Florida Senate - 2014              PROPOSED COMMITTEE SUBSTITUTE
       Bill No. CS for SB 416
       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.
   32  Be It Enacted by the Legislature of the State of Florida:
   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.—
   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.