MINUTES OF THE CLAIMS COMMITTEE MEETING Wednesday, June 4, 2014

Transcription

1 CITIZENS PROPERTY INSURANCE CORPORATION MINUTES OF THE CLAIMS COMMITTEE MEETING Wednesday, The Claims Committee of Citizens Property Insurance Corporation (Citizens) convened telephonically on Wednesday, at 9:00 a.m. (EDT). The following members of the Claims Committee were present: Gary Aubuchon (Chairman) Tom Lynch (Board member) Jim Holton (Board member) Jon Palmquist (Technical advisor) The following Citizens staff members were present telephonically: Barry Gilway Jay Adams Jeff Handy Jimmy Johnson Anne Olson Elaina Paskalakis Call Meeting to Order Roll was called: Chairman Aubuchon, Tom Lynch, Jim Holton and Jon Palmquist were present. 1. Approval of Prior Meeting s Minutes (February 19, 2014) Barry Gilway stated, I have one correction on page six under the discussion of the Vendor Update specifically related to water damage claims, the accurate numbers are that Miami-Dade has 19% of the policies, 35% of the claims, and 67% of the litigation. Tom Lynch stated, I think it would be good show if it was a unanimous vote or a split vote just so we know how the issue passed. Chairman Aubuchon asked, are you speaking for this set of minutes or in the future? Tom Lynch stated, in the future to show exactly what the vote was. A motion was made and seconded to approve the February 19, 2014 minutes with the above said changes. All were in favor. Motion carried.

2 2. Non-Litigation Reorganization Jay Adams stated, we have two subsets of the Claims organization, one focuses on nonlitigated claims and one that focuses on litigated claims. The non-litigated group is what we would call the front end claims processing group, where they handle the claim from cradle to the grave. As we continue to look at our organization and the model that Citizens must use relying heavily on vendor use with independent adjusters (IA) we constantly look the model to see where there are areas of opportunity in making sure we have enough oversight at all levels of the organization. When we speak specifically to the Non-Litigated Claims Department, we have that run by Jimmy Johnson as the Director. We ve promoted a few individuals to Assistant Directors within Jimmy s organization. We want to make sure we have the appropriate leadership and the appropriate oversight of our claims adjusting model where we use the IAs. Jay Adams continued, in our non-cat claims model, we re handling about 90% of our claims volume through a managed claim model (MCM). In order to make sure that we re getting the proper oversight, we ve made a few tweaks and adjustments to this team. In those adjustments, we ve added an Assistant Director over the MCM. This group manages the lower severity claims but they there tends to be a high volume of them. These are severities 1, 2, and 3. They can be water, fire, smoke, etc. We have in that structure managers and Citizens supervisors that oversee site adjusters. We promoted a field manager to a director and we hired additional field managers. We are looking to try to handle more of the claims that are ending up in our disputed and litigated department. For example, these would be claims like water pipe breaks. Jay Adams continued, the majority of claims going into litigation are from South Florida, and they are water pipe claims. We are trying to build a presence in South Florida where Citizens staff can adjust those water pipe break claims. That is part of a larger strategy that we ll talk about as we move into the litigated model. We struggle to provide the level of training in detail to the IA firms and/or to the IAs because of that contractual relationship. Where we can put stuff, we can do it at a level that is more dependable because we can control the pending and the volumes of claims. We can also provide the level of training that we need to get a consistent product, so we have a better defense if they show up for litigation. Jay Adams continued, under the Assistant Director portion, those teams are responsible for CAT planning. The reality at Citizens is that we do this 24/7. We are always planning, testing, or executing some CAT planning model. They are also responsible directly over the CAT. Within the MCM, we have a team called Central Claims Unit. In areas where we ve struggled in the past, we ve created teams to handle those on the frontend. They handle burglary, lightening, theft, dropped objects, etc. They also the main conduit for the claims handled by IA. The claims we attempt to assign to IA are those claims that have a short cycle time. If that claim needs other special handling, then we transfer it to a team to handle it by Citizens staff. They are responsible for total loss mobile homes. Jay Adams continued, we spoke a little about the MCM, where it handles end-to-end claims handling. They manage claims that are high volume with low severity. We spoke about the Citizens Property Insurance Corporation Claims Committee 2

