Agency Owner Bobby Raymond as well as a rental home Raymond owned next door. Photo courtesy of Bobby Raymond. 12 | INSURANCE JOURNAL | FOCUS ON FLORIDA NOVEMBER 20, 2017
In this Monday, Sept. 11, 2017, photo provided by DroneBase, people trudge through floodwaters in the aftermath of Hurricane Irma in Jacksonville, Fla. In a parting blow to the state, the storm caused record flooding in the Jacksonville area. (DroneBase via AP) the northeast side of Florida, experienced significant and unexpected flooding around St. Johns River from Irma as well, so Raymond had many customers affected by the storm. “That was a big surprise. Flood Zone X areas actually flooded – areas that hadn’t flooded before,” he said. “It was just a function of how the storm surge worked and a low tide, so the river wasn’t able to empty out.” Raymond’s agency processed about 100 claims out of its 2,500 policies. Since he lost internet and phone service, many of Raymond’s calls were handled through Brightway’s customer service center. One of Raymond’s most memorable clients after the storm was a permaINSURANCEJOURNAL.COM
nently disabled Iraq War Veteran named Gary Boggs. Despite flooding in his own apartment, Boggs was driving around in his jeep, taking assisted living facility residents to the grocery store and to get supplies. While he was running all over the area helping people, he called Raymond – his agent – to figure out what to do about his flooded home. “I told him we needed to get a drying company out there as quickly as possible,” he said. Raymond referred him to a number of companies and the one Boggs was able to get in touch with said they wouldn’t be able to make it to his home for a week. Luckily, Raymond had a contact there to whom he explained Boggs’ story and the work he was doing in the
community. “I said ‘If you can do anything to move him to the top of the priority list, and if anyone deserves it, he certainly does.’ Within 30 minutes, they got a team that had traveled from California to his home and got started on everything right away,” he said. “I have plenty of customers with claims, but he is kind of special. I was really happy we were able to get them in.” Raymond was also able to help Boggs line up contractors to start repairs to his damaged home. The other good news for Boggs: he had flood insurance, thanks to Raymond. “I spent a lot of time teaching him about it and told them they were close
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safety. People have different degrees of comfort,” Havemeier said. Havemeier said he made the decision to the close the Naples office Sept. 8, the Friday before Irma made landfall, to allow staff to prepare or evacuate their own homes. Still, Gulfshore kept its customer service line open over the weekend, and the 25 to 30 employees who remained answered calls and responded to clients, Havemeier said. “When you are in the customer service business, you have to respond. But when you have a skeletal staff, it can get a little overwhelming,” he said. Naples, on the bottom West Coast of Florida, took a direct hit from President of Gulfshore Insurance Brad Havemeier and VP of IT Jim Helton prepare the office building in Irma on Sept. 10 and experienced Naples, Fla., for Hurricane Irma in the days before the large storm was expected to hit. Photo courtesy significant flooding. Havemeier of Gulfshore Insurance. said Gulfshore’s Naples office sustained some minor building damGulfshore Insurance, Naples, Fla. age from the 140 mph winds. The area to the river and needed flood insur Naples, Fla.-based Gulfshore ance,” Raymond said. “A flood adjuster of Marco Island, where Gulfshore also has an office, experienced catastrophic got there within a couple days after Irma Insurance, an independent agency with and approved all of his services and dry130 employees in five offices in the damage, and the agency’s office there ing, and released a check to him to get remains closed. state, held its extensive annual hurrithings started.” cane preparedness test to go over the But the Naples office was back up and Raymond said it agency’s emergency plans running on Sept. 12. Havemeier said he just a month or so before was rewarding workfound out the office is on the same power grid as the hospital and fire station, ing with customers Hurricane Irma made landfall. so they were one of the first in the area to get them back on their feet in the afterto get power restored. Many Gulfshore Gulfshore President math of Irma, even employees went without power for a Brad Havemeier said that while dealing with week or more after the storm, and some exercise is important his own hurricane drama. slept at the office because they could for an agency located in a hurricane “It’s a good feeling when you spend exposed area, especially since the region escape the heat with its air conditioning. all this time selling insurance policies, Havemeier said the agency had about hadn’t experienced a significant storm and then when it comes time to protect 10,000 customers affected by Irma, and in 15 years. the people you are trying to protect, to an adjuster shortage meant carriers “We wanted to make sure that people be able to tell them ‘Yes, you are covcould not respond as quickly as they were prepared,” he said. ered, here’s the number and let us know wanted. Communication disruptions But once Hurricane Irma began its how we can help or if you don’t underfrom cell towers that were out also path toward Florida the first week of stand, let us know.’ People appreciate slowed service. September and projections about the that,” he said. “So, for me, it has been He said insurance colleagues from storm’s strength and track became more really hectic, and I’ve been really busy outside of the area reached out to see if dire, employees of the agency understandably began to fear for their own and stressed, but it’s a good feeling to they could help his agency. safety and the safety of their families. be able to help your insureds and know “It’s good to have that camaraderie,” you’ve done it right … that’s what we are “You can’t prepare for the fear and he said. concern people feel for their own life in the business for.” He is proud that his agency was able to
“When you are in the customer service business, you have to respond.”
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help customers after the storm despite not having all the usual resources. “We are here to hold people’s hands and give them the right advice, and we have customers who value us for that,” he said. “With the community based insurance agency starting to disappear, you start losing that relationship. You wonder how people will be served.”
Brightway, The Landers Agency, Fort Lauderdale, Fla.
Brightway, The Landers Agency, is located in a flood zone about three blocks from a mandatory evacuation area in Fort Lauderdale. Its owner, Kandie Landers, also owns a Brightway franchise in Denver and just expanded her franchise into Florida back in March. Landers was working from Denver before Hurricane Irma hit and planned to fly back to Fort Lauderdale to help her staff prepare the office. Instead, she decided to stay behind so she could assist customers with claims in the event of power outages after the storm. “I had my team get everything out of the office that we could and get stuff off the ground, take laptops and phones
home,” she said. “During the hurricane I never lost power in Colorado, so I was able to help customers.” Landers flew back to Florida and returned to her office the Wednesday after Irma, where she found it completely flooded and the air conditioning blown out. Landers and her team, husband, and parents got to work cleaning up the office, all while assisting clients and others who needed her agency’s resources. “It was exhausting – both physically and emotionally because we couldn’t help everybody. But we truly tried our best to help everyone we could,” she said. It was about two weeks of working remotely and cleaning up before Landers could get back into her office. About one-third of her agency’s 1,400 policies were affected in some way, Landers said, including several clients in the Florida Keys, which suffered catastrophic damage. “Once that storm is gone, there are demands from clients, mortgage brokers, dealing with day-to-day expectations… they don’t stop. You can’t be as efficient when you aren’t all together in the office,” she said. “It hurts produc-
“We are an advisor. We need to advise clients all the way through this”
tion too. From a business owners’ standpoint, you are sacrificing not only on the product side, but the day-to-day work.” Landers said the lack of education among Florida residents when it comes to their insurance needs has been “pretty scary.” She said the consultative approach to educating her clients she used in Denver is even more essential in the hurricane-prone state. “A lot of people don’t know what they have and don’t have, and that’s why it’s our duty to educate them on what they need,” she said. But Irma helped raise awareness among her clients, who have been calling to thank her since the hurricane because they had the right coverages. “[Clients] may not always want everything I have or say they need, but my job at the end of the day is to make sure they are protected,” she said. “That was one of the things that really resonated for me through all of this – we are an advisor. We need to advise clients all the way through this.” And though her first year in Florida has been eventful, she says she doesn’t regret opening her office there. “We are lucky we didn’t get more damage than we did, and we will move forward and use the experience as an opportunity to educate,” she said.
