Florida Senate - 2014 PROPOSED COMMITTEE SUBSTITUTE
Bill No. CS for SB 416
Ì655076;Î655076
576-02530-14
Proposed Committee Substitute by the Committee on Appropriations
(Appropriations Subcommittee on General Government)
1 A bill to be entitled
2 An act relating to sinkhole coverage; amending s.
3 627.351, F.S.; requiring Citizens Property Insurance
4 Corporation to submit a biannual report on the number
5 of residential sinkhole policies requested, issued,
6 and declined; providing legislative intent and
7 establishing a Citizens Sinkhole Stabilization Repair
8 Program for sinkhole claims; defining terms;
9 prohibiting the corporation from requiring a
10 policyholder to advance payment for stabilization
11 repairs provided under the program; providing
12 requirements and procedures for selecting
13 stabilization repair contractors to conduct
14 stabilization repairs; requiring stabilization repairs
15 to be conducted pursuant to a contract and providing
16 parameters for such contracts; requiring the
17 policyholder to select a contractor from the pool
18 within a certain time period; specifying additional
19 parameters with respect to the program, including
20 provision for resolving disputes between the
21 corporation and a policyholder; providing
22 applicability; requiring the corporation to offer
23 specified deductible amounts for sinkhole loss
24 coverage; amending s. 627.706, F.S.; revising the
25 definition of “professional engineer”; requiring the
26 Office of Program Policy Analysis and Government
27 Accountability to conduct a study of the program and
28 submit a report to the Governor, the Chief Financial
29 Officer, and the Legislature; providing an effective
30 date.
31
32 Be It Enacted by the Legislature of the State of Florida:
33
34 Section 1. Paragraph (ee) of subsection (6) of section
35 627.351, Florida Statutes, is amended, present paragraphs (ff)
36 through (hh) of that subsection are redesignated (hh) through
37 (jj), respectively, and new paragraphs (ff) and (gg) are added
38 to that subsection, to read:
39 627.351 Insurance risk apportionment plans.—
40 (6) CITIZENS PROPERTY INSURANCE CORPORATION.—
41 (ee) At least once every 6 months, the corporation shall
42 submit a report to the office disclosing:
43 1. The total number of requests received for residential
44 sinkhole loss coverage;
45 2. The total number of policies issued for residential
46 sinkhole loss coverage;
47 3. The total number of requests declined for residential
48 sinkhole loss coverage; and
49 4. The reasons for declining requests for residential
50 sinkhole loss coverage The office may establish a pilot program
51 to offer optional sinkhole coverage in one or more counties or
52 other territories of the corporation for the purpose of
53 implementing s. 627.706, as amended by s. 30, chapter 2007-1,
54 Laws of Florida. Under the pilot program, the corporation is not
55 required to issue a notice of nonrenewal to exclude sinkhole
56 coverage upon the renewal of existing policies, but may exclude
57 such coverage using a notice of coverage change.
58 (ff) The Legislature finds that providing a program to
59 repair property damaged by sinkholes safeguards the public’s
60 health, safety, and welfare and that it is in the public’s
61 interest for sinkhole loss claims to be resolved by stabilizing
62 the land and structure and repairing the foundation of the
63 damaged structure. The Legislature further finds that, in the
64 past, many homeowners who obtained payouts from the corporation
65 for a sinkhole claim did not use the funds to repair or
66 remediate the claimed damage, thereby harming the real estate
67 marketability of their homes and the valuation of other homes in
68 the area. Therefore, the corporation shall establish a Citizens
69 Sinkhole Stabilization Repair Program to promote the repair and
70 remediation of sinkhole damage to homes. By March 31, 2015, any
71 claim against a corporation policy that covers residential
72 sinkhole loss for which it is determined that a covered sinkhole
73 loss has occurred must be included in and governed by the repair
74 program for the purpose of making stabilization repairs. The
75 determination of whether a policyholder has a covered sinkhole
76 loss will be made by the corporation or through neutral
77 evaluation, judicial decree, or final judgment.
78 1. As used in this paragraph, the term:
79 a. “Engineering report” means the report issued pursuant to
80 s. 627.7073(1).
81 b. “Neutral evaluation” and “neutral evaluator” have the
82 same meanings as provided in s. 627.706(2).
83 c. “Recommendation of the engineer” means the
84 recommendation of the professional engineer engaged by the
85 corporation and included in the report pursuant to s.
86 627.7073(1)(a)5.
87 d. “Sinkhole loss” has the same meaning as provided in s.
88 627.706(2).
89 e. “Stabilization repair” means stabilizing the land and
90 structure caused by sinkhole activity and repairing the damaged
91 structure.
92 f. “Stabilization repair contractor” means a contractor who
93 makes stabilization repairs.