3 large loss field teams. They typically handle the most severe claims and we are putting a focus on water pipe breaks. One of the other changes we made is that we moved appraisal and mediation out from the litigated group back to this frontend claims handling non-litigated team. These are really alternate dispute resolution methods. The main driving reason we chose to do that is that we want the initial adjuster who worked on the loss to be engaged in the process. Originally, the initial handler had no idea the claim went into mediation and was never given an opportunity to settle the claim. 3. Litigation Reorganization Jay Adams stated, we ve recognized that the claims litigation has grown at significant levels. Our new receipts for this are not lining up with the decline in our regular claims business. Citizens has been working with Coordinating Counsel to assist in the development of a more uniformed response to disputed claims in an effort to reach a timely resolution with our policyholder. As a result, it became clear that we had to make significant organizational changes before we can execute any significant layer of strategy to our pending litigations. I worked closely with Barry to work on an organizational strategy where we are investing in additional leadership positions who will greatly reduce the spans of control. This new structure will provide the basis for the execution of a new litigation strategy that will follow. This new litigation organization will be led by a new Vice President and three Directors. Jay Adams continued, the new organization will focus on an alignment that will provide oversight to complex claims, consisting of commercial and sinkhole. There will be another team focused on triage and early settlement. The third team will focus on the claims we really do want to try in the court system. In bringing this new organization forward, I would like to welcome Elaina Paskalakis to the claims team as the Vice President of the Litigated Claims Support Group. Elaina first joined Citizens in August 2007 as the first ligation counsel in Citizens Legal Services Department. She s held increasing responsibilities since that time. Mostly recently, she served as Assistant General Counsel and Director of Claims in Legal Services. Elaina brings a legal background to this team to help marry the legal strategies with the claims strategies in this new direction of leadership. Jay Adams continued, one of the things we ve learned in working with Coordinating Counsel with sinkholes is that it s hard to execute global strategies when you have multiple adjusters and turnover. What we ve decided to do in our revised litigated strategies is that we re putting investment in the leadership piece. We want to have more managers with smaller spans of control in a smaller pending so the manager has the chance to engage in these files and help make the critical decisions. In this new organization, we are focusing on buckets of work and types of claims. We ll segregate those types of claims and give them consistent handling to develop strategies on how to handle those effectively. All of this will help our cycle time going forward. One of the teams we will have is residential, which has the largest amount of cases mainly driven by water losses in South Florida. The sinkhole team continues to be established in Tampa. We have a commercial team and this is an area with a low frequency of claims volume. Those claims are significantly complex with higher exposure. Citizens Property Insurance Corporation Claims Committee 3

4 Jay Adams continued, I want to talk a little about the triage team because this is something different from what we ve done before. I spoke to the volume of litigation we get on a monthby-month basis. We re trying to funnel that through a team called triage to look at those cases to see what merit there is to settle that claim. It could be something we missed. It could be a dispute over an estimated amount. We hope to move those into the early settlement. Barry Gilway stated, I want to compliment Jay Adams and his team. In a very few short months, Jay was able to dig into the Claims organization doing a comprehensive analysis of the issues underlying the structure. There has been a lot of work put into this organization in conjunction with our Legal team. Tom Lynch stated, it seems to me that Citizens has more ligation I have ever seen. I m glad we re finding an organizational system that works, but I hope we put an end to this tremendous amount of litigation. Barry Gilway responded, I agree with you. We have geographic areas within the tricounty area and we have organization issues. This reorganization is going to help us with opportunities to settle cases. Tom Lynch stated, I hope you will bring suggestions to keep improving not just the organizational structure but also policy changes. Barry Gilway responded, we are looking at arbitration and determine if there are any appropriate changes that we can make to the arbitration language. Jim Holton inquired, do you foresee a greater shift toward the managed repair that you got started will help the process, especially in the South Florida area where there is fraud and abuse in the water area? Barry Gilway responded, the primary purpose in the consulting attorney program is to establish standardization practices and procedures. We really expect Elaina and Scott s team to have an impact in this area with consistent approaches and standards. Jay Adams added, we will give an update in the vendor section piece. We are working on emergency services agreement for the managed repair program. Based on where our policy language is we will start the program as voluntary. We will garner information and make those decisions at a later time. Jim Holton asked, so you re gaining metrics on that information now to see how it works on the voluntary basis to make a reasonable decision going forward? Jay Adams responded, yes. Chairman Aubuchon stated, I want to make share to welcome Elaina and to congratulate her to her reassignment. I have a question. On the litigated reorganization, you Citizens Property Insurance Corporation Claims Committee 4