Flood damage to Brightway, The Landers Agency, from Hurricane Irma kept agency owner Kandie Landers out of her office in Fort Lauderdale, Fla., for two weeks. Photo courtesy of Kandie Landers. INSURANCEJOURNAL.COM
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FOCUS ON FLORIDA
Miami Insurance Agent Arrested Over Assisted Living Facility Fraud Scheme
| Fraud Round-up
An investigation led by the Florida Department of Financial Services (DFS) Bureau of Insurance Fraud led to the arrest of a Miami insurance agent for attempting to evade a higher insurance premium for his assisted living facility (ALF) client. According to Chief Financial Officer Jimmy Patronis and DFS, an investigation found insurance agent Claudia Estevez aided Ariel Mora by helping him submit a fictitious insurance application, allowing Mora to fraudulently obtain a less expensive, inadequate insurance policy. Investigators allege Mora completed a residential homeowners insurance application indicating the structure he was insuring was not being used for business or commercial purposes. Estevez authorized the application, allowing Mora to purchase a homeowner’s insurance policy instead of obtaining a commercial insurance policy for his ALF, as required by Florida law. DFS said the investigation found Estevez knew the property was intended to be an ALF and was attempting to help Mora obtain a lower insurance premium. As a result of Estevez’s actions, Citizens Property Insurance lost $1,536 in underpaid premiums. In addition, any future claims against Mora’s ALF policy would have been denied due to inadequate insurance coverage. Investigators arrested Estevez Aug. 9,
2017, and charged her with insurance fraud, grand theft and organized scheme to defraud. Estevez was transported to Turner Guilford Knight Correctional Center without incident. If convicted, she could face up to 15 years in prison. Investigators arrested Mora May 24, 2017, and charged him with insurance fraud and grand theft. Mora was transported to Turner Guilford Knight Correctional Center. These cases were to be prosecuted by the Miami-Dade State Attorney’s Office.
Workers’ Comp Scam Leads to Arrest of Miami Construction Company Owner
The owner of a construction company was arrested in August after his alleged attempt to operate a shell company with the sole intent of circumventing the state’s workers’ compensation laws, according to a statement from Florida Chief Financial Officer Jimmy Patronis. A “shell company” is an entity that conducts no significant business operations and can be used as a vehicle to conduct fraudulent financial transactions, such as workers’ compensation fraud. Juan Jose Castro, owner of JACM Construction Corp., reportedly obtained a workers’ compensation policy for his company on April 25, 2017. When obtaining the policy, Castro provided his business operated with an estimated annual payroll of $112,000 for work classified under the description of wallboard installation and carpentry. The Department of Financial Services’ Bureau of Workers’ Comp Fraud, along with the Broward Sheriff’s Office (BSO), said it was conducting a surveillance operation at a Vero Beach money service business (MSB) when a suspicious trans-
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action for JACM Construction Corp. was identified. The transaction involved Castro, the president and sole registered agent of JACM, cashing 27 business-to-business checks totaling $127,025. DFS said this single transaction surpassed Castro’s estimated yearly payroll. Through further investigation, it was found that from Feb. 12, 2016 to Aug. 6, 2017, Castro cashed more than $8.4 million in payroll at various MSBs in Florida. DFS said had Castro accurately provided the amount of payroll that would be transmitted by his company, Castro’s yearly premium would have been $424,314. As a result of his actions, Castro allegedly defrauded his insurance company by avoiding nearly $300,000 in premium payments. Castro was arrested Aug. 11, 2017 in Palm Beach County by the Bureau of Workers’ Comp Fraud in conjunction with the BSO Money Laundering Task Force and BSO Workers’ Compensation Fraud Task Force. He was charged with workers’ compensation premium fraud, a first-degree felony. This case was to be prosecuted by the Miami-Dade State Attorney’s Office, 11th judicial circuit. If convicted, Castro could face up to 10 years in prison.
