Florida Sinkhole Database Rule Hearing Report: January 11

On January 11, 2010, the Florida Department of Financial Services (“DFS”), Division of Consumer Services held a hearing on proposed Rule 69J-9.001 entitled “Database of Information Relating to Sinkholes.”  To view the meeting notice and proposed Rule, click here.

As prescribed by Florida law, the DFS has consulted with the Florida Geological Survey and the Florida Department of Environmental Protection to implement a statewide electronic database of sinkholes and related activity identified in the State. The form and content of the database is set forth in the proposed Rule.

The law provides for the database content to include standards for reporting and investigating sinkholes for inclusion in the database, along with requirements for insurers to report the receipt of claims involving sinkhole loss and other similar activities.  The database may also include information on damage due to ground settling and other subsidence activity. 

The proposed Rule would require insurers to submit an electronic report (on a secured DFS Web site) on all sinkhole claims investigated after January 1, 2005.  Some of the information would include the name of the insurance company, where the claim occurred and the depth and width of the sinkhole.

DFS Bureau of Education, Advocacy & Research Chief Greg Thomas presided over the hearing, which he opened by noting that the goal of the proposed Rule is to comply with the statutory requirements in section 627.7065, F.S. in the most functional and inexpensive manner possible.

Mr. Thomas acknowledged insurance carrier concerns regarding the ability to acquire the necessary data.  He also noted that the DFS may lack the authority to impose penalties for lack of compliance because they do not directly regulate insurance companies. 

Insurance company representatives who attended the hearing raised other concerns, which are outlined below.

• The difficulty of retroactively pulling hard claim files to compile the required information.
• The need to clarify the definitions of “sinkhole” and “catastrophic ground collapse,” since they have changed since 2005. It was suggested that two forms be used: one for “sinkhole” claims and the other for “catastrophic ground collapse.”
• The reporting requirements involve disclosure of sensitive company and policyholder information such as license numbers, claim numbers, status of claim, location of the occurrence.

Mr. Thomas indicated that all of these concerns will be considered in Rule development.

The record will remain open until Tuesday, January 19, 2010 for additional written comments. 

Should you have any comments or questions, please contact Colodny Fass.

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