If you live in Florida, you have seen the media reports over the past year and half exposing Citizens Property Insurance Corporation’s many failures. Citizens’ approach to Sinkhole Loss claims is no different. Florida law requires all insurance carriers, including Citizens, to repair below ground damages and immediately tender the actual value of the above ground damages. Many policyholders participate in the statutory alternative dispute resolution program called neutral evaluation provided by Florida Statute 627.7074. This program requires the Department of Financial Services to appoint a third-party engineer not retained by either party to review subsurface data and issue an opinion whether there is sinkhole activity and how to repair it.

On many occasions, Citizens will refuse to adopt the neutral evaluator’s findings. As you can imagine, a policyholder is placed in a difficult situation. Does the policyholder repair the home the way Citizens’ demands, despite knowing that the independent third-party engineer has recommended additional repair? Or, is the policyholder forced to file a lawsuit against Citizens for its failure to agree to repair the property in accordance with the neutral evaluator’s recommendations?

Even more troubling are the cases wherein Citizens refuses to recognize coverage for the loss after the third-party neutral evaluator opines that sinkhole activity exists at the property. Obviously, litigation is necessitated because the policyholder has suffered damage and the neutral evaluator has opined the cause and origin of the loss is covered under the insurance contract between the parties.

So far, I have only discussed Citizens shortcomings for the subsurface issues. The most troubling action taken by Citizens is how it handles the above ground damages portion of a sinkhole loss claim. Florida law unambiguously requires Citizens to tender the actual cash value of the claim upon confirmation of a sinkhole. Citizens often delays payment up to a year and its payment is often egregiously low. In fact, Citizens ignores basic adjustment principles and Florida Statutes in its adjustment of this portion of the loss. On many occasions, policyholders provide Citizens with an estimate from a state licensed general contractor that is ignored by Citizens.

Florida Statute 626.9744 requires that all insurance carriers place the policyholder into their pre-loss condition.

Unless otherwise provided by the policy, when a homeowner’s insurance policy provides for the adjustment and settlement of first-party losses based on repair or replacement cost, the following requirements apply:

(1) When a loss requires repair or replacement of an item or part, any physical damage incurred in making such repair or replacement which is covered and not otherwise excluded by the policy shall be included in the loss to the extent of any applicable limits. The insured may not be required to pay for betterment required by ordinance or code except for the applicable deductible, unless specifically excluded or limited by the policy.

(2) When a loss requires replacement of items and the replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. In determining the extent of the repairs or replacement of items in adjoining areas, the insurer may consider the cost of repairing or replacing the undamaged portions of the property, the degree of uniformity that can be achieved without such cost, the remaining useful life of the undamaged portion, and other relevant factors.

One of the most common types of above ground damage at a property is damaged tiles throughout the interior of the property. Citizens will note damaged tiles, but will only agree to pay for the individual cracked tiles and attempt to replace the damaged tile with tile that does not match in quality, color, or size.

Citizens pushes for everyone to believe lawsuits over sinkhole loss claims are frivolous, but nothing can be further from the truth. Citizens has the ability to treat its policyholders in a compassionate way and prevent many of its own problems and lawsuits. For starters, adopt what the neutral evaluator recommends, it makes common sense and is the right thing to do. Secondly, apply adjustment practices 101 and make proper payments for all damage to the property. Maybe then Citizens will not waste so much money on attorneys’ fees and actually achieve its proposed goal and get these properties repaired effectively and efficiently.