State of Florida Sinkhole Laws - 2004

627.706  Sinkhole insurance.--

(1)  Every insurer authorized to transact property insurance in this state shall make available coverage for insurable sinkhole losses on any structure, including contents of personal property contained therein, to the extent provided in the form to which the sinkhole coverage attaches.

(2)  "Loss" means structural damage to the building. Contents coverage shall apply only if there is structural damage to the building.

(3)  "Sinkhole loss" means actual physical damage to the property covered arising out of or caused by sudden settlement or collapse of the earth supporting such property only when such settlement or collapse results from subterranean voids created by the action of water on a limestone or similar rock formation.

(4)  Every insurer authorized to transact property insurance in this state shall make a proper filing with the office for the purpose of extending the appropriate forms of property insurance to include coverage for insurable sinkhole losses.

History.--s. 2, ch. 81-280; s. 809(2nd), ch. 82-243; s. 79, ch. 82-386; s. 114, ch. 92-318; s. 8, ch. 2000-333; s. 1189, ch. 2003-261.

627.7061  Coverage inquiries.--Inquiries about coverage on a property insurance contract are not claim activity, unless an actual claim is filed by the insured that results in a company investigation of the claim.

History.--s. 78, ch. 92-318.

627.707  Minimum standards for investigation of sinkhole claims by insurers; nonrenewals.--

(1)  Upon receipt of a claim for a sinkhole loss, an insurer must meet the following minimum standards in investigating a claim:

(a)  Upon receipt of a claim for a sinkhole loss, the insurer must make an inspection of the insured's premises to determine if there has been physical damage to the structure which might be the result of sinkhole activity.

(b)  If, upon the investigation pursuant to paragraph (a), the insurer discovers damage to a structure which is consistent with sinkhole activity or if the structure is located in close proximity to a structure in which sinkhole damage has been verified, then prior to denying a claim, the insurer must obtain a written certification from an individual qualified to determine the existence of sinkhole activity, stating that the cause of the claim is not sinkhole activity, and that the analysis conducted was of sufficient scope to eliminate sinkhole activity as the cause of damage within a reasonable professional probability. The written certification must also specify the professional discipline and professional licensure or registration under which the analysis was conducted.

(c)  If the insurer obtains, pursuant to paragraph (b), written certification that the cause of the claim was not sinkhole activity, and if the policyholder has submitted the sinkhole claim without good faith grounds for submitting such claim, the policyholder shall reimburse the insurer for 50 percent of the cost of the analysis under paragraph (b); however, a policyholder is not required to reimburse an insurer more than $2,500 with respect to any claim. A policyholder is required to pay reimbursement under this paragraph only if the insurer, prior to ordering the analysis under paragraph (b), informs the policyholder of the policyholder's potential liability for reimbursement and gives the policyholder the opportunity to withdraw the claim.

(2)  No insurer shall nonrenew any policy of property insurance on the basis of filing of claims for partial loss caused by sinkhole damage or clay shrinkage as long as the total of such payments does not exceed the current policy limits of coverage for property damage, and provided the insured has repaired the structure in accordance with the engineering recommendations upon which any payment or policy proceeds were based.

History.--s. 1, ch. 92-146; s. 4, ch. 93-401.

627.7077  Florida Sinkhole Insurance Facility and other matters related to affordability and availability of sinkhole insurance; feasibility study.--

(1)  The Florida State University College of Business Department of Risk Management and Insurance shall, under the direction of the office, conduct a feasibility and cost-benefit study of a potential Florida Sinkhole Insurance Facility and of other matters related to affordability and availability of sinkhole insurance. The study shall be conducted in consultation with the State Board of Administration and the Florida Geological Survey. The university shall provide a preliminary report of its analysis, findings, and recommendations to the Financial Services Commission and the presiding officers of the Legislature no later than February 1, 2005, and shall provide a final report no later than April 1, 2005.

(2)  The potential functions of the facility to be analyzed include:

(a)  Serving as the direct insurer or the reinsurer for all or some sinkhole losses.

(b)  Providing training, communication, and other educational services to the public, engineers, the construction industry, insurance professionals, or others.

(c)  Providing uniform standards for use by insurers in evaluating sinkhole loss claims.

(d)  Providing consulting services for insurers.

(e)  Maintaining a public database of all confirmed sinkholes and paid sinkhole loss claims, for use by consumers and by the insurance, building construction, banking, and real estate industries.

(3)  The feasibility study shall, at a minimum, address the following issues:

(a)  Where the facility should be housed, including, but not limited to, the options of creating a separate facility or using the Citizens Property Insurance Corporation or the Florida Hurricane Catastrophe Fund.

(b)  Federal income taxation implications.

(c)  Funding options and costs associated with operating the facility, including means of funding sinkhole insurance through premiums that are adequate to fund covered losses.

(d)  Applicability of the experience of similar facilities of other states.

(e)  Other economic impact considerations pertinent to a facility.

(f)  Alternative dispute resolution mechanisms.

(g)  The impact of all present requirements in the Florida Insurance Code on affordability and availability of sinkhole insurance and recommendations to address such impacts.

(4)  The study shall be funded from a budget of no more than $300,000, which will be funded by assessments on insurers issuing property insurance in this state. Such assessments shall be collected by the office and shall be prorated among such insurers according to a formula whereby each insurer shall pay a fraction of such budget, the numerator of which shall be such insurer's direct earned premiums for property insurance in this state and the denominator of which shall be the total direct earned premiums for property insurance in this state for calendar year 2003.

History.--s. 15, ch. 2004-370; s. 160, ch. 2004-390.




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