Florida Senate - 2014                              CS for SB 416
       By the Committee on Banking and Insurance; and Senator Simpson
       597-01643-14                                           2014416c1
    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; providing requirements and
   15         terms for contracts between the corporation and such
   16         contractors; specifying additional parameters with
   17         respect to the program, including provision for
   18         resolving disputes between the corporation and a
   19         policyholder; providing applicability; requiring the
   20         Office of Program Policy Analysis and Government
   21         Accountability to conduct a study of the program and
   22         submit a report to the Governor, the Chief Financial
   23         Officer, and the Legislature; providing an effective
   24         date.
   26  Be It Enacted by the Legislature of the State of Florida:
   28         Section 1. Paragraph (ee) of subsection (6) of section
   29  627.351, Florida Statutes, is amended, present paragraphs (ff)
   30  through (hh) of that subsection are redesignated as paragraphs
   31  (gg) through (ii), respectively, and new paragraphs (ff) is
   32  added to that subsection, to read:
   33         627.351 Insurance risk apportionment plans.—
   35         (ee) At least once every 6 months, the corporation shall
   36  submit a report to the office disclosing:
   37         1. The total number of requests received for residential
   38  sinkhole loss coverage;
   39         2. The total number of policies issued for residential
   40  sinkhole loss coverage;
   41         3.The total number of requests declined for residential
   42  sinkhole loss coverage; and
   43         4. The reasons for declining requests for residential
   44  sinkhole loss coverage The office may establish a pilot program
   45  to offer optional sinkhole coverage in one or more counties or
   46  other territories of the corporation for the purpose of
   47  implementing s. 627.706, as amended by s. 30, chapter 2007-1,
   48  Laws of Florida. Under the pilot program, the corporation is not
   49  required to issue a notice of nonrenewal to exclude sinkhole
   50  coverage upon the renewal of existing policies, but may exclude
   51  such coverage using a notice of coverage change.
   52         (ff)The Legislature finds that providing a program to
   53  repair property damaged by sinkholes safeguards the public’s
   54  health, safety, and welfare and that it is in the public’s
   55  interest for sinkhole loss claims to be resolved by stabilizing
   56  the land and structure and repairing the foundation of the
   57  damaged structure. The Legislature further finds that, in the
   58  past, many homeowners who obtained payouts from the corporation
   59  for a sinkhole claim did not use the funds to repair or
   60  remediate the claimed damage, thereby harming the real estate
   61  marketability of their homes and the valuation of other homes in
   62  the area. Therefore, the corporation shall establish a Citizens
   63  Sinkhole Stabilization Repair Program to promote the repair and
   64  remediation of sinkhole damage to homes. By March 31, 2015, any
   65  claim against a corporation policy that covers residential
   66  sinkhole loss for which it is determined that a covered sinkhole
   67  loss has occurred must be included in and governed by the repair
   68  program for the purpose of making stabilization repairs. The
   69  determination of whether a policyholder has a covered sinkhole
   70  loss will be made by the corporation or through neutral
   71  evaluation, judicial decree, or final judgment.
   72         1. As used in this paragraph, the term:
   73         a. “Engineering report” means the report issued pursuant to
   74  s. 627.7073(1).
   75         b. “Neutral evaluation” and “neutral evaluator” have the
   76  same meanings as provided in s. 627.706(2).
   77         c. “Recommendation of the engineer” means the
   78  recommendation of the professional engineer engaged by the
   79  corporation and included in the report pursuant to s.
   80  627.7073(1)(a)5.
   81         d. “Sinkhole loss” has the same meaning as provided in s.
   82  627.706(2).
   83         e. “Stabilization repair” means stabilizing the land and
   84  structure caused by sinkhole activity and repairing the damaged
   85  structure.
   86         f. “Stabilization repair contractor” means a contractor who
   87  makes stabilization repairs.
   88         2. The repair program shall be managed by the corporation
   89  and must include the following components:
   90         a.The policyholder may not be required to advance payment
   91  for stabilization repairs.
   92         b.Stabilization repairs must be conducted by a
   93  stabilization repair contractor selected from an approved
   94  stabilization repair contractor pool procured by the corporation
   95  pursuant to an open and transparent process. Each contractor
   96  within the pool must be qualified and approved by the
   97  corporation based on criteria that include the following
   98  requirements:
   99         (I)The stabilization repair contractor corporate entity
  100  must demonstrate experience in the stabilization of sinkhole
  101  activity pursuant to requirements established by the
  102  corporation.
  103         (II) The stabilization repair contractor must be certified
  104  as a contractor pursuant to s. 489.113(1).
