HB 217

1
A bill to be entitled
2An act relating to sinkhole insurance; amending s.
3627.706, F.S.; allowing a deductible amount applicable to
4sinkhole losses in a policy for residential property
5insurance; defining the term "professional engineer";
6amending s. 627.707, F.S.; revising references to certain
7engineers; authorizing insurers to make direct payment for
8certain repairs; excluding insurers from liability for
9repairs under certain circumstances; amending s. 627.7072,
10F.S.; revising references to certain engineers;
11eliminating the requirement for certain testing
12compliance; amending s. 627.7073, F.S.; revising
13requirements for sinkhole reports by professional
14engineers and professional geologists; providing for the
15recording of sinkhole reports by the clerk of court rather
16than the property appraiser; creating s. 627.7074, F.S.;
17prescribing an alternative method for resolving disputed
18sinkhole insurance claims; providing definitions;
19prescribing procedures for invoking the alternative
20method; providing that a recommendation by a neutral
21evaluator is not binding on any party; providing for
22payments of costs; requiring the insurer to pay attorney's
23fees of the policyholder up to a specified amount under
24certain conditions; providing that an insurer is not
25liable for attorney's fees or for certain damages under
26certain conditions; amending s. 877.02, F.S.; prohibiting
27certain solicitations by contractors and other persons
28providing sinkhole remediation services; providing
29penalties; requiring the Office of Insurance Regulation to
30calculate a certain presumed factor on residential
31property insurance rates; providing requirements and
32procedures for determining such calculation; requiring the
33office to provide notice of such rate factor to insurers;
34requiring insurers to include such rate factor in certain
35rate filings; providing appropriations and authorizing
36additional positions and salary rates; providing effective
37dates.
38
39Be It Enacted by the Legislature of the State of Florida:
40
41     Section 1.  Subsection (1) and paragraph (d) of subsection
42(2) of section 627.706, Florida Statutes, are amended to read:
43     627.706  Sinkhole insurance; definitions.--
44     (1)  Every insurer authorized to transact property
45insurance in this state shall make available coverage for
46insurable sinkhole losses on any structure, including contents
47of personal property contained therein, to the extent provided
48in the form to which the sinkhole coverage attaches. A policy
49for residential property insurance may include a deductible
50amount applicable to sinkhole losses equal to 1 percent, 2
51percent, 5 percent, or 10 percent of the policy dwelling limits,
52with appropriate premium discounts offered with each deductible
53amount.
54     (2)  As used in ss. 627.706-627.7074, and as used in
55connection with any policy providing coverage for sinkhole
56losses:
57     (d)  "Professional engineer" means a person, as defined in
58s. 471.005, who has a bachelor's degree or higher in engineering
59with a specialty in the geotechnical engineering field. A
60professional An engineer must have geotechnical experience and
61expertise in the identification of sinkhole activity as well as
62other potential causes of damage to the structure.
63     Section 2.  Subsections (2), (3), (5), (6), and (9) of
64section 627.707, Florida Statutes, are amended to read:
65     627.707  Standards for investigation of sinkhole claims by
66insurers; nonrenewals.--Upon receipt of a claim for a sinkhole
67loss, an insurer must meet the following standards in
68investigating a claim:
69     (2)  Following the insurer's initial inspection, the
70insurer shall engage a professional an engineer or a
71professional geologist to conduct testing as provided in s.
72627.7072 to determine the cause of the loss within a reasonable
73professional probability and issue a report as provided in s.
74627.7073, if:
75     (a)  The insurer is unable to identify a valid cause of the
76damage or discovers damage to the structure which is consistent
77with sinkhole loss; or
78     (b)  The policyholder demands testing in accordance with
79this section or s. 627.7072.
80     (3)  Following the initial inspection of the insured
81premises, the insurer shall provide written notice to the
82policyholder disclosing the following information:
83     (a)  What the insurer has determined to be the cause of
84damage, if the insurer has made such a determination.
85     (b)  A statement of the circumstances under which the
86insurer is required to engage a professional an engineer or a
87professional geologist to verify or eliminate sinkhole loss and
88to engage a professional an engineer to make recommendations
89regarding land and building stabilization and foundation repair.
