Bill Text: FL S0416 | 2014 | Regular Session | Comm Sub
Bill Title: Sinkhole Coverage
Spectrum: Bipartisan Bill
Status: (Failed) 2014-05-02 - Died in Appropriations [S0416 Detail]
Download: Florida-2014-S0416-Comm_Sub.html
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. 25 26 Be It Enacted by the Legislature of the State of Florida: 27 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 coverageThe office may establish a pilot program45to offer optional sinkhole coverage in one or more counties or46other territories of the corporation for the purpose of47implementing s. 627.706, as amended by s. 30, chapter 2007-1,48Laws of Florida.Under the pilot program, the corporation is not49required to issue a notice of nonrenewal to exclude sinkhole50coverage upon the renewal of existing policies, but may exclude51such 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.