View this article online: https://www.insurancejournal.com/magazines/mag-features/2011/06/06/201143.htm
Florida Gov. Rick Scott signed into law legislation that promises to lower costs for the state’s property insurers, including what they pay on sinkhole claims. Scott said the bill (SB 408) “strengthens Florida’s property insurance market by addressing cost drivers associated with burdensome regulations, and confronting the sinkhole crisis.”
The legislation was sponsored by Sen. Garrett Richter (R-Naples) and Rep. John Wood (R-Haines City). It passed the Senate 26-11 and the House 85-33 and took effect upon signing.
The new law limits sinkhole losses, changes the holdback provisions on dwelling and contents coverage, places a statute-of-limitations on sinkhole and hurricane claims, and caps public adjusters’ compensation. A summary of some of the key provisions of the new law prepared by the Legislature follows.
Time Limits, Statute of Limitations
The bill places time limits for bringing a hurricane or sinkhole claim and also creates a statute of limitations for bringing a breach of contract property insurance action in court. A claim, supplemental claim, or reopened windstorm or hurricane claim must be given to the insurer within 3 years after the hurricane first makes landfall or the windstorm causes covered damage. An initial, supplemental or reopened sinkhole claim must be given to the insurer within 2 years after the policyholder knew or reasonably should have known about the sinkhole loss. The bill also enacts a 5-year statute of limitations for bringing an action for the breach of a property insurance contract that runs from the date of loss.
Public Adjusters
The bill limits public adjuster fees related to reopened or supplemental claims to a maximum of 20 percent of the reopened or supplemental claim payment. The bill also limits public adjuster fees to 20 percent of an insurance claim payment made by the insurer more than one year after events that are the subject of a declaration of a state of emergency by the governor. A public adjuster fee related to a policy issued by Citizens Property Insurance Corp. may not exceed 10 percent of the additional amount actually paid in excess of the amount originally offered by Citizens on the claim.
Rate Standards
The bill requires property insurance rate filings to be submitted via the “file and use” method until May 1, 2012 and receive approval from the Office of Insurance Regulation before implementing the insurer’s proposed rate. Residential property insurers are authorized to make a separate rate filing limited solely to an adjustment of its rates for reinsurance and financing products used as a replacement for reinsurance. The rate filing may not result in a premium increase of more than 15 percent for an individual policyholder and must be approved or disapproved by the Office of Insurance Regulation within 45 days.
Citizens Property Insurance Corp.
As of January 1, 2012, Citizens must require agents to obtain from applicants for coverage a signed Acknowledgment of Potential Surcharge and Assessment Liability form. The form details that Citizens policyholders are subject to a Citizens policyholder surcharge of up to 45 percent of premium and emergency assessments.
Citizens policies issued or renewed on or after January 1, 2012, which cover sinkhole loss may not include coverage for losses to appurtenant structures, sidewalks, decks, or patios that are caused by sinkhole activity.
Replacement Cost Coverage
The bill modifies how insurers must pay dwelling or personal property losses on a replacement cost basis. For a dwelling loss, the insurer must initially pay the actual cash value, minus the deductible. Subsequently the insurer must pay any amounts necessary to perform repairs as work is performed. If a total loss of a dwelling occurs, the insurer must pay the entire replacement cost coverage without holdback of depreciation in value pursuant to the Valued Policy Law.
For personal property losses insured on a replacement cost basis, the insurer must offer two claim payment options. The first option requires the insurer to pay the replacement cost without holdback of depreciation, regardless of whether the insured replaces the property. The second option allows the insurer to limit the initial payment to the actual cash value of the personal property to be replaced. To receive payment from the insurer for the full replacement value of the personal property, the insured must provide a receipt for the replaced property to the insurer.
Sinkhole and Catastrophic Ground Cover Collapse Insurance
The bill authorizes insurers to restrict catastrophic ground cover collapse and sinkhole loss coverage to the principal building as defined in the insurance policy. The bill also allows an insurer to require a property inspection prior to issuing sinkhole loss coverage.