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Miami lawmaker: Citizens insurance should cut millions in costs before raising premiums

Citizens Property Insurance spent more than $2.4 billion over five years on legal costs for claims.

That’s according to information obtained by Rep. Frank Artiles, R-Miami, who criticized the state-run insurer for fighting claims, saying it’s “subsidizing the legal community.”

In a letter to the Sun Sentinel, Artiles said that Citizens’ should not be spending so much of policyholders’ premiums on litigating claims because it’s “unsustainable and will bankrupt any private or public company.”

Artiles said lawmakers should direct Citizens to lower its operating expenses before it implements plans to lower its risk by reducing coverage options and increasing premiums; continues increasing policyholders’ premiums based on its higher estimates of the cost to rebuild homes; and moves policies to less regulated insurers under new legislation.

Citizens spent $2.4 billion from 2006 to 2010 on legal payments made related to claims, including for lawyers hired by the insurer and policyholders. That’s more than 40 percent of the money it has saved up over the years for its claims-paying reserves. The legal costs declined every year, from a high of $1.4 billion in 2006 – after the rough 2004 and 2005 hurricane seasons – to $143 million in 2010, according to an analysis of the data.

Nearly all Floridians are subject to paying fees to help offset Citizens’ deficits after a major hurricane. Citizens Spokeswoman Christine Ashburn said that’s why it is important that the insurer doesn’t overpay claims and pays “the proper amount based on the coverage provided under the insurance policy.”

“All but a small percentage of Citizens claims are paid without the need for litigation,” she added. “For claims where disputes do arise, they are based on the specific facts of the individual case.”

Citizens employees have said in recent meetings that a large portion of its legal claims expenses in recent years went to sinkhole claims.

An explosion of sinkhole claims, including many that are inflated or fraudulent, are creating a new insurance disaster in Florida, according to stories this week by the Tampa Bay Times…