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Scott signs Citizens Insurance reform bill, blasts company in sharp-tongued letter

Gov. Rick Scott wasted no time signing a bill to reform Citizens Property Insurance Corp., which has seen a whirlwind of criticism since it approved a special $52 million deal for an upstart company with ties to top politicians last week. 

Scott signed SB 1770 on Wednesday, one day after the reform proposal reached his desk. The bill creates a “clearinghouse” to direct policies out of Citizens and into the private market, and includes several reforms that address controversies and scandals that have taken place at Citizens. 

In a sharply worded missive, Scott focused mainly on those scandals, using words like “outrageous,” “egregious,” and “fraud, waste and abuse.” 

The bill creates an Inspector General at Citizens, something Scott has called for ever since media reports documented the company’s missteps, which include: lavish travel expenses for executives, huge salary hikes, large severance packages for disgraced employees, overpriced contracts, mishandled investigations and the abrupt dismissal  of corporate investigators who uncovered some of the misconduct. 

“This new Inspector General will be accountable to the Cabinet and will not be an entity Citizens can fire, as they did with their old compliance officers,” Scott said in a statement. “A strong Inspector General is needed to provide independent oversight at Citizens and to end the fraud, waste, and abuse which has plagued Citizens for too long.” 

Scott also called on Citizens to change its policies after a controversial deal worth up to $52 million deal for Heritage Property and Casualty Company, which is looking to take over 60,000 policies from the state-run insurer. Critics have blasted the quickly-approved deal for the nine-month-old St. Petersburg company, which contributed $110,000 to Scott’s reelection campaign in March. Scott said the board should require at least seven days notice before any future board meetings, in accordance with state agency guidelines. The Heritage deal was unveiled on a Friday, and voted out on the following Wednesday in a 3-2 vote. Several board members complained that there was not enough time to vet the proposal, a concern echoed by House Speaker Will Weatherford and Chief Financial Officer Jeff Atwater

Citizens has stood by the Heritage deal, saying that it was thoroughly vetted for several weeks and would significantly reduce the company’s liability, which is backed by the state’s consumers. 

"The financials associated with this deal are significantly in our favor," Citizens President Barry Gilway said Wednesday.

Citizens currently has about 1.3 million policies, and is the state’s largest insurance company.

Under the clearinghouse, homeowners with Citizens who receive a comparable insurance rate from a private insurer will be forced into the private market. 

The bill also prohibits Citizens from insuring newly built homes that are located right on the water, reduces the maximum home value for a Citizens policy to $700,000 and requires Citizens to follow state guidelines on contracting. 

SB 1770 passed with bipartisan support after Senate-backed language including large rate hikes was stripped out of the bill in the House. 

“At the end of the day, Citizens’ responsibility is to be the insurer of last resort,” said Gilway, in a statement. “By definition, we should be the company that is retaining the business that other companies are unwilling to (carry.)”

Read Scott’s full statement below:

TALLAHASSEE, FL – Today, Governor Rick Scott signed SB 1770 into law, which reforms the state’s largest insurance company, Citizens Property Insurance Corporation, a taxpayer backed entity.

Governor Scott said, “This legislation will bring much needed reforms to better protect the taxpayers who support Citizens Property Insurance. This legislation requires Citizens to have an Inspector General that they cannot fire, follow state purchasing guidelines, and disclose potential surcharges with each policy renewal notice.  It also requires Citizens to implement a clearinghouse to ensure Floridians no longer subsidize those with private insurance options.  Additionally, this law helps protect the environment by removing subsidies for new construction in environmentally sensitive coastal areas.  

“With this legislation now in place, I am asking Chief Inspector General Melinda Miguel to immediately join with other Cabinet offices and begin a nationwide search for the new Citizens Inspector General.  This new Inspector General will be accountable to the Cabinet and will not be an entity Citizens can fire, as they did with their old compliance officers. A strong Inspector General is needed to provide independent oversight at Citizens and to end the fraud, waste, and abuse which has plagued Citizens for too long.

“I have previously requested and reviewed Inspector General Reports on the egregious travel expenses at Citizens and the termination of their compliance office. The IG reports confirmed what most of us already knew – Citizens needs serious reform in order to instill the public confidence that should belong to the state’s largest insurance company, which is supported by Florida taxpayers.

“We called for Citizens to make immediate changes to their travel guidelines to bring them in line with official state travel restrictions, which do not reimburse for the purchase of alcohol. We called on them to further change their travel policy so it prohibited any international travel and permitted only essential employees to attend board meetings. We called on them to give back the outrageous pay raises they doled out to their executives last year. And, we called for the creation of an independent statutory IG to enforce existing rules at Citizens and force them to make additional reforms, which this legislation will finally begin today. Disappointingly, Citizens has still not returned the lavish pay raises it doled out to its executives last year.

“With this legislation, Citizens will now have to follow state guidelines for purchasing commodities.  Because they oversee millions of dollars in contracts, this reform is long overdue.  State purchasing guidelines will help ensure a high level of transparency and competition. 

“Senate Bill 1770 also prohibits new construction commencing after July 1, 2014 from Citizens coverage if it is built in high-risk, environmentally sensitive coastal areas.  This commonsense step eliminates public insurance subsidies for new coastal constructions with a high risk of storm losses. This reform also has the added benefit of protecting environmentally sensitive areas from further development. 

“Finally, in light of the risk transfer agreement Citizens executed last week with only four days public notice, the company should further reform their existing policies to require a minimum seven days notification of a public meeting. This commonsense reform would bring Citizens’ policies in line with the state’s Administrative Procedures Act, which directs agencies to publish their agenda at least seven days in advance. This is another area where Citizens should come in line with existing state policies and not be given special treatment. 

“I am grateful for the leadership of Senators Simmons and Richter, Representatives Holder and Nelson, and the Legislature for their work on SB 1770. While this law will not be a cure-all for Citizens’ many problems, it makes important reforms to improve this taxpayer backed organization.”