Legislators considering catastrophic-only sinkhole coverage
Apr 4, 2011
The following article was published in the Suncoast News on April 4, 2011:
Legislators Considering Catastrophic-Only Sinkhole Coverage
By Carl Orth
NEW PORT RICHEY – Sinkhole claims continue to frustrate state lawmakers trying to contain fraud and staggering losses the past five years or so.
Now some legislators are contemplating essentially doing away with full insurance coverage for sinkhole damage. Only a catastrophic ground collapse that renders a house uninhabitable would be covered.
About four-fifths of Citizens Property Insurance policyholders in Pasco already have bypassed full sinkhole coverage since the option became available in 2007. They were eager for dramatically lower premiums on homeowner insurance policies.
Even then the river of red ink continued to flow on sinkhole claims paid by Citizens. The state’s insurer of last resort, Citizens is about the only choice for West Pasco residents since private insurers are too scared to enter the market here.
Greg Armstrong, a former president of the West Pasco Board of Realtors, cheered the 7-3 vote by a Florida Senate committee in late February for a bill that would virtually end full sinkhole coverage.
State Sen. Mike Fasano, R-New Port Richey, voted against the proposal. He fears residents could be left in the lurch.
“I have full respect for Mike, but we happen to disagree on this issue,” Armstrong said in a Tuesday phone interview.
As a spokesman for Florida Realtors, Armstrong traveled several times to Tallahassee to testify that drastic changes are needed and needed now in sinkhole insurance.
“I don’t see how you can do away with the fraud without eliminating the (full) coverage,” Armstrong said, adding. “I grew up in Florida and we didn’t have a sinkhole problem until we had full sinkhole coverage.”
If one home gets sinkhole repairs, it “stigmatizes” the surrounding neighborhood and drags down home values, Armstrong said.
Insurance executives often don’t even try to challenge sinkhole claims under current rules, Armstrong said. They simply write checks and move on, he said.
That could change, however, forcing the insurer either to fix the problem or pay off a house and tear it down.
The House just introduced a bill for changes in sinkhole insurance, state Rep. John Legg, R-Port Richey, said Wednesday. So debate over the legislation is still taking shape as the Legislature convenes Tuesday for its 2011 regular session.
“We have a significant concern about the increased number of questionable claims,” Legg said, adding, “At the end of the day, it gets the attorneys and public adjusters out of the process.”
Current sinkhole regulations produce an “open-ended claims process,” Legg complained. Nobody knows how much repairs might cost, even for a problem that begins with a hairline crack.
House leaders are looking at an alternative plan based on a Texas law. Texas lawmakers faced similar problems with mold damage claims.
Florida might copy the Texas mold-damage plan by giving residents a chance to buy optional sinkhole coverage in steps from $25,000 to $100,000 as a rider to the main policy.
“It allows the consumer a choice,” Legg said.
Fasano is “very concerned” that Senate Bill 408 has “become a pro-insurance industry bill that will ultimately do great harm” to homeowners, said his chief legislative aide, Greg Giordano.
Fasano wants to keep the mandate that insurers must offer full sinkhole coverage if the homeowner wishes to pay for it. Otherwise, banks and other lenders might be reluctant to underwrite new mortgages or new home construction.
Fasano attempted to create stricter licensing and training requirements for public adjusters before they can handle sinkhole claims.