Latest News…August 19, 2019

Let’s “Coalesce Around the Success”…

The Latest News section of this website is intended to present facts to the public about the extent of remediation being done by CFSIC.

Our job at CFSIC is to fix foundations, reimburse some who have already done that, and return people to their homes. It is also the Superintendent’s job to stay out of politics…or at least it’s supposed to be.

Today, I’m going to take a departure on this page. I’m going to offer an opinion. In fact, I’m going to offer more than one. This is the first and will be the last time that I offer my opinions on this page.

These will be my opinions only, and in no way reflect the opinions of my volunteer Board of Directors, who are among some of the best people I know.

In the late 1990s, Connecticut, and in fact the entire United States, was gripped by a growing medical malpractice insurance crisis. Malpractice claims made against OB-GYNs and hospitals, in particular, were escalating at an unbelievable rate. Malpractice insurers were exiting CT with less than 90 days’ notice. Connecticut was at the epicenter of this national problem, because we are a state universally acknowledged by the insurance industry as being one of the worst litigation environments in the United States.

Individual OB-GYNs in CT were facing the possibility by 2002 and 2003 of medical malpractice insurance premiums reaching almost $200,000 per year. None of this was sustainable in an environment where the then rate of payment to an OB-GYN, per birth, was less than $1,500. In fact, there was a very real danger that babies in CT would be born compromised (particularly if those children were born to mothers on Medicaid), as we were facing the potential of a flight of 300 or more OB-GYNs from our state. The history is clear: the OB-GYN “white coat march” on the Capitol in Hartford occurred and is an historical fact. I was there. We had in our state a monumental looming public health crisis, and a crisis impacting the most vulnerable among us: our children.

Michael Maglaras & Company was at the epicenter of the solution.

I know all about this, because it was Michael Maglaras & Company that formed more captive insurance companies sponsored by Connecticut tax-exempt hospitals during this crisis than any other company in the state of Connecticut. It was my firm that also obtained a $750,000 grant from the Connecticut Health and Educational Facilities Authority (“CHEFA”) to begin the process of measurably improving obstetrical care using captive claim data.

Where did the data come from that we used to present to CHEFA, to the public, to the CT Department of Health, to the Insurance Department, and to others, to convince them as to how the crisis could be confronted and defeated, and how CT could continue to be a place where babies could be born healthy and mothers returned to their families after difficult pregnancies… pregnancies that in many cases did not include adequate access to prenatal care?

The data came from hospital-owned captive insurance companies, many of them formed in the late 1980s by my firm…and all of them structured in almost the exact same way as CFSIC is structured now.

Almost every hospital in CT then owned (and continues to own) a captive insurance company. Those captives expanded in 2002 and after, to insure not only employed OB-GYNs (employed by the hospital that owned the captive)…but also OB-GYNs who practiced in the community as independent, private physicians. The crisis was met head-on. The crisis was largely defeated by the end of 2007.

The OB-GYN best practices claim data extracted from captive insurance companies was, as a result, used to improve the quality of care in the delivery room in every hospital in CT and to create standards to which OB-GYNs now, today, hold themselves accountable throughout our state. As I write this, babies are being born in delivery rooms in almost every hospital in CT, and their chances of survival are better because of the existence of captive insurance companies and the claim data that those companies had on their books and put to good use for the benefit of our citizens.

Captives are huge warehouses of claim data. The first real captive insurance company was, in fact, Lloyd’s of London as it was originally formed in 1688. Captives hold data in the form of statistical information about the average cost of a claim, why claims occur, and how they can be prevented. The first American captive was formed in 1836 in Rhode Island.

Which takes me now to 2019, the important issue of CFSIC, and the more important issue of CFSIC’s data.

With almost 1,100 claims registered on our books in eight months, CFSIC has now become the single most important source of data on the crumbling foundations natural disaster in Connecticut. There is no better, more credible, or more verifiable source of crumbling foundations data anywhere else in Connecticut on this crisis…Connecticut’s own crisis. I’m not talking about the Irish crisis or the Canadian crisis. I’m talking about the Connecticut crisis…a crisis that currently affects 22 homeowners in the very town where I live. At the farmer’s market yesterday in Ashford, I ran into some of my claimants. They are my neighbors.

And by the way…I’m also talking about the crisis to come in Massachusetts, which is just a few miles over the border from Stafford Springs (a town where this morning I have 78 known claimants whose foundations need to be replaced).

CFSIC has entered into Participation Agreements for $35 million of payments in less then seven months. Those are the facts.

It’s time for a new shout-out slogan. It’s time to “coalesce around the success.”

