Senate Banking and Insurance Committee Reviews Sinkhole Report; Chairman Richter Indicates Preference for Private Market Solution
Jan 11, 2011
On January 10, 2010, the Florida Senate Committee on Banking and Insurance (“Committee”) met in Tallahassee, Florida, during which Committee Staff Director Steve Burgess and Staff Attorney Kathy Emerich reviewed the recently released Senate Interim Report (“Report”) on issues relating to sinkhole insurance.
The report provides a review of Florida laws and academic studies related to sinkholes, an analysis of sinkhole claims and costs, a review of single-peril residual market facilities and a summary of sinkhole-related problem areas.
Mr. Burgess and Ms. Emerich provided a detailed overview of the problems created by rising sinkhole claims. Mr. Burgess commented that sinkhole losses far exceed sinkhole premiums collected. He also noted that, while geological factors have not changed, sinkhole claims have risen dramatically. Claims frequency has tripled in three years.
Ms. Emerich reviewed options for the Florida Legislature to consider in relation to sinkhole issues. On one hand, the Legislature could recognize that sinkholes are an uninsurable risk and create a sinkhole repair program. Alternatively, the Legislature could change the current laws to address sinkhole insurance cost drivers.
Committee Chairman Garrett Richter noted that the current sinkhole situation has created a growing cottage industry. Statutory changes are needed to address cost drivers, he said, noting that, while a government program is one recommendation in the Report, he prefers a private market approach to solve the sinkhole problem.
During public testimony, several members of the Florida Property Casualty Association (“FPCA”) provided testimony from the insurance industry perspective. FPCA Member Locke Burt provided the Committee with an example of a sinkhole claim that demonstrated the unique and significant problems with sinkhole coverage.
In his presentation, Mr. Burt noted two major issues: In litigation, insurers are required to prove a negative (that a sinkhole does not exist), and they have to repair or remediate the ground.
Jimmy Graganella, also an FPCA member, discussed the problems created by public adjuster activities, such as inflating and re-opening claims.
The meeting concluded with several speakers unable to provide testimony due to time constraints.
To view the meeting agenda, click here.
Should you have any comments or questions, please contact Colodny Fass.