Sunrise Mayor Mike Ryan: Empty Promises By Insurance Companies Costing Taxpayers!
BY MIKE RYAN, MAYOR, CITY OF SUNRISE
In tough economic times, cities try to make older assets last longer, choosing repair and rehabilitation over replacement. For most cities, catastrophic damage to a building during a repair or rehab project would be financially crippling.
In contracting for such repair projects, cities routinely require the contractors to have insurance coverage. This provides full protection from catastrophic damage caused by a contractor, right?
Sadly, it’s not that simple. These policies are often filled with empty promises. “Exclusions” imbedded in policies are used by insurance companies to try to avoid protecting taxpayers.
Taxpayers Being Left Out to Dry
By way of example, assume the city needs some routine repair and maintenance on the municipal pool. Though not a major project, the repair and maintenance requires the pool to be drained. The contract requires evidence of insurance coverage, which is provided by the contractor.
During the repair and maintenance, an employee of the contractor negligently drains the water from the pool. The pool “pops” out of the ground. As a result, the whole pool is destroyed and must be rebuilt. Thankfully, the insurance company will agree to replace the entire pool, right?
Not so simple. When the claim is made, the insurance company refuses to pay to fix the pool itself. It leaves the contractor and the city out to dry!
The Law Protects Insurance Companies?
A similar scenario happened in the private sector in American Equity Insurance Co. v. Van Ginhoven. A pool “popped” from the ground when being drained by a contractor. The negligence was obvious; the damage was related to the conduct of the contractor.
The insurance company hid behind a common, but non-sensical, “exclusion” buried in the insurance contract. In essence, the insurance company avoided paying for damage to the pool itself upon which the contractor was performing operations negligently, paying only for the collateral damage.
Change the scenario to a busted water pipe, fire, or anything you can think up. The insurance companies will have an excuse why the taxpayers lose.
This is a real concern. Recently, Boca Raton High School had a new pool constructed. According to news reports, emerging concerns about structural integrity of the walls of the new pool caused the Palm Beach County School Board to scramble to financially protect the taxpayers from potential failure of the pool. Costly warranties and post-construction bonds were considered. Insurance policies are likely a poor vehicle to protect taxpayers because of exclusions.
Winners and Losers?
So what happens when the insurance companies try to avoid responsibility? Contractors declare bankruptcy. Cities may divert dollars from another city service or project, or face an inability to fix the property. Residents lose.
The BIG WINNER: The insurance company. It sold a promise. It collected premiums. It never had to honor the full promise it made.
How do we protect taxpayers?
Demand a change in Florida law to prohibit such insurance company exclusions involving municipal contracts. The industry could spread the risk better than cities. The contractors would be protected from going bankrupt because of a simple mistake. Most importantly, you and I would be protected from empty promises.
In the end, we must protect taxpayers and precious resources from empty promises and an industry hiding behind small print and exclusions.
February 14th, 2012 at 8:31 am
I like the suggestion but say the Legislature somehow works up the nerve to grant an insurance request that actually protects people instead of insurance companies. Say they demonstrate a rare moment of duty and pass such a rule. Insurance carriers will retaliate by jacking up premiums because for sure they will be given that option. Then they will find another loopholes to screw us with afterward. In our system the bank and the insurance company always wins and not far behind them cashing in also are the lawyers.
The problem is much bigger and while what Ryan mentions is important, this is a merely a symptom of a larger insurance cancer that is consuming our economy. We have lost all sense of business ethics in the insurance industry and Ryan points to a perfect example.
Take the Allstate logo, for example. There you have a family’s house nestled in the cupped palms of a caring person’s hands. You’ve seen this a thousand times and it is supposed to describe how that company cares about you. They hold your house as it it was a precious thing to be protected. But the more accurate image is a slanted palm with fingers apart holding your house. Perhaps it was once a true representation of the company’s soul. Not today and not for decades.
Proper and honorable coverage at a fair and competitive price is not attainable in Florida no matter what kind of insurance you buy. That is because the Legislature that was supposed to look out for us sold out to the insurance lobby years ago. That is the truth of it and it remains the case today.
February 14th, 2012 at 10:20 am
The requirement “the lowest responsible bid” is the culprit. This requirement forces most contractors to use not so reputable insurance policies. A municipality or resident may hire a legitimate company for a project to only find out later that other non licensed companies performed the work on the project “AKA Sub-contractors.” During a Florida workman’s comp hearing. The committee used two government projects one in Miami and the other was the Sunrise safety complex as examples of non insured workers found to be on the job site. Tighter controls involving security check in at projects for all workers, name badge with company name and insurance name requirements printed on badges should be required. This simple change would level the playing field for your reputable companies. Bonding should also be a requirement on some projects.
