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; revising
15requirements with respect to the required filing of a
16report and certification by an insurer that has paid a
17claim for a sinkhole loss; providing for the recording of
18a report and certification with the clerk of court rather
19than the property appraiser; limiting the effect of the
20recording of the report and certification; creating s.
21627.7074, F.S.; prescribing an alternative method for
22resolving disputed sinkhole insurance claims; providing
23definitions; prescribing procedures for invoking the
24alternative method; providing that a recommendation by a
25neutral evaluator is not binding on any party but
26mandatory if requested by either party; providing for
27payments of costs; requiring the insurer to pay attorney's
28fees of the policyholder up to a specified amount under
29certain conditions; providing that an insurer is not
30liable for attorney's fees or for certain damages under
31certain conditions; amending s. 877.02, F.S.; prohibiting
32certain solicitations by contractors and other persons
33providing sinkhole remediation services; providing
34penalties; requiring the Office of Insurance Regulation to
35calculate a certain presumed factor on residential
36property insurance rates; providing requirements and
37procedures for determining such calculation; requiring the
38office to provide notice of such rate factor to insurers;
39requiring insurers to include such rate factor in certain
40rate filings; providing appropriations and authorizing
41additional positions and salary rates; providing effective
42dates.
43
44Be It Enacted by the Legislature of the State of Florida:
45
46     Section 1.  Effective October 1, 2006, subsection (1) and
47paragraph (d) of subsection (2) of section 627.706, Florida
48Statutes, are amended to read:
49     627.706  Sinkhole insurance; definitions.--
50     (1)  Every insurer authorized to transact property
51insurance in this state shall make available coverage for
52insurable sinkhole losses on any structure, including contents
53of personal property contained therein, to the extent provided
54in the form to which the sinkhole coverage attaches. A policy
55for residential property insurance may include a deductible
56amount applicable to sinkhole losses equal to 1 percent, 2
57percent, 5 percent, or 10 percent of the policy dwelling limits,
58with appropriate premium discounts offered with each deductible
59amount.
60     (2)  As used in ss. 627.706-627.7074, and as used in
61connection with any policy providing coverage for sinkhole
62losses:
63     (d)  "Professional engineer" means a person, as defined in
64s. 471.005, who has a bachelor's degree or higher in engineering
65with a specialty in the geotechnical engineering field. A
66professional An engineer must have geotechnical experience and
67expertise in the identification of sinkhole activity as well as
68other potential causes of damage to the structure.
69     Section 2.  Subsections (2), (3), (5), (6), and (9) of
70section 627.707, Florida Statutes, are amended to read:
71     627.707  Standards for investigation of sinkhole claims by
72insurers; nonrenewals.--Upon receipt of a claim for a sinkhole
73loss, an insurer must meet the following standards in
74investigating a claim:
75     (2)  Following the insurer's initial inspection, the
76insurer shall engage a professional an engineer or a
77professional geologist to conduct testing as provided in s.
78627.7072 to determine the cause of the loss within a reasonable
79professional probability and issue a report as provided in s.
80627.7073, if:
81     (a)  The insurer is unable to identify a valid cause of the
82damage or discovers damage to the structure which is consistent
83with sinkhole loss; or
84     (b)  The policyholder demands testing in accordance with
85this section or s. 627.7072.
86     (3)  Following the initial inspection of the insured
87premises, the insurer shall provide written notice to the
88policyholder disclosing the following information:
89     (a)  What the insurer has determined to be the cause of
90damage, if the insurer has made such a determination.
91     (b)  A statement of the circumstances under which the
92insurer is required to engage a professional an engineer or a
93professional geologist to verify or eliminate sinkhole loss and
94to engage a professional an engineer to make recommendations
95regarding land and building stabilization and foundation repair.
96     (c)  A statement regarding the right of the policyholder to
97request testing by a professional an engineer or a professional
98geologist and the circumstances under which the policyholder may
99demand certain testing.
100     (5)(a)  Subject to paragraph (b), if a sinkhole loss is
101verified, the insurer shall pay to stabilize the land and
102building and repair the foundation in accordance with the
103recommendations of the professional engineer as provided under
104s. 627.7073, and in consultation with the policyholder, subject
105to the coverage and terms of the policy. The insurer shall pay
106for other repairs to the structure and contents in accordance
107with the terms of the policy.
