HB 0217

CS

CHAMBER ACTION

1	The Insurance Committee recommends the following:
2
3	Council/Committee Substitute
4	Remove the entire bill and insert:
5	A bill to be entitled
6	An act relating to sinkhole insurance; providing a short
7	title; revising references to certain engineers; amending
8	s. 627.707, F.S.; authorizing insurers to make direct
9	payment for certain repairs; excluding insurers from
10	liability for repairs under certain circumstances;
11	revising the requirements for reimbursement of the insurer
12	with respect to certain claims; reducing the amount a
13	policyholder is required to reimburse an insurer;
14	requiring the Department of Environmental Protection to
15	maintain lists of qualified professionals to conduct
16	certain tests; requiring insurers to obtain such lists and
17	to engage with such professionals for certain tests;
18	authorizing the department to adopt rules; creating s.
19	627.7071, F.S.; providing legislative intent for the
20	process of filing sinkhole claims; amending s. 627.7072,
21	F.S.; revising testing standards for sinkholes; requiring
22	a report upon conclusion of testing; requiring retention
23	of certain information for a specified period; authorizing
24	the department to adopt rules for the implementation of
25	sinkhole testing and reporting; amending s. 627.7073,
26	F.S.; revising a presumption relating to the findings,
27	opinions, and recommendations in sinkhole reports;
28	creating s. 627.7074, F.S.; providing for an alternative
29	procedure for the resolution of disputed sinkhole
30	insurance claims which is optional, nonbinding, and
31	informal; providing definitions; requiring the Department
32	of Financial Services to certify and maintain a list of
33	neutral evaluators, prepare a consumer information
34	pamphlet explaining the alternative procedure, and adopt
35	rules for the implementation of an alternative procedure;
36	providing for payment of costs and attorney's fees;
37	preserving access to courts and authorizing judicial
38	review of neutral evaluation recommendations; providing an
39	effective date.
40
41	Be It Enacted by the Legislature of the State of Florida:
42
43	Section 1.  This act may be cited as the "Sinkhole
44	Insurance Relief Act."
45	Section 2.  Subsections (2), (3), (5), (6), (7), and (9) of
46	section 627.707, Florida Statutes, are amended, and subsection
47	(10) is added to that section, to read:
48	627.707  Standards for investigation of sinkhole claims by
49	insurers; nonrenewals.--Upon receipt of a claim for a sinkhole
50	loss, an insurer must meet the following standards in
51	investigating a claim:
52	(2)  Following the insurer's initial inspection, the
53	insurer shall engage a professional an engineer or a
54	professional geologist, chosen by the department in accordance
55	with subsection (10), to conduct testing as provided in s.
56	627.7072 to determine the cause of the loss within a reasonable
57	professional probability and issue a report as provided in s.
58	627.7073, if:
59	(a)  The insurer is unable to identify a valid cause of the
60	damage or discovers damage to the structure which is consistent
61	with sinkhole loss; or
62	(b)  The policyholder demands testing in accordance with
63	this section or s. 627.7072.
64	(3)  Following the initial inspection of the insured
65	premises, the insurer shall provide written notice to the
66	policyholder disclosing the following information:
67	(a)  What the insurer has determined to be the cause of
68	damage, if the insurer has made such a determination.
69	(b)  A statement of the circumstances under which the
70	insurer is required to engage a professional an engineer or a
71	professional geologist to verify or eliminate sinkhole loss and
72	to engage a professional an engineer to make recommendations
73	regarding land and building stabilization and foundation repair.
74	(c)  A statement regarding the right of the policyholder to
75	request testing by a professional an engineer or a professional
76	geologist and the circumstances under which the policyholder may
77	demand certain testing.
78	(5)(a)  Subject to paragraph (b), if a sinkhole loss is
79	verified, the insurer shall pay to stabilize the land and
80	building and repair the foundation in accordance with the
81	recommendations of the professional engineer as provided under
82	s. 627.7073, and in consultation with the policyholder, subject
83	to the coverage and terms of the policy. The insurer shall pay
84	for other repairs to the structure and contents in accordance
85	with the terms of the policy.
