Sunday, June 12, 2011

Sinkhole insurance: 16 changes in 2011

Florida's sinkhole insurance laws are extensively revised by SB 408 (Ch. 2011-039).  Here is a summary of the changes:

(1) Statement of legislative intent.  According to the new law, technical or scientific definitions that were adopted in the 2005 legislation are clarified in SB 408 to implement and advance the Legislature’s intended reduction of sinkhole claims and disputes; and other revisions are enacted to rely on scientific or technical determinations, reduce the number and cost of disputes, and ensure that repairs are made.  This is the only provision related to retroactivity, and there may be many court decisions (and many years) before the full impact of this statement is known.

(2) Pre-coverage inspection.  An insurer may require inspection of the property before issuance of sinkhole loss coverage.

(3) Principal building limitation.  Insurers may restrict coverage for sinkhole and catastrophic ground cover collapse (CGCC) to the principal building.

(4) Definitions.  SB 408 substantially revises the definition of “structural damage” and changes several other definitions.

(5) Claim-filing deadline.  There is a new claim-filing deadline of two years from discovery.

(6) Database.  The sinkhole database is repealed.

(7) Claim inspection.  The bill modifies both the procedures for the insurer's claim inspection and the written notice to the policyholder following the insurer's initial claim inspection.

(8) Policyholder demand for testing and liability for cost.  If the insurer denies a claim without testing, the policyholder now has no more than 60 days to demand testing.  If testing is performed due to policyholder demand, the policyholder pays up front the lesser of 50% of testing costs or $2,500.  The insurer reimburses the policyholder if the insurer's testing confirms a sinkhole loss.

(9) Repairs.  (a) For a confirmed sinkhole loss or CGCC, the insured must repair damage or loss in accordance with the recommendations of the insurer's professional engineer.  (b) If the insurer's professional engineer determines that repairs cannot be completed within policy limits, the insurer must (i) pay to complete the recommended repairs or (ii) tender policy limits. (c) The policyholder must enter into a contract for building stabilization or foundation repairs within 90 days after the insurer notifies the policyholder that a sinkhole loss is confirmed (the time period is tolled for neutral evaluation).  (d) Stabilization and repairs must be completed within 12 months after entering a contract for repairs, unless there is mutual agreement or the claim is in neutral evaluation, litigation, appraisal or mediation.  (e) There is no longer a requirement of obtaining policyholder consent for an insurer to make payment directly to persons selected by the policyholder to perform land and building stabilization and foundation repairs (although lienholder written consent is still required).

(10) Rebates prohibited:  If the policyholder accepts a rebate from a contractor (person performing repairs), coverage is void and the policyholder must refund the rebate. The contractor who "offers" a rebate commits insurance fraud and third degree felony.

(11) Nonrenewal.  Modifies circumstances in which the insurer may nonrenew on the basis of filing of sinkhole claims, including the addition of a sentence that the insurer may nonrenew the policy if it pays policy limits.

(12) Reports.  Modifies the content of the report of insurer's professional engineer or geologist, to conform to other changes in law made by SB 408.  Clarifies that the presumption of correctness (in favor of the findings, opinions, and recommendations of the professional engineer and geologist) is limited to the insured’s engineer and geologist.

(13) Stabilization/repair certificate. The professional engineer who monitored repairs is required to issue a report specifying what repairs were performed and certifying that repairs have been properly performed.

(14) Clerk of courts filing.  Adds requirement to file: (a) the neutral evaluator's report (if sinkhole activity caused damage), (b) the stabilization certificate, and (c) the amount paid by the insurer.

(15) Seller's disclosure.  A policyholder-seller is required to disclose to the property buyer (prior to closing) the amount of payment received for a sinkhole loss.

(16) Neutral evaluation – There are wide-ranging revisions to the neutral evaluation process.

This summary was prepared by Perry Cone and posted at

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