108     (b)  The insurer may limit its payment to the actual cash
109value of the sinkhole loss, not including underpinning or
110grouting or any other repair technique performed below the
111existing foundation of the building, until the policyholder
112enters into a contract for the performance of building
113stabilization or foundation repairs. After the policyholder
114enters into the contract, the insurer shall pay the amounts
115necessary to begin and perform such repairs as the work is
116performed and the expenses are incurred. The insurer may not
117require the policyholder to advance payment for such repairs. If
118repair covered by a personal lines residential property
119insurance policy has begun and the professional engineer
120selected or approved by the insurer determines that the repair
121cannot be completed within the policy limits, the insurer must
122either complete the professional engineer's recommended repair
123or tender the policy limits to the policyholder without a
124reduction for the repair expenses incurred.
125     (c)  Upon the insurer's obtaining the written approval of
126the policyholder and any lienholder, the insurer may make
127payment directly to the persons selected by the policyholder to
128perform the land and building stabilization and foundation
129repairs. The decision by the insurer to make payment to such
130persons does not hold the insurer liable for the work performed.
131     (6)  Except as provided in subsection (7), the fees and
132costs of the professional engineer or the professional geologist
133shall be paid by the insurer.
134     (9)  The insurer may engage a professional structural
135engineer to make recommendations as to the repair of the
136structure.
137     Section 3.  Section 627.7072, Florida Statutes, is amended
138to read:
139     627.7072  Testing standards for sinkholes.--
140     (1)  The professional engineer or and professional
141geologist shall perform such tests as sufficient, in their
142professional opinion, to determine the presence or absence of
143sinkhole loss or other cause of damage within reasonable
144professional probability and for the professional engineer to
145make recommendations regarding necessary building stabilization
146and foundation repair.
147     (2)  Testing by a professional geologist shall be conducted
148in compliance with the Florida Geological Survey Special
149Publication No. 57 (2005).
150     Section 4.  Subsections (1) and (2) of section 627.7073,
151Florida Statutes, are amended to read:
152     627.7073  Sinkhole reports.--
153     (1)  Upon completion of testing as provided in s. 627.7072,
154the professional engineer or and professional geologist shall
155issue a report and certification to the insurer and the
156policyholder as provided in this section.
157     (a)  Sinkhole loss is verified if, based upon tests
158performed in accordance with s. 627.7072, a professional an
159engineer or and a professional geologist issue a written report
160and certification stating:
161     1.  That the cause of the actual physical and structural
162damage is sinkhole activity within a reasonable professional
163probability.
164     2.  That the analyses conducted were of sufficient scope to
165identify sinkhole activity as the cause of damage within a
166reasonable professional probability.
167     3.  A description of the tests performed.
168     4.  A recommendation by the professional engineer of
169methods for stabilizing the land and building and for making
170repairs to the foundation.
171     (b)  If sinkhole activity is eliminated as the cause of
172damage to the structure, the professional engineer or and
173professional geologist shall issue a written report and
174certification to the policyholder and the insurer stating:
175     1.  That the cause of the damage is not sinkhole activity
176within a reasonable professional probability.
177     2.  That the analyses and tests conducted were of
178sufficient scope to eliminate sinkhole activity as the cause of
179damage within a reasonable professional probability.
180     3.  A statement of the cause of the damage within a
181reasonable professional probability.
182     4.  A description of the tests performed.
183     (c)  The respective findings, opinions, and recommendations
184of the professional engineer or and professional geologist as to
185the cause of distress to the property verification or
186elimination of a sinkhole loss and the findings, opinions, and
187recommendations of the professional engineer as to land and
188building stabilization and foundation repair shall be presumed
189correct.
190     (2)  Any insurer that has paid a claim for a sinkhole loss
191shall file a copy of the report and certification, prepared
192pursuant to subsection (1) and including the legal description
193of the real property and the name of the property owner, with
194the county clerk of court property appraiser, who shall record
195the report and certification with the parcel number. The insurer
196shall bear the cost of filing and recording the report and
197certification. There shall be no cause of action or liability
198against an insurer for compliance with this section. The
199recording of the report and certification shall not constitute a
200lien or encumbrance or restriction on the title to the real
201property, nor constitute a defect in the title to the real
202property, create any cause of action or liability against any
203grantor of the real property for breach of any warranty of good
204title or warranty against encumbrances, nor create any cause of
205action or liability against any title insurer that insures the
206title to the real property. The seller of real property upon
207which a sinkhole claim has been made by the seller and paid by
208the insurer shall disclose to the buyer of such property that a
209claim has been paid and whether or not the full amount of the
210proceeds were used to repair the sinkhole damage.