Just as improvements in obstetrical care at Saint Francis Hospital in Hartford in 2003 and 2004 were made because of claim data extracted from captives, which also resulted in improvements in obstetrical care at Norwalk Hospital at the other end of our state, and throughout our state…what we now know in Stafford Springs from CFSIC’s claim data about the extent of the concrete crisis and its remediation will help homeowners a few miles up the road and just over the border in Massachusetts. CFSIC’s data is available to those in Massachusetts who need it. They have only to ask. We have claims in CT on the border of Connecticut and Massachusetts…where the affected CT home is so close to the border that you can throw a rock from one state to the other.

CFSIC’s claim data is still evolving and still improving, and it will continue to evolve and improve over the next six months…but here’s the unfortunate difference between what happened with the obstetrical crisis in Connecticut 17 years ago and what’s happening in 2019 with the concrete crisis in CT: in 2002, everyone, including many in state government, quickly learned from captive insurance company data how to defeat the obstetrical crisis; in 2019, not enough people seem interested in learning from CFSIC’s data how to defeat the concrete crisis.

Yet, there are still a few concrete activists and advocates, particularly those on social media, who continue to publish half-truths and misleading information about CFSIC; unhelpful information not only about the extent of the crisis, but about the success of CFSIC’s remediation activities.

It’s time to “coalesce around the success.”

The data we read and we see on social media is, for the most part, wrong…it’s misleading, and most importantly it does not bring hope to those who are now affected and will in the future be affected by this natural disaster.

CFSIC’s product is a replaced foundation. CFSIC’s mission is hope. That should be everybody’s mission. I understand the anger. I understand the frustration. I understand how homeowners feel abused and misunderstood. I understand this well, because I take their calls each and every day. But CFSIC has never been the problem; CFSIC has always been the solution.

It’s time to “coalesce around the success.”

No one in CT has approached CFSIC for any meaningful, comprehensive data. No one among the advocates and agitators. No department of state government has asked us to prepare comprehensive reports about what we know and how the data can be used. (The exception here is our regulator, the CT Insurance Department; we have regularly briefed Commissioner Mais and his team on our financial condition. They have been incredibly helpful.) I particularly want to recognize DOH Commissioner Mosquera-Bruno, who has demonstrated again and again how she cares about our claimants. We are and have been prepared to provide comprehensive, all-encompassing reports in support of our funding requests. We are here waiting for the data requests, and we have been waiting. I’m not talking about the occasional brief report presented to a group of legislators, all of whom are well-meaning public servants and who are very much interested in learning the truth. I’m talking about in-depth, comprehensive reports that, among other things, predict exactly how hard the next wave of this terrible crisis will hit…how much it will cost and what it will take to fix it.

Our data can counter untruthful statements. Our data might be used to raise more funds from the state (probably not going to happen) and could, more probably, be used with the federal government (I believe firmly in the future of federal assistance). Our data can be used to focus people’s advocacy efforts, so that advocacy and agitation can again become constructive, thus making advocacy and agitation less about almost continual complaint and more about celebrating positive action for the benefit of all affected.

During the 2016 presidential campaign, as I drove around my town and many of the surrounding communities, I counted plenty more Trump posters than I did Clinton posters. President Trump has a deep interest in catering to “his base.” A good hunk of President Trump’s base in the state of CT is within a 20-mile radius of J.J. Mottes. I know. I saw the posters. I’m sorry if people don’t accept this fact because it is an inconvenient truth. If I could get in front of Mr. Trump, I would tell him how quickly he could score a victory with that “base” by picking up his pen and ordering FEMA to recognize this disaster as a natural one. I would only need seven to ten minutes with him, one on one. Mr. Trump already knows what a captive insurance company is. Businessmen, as well as hospitals, have used them for years.

It’s time to “coalesce around the success.”

CFSIC’s claim data now indicates clearly which towns are affected…which streets within which towns are affected. Not only that, it projects with reasonable precision the extent of the next wave of the crisis to come, most probably in 2024 and 2025. Our data captures the average cost of remediation. Our data shows how long remediation takes on average to accomplish. Our data captures the average size of single-family dwellings being remediated… as well as condos and PUDs, which will begin the remediation process shortly. CFSIC’s data shows which insurers currently insure homes with crumbling foundations. The data makes clear that the average cost of remediation is currently $144,000, not the $175,000 we keep reading about endlessly and falsely in social media. The data also makes clear that the average ratio of expense to revenue in CFSIC’s operations is currently less than 4% on a cash basis…not the 10% that keeps getting repeated by people who seem bent on tearing down our efforts rather than supporting them with facts…rather than supporting the effort to put people back in their homes.

