HB 0217CS

CHAMBER ACTION



1The State Administration Appropriations Committee recommends the
2following:
3
4     Council/Committee Substitute
5     Remove the entire bill and insert:
6
A bill to be entitled
7An act relating to sinkhole insurance; providing a short
8title; amending s. 627.706, F.S.; authorizing the
9inclusion of specified deductibles for sinkhole losses in
10residential property insurance policies; amending s.
11627.707, F.S.; revising references to certain engineers;
12excluding certain policies from payment provisions for
13certain repairs; authorizing insurers to make direct
14payment for certain repairs; excluding insurers from
15liability for repairs under certain circumstances;
16creating s. 627.7071, F.S.; providing legislative intent
17for the process of filing sinkhole claims; amending s.
18627.7072, F.S.; requiring a report upon conclusion of
19testing; amending s. 627.7073, F.S.; revising a
20presumption relating to the findings, opinions, and
21recommendations in sinkhole reports; creating s. 627.7074,
22F.S.; providing for an alternative procedure for the
23resolution of disputed sinkhole insurance claims which is
24optional, nonbinding, and informal; providing definitions;
25requiring the Department of Financial Services to certify
26and maintain a list of neutral evaluators, prepare a
27consumer information pamphlet explaining the alternative
28procedure, and adopt rules for the implementation of an
29alternative procedure; providing for payment of costs and
30attorney's fees; preserving access to courts and
31authorizing judicial review of neutral evaluation
32recommendations; requiring the Office of Insurance
33Regulation to calculate a certain presumed factor on
34residential property insurance rates; providing
35requirements and procedures for determining such
36calculation; requiring the office to provide notice of
37such rate factor to insurers; requiring insurers to
38include such rate factor in certain rate filings;
39providing appropriations and authorizing additional
40positions and salary rates; providing an effective date.
41
42Be It Enacted by the Legislature of the State of Florida:
43
44     Section 1.  This act may be cited as the "Sinkhole
45Insurance Relief Act."
46     Section 2.  Section 627.706, Florida Statutes, is amended
47to read:
48     627.706  Sinkhole insurance; definitions.--
49     (1)  Every insurer authorized to transact property
50insurance in this state shall make available coverage for
51insurable sinkhole losses on any structure, including contents
52of personal property contained therein, to the extent provided
53in the form to which the sinkhole coverage attaches.
54     (2)  A policy for residential property insurance shall
55include a deductible applicable to sinkhole losses no lower than
561 percent of the policy dwelling limits. The policy shall offer
57additional deductibles applicable to sinkhole losses of 2
58percent, 5 percent, and 10 percent, with premium discounts
59offered with each deductible amount.
60     (3)(2)  As used in ss. 627.706-627.7074, and as used in
61connection with any policy providing coverage for sinkhole
62losses:
63     (a)  "Sinkhole" means a landform created by subsidence of
64soil, sediment, or rock as underlying strata are dissolved by
65groundwater. A sinkhole may form by collapse into subterranean
66voids created by dissolution of limestone or dolostone or by
67subsidence as these strata are dissolved.
68     (b)  "Sinkhole loss" means structural damage to the
69building, including the foundation, caused by sinkhole activity.
70Contents coverage shall apply only if there is structural damage
71to the building caused by sinkhole activity.
72     (c)  "Sinkhole activity" means settlement or systematic
73weakening of the earth supporting such property only when such
74settlement or systematic weakening results from movement or
75raveling of soils, sediments, or rock materials into
76subterranean voids created by the effect of water on a limestone
77or similar rock formation.
78     (d)  "Engineer" means a person, as defined in s. 471.005,
79who has a bachelor's degree or higher in engineering with a
80specialty in the geotechnical engineering field. An engineer
81must have geotechnical experience and expertise in the
82identification of sinkhole activity as well as other potential
83causes of damage to the structure.
84     (e)  "Professional geologist" means a person, as defined by
85s. 492.102, who has a bachelor's degree or higher in geology or
86related earth science with expertise in the geology of Florida.
87A professional geologist must have geological experience and
88expertise in the identification of sinkhole activity as well as
89other potential geologic causes of damage to the structure.
90     (4)(3)  Every insurer authorized to transact property
91insurance in this state shall make a proper filing with the
92office for the purpose of extending the appropriate forms of
93property insurance to include coverage for sinkhole losses.
