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There’s big news coming out of Florida this week about phony real estate values (again): a big lawsuit has been filed claiming that Citizens Property Insurance Company has been inflating real estate values in the replacement value of homes so they can charge the Florida homeowner higher insurance premiums.

The Florida Association for Insurance Reform (FAIR) filed the lawsuit against Citizens, which is Florida’s biggest property insurer.  According to FAIR, Citizens didn’t even bother with evildoing appraisers and appraisal fraudsters: nope.  They went very high tech, 21st century and used appraisal software to boost values on Florida real estate.

It’s really bad.  An 82-year-old Florida woman, Ruth Lauro, has been used as an example: her home is valued at $50,000; however, her insurance premium through Citizens had it valued at  $129,000.   Mrs. Lauro is one of the plaintiffs in the new lawsuit.

As the Wall Street Journal reports, Citizens is a big money-maker: last year, Florida’s Big Kahuna of home insurance was adding 4000 new policyholders to its rolls each month.  That’s a lot of revenue, especially for a company that is supposed to be in business to protect homeowners from the dangers of devastation here in hurricane-prone Florida.

In fact, according to the WSJ, Citizens Property Insurance Corp. has 1.5 million policyholders with a total exposure in the event of a major disaster of $511 billion; the WSJ’s numbers show Citizen has cornered around 25% of the home insurance market.

Larry’s Tip

Here in Florida, our communities are often the target of powerful hurricanes. Hurricanes pose different kinds of damage to homes: wind, flood and flying debris.  Damage that is covered by home insurance policies.

A while back, independent insurance companies balked at continuing to provide insurance coverage here because the risk for damage was so high. When devastating storms occurred, insurance companies were at risk of being forced out of business, bankrupted by the claims amounts that they must pay.  Our state government on occasion had to step into the money gap, and cover claims that the insurance company pockets didn’t have.  Unfortunately, homeowners were at risk of having an insurance policy that wasn’t worth the paper that it was written on (to quote the old saying).

Remember Hurricane Andrew?  Back in 1992, that one storm was so huge that many insurance companies didn’t want to provide coverage here in Florida any more because they didn’t want to bear the risk of another Andrew-like storm on their books.

Which means that Florida (and the Texas Gulf Coast, the California Earthquake zone, etc.) have higher insurance premiums than other parts of the country.  But that doesn’t mean that an insurance company can use that risk analysis to gouge its customers.

Appraisal fraud? Citizens may well argue that it’s just a software glitch (the software company is another defendant in the case).  It’s not fraud if Citizens had no intent to do bad things.

However, oops! in this instance does not mean that a legal wrong has not occurred.  Appraiser error or appraiser mistake – whether by a human, a man or woman licensed as an appraiser in the State of Florida  or a software package designed to automatically spit out appraisals – can be the basis for the home owner to file a lawsuit for damages.

Appraisal negligence has been running rampant here in the State of Florida.  The fact that Citizens has now been sued for appraisal error (whether fraud or negligence) is not surprising.

For more on appraisal negligence and appraisal fraud, read our previous posts on the topic.  And if you believe that you may be a victim of a form of a phony appraisal, then consider your legal options with an experienced Florida real estate attorney.   Florida law may be able to help you fix that bad appraisal.

If you have questions or comments, please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com or (954) 458-8655.

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