Title: Sinkhole Coverage

Summary: Requires Citizens Property Insurance Corporation to submit biannual report on number of residential sinkhole policies requested, issued, & declined & reasons for declining coverage; requires corporation to establish Citizens Sinkhole Stabilization Repair Program for sinkhole claims; prohibits corporation from requiring policyholder to advance payment for stabilization repairs provided under program; provides requirements & procedures for selecting stabilization repair contractors to conduct stabilization repairs; requires stabilization repairs to be conducted pursuant to contract; provides requirements for such contracts; requires policyholder to select contractor from pool within certain time period; specifies additional requirements with respect to program; requires corporation to offer specified deductible amounts for sinkhole loss coverage; requires OPPAGA to conduct study of program & submit report to Governor, CFO, & Legislature; provides severability.

Full Text:
An act relating to sinkhole coverage; amending s. 627.351, F.S.; requiring Citizens Property Insurance Corporation to submit a biannual report on the number of residential sinkhole policies requested, issued, and declined and the reasons for declining coverage; providing leg islative findings; requiring the corporation to establish a Citizens Sinkhole Stabilization Repair Program for sinkhole claims; providing definitions; prohibiting the corporation from requiring a policyholder to advance payment for stabilization repairs pr ovided under the program; providing requirements and procedures for selecting stabilization repair contractors to conduct stabilization repairs; requiring stabilization repairs to be conducted pursuant to a contract; providing requirements for such contrac ts; requiring the policyholder to select a contractor from the pool within a certain time period; specifying additional requirements with respect to the program; requiring the corporation to offer specified deductible amounts for sinkhole loss coverage; am ending s. 627.706, F.S.; revising definitions; requiring the Office of Program Policy Analysis and Government Accountability to conduct a study of the program and submit a report to the Governor, the Chief Financial Officer, and the CS/HB 2014 Legislature; providing legislative intent; providing severability;providing an effective date. Be It Enacted by the Legislature of the State of Florida: Section 1. Paragraph (ee) of subsection (6) of section 627.351, Florida Statutes, is amended, paragraphs (ff) throu gh (hh) of that subsection are redesignated as paragraphs (hh) through (jj), respectively, and new paragraphs (ff) and (gg) are added to that subsection, to read: 627.351 Insurance risk apportionment plans.-(6) CITIZENS PROPERTY INSURANCE CORPORATION.-(ee) At least once every months, the corporation shall submit a report to the office disclosing: 1. The total number of requests received for residential sinkhole loss coverage; 2. The total number of policies issued for residential sinkhole loss coverage; 3. The total number of requests declined for residential sinkhole loss coverage; and 4. The reasons for declining requests for residential sinkhole loss coverage The office may establish a pilot program to offer optional sinkhole coverage in one or more counties or other territories of the corporation for the purpose of implementing s. 627.706, as amended by s. 30, chapter 2007-1, Laws of Florida. Under the pilot program, the corporation is not CS/HB 2014 required to issue a notice of nonrenewal to excl ude sinkhole coverage upon the renewal of existing policies, but may exclude such coverage using a notice of coverage change.(ff) The Legislature finds that providing a program to repair property damaged by sinkholes safeguards the public's health, safe ty, and welfare and that it is in the public's interest for sinkhole loss claims to be resolved by stabilizing the land and structure and repairing the foundation of the structure. The Legislature further finds that, in the past, many homeowners who obtain ed payouts from the corporation for a sinkhole claim did not use the funds to repair or remediate the claimed damage, thereby harming the real estate marketability of their homes and the valuation of other homes in the area. Therefore, the corporation shal lestablish a Citizens Sinkhole Stabilization Repair Program to ensure repair and remediation of sinkhole damage to homes. By March 31, 2015, any claim against a corporation policy that covers residential sinkhole loss for which it is determined that a cov ered sinkhole loss has occurred must be included in and governed by the repair program for the purpose of making stabilization repairs. The determination of whether a policyholder has a covered sinkhole loss will be made by the corporation or through neutr al evaluation, judicial decree, or final judgment. 1. As used in this paragraph, the term: a. "Engineering report" means the report issued pursuant to s. 627.7073(1). CS/HB 2014 b. "Recommendation of the engineer" means the recommendation of the professional en gineer engaged by the corporation and included in the report pursuant to s. 627.7073(1)(a)5. c. "Sinkhole loss" has the same meaning as provided in s. 627.706(2). d. "Stabilization repair" means stabilizing the land and structure caused by sinkhole act ivity and repairing the foundation of the structure. e. "Stabilization repair contractor" means a contractor who makes stabilization repairs. 