(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.