Participation Agreement Commitments Continue
CFSIC is not currently in suspension with regard to Participation Agreement signing.
We are continuing to execute a reduced limited number of Participation Agreements that have been in line since the middle of June, in order to fulfill obligations to homeowners who have been waiting in line while we continue to closely monitor the level of our remaining cash on hand from the two bond allotments we have received.
It is important to note that CFSIC’s sole existing source of revenue is from the funds provided to us through the CT Bond Commission. The homeowners’ insurance policy surcharge that many of you have read about will not hit our books, we’re told, until June of 2020. CFSIC does not spend cash it does not have in its bank account.
It is for this reason that we are monitoring application approval activity, approval of contractor proposals, and potential Participation Agreement signings very closely on a daily basis.
All CFSIC’s operations are underway and all support staff are fully engaged. Approved Type 2 reimbursements for this fiscal year are being paid on schedule; Type 1 foundation replacement claims, where Participation Agreements have been signed, are being paid, with everything from “first shovel in the ground” work to final work preparatory to a family moving back in. We are completely operational. Cash out the door each week for claim payments now averages more than $600,000.
A Participation Agreement, once countersigned by the Superintendent, is a promise to pay a Type 1 claim, whether the work begins next week or three years from now, and our position is clear: when CFSIC’s cash balance reaches a point where there is not a reasonable “cushion” between the value of outstanding Participation Agreement commitments and our cash on hand…we stop signing Participation Agreements. This may occur soon.
The definition of the term “reasonable cushion” includes the requirement that we maintain a minimum unencumbered and uncommitted statutory capital and surplus in our bank account in order to maintain our license as an insurance company. We cannot serve the public without an insurance license. This definition also includes the cash needed to continue to pay the service providers (if, for example, we go into suspension) who provide day-to-day claims management services; who answer the phones; who run interference with contractor proposals; who deal with the very building blocks of each and every claim.
We are in close communication with the Governor’s Office, the Department of Housing, and the Office of Policy and Management. Everyone we’ve spoken with in state government understands our cash position and the speed with which we are approving applications, remediating foundations, and reimbursing for foundations already done. Our positive and collaborative discussions with leadership in state government keep both sides informed of all activities.
Simply put, CFSIC has established a successful infrastructure to adjust and pay crumbling foundation claims; similarly, our claimants now know how to file a claim efficiently and quickly, including the uploading of more than an average of 100 pages of documentation associated with each and every claim. Both sides of this process now work together efficiently and, most importantly, quickly.
As part of the business plan provided to the CT Insurance Department when we first applied for our license, we provided an actuarial study assessing the “run rate” on the average application and claim payment process. We estimated that the time a claim would take to adjust and put in line for payment would take more than a month per claim. We were wrong. CFSIC has become, over time, an efficient claims management and adjustment company. Homeowners now completely understand what they must do to file a claim and support the evidence of their request for payment. We have reduced the time originally estimated to approve and put claims in line for payment by more than half, which results in a more rapid approval and payment rate…and an equally rapid reduction in CFSIC’s cash on hand has occurred accordingly.
We could be slowing this process down. But what this would mean is no help on the way for homeowners who, every time it rains, pump their basements out because they are severity coded 3 and daylight shows through the cracks in their basement. It would also mean no help on the way for towns severely impacted by a property tax crisis. Every home we restore does two things: we keep a family in that community and in that home, and that family starts paying their fair share of the tax they owe.
CFSIC has been judged to be tax-exempt under Section 501(c)(3) of the Internal Revenue Code. It has an independent voting volunteer board of citizens who donate their time. They expect nothing in return except recognition for their service to the public. We have four elected officials who are non-voting ex-officio board members, who fully participate in our process. The board conducts itself in a way which is consistent with the stated mission on our website and our general service commitment to the public. CFSIC is a private corporation and not a branch of state government. Our first duty and our only duty is to the claimants we serve.
To the extent we decide to go into temporary suspension for the signing of new Participation Agreements, we will endeavor to give our existing and potential claimants as much notice as we can, and we will be as clear as we can about the length of any suspension announced. As a tax-exempt, we have an affirmative duty to be transparent, truthful, and fair in our dealings.
We have received dozens of phone calls and emails from claimants over the last two weeks who are on the cusp of signing leases to rent houses and apartments in preparation for work on their foundations to commence, and as a result for their lives to be turned upside down. We know that claimants have significant personal concerns about children returning to school, commuting longer distances to get to work, and other personal and family matters that occur with every foundation replacement.
Then there is the issue of scheduling contractor work. Some contractors are now ready to begin within the next ten days.
These kinds of thoughts are foremost in our minds as we do CFSIC’s work every day. Our board is committed to telling you what we know, when we know it, as a result.
Where We Are
Over the past week, CFSIC’s claims adjustment team has rapidly assessed the condominium and PUD situation in response to Governor Lamont’s signing of expanded crumbling foundations legislation on July 9.
The team has identified as much as $12 million of new statutory claim liabilities that will be added to CFSIC’s balance sheet by July 31. CFSIC’s financial statements for the period ending July 31 will show roughly $106 million in established claim liabilities, and a greater than $60 million statutory loss. CFSIC will have been open for less then seven months.
As of Friday July 19, CFSIC had received 755 applications, of which we have identified 664 Type 1 claims and 91 Type 2. Active claimants under the Type 1 category equal 444 and under the Type 2 category 68. In less than seven months, CFSIC has paid $9 million in foundation replacement and reimbursement claims, and has made contractual commitments for the payment of more than $24 million in claim activity through the signing of Participation Agreements with homeowners for Type 1 and Type 2 claims.
CFSIC’s audit is underway. We do not expect the auditors to conclude their work until most probably the end of September. Meanwhile, we are at work on an annual report summarizing where the claims exist, town by town, and providing additional statistical information about the depth and breadth of the crisis, and CFSIC’s response. That annual report will summarize operations through August…which means it will include statistical information from January 10, 2019 through August 31, 2019.
Sunset of CFSIC Foundation Re-examination Program
The CFSIC-sponsored foundation re-examination program will sunset on July 31, 2019. Work being undertaken now or requested now up to July 31 will continue to be paid for by CFSIC as part of its outreach to homeowners who had engineer visual examinations conducted, at some point in the past, but where no severity class code had been applied.
As mentioned above, until July 31 we will continue to honor and pay for re-examinations done by the engineering firm found in Section 12 of the “For Homeowners” section of this site.
Given that all CT-licensed home inspectors are now educated in the importance of severity-coding foundations, and all 47 CFSIC-certified home inspectors are appropriately trained, there is no reason for us to continue the re-examination program.
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: firstname.lastname@example.org
– Email CFSIC at: email@example.com
Michael Maglaras, Principal
Michael Maglaras & Company