February 14th, 2012 at 11:13 am
This is very similar to SB 1196 moving through the Florida legislature. It RELIEVES developers from responsibility for any substandard workmanship or materials..UNLESS it’s on a particular homeowner’s lot. That means that sewer pipes, electrical conduits, or anything that developers do BETWEEN properties…or in all common areas are NOT the responsibility of the developer if they were installed improperly, if the materials were defective, or for any reason. Our legislators do not appear to be protecting residents…just their big business, deep-pocketed friends.
February 14th, 2012 at 3:25 pm
They once asked John Glenn what his biggest fear was orbiting the Earth. It’s rumored that he said riding in a space craft built by the lowest bidder. Not sure if that is true but it sure makes sense.
February 14th, 2012 at 3:53 pm
Mike Ryan asks: How do we protect taxpayers – it seems like we are getting ripped-off right here in Fort Lauderdale:
City of Fort Lauderdale Procurement Item Beach Equipment Rental Franchise 3 year agreement
Timeline of recent events
Lobbyists George Platt (Shutts & Bowen) and Stephanie Toothaker (Tripp, Scott) are registered to lobby on behalf of BBMFL.
September 15, 2011 – Mayor Seiler reports campaign contributions from Boucher interests:
Jim Scott (Tripp Scott) $250
Alex Heckler (Shutts) $250
George Platt (Shutts) $250
Charles Perry (BBMFL) $250
Cheryl Perry (BBMFL) $250
October 19, 2011 – A Request for Proposals (RFP) #715-10794 was issued by Procurement Services
for the beach equipment rental franchise on Fort Lauderdale Beach. 526 prospective bidders were notified. The contract has significant value to the parties – the City’s guaranteed share is over $1mil.
November 28, 2011- The RFP was opened on. Of 526 solicitations, one bid was received from Boucher Brothers Beach Management Fort Lauderdale, LLC, (BBMFL) who is the incumbent and has held the contract for beach equipment rental franchise for the past 3 years.
November 30, 2011
Mayor Seiler reports campaign contributions from Boucher interests:
Heather Boucher (BBMFL) $250
James Rocco Boucher (BBMFL) $250
Loreto Z. Boucher (BBMFL) $250
Perry A. Boucher (BBMFL) $250
Edward Pozzouli (Tripp Scott) $250
Stephanie Toothaker (Tripp Scott) $250
Norman Tripp (Tripp Scott) $250
December 5, 2011
Mayor Seiler reports campaign contributions from Boucher interests:
Gina Pozzouli $200 (Fundraiser)
Jan 11, 2010
Mayor Jack Seiler meets with Lobbyist Toothaker (re: Lauderdale One Condo) – no disclosure regarding Boucher Brothers
Jan. 14, 2012 – Mayor Seiler reports campaign contributions from Boucher interests:
Maxine Calloway (Husband Shutts) $150
Joseph M. Goldstein (Shutts) $250
Anitra Lanczi (Shutts) $ 50
Jan 17, 2012
Fort Lauderdale City Commission approves 3 year contract with BBMFL
Approved on consent agenda – no public discussion or disclosures
Jan. 19, 2012 – Mayor Seiler reports campaign contributions from Boucher interests:
Brendan Barry (Shutts) $250
Jan. 26, 2012 – Mayor Seiler reports campaign contributions from Boucher interests:
Sidney Calloway (Shutts) $250 – INK Fundraiser
Stephen Tilbrook (Shutts) $100 – INK Fundraiser
February 15th, 2012 at 8:55 am
This state has been lax in regulating the insurance industry for years. The industry virtually controls the Legislature and without an elected insurance commissioner (with its own problem of raising contributions from the industry), Floridians have no recourse. The rates are higher here than any neighboring state, who also are subject to hurricanes.
I must say that the industry also must fight widespread auto accident fraud by chiropractors and other health clinic operators. The Legislature is trying to do something about this.
To curb the abusive practice that Mayor Ryan talks about would require the Legislature to finally act against the business interests of its friends and campaign contributors in the industry. The mayor needs to start talking to legislators and the ones running for office now.
February 15th, 2012 at 1:04 pm
I agree with Mike Ryan, we the citizens are the big losers, and the insurance companies are the big winners. We should change the law! The legislature should change the law that the insurance company must pay the claim before the 90 days in full for the homeowners disaster.