211     Section 5.  Effective October 1, 2006, section 627.7074,
212Florida Statutes, is created to read:
213     627.7074  Alternative procedure for resolution of disputed
214sinkhole insurance claims.--
215     (1)  As used in this section, the term:
216     (a)  "Neutral evaluation" means the alternative dispute
217resolution provided for in this section.
218     (b)  "Neutral evaluator" means a professional engineer or a
219professional geologist who has completed a course of study in
220alternative dispute resolution designed or approved by the
221department for use in the neutral evaluation process, who is
222determined to be fair and impartial.
223     (2)(a)  The department shall certify and maintain a list of
224persons who are neutral evaluators.
225     (b)  The department shall prepare a consumer information
226pamphlet for distribution by insurers to policyholders which
227clearly describes the neutral evaluation process and includes
228information and forms necessary for the policyholder to request
229a neutral evaluation.
230     (3)  Following the receipt of the report provided under s.
231627.7073 or the denial of a claim for a sinkhole loss, the
232insurer shall notify the policyholder of his or her right to
233participate in the neutral evaluation program under this
234section. Neutral evaluation supersedes the alternative dispute
235resolution process under s. 627.7015. The insurer shall provide
236to the policyholder the consumer information pamphlet prepared
237by the department pursuant to paragraph (2)(b).
238     (4)  Neutral evaluation is nonbinding but mandatory if
239requested by either party. A request for neutral evaluation may
240be filed with the department by the policyholder or the insurer
241on a form approved by the department. The request for neutral
242evaluation must state the reason for the request and must
243include an explanation of all the issues in dispute at the time
244of the request. Filing a request for neutral evaluation tolls
245the applicable time requirements for filing suit for a period of
24660 days following the conclusion of the neutral evaluation
247process or the time prescribed in s. 95.11, whichever is later.
248     (5)  Neutral evaluation shall be conducted as an informal
249process in which formal rules of evidence and procedure need not
250be observed. A party to neutral evaluation is not required to
251attend neutral evaluation if a representative of the party
252attends and has the authority to make a binding decision on
253behalf of the party. All parties shall participate in the
254evaluation in good faith.
255     (6)  The insurer shall pay the costs associated with the
256neutral evaluation.
257     (7)  Upon receipt of a request for neutral evaluation, the
258department shall provide the parties a list of certified neutral
259evaluators. The parties shall mutually select a neutral
260evaluator from the list and promptly inform the department. If
261the parties cannot agree to a neutral evaluator within 10
262business days, the department shall appoint a neutral evaluator
263from the department list. Upon selection or appointment, the
264department shall promptly refer the request to the neutral
265evaluator. Within 5 business days of the referral, the neutral
266evaluator shall notify the policyholder and the insurer of the
267date, time, and place of the neutral evaluation conference. The
268conference may be held by telephone, if feasible and desirable.
269The neutral evaluation conference shall be held within 45 days
270after the receipt of the request by the department.
271     (8)  The department shall adopt rules of procedure for the
272neutral evaluation process.
273     (9)  For policyholders not represented by an attorney, a
274consumer affairs specialist of the department or an employee
275designated as the primary contact for consumers on issues
276relating to sinkholes under s. 20.121 shall be available for
277consultation to the extent that he or she may lawfully do so.
278     (10)  Evidence of an offer to settle a claim during the
279neutral evaluation process, as well as any relevant conduct or
280statements made in negotiations concerning the offer to settle a
281claim, is inadmissible to prove liability or absence of
282liability for the claim or its value, except as provided in
283subsection (13).
284     (11)  Any court proceeding related to the subject matter of
285the neutral evaluation shall be stayed pending completion of the
286neutral evaluation.