  105         (III)The stabilization repair contractor must demonstrate
  106  capacity to be bonded and provide performance, surety, or other
  107  bonds as described in this section, which may be supplemented by
  108  additional requirements as determined by the corporation.
  109         (IV)The stabilization repair contractor must demonstrate
  110  that it meets insurance coverage requirements, including, but
  111  not limited to, commercial general liability and workers’
  112  compensation, established by the corporation.
  113         (V)The stabilization repair contractor must maintain a
  114  valid drug-free workplace program.
  115         (VI)Such other requirements as may be established by the
  116  corporation.
  117         c. Stabilization repair contractors selected from the
  118  approved stabilization repair contractor pool shall conduct
  119  stabilization repairs pursuant to a contract between the
  120  contractor and the corporation. Such contract is not subject to
  121  paragraph (e) or s. 287.057. Pursuant to the terms of the
  122  contract, the selected contractor is solely responsible for the
  123  performance of all necessary stabilization repairs specified in
  124  the engineering report and the recommendations of the engineer.
  125         d. The corporation shall develop a standard stabilization
  126  repair contract for the purpose of conducting stabilization
  127  repairs on all properties within the repair program. At a
  128  minimum, the contract must require:
  129         (I) The assigned stabilization repair contractor to
  130  complete all stabilization repairs identified in the engineering
  131  report based on line-item prices developed by the corporation
  132  which reasonably reflect actual market prices for sinkhole
  133  stabilization activities.
  134         (II)Each stabilization repair contractor to post a payment
  135  bond in favor of the corporation as obligee for each project
  136  assigned and to post a performance bond, secured by a third
  137  party surety, in favor of the corporation as obligee, in a
  138  principal amount equal to the total cost of all contracts
  139  annually awarded to that contractor.
  140         (III)The stabilization repair contractor to provide a
  141  warranty to the policyholder which covers all repairs provided
  142  by the stabilization repair contractor for at least 5 years
  143  after completion of the stabilization repairs. The corporation
  144  shall also provide a warranty to the policyholder which covers
  145  all repairs provided by the stabilization repair contractor for
  146  at least 5 years if the stabilization repair contractor is
  147  unable to provide a remedy required under the warranty it
  148  provided to the policyholder.
  149         (IV)That, throughout the course of the stabilization
  150  repairs performed by the contractor, the engineer monitor the
  151  property and confirm that stabilization has been satisfactorily
  152  completed and that no further stabilization is necessary to
  153  remedy the damage identified in the engineering report and the
  154  recommendations of the engineer.
  155         (V)That the stabilization repair contractor notify the
  156  corporation if the engineer concludes that additional
  157  stabilization repairs are necessary to complete the repairs
  158  specified in the engineering report and the recommendations of
  159  the engineer. If repairs can be completed within policy limits,
  160  the stabilization repair contractor shall complete the
  161  additional repairs based on the line-item prices developed by
  162  the corporation. The contract must also contain provisions
  163  specifying the remedy and sanctions for failing to perform the
  164  additional repairs.
  165         e.The corporation shall enter into contracts with
  166  qualified stabilization repair contractors to perform repairs
  167  pursuant to a process that requires all of the following
  168  components:
  169         (I)Within 30 days after the completion of the engineering
  170  report, the report must be posted on a list that is made
  171  available to all stabilization repair contractors within the
  172  pool.
  173         (II)The corporation shall select a stabilization repair
  174  contractor from the pool pursuant to a selection process
  175  established by the corporation for assigning a stabilization
  176  repair contractor to perform stabilization repairs for each
  177  property within the program. The selection process must include
  178  all of the following:
  179         (A) All stabilization repair contractors within the pool
  180  are provided an opportunity to submit an offer to perform the
  181  stabilization repairs recommended in the engineering report.
  182  Such offer must include an itemized statement of work based on
  183  line-item prices developed by the corporation.
  184         (B)The corporation shall review the offers and provide the
  185  policyholder with a list of all stabilization repair contractors
  186  that submit an offer under sub-sub-sub-subparagraph (A).
  187         (C)The policyholder has up to 30 days to select a
  188  stabilization repair contractor from the list. If the
  189  policyholder fails to make a selection within 30 days, the
  190  corporation shall make the selection. The corporation may
  191  reserve the right to select a stabilization repair contractor on
  192  the list based upon quality, cost-effectiveness, and such other
  193  criteria as the corporation determines appropriate.