94 2. The repair program shall be managed by the corporation
95 and must include the following components:
96 a. The policyholder may not be required to advance payment
97 for stabilization repairs.
98 b. Stabilization repairs must be conducted by a
99 stabilization repair contractor selected from an approved
100 stabilization repair contractor pool procured by the corporation
101 pursuant to an open and transparent process. Each contractor
102 within the pool must be qualified and approved by the
103 corporation based on criteria that include the following
104 requirements:
105 (I) The stabilization repair contractor corporate entity
106 must demonstrate experience in the stabilization of sinkhole
107 activity pursuant to requirements established by the
108 corporation.
109 (II) The stabilization repair contractor must be certified
110 as a contractor pursuant to s. 489.113(1).
111 (III) The stabilization repair contractor must demonstrate
112 capacity to be bonded and provide performance, surety, or other
113 bonds as described in this section, which may be supplemented by
114 additional requirements as determined by the corporation.
115 (IV) The stabilization repair contractor must demonstrate
116 that it meets insurance coverage requirements, including, but
117 not limited to, commercial general liability and workers’
118 compensation, established by the corporation.
119 (V) The stabilization repair contractor must maintain a
120 valid drug-free workplace program.
121 (VI) Such other requirements as may be established by the
122 corporation.
123 c. Stabilization repair contractors selected from the
124 approved stabilization repair contractor pool shall conduct
125 stabilization repairs pursuant to a contract between the
126 contractor and the corporation. Such contract is not subject to
127 paragraph (e) or s. 287.057. Pursuant to the terms of the
128 contract, the selected contractor is solely responsible for the
129 performance of all necessary stabilization repairs specified in
130 the engineering report and the recommendations of the engineer.
131 d. The corporation shall develop a standard stabilization
132 repair contract for the purpose of conducting stabilization
133 repairs on all properties within the repair program. At a
134 minimum, the contract must require:
135 (I) The assigned stabilization repair contractor to
136 complete all stabilization repairs identified in the engineering
137 report based on line-item prices developed by the corporation
138 which reasonably reflect actual market prices for sinkhole
139 stabilization activities.
140 (II) Each stabilization repair contractor to post a payment
141 bond in favor of the corporation as obligee for each project
142 assigned and to post a performance bond, secured by a third-
143 party surety, in favor of the corporation as obligee.
144 (III) The stabilization repair contractor to provide a
145 warranty to the policyholder, secured by an authorized insurer
146 or registered risk retention group, which covers all repairs
147 provided by the stabilization repair contractor for at least 5
148 years after completion of the stabilization repairs. If, for any
149 contract, the stabilization repair contractor demonstrates that
150 a warranty that is secured by an authorized insurer or
151 registered risk retention group cannot be procured, or that such
152 warranty cannot be procured for a cost equal to or less than 3
153 percent of the stabilization repair contract amount, the
154 corporation shall serve as the guarantor of the work performed
155 by the contractor. The corporation shall also provide a warranty
156 to the policyholder which covers all repairs provided by the
157 stabilization repair contractor for at least 5 years if the
158 stabilization repair contractor is unable to provide a remedy
159 required under the warranty it provided to the policyholder.
160 (IV) That, throughout the course of the stabilization
161 repairs performed by the contractor, the engineer monitor the
162 property and confirm that stabilization has been satisfactorily
163 completed and that no further stabilization is necessary to
164 remedy the damage identified in the engineering report and the
165 recommendations of the engineer.
166 (V) That the stabilization repair contractor notify the
167 corporation if the engineer concludes that additional
168 stabilization repairs are necessary to complete the repairs
169 specified in the engineering report and the recommendations of
170 the engineer. If repairs can be completed within policy limits,
171 the stabilization repair contractor shall complete the
172 additional repairs based on the line-item prices developed by
173 the corporation. The contract must also contain provisions
174 specifying the remedy and sanctions for failing to perform the
175 additional repairs.
176 e. The corporation shall enter into contracts with
177 qualified stabilization repair contractors to perform repairs.
178 The policyholder shall have up to 30 days to select a
179 stabilization repair contractor from the pool. If the
180 policyholder fails to make a selection within 30 days, the
181 corporation shall make a selection.
182 3. The corporation is not responsible for serving as a
183 stabilization repair contractor. The corporation’s obligations
184 under the repair program are not an election to repair by the
185 corporation and therefore do not imply or create a new
186 contractual relationship with the policyholder.
187 4. The corporation’s liability related to stabilization
188 repair activity pursuant to the repair program and all other
189 repairs to the structure conducted in accordance with the terms
190 of the policy may not be greater than the policy limits on the
191 structure.
192 5. The corporation shall pay for other repairs to the
193 structure and contents in accordance with the terms of the
194 policy.