94     Section 3.  Subsections (2), (3), (5), (6), and (9) of
95section 627.707, Florida Statutes, are amended to read:
96     627.707  Standards for investigation of sinkhole claims by
97insurers; nonrenewals.--Upon receipt of a claim for a sinkhole
98loss, an insurer must meet the following standards in
99investigating a claim:
100     (2)  Following the insurer's initial inspection, the
101insurer shall engage a professional an engineer or a
102professional geologist to conduct testing as provided in s.
103627.7072 to determine the cause of the loss within a reasonable
104professional probability and issue a report as provided in s.
105627.7073, if:
106     (a)  The insurer is unable to identify a valid cause of the
107damage or discovers damage to the structure which is consistent
108with sinkhole loss; or
109     (b)  The policyholder demands testing in accordance with
110this section or s. 627.7072.
111     (3)  Following the initial inspection of the insured
112premises, the insurer shall provide written notice to the
113policyholder disclosing the following information:
114     (a)  What the insurer has determined to be the cause of
115damage, if the insurer has made such a determination.
116     (b)  A statement of the circumstances under which the
117insurer is required to engage a professional an engineer or a
118professional geologist to verify or eliminate sinkhole loss and
119to engage a professional an engineer to make recommendations
120regarding land and building stabilization and foundation repair.
121     (c)  A statement regarding the right of the policyholder to
122request testing by a professional an engineer or a professional
123geologist and the circumstances under which the policyholder may
124demand certain testing.
125     (5)(a)  Subject to paragraph (b), if a sinkhole loss is
126verified, the insurer shall pay to stabilize the land and
127building and repair the foundation in accordance with the
128recommendations of the professional engineer as provided under
129s. 627.7073, and in consultation with the policyholder, subject
130to the coverage and terms of the policy. The insurer shall pay
131for other repairs to the structure and contents in accordance
132with the terms of the policy.
133     (b)  The insurer may limit its payment to the actual cash
134value of the sinkhole loss, not including underpinning or
135grouting or any other repair technique performed below the
136existing foundation of the building, until the policyholder
137enters into a contract for the performance of building
138stabilization or foundation repairs. After the policyholder
139enters into the contract, the insurer shall pay the amounts
140necessary to begin and perform such repairs as the work is
141performed and the expenses are incurred. The insurer may not
142require the policyholder to advance payment for such repairs. If
143repair has begun and the professional engineer selected or
144approved by the insurer determines that the repair cannot be
145completed within the policy limits, the insurer must either
146complete the professional engineer's recommended repair or
147tender the policy limits to the policyholder without a reduction
148for the repair expenses incurred. The provisions of this
149subsection do not apply when two or more buildings, structures,
150mobile homes, or manufactured buildings are insured under a
151blanket policy for a single amount of insurance.
152     (c)  Upon the insurer's obtaining the written approval of
153the policyholder and any lienholder, the insurer may make
154payment directly to the persons selected by the policyholder to
155perform the land and building stabilization and foundation
156repairs. The decision by the insurer to make direct payment to
157such persons does not hold the insurer liable for the work
158performed.
159     (6)  Except as provided in subsection (7), the fees and
160costs of the professional engineer or the professional geologist
161shall be paid by the insurer.
162     (9)  The insurer may engage a professional structural
163engineer to make recommendations as to the repair of the
164structure.
165     Section 4.  Section 627.7071, Florida Statues, is created
166to read:
167     627.7071  Legislative intent.--It is the intent of the
168Legislature that the following process be used when a sinkhole
169claim is filed:
170     (1)  The insurer shall inspect the claim.
171     (2)  If the insurer is unable to determine a valid cause of
172the damage or discovers damage to the structure consistent with
173a sinkhole loss or if demanded by the policyholder, the insurer
174shall engage in testing, as set forth in s. 627.7072.
175     (3)  If the policyholder and the insurer are unable to
176agree on the cause of the damage or other aspects of the
177sinkhole claim, the policyholder and the insurer may take part
178in neutral evaluation under s. 627.7074.
179     Section 5.  Subsections (1) and (2) of section 627.7072,
180Florida Statutes, are amended to read:
181     627.7072  Testing standards for sinkholes.--
182     (1)  The professional engineer and professional geologist
183shall perform such tests as sufficient, in their professional
184opinion, to determine the presence or absence of sinkhole loss
185or other cause of damage within reasonable professional
186probability and for the professional engineer to make
187recommendations regarding necessary building stabilization and
188foundation repair.