5 put the names of the people who are in the slots. On the non-litigated, you put the slots without names. Is there any reason for that? Jay Adams responded, there is no intent behind that at all. Jimmy has been working closely with his team and he s been making adjustments and changes. At the time of when we needed to provide these materials, all those additions had not been signed and approved on. I can provide an update to you with names after this meeting. All the offers have been extended and they are all in HR. Chairman Aubuchon continued, we want to see our backlog of pending claims go down. One of the backup materials you gave us is a total claims metrics with a closing ratio. Anytime a ratio is up over 100%, then we re making some level of progress on our backlog. Do we have internal targets on what we want that closing ratio to be? Jay Adams responded, Elaina just got started. We are re-cutting the mold as how we look at the litigation group. We want to see that number get as close to 100% as possible. We had about 12,000 pending litigated claims. We are going through and compartmentalizing the litigated claims and we are putting them into buckets. We are holding conferences on weekly basis and look for the low hanging fruit to resolve the ones we can as quickly as possible. We are drowning with the ones that are coming in and the pending. We have to have the new organizational structure get its legs so we can move the bulk. 4. Catastrophe (CAT) Update Jimmy Johnson stated, let s discuss the offsite exercise we completed in May. We simulated a CAT deployment exercise. We found this exercise revealing in terms of our overall preparedness. We deployed 191 resources to a hotel in Jacksonville. We took them through our check-in process where adjusters arrive. We validate their credentials. We provided them with passwords and orientation assignments. We completed the check-in process in an hour. We provided a storm center orientation as well as a claims center exercises. We got to test the Claims Center in a simulated environment. This portion of the exercise that went as plan. The issue that arose was satellite connectivity. While we were able to test it, we did encounter interruptions. This issue has been addressed, but we re going to test it again next week. Jimmy Johnson continued, our next exercise was the Fast Track. We worked on severity 1 claims coming in by the phone. We want to be sure we expedite claims as quickly and as efficiently as possible. This exercise will go through the month of July. Many of you know that we have an emergency operating center (EOC), which acts as, in an event of an emergency, a customer service vehicle where customers can report a claim and receive additional living expenses upfront. Other areas of focus we ve focused on this year is testing our call center vendors, validating our underwriter process, testing the performance testing, and training the ongoing ClaimCenter training of credential resources. While we hope we fare well with another year without a CAT, we are in a good position to respond if we do. Chairman Aubuchon stated, having observed the exercise, I was impressed with how we handled as an organization everything that came at us, including the unexpected downtime with Citizens Property Insurance Corporation Claims Committee 5

6 the satellite. The IT team did not miss a beat providing connectivity at the hotel. From my understanding, we are doing the re-testing at the satellite provider s expense. 5. Sinkhole Update Jeff Handy stated, if you turn to section five in your materials, you ll find the presentation of Citizens ten year history as it relates to sinkholes. This presentation was prepared at the request of Florida s Chief Financial Officer Jeff Atwater. It comes at a time when Citizens legal costs are on the rise and are fueling a debate in a number of circles. CFO Atwater fully recognized that to understand those rising costs one had to understand the drivers behind them. Suffice it to say, the presentation tells a compelling story of the challenges that Citizens confronted over the years. Jeff Handy continued, there is one development that I d like to highlight and that s the significant decrease in the number of sinkhole claims being reported. Let s start with 2010 when we received on average 228 new sinkhole claims a month. In 2011 that number spiked to 375 claims a month. In 2012 it started to decline and was at 261 claims a month when the effects of Senate Bill (SB) 408 started to be felt. In 2013, we dropped to 97 claims per month being reported. In 2014, we are at 47 claims a month. Jeff Handy continuing, continuing on the point of legal costs, CFO Atwater has a recommendation. Citizens finds itself in litigation on approximately 1,300 confirmed sinkhole losses in which the disputes mostly revolve around the best method of repair of the property. In a letter dated April 28, 2014, CFO Atwater suggested that we offer each of these 1,300 policyholders an opportunity to utilize the neutral evaluation process (NEP) to establish the method and specifications of repair. To encourage their participation, CFO Atwater recommended that Citizens agree in advance the NEP but not the same of the insured, and thereby leave them to pursue other remedies if they choose. By recognizing that this approach could potentially resolve a number of these disputes and demonstrating a good faith effort to resolve differences in May, Citizens sent letters to the policyholders extending the offer proposed by CFO Atwater. Tom Lynch asked, the letter you were talking about with the non-binding portion to the client, is that the 3,227 shown in graphs of the claims still pending? Jeff Handy responded, no. This is a subsection of that group. Of that group, there is 1,300 in which we both agree there is a sinkhole loss. We are disputing the method of repair. Tom Lynch asked, so there are roughly 2,000 that are disputing whether they are sinkhole claims or not? Jeff Handy responded, they make up a myriad of different issues. Anne Olson added, if it s not a method of repair, it can be based on a causation dispute or they are not selecting a stabilization vendor to do the repairs. If they hadn t made any Citizens Property Insurance Corporation Claims Committee 6

