This week there has been some buzz in the insurance industry media and Florida media about a new class action filing against Citizens Property Insurance Corporation, the state-sponsored property insurer of last resort in Florida, and Xactware Solutions, Inc.  The case, Freitas v. Citizens Property Insurance Corporation, was filed in the Circuit Court of the 6th Judicial District, in Pasco County, Florida (Case No. 512012CA0799WS).  The Freitas v Citizens Property complaint.pdf alleges that Citizens purchased the 360Value software from Xactware, and purportedly manipulated the software to inflate the replacement cost value of homes, thereby inflating the premiums charged.  The proposed class is all Citizens policyholders who purchased a policy where Value360 was used to determine replacement cost.  The sole claim alleged in the complaint is for violation of Fla. Stat. § 627.351(6)(a)(1), which sets forth the legislative purpose for the creation of Citizens, including that Citizens “shall strive to increase the availability of affordable property insurance in this state . . . .”  The case also seeks injunctive relief requiring Citizens to stop using 360Value or modify its use so that determinations of replacement cost are more accurate. 

According to Tampa Bay’s Channel 10, Citizens apparently has changed its practices in response to the lawsuit and is now allowing insureds to use their own estimates of replacement cost.  Channel 10 also reports that the plaintiffs’ lawyers who filed this suit are planning to sue other insurance companies (not yet identified, except that Universal Property Insurance is mentioned in an article). 

A couple thoughts: 

  • The Florida statute that is cited as the sole basis for the complaint against Citizens and Xactware appears to be a hortatory statute regarding the general purpose and intent behind the creation of Citizens as a state-created entity.  Does this statute really create an enforceable legal obligation, let alone a private right of action that insureds can bring suit under?  How does it create any basis for a suit against Xactware?  How could it be the basis of a claim against a private insurer other than Citizens? 
  • Given that Florida has a valued policy law, assuming the allegations were true, why would an insurer encourage (or require) overinsurance?  In the event of a covered total loss, a valued policy law requires payment of the full policy limit, and in that respect is intended to create a strong incentive for insurers not to allow overinsurance (and the moral hazard it creates).  If Citizens is charging much more than appropriate for premiums, it also will be paying out much more for total losses.   

In any event, given the attention this new filing is getting, insurers that use Xactware’s 360Value or other similar software should take a careful look at how they are using it in light of these allegations.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.