And how about this?…our data is just beginning to reveal an incredibly important fact. That emerging fact, which we will have more information about in the next few months, is the average gap, in years, between the date of a home’s construction using tainted concrete and the point at which deterioration begins to show itself. Is anybody out there interested in that information?

It’s time to “coalesce around the success.”

Our data already points to improvements in the tax base in the 42 towns in question, slow improvements in the devastated real estate market, increases in payroll tax payments by contractors hiring more workers in the northeast corner, increased purchases of construction equipment from CT-based vendors of that equipment, which includes potential important CT sales tax implications. The data shows the true extent of the crisis, and just as importantly shows exactly where the crisis will continue to grow as the second wave comes after CFSIC’s sunset date on June 30, 2022, which means that the data presents a credible case not to let CFSIC go out of business on that date.

Not enough people have asked us for this data.

I have a few theories as to why. Some people don’t know what to ask for, and that includes some but not all people in state government…but the way to fix that problem is for them to simply ask, “Mike, tell me what I should be asking CFSIC for?” I’ve been waiting by my phone for that question to be asked. My cell phone number is known to many people in state government. Some members of the public simply prefer to agitate rather than ask for hard facts, because agitation seems to be more important than the fix, and they have gotten themselves into a continual agitation habit without appreciating the solution that CFSIC has presented. To those people we ask one important question: “Are you more interested in agitation than you are in learning about how to put more people back in their homes with the facts that can make more money flow to homeowners?”

It is only data that will put more people back in their homes. It is only CFSIC’s success to date that is the foundation upon which you will build the solution to this crisis. We defeated a medical malpractice crisis in CT that was twice the size of the crumbling foundations crisis. We did it by paying attention to captive claim data. That’s the model. We can do it again.

It’s time to “coalesce around the success.”

CFSIC exists because of the hard work of many fine people. It exists because of advocacy and agitation. It was advocacy and agitation that caused the enabling legislation to be written and Governor Malloy to sign it. The reason CFSIC exists, and the reason that I am on the job as Superintendent, is because of advocacy and agitation. Make no mistake. This is what happens when Americans come together, get angry, protest, and demand relief from their elected representatives, as is our constitutional right.

But the problem now is a different one: it’s now less about agitation to get funds flowing. It’s about agitation to get more funds flowing. There is virtually no public recognition or celebration by the public of CFSIC’s recent successes that are slowly and measurably improving the northeast corner. We have to ask ourselves why. I bought a couple of bottles of champagne to toast our first homeowner in May (and, yes, I paid for those bottles out of my own pocket…it was not a CFSIC expense). It doesn’t have to be champagne every time…but I need the agitators and advocates to start celebrating each time a town building inspector hands a homeowner a certificate of completion for a new foundation paid for by CFSIC. Let’s agree that we need to spend more time celebrating “shovels in the ground” on Facebook, and spend less time on Facebook spreading misinformation.

It’s time to “coalesce around the success.”

Let me be clear: there is no hope of raising additional funds, in particular from the federal government, without valid, objective, and quantifiable statistical information…the kind of information that I recently provided to the GAO as part of an extensive interview I granted to their researchers. It is one thing to continue to shout out that 35,000 homes are affected in the northeast corner and that we have a $2 billion crisis…that sort of information, which has no current basis in fact, makes great headlines in the news…but it doesn’t raise more funds. In fact, my friends, it does the reverse: it makes the crisis look insurmountable…so large that the only result is stagnation, not action. The crumbling foundations crisis is manageable. I know, because I spend each day, seven days a week, analyzing the CFSIC data.

What will now raise more money is analytical evidence of the size of the crisis. What will now raise more money is data. What will convince people in Fairfield County (where I lived for 33 years before I moved to the beautiful northeast corner) to join our cause and not complain about the $12 homeowner surcharge (which is the equivalent of one lunch at McDonald’s…if you include what they refer to as “dessert”) is more data. We have the data, and we’ve been sitting here waiting for someone to ask us for it, so that we can collectively put it to use.

It’s time to “coalesce around the success.”

Babies who were born in 2002 and 2003 in CT, using improved obstetrical best practices derived from captive insurance company claim data, will be entering college in the next year or two. Some of these kids are the hope of CT and the hope of our future. It was captive claim information that, among other things, created the standard that dictates that, when a mother presents in the ED and is in labor, the hospital must be prepared to do a safe C-section, if one is needed, within a maximum of 30 minutes of that mother’s arrival on that hospital’s property. Some of these kids were delivered that way. They are the living proof that captive insurance companies can make a difference in people’s lives.

In 2002 and 2003, OB-GYNs were facing the possibility of annual premiums of up to $200,000. In 2019, some OB-GYNs in this state with good claim records are paying $46,000 per year. Captives made this difference happen.

