CFSIC’s Financial Condition
We were informed last Friday, March 22, that the scheduled March 29 Bond Commission hearing had been cancelled. We understand that the next one is scheduled, at least on paper, for April 26.
CFSIC’s sole source of revenue is the annual $20 million in bonding proceeds afforded to it, which must be approved, each time, by the CT Bond Commission and which can then only pass to CFSIC through the CT Department of Housing. CFSIC will not begin to receive any of the proceeds from the homeowner insurance policy surcharge until April of 2020.
CFSIC has no other source of revenue by which to fulfill the commitments we are making to homeowners except the bonding allotment noted above.
As a result of the cancellation of the March 29 meeting, we’ll be making an important announcement on April 1 concerning CFSIC’s operations. That announcement will be made here within the “Latest News” section of this site. We will also provide the media with a press release providing all needed information. The Board of CFSIC is committed to clarity and transparency with all affected by the crumbling foundations natural disaster.
Where We Are
CFSIC has received, as of March 22, 534 applications for claim assistance. Of this number, 516 (or 97%) have been reviewed, analyzed, and assessed. This takes care of all claim applications filed with CFSIC from inception through March 12, 2019.
ESIS and the rest of the team are in the process of reviewing the other 3% remaining…and of course reviewing the new application flow that occurs each day.
It’s important to note that, in addition to the very careful review of each application and the upwards of 100 pages that can accompany the application, there is the complex process of reviewing contractor proposals for each claim, and the frequent need to ask contractors to revise them when they are incomplete or inadequate for purposes of the substantiation of a payment. All this takes time.
It can take a week or more in person-hours to review an application, make it active, review contractor proposals for accuracy and completeness, and place the claim in a position where the Participation Agreement can be signed by the homeowner and the Superintendent.
As of March 22, CFSIC had statutory claim reserves on its balance sheet of $69,088,008. As of January 10, CFSIC had $0 in claim reserves.
These are reserves for active Type 1 and Type 2 claimants, and also include claimants who are inactive for various reasons but where, because of their severity coding, statutory reserves have been placed on their claims in order to make certain that they are counted in our tally for when they become, as we suspect they will, active claimants.
On March 18, CFSIC’s CEO Steve Werbner and I testified before the General Obligation Bond Subcommittee concerning CFSIC’s operations. At that hearing, I indicated that I thought we would have somewhere close to $70 million in total active and inactive claim reserves by the end of April. In the intervening week since that testimony, the ESIS claim team’s diligent efforts moved the needle. We now have as much in claim reserves on our balance sheet as I projected we would have at the end of April. This is nothing but good news. We’ve identified more claimants; we know the towns they live in; the data we’re collecting, as a result, will better enable us to plan for the use of CFSIC’s limited resources.
In fact, the data we are collecting is the most accurate data that can be collected concerning the crumbling foundations natural disaster.
The concept of statutory claim reserves, in an insurance company organized such as CFSIC, is best understood not from an accounting perspective, but from the perspective of “promises made.”
As of March 22, CFSIC has made more than $69 million in promises to Connecticut homeowners and taxpayers.
When a “Denial” Is Not a Denial
We have received comments from some homeowners expressing dissatisfaction about the CFSIC claim adjustment process with specific regard to letters sent to them by their commercial homeowner insurers, which these homeowners claim are “denial letters.”
The problem is that many times these are not denial letters. These letters are sometimes letters expressing the insurer’s “reservation of rights.”
When a commercial insurer reserves its rights on a claim…it is essentially announcing to the claimant that it hasn’t made up its mind yet about the claim; that it needs more time; that it hasn’t made a decision.
It’s important to note that when you get a reservation of rights letter for a claim submitted to an insurer, the actual outcome can be different than you expect…the insurer can actually decide that it’s going to honor the claim. Not all reservation of rights letters result in a negative outcome for a homeowner.
When you get a denial letter…an actual denial…the letter will say that.
CFSIC cannot make a claim eligibility determination based on a commercial insurer’s reservation of rights. It can only do what it does with a letter either accepting or rejecting your homeowner’s insurance claim.
The insurance agent who placed your policy is your best source of information about what this importance difference is.
The Importance of the Participation Agreement
The Participation Agreement is the most important document in the CFSIC claim adjustment process.
CFSIC is a “sponsored captive” under the Connecticut captive statutes. It doesn’t have “insureds”…it has “participants.”
When a claim is made active, fully vetted, and adjusted, the Type 1 or Type 2 claimant is instructed to go to CFSIC’s website, and download and complete the applicable Participation Agreement. In that agreement, the homeowner is representing and warranting the truthfulness of what they have told us as part of the application and construction proposal processes. The Superintendent personally countersigns each Participation Agreement. This results in a two-way promise: the homeowner promises truthfulness and accuracy; the Superintendent promises to honor the claim under CFSIC’s guidelines and to pay it.
An important point with respect to condos and PUDs is that CFSIC defines an eligible “residential building” as including the space where people live as well as the foundation.
The assumption made in everything we do is that someone signing a Participation Agreement owns the foundation. This is true of PUDs. This is not true of condos.
It is for this reason that we have asked condo owners to deal through their associations, because in fact it must be the association’s president or board chair who signs the CFSIC application on behalf of the condo units applying, because of the issue cited above with respect to the actual ownership of the foundations in question.
Just as importantly…and, again, because of the ownership of the foundation itself…it would be the association’s president or board chair also signing the Participation Agreement on behalf of all condo units for which the association is applying.
We continue to work closely with condominium associations to help them through the process of applying for and receiving assistance.
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