Insurance Bill to Aim at Sinkhole Claims

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An effort to reduce costs for property insurers set to emerge in the state Senate will closely mirror legislation vetoed earlier this year by Gov. Charlie Crist, but with a stronger push to reduce claims for sinkhole damage.

The proposal, still being drafted, will likely come up in the Senate Banking and Insurance Committee meeting on Jan. 12, said the committee’s chairman, Sen. Garrett Richter. It will take on many of the industry-sought items that were included in last session’s SB 2044 that was vetoed, including a time limit on filing claims after a hurricane, and a provision that will make it easier for companies to navigate the rate approval process in some cases.

“Last session’s 2044 was a collaborative effort to …address some of the cost drivers – fraud and other issues,” Richter said Thursday. “We will be hearing a bill of similar nature.”

But Richter confirmed that this year’s effort will also include provisions aimed at reducing what insurers are paying out for sinkhole claims that the industry says aren’t, in many cases, legitimate.

There isn’t suddenly a rash of holes opening up in the ground, said Sam Miller, spokesman for the Florida Insurance Council, which is supporting the legislation.

“We don’t have a sinkhole crisis, we have a sinkhole insurance crisis in Pasco and Hernando counties, and some other places,” said Miller.

The Banking and Insurance Committee is expected to release this week or next week an interim study looking at the state's sinkhole insurance landscape. With nearly $2 billion in claims paid out between 2006 and 2010, sinkhole payouts have reached the level of a small hurricane.

Miller said that even though the state hasn’t seen a major hurricane since 2005, companies are concerned about the sinkhole costs. Industry officials say they’re seeing large numbers of claims for foundation cracks attributed to sinkholes that may not be.

“If you have a crack, we can’t prove it’s not a sinkhole, so if you are so inclined you can get tens of thousands of dollars,” even if it’s not the cause, Miller said.

Richter confirmed Thursday that language seeking to make it harder to be compensated for a fraudulent sinkhole claim would be included in the bill, but said the measure remained a work in progress.

“At a minimum, the Legislature must enact an appropriate definition of structural damage from sinkholes defining what is and what is not covered by an insurance policy,” Miller said.

With Crist leaving office, the proposal is generally thought to be much more likely to become law.

Richter noted that incoming Gov. Rick Scott had a property insurance proposal during the campaign that closely tracks what lawmakers and the industry are seeking to do.

“I expect the (new) governor’s office to be very supportive,” said Richter, R-Naples.

The measure is also expected to cut to two or three years the period after a hurricane during which a homeowner can file a claim related to the storm. The current limit is five years.

The proposal also will seek some additional regulations of public adjusters. Miller said it was likely to be the same limits on the public adjusting industry included in the bill Crist vetoed, which was supported by the Florida Association of Public Insurance Adjusters.

Insurers have claimed for a few years that public adjusters have encouraged people to file claims that are in many cases bordering on fraudulent several years after a storm.

The public adjusters association’s executive director, Melissa Edwards, said Thursday that the group hadn’t seen any drafts of the coming legislation, but confirmed that it was supportive of the restrictions on public adjusters included in last year’s bill in an effort to increase the professionalism of the industry.

Another provision would seek to reduce fraud by limiting cash up front to policy holders until a contract for repairs can be produced.

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