Ever been cancelled by your insurance company; even though you reported no losses for years, maybe decades?
The Florida Senate and the Florida House are fast tracking a bill relating to property insurance in Florida. And, that sounds good on its face, but is it good for homeowners?
Easy answer is it is not good for homeowners, but it is simply one of many bills that legislators are trying to pass that will help big business (not small business owners) and will hurt consumers. This bill will severely limit coverage available to consumers and provides no reduction in premium that in any realistic way corresponds to the loss by consumers.
Let’s take a look at the latest version of Senate Bill 408 – An Act Relating to Property and Casualty Insurance; shall we?
Florida is a big sand bar. Sinkholes are a fact of life; even though they happen rarely. The damage, which can be done by a sinkhole is typically substantial.
The new law will limit coverage for sinkholes to only the “principal building”. So, no coverage for your unattached garage unless the insurance company specifically agrees to add it. In addition, there is no longer the standard deductible; insurers will now be able to charge a deductible equal to “1 percent, 2 percent, 5 percent, or ten percent of the policy dwelling limits”. So, if you have $250,000 in dwelling coverage, you could have a sinkhole damage deductible as high as $25,000.
Question: is there a sinkhole crisis in Florida that would compel the legislature to limit consumers’ rights and additional benefits to protect insurance companies?
Now, though, through a carefully worded disclosure, insurance companies are not required to offer sinkhole coverage as long as they “inform” policyholders of the following:
“Your policy provides coverage for a catastrophic ground cover collapse that results in the property being condemned and uninhabitable. Otherwise, your policy does not provide coverage for sinkhole losses.”
If a sinkhole collapses the corner foundation and requires $30,000 in structural repairs, but does not cause your property to be “condemned and uninhabitable”, there is likely to be no coverage. If there is coverage, your deductible may be high enough that there may as well not be any coverage.
If you file a claim, this is how the process goes under Senate Bill 408.
The insurance company hires the professional engineer to determine if sinkhole activity has occurred and the extent of repairs necessary according to the engineer hired by the insurance company. The insurance company does not have to pay for repairs not found necessary by the insurance company paid engineer.
What happens if the insurance company paid engineer finds no sinkhole loss and after you have refused to withdraw the claim, but you refuse to withdraw it? The “policyholder shall reimburse the insurer for 50 percent of the actual costs of the analyses and services provided…”
What if you must file a lawsuit against the insurance company? The new law says that the burden of proof shifts in favor of the insurance company and its engineer:
“…the findings, opinions, and recommendations of the professional engineer as to the land and building stabilization and foundation repair…shall be presumed correct…”
In English, this means that you must go into court, the judge is going to start out believing the findings of the insurance company paid engineer and you will be required to prove that he or she is wrong and why.
So, let us assume that you have a sinkhole loss that the insurance company agrees to and pays for repairs. If that happens, under Senate bill 408, you are required to record in the county records that a sinkhole loss occurred to the property. In addition, if you sell your house, you are affirmatively required to disclose to a buyer that a sinkhole loss occurred. Now, if we assume that the insurance company’s engineer properly identifies all the necessary repairs; the insurance company pays the correct amount; and the insurance company’s contractor properly makes the repairs; the house should be fine now. Well, maybe. The new law specifically waives any liability upon the insurance company for the negligence of the insurance company paid engineer in finding all the damage or proscribing all the appropriate repairs.
Why should a paper have to be recorded to notify the world of sinkhole damage; why is there an affirmative duty to disclose the nature of sinkhole damage; and why such a large deductible for sinkhole claims? Because these three things combines will discourage homeowners from reporting sinkhole claims. The insurance companies know this; your legislators know this; and both of them are chuckling all the way to the bank.
When can you file suit? Well, you must agree to non-binding, but mandatory, “neutral evaluation” before you may file a lawsuit (now, keep in mind that your house is damaged through this whole process). The “neutral evaluator” must “make reasonable efforts” to hold the evaluation conference within 90 days, but the failure to accomplish it in 90 days does not invalidate the requirement to still go forward with it. After the “neutral evaluator” gets around to evaluating, he or she has 14 business days (effectively three weeks” in which to issue a report.
So, if you suffer sinkhole damage to your home. If you are lucky enough to get the insurance company to agree to pay for repairs. If you are fortunate enough to get everything properly repaired, you have probably been living in a damaged home for possibly as long as four to six months. You are also now branded forever with a home that has been documented as having suffered a sinkhole collapse; even though the insurance company’s engineer will assure you that it has all been properly identified and fixed.
So, what is the overriding crisis that is motivating your legislators to pass this type of anti-consumer legislation?
Because they are betting they can get away with it and that you will reelect them anyway. What does that say about what they think of us voters?