Insurance companies are not paying government claims

Almost two years after Hurricane María, the Department of Housing, the Public Buildings Authority (PBA), the Department of Transportation and Public Works (DTOP, Spanish acronym), the Tren Urbano (Urban Train) and even the University of Puerto Rico (UPR) keep dozens of facilities closed or waiting for repairs because they have not been paid their insurance claims, according to an analysis by El Nuevo Día.

Some agencies heads said that the wait has been so long that, in some cases, agencies are considering suing insurance companies and in others, insurers have not even made an offer. And in the worst cases, the claim was settled for less than half of the insured loss total.

While more than a hundred government claims - according to official figures – pile up on the desks of adjusters and attorneys, facilities such as the Justice Department in Miramar, schools in Barranquitas and Las Marías, and government centers in Naguabo and Corozal, among others, have not reopened after María.

In other places like the Tren Urbano, stairs and elevators remain out of service and multiple roads lack signs and there still traffic lights to repair.

"We are seriously evaluating the possibility of suing insurance companies," said Housing secretary Fernando Gil Enseñat, who said Mapfre's delay in paying claims affects the agency twice.

"We have the Miramar building where the Justice Department was, perimeter fences in many schools that fell down or were destroyed by trees... I have 14 properties closed, including four schools that require new construction or total rebuilding," explained PBA Executive Director Melitza López Pimentel.

López Pimentel said that Public Buildings claimed $127 million in damage from Triple-S Property. The insurance policy covered $90 million.

Gil Enseñat and López Pimentel are two of at least a dozen agencies heads fighting to recover part or all of the costs associated with hurricane-related damage during the 2017 hurricane season. Agencies, public corporations, and municipalities are required by law or federal regulations to buy property and casualty insurance, especially if then, they ask for federal aid.

According to sources, when it comes to paying claims, government agencies are "last on the list" of insurers, and they now find themselves without alternatives. Despite not being paid, agencies were forced to renew their insurance paying up to three times the previous premium and even with the same insurer because there are no others interested in covering that risk.

Those who received the lowest amount

De ese universo, 1,456 reclamaciones -o seis de cada 10 reclamaciones- cerraron sin que las aseguradoras pagaran un centavo. Otras 711 reclamaciones cerraron con pagos que totalizaron  $658 millones.

As of last June, data from the Office of the Commissioner of Insurance (OCS, Spanish acronym) indicate that agencies, corporations, and municipalities had filed 2,290 claims associated with Hurricane María for losses totaling $1.198 billion. Of those, 1,456 claims - or six out of 10 - were closed without insurers paying a cent. Another 711 claims were closed with payments totaling $658 million.

According to data from the OCS, in total, home and vehicle owners, businesses and government agencies claimed $8.248 billion from insurers as a result of Hurricane María.

In a recent interview, Insurance Commissioner Javier Rivera Ríos said the government is among the list of largest claims. Of the total losses claimed, the government received only 55 percent while businesses received 76 percent and homeowners got 93 percent.

The Treasury Department Public Insurance Area (ASP, Spanish acronym) hires producers to manage the insurance of public agencies and corporations. Municipalities, meanwhile, hire these professionals directly.

Last week, El Nuevo Día revealed that over the years, partisan political considerations, rather than the expertise to address complex risks, was decisive in the process to hire insurance producers for government agencies. Sources in the insurance sector argue that agencies have not been able to recover what they lost because of the limited experience and capacity of producers who worked with several government entities.

Since  ASP would be at the core of the insurance hiring process, El Nuevo Día has been asking the agency and former secretaries Raúl Maldonado and Teresita Fuentes Marimón a detail of the insurance claims filed after hurricanes Irma and María for almost two years but never received a response. The Treasury secretary Francisco Parés Alicea promised to find that information.

The Housing Department

"It's not just the visible damage, there's also structural and foundation-level damage to buildings. It's not about changing a door," said Gil Enseñat.

Housing has claimed some $700 million from Mapfre for damage to some 330 public housing projects and 70 other properties, including the agency´s headquarters in Hato Rey.

The Housing Department and Public Housing Administration's insurance have the biggest insurance policy in the government. The policy covers about $1.7 billion in insured assets.