86	(b)  The insurer may limit its payment to the actual cash
87	value of the sinkhole loss, not including underpinning or
88	grouting or any other repair technique performed below the
89	existing foundation of the building, until the policyholder
90	enters into a contract for the performance of building
91	stabilization or foundation repairs. After the policyholder
92	enters into the contract, the insurer shall pay the amounts
93	necessary to begin and perform such repairs as the work is
94	performed and the expenses are incurred. The insurer may not
95	require the policyholder to advance payment for such repairs. If
96	repair covered by a personal lines residential property
97	insurance policy has begun and the professional engineer
98	selected or approved by the insurer determines that the repair
99	cannot be completed within the policy limits, the insurer must
100	either complete the professional engineer's recommended repair
101	or tender the policy limits to the policyholder without a
102	reduction for the repair expenses incurred. Upon written
103	approval of the policyholder obtained by the insurer after the
104	completion of the stabilization and foundation repairs, the
105	insurer may make payment directly to the persons selected by the
106	policyholder to perform the land and building stabilization and
107	foundation repairs. If the direct payment is made with the
108	written approval of the policyholder obtained after the
109	completion of the stabilization and repairs, the insurer has no
110	liability for the work performed unless it agrees to such
111	liability in writing. The insurer must make direct payment for
112	stabilization and repairs, based upon the policyholder's written
113	approval, within 30 days after repair completion, unless a
114	contract between the policyholder and repair person specifies
115	otherwise. However, an insurer may not be required to make such
116	direct payment sooner than within 15 days after repair
117	completion.
118	(6)  Except as provided in subsection (7), the fees and
119	costs of the professional engineer or the professional geologist
120	shall be paid by the insurer.
121	(7)  If the insurer obtains, pursuant to s. 627.7073,
122	written certification that there is no sinkhole loss or that the
123	cause of the damage was not sinkhole activity, and if the
124	policyholder has submitted the sinkhole claim without good faith
125	grounds for submitting such claim, the policyholder shall
126	reimburse the insurer for 50 percent of the actual costs of the
127	analyses and services provided under ss. 627.7072(4) and
128	627.7073; however, a policyholder is not required to reimburse
129	an insurer more than $1,000 $2,500 with respect to any claim. A
130	policyholder is required to pay reimbursement under this
131	subsection only if the insurer, prior to ordering the analysis
132	under s. 627.7072, informs the policyholder in writing of the
133	policyholder's potential liability for reimbursement and gives
134	the policyholder the opportunity to withdraw the claim.
135	(9)  The insurer may engage a professional structural
136	engineer to make recommendations as to the repair of the
137	structure.
138	(10)  The department shall maintain a list of approved
139	professional engineers and professional geologists who are
140	qualified to conduct testing as provided in s. 627.7072. When an
141	insurer is required to engage a professional engineer or
142	professional geologist under this section, the insurer shall
143	contact the department's Division of Consumer Services to obtain
144	the name of an approved individual or firm that the insurer may
145	engage. The department may adopt rules to implement this
146	subsection.
147	Section 3.  Section 627.7071, Florida Statues, is created
148	to read:
149	627.7071  Legislative intent.--It is the intent of the
150	Legislature that the following process be used when a sinkhole
151	claim is filed:
152	(1)  The insurer shall inspect the claim.
153	(2)  If the insurer is unable to determine a valid cause of
154	the damage or discovers damage to the structure consistent with
155	a sinkhole loss or if demanded by the policyholder, the insurer
156	shall engage in phase I testing, as set forth in s. 627.7072(3).
157	(3)  If phase I testing is inconclusive as to the cause of
158	the damage or if demanded by the policyholder, the insurer shall
159	perform phase II testing, as set forth in s. 627.7072(4).
160	(4)  If the policyholder and the insurer are unable to
161	agree on the cause of the damage or other aspects of the
162	sinkhole claim, the policyholder and the insurer may take part
163	in neutral evaluation under s. 627.7074.
164	Section 4.  Subsection (1) of section 627.7072, Florida
165	Statutes, is amended, and subsections (3), (4), (5), and (6) are
166	added to that section, to read:
167	627.7072  Testing standards for sinkholes.--
168	(1)  The professional engineer and professional geologist
169	shall perform such tests as sufficient, in their professional
170	opinion, to determine the presence or absence of sinkhole loss
171	or other cause of damage within reasonable professional
172	probability and for the professional engineer to make
173	recommendations regarding necessary building stabilization and
174	foundation repair.
175	(3)(a)  All of the following may be performed in the
176	initial phase of testing, referred to as phase I testing, by or
177	under the supervision of the professional engineer or
178	professional geologist, as appropriate:
179	1.  Identification and location of all reasonably
180	observable damage.
181	2.  A geophysical survey such as a ground-penetrating radar
182	(GPR) test, an electrical resistivity test, or other appropriate
183	geophysical method.
184	3.  Hand auger boring and push penetrometer testing in two
185	or more locations around the foundation of the structure to
186	determine the composition and relative strength of the nearby
187	surface soils. The hand auger boring must penetrate to 10 feet,
188	and the push penetrometer must penetrate to at least 4 feet.
