New rules changing the way disputed sinkhole claims are handled in Florida as part of the state’s Sinkhole Neutral Evaluation Program have been approved and took effect July 27.
The main changes to the consumer sinkhole claim dispute process include:
- Repealing the Neutral Evaluator standards because the standards are now set forth in Florida statute.
- Imposing a five business day limit on insurers to contact claimants after notice of a request for neutral evaluation.
- Imposing a three business day deadline on neutral evaluators to disclose conflicts of interest.
- Requiring professionals used by a neutral evaluator to disclose conflicts of interest.
The Florida Department of Financial Services proposed the new rules earlier this year. Amendments and additions requested by the Florida Insurance Council were also approved following a May hearing requested by FIC, according to Tasha Carter, director of the Division of Consumer Services of DFS.
The council testified at the May 12 hearing on behalf of its member companies. FIC said its main concern was the proposed time limit of three days on insurers to contact claimants after receiving notice of a request for neutral evaluation and requested a seven day time period instead.
“A lot of times policyholders are represented by a public adjuster or plaintiff’s attorneys and when insurance company [representatives] have to contact a policyholder and then go through an attorney or adjuster three days is just too short,” said Katrina Calloway, general counsel for FIC.
Tom Valentine, senior attorney for DFS, rejected this request, saying a seven day waiting period would eat too much into the time allowed to resolve the sinkhole dispute (14 days). The parties ultimately compromised on changing the limit to five days.
Calloway also requested the new sinkhole rules include additional language stating that if all time periods are not complied with the request for a neutral evaluation would not be invalidated. She said a lack of such language could create a situation where a policyholder or attorney could try to get out of the neutral evaluation process.
“Our companies love neutral evaluation,” said Calloway. “Any kind of alternative dispute resolution mechanism helps decrease litigation and is good for the policyholder and is good for the insurance company.”
DFS agreed to the request. The department also approved an FIC recommendation allowing any professionals that a neutral evaluator retains (building contractors, geologists and engineers) to come and inspect the property as part of the dispute resolution process, not just neutral evaluators and the representatives of the insured.
Other additions requested by FIC and incorporated into the revised rule included:
- Allowing insurance companies to contact policyholder representatives and not just the policyholder.
- Starting the neutral evaluation request process as of the date insurers receive notification from DFS, instead of the date DFS was first notified of the dispute.
Florida’s Sinkhole Neutral Evaluation Program requires by law that insurance companies inspect the premises of a property upon receipt of a claim for a sinkhole loss to determine if there has been structural damage that may be the result of sinkhole activity.
If the insurer discovers structural damage which is consistent with a sinkhole loss, or if the insurer is unable to identify a valid cause of such damage, the insurer must engage a professional engineer or geologist to conduct testing to determine the cause of loss and report their findings to the insurer, DFS states on their website.
Following the receipt of the report or the denial of a claim for a sinkhole loss, the insurer is required to notify the policyholder of their right to participate in the neutral evaluation program.
The neutral evaluator is defined by DFS as a professional engineer or geologist who has completed a course of study in alternative dispute resolution designed or approved by DFS for use in the neutral evaluation process and who is determined by DFS to be fair and impartial to the process.
Neutral evaluation requested by an insured or their insurer is mandatory.
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