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A Miami homeowner is suing Florida’s Citizens Property Insurance Corp. for forcing him into arbitration over a 2024 damage claim dispute, claiming the process violates due process and equal protection rights.

Stainton Williams, 92, contends the damage to his home located 10 miles from the water was caused by wind, not by storm surge, and thus should have been paid by the state’s largest property insurer. But the state-backed insurer denied his claim, maintaining that it was caused by storm surge, which is not a covered peril under its homeowners policy.

When Williams objected to the claim denial, Citizens invoked the arbitration endorsement in its policy so that the dispute would be referred to an administrative law judge (ALJ) within the Division of Administrative Hearings (DOAH).

The insurer created the DOAH option as a way to avoid courts, curb legal costs, and speed up resolution of disputes. The state insurance regulator approved the endorsement in August 2022 and it took effect for new and renewing policies on February 1, 2023. The arbitration endorsement may be invoked by either Citizens or an insured.

Florida Citizens’ Endorsement Now in Effect: Disputes to be Heard by Admin Judges

When he went before the ALJ, Williams protested the constitutionality of the arbitration endorsement and its use by Citizens but he maintains that the judge would not consider his constitutional arguments.

Williams alleges that the arbitration process is structurally flawed and biased in favor of the insurer, which selects the judges and pays them. According to his complaint, since Citizens began redirecting disputes away from the courts and into DOAH, Citizens has “prevailed in nearly every case” sent to DOAH in proceedings that “deny basic procedural rights including access to discovery, a neutral decisionmaker, and judicial review.”

He charges that the legal strategy is “orchestrated and defended” by a former Florida Supreme Court justice who serves as chief legal officer for the insurer. Williams further asserts that the administrative judges “routinely refuse to hear constitutional challenges and decline to engage with jurisdictional defects” and they “rely almost entirely on prior administrative decisions rendered by ALJ colleagues operating under identical circumstances.”

Williams believes that more than his claim is at stake. “This is not merely a dispute about insurance,” his court filing declares. “It is a direct challenge to a calculated and state-backed apparatus that deprives Florida homeowners of their most basic constitutional rights.”

The suit filed in federal court asks for a declaratory judgment that the arbitration clause is unconstitutional as written and enforced and for an injunction barring Citizens from enforcing the clause and rerouting cases to DOAH in future disputes.

Citizens had not filed an answer to the Williams complaint by press time. In a statement to ¾ÅÉ«, a Citizens spokesperson said: “Citizens supports the move to DOAH because it provides a well-established, fair, and efficient process for policyholders, who no longer must wait nearly two years, on average, for a resolution.”

At the time it proposed the DOAH endorsement in 2022, Citizens was dealing with a growing number of lawsuits and escalating legal costs. At the time, the insurer said that its legal defense costs were on track to top $100 million. In the first four months of 2022 alone, Citizens faced more than 3,800 lawsuits. The endorsement was seen as helping by lowering costs with a $200 cap on plaintiffs’ attorney fees and speeding up cases by using administrative judges who do not have the case backlogs other judges have.

Unlike binding arbitration decisions, DOAH judges’ rulings can be appealed to a Florida District Court of Appeals.

Florida law allows private insurers in Florida to also have arbitration clauses although not all insurers do.

Some plaintiffs’ lawyers believe that arbitration hurts policyholders. They have argued that because arbitration limits attorney fees, fewer lawyers are willing to take on the cases and that ALJs may not be familiar with the intricacies of insurance law.

In recent years, hurricane-prone Florida has taken steps to reduce the amount of insurance litigation and the state has been able to attract additional property insurers, which has reduced the policy count for Citizens.

Topics Lawsuits Florida Legislation Claims