189	Laboratory tests, including, but not limited to, moisture
190	content, organic content for probable organic-rich soils, and
191	Attenberg limits data for clays, must be conducted on any
192	potentially deleterious soils obtained in the hand auger borings
193	to document a proximal cause for damage.
194	4.  The excavation of one or more test pits to determine to
195	the extent possible the thickness, bearing depth, and type of
196	foundation system used in the construction.
197	5.  Preparation of a site map showing damage locations,
198	documentation of representative damage through the use of
199	photographs taken at the time of initial and subsequent site
200	reconnaissance and field testing under this section, and a
201	written description of the nature of each damage feature.
202	6.  A floor slab elevation map.
203	(b)  Phase I testing may include other tests the
204	professional engineer and professional geologist deem to be
205	practicable and appropriate to identify the cause of distress to
206	the property, but may not include the type of tests included
207	under phase II.
208	(4)(a)  If testing performed under subsection (3) is
209	inconclusive as to the determination of sinkhole loss or reveals
210	damage other than that related to a sinkhole, in the opinion of
211	either the professional engineer or professional geologist, or
212	both, or if additional testing under this section is demanded by
213	the policyholder in writing within 60 days after the receipt of
214	the phase I testing results, the following additional tests,
215	referred to as phase II testing, shall be performed by or under
216	the supervision of the professional engineer or professional
217	geologist:
218	1.  A floor elevation survey or study to determine any
219	variances in the floor elevation.
220	2.  At least two invasive penetration test borings,
221	consisting of standard penetration tests, to determine the
222	composition and properties of the subsurface geologic materials
223	surrounding the structure. Cone penetrometer tests may be used
224	to discover the relative consistency of subsurface conditions.
225	3.  Laboratory analyses of representative samples of
226	potentially problematic materials found within the upper 20 feet
227	of soil to determine if these materials may have contributed to
228	the damage.
229	(b)  Phase II testing may include other tests the
230	professional engineer and professional geologist deem to be
231	appropriate.
232	(5)  Upon conclusion of testing required by this section,
233	the person conducting the tests must provide a written report to
234	the insurer and policyholder. All relative testing data, logs,
235	error reports, and similar information, regardless of whether
236	the professional engineer or professional geologist finds the
237	information to be relevant, shall be retained by the
238	professional engineer or professional geologist for at least 2
239	years from the date of the resolution of the claim.
240	(6)  The Department of Environmental Protection may adopt
241	rules to implement this section.
242	Section 5.  Subsection (1) of section 627.7073, Florida
243	Statutes, is amended to read:
244	627.7073  Sinkhole reports.--
245	(1)  Upon completion of testing as provided in s. 627.7072,
246	the professional engineer and professional geologist shall issue
247	a report and certification to the insurer and the policyholder
248	as provided in this section.
249	(a)  Sinkhole loss is verified if, based upon tests
250	performed in accordance with s. 627.7072, a professional an
251	engineer and a professional geologist issue a written report and
252	certification stating:
253	1.  That the cause of the actual physical and structural
254	damage is sinkhole activity within a reasonable professional
255	probability.
256	2.  That the analyses conducted were of sufficient scope to
257	identify sinkhole activity as the cause of damage within a
258	reasonable professional probability.
259	3.  A description of the tests performed.
260	4.  A recommendation by the professional engineer of
261	methods for stabilizing the land and building and for making
262	repairs to the foundation.
263	(b)  If sinkhole activity is eliminated as the cause of
264	damage to the structure, the professional engineer and
265	professional geologist shall issue a written report and
266	certification to the policyholder and the insurer stating:
267	1.  That the cause of the damage is not sinkhole activity
268	within a reasonable professional probability.
269	2.  That the analyses and tests conducted were of
270	sufficient scope to eliminate sinkhole activity as the cause of
271	damage within a reasonable professional probability.
272	3.  A statement of the cause of the damage within a
273	reasonable professional probability.
274	4.  A description of the tests performed.
275	(c)  The respective findings, opinions, and recommendations
276	of the professional engineer and professional geologist as to
277	the cause of distress to the property verification or
278	elimination of a sinkhole loss and the findings, opinions, and
279	recommendations of the professional engineer as to land and
280	building stabilization and foundation repair are conclusive,
281	unless contrary findings and conclusions are proven by clear and
282	convincing evidence shall be presumed correct.
283	Section 6.  Section 627.7074, Florida Statutes, is created
284	to read:
285	627.7074  Alternative procedure for resolution of disputed
286	sinkhole insurance claims.--
287	(1)  As used in this section:
288	(a)  "Neutral evaluation" means the alternative dispute
289	resolution provided for in this section.
290	(b)  "Neutral evaluator" means an professional engineer or
291	a professional geologist who has completed a course of study in
292	alternative dispute resolution designed or approved by the
293	department for use in the neutral evaluation process, who is
294	determined to be fair and impartial, and who is attempting to
295	resolve the dispute or claim under this section.