The next $100 million in funding for CFSIC…an additional $100 million that will mean 750 more families in the northeast corner returned to their homes, and those homes returned to the tax base…will not come our way because of exaggeration, untruths, and agitation simply for the sake of agitation.

That money may come, very simply, because somebody asked us for credible data to support the request for more funds. That data will come from CFSIC: a successful captive insurance company that is only eight months old and which has already been judged by the Internal Revenue Service to be tax-exempt because of the quality and integrity of its operations.

Let’s coalesce around the success.

– Mike Maglaras

Condo Update

A significant amount of misinformation has been brought to our attention regarding the condo issue. This misinformation is not helpful to the overall cause of fixing condominium foundations and doing it quickly.

What follows is a Q&A on the condo issue:

Question: How many condominium associations have applied so far?

Answer: Seven

Question: Which associations are they?

Answer: We never reveal claimant names. The condo association is our claimant, and we believe the association has a right to privacy. CFSIC will never reveal, through its own sources, any individual claimant data to the public. The data we release is collective in nature.

Question: Okay…what is CFSIC’s current claim liability for all foundation replacements that are on your books, including condos?

Answer: $118,024,274 as of Friday, August 16.

Question: Of that claim liability that you’re carrying on your books, how much of it is allocated to condominiums?

Answer: 16.7%

Question: How many active and inactive claims do you have on your books for condos?

Answer: 42 active claims and 26 inactive claims.

Question: Do you consider a “claim” to be an individual condo unit?

Answer: No. It is the foundation lying below that unit. In a six-unit condo configuration, where the six units are sited on one foundation, that’s one claim for us. We keep track numerically of how many condo units we have in our system, but our reserving is based on each foundation.

Question: But you seem to have a big surge in claim activity. Is that mostly due to condos?

Answer: It is. But to be clear, this is not a surge in applications… this is a surge in individual dwelling unit claimants. While the true claimant for us in a condo situation is the association, and the association applies on behalf of all units, we report total claimant activity by number of dwellings. We do that so that we can track applicable caps by type of dwelling, and we can track our expenditures accordingly.

Question: Aren’t all of these condo foundations severity coded class 3, as has recently been mentioned in social media?

Answer: Absolutely not…and anyone publishing that in any form is acting irresponsibly. In fact, the majority of active condo claimants are not severity coded 3.

Question: Why are some claims still inactive?

Answer: They may be inactive for a variety of reasons. We may be missing an insurance company’s letter of acceptance or declination; we may not have a clean list of construction dates for all foundations within the association; in some cases, an association’s foundation severity class codings are incomplete, with some foundations coded and others uncoded.

Question: Do you believe that all associations in the affected area have applied?

Answer: We cannot be certain of that…but our town records would lead us to believe that, at the current time, we’ve accounted for all condos in the affected area.

Question: Do you have both Type 1 and Type 2 claims in this condo group?

Answer: We do.

Question: Will you run out of money before you can get to all seven of these condos?

Answer: We will not with regard to all known active claims. We may before we get to all inactive claims (with the exception of inactive claims now severity coded 3 or 2). Of course, this goes for everybody in our system, and not just condos.

Question: I understand that some condo owners have written to you indicating that the association does not represent them. Is this true?

Answer: It is. In the handful of occasions where this has happened, we have forwarded that condo owner’s email or letter to the applicable condo association president for handling, with a request as to whether the association president would like to withdraw their application as a result.

Question: Have any condo association applications been withdrawn as a result of individual condo unit owners’ complaints?

Answer: No…and each association president has reaffirmed their wish to proceed with the application process, despite this issue. CFSIC does not mediate disputes among members of an association. Anyone who wants our help is either “all in”…or they are not.

Where We Are

CFSIC has information now on 1,073 claimants and potential claimants. 720 of these claimants are active Type 1 and Type 2 claimants. CFSIC has committed to construction and reimbursement costs of $34,884,979.38. CFSIC has paid to date $12,157,773.54 in remediation and reimbursement costs.

CFSIC Is In Suspension

CFSIC went into suspension on August 5. We do not know the exact date on which we will be out of suspension. We believe it will be before the end of the first week in October.

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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.

Phone: 844-763-1207

Email: cfsic@esis.com

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: cfsic@esis.com

– Email CFSIC at: info@crumblingfoundations.org

To view a video of how to complete an electronic application, go here.

To apply for a Type 1 claim, go here.

To apply for a Type 2 claim, go here.

To learn more about the program, if you are a homeowner, including application help, go here.

To learn more about the program, if you are a contractor, go here.

Michael Maglaras, Principal
Michael Maglaras & Company
Superintendent, CFSIC