Citizens Sue Citizens Over No-bid Contracting

Florida’s state insurance company is the target of a class action suit filed last week. The suit, filed on behalf of 1.2 million Citizens Property Insurance Company policyholders, alleges that the insurer awarded 33 no-bid contracts improperly over the past six years. Citizens was founded to provide insurance to property owners, both private and commercial, who could not find insurance elsewhere.

The 33 contracts represent more than $49 million in services. The complaint alleges that the insurer failed to take competitive bids in violation of its own rules and Florida law. Competitive bids are required for all contracts valued above $35,000. Exceptions are made in emergency situations or when there is only one vendor.

Citizens maintains that the contracts were awarded appropriately. But the Florida Chief Financial Officer, one of the state officials who appoints the company’s board members, had urged the company earlier this month to revise its contracting procedures — the CFO sent the letter after news reports brought the contracts in question to light.

Among the recommendations in the CFO’s letter were broadening the criteria for emergency exemption from competitive bidding and making the process more transparent by posting contracts on a website that vendors could search. He also recommended additional training for staff. According to reports, the board will address the emergency exemption at its December meeting.

The company is the largest property insurer in the state. State ownership makes for a complicated relationship with Florida residents. For example, all Floridians pay a fee over and above their insurance premium to cover the company’s losses from the 2005 hurricane season. Attorneys for the plaintiffs in the class action suit contend that the no-bid violations have been passed on to all Floridians in higher fees and assessments.

The class action suit seeks unspecified monetary damages as well as a temporary injunction that would stop Citizens from continuing to collect the deficit assessments. Another injunction requested would stop work that has begun under the allegedly improper contracts.

Resource: Insurance Journal “Lawsuit Targets Florida’s Citizens Over No-bid Contracts” 10/25/10

Share