Florida Senate - 2014 CS for SB 416
By the Committee on Banking and Insurance; and Senator Simpson
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
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.—
34 (6) CITIZENS PROPERTY INSURANCE CORPORATION.—
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.
81 d. “Sinkhole loss” has the same meaning as provided in s.
83 e. “Stabilization repair” means stabilizing the land and
84 structure caused by sinkhole activity and repairing the damaged
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
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
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
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
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
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
216 5. The corporation shall pay for other repairs to the
217 structure and contents in accordance with the terms of the
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
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.