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It’s been 3 years since Hurricane Irma made landfall in Florida as a Category 4 storm, and the trail of damage left in its wake is still being felt across the state today, particularly by the insurance industry as it continues to see thousands of claims per month and costly litigation from the catastrophic event.

But with the storm’s 3-year anniversary comes a deadline that much of the industry hopes will put an end to the many purported frivolous and fraudulent Irma-related claims that have taken a significant toll on the state’s insurance market. In what is an unlikely coincidence, experts say, the run-up to this deadline – when the first notice of loss related to Irma must be filed with insurers – has also brought a new onslaught of claims.

“There’s been one last gasp to get the claims in prior to the September 13th deadline,” said Barry Gilway, president & CEO of Citizens Property Insurance Corp., referring to the statutory requirement that specifies policyholders must notify their insurer of a claim within 3 years of when a hurricane makes landfall and causes covered damage. In the case of Irma claims, that deadline falls on Sept. 13, when the storm warning officially ended, Gilway said.

Florida approved the three-year insurer notice of windstorm or hurricane loss requirement in 2011 as part of sinkhole reform. Claims can be reopened or supplemental claims related to the original claim can still be filed as long as the insurer received the first notice of loss ahead of the corresponding storm’s deadline.

Now, nine years later, that filing deadline is officially being put to the test for claims from Hurricane Irma, the first major storm to hit the state in over a decade when it made landfall in the Florida Keys on Sept. 10, 2017 as a Category 4 hurricane with 130-mile per hour winds. The storm then spread north over Florida’s east and west coasts causing widespread damage and losses statewide. Loss estimates when the storm first hit ranged from $25 billion to $65 billion by catastrophe modelers.

According to the most recent Hurricane Irma claims data from the Florida Office of Insurance Regulation in January of this year, more than 1 million Irma claims have been filed – 909,321 of those being residential property and 61,518 commercial – totaling almost $17.5 billion in insured losses.

For Florida insurers and Citizens, the state-run insurer of last resort, Irma was and continues to be a very significant event, Gilway said. Citizens received about 76,500 claims and that number keeps growing. Citizens is one of many insurers today, Gilway said, receiving hundreds of Irma cases per month, with the number of claims spiking as the first notice deadline neared.

“There really is this push the closer you get to the deadline date for new claims to come in. You get this push to put in more and more and more claims,” Gilway said. “Here we are three years out from the storm, and we’re still getting between 450 and 600 claims per month. From a size standpoint, most companies are seeing that uptick in claims.”

As is the case with most storms, Gilway said, most insureds filed their claims right after Irma. There have been some “scope claims,” since then he noted, thanks to contractor shortages at the time of the event that kept the work from being completed right away.

“The claims that we received, initially started out as being legitimate, solid claims. It’s very, very clear that when it comes to hurricane claims, people want to put the claim in, they want to put it in now because it is very real damage and they need a response to the damage,” Gilway said. “As time goes on, what you find is you’re getting more and more claims that are extremely questionable.”

The majority of the claims coming in now tend to be declined because they are fraudulent, Gilway said, calling them “door knocker” claims from people out there promising insurance payouts for damage unrelated to Irma.

“This is common across the industry and the vast majority of companies are seeing these late reported claims particularly in the southeast, Tri-County area,” Gilway said.

CaseGlide, a Florida-based litigation management and analytics software company that monitors Florida carrier claims and works with about 15 to 20 of Florida’s domestic companies, said an influx in claims came right after Irma, as would be expected, as well as for several months after.

“But then you’re also seeing a lot that are being filed for the first time this year … And I don’t think there’s really anything unique about Irma as far as why you would see that,” said Wesley Todd, CEO and founder.

Not everyone agrees, however, that the all of the Irma claims still coming in are fraudulent or inflated. Florida attorney Gina Clausen Lozier, member of law firm Berger Singerman’s Dispute Resolution team, said in a recent survey conducted by her law firm of 2,000 business owners in Florida, 75% were unaware of the first notice of loss deadline for Irma. That is concerning, she said, especially given the COVID-19 situation that could be preventing people from having inspections done on their home or business.

“There’s no reason that anyone would be aware of it if you’re just a regular business owner and consumer,” she said.

Larger commercial claims, in particular, can take longer to go through the claims adjustment process and many claims are just in the last six months getting resolved in litigation or in the alternative dispute resolution process, she said. Additionally, more repairs or a more thorough overview of damage can require a supplemental claim because the scope of damages is larger than originally thought. Or “there’s some people who are just now being made aware that they had significant damages to their roof from a wind event, which a lot of times seems to be Irma,” she said.

The timing of Irma may have played a role in these delays, Clausen Lozier noted, as it came right after Hurricane Harvey and was then followed by Maria, and the industry was stretched thin in terms of the availability of claims adjusters and other resources.

“Sometimes there’s a turnaround and reassignment and it just goes through the process and unfortunately it takes some time,” she said.

Condominium associations in particular, Clausen Lozier noted, is where she has seen a lot of additional claims as they continue to experience interior leaks through windows or roofs caused by Irma and end up requiring additional repairs.

While acknowledging there are definitely those who take advantage of the system, she disputes the idea that many Irma claims are fraudulent because “the opportunity for fraud is lower in a hurricane claim because we all know the hurricane hit. It’s not like someone created a hurricane to put in an insurance claim.”