  194         (D)If no stabilization repair contractor submits an offer
  195  to perform the stabilization repairs for a property within the
  196  program or if all offers are above the policyholder’s policy
  197  limit, the corporation may enter the property into the selection
  198  process again or may pay the policyholder an amount up to the
  199  policy limits on the structure. If the property is entered into
  200  the selection process three times and no stabilization repair
  201  contractor submits an offer to repair the property or all offers
  202  are above the policyholder’s policy limit, the corporation shall
  203  elect to pay for stabilization repairs above the policyholder’s
  204  policy limit or pay the policyholder an amount up to the policy
  205  limits on the structure.
  206         3.The corporation is not responsible for serving as a
  207  stabilization repair contractor. The corporation’s obligations
  208  under the repair program are not an election to repair by the
  209  corporation and therefore do not imply or create a new
  210  contractual relationship with the policyholder.
  211         4.The corporation’s liability related to stabilization
  212  repair activity pursuant to the repair program and all other
  213  repairs to the structure conducted in accordance with the terms
  214  of the policy may not be greater than the policy limits on the
  215  structure.
  216         5. The corporation shall pay for other repairs to the
  217  structure and contents in accordance with the terms of the
  218  policy.
  219         6.If the professional engineer engaged by the corporation
  220  determines that the stabilization repair cannot be completed
  221  within policy limits, the corporation must pay to complete the
  222  stabilization repair recommended by the corporation’s
  223  professional engineer or tender the policy limits to the
  224  policyholder.
  225         7.If a dispute arises between the corporation and the
  226  policyholder under this paragraph, under the policy, or under s.
  227  627.707 relating to the nature or extent of stabilization
  228  repairs to be conducted under the repair program, the sole
  229  remedy for resolving such dispute shall be to proceed with the
  230  necessary stabilization repairs through the repair program
  231  established under this paragraph, regardless of whether the
  232  claim, judgment, or decree is for breach of contract,
  233  declaratory relief, or specific performance.
  234         8. If the corporation denies a policyholder’s claim for
  235  sinkhole loss, the corporation or the policyholder may invoke
  236  neutral evaluation by filing a request with the department
  237  pursuant to s. 627.7074(7). Neutral evaluation is mandatory if
  238  requested by the corporation or the policyholder.
  239         a. The neutral evaluator may not directly or indirectly
  240  participate in the remediation, repair, or restoration of the
  241  damaged property that is the subject of the claim, have a
  242  financial interest in the remediation, repair, or restoration of
  243  the damaged property that is the subject of the claim, or have a
  244  financial interest in any business entity that is involved in
  245  the remediation, repair, or restoration of the damaged property
  246  that is the subject of the claim.
  247         b. The only issues to be determined by the neutral
  248  evaluator, pursuant to state law and the applicable policy, are
  249  whether there is sinkhole activity present as determined by a
  250  qualified professional geologist and, if so, whether there is
  251  sinkhole loss as determined by a qualified professional
  252  engineer. If the neutral evaluator determines that sinkhole loss
  253  exists, the sinkhole damage shall be included in and governed by
  254  the repair program.
  255         c. Filing a request for neutral evaluation tolls the
  256  applicable time requirements for filing suit for 60 days
  257  following the conclusion of the neutral evaluation process or
  258  the time prescribed in s. 95.11, whichever is later.
  259         9.This paragraph does not prohibit the corporation from
  260  establishing a managed repair program for other repairs to the
  261  structure in accordance with the terms of the policy.
  262         10. This paragraph supersedes s. 627.7074(4) and applies
  263  only to the corporation and its policyholders and does not apply
  264  to any other insurer.
  265         11. This paragraph supersedes s. 627.707(5)(a)-(d).
  266         Section 2. By January 1, 2017, the Office of Program Policy
  267  Analysis and Government Accountability shall review the Citizens
  268  Sinkhole Stabilization Repair Program and submit a report to the
  269  Governor, the Chief Financial Officer, the President of the
  270  Senate, and the Speaker of the House of Representatives. The
  271  report must:
  272         (1) Analyze policyholder satisfaction with stabilization
  273  repairs received through the program and the sufficiency of
  274  consumer protections provided by the program.
  275         (2) Analyze the timeliness of stabilization repairs, in
  276  comparison with industry averages and practices. The report
  277  shall evaluate the loss costs associated with sinkhole claims
  278  under the program, comparing them with corporation’s loss costs
  279  before the program’s creation.
  280         (3) Evaluate whether disputes between stabilization repair
  281  contractors and policyholders are resolved in an effective and
  282  timely manner.
  283         (4) Evaluate whether litigation of sinkhole claims and
  284  associated costs are increasing or decreasing under the program,
  285  and the causes of such litigation.
  286         (5) Evaluate the cost-effectiveness of allowing the program
  287  to be managed by a third-party administrator.
  288         Section 3. This act shall take effect July 1, 2014.