Are Insurers Stacking the Deck Against Florida Policyholders With Sinkhole Claims?
(Note: this Guest Blog is part of a series on sinkhole issues).
Carriers seem to be using the 2005 changes to sinkhole legislation to stack the deck against policyholders who are seeking adequate repairs for their property. There are two statutes at play that have emboldened carriers to force inadequate repairs on the policyholders.
Florida Statute section 627.707 allows a carrier to withhold payment for the cost of building stabilization (sub-surface repairs) until the insured has entered into a contract to perform the work. Florida Statute section 627.7073(1)(c) declares that the “findings, opinions, and recommendations” of the carrier’s engineer or geologist as to the cause of distress to the property and as to the remediation protocol are “presumed correct.” Stacked together, these statutes have created a host of problems for policyholders seeking payment for proper repairs to their property. We have seen a trend in the last few years whereby carriers, armed with these new “rights,” have repeatedly recommended inadequate stabilization techniques and then withheld payment until the policyholders get under contract to do the repairs in the way forced by the carriers. The “my way or the highway” attitude surely can’t be what the legislature contemplated in reforming sinkhole legislation.
A closer inspection of the provisions of Florida Statue section 627.707 and a recent court decision give policyholders some much needed leverage in dealing with their carriers.
First, Florida Statute section 627.707 requires that the carriers “consult” with policyholders about the repair protocol. This “consultation” involves more than the carrier simply sending a repair protocol and saying “do it.” A meaningful consultation should include a dialogue about the proper repair method. Practically speaking, a policyholder will need to have a second opinion from its own engineer to present to the carrier. The relatively small investment in retaining an engineer will be well worth it if it results in the carrier agreeing to pay for the proper repairs.
Second, a carrier’s breach of its obligation to consult with the policyholder to develop a proper repair method could preclude the carrier from invoking Florida Statute section 627.707 to withhold payment for the stabilization until the insured is under contract. In certain cases, one party’s breach of a contract can preclude it from seeking protection under related portions of the contract. Here, Florida Statute 627.707 is part of the contract, and a carrier’s breach of one provision of the statute could affect its rights under other provisions of the statute.
Third, although Florida Statute section 627.7073 creates a presumption that the carrier’s engineering opinions and recommendations are correct, that presumption is rebuttable and it does not shift the burden of proof at trial. Recently, the Second District Court of Appeals held in Warfel v. Universal Insurance Co. of North America, that the presumption created in Florida Statute section 627.7073 does not shift the burden of proof to the policyholder at trial. In plain language – the carrier still has an obligation to prove by the greater weight of the evidence (i.e., the more persuasive and convincing) that the claim is excluded under an all-risk policy. This is a significant ruling that will help policyholders get fair treatment and adequate repairs for their sinkhole claims.
Amy,
First, I am happy to see that you, Donna and Kristin will be helping to educate the public about some of the complex Sinkhole claims issues of the day.
Regarding the topic at hand, my answer to your headline question is a resounding YES.
Over the years it has become increasingly difficult for policyholders, especially those who are uninformed, to obtain adequate settlements for their sinkhole claims.
Keep up the good work!
Great to see this post..You have done a great job..
I work for a property insurance company and while the statutes are correct, the assumptions are not always true. First, I find trouble with the land owners who want to fill void with cheaper sand and dirt options and not the correct concrete option that we recommend. Second, most people who claim singles end up picketing the money paid out by the insurer, so requiring a contract is not wrong or unethical in this situation.
If Chuck in Ocala gets a $150k settlement from insurers and pockets all but $20k and the rates go up in that area, how is that fair to other policy holders? Another fact missing from this, cost of sinkhole coverage is minimal and the payouts are extreme. To put a bad light on insurers is irresponsible.
Maybe this article should focus on public adjusters coercing people to sign with them, doing little or no valuable work on the claim, and then demanding 20% of sinkhole victims' payouts.
'Iceman' is an appropriate moniker.
If the insurers are not underwriting their files properly to assess the increased risk of sinkholes - they're doing something wrong. And now they want Floridians whose homes are damaged by sinkholes to pay the price for their ineptitude?
Aren't people suffering enough with financial crisis'? let's just throw one more thing on top of them if they discover they have a sinkhole.. let's just let' them literally get in the hole.
We need solutions.. not unintended consequences.. are they even thinking about this? Walk a mile in the shoes of a homeowner whose house is cracking and shifting due to a sinkhole... only to find their insurance company was not required to offer that coverage EVEN THOUGH THE LEGISLATORS KNEW FULL WELL THAT SINKHOLE CLAIMS WERE ON THE RISE. Are they just buying into the false premise that all sinkhole claims are fraudulent EVEN THOUGH the office of insurance regulation report which was published a few short months ago clearly said that less than .12% thats POINT 12% of claims were even referred for fraud? in fact.. the number of sinkholes are increasing whiel the number of reported cases of fraud is sharply decreasing.
So, do we have a sinkhole "claim" crisis or a sinkhole crisis?????
http://www.floir.com/pdf/2010_Sinkhole_Data_Call_Report.pdf