90     (c)  A statement regarding the right of the policyholder to
91request testing by a professional an engineer or a professional
92geologist and the circumstances under which the policyholder may
93demand certain testing.
94     (5)(a)  Subject to paragraph (b), if a sinkhole loss is
95verified, the insurer shall pay to stabilize the land and
96building and repair the foundation in accordance with the
97recommendations of the professional engineer as provided under
98s. 627.7073, and in consultation with the policyholder, subject
99to the coverage and terms of the policy. The insurer shall pay
100for other repairs to the structure and contents in accordance
101with the terms of the policy.
102     (b)  The insurer may limit its payment to the actual cash
103value of the sinkhole loss, not including underpinning or
104grouting or any other repair technique performed below the
105existing foundation of the building, until the policyholder
106enters into a contract for the performance of building
107stabilization or foundation repairs. After the policyholder
108enters into the contract, the insurer shall pay the amounts
109necessary to begin and perform such repairs as the work is
110performed and the expenses are incurred. The insurer may not
111require the policyholder to advance payment for such repairs. If
112repair covered by a personal lines residential property
113insurance policy has begun and the professional engineer
114selected or approved by the insurer determines that the repair
115cannot be completed within the policy limits, the insurer must
116either complete the professional engineer's recommended repair
117or tender the policy limits to the policyholder without a
118reduction for the repair expenses incurred.
119     (c)  Upon the insurer's obtaining the written approval of
120the policyholder and any lienholder, the insurer may make
121payment directly to the persons selected by the policyholder to
122perform the land and building stabilization and foundation
123repairs. The decision by the insurer to make payment to such
124persons does not hold the insurer liable for the work performed.
125     (6)  Except as provided in subsection (7), the fees and
126costs of the professional engineer or the professional geologist
127shall be paid by the insurer.
128     (9)  The insurer may engage a professional structural
129engineer to make recommendations as to the repair of the
130structure.
131     Section 3.  Section 627.7072, Florida Statutes, is amended
132to read:
133     627.7072  Testing standards for sinkholes.--
134     (1)  The professional engineer or and professional
135geologist shall perform such tests as sufficient, in their
136professional opinion, to determine the presence or absence of
137sinkhole loss or other cause of damage within reasonable
138professional probability and for the professional engineer to
139make recommendations regarding necessary building stabilization
140and foundation repair.
141     (2)  Testing by a professional geologist shall be conducted
142in compliance with the Florida Geological Survey Special
143Publication No. 57 (2005).
144     Section 4.  Subsections (1) and (2) of section 627.7073,
145Florida Statutes, are amended to read:
146     627.7073  Sinkhole reports.--
147     (1)  Upon completion of testing as provided in s. 627.7072,
148the professional engineer or and professional geologist shall
149issue a report and certification to the insurer and the
150policyholder as provided in this section.
151     (a)  Sinkhole loss is verified if, based upon tests
152performed in accordance with s. 627.7072, a professional an
153engineer or and a professional geologist issue a written report
154and certification stating:
155     1.  That the cause of the actual physical and structural
156damage is sinkhole activity within a reasonable professional
157probability.
158     2.  That the analyses conducted were of sufficient scope to
159identify sinkhole activity as the cause of damage within a
160reasonable professional probability.
161     3.  A description of the tests performed.
162     4.  A recommendation by the professional engineer of
163methods for stabilizing the land and building and for making
164repairs to the foundation.
165     (b)  If sinkhole activity is eliminated as the cause of
166damage to the structure, the professional engineer or and
167professional geologist shall issue a written report and
168certification to the policyholder and the insurer stating:
169     1.  That the cause of the damage is not sinkhole activity
170within a reasonable professional probability.
171     2.  That the analyses and tests conducted were of
172sufficient scope to eliminate sinkhole activity as the cause of
173damage within a reasonable professional probability.
174     3.  A statement of the cause of the damage within a
175reasonable professional probability.
176     4.  A description of the tests performed.
