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Citizens Insurance lost $27.1 million during 2016; first loss in a decade

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Citizens Property Insurance Corp. lost money for the first time in a decade because of water loss claims, assignment of benefits abuse, and rising litigation costs, the company said Wednesday.

Staff at Florida’s insurer of last resort told its board of governors that they expect to post a $27.1 million loss for 2016.

“Every year, we rely on standardized, accepted actuarial principles to set our rates,” chairman Chris Gardner said in a press release.

“Last year, the same principles that provided rate decreases to our customers in recent years translated into hikes for 84 percent of our policyholders. Without legislative changes, that trend will continue,” he said.

Citizens is seeking legislation this year attacking assignment of benefits, or AOB, abuse.

In the House, an AOB bill has passed its first committee test. Senate legislation is scheduled for a committee hearing next week.

Citizens and other insurance and business interests blame surging non-weather-related water claims, particularly in South Florida, and attendant litigation by contractors armed with AOBs, which give them the right to sue without policyholder approval.

According to Citizens, litigation raises claims by an average $20,000.

“The tragedy here is that the ultimate loser is the policyholder,” Gardner said. “Higher insurance costs simply make it more difficult for more Floridians to own a home.”

Citizens’ explanation drew push-back from Chip Merlin of the Merlin Law Group, a plaintiffs’ firm. He blamed Citizens “depopulation” policy of lowering its risk pool by sending policies to private insurers.

The policy allows those private insurers to “cherry pick” the best risks, Merlin said.

“Now, Citizens management has its claims department take a tougher line to keep claims payments down so it can break even,” he said. “Litigation goes up when claims are not paid.”

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