Suddenly, People’s Trust Insurance is suing dozens of its own policyholders.
The Deerfield Beach-based insurer, opening a new front in the long-running war over third-party claims assignments, has filed more than 80 lawsuits against customers it accuses of failing to comply with the requirements of their policies.
After suing policyholders in Broward and Miami-Dade counties just 12 times in the first half of 2017, People’s Trust has filed 67 such suits since July 1. The company has targeted policyholders in other parts of the state, including Orange, Hillsborough and Pinellas counties, but in much smaller numbers.
“It’s very disconcerting. I’ve heard it’s increasing in frequency,” said Paul Handerhan, spokesman for the insurance industry watchdog group Florida Association for Insurance Reform. “I’ve never heard of an insurance company going out and suing its policyholders like this.”
As of June 30, People’s Trust had 56,511 policies in the tricounty region and 135,530 statewide, according to the Florida Office of Insurance Regulation’s QUASR database.
The Sun Sentinel reviewed a sample of the 79 suits filed in Broward and Miami-Dade so far this year. Of that sample, most of the suits accuse the policyholders of failing to allow People’s Trust’s “preferred contractor”— Rapid Response Team — to fix the damages that triggered their claim.
People’s Trust calls Rapid Response Team, which it created in 2009, an affiliated company. The companies share two corporate officers, according to records on file with the state Division of Corporations.
The suits assert that policyholders knew upfront that they were signing the company’s “preferred contractor endorsement” that gives People’s Trust the right to assert its “election to repair” and dispatch Rapid Response Team to make repairs. In return, the suits say, the customers were given “adequate monetary consideration by way of a … premium discount.”
Responding by email to questions about the suits, People’s Trust’s chief marketing officer Amy Rosen said suing policyholders is a rare last resort employed only when a policyholder is unwilling to comply with provisions of their policies “often on the advice of third parties who seek to avoid actual repairs to the homes in order for them to be paid out with a cash settlement.”
Policyholders’ use of attorneys and public adjusters, plus water damage repair companies working under “assignment of benefits” has become a major irritant to property insurers in Florida and the focus of years of legislative debate. Insurers argue that repair companies, primarily in South Florida, routinely overbill with the intention of filing suit when insurers underpay or deny inflated invoices.
So far in 2017, People’s Trust has been sued 615 times statewide, according to state data. More than two-thirds of those suits were filed in Broward and Miami-Dade counties.
Over the past two years, insurers have cited assignment of benefits abuse in imposing steep rate increases on South Florida customers.
Policyholders’ attorneys counter that insurers invite lawsuits by trying to dodge their responsibilities to make their customers “whole.” Use of preferred contractors — a growing trend in Florida — helps insurers control repair costs but too often yields shoddy work, attorneys say.
Rosen said attorneys stand in the way of the company performing timely repairs.
“If an insured is represented, legally we cannot speak with them directly, and filing [suit] is our last resort for resolution in the event there is no compliance,” Rosen said. “By filing a [lawsuit], we are able to request the court to allow us to carry out PTI’s responsibility under our policy terms.”
Rosen said “very few” of its suits are challenged “and in most cases, we are able to work with the insured or their designated claims agent to enter a [settlement] in which the parties agree to allow PTI’s preferred contractor … to return the property to its pre-loss condition via an agreed upon scope or appraisal.”
But attorneys representing some of the targeted policyholders — as well as plaintiffs in suits against People’s Trust — say disputes usually stem from disagreements over the scope and cost to repair covered damages, such as ruined kitchen cabinetry and flooring after water lines break.
When such disputes arise, People’s Trust asserts its right to demand the two sides hire a third-party appraiser to estimate the cost of repairs, often delaying the start of work, said Pinecrest-based attorney Erik Barnard.
People’s Trust sued his clients Leon and Carmen Vargas even though they weren’t opposed to using Rapid Response Team, but the appraisal process dragged on so long, the work hadn’t started before the insurer decided to sue, Barnard said.
If People’s Trust fails to perform any of the duties required of it under the policy — such as meeting deadlines to produce written scopes of planned repairs — policyholders will invoke that failure as grounds to demand payment for the loss so they can find their own contractor, said Louis Gonzalez, a managing partner at Trujillo Vargas Gonzalez Hevia in Coral Gables and Orlando.
Gonzalez said People’s Trust seems to be targeting policyholders represented by attorneys or public adjusters to “strong arm” consumers from “exercising their right to contest” People’s Trust’s assertion of its right to make repairs.
Assertion of that right is a key element of People’s Trust’s business model, the attorneys say. People’s Trust’s policies require that customers pay their deductibles before repairs may commence. People’s Trust also created a finance company to enable policyholders to finance that deductible over time, said Joe Ligman, a plaintiff’s attorney based in Palmetto Bay who specializes in representing clients in insurance disputes.
“And they charge a percentage on that,” he said. With typical insurance companies, consumers will file claims and quickly receive payment for the loss, minus the deductible, Ligman said. Then they can hire their own contractors and make repairs in stages even if they don’t have the full deductible.
Gonzalez said People’s Trust policyholders often don’t realize they signed up with a preferred contractor insurance model until they make a claim.
Rosen counters that the company communicates clearly to its customers how its policies work.
“We are clear about our policy provisions in the policy itself, in our marketing materials and communications with policyholders, and even in communications with law firms and claims representatives,” she said. “When policyholders are advised to not comply with the terms of their policies, we unfortunately need a judicial determination of how to resolve the impasse.”