Her firm’s team, specifically, recovered $95 million just in the last year for clients “that insurance companies said they didn’t have to pay.”

“And it’s not because the claims were fraud, they paid them voluntarily or through some other alternative dispute resolution,” she said.

Gilway noted that Citizens’ attitude is to absolutely reopen legitimate claims to pay final or differentiated costs and the insurer encourages insureds to reach out for additional payment if more damage is found.

“Those are good claims. What is problematic are the new claims coming in,” he said, and every single one is investigated.

The blip the company has seen, most notably in July, for Irma claims was “like the attorneys came back out of their hiding place and starting filing new cases again,” he said. “You had a shift, because of the deadline. You had a shift. And you had a slight blip. And again, it was almost totally consistent across the industry.”

Irma Impact on Florida Market

But it hasn’t just been the number of Irma claims that have hurt Florida insurers. The severity of these claims, thanks to corresponding litigation, has left a major mark on the books of carriers, their reinsurers and ultimately the state’s insurance market.

Ratings agencies and analysts forecasted immediately after Irma that Florida domestics were well-prepared financially to handle the expected losses after Florida’s 11-year hurricane drought, though AM Best warned that Hurricane Irma had the potential to amplify the AOB issue that was leading to an increase in frequency and severity of litigated water claims.

“A.M. Best expects that Hurricane Irma and AOB losses will have a much greater impact on operating results for the concentrated insurers,” a Sept. 2017 report stated.

That prediction came to fruition, albeit later than expected, as significant loss creep from Irma in the form of reopened claims, AOB and first-party litigation related to the storm started pouring in months after.

The impact of Irma litigation on Florida carriers, which Gilway largely attributes to the “bad actors” filing frivolous claims and lawsuits, can’t be understated, he said, calling it “unlike anything we have seen before.”

“The reality is, loss development has just been ridiculous for Irma,” he said, citing numbers as high as 200 to 250% for some companies. Carriers were not expecting such loss development as the litigation rate during prior storms was typically around 4 or 5% and for Irma it was 25%, Gilway said.

The negative effect of those numbers on the market has been substantial, particularly for the reinsurance market which mostly absorbed the losses for the Florida domestic companies. But that “basically shut down the retrocession market” and led to huge pricing increases on reinsurance this year, Gilway said.

Carriers have responded with their own pricing increases and a pullback in Florida market capacity.

“Irma has been an unprecedented event as far as what many characterize as loss creep,” said Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents (FAIA). “If you talk to any insurer or reinsurer and they talk about what happened post Irma, it has been something that I don’t know that they’ve seen anywhere in the world ever. The number of claims that have been filed so far out from the actual event happening – it’s had a significant impact on reinsurance pricing and loss adjustment expense for many carriers, and has, frankly, changed the way that reinsurers look at Florida.”

The good news, Gilway says, is that litigation has finally dropped off for Florida carriers, particularly Citizens. The number of litigated cases during the first six months of this year fell from an average of 902 new lawsuits per month for the same period last year to 589 new lawsuits per month this year – a 35% reduction. Part of that is thanks to AOB reforms passed in 2019 and “part of it is that we’re starting to see the beginning of the end of the Irma impact,” Gilway said.

He expects carriers will be able to weather any future financial impact that could come from additional Irma claims.

“Frankly, I don’t think it’s a financial issue again, because for the vast majority of these carriers, that coverage is well into their reinsurance layers. Any additional Irma claims coming in is covered by their reinsurers, and any additional dollars associated with those claims are covered by the reinsurers,” he said.

CaseGlide data showed that Florida litigation against the top 15 to 20 property carriers, including suits related to Irma, peaked in May 2019, right before the AOB law kicked in. Litigation dropped after that but ticked up again this summer between June, July and August to around 4,000 lawsuits per month.

“There’s been increases throughout the summer, it’s a little bit elevated, with a significant share of those new lawsuits being Irma, a rising from Irma claims,” Todd said.

Many in the Florida insurance industry are now breathing a sigh of relief that the deadline is finally here.

“Everybody has seen loss creep in their books over the last three years that no one expected,” said Ulrich. “I don’t want to say that people are looking forward to a point in time when people can’t file claims, but at some point, there does have to be some finality. There is always that option for people to reopen a supplemental claim from a previous claim that was valid.”

Todd says, the deadline will at least “close the universe on the potential amount of claims,” and expects that will make a difference for Florida carriers in assessing the extent of their Irma liability.

“This marks a bookend to, or at least part of a bookend, to re-insurance obligations, and carry obligations for the storms. It’s a very important time for the industry to start evaluating and analyzing what happened and what it means for their business model,” he said. “In several months, toward the end of the year, towards the beginning of next year, you should start seeing decreases in litigation in Florida, because the Irma claims are such a significant share of the Florida litigation.”

Gilway said he wouldn’t be surprised to see the industry push for a reduction in the first notice of loss deadline from three years to two years during the next legislative session, and fully expects another push for reform to first-party litigation.

Without reform, these last-ditch efforts to file frivolous claims will be the norm.

“We’ll see the same thing in [Hurricane] Michael – as the deadline approaches, you’re going to see a last opportunity for public adjusters and attorneys to take advantage of the system,” he said.

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Topics Lawsuits Catastrophe Natural Disasters Florida Carriers Profit Loss Fraud Claims Legislation Hurricane Reinsurance Market