2. The repair program shall be managed by the corporation and must include the following components: a. The policyholder may not be required to advance payment for stabilization repairs. b. Stabilization repairs must be conducted by a stabilization repair contractor selected from an approved stabilization repair contractor pool procured by the corporation pursuant to an open and transparent process. The pool must be sufficiently comprehensive to provide competition and inclusiveness. A pool with a minimum of contractors shall be presumed to be competitive and inclusive. Each contractor within the pool mu st be qualified and approved by the corporation based on criteria that include the following requirements: (I) The stabilization repair contractor corporate entity must demonstrate experience in the stabilization of sinkhole CS/HB 2014 activity pursuant to requirem ents established by the corporation. (II) The stabilization repair contractor must be certified as a contractor pursuant to s. 489.113(1). (III) The stabilization repair contractor must demonstrate capacity to be bonded and provide performance, surety, or other bonds as described in this paragraph, which may be supplemented by additional requirements as determined by the corporation. (IV) The stabilization repair contractor must demonstrate that it has obtained all insurance required by law, including,but not limited to, public liability, property damage, and workers' compensation insurance. (V) The stabilization repair contractor must maintain a valid drug-free workplace program. (VI) Such other requirements consistent with s. 287.057. c. Stabilization repair contractors shall be selected from the approved stabilization repair contractor pool to stabilize the land and structure and repair the foundation of the structure in accordance with the recommendation of the engineer pursuant to a con tract between the contractor and the corporation. Such contracts are not subject to paragraph (e) or s. 287.057. Pursuant to the terms of the contract, the selected contractor is solely responsible for the performance of all necessary stabilization repairs specified in the engineering report and the recommendation of the engineer. d. The corporation shall develop a standard stabilization CS/HB 2014 repair contract for the purpose of stabilizing the land and structure and repairing the foundation of the structure in accordance with the recommendation of the engineer for all properties within the repair program. At a minimum, the contract must require: (I) The assigned stabilization repair contractor to complete all stabilization repairs identified in the engineering report based on line-item prices developed by the corporation which reasonably reflect actual market prices for sinkhole stabilization activities. (II) Each stabilization repair contractor to post a payment bond, secured by a third-party surety, in favo rof the corporation as obligee for each project assigned and to post a performance bond, secured by a third-party surety, in favor of the corporation as obligee for each project assigned. The amount of the payment bond and performance bond shall be equal to the amount of each project contract. (III) The stabilization repair contractor to provide a warranty to the policyholder, secured by an authorized insurer or registered risk retention group, which covers all repairs provided by the stabilization repai rcontractor for at least 151 years after completion of the stabilization repairs. If, for any contract, the stabilization repair contractor demonstrates that a warranty that is secured by an authorized insurer or registered risk retention group cannot be pr ocured, or that such warranty cannot be procured for a cost equal to or less than 156 CS/HB 2014 percent of the stabilization repair contract amount, the corporation shall serve as the guarantor of the work performed by the contractor. The corporation shall also provid ea warranty to the policyholder which covers all repairs provided by the stabilization repair contractor for at least years if the stabilization repair contractor is unable to provide a remedy required under the warranty it provided to the policyholder. (IV) That, throughout the course of the stabilization repairs performed by the contractor, the professional engineer monitor the property and confirm that stabilization has been satisfactorily completed and that no further stabilization is necessary to remedy the damage identified in the engineering report and the recommendation of the engineer. (V) That the stabilization repair contractor notify the corporation if the professional engineer concludes that additional stabilization repairs are necessary to complete the repairs specified in the engineering report and the recommendation of the engineer. If repairs can be completed within policy limits, the stabilization repair contractor shall complete the additional repairs based on the line-item prices developed by the corporation. The contract must also contain provisions specifying the remedy and sanctions for failing to perform the additional repairs. e. The corporation shall enter into contracts with qualified stabilization repair contractors to perf orm repairs. The policyholder shall have up to days to select a CS/HB 2014 stabilization repair contractor from the pool. If the policyholder fails to make a selection within days, the corporation shall make a selection. 3. The corporation is not responsible for serving as a stabilization repair contractor. The corporation's obligations under the repair program are not an election to repair by the corporation and therefore do not imply or create a new contractual relationship with the policyholder. 