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.

Property reform: two steps forward, two ½ steps back

Property insurance bills moved forward, although not unscathed, during week three of the 2011 Florida legislative session. Here is a summary of last week’s activity:

• Big Property Bill/Sinkholes. SB 408 was voted out of the Senate Budget Committee, with some weakening. The Committee approved amendments sponsored by Sen. Mike Fasano that: (a) would repeal “use and file” for residential homeowners filings; and (b) watered down the insurance industry's attempt to bring replacement cost value (RCV) coverage more in line with national norms. The Senate bill has now been the subject of five committee meetings (two in Budget, three in Banking and Insurance), plus workshops.

Sinkhole Summit 1.5

Last Friday, Sinkhole Summit 1.5 included several interesting panels, including one focusing on public policy aspects of the sinkhole insurance quandry.  The policy panel was diverse and consisted of Perry Cone (an insurance regulatory and corporate attorney with GrayRobinson, P.A.), David Salmon (a carrier defense attorney with Groelle & Salmon, P.A.), Ken Thomas (a policyholder attorney with Marshall Thomas Burnett), Tom Diana (an insurance claims executive and attorney with Homewise Insurance Co.), and panel facilitator Rebecca Leisure (with ROL Insurance Consulting).  Perry Cone spoke from his perspective as co-leader of the Florida insurance industry during 2005 when the Florida legislature first enacted landmark changes intended to reform the sinkhole insurance laws.

Sinkhole presumption: FSC Arguments in Warfel

The Florida Supreme Court today heard argument in Universal Insurance Co. v. Warfel, which involves the significant issue of whether the findings and conclusions of the insurance company's experts are presumed correct when litigating a sinkhole claim.  This case is particularly unusual because the jury actually found that damage to the insured's home was not caused by a sinkhole, in part due to presumption language added by 2005 legislative reforms.

The decision is likely to turn on whether the Florida Supreme Court finds any implicit legislative intent to create a litigation presumption based on public or social policy (as Universal argued), or whether the presumption is limited to the claims investigation process (as Warfel argued).  Constitutional retroactivity also could come into play.

Below, after a summary of the case, there are some unofficial excerpts from the argument.

Sinkholes - start from scratch, says former Senator Locke Burt to the Senate

Insurance executive and former Senator Locke Burt made a powerful presentation about sinkholes to a Florida Senate committee this week.  Burt recommended that the Legislature rewrite the sinkhole insurance laws from scratch, rather than just tinkering and tweaking.

2010 in quotes - Sinkhole Insurance version

"'Then another house and another house,' said the 67-year-old retiree as a pump in her yard strained to send a stabilizing concoction into limerock voids and sand under her foundation. 'Then it started coming over on our side ...'"  From Ocala.com, August 9, 2010.  Available at this link:
Gambling with sinkhole coverage - After change in insurance law, more property owners are going without sinkhole coverage.

"Volcanoes and earthquakes get all the attention. But what about sinkholes?"  From the Wall Street Journal, April 19, 2010.  Available at this link:
This Town Is Going Down, and Strawberries Share the Blame

Senate publishes Sinkhole Report-2011

The staff of the Senate Banking and Insurance Committee has released its long-awaited study and report on the sinkhole insurance laws.  The report is on the Senate website at this link:  Issues Relating to Sinkhole Insurance, Committee on Banking and Insurance, Dec. 2010.