296	(c)  "Department" means the Department of Financial
297	Services.
298	(2)  The department shall certify and maintain a list of
299	persons who are neutral evaluators.
300	(3)  Following the receipt of the report provided under s.
301	627.7073 or the denial of a claim for a sinkhole loss, the
302	insurer shall notify the policyholder of his or her right to
303	participate in the neutral evaluation program under this
304	section. Neutral evaluation supersedes the alternative dispute
305	resolution process under s. 627.7015. The department shall
306	prepare a consumer information pamphlet for distribution by the
307	insurer to policyholders. The pamphlet shall clearly describe
308	the neutral evaluation process and include directions and forms
309	necessary for the policyholder to request a neutral evaluation.
310	(4)  Neutral evaluation is optional and nonbinding. Either
311	the policyholder or the insurer may decline to participate. A
312	request for neutral evaluation shall be filed with the
313	department by the policyholder or the insurer on a form approved
314	by the department. The request for neutral evaluation must state
315	the reason for the request and must include an explanation of
316	all the issues in dispute at the time of the request. Filing a
317	request for neutral evaluation tolls the applicable time
318	requirements for filing suit for a period of 60 days following
319	the conclusion of the neutral evaluation process or the time
320	prescribed in s. 95.11, whichever is later.
321	(5)  Neutral evaluation shall be conducted as an informal
322	process in which formal rules of evidence and procedure need not
323	be observed. A party to neutral evaluation is not required to
324	attend neutral evaluation if a representative of the party
325	attends and has the authority to make a binding decision on
326	behalf of the party. All parties shall participate in the
327	evaluation in good faith.
328	(6)  The insurer shall pay the costs associated with the
329	neutral evaluation.
330	(7)  Upon receipt of a request for neutral evaluation, the
331	department shall refer the request to a neutral evaluator. The
332	neutral evaluator shall notify the policyholder and the insurer
333	of the date, time, and place of the neutral evaluation
334	conference. The conference may be held by telephone, if feasible
335	and desirable. The neutral evaluation conference shall be held
336	within 45 days after receipt of the request by the department.
337	(8)  The department shall adopt rules of procedure for the
338	neutral evaluation process.
339	(9)  For policyholders not represented by an attorney, a
340	consumer affairs specialist of the department or an employee
341	designated as the primary contact for consumers on issues
342	relating to sinkholes under s. 20.121 shall be available for
343	consultation to the extent that he or she may lawfully do so.
344	(10)  Disclosures and information divulged in the neutral
345	evaluation process are not admissible in any subsequent action
346	or proceeding relating to the claim or to the cause of action
347	giving rise to the claim, except as provided in subsection (13).
348	(11)  Any court proceeding related to the subject matter of
349	the neutral evaluation shall be stayed pending completion of the
350	neutral evaluation.
351	(12)  For matters that are not resolved by the parties at
352	the conclusion of the neutral evaluation, the neutral evaluator
353	shall prepare a report stating that in his or her opinion the
354	sinkhole loss has been verified or eliminated and, if verified,
355	the need for and estimated costs of stabilizing the land and any
356	covered structures or buildings and other appropriate
357	remediation or structural repairs. The evaluator's report shall
358	be sent to all parties in attendance at the neutral evaluation
359	and to the department.
360	(13)  The recommendation of the neutral evaluator is not
361	binding on any party and the parties retain access to courts.
362	The neutral evaluator's written recommendation is admissible in
363	any subsequent action or proceeding relating to the claim or to
364	the cause of action giving rise to the claim only for purposes
365	of determining the award of attorney's fees.
366	(14)  If the policyholder declines to participate in
367	neutral evaluation requested by the insurer or declines to
368	resolve the matter in accordance with the recommendation of the
369	neutral evaluator pursuant to this section, the insurer shall
370	not be liable for attorney's fees under s. 627.428 or other
371	provisions of the insurance code or for extra contractual
372	damages related to a claim for a sinkhole loss.
373	(15)  A party may seek judicial review of the
374	recommendation of the neutral evaluator to determine whether the
375	recommendation is reasonable. A recommendation is reasonable
376	unless it was procured by corruption, fraud, or other undue
377	means; there was evident partiality by the neutral evaluator or
378	misconduct prejudicing the rights of any party; or the neutral
379	evaluator exceeded the authority and power granted by this
380	subsection. If the court declares the recommendation is not
381	reasonable, the neutral evaluation recommendation shall be
382	vacated.
383	Section 7.  This act shall take effect July 1, 2006.

CODING: Words stricken are deletions; words underlined are additions.