FPCA Homeowners Division: Two Sinkhole Tail Claim Proposals Currently Circulating for 2011 Florida Legislative Session
Mar 7, 2011
Florida Property and Casualty Association Members:
Two proposals relating to sinkhole “tail” claims are currently circulating in advance of Florida’s 2011 Regular Legislative Session, which begins tomorrow, March 8.
A brief summary of both proposals is below. One outlines the creation of a sinkhole facility to handle the claims and the other is modeled after legislation that utilized additional litigation reforms to deal with asbestos claims during the mid 1990s.
If you would like additional information on these two proposals, please contact Katie Webb (kwebb@cftlaw.com) at Colodny Fass.
Sinkhole “Tail” Claims-Legislative Proposals
The “Facility” repair program would:
- Create a program under the Florida Insurance Guaranty Association (“FIGA”) that investigates and facilitates sinkhole “tail” claims and repairs
- Be governed by a board of directors and plan of operation.
- Be authorized to purchase reinsurance
- Be authorized to contract with vendors to administer and adjust claims
- Require a plan of operation to provide for reasonable accounting and data reporting, and an annual review of costs associated with the administration and servicing of claims
- Allow insurers to choose to participate in the program and pay a premium for participation
- Require an annual review of the program to determine whether or not it should be deactivated
- Authorize FIGA procedures to be instituted if the program goes insolvent.
- Allow public adjusters to only charge up to 10 percent
- Not be governed by Florida’s bad faith statutes
The asbestos litigation-based proposal would:
- Provide a framework to sinkhole claims and litigation in situations where a trial has not yet begun; or, in the alternative, to claims filed after the legislation’s effective date. This would be specifically for claims made on expired policies.
- Require additional evidence supporting when the alleged sinkhole damage occurred, as well as certifications by an engineer regarding the damage to the property
- Establish the following litigation reforms in addition to the above:
- A “statute of repose” would establish a “bright line” cut-off beyond which no lawsuits relating to sinkhole claims could be filed, regardless of the date the insured noticed the damage.
- Clarify the burden of proof standard for sinkhole claim
- Eliminate one-way attorneys’ fees for sinkhole claims
- Eliminate extra-contractual damages for sinkhole claim
- Require additional disclosures on properties with sinkhole claims
- Impose bad faith penalties on claimants who file back-dated sinkhole claims
Additionally, it has been proposed that, if insurers are required to offer sinkhole coverage, then the following should apply:
- All bad faith on sinkhole claims should be eliminated
- It should be illegal for public adjusters and attorneys to be involved in a sinkhole claim in any manner
- Insurers should be allowed to “cap” coverage at $20,000. The ability to offer more coverage should be optional.
- It should be incumbent on policyholders to prove existence of a sinkhole, as well as to pay for the engineer report.
- Under no circumstance should insurers be obligated to go beyond the stated limit of $20,000 or coverage they choose to offer above that amount.
- Insurers should be allowed to charge for “land,” since that is what they are covering.
- The Florida Office of Insurance Regulation should not be relied upon to promulgate rates for “land” coverage, but rather state that it is 100 percent of the rate that applies to the dwelling coverage.