Unlicensed Contractor Arrested by Florida Disaster Fraud Strike Team
An unlicensed contractor from Fort Myers, Fla., was arrested after he was found to be conducting subpar roof repairs and operating without insurance in the wake of Hurricane Irma. Chief Financial Officer Jimmy Patronis said Oscar M. Palma was arrested by the Department of Financial Services’ Disaster Fraud Action Strike Team. Palma was reported to authorities after allegedly making subpar roof repairs to an area apartment complex following Hurricane Irma. A statement from DFS said an investigation was then launched where fraud detectives found Palma was advertising himself as a licensed and insured contractor, but held no workers’ compensation INSURANCEJOURNAL.COM
coverage and was not licensed as a contractor. The Department’s Bureau of Workers’ Compensation Compliance received a tip Oct. 12, 2017, alleging unlicensed, uninsured and careless roof work was being performed by Palma’s company. Investigators visited one of Palma’s current work sites and issued a stop work order upon confirming Palma failed to secure workers’ compensation insurance and Palma’s confession to having no professional license. He was arrested Oct. 13, 2017, and transported to Lee County Jail. This case was to be prosecuted by the Lee County Office of the State Attorney, 20th Judicial Circuit. If convicted, Palma could face up to five years in prison. DFS’s anti-fraud strike team consists of three teams working in areas heavily impacted by Hurricane Irma including South Florida, Miami-Dade and Monroe counties; Southwest Florida, including Lee and Collier counties; and Central Florida, including Polk and Orange counties.
Florida Construction Company Owner Arrested for $1M Workers’ Comp Scam
The owner of a Florida construction company was arrested for allegedly obtaining a fraudulent workers’ compensation policy by underreporting the number of staff he employed, the company’s annual payroll amount and the company’s scope of work. According to a statement from Florida Chief Financial Officer Jimmy Patronis and the Department of Financial Services (DFS) Carlos Contreras, owner of DJC Builders & Construction was arrested after providing false information on his insurance application and illegally avoiding paying more than $1 million in premium payments for an adequate policy. Contreras allegedly claimed his company’s annual payroll was $273,786, and thus was quoted an annual workers’ compensation policy premium of $25,311. However, between January and August 2017, DFS investigators determined that INSURANCEJOURNAL.COM
Contreras cashed at least 620 payroll checks for DJC Builders & Construction. In total, nearly $6.5 million in payroll was cashed using various money service businesses located across the state. DFS said if Contreras had accurately reported the company’s total payroll, number of employees and correct work description, the company’s proper workers’ compensation premium would have been more than $1.2 million. Contreras was arrested on Oct. 19 and transported to the Duval County jail. He has been charged with one count of knowingly concealing payroll and one count of scheme to defraud. The Duval County State Attorney’s Office was to prosecute the case and if convicted, Contreras could face up to 60 years in prison.
Miami Agency Owner Charged With Creating Fake Policies, Stealing $276K in Premiums
A Florida insurance agency owner has been arrested after being accused of submitting fake insurance applications and stealing nearly $300,000 in insurance premiums. A statement from Chief Financial Officer Jimmy Patronis announced the arrest of Jose Manuel Caballero-Morlesin (Caballero), an insurance agent and owner of Axis Underwriters Inc., a Miami-based insurance agency. An extensive investigation led by the Department of Financial Services’ Bureau of Insurance Fraud unraveled a complex scam in which Caballero enlisted a finance company to pay annual premiums tied to fake insurance applications. In total, DFS said Caballero submitted 38 fake applications and stole $276,000 in premium payments. Caballero confessed to investigators and faces up to 157 years in prison, if convicted. Many residential and commercial insurance policyholders are required to pay annual premiums up front. Insurance agencies partner with finance companies to front the cost of the annual premium, allowing the policyholders to make monthly installments to the finance
company if they cannot afford to pay the full premium amount at one time. During a six-month timeframe in mid2016, DFS said Caballero submitted 38 applications for financing using made-up consumer information. The unsuspecting finance company approved the applications and issued annual premium payments to Caballero’s insurance agency, Axis Underwriters Inc. In time, the finance company grew suspicious when no policyholders came forward to pay their monthly installments. The finance company reported their suspicions to the Department’s Division of Insurance Agent and Agency Services, which referred the case to fraud investigators as a suspected scam. DFS said it would seek the immediate suspension of Caballero’s insurance license once formal charges were filed. Caballero turned himself in to authorities Oct. 9, 2017, and has been charged with one count of organized scheme to defraud and 38 counts of forgery, uttering forged instruments, grand theft and the misappropriation of insurance funds. This case was to be prosecuted by the Office of Katherine Fernandez Rundle of the Miami State Attorney’s Office.