195 6. If the professional engineer engaged by the corporation
196 determines that the stabilization repair cannot be completed
197 within policy limits, the corporation must pay to complete the
198 stabilization repair recommended by the corporation’s
199 professional engineer or tender the policy limits to the
200 policyholder, subject to any dual interest noted on the policy.
201 7. Once a sinkhole property damage claim has been settled,
202 or a court judgment or order for damages obtained, the property
203 owner must use the proceeds from such settlement or court
204 decision to repair and remediate the property within a
205 reasonable period of time. Property owners must provide notice
206 within 45 days after completion of the repairs. To facilitate
207 timely repairs and remediation, the corporation shall disburse
208 claim settlement proceeds and court-ordered judgments made
209 payable to the property owner, and if there is a mortgage
210 balance, to both the property owner and financial lender as co
211 payees.
212 8. If the corporation denies a policyholder’s claim for
213 sinkhole loss, the corporation or the policyholder may invoke
214 neutral evaluation by filing a request with the department
215 pursuant to s. 627.7074(7). Neutral evaluation is mandatory if
216 requested by the corporation or the policyholder.
217 a. The neutral evaluator may not directly or indirectly
218 participate in the remediation, repair, or restoration of the
219 damaged property that is the subject of the claim, have a
220 financial interest in the remediation, repair, or restoration of
221 the damaged property that is the subject of the claim, or have a
222 financial interest in any business entity that is involved in
223 the remediation, repair, or restoration of the damaged property
224 that is the subject of the claim.
225 b. The only issues to be determined by the neutral
226 evaluator, pursuant to state law and the applicable policy, are
227 whether there is sinkhole activity present as determined by a
228 qualified professional geologist and, if so, whether there is
229 sinkhole loss as determined by a qualified professional
230 engineer. If the neutral evaluator determines that sinkhole loss
231 exists, the sinkhole damage shall be included in and governed by
232 the repair program.
233 c. Filing a request for neutral evaluation tolls the
234 applicable time requirements for filing suit for 60 days
235 following the conclusion of the neutral evaluation process or
236 the time prescribed in s. 95.11, whichever is later.
237 9. This paragraph does not prohibit the corporation from
238 establishing a managed repair program for other repairs to the
239 structure in accordance with the terms of the policy.
240 10. This paragraph supersedes s. 627.7074(4) and applies
241 only to the corporation and its policyholders and does not apply
242 to any other insurer.
243 11. This paragraph supersedes s. 627.707(5)(a)-(d).
244 (gg) As a component of the stabilization repair program set
245 forth in paragraph (ff), a policy for residential property
246 insurance issued by the corporation must include a deductible
247 applicable to sinkhole losses which shall be offered in amounts
248 equal to 2 percent, 5 percent, and 10 percent of the policy
249 dwelling limits, with appropriate premium discounts offered with
250 each deductible amount. However, for the purposes of determining
251 eligibility pursuant sub-subparagraphs (c)5.a. and b. and s.
252 627.3518(5), the term “comparable coverage” for sinkhole losses
253 means a 10 percent deductible regardless of the deductible
254 selected by a corporation policyholder.
255 Section 2. Paragraph (f) of subsection (2) of section
256 627.706, Florida Statutes, is amended to read:
257 627.706 Sinkhole insurance; catastrophic ground cover
258 collapse; definitions.—
259 (2) As used in ss. 627.706-627.7074, and as used in
260 connection with any policy providing coverage for a catastrophic
261 ground cover collapse or for sinkhole losses, the term:
262 (f) “Professional engineer” means an engineer a person, as
263 defined in s. 471.005, who has a bachelor’s degree or higher in
264 engineering. A professional engineer must also have experience
265 and expertise in the identification of sinkhole activity or as
266 well as other potential causes of structural damage.
267 Section 3. By January 1, 2017, the Office of Program Policy
268 Analysis and Government Accountability shall review the Citizens
269 Sinkhole Stabilization Repair Program and submit a report to the
270 Governor, the Chief Financial Officer, the President of the
271 Senate, and the Speaker of the House of Representatives. The
272 report must:
273 (1) Analyze policyholder satisfaction with stabilization
274 repairs received through the program and the sufficiency of
275 consumer protections provided by the program.
276 (2) Analyze the timeliness of stabilization repairs, in
277 comparison with industry averages and practices. The report
278 shall evaluate the loss costs associated with sinkhole claims
279 under the program, comparing them with corporation’s loss costs
280 before the program’s creation.
281 (3) Evaluate whether disputes between stabilization repair
282 contractors and policyholders are resolved in an effective and
283 timely manner.
284 (4) Evaluate whether litigation of sinkhole claims and
285 associated costs are increasing or decreasing under the program,
286 and the causes of such litigation.
287 (5) Evaluate the cost-effectiveness of allowing the program
288 to be managed by a third-party administrator.
289 Section 4. This act shall take effect July 1, 2014.