287     (12)  For matters that are not resolved by the parties at
288the conclusion of the neutral evaluation, the neutral evaluator
289shall prepare a report stating that in his or her opinion the
290sinkhole loss has been verified or eliminated and, if verified,
291the need for and estimated costs of stabilizing the land and any
292covered structures or buildings and other appropriate
293remediation or structural repairs. The evaluator's report shall
294be sent to all parties in attendance at the neutral evaluation
295and to the department.
296     (13)  The recommendation of the neutral evaluator is not
297binding on any party, and the parties retain access to court.
298The neutral evaluator's written recommendation is admissible in
299any subsequent action or proceeding relating to the claim or to
300the cause of action giving rise to the claim.
301     (14)  If the neutral evaluator first verifies the existence
302of a sinkhole and, second, recommends the need for and estimates
303costs of stabilizing the land and any covered structures or
304buildings and other appropriate remediation or structural
305repairs, which costs exceed the amount that the insurer has
306offered to pay the policyholder, the insurer is liable to the
307policyholder for up to $2,500 in attorney's fees for the
308attorney's participation in the neutral evaluation process. For
309purposes of this subsection, the term "offer to pay" means a
310written offer signed by the insurer or its legal representative
311and delivered to the policyholder within 10 days after the
312insurer receives notice that a request for neutral evaluation
313has been made under this section.
314     (15)  If the insurer timely agrees in writing to comply and
315timely complies with the recommendation of the neutral
316evaluator, but the policyholder declines to resolve the matter
317in accordance with the recommendation of the neutral evaluator
318pursuant to this section:
319     (a)  The insurer is not liable for extra-contractual
320damages related to a claim for a sinkhole loss but only as
321related to the issues determined by the neutral-evaluation
322process. Nothing in this section shall effect or impair claims
323for extra-contractual damages unrelated to the issues determined
324by the neutral-evaluation process contained in this section.
325     (b)  The insurer is not liable for attorney's fees under s.
326627.428 or other provisions of the insurance code unless the
327policyholder obtains a judgment that is more favorable than the
328recommendation of the neutral evaluator.
329     Section 6.  Subsection (2) of section 877.02, Florida
330Statutes, is amended to read:
331     877.02  Solicitation of legal services or retainers
332therefor; penalty.--
333     (2)  It shall be unlawful for any person in the employ of
334or in any capacity attached to any hospital, sanitarium, police
335department, wrecker service or garage, prison or court, or for a
336person authorized to furnish bail bonds, investigators,
337photographers, insurance or public adjusters, or for a general
338or other contractor as defined in s. 489.105 or other business
339providing sinkhole remediation services, to communicate directly
340or indirectly with any attorney or person acting on said
341attorney's behalf for the purpose of aiding, assisting or
342abetting such attorney in the solicitation of legal business or
343the procurement through solicitation of a retainer, written or
344oral, or any agreement authorizing the attorney to perform or
345render legal services.
346     Section 7.  (1)  By September 1, 2006, the Office of
347Insurance Regulation shall calculate a presumed factor to
348reflect the impact of the changes made in this act and sections
34917, 18, 19, 20, and 21 of chapter 2005-111, Laws of Florida, to
350rates filed by residential property insurers providing sinkhole
351loss coverage. The office shall issue a notice informing all
352insurers writing residential property insurance coverage of the
353presumed factor.
354     (2)  In determining the presumed factor, the office shall
355use generally accepted actuarial techniques and standards in
356determining the expected impact on losses, expenses, and
357investment income of the insurer.
358     (3)  The office may contract with an appropriate vendor to
359determine the presumed factor.
360     (4)  Each residential property insurer shall, at its next
361rate filing after October 1, 2006, reflect a rate change that
362takes into account the presumed factor determined under
363subsection (1).
364     (5)  The sum of $250,000 in nonrecurring funds is
365appropriated from the Insurance Regulatory Trust Fund in the
366Department of Financial Services to the Office of Insurance
367Regulation for the 2006-2007 fiscal year for the purposes of
368funding the provisions of this section.
369     Section 8.  The sums of $115,322 in recurring funds and
370$10,486 in nonrecurring funds are appropriated from the
371Insurance Regulatory Trust Fund in the Department of Financial
372Services for the 2006-2007 fiscal year for the purposes of
373funding the provisions of this act, and two full-time equivalent
374positions with 59,435 in associated salary rate are authorized.
375     Section 9.  Except as otherwise expressly provided in this
376act, this act shall take effect July 1, 2006.


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