Florida Woman Hires Someone to Drive SUV Into Lagoon For Insurance Money
Authorities say a Florida woman had her SUV driven into Grand Lagoon and then pretended the vehicle had been stolen. The News Herald of Panama City reported that 65-year-old Debra Jenkins was charged with insurance fraud. She was arrested after a man spotted a submerged SUV in the waters. The Bay County Sheriff’s Office said in a report that a stick was found inside the vehicle on the driver’s floorboard to possibly hold the gas pedal. Jenkins initially told authorities that the SUV had been stolen the night before. According to an arrest report, Jenkins later told police that she and a friend had devised the plan to get rid of the vehicle and claim the insurance money. Copyright 2017 Associated Press.
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FOCUS ON FLORIDA
| News & Markets
Florida OIR Names New Chief of Staff, Deputy Commissioners
lorida Insurance Commissioner David Altmaier appointed Michael Yaworsky as the new chief of staff for the Florida Office of Insurance Regulation (OIR) over the summer, replacing former Chief of Staff Belinda Miller, who retired at the beginning of July. Miller worked at OIR for nearly 30 years in a variety of capacities, including as deputy commissioner of Property & Casualty and general counsel. In a statement on Miller’s retirement, Altmaier said Miller was instrumental to the OIR through several significant market events, including the rebuilding of Florida’s property market after the 2004 and 2005 hurricane seasons and economic crisis, the examination of the asymmetrical use of the death master file by life insurance companies, and the receivership of several significant carriers in the state. “Her knowledge of Florida’s insurance market and her steadfast devotion to consumers is unparalleled. In 2014, our peers nationwide honMichael Yaworsky ored her achievements with the prestigious Robert Dineen Award, given annually to only a handful of regulators for their outstanding service and contributions to the state regulation of insurance,” he said. Yaworsky’s appointment became effective July 24. Since 2015, Yaworsky served as legal counsel for the Georgia Office of Insurance and Safety Fire Commissioner, where he was responsible for advis- Susanne Murphy
ing the commissioner and senior staff on policy decisions and performing administrative, regulatory and litigation duties associated with the legal unit. He also served as general counsel for the Office of President Pro Tempore in the Georgia Senate from 2013 – 2015. Altmaier said Yaworsky has a wide range of experience serving in state government positions both in Florida and Georgia. “This public service background combined with his exceptional leadership abilities will be a tremendous asset to the
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office. I look forward to his counsel and on working with him to implement strategies to bolster the administrative and operational functions of the office,” said Altmaier. Yaworsky has a bachelor’s degree in social science from Florida State University and a Juris Doctor degree from Samford University’s Cumberland School of Law. He has been a member of the Georgia Bar since 2014. OIR also appointed two new deputy commissioners earlier this year. Susanne Murphy was tapped as deputy commissioner of Property & Casualty. Murphy has been with OIR since 2013. In her role, Murphy oversees the Bureaus of Property & Casualty Financial Oversight and Product Review and a newly created Property & Casualty Market Conduct unit. Johnson was picked for the role of deputy commissioner of Life & Health. He joined the OIR in 2011, and since that time, has been a “nationally recognized thought leader on issues from the Affordable Care Act to Long Term Care,” according to Altmaier. In his role, he oversees the Bureaus of Life & Health Financial Oversight and Product Review, as well as a new Life & Health Market Conduct unit. The Florida OIR has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. INSURANCEJOURNAL.COM
The Competitive Advantage
How to Help Policyholders After the Storm ened rules to allow for instant payments such as debit cards for alternative lodging when homes are uninhabitable, for most people who are able to reside in their homes the wait will seem long. So stay in touch and remind them to be patient.
