Sinkholes, Drywall, Public Adjusters and Alternative Reinsurance Products Part of Florida Senate’s 2010 Interim Project Work Plan

Jul 13, 2010


The Florida Senate’s Interim Project Work Plan, issued July 12, 2010, features several insurance-related items that focus on major property-related issues, such as public adjusters, defective drywall and sinkholes. 

Following is a list of insurance-related Senate Interim Projects, accompanied by the page number of the Work Plan on which the project can be located.   To view the complete Work Plan, click here and scroll to the page required.


Senate Committee on Banking and Insurance (Begins on Page 13)

  • 2011-104 (Interim Project – Due October 1, 2010) Issues Relating to Sinkhole Insurance
    • Florida has more sinkholes than any other state in the nation.   Further, insurance claims from Florida homeowners for damages resulting from sinkholes have increased dramatically both in number and costs over the past 10 years.   Costs associated with insuring against sinkhole-related losses and the increasing costs to remedy damage caused to insured property have escalated as well.  The Florida Legislature has made multiple changes to the laws governing sinkhole insurance coverage in 2005, 2006 and 2007, but has determined that further examination of the issues is warranted, 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 Florida’s Sinkhole Database, the oversight of which is the responsibility of the Florida Department of Financial Services (“DFS”).  To complete its report, Senate professional staff will research relevant statutes, rules, reports, studies and case law relating to sinkholes; interview DFS, Florida Office of Insurance Regulation (“OIR”) and Citizens Property Insurance Corporation staff; and survey selected stakeholders, insurers and consumers involved in the sinkhole claims process.


  • 2011-202 (Issue Brief – Due October 1, 2010) Financial Products That Serve As Alternative to Reinsurance
    • During the 2010 Legislative Session, Florida lawmakers considered a proposal that would have allowed insurers to transfer risk by purchasing a range of certain financial products in lieu of buying traditional reinsurance, which is more expensive.  However, Florida law does not qualify these products as reinsurance.  Under current law, authorized Florida insurers that purchase reinsurance are allowed to receive credit on their financial statements only if the reinsurance is a type that is approved and acceptable to the OIR, as specified in s. 624.610, F.S.  The 2010 legislation, which was not passed, would have provided for the aforementioned financial products to be treated as reinsurance under Florida law.  In finalizing Issue Brief 2011-202, the Senate will examine and evaluate various financial products that could serve as an alternative to reinsurance.


  • 2011-203 (Issue Brief – Due October 1, 2010) Public Adjusters
    • In the wake of Florida Governor Charlie Crist’s veto of CS/CS/SB 2044, the omnibus property insurance package that included revisions to the State’s regulation of public adjusters, the Senate will explore various public adjuster industry-related issues through interviews with selected insurers, public adjusters, DFS and OIR officials, as well as the Florida Insurance Consumer Advocate.  If it had become law, CS/CS/SB 2044 would have:
      • Prohibited public adjusters from making certain statements in advertisements or solicitations and mandated that certain information be included in contracts;
      • Instituted a three-year claims filing deadline for new, supplemental or reopened claims;
      • Capped fees in supplemental or reopened cases;
      • Required persons acting on behalf of an insurer to provide at least 48 hours’ notice to an insured or claimant, public adjuster or legal representative prior to scheduling a meeting with the claimant or an onsite inspection of the insured property;
      • Prohibited an insurer from excluding the public adjuster from in-person meetings with the insured;
      • Prohibited a public adjuster from restricting or preventing an insurer, or other person acting on behalf of the insurer, from having reasonable access to any insured, or to the insured property; and
      • Required public adjuster apprentices to complete additional hours of continuing education.


Senate Committee on Commerce (Begins on Page 37)

  • 2011-319 (Monitor Project) Imported Drywall 
    • Florida property appraisers in whose counties homes are affected by the presence of defective (“Chinese”) drywall  have recognized the depreciated value of these homes by lowering their assessments as required under s. 193 011, F.S., which specifically cites the present cash value of property and its condition as factors to be considered in determining just value.   However, no statewide policy currently exists to address this situation, therefore, property owners in different counties may receive different treatment.  The U.S. Consumer Product Safety Commission (“CPSC”) continues to issue interim remediation guidance to help homeowners struggling to rid their properties of problem drywall linked to corrosion of metal in their homes such as electrical components.  Based on scientific study of the problem to date, the U.S. Department of Housing and Urban Development and the CPSC have recommended that consumers remove all possible problem drywall from their homes and replace electrical components and wiring, as well as gas service piping, fire suppression sprinkler systems, smoke alarms and carbon monoxide alarms.  Several courts have now awarded damages to homeowners with defective drywall.  Ongoing litigation helps provide more information about the problem. However, because many of the manufacturers being sued are in China, it may be challenging for the homeowners to recover from the manufacturers themselves.  In conjunction with the Senate Committee on Regulated Industries, the Committee on Banking and Insurance will continue to monitor the development of the scientific, economic, legal and general policy issues associated with the national challenge presented by the imported drywall crisis.


    Senate Committee on General Government Appropriations (Begins on Page 85)

    • 2011-344 (Monitor Project) Florida Department of Financial Services Division of Risk Management Program Costs
      • Deficits of $17.1 million in Fiscal Year 2009-2010, $39.0 million in Fiscal Year 2010-2011 and $40.2 million in Fiscal Year 2011-2012 have been projected within Florida’s Risk Management Trust Fund.  The four primary cost drivers to which the increased program costs are attributed are:  (1) increasing workers’ compensation medical costs, including the escalating cost of prescription medications; (2) the annual cost of living supplements paid on claims involving total and permanent disability; (3) the increasing cost of civil rights claim settlements; and (4) the increasing number of presumption claims involving correctional officers.  In order to reduce claims and program costs, the 2010 Legislature passed HB 5306, which institutes several cost savings and efficiencies measures. However, the bill was vetoed.  Therefore, as part of its Work Plan, the Senate will continue to monitor program expenditures and explore options to reduce program costs and claims to Florida’s Risk Management Program.



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