7 efforts to fix the property or given us the opportunity to investigate, the lawsuit might be premature. Tom Lynch asked, since there have been legislative changes, how many sinkhole claims have come in since the past 18 months? Barry Gilway responded, the number we are looking at is the number that we have under the new legislation versus the new pre-sb 408. Jeff Handy responded, it s about 1,400 since the beginning of Tom Lynch responded, it looks like there are 400 to 600 that are in dispute. Or, is it under 200? Jeff Handy responded, that s a pending number for 2013 and not an all-inclusive number. Tom Lynch continued, if there were 1,300 claims in 2013 but there is less than 200 that are settled, does that mean they are disputed? I m trying to see if we are going in the right direction. Jay Adams responded, that number represents pending claims. If it s in litigation, we break that number into what type of litigation. If everything goes as expected to handle the claim, you re in it for about six months. What we can show, though, is that since the passing of SB 408, claims reported after that adoption has dropped year-over-year. We are only averaging 47 a month compared to 400 to 500 reported every month prior to SB 408. Tom Lynch asked, out of the 47 in 2013, are they in the four counties? Jay Adams responded, primarily, yes. There is a small pocket where we get claims in West Palm and Miami-Dade. Jon Palmquist inquired, on page 11, you identify three separate sets of strategies depending on the dispute. Are we using those three strategies? Jeff Handy responded, yes. Jon Palmquist asked, when did you start using those? Jay Adams responded, we engaged with Coordinating Counsel in October two years ago. We started developing these strategies. Jon Palmquist requested, explain how you distinguish two and three, where we do the repair and we are tendering to the insured and how do you police three? Citizens Property Insurance Corporation Claims Committee 7

8 Jay Adams responded, option two is the only option we provide for the non-litigated group. For those in litigation, some of the attorneys are wanting to administrate how those repairs are done. The way we police that is that part of the settlement is where we stipulate that part of the attorney firm will monitor, measure, etc. will use those funds for stabilization. Jon Palmquist asked, do you keep an adjuster assigned on that file to follow up? Jay Adams responded, there is an adjuster assigned to the file until it s concluded. Jon Palmquist continued, I see where we make a payment. Jay Adams continued, if we tendered the limits of stabilization to the attorney fee to administrate on behalf of their client, we would then expect to see a re-inspection request so we can make the replacement claim holdback for the damages. There is an adjuster still involved and we would anticipate that last step on the basis of holdback. This is an option we put forth in two separate settlement agreements. We haven t had anyone select option three, yet. Jon Palmquist asked, it would be interesting to hear more about this in the future. I m curious about the part where any unused insurance proceeds will be returned to Citizens. Jim Holton asked, have you had any feedback on the sinkhole plaintiffs bar on these new proposals? What is the feedback that you re getting from the other side on this? Elaina Paskalakis responded, the feedback is that we are trying to get these properties fixed. The feedback is that there is frustration without the cash payout for their fees. That has been the resistance we ve seen. The option three was developed out of what we ve heard from our policyholders and their representation. They want control over their repairs. That s how we got to option three. Out of some of these settlement strategies, we ve entered into over 315 stabilization contracts with policyholders and their firms. It s a mixed bag. Jim Holton continued, we can see some obvious conflicts between the attorneys and the policyholders, with firms not wanting to take additional obligations after payment has been made. I think you re on a great track. Jay Adams added, Citizens is committed to fixing these homes. We are trying to come up with strategies and solutions that benefit our insured and create safety for them to fix their losses without losing their house value. 6. Vendor Update Jay Adams stated, I want to give you an overview on the programs that we are working on. The IA Services RFP has been issued. We received multiple protests when we released our intent to award. We pulled it back and are in the process in doing a new solicitation. We extended a six month renewal option to get us through CAT season. We hope to come back to the Board in September. Citizens Property Insurance Corporation Claims Committee 8