Encourage documentation You may think homeown-
By Jason Wolf
he active and devastating 2017 hurricane season is officially over, which means it’s the perfect time to reflect on Hurricane Irma insurance claims. Claims are still being resolved from the storm that hit all parts of Florida in September, and agents are busy helping policyholders with their recovery. Here are some tips on how to simplify and keep customers informed on the claims process, now and after future storms.
Communicate With Your Policyholders
Remind them that the insurance industry is working overtime and has mobilized all hands on deck to deal with storm claims, with executives, managers and even secretaries answering incoming calls from policyholders. The agent is typically the first avenue of contact – so reassure policyholders and remind them they are not the only person with a claim, but are just as important as everyone else. After Irma, there were a myriad of issues that were out of everyone’s control. Many talented adjusters from around the country were mobilized to Houston for Hurricane Harvey and in Puerto Rico following Maria. Catastrophe adjusters, as they’re known in the industry, are typically independent contractors who travel from disaster to disaster whenever the need arises; there is a finite quantity of qualified adjusters in this country. Although there are some loosINSURANCEJOURNAL.COM
ers are well aware that they should take pictures of the damage and of the repairs – the house, the yard, or the car after it is repaired. But not everyone remembers. Work with the homeowner, who is probably very distressed. Tell them to get receipts; even if they pay cash to a guy in a truck to remove debris, urge them to get a written receipt. A written receipt on a piece of paper, with basic contact information, will go a long way in helping prove money spent on repairs. Have policyholders gather everything. You probably tell your policyholders to have all of their documents in order, but let’s be honest, not everyone has a folder full of important documents. Tell them to gather up what they can – home inspection reports, any receipts for any repair work they’ve done especially major repairs, roof work, and other similar repairs. Whatever they can provide will help when it comes time to file the claim.
Provide Common Sense
Homeowners who have watched any TV or listened to local radio have undoubtedly heard that a public adjuster can help. This can be true – but homeowners need to know that public adjusters take a percentage of the claim proceeds. It may need to be explained that if a policyholder has a claim because a hurricane damaged the house, and the insurance company processed the claim and finds that the homeowner is owed $20,000 to restore the home to pre-loss condition, some of that money
will go to the public adjuster. Public adjusters will respond to this comment by suggesting that they can get the policyholder more than initially offered. But, nearly every insurance company has a standard procedure for insureds to come back for more money, provided it is truly needed.
Break things down
You are going to be bombarded with questions. Many policyholders will have the same questions, but answer every single one. Make sure insureds know past claims will not impact new claims. Let them know they can opt-in for more coverage if they think they have the wrong type of policy. Advise them on the difference between water and wind damage claims. In fact, they may not even realize that they have a different insurance company for windstorm claims than they do for regular claims. Some even have separate companies for claims unrelated to wind.
Take a Deep Breath
You probably have a lot of clients who are looking for guidance. Be reassuring. Tell them if they are safe, dry and have any semblance of a routine, things will get done. Hurricanes have a lengthy recovery process and are a part of life. They are not alone – yes, you can say, we are all in this together. Jason Wolf manages the Property Insurance Litigation group at Koch Parafinczuk Wolf Susen in Fort Lauderdale, Fla. He can be reached at Wolf@KPWLaw.com.
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Special Supplement: The Florida Issue