177     (c)  The respective findings, opinions, and recommendations
178of the professional engineer or and professional geologist as to
179the cause of distress to the property verification or
180elimination of a sinkhole loss and the findings, opinions, and
181recommendations of the professional engineer as to land and
182building stabilization and foundation repair shall be presumed
183correct.
184     (2)  Any insurer that has paid a claim for a sinkhole loss
185shall file a copy of the report and certification, prepared
186pursuant to subsection (1), with the county clerk of court
187property appraiser, who shall record the report and
188certification with the parcel number. The insurer shall bear the
189cost of filing and recording the report and certification. There
190shall be no cause of action or liability against an insurer for
191compliance with this section. The seller of real property upon
192which a sinkhole claim has been made shall disclose to the buyer
193of such property that a claim has been paid and whether or not
194the full amount of the proceeds were used to repair the sinkhole
195damage.
196     Section 5.  Effective October 1, 2006, section 627.7074,
197Florida Statutes, is created to read:
198     627.7074  Alternative procedure for resolution of disputed
199sinkhole insurance claims.--
200     (1)  As used in this section, the term:
201     (a)  "Neutral evaluation" means the alternative dispute
202resolution provided for in this section.
203     (b)  "Neutral evaluator" means a professional engineer or a
204professional geologist who has completed a course of study in
205alternative dispute resolution designed or approved by the
206department for use in the neutral evaluation process, who is
207determined to be fair and impartial.
208     (2)(a)  The department shall certify and maintain a list of
209persons who are neutral evaluators.
210     (b)  The department shall prepare a consumer information
211pamphlet for distribution by insurers to policyholders which
212clearly describes the neutral evaluation process and includes
213information and forms necessary for the policyholder to request
214a neutral evaluation.
215     (3)  Following the receipt of the report provided under s.
216627.7073 or the denial of a claim for a sinkhole loss, the
217insurer shall notify the policyholder of his or her right to
218participate in the neutral evaluation program under this
219section. Neutral evaluation supersedes the alternative dispute
220resolution process under s. 627.7015. The insurer shall provide
221to the policyholder the consumer information pamphlet prepared
222by the department pursuant to paragraph (2)(b).
223     (4)  Neutral evaluation is optional and nonbinding. Either
224the policyholder or the insurer may decline to participate. A
225request for neutral evaluation may be filed with the department
226by the policyholder or the insurer on a form approved by the
227department. The request for neutral evaluation must state the
228reason for the request and must include an explanation of all
229the issues in dispute at the time of the request. Filing a
230request for neutral evaluation tolls the applicable time
231requirements for filing suit for a period of 60 days following
232the conclusion of the neutral evaluation process or the time
233prescribed in s. 95.11, whichever is later.
234     (5)  Neutral evaluation shall be conducted as an informal
235process in which formal rules of evidence and procedure need not
236be observed. A party to neutral evaluation is not required to
237attend neutral evaluation if a representative of the party
238attends and has the authority to make a binding decision on
239behalf of the party. All parties shall participate in the
240evaluation in good faith.
241     (6)  The insurer shall pay the costs associated with the
242neutral evaluation.
243     (7)  Upon receipt of a request for neutral evaluation, the
244department shall refer the request to a neutral evaluator. The
245neutral evaluator shall notify the policyholder and the insurer
246of the date, time, and place of the neutral evaluation
247conference. The conference may be held by telephone, if feasible
248and desirable. The neutral evaluation conference shall be held
249within 45 days after receipt of the request by the department.
250     (8)  The department shall adopt rules of procedure for the
251neutral evaluation process.
252     (9)  For policyholders not represented by an attorney, a
253consumer affairs specialist of the department or an employee
254designated as the primary contact for consumers on issues
255relating to sinkholes under s. 20.121 shall be available for
256consultation to the extent that he or she may lawfully do so.
257     (10)  Evidence of an offer to settle a claim during the
258neutral evaluation process, as well as any relevant conduct or
259statements made in negotiations concerning the offer to settle a
260claim, is inadmissible to prove liability or absence of
261liability for the claim or its value, except as provided in
262subsection (13).
263     (11)  Any court proceeding related to the subject matter of
264the neutral evaluation shall be stayed pending completion of the
265neutral evaluation.
