Florida’s Citizens Property Insurance Asks Takeout Insurers to Apply All Other Perils Deductible to Certain Sinkhole Claims

Florida’s Citizens Property Insurance Corporation (“Citizens”) advised insurers in its Depopulation Program today, June 6, 2013, that for renewals June 1 or later, it has implemented a mandatory 10 percent sinkhole loss deductible for HO-3, DP-1 and DP-3 policies with Building and Sinkhole Loss coverage.  This coverage change was sent to affected policyholders through a Notice of Change in Policy Terms with the renewal policy.

However, it has been determined that policyholders with renewals effective January 1, 2013 through April 5, 2013 were not properly notified.  To resolve this issue, Citizens is sending a letter of explanation to affected policyholders advising that, because of this omission, the 10 percent sinkhole loss deductible shown on the Renewal Declarations page will not be effective until the policy renews in 2014, unless the policy already included a 10 percent sinkhole deductible prior to the 2013 renewal.

Until the 2014 renewal, Citizens will apply the All Other Perils (“AOP”) deductible to any sinkhole claim filed on policies whose renewal effective dates are from January 1, 2013 through April 5, 2013, and for which the policyholder was not properly notified.

Nearly 300 affected policies have been assumed in the Depopulation Program.  If a takeout insurer assumed policies renewing January 1, 2013 through April 5, 2013, assumed policies affected by this issue might have been included.  Citizens will provide a list of affected policies under separate cover.  

Citizens asks takeout companies to apply the AOP deductible to any covered sinkhole claim with a Date of Loss during the assumption period (i.e. up to the expiration date of the Citizens policy).  Companies should contact Citizens immediately regarding any disagreement with this request.

Important Notes Regarding Depopulation Data:

• Beginning with the June Month-End Extracts, Citizens will include a field to identify those affected policies already assumed.  Citizens asks that takeout companies apply the AOP deductible to these policies for covered sinkhole losses during the assumption period.

Beginning with the June month-end IDF, Citizens will include a field to identify those affected policies for which the AOP deductible is considered grandfathered.  If a takeout company selects affected policies for assumptions to occur during the 2013 policy year, the company must certify that it will apply the AOP deductible for all covered sinkhole claims during the assumption period.

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