4. The co rporation's liability related to stabilization repair activity pursuant to the repair program and all other repairs to the structure conducted in accordance with the terms of the policy may not be greater than the policy limits on the structure. 5. The corporation shall pay for other repairs to the structure and contents in accordance with the terms of the policy. 6. If the professional engineer engaged by the corporation determines that the stabilization repair cannot be completed within policy limits, the corporation must pay to complete the stabilization repair recommended by the corporation's professional engineer or tender the policy limits to the policyholder without a reduction for the repair expenses incurred and subject to any dual interest note don the policy. 7. Once there has been an adjudication of a litigated sinkhole property damage claim and an order has verified sinkhole loss and adjudicated whether repairs must be made, CS/HB 2014 including repairs other than or in addition to those in the recommendation of the engineer, stabilization repairs must be completed within a reasonable period of time. Property owners must provide notice of any dissatisfaction with regard to the effectiveness of repairs within days after completion of the repairs. To facilitate timely repairs and remediation, the corporation shall respond to such notice within days. If policy limits are tendered pursuant to subparagraph 6., such proceeds shall be made payable to the policyholder, subject to any dual interest noted on the policy. 8. This paragraph does not prohibit the corporation from establishing a managed repair program for other repairs to the structure in accordance with the terms of the policy. 9. This paragraph supersedes s. 627.707(5)(a)-(d). 10. This paragraph does not alter the procedure for engaging a professional engineer specified under s. 627.707. (gg) As a component of the stabilization repair program set forth in paragraph (ff), a policy for residential property insurance issued by the corporat ion must include a deductible applicable to sinkhole losses which shall be offered in amounts equal to percent, percent, and percent of the policy dwelling limits, with appropriate premium discounts offered with each deductible amount. However, for the purposes of determining eligibility pursuant sub-subparagraphs (c)5.a. and b. and s. 627.3518(5), the term "comparable coverage" for sinkhole losses means a-percent deductible regardless of the deductible CS/HB 2014 selected by a corporation policyholder. Section 2. Paragraphs (c) and (f) of subsection (2) of section 627.706, Florida Statutes, are amended to read: 627.706 Sinkhole insurance; catastrophic ground cover collapse; definitions.-(2) As used in ss. 627.706-627.7074, and as used in connection with any policy providing coverage for a catastrophic ground cover collapse or for sinkhole losses, the term: (c) "Neutral evaluator" means an a professional engineer licensed under chapter with experience and expertise in the identification of sinkh ole activity as well as other potential causes of structural damage or a professional geologist.The engineer or professional geologist must have who has completed a course of study in alternative dispute resolution designed or approved by the department for use in the neutral evaluation process, must be and who is determined by the department to be fair and impartial,and must not be otherwise ineligible for certification as provided in s. 627.7074.(f) "Professional engineer" means a person, as defined in s. 471.005, who has a bachelor's degree or higher in engineering. A professional engineer must also have experience and expertise in the identification of sinkhole activity or as well as other potential causes of structural damage. Section 3. By January 1, 2017, the Office of Program Policy Analysis and Government Accountability shall review the Citizens Sinkhole Stabilization Repair Program and submit a CS/HB 2014 report to the Governor, the Chief Financial Officer, the President of the Senate, and the Speaker of the House of Representatives. The report must: (1) Analyze policyholder satisfaction with stabilization repairs received through the program and the sufficiency of consumer protections provided by the program. (2) Analyze the timeliness of stabilization repairs in comparison with industry averages and practices. The report must evaluate the loss costs associated with sinkhole claims under the program, comparing them with the corporation's loss costs before the program's creation. (3) Evalu ate whether disputes between stabilization repair contractors and policyholders are resolved in an effective and timely manner. (4) Evaluate whether litigation of sinkhole claims and associated costs are increasing or decreasing under the program and the causes of such litigation. (5) Evaluate the cost-effectiveness of allowing the program to be managed by a third-party administrator. Section 4. If any provision of this act or the application thereof to any person or circumstance is held invalid, su ch invalidity shall not affect other provisions or applications of this act which can be given effect without the invalid provision or application. It is the express intent of the Legislature to enact multiple important but independent reforms to Florida law relating to sinkhole insurance coverage provided by Citizens CS/HB 2014 Property Insurance Corporation and related claims. The Legislature further intends that the multiple reforms in the act could and should be enforced if one or more provisions are held invalid. To this end, the provisions of this act are declared severable. Section 5. This act shall take effect July 1, 2014.