266     (12)  For matters that are not resolved by the parties at
267the conclusion of the neutral evaluation, the neutral evaluator
268shall prepare a report stating that in his or her opinion the
269sinkhole loss has been verified or eliminated and, if verified,
270the need for and estimated costs of stabilizing the land and any
271covered structures or buildings and other appropriate
272remediation or structural repairs. The evaluator's report shall
273be sent to all parties in attendance at the neutral evaluation
274and to the department.
275     (13)  The recommendation of the neutral evaluator is not
276binding on any party, and the parties retain access to courts.
277The neutral evaluator's written recommendation is admissible in
278any subsequent action or proceeding relating to the claim or to
279the cause of action giving rise to the claim only for purposes
280of determining the award of attorney's fees.
281     (14)  If the neutral evaluator first verifies the existence
282of a sinkhole and, second, recommends the need for and estimates
283costs of stabilizing the land and any covered structures or
284buildings and other appropriate remediation or structural
285repairs, which costs exceed the amount that the insurer has
286offered to pay the policyholder, the insurer is liable to the
287policyholder for up to $2,500 in attorney's fees for the
288attorney's participation in the neutral evaluation process. For
289purposes of this subsection, the term "offer to pay" means a
290written offer signed by the insurer or its legal representative
291and delivered to the policyholder within 10 days after the
292insurer receives notice that a request for neutral evaluation
293has been made under this section.
294     (15)  If the policyholder declines to participate in
295neutral evaluation requested by the insurer or declines to
296resolve the matter in accordance with the recommendation of the
297neutral evaluator pursuant to this section, the insurer is not
298liable for attorney's fees under s. 627.428 or other provisions
299of the insurance code or for extra-contractual damages related
300to a claim for a sinkhole loss.
301     Section 6.  Subsection (2) of section 877.02, Florida
302Statutes, is amended to read:
303     877.02  Solicitation of legal services or retainers
304therefor; penalty.--
305     (2)  It shall be unlawful for any person in the employ of
306or in any capacity attached to any hospital, sanitarium, police
307department, wrecker service or garage, prison or court, or for a
308person authorized to furnish bail bonds, investigators,
309photographers, insurance or public adjusters, or for a general
310or other contractor as defined in s. 489.105 or other business
311providing sinkhole remediation services, to communicate directly
312or indirectly with any attorney or person acting on said
313attorney's behalf for the purpose of aiding, assisting or
314abetting such attorney in the solicitation of legal business or
315the procurement through solicitation of a retainer, written or
316oral, or any agreement authorizing the attorney to perform or
317render legal services.
318     Section 7.  (1)  By February 1, 2007, the Office of
319Insurance Regulation shall calculate a presumed factor to
320reflect the impact of the changes made in this act to rates
321filed by residential property insurers providing sinkhole loss
322coverage. The office shall issue a notice informing all insurers
323writing residential property insurance coverage of the presumed
324factor.
325     (2)  In determining the presumed factor, the office shall
326use generally accepted actuarial techniques and standards in
327determining the expected impact on losses, expenses, and
328investment income of the insurer.
329     (3)  The office may contract with an appropriate vendor to
330determine the presumed factor.
331     (4)  Each residential property insurer shall, at its next
332annual rate filing after May 1, 2007, reflect an overall rate
333reduction at least as great as the presumed factor determined
334under subsection (1).
335     (5)  The sum of $250,000 in nonrecurring funds is
336appropriated from the Insurance Regulatory Trust Fund in the
337Department of Financial Services to the Office of Insurance
338Regulation for the 2006-2007 fiscal year for the purposes of
339funding the provisions of this section.
340     Section 8.  The sums of $115,322 in recurring funds and
341$10,486 in nonrecurring funds are appropriated from the
342Insurance Regulatory Trust Fund in the Department of Financial
343Services for the 2006-2007 fiscal year for the purposes of
344funding the provisions of this act, and two full-time equivalent
345positions with 59,435 in associated salary rate are authorized.
346     Section 9.  Except as otherwise expressly provided in this
347act, this act shall take effect July 1, 2006.


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