189     (2)  Upon conclusion of testing required by this section,
190the person conducting the tests must provide a written report to
191the insurer and policyholder Testing by a professional geologist
192shall be conducted in compliance with the Florida Geological
193Survey Special Publication No. 57 (2005).
194     Section 6.  Subsection (1) of section 627.7073, Florida
195Statutes, is amended to read:
196     627.7073  Sinkhole reports.--
197     (1)  Upon completion of testing as provided in s. 627.7072,
198the professional engineer or and professional geologist shall
199issue a report and certification to the insurer and the
200policyholder as provided in this section.
201     (a)  Sinkhole loss is verified if, based upon tests
202performed in accordance with s. 627.7072, a professional an
203engineer or and a professional geologist issue a written report
204and certification stating:
205     1.  That the cause of the actual physical and structural
206damage is sinkhole activity within a reasonable professional
207probability.
208     2.  That the analyses conducted were of sufficient scope to
209identify sinkhole activity as the cause of damage within a
210reasonable professional probability.
211     3.  A description of the tests performed.
212     4.  A recommendation by the professional engineer of
213methods for stabilizing the land and building and for making
214repairs to the foundation.
215     (b)  If sinkhole activity is eliminated as the cause of
216damage to the structure, the professional engineer or and
217professional geologist shall issue a written report and
218certification to the policyholder and the insurer stating:
219     1.  That the cause of the damage is not sinkhole activity
220within a reasonable professional probability.
221     2.  That the analyses and tests conducted were of
222sufficient scope to eliminate sinkhole activity as the cause of
223damage within a reasonable professional probability.
224     3.  A statement of the cause of the damage within a
225reasonable professional probability.
226     4.  A description of the tests performed.
227     (c)  The respective findings, opinions, and recommendations
228of the professional engineer or and professional geologist as to
229the cause of distress to the property verification or
230elimination of a sinkhole loss and the findings, opinions, and
231recommendations of the professional engineer as to land and
232building stabilization and foundation repair are conclusive,
233unless contrary findings and conclusions are proven by
234preponderance of evidence shall be presumed correct.
235     Section 7.  Section 627.7074, Florida Statutes, is created
236to read:
237     627.7074  Alternative procedure for resolution of disputed
238sinkhole insurance claims.--
239     (1)  As used in this section:
240     (a)  "Neutral evaluation" means the alternative dispute
241resolution provided for in this section.
242     (b)  "Neutral evaluator" means an professional engineer or
243a professional geologist who has completed a course of study in
244alternative dispute resolution designed or approved by the
245department for use in the neutral evaluation process, who is
246determined to be fair and impartial, and who is attempting to
247resolve the dispute or claim under this section.
248     (c)  "Department" means the Department of Financial
249Services.
250     (2)  The department shall certify and maintain a list of
251persons who are neutral evaluators.
252     (3)  Following the receipt of the report provided under s.
253627.7073 or the denial of a claim for a sinkhole loss, the
254insurer shall notify the policyholder of his or her right to
255participate in the neutral evaluation program under this
256section. Neutral evaluation supersedes the alternative dispute
257resolution process under s. 627.7015. The department shall
258prepare a consumer information pamphlet for distribution by the
259insurer to policyholders. The pamphlet shall clearly describe
260the neutral evaluation process and include directions and forms
261necessary for the policyholder to request a neutral evaluation.
262     (4)  Neutral evaluation is optional and nonbinding. Either
263the policyholder or the insurer may decline to participate. A
264request for neutral evaluation shall be filed with the
265department by the policyholder or the insurer on a form approved
266by the department. The request for neutral evaluation must state
267the reason for the request and must include an explanation of
268all the issues in dispute at the time of the request. Filing a
269request for neutral evaluation tolls the applicable time
270requirements for filing suit for a period of 60 days following
271the conclusion of the neutral evaluation process or the time
272prescribed in s. 95.11, whichever is later.
273     (5)  Neutral evaluation shall be conducted as an informal
274process in which formal rules of evidence and procedure need not
275be observed. A party to neutral evaluation is not required to
276attend, provided a representative of the party attends and has
277the authority to settle the claim on behalf of the party. All
278parties shall participate in the evaluation in good faith.
