Why Roofing Insurance Scams Are Costing Homeowners More Money On Their Home Insurance Policies
Write By Kim Deppe

DUBO Roofing Owner Says Many Sales Pitches Are Based On Lies

In Florida, hundreds of thousands of roofs have been replaced since Hurricane Irma, whether they needed to be or not, insurance industry leaders claim. The hurricane, Florida’s biggest catastrophe since state leaders changed the rules governing property insurance in 2011, triggered more than 1 million property claims totaling more than $17 billion in insured losses, including more than 909,000 residential property claims for the storm that touched nearly every part of the state.

While the property damage claims from Irma and other hurricanes since have mounted, a bigger trend is proving more costly for Florida insurance companies. Nothing has hit the industry harder than the spike in roofing replacement claims and lawsuits led to collect from insurers. Over the past two years, the cost of claims with litigation were nearly double those without litigation, and lawsuits have continued to pile up, according to  Florida Insurance Commissioner David Altmaier. “These don’t appear to be normal roofing claims,” Altmaier told Florida lawmakers earlier this year.

The biggest driver of insurance company payouts in recent years is from an increase in Florida lawsuits, up more than 210% last year to 85,007 from the 27,416 led in 2013. In Southwest Florida’s Lee and Collier counties, that increase is even more dramatic, up more than 1,258% from 469 in 2013 to 6,370 in 2019, the most recent year available.

Florida Homeowners Are Paying More

More than any other disaster-prone state, Florida property owners are paying the cost of insurance lawsuits. Fraker estimates that about $866 of a Florida property owner’s insurance premium this year will go toward paying litigation costs, up 78% from $487 in 2019. “The number one thing we have to do is bring down the number of lawsuits,” says Sen. Kathleen Passidomo of Naples.

The spike in litigation that began in 2016 comes as a result of Florida laws that give property owners more time and more coverage for storm damage than other states, and court rulings that opened the door to more damage claims, Fraker said. Damage done after Florida landfalls by Hurricanes Matthew, Irma, Michael and Sally certainly contributed to the payouts by insurance companies during the period. But Fraker said those storms don’t explain why insurance litigation costs in Florida are significantly higher than any other state vulnerable to catastrophe, such as Louisiana, Texas and Mississippi.

In 2019, insurance litigation costs consumed 17% of all Florida property premiums, nearly three times the U.S. average of 6%, and more than three times the costs in Texas, the next highest state, according to Fraker’s analysis.

The increase in lawsuits is following an increase in roofing contractors going door to door to solicit business, said Tasha Carter, Florida’s insurance consumer advocate. She said her office in the Division of Financial Services has received numerous complaints about door-to-door solicitors swarming neighborhoods. The salespeople represent roofing contractors, working with lawyers and public adjusters, who offer property owners gift cards if they allow a roof inspection and the promise of a new roof paid for by their insurance company once damage is found, Carter said.

Here in Jacksonville, the offer may be different, according to Duke Duncan, owner of DUBO Roofing in Orange Park. Duncan says the salespeople are offering to pay the homeowner’s deductible, or even that they will “pay” the client $1,000 to allow the roofer to put a yard sign in their yard.

Jacksonville Experience Is A Little Different, DUBO Owner Says

“Some of these roofers lie to homeowners from the start,” Duncan said. “Around here they normally start the conversation by saying something like ‘hey, you have some roof damage, and I can get you a new roof’,” he said. But that may not be accurate at all. Duncan says you can’t tell there is roof damage simply by walking by. “Unless there is a fairly large area of materials missing, which any homeowner should be able to see as well as anyone else, you can’t see storm damage from the ground. You have to get on the roof to see most types of storm damage.”

Fort Lauderdale lawyer Scott Strems is facing a lawsuit from Citizens Insurance Property Company accusing him of participating in a scheme, which included a public adjuster and a contractor, to submit millions in fraudulent insurance claims. The lawsuit claims the scheme included improper collaboration among the parties to solicit business from homeowners, submission of fraudulent claims and filing harassing lawsuits to pressure payment.

A separate Lee County investigation is focusing on a door-to-door push last year made in one neighborhood of seniors just before the three-year deadline passed in September to file initial claims for Irma damage, Carter said. Property owners received gift cards if they allowed a roof inspection, and one public adjuster, one contractor and one lawyer were all tied to the claims led in the neighborhood with 15 different insurance companies. “This was a way for the community, the homeowners, to receive new roofs,” she says, declining to offer more details about the ongoing investigation.

The solicitation, knocking on doors in a neighborhood, is the common thread in a number of cases insurance companies argue provide proof that some contractors, adjusters and lawyers are breaking the law in Florida. A “runner” knocks on a door with a gift card for the property owner and identifies roof damage in an inspection requiring a new roof. The salesperson asks the property owner to sign documents on an iPad or electronically, agreeing to hire a contractor, retain a lawyer and to transfer insurance benefits to them.

As the billions in covered losses after Irma became apparent, that solicitation practice became more common, and could have violated numerous Florida laws governing public adjusters, soliciting legal business and handling insurance claims.

It’s all part of an aggressive effort by a growing industry of roofing contractors and lawyers who are pulling in billions of dollars from claims and lawsuits, insurance companies argue. Some roofing contractors and lawyers work together, sending solicitors door-to-door through neighborhoods offering property owners a “free roof” and the legal muscle to force insurance companies to pay for it.

“I can’t tell you how many times the salesman told me they have more lawyers than roofing contractors to get people new roofs,” Clemento says.

Three-Quarters Of Insurance Payments Go To Attorneys

Since 2013, lawyers collected the lion’s share of awards paid by insurance companies for lawsuits filed on behalf of Florida policyholders. While property owners received slightly more than $1 billion of the $15 billion paid out, their lawyers filing the cases collected more than $10.8 billion, or nearly three-fourths of all payments made by insurers, according to one analysis.

The property damage claims and litigation costs led to more than $1 billion in underwriting losses last year for the dozens of insurers who issue policies in Florida, marking the fifth straight year in losses for an industry that makes up about 3% of the state’s economy.

Florida’s property insurance market “is in a free-fall collapse, as in not viable,” says Guy Fraker, the analyst who identified the litigation trends and other problems facing the industry in an analysis commissioned by advocates for property insurance reform. Continued underwriting losses will mean insurers will leave the state, reducing coverage options for property owners and putting more pressure on the state-run Citizens Property Insurance Company to cover properties in hurricane-vulnerable Florida, Fraker argued. Some insurers already have pulled out of the Miami area and some counties around Orlando. “This is a real meltdown,” he says.

Citizens, considered the insurer of last resort for Florida property owners who can’t find coverage, is experiencing a surge of new customers as a result, said president and executive director Barry Gilway. Citizens is projected to insure 630,257 Florida property owners this year, a 43% increase over the 440,406 customers it served when Irma struck in 2017.

Florida property owners got their first glimpse of the fallout this year when their insurance premiums jumped by as much as 30%, or up to $1,300 for a premium that last year cost $1,000. And those increases are expected to continue, perhaps to the point where an annual premium of thousands of dollars will make homeownership unaffordable for many. “We’re going to reach a point where our consumers cannot afford their premiums,” said Sen. Doug Broxson of Pensacola, who backs changes in state law to help the insurance industry.

Sources:

 “Through the Roof” by Gulfshore Business

Florida Insurance Consumer Advocate

Photo Credit: Getty; Courtesy WINK News, Courtesy Security First Florida Corp.

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