Gil Enseñat listed some of the properties affected. He mentioned that there are buildings in the Luis Lloréns Torres housing project with foundations destroyed as a result of the cyclone. Virtually all the roofs of the multi-family buildings,that are home to thousands of vulnerable people, were turned into colanders, with water leaking through walls and electrical pipes.

"There have been residences where the land caved in," said Gil Enseñat, adding that the Housing regional office in Humacao was destroyed and the Dos Ríos and Alturas de Ciales housing projects were declared a total loss.

According to the official, the most significant risk to Housing could have worse effects than an unreplaced door.

"Not only are the lives of the residents at stake, but PHA (Public Housing Administrator) category may also be affected," the official said, recalling that the Puerto Rico´s housing program for the most vulnerable is the largest in the United States.

Gil Enseñat explained that since the Housing Department has not been able to repair all the damage caused by the 2017 disaster, this could affect the Public Housing Administration category for this program at the federal level and that could mean less federal funds or penalties to pay.

The role of the public adjuster

"There is a problem of attitude toward our public adjuster," Gil Enseñat added, pointing out that Mapfre's actions denote bad faith with the agency's claim.

Mapfre indicated that, in accordance with its policy, they would not comment on claims that are "actively being worked on."

Housing Department's public adjuster Scott Favre, an engineer whose Mississippi-based firm received almost 50 government clients after Hurricanes Irma and María. Most contracts in favor of Scott M. Favre, Public Adjuster LLC have no defined amount because the payment will be a percentage of the payment made by the insurer, but in agreements with specific compensation, from 2017 through the current fiscal year, Favre got contracts for $27.2 million.

El Nuevo Día has already reported that the OCS received several complaints against Favre for alleged fraud in the filing of claims. The OCS told this newspaper that the investigation against the public adjuster has not concluded.

In very simple terms, a public adjuster examines the effects of a catastrophic event on a structure to determine how much money is needed to restore it to its pre-catastrophic condition. Generally, the public adjuster works on behalf of the insured.

As for Housing, Gil Enseñat said Favre would earn a 5 percent commission if he can recover more than $300 million from Mapfre for the agency.

However, it seems, that problems with government claims do not necessarily respond to public adjusters' estimates.

Dozens of closed structures

In PBA, inspections were done with internal resources - the public corporation has engineers, electricians, and other construction professionals - and in many of the claims, parties even agree, but Triple-S still has not paid them a cent, López Pimentel explained.

For López Pimentel, although there are indeed dozens of schools built 30 or 40 years ago, the school inventory under the PBA includes recent constructions, as many of these facilities were built with loans (bonds) obtained from the municipal market.

According to López Pimentel, once the facilities were declared unusable, PBA had to help transfer students to other schools and move certain operations of several agencies, including the Puerto Rico Police and the Office of Court Administration. As for PBA, agencies have to pay the rent of these facilities even if they do not use them because these payments are the guarantee of that public corporation bonds.

López Pimentel, who has been recently appointed by governor Wanda Vázquez to PBA, expects  Triple-S to pay the entire policy: $90 million.

To questions from El Nuevo Día, José del Amo, president of Triple-S Propiedad answered that as of June 30, the insurer had paid nearly $700 million in claims related to the hurricanes of 2017.

Del Amo said that pending claims, including some in the public sector, are highly “voluminous and complex.”

"We continue to focus on working closely with all parties involved to achieve a fair resolution consistent with the values and conditions outlined in each policy. That has always been Triple-S Property's commitment," the executive said.

If Triple-S Property paid the entire policy to PBA, the agency would still have to cover another $37 million in losses. According to López Pimentel, the gap has been gradually filled with budget savings or federal funds, a scenario similar to that in Housing.

The UPR, meanwhile, settled its claim with Real Legacy before the imminent liquidation of the insurer by the OCS. And the Integrated Transit Authority (ATI), barely got $1.5 million of a claim totaling $175 million with that insurer.

"Highways has not received a cent," said the Department of Transportation and Public Works (DTOP), whose insurer has been Mapfre for the last 10 years. The DTOP claims $47.9 million in damage.