Florida’s Citizens Insurance Settles Fraud Case Against Law Firm

Citizens Property Insurance Corp., a state-owned corporation, has agreed to a $1 million settlement with the Coral Gables-based The Strems Law Firm, P.A. Insurers claim Strems was a major driver of excessive litigation, which drives up homeowner premiums.

Source: South Florida Sun Sentinel | Published on May 13, 2022

Florida insurer of last resort

Scot Strems and his firm filed 8,756 lawsuits against property insurers, mostly in South Florida, between May 2014 and June 2020, according to state records, averaging 1,459 lawsuits per year.

The agreement brings to an end a two-year legal battle with The Strems Law Firm, P.A. Citizens accused the firm and several of its associates of running a racketeering operation in violation of the federal Racketeer Influenced and Corrupt Organizations Act in a lawsuit filed in June 2020.

Contender Claims Consultants, All Insurance Restoration Services, Strems, and three other individuals who worked for the associated companies were named as co-defendants in the lawsuit.

Citizens claimed that the defendants collaborated to inflate or fabricate insurance claims, mostly involving non-weather-related water damage, and that they submitted them on behalf of policyholders using "false and fictitious invoices."

In response to a Florida Bar complaint, the state Supreme Court suspended Strems indefinitely after he filed over 8,000 lawsuits in six years. Strems was eventually suspended for two years, and another Florida Bar complaint is currently pending before the state Supreme Court. Following his suspension, his law firm was restructured and is now known as The Property Advocates, P.A.

According to one of the Bar's complaints, Strems targeted thousands of homeowners he and his associates knew would not ask too many questions, "including the elderly, immigrants, and people of humble means and education" who they believed "were unlikely to recognize the impropriety of the scheme."

Citizens will receive $1 million as part of the March 21 settlement and will have its case against all of the defendants dismissed. According to a Citizens news release, both parties will pay their own legal fees.

"Strems and the other defendants continue to deny wrongdoing in the settlement agreement, while Citizens stands by the allegations in its complaint," according to the release.

Lawyers and insurance premiums

Insurers in Florida have long blamed a small group of litigious plaintiffs attorneys, including Stems, for perpetuating fraudulent claims by collaborating with repair contractors to persuade homeowners to sign over their rights to pursue their claims, then filing lawsuits in the homeowners' names without informing them.

In the middle of the last decade, the practice became widespread in Broward, Palm Beach, and Miami-Dade counties. These violations mostly involved claims filed in response to leaks in kitchen or bathroom pipes, appliances, or water heaters.

Insurers have recently claimed that they are suffering significant financial losses as a result of claims abuse and litigation by roof repair companies and their attorneys. The companies send out solicitors to knock on doors and promise homeowners that their insurers will pay for a new roof.

They then file claims for entire roof replacements and file lawsuits if the insurers dispute their invoice. Roof coverage will almost certainly be discussed during the upcoming special Legislative session on property insurance.

Insurance companies are lobbying for legislation that would allow them to only cover the depreciated value of roofs in standard multiperil homeowner policies. Currently, standard policies cover the entire cost of replacing a damaged roof.