Florida Judge Slams SFR Restoration Firm for Misrepresentation, Fraud in Tower Hill Case

SFR Services, a Florida restoration firm made famous by its volume of claims litigation and its charges that United Property & Casualty Insurance Co. had instructed desk adjusters to alter their estimates, now finds itself in some legal trouble of its own.

A circuit judge in Lee County found that SFR had intentionally concealed and misrepresented material facts during the appraisal process in a Fort Myers-area condominium claim dispute with Tower Hill Prime Insurance Co. The firm stuck with an estimate of $233,000 and failed to disclose a contract with a roofing company, which charged a fraction of that for the actual work, Judge Michael McHugh wrote in his May 9 order.

“SFR Services was aware that the cost of the scope of roof work was $99,000, at least as of March 20, 2020,” the judge noted. “Despite knowing this information, SFR Services continued to present an estimate generated by Elite Claims and continued to represent that the value of the roof replacements for the clubhouse and both gatehouses was more than $230,000…”

Members of an appraisal panel, assigned to resolve differences between two other estimates, said they were unaware of the lower price from Castillo Roofing when they awarded the higher amount on the claim. The judge found that SFR, as an assignee of the condominium association, had violated the concealment and misrepresentation provision of the insurance policy and was “tainted by fraud.”

McHugh ruled in favor of Tower Hill and vacated the higher appraisal award, voided part of the coverage and agreed to Tower Hill’s request for a new umpire on the appraisal.

SFR, based in Stuart, Florida, quickly asked Florida’s 6th District Court of Appeals to review the decision.

“Unfortunately we are appealing this egregious ruling,” SFR’s principal, Ricky McGraw, said in an email to Insurance Journal. “We have moved to disqualify the judge presiding over the case. Florida has made it hard for contractors that help their clients.”

SFR’s attorney, Melissa Giasi, asked the judge to disqualify himself, arguing that he was prejudiced by his concerns about McGraw’s allegedly fraudulent activity; the judge did not hold a jury trial; and he adopted a final order drafted by Tower Hill that contained numerous errors. When that motion failed, Giasi asked the appeals court to step in and prohibit McHugh’s order. The appeals judges declined.

In its answer to Tower Hill’s 2020 motion in Lee County, which asked the court to vacate the high-end appraisal award, the SFR attorney also argued that Tower Hill had “unclean hands,” had acted in bad faith and had improperly adjusted the claim amount.

Judge McHugh did not see it that way. He also pointed out that the insured, Rookery Pointe Homeowners Association, did not participate in the alleged fraud.

“In fact, the condo association, through its former president, Debbie Kiel, testified they were so concerned with the estimate provided by SFR Services, they got their own estimates which were in line with Castillo Roofing’s estimate,” the judge wrote.

McGraw and SFR Services for years have been thorns in the sides of several insurance carriers in Florida. Court records show that the firm has filed hundreds of lawsuits against insurers over AOB claims in recent years. Most famously, in early 2022 SFR charged in a federal lawsuit that United Property & Casualty had conspired with adjuster firms to systematically deny and underpay thousands of roof claims after Hurricane Irma.

The lawsuit, charging anti-racketeering law violations, purported to show copies of text messages by a desk adjuster, sent at the behest of UPC, to field adjusters directing them to avoid estimating roof damages altogether because the insurer planned to issue blanket denials.

A federal judge dismissed the suit in October, noting that a federal statute leaves it to states to regulate the business of insurance, so the federal racketeering law did not apply.

Florida regulators this year deemed UPC insolvent and have placed the company into liquidation, likely making claims suits against the insurer a long shot.

Meanwhile, SFR has made similar allegations in state court against individuals associated with the insurer. In a suit filed in Pinellas County, SFR charges that a number of adjusters, UPC officials and UPC board members engaged in a scheme to underpay claims from Hurricane Irma. The complaint cites deposition testimony from a field adjuster who said that UPC officials demanded that he remove portions of his damage estimates.

In the Lee County case, the judge said SFR was the party that engaged in misrepresentation, a judgment that has left some insurance defense attorneys with a strong sense of schadenfreude. They said that the alleged tactics by SFR have not been uncommon in the years of claims litigation against insurers, and have helped drive exorbitant defense costs.

The Rookery Pointe case began in 2019, when the condo association signed an AOB agreement with SFR. SFR contracted with Elite Claims Consulting as its public adjuster on the condos.

The next day, SFR contracted with Castillo Roofing to replace the three roofs for $99,000. SFR also directed Castillo Roofing to submit a permit application with a declared value of $233,525, something the judge said was intentionally misleading.

“Without the Castillo Roofing invoices, there was never a meaningful exchange of information,” the judge noted.