279     (6)  The insurer shall pay the costs associated with the
280neutral evaluation.
281     (7)  Upon receipt of a request for neutral evaluation, the
282department shall refer the request to a neutral evaluator. The
283neutral evaluator shall notify the policyholder and the insurer
284of the date, time, and place of the neutral evaluation
285conference. The conference may be held by telephone, if feasible
286and desirable. The neutral evaluation conference shall be held
287within 45 days after receipt of the request by the department.
288     (8)  The department shall adopt rules of procedure for the
289neutral evaluation process and, through materials produced,
290clarify the role of the consumer affairs specialist as a
291nonattorney.
292     (9)  For policyholders not represented by an attorney, a
293consumer affairs specialist of the department or an employee
294designated as the primary contact for consumers on issues
295relating to sinkholes under s. 20.121 shall be available for
296consultation to the extent that he or she may lawfully do so.
297     (10)  Evidence of an offer to settle a claim during the
298neutral evaluation process, as well as any relevant conduct or
299statements made in negotiations concerning the offer to settle a
300claim, is inadmissible to prove liability or absence of
301liability for the claim or its value, except as provided in
302subsection (13).
303     (11)  Any court proceeding related to the subject matter of
304the neutral evaluation shall be stayed pending completion of the
305neutral evaluation.
306     (12)  For matters that are not resolved by the parties at
307the conclusion of the neutral evaluation, the neutral evaluator
308shall prepare a report stating that in his or her opinion the
309sinkhole loss has been verified or eliminated and, if verified,
310the need for and estimated costs of stabilizing the land and any
311covered structures or buildings and other appropriate
312remediation or structural repairs. The evaluator's report shall
313be sent to all parties in attendance at the neutral evaluation
314and to the department.
315     (13)  The recommendation of the neutral evaluator is not
316binding on any party and the parties retain access to courts.
317The neutral evaluator's written recommendation is admissible in
318any subsequent action or proceeding relating to the claim or to
319the cause of action giving rise to the claim only for purposes
320of determining the award of attorney's fees.
321     (14)  If the policyholder declines to participate in
322neutral evaluation requested by the insurer or declines to
323resolve the matter in accordance with the recommendation of the
324neutral evaluator pursuant to this section, the insurer shall
325not be liable for attorney's fees under s. 627.428 or other
326provisions of the insurance code or for extra contractual
327damages related to a claim for a sinkhole loss.
328     (15)  A party may seek judicial review of the
329recommendation of the neutral evaluator to determine whether the
330recommendation is reasonable. A recommendation is reasonable
331unless it was procured by corruption, fraud, or other undue
332means; there was evident partiality by the neutral evaluator or
333misconduct prejudicing the rights of any party; or the neutral
334evaluator exceeded the authority and power granted by this
335subsection. If the court declares the recommendation is not
336reasonable, the neutral evaluation recommendation shall be
337vacated.
338     Section 8.  (1)  By February 1, 2007, the Office of
339Insurance Regulation shall calculate a presumed factor to
340reflect the impact of the changes made in this act to rates
341filed by residential property insurers providing sinkhole loss
342coverage. The office shall issue a notice informing all insurers
343writing residential property insurance coverage of the presumed
344factor.
345     (2)  In determining the presumed factor, the office shall
346use generally accepted actuarial techniques and standards in
347determining the expected impact on losses, expenses, and
348investment income of the insurer.
349     (3)  The office may contract with an appropriate vendor to
350determine the presumed factor.
351     (4)  Each residential property insurer shall, at its next
352annual rate filing after May 1, 2007, reflect an overall rate
353reduction at least as great as the presumed factor determined
354under subsection (1).
355     (5)  The sum of $250,000 in nonrecurring funds is
356appropriated from the Insurance Regulatory Trust Fund in the
357Department of Financial Services to the Office of Insurance
358Regulation for the 2006-2007 fiscal year for the purposes of
359funding the provisions of this section.
360     Section 9.  The sums of $115,322 in recurring funds and
361$10,486 in nonrecurring funds are appropriated from the
362Insurance Regulatory Trust Fund in the Department of Financial
363Services for the 2006-2007 fiscal year for the purposes of
364funding the provisions of this act, and two full-time equivalent
365positions with 59,435 in associated salary rate are authorized.
366     Section 10.  This act shall take effect July 1, 2006.


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