FPCA Homeowners Division – Member Review and Comment Requested
Aug 20, 2010
FPCA Homeowners Division Members:
We understand that the Florida Office of Insurance Regulation (OIR) is going to issue a data call for information on sinkhole claims activity in order to help the Senate staff with their interim project on sinkholes. The interim project has an October deadline, and as a result this data call will likely be issued within the next week. OIR needs some time to program the data call, so the specific information they request will be finalized very soon. From what we gather, OIR is going to ask for the data from all homeowners insurers, but Senate staff plans to concentrate on the top 25 or so carriers.
CFTKA is requesting your thoughts on the specific information you think OIR must ask carriers to provide to get an accurate picture of the sinkhole claims situation. At this time, it appears that OIR will attempt to only focus on “big picture” information. We would like to provide OIR with suggestions, concerns, and additional comments regarding the type of information that will illuminate the problem areas without overwhelming carriers or the Senate staff that will review the information for their report.
Specifically, OIR will likely request information relating to the following:
- Date of loss;
- Number of open claims per year and the number of closed claims per year;
- Date each claim opened, closed, whether there was a dispute, wether there was suspected fraud, and whether the suspected fraud was reported to the Division of Insurance Fraud;
- County of sinkhole;
- Was there an inspection by the company;
- Was an engineering report produced;
- Was a public adjuster involved; and
- Was an attorney involved.
Please provide feedback as soon as possible to Katie Webb (email@example.com). Please note that time is of the essence. For your reference, a description of the Senate’s interim project is set forth below.
INTERIM PROJECT TITLE:
Issues Relating to Sinkhole Insurance
DATE DUE: October 1, 2010
PROJECT NUMBER: 2011-104
ISSUE DESCRIPTION and BACKGROUND:
Florida has more sinkholes than any other state in the nation. They are an obvious feature of
Florida’s natural topography as they provide a primary pathway for rainwater to replenish subsurface
groundwater and play an important part of the aquifer system that supplies 95 percent of Florida’s
drinking water. However, sinkhole formation is aggravated and accelerated by urbanization and
suburbanization. Development increases water usage, alters drainage pathways, adds weight to the
ground surface, and redistributes soil. According to the Federal Emergency Management Agency
(FEMA), the number of human-induced sinkholes has doubled since 1930.
Insurance claims from Florida homeowners for damages resulting from sinkholes have increased
dramatically both in number and costs over the past 10 years. Under current law, insurers must make
available to policyholders, for an appropriate additional premium, sinkhole coverage for losses on any
structure, including personal property contents. Property insurers must also provide coverage for a
catastrophic ground cover collapse.
The costs associated with insuring against sinkhole-related losses and the increasing costs to remedy
damage caused to insured property have escalated. Sinkhole insurance claims have increased in recent
years by 200 to 300 percent for some property insurers who in turn have paid millions of dollars
annually to settle such claims. For example, the number of sinkhole claims made against Citizens
Property Insurance Corporation have more than doubled between 2005 and 2009.
The Legislature has made multiple changes to the laws governing sinkhole insurance coverage in
2005, 2006, and 2007, but further issues need to be examined, including but not limited to, sinkhole
investigations and reports; the burden of proof in sinkhole claim disputes; fraudulent practices pertaining
to sinkhole claims; the procedures and time parameters for the stabilization and repair of damaged
buildings and structures, including the payment by insurers of sinkhole claims; the accountability and
liability of engineers and geologists involved in sinkhole claims; the neutral evaluation process,
including the selection and qualifications of the sinkhole neutral evaluator; and the purpose and
effectiveness of the sinkhole database which is the responsibility of the Department of Financial
The recent increase in the number of sinkhole claims and costs associated with such claims
underscores the need to examine the issues outlined above. In examining these matters, the interim
report will seek to provide information to aid policymakers and other interested parties in assessing
Professional staff will employ a number of research methods including:
researching relevant statutes, rules, reports, studies, and case law relating to sinkholes;
interviewing staff with the Department of Financial Services, the Office of Insurance
Regulation, and Citizens Property Insurance Corporation; and
surveying selected stakeholders, insurers and consumers involved in the sinkhole claims’