Where We Are
Last week, CFSIC mailed checks to the first round of claimants. We also notified more than fifty Type 1 claimants to proceed with securing at least two proposals for contractor services. The process of paying claims has begun. Within the next few weeks, houses will be lifted off their foundations, and the work of recovery will commence.
Insurance companies are required to post claim liabilities on their books. CFSIC is a legitimate insurance company licensed by the State of Connecticut. Liabilities have been posted based on the applications we have received and that are now active, are in the process of becoming active, or are inactive.
CFSIC is underwater. What that means is, as I write this, CFSIC has more in liabilities on its balance sheet, for both active and inactive claims, than it does in assets. My board has made promises to the public based on enabling legislation.
Since the inception of the development of the CFSIC program in May of 2018, I have been clear that what has happened would be the case. CFSIC’s business model is built on a promise…that we can keep posting liabilities on our balance sheet in excess of available assets because the State of Connecticut will release the funds we need to honor promises made.
However, there is another important issue, and that is the issue of cash.
It is one thing for CFSIC to hold more in liabilities on its balance sheet than it has in assets. It is another thing entirely for CFSIC to run out of cash in any particular fiscal year. CFSIC now has sufficient cash on hand to honor its current claim obligations to homeowners and to contractors, and its contractual commitments to its service providers…but it will be out of cash before the close of this fiscal year, which ends on June 30, 2019.
The important message here is that each Bond Commission agenda where CFSIC’s next $20 million allotment of cash is not on the agenda brings us closer to the temporary suspension of activities.
What will happen if we temporarily suspend activities?
If this happens (and “if” is the operative word), we will announce it on this website well in advance of the suspension of activities taking effect. It will be announced in the public media. We will instruct contractors to temporarily stop giving proposals to homeowners.
What this does not mean is that homeowners in line to have Type 2 claims reimbursed, and Type 1 claimants who are in line to have deposit checks cut to their contractors or progress payments made to those contractors, will have this process stop. It just means that no new payments can be made to anybody for anything, starting on the day when we temporarily suspend operations.
Upon suspension of operations, whether for an hour, a day, or month, or longer, the ESIS electronic applications on the website will be disabled. The PDFs of the applications on the website will be taken off the website. It’s important that we are clear with the public about what happens if we suspend operations. With any luck, and with all hands on deck supporting CFSIC’s financial needs, none of what I just outlined above will come even close to happening. CFSIC is owed $20 million in the fiscal year commencing July 1, 2018. This cash is vital to the fulfillment of our mission.
Claims Awaiting Commercial Insurer Settlement or Litigation
CFSIC takes no position at all with regard to any litigation between homeowners and insurers. We are not in favor of litigation, and we are not opposed to it. From Day One, I have been clear that we have no horse in the litigation race.
CFSIC’s claims-paying process exists outside of and independent from any individual litigation a homeowner may be involved in, or any multiple-party litigation that multiple homeowners may be involved in.
Homeowners who are involved in litigation, or those simply waiting to have their claim accepted or denied, are inactive claimants under CFSIC’s current underwriting and claims management guidelines.
It’s important, however, to describe how CFSIC will handle a claim, once it is possible to make an inactive claim active, and as a result for the adjustment process to happen.
If the only thing holding up making your claim active is:
– you are waiting for a claim to be denied;
– you are waiting for a claim to be accepted;
– you are waiting for a claim to be settled through individual or group litigation;
then you should understand the process by which CFSIC will contribute to a claim paid in whole or in part by a commercial insurer…once you inform ESIS in writing that you and a commercial insurer have come to a settlement.
Let’s use an example.
In this example, your entire foundation project costs $200,000.
Of that total amount, $150,000 is “allowable concrete work” according to CFSIC’s standards, and where the cost of that work is at or below CFSIC’s replacement cost parameters.
And, let’s assume that your settlement from a homeowners’ insurance company for your claim (regardless of whether litigated or not) is $100,000, and where such settlement does not distinguish between allowable and non-allowable foundation work…in other words, it is a non-specific settlement.
How CFSIC would adjust this claim for purposes of its payment to the homeowner would be as follows:
Step 1: Using your construction contract, our adjusters would review the allowable concrete work for accuracy and correctness, including making certain that the allowable concrete costs do not exceed CFSIC’s cost parameters.
Step 2: Our adjusters would determine the percentage of the concrete work that bears to the whole cost of the project…which, in the case above, is allowable concrete work amounting to 75% of the project total ($150,000 of allowable concrete work divided by $200,000 of total project cost).
Step 3: We would take the total settlement received from the insurance company, which in this case is $100,000, and multiply it by 75%, which would equal $75,000. This means that $75,000 of the $150,000 total cost of concrete work would be deducted from what CFSIC would pay. This results in a claim paid by CFSIC of $75,000.
In this specific example, this means that all of the $150,000 of allowable concrete work would be paid for, through a combination of commercial insurer settlement and CFSIC payment.
To be clear…the calculation method employed above works equally for those who have already settled and have moved into active claim status.
Three Homeowner Benefit Programs Are Now Operational
We have successfully concluded the implementation of three benefit programs sponsored by Travelers, The Hartford, and Liberty Mutual. In total, these benefit programs provide $15.5 million in additional benefits to eligible homeowners above and beyond what CFSIC will pay. We applaud the efforts of these three insurers to contribute to the rebuilding of communities hard-hit by the crumbling foundations crisis.
To learn more about these three benefit programs, go to the “For Homeowners” section of this website, and specifically to Section 13.
Three links are there to take you to the three insurer sites.
You’ll also see information in Section 13 about how we are moving your information to these insurers, once we receive your permission to do so.
If you have any questions about the operation of the program, ESIS is your best source of information on your claim, and their phone number and email are shown below.
As you work through the information and application process, here’s how you can get help:
– Call ESIS (the claim adjuster) at: 844-763-1207
– Email ESIS at: email@example.com
– Email CFSIC at: firstname.lastname@example.org
Michael Maglaras, Principal
Michael Maglaras & Company