9 Jay Adams continued, for the Sinkhole Stabilization Manage Repair in the fall last year, we entered into a solicitation and we received six protests. We sought to seek resolution without having to go to the Board with the protests. We also tried to stand up the repair program as an option in our settlement agreements. The majority of the protests were that they did not fully comply with everything that was needed in the solicitation. Initially, our goal was to do business with any sinkhole business wanting to do business with Citizens. We agreed to issue a second solicitation. When we issued this solicitation, we received a single protest that has since been resolved. Jay Adams continued, for Property Loss Estimating, this is what we use to estimate our claims for payments. Today, we are under contract with Xactware and that contract ended on May 31 st. We went into an emergency extension there because of the timing to get us through CAT Season. In April, we released a solicitation and we are in the final negotiations with three vendors. If this is resolved prior to the June Board meeting, we would like to know if the Claims Committee would like to push this to the June Board meeting for an award contract. Chairman Aubuchon stated, I m okay with that. Jon Palmquist asked, Jay, are you going to be willing to switch platforms during hurricane season? Jay Adams responded, we would not be doing it during hurricane season. The intent would be to pick this up at the end of the renewal contract in December. Jon Palmquist responded, with that, I would have no problems. Jim Holton responded, I do not either. Jay Adams continued, for what we re going to do about managed repair programs, we have been doing some due diligence. Initially, we were working on a water managed repair program. We need to make it more inclusive and make it an emergency services contract. We want to provide services for our customers when an emergency happens, such as a broken water pipe water extraction, fans, and slight tear-out materials that were damaged. It could be a small kitchen fire with smoke going throughout the house. One of the pieces is board up, tarping, etc. which will allow us to get repairs started so no further damages occur. We hope to have this up and running in the first quarter of Jay Adams continued, we are working on a fraud analytics tool. We are trying to get our fraud program to an enterprise-wide basis. Today, we have limited resources for doing proactive work. We want this tool wired into our mission critical application tools so that it can generate referrals. We hope to post a solicitation in the fourth quarter and start working on the software in For the Sinkhole Stabilization Managed Repair Program Vendor Services, this would be the second solicitation. It would add nine additional vendors to the 15 we already have. It s a budgeted item not to exceed five years and it s $50 million. This is not additional spend. It comes out of the indemnity dollars. The purpose of this solicitation is to expand the number of Citizens Property Insurance Corporation Claims Committee 9

10 experienced and credentialed sinkhole stabilization vendors providing managed repair services. Citizens is seeking Responses from Vendors capable of providing Sinkhole Stabilization Services within the framework of the Managed Repair Program which will be required statewide for eligible sinkhole property claims. The resulting contract will provide Citizens policyholders with multi-vendor network capable of providing managed stabilization repair services. This is a voluntary program, related structural and building repairs are outside the scope of intended services. The intended Contracts will have a base term of three (3) years; and, at Citizens discretion, have one (1) optional two (2) year renewal term. Jay Adams continued, this came through Monday. We resolved the last protest. When we posted the intent for award on Citizens website, Advance Tier Technology, LLC was not included because there was a protest pending. We reached a settlement agreement with them and we will award them with a contract. Jon Palmquist asked, you will have contracts will all of these vendors. These will be vendors chosen by the insured? Jay Adams responded, we put all of the active status vendors out there and we provide our inured a list of activated vendors. We ask the policyholder to choose from a randomized list. If they have not made their choice after 30 days, Citizens will put together a round robin method and we will find the vendor. The policyholder must enter the program voluntarily. A motion was made and seconded to recommended that the Claims Committee recommend to Citizens Board to approve the recommended award and resulting contract, including renewal periods, for ITB No.: to above list of vendors, to authorize staff to take any appropriate or necessary action consistent with this Action Item, and for the contracts not exceed $50,000,000 over the contract period. All were in favor. Motion carried. New Business [meeting adjourned] Citizens Property Insurance Corporation Claims Committee 10