On May 11, 2011, SB 408 was presented to Governor Scott, who signed the legislation into law on May 17, 2011 (Chapter Law 2011-39). The legislation became effective upon signing, with the exception of sections which specifically stated a later effective date. SB 408 is a sweeping piece of legislation that proposes various changes to Florida’s property insurance laws. The purpose of this analysis is to discuss the important changes relating to public insurance adjusters, claims handling, and sinkhole laws. This analysis will not discuss every change contained in SB 408.The page numbers in parentheses refer to the page numbers in Chapter Law 2011-39.

Public Insurance Adjusters

– Compensation for a reopened or supplemental claim may not exceed 20 percent of the reopened or supplemental claim payment. (pg. 9)

– Current law provides that a public adjuster may not charge more than 10% of the amount of insurance claim payments made for claims based on an event that is the subject of a declaration of emergency by the Governor. The 10% limitation applies to claims made up to 1 year after the declaration. This law is amended to provide that after the 1 year period, the public adjuster fee limitation is 20% of the amount of insurance claim payments. (pg. 10)

– Senate Bill 408 outlines the definition of “misleading and deceptive” adjuster practices in 626.9541. The following statements are prohibited:

1.      A statement or representation that invites an insured policyholder to submit a claim when the policyholder does not have covered damage to insured property.

2.   A statement or representation that invites an insured policyholder to submit a claim by offering monetary or other valuable inducement.

3.   A statement or representation that invites an insured policyholder to submit a claim by stating that there is “no risk” to the policyholder by submitting such claim.

4.   A statement or representation, or use of a logo or shield, that implies or could mistakenly be construed to imply that the solicitation was issued or distributed by a governmental agency or is sanctioned or endorsed by a governmental agency. (pg. 12)

– The following must be printed on any written advertisement (defined as newspapers, magazines, flyers, and bulk mailers) distributed by a Adjuster: “


– A company employee adjuster, independent adjuster, attorney, investigator, or other persons acting on behalf of an insurer that needs access to an insured or claimant or to the insured property that is the subject of a claim must provide at least 48 hours’ notice to the insured or claimant, public adjuster, or legal representative before scheduling a meeting with the claimant or an onsite inspection of the insured property. The insured or claimant may deny access to the property if the notice has not been provided. The insured or claimant may waive the 48-hour notice. (pg. 13)

– A public adjuster must ensure prompt notice of property loss claims submitted to an insurer by or through a public adjuster or on which a public adjuster represents the insured at the time the claim or notice of loss is submitted to the insurer. The public adjuster must ensure that notice is given to the insurer, the public adjuster’s contract is provided to the insurer, the property is available for inspection of the loss or damage by the insurer, and the insurer is given an opportunity to interview the insured directly about the loss and claim. The insurer must be allowed to obtain necessary information to investigate and respond to the claim. (pgs. 13-14)

-The insurer may not exclude the public adjuster from its in-person meetings with the insured. The insurer shall meet or communicate with the public adjuster in an effort to reach agreement as to the scope of the covered loss under the insurance policy. (pg. 14)

– A public adjuster must not impede “reasonable access” to the insured or the insured’s property. (pg. 14) 

– A public adjuster may not act or fail to reasonably act in any manner that obstructs or prevents an insurer or insurer’s adjuster from timely conducting an inspection of any part of the insured property for which there is a claim for loss or damage. The public adjuster representing the insured may be present for the insurer’s inspection, but if the unavailability of the public adjuster otherwise delays the insurer’s timely inspection of the property, the public adjuster or the insured must allow the insurer to have access to the property without the participation or presence of the public adjuster or insured in order to facilitate the insurer’s prompt inspection of the loss or damage. (pg. 14)

– A licensed contractor under part I of chapter 489, or a subcontractor, may not adjust a claim on behalf of an insured unless licensed and compliant as a public adjuster under this chapter. However, the contractor may discuss or explain a bid for construction or repair of covered property with the residential property owner who has suffered loss or damage covered by a property insurance policy, or the insurer of such property, if the contractor is doing so for the usual and customary fees applicable to the work to be performed as stated in the contract between the contractor and the insured. (pg. 14)

**Note: The paragraphs above apply only to residential or condominium unit owner policies. The previous statutory language was changed to specify unit owners rather than condominium associations.

– A public adjuster contract relating to a property andcasualty claim must contain the full name, permanent business address, and license number of the public adjuster; the full name of the public adjusting firm; and the insured’s full name and street address, together with a brief description of the loss. The contract must state the percentage of compensation for the public adjuster’s services; the type of claim, including an emergency claim, nonemergency claim, or supplemental claim; the signatures of the public adjuster and all named insureds; and the signature date. If all of the named insureds signatures are not available, the public adjuster must submit an affidavit signed by the available named insureds attesting that they have authority to enter into the contract and settle all claim issues on behalf of the named insureds. An unaltered copy of the executed contract must be remitted to the insurer within 30 days after execution. (pg. 15)

– For any claim filed under any policy of Citizens, a public adjuster may not charge, agree to, or accept any compensation, payment, commission, fee, or other thing of value greater than 10% of the additional amount actually paid over the amount that was originally offered by the corporation for any one claim. (pg. 30)

Statute of Limitations 

s. 95.11(2) has been amended specifically as to property insurance contracts. In an action for breach of a property insurance contract, the 5 year limitations period now begins to run from the date of loss. Previously, the period began running from the date of denial of the claim. It is extremely important to recalculate each case to be sure the limitations period does not run before a suit can be filed. (pg. 4)

Claims Handling

– A claim, supplemental claim, or reopened claim under an insurance policy that provides property insurance, as defined in s. 624.604, for loss or damage caused by the peril of windstorm or hurricane is barred unless notice of the claim, supplemental claim, or reopened claim was given to the insurer in accordance with the terms of the policy within 3 years after the hurricane first made landfall or the windstorm caused the covered damage. For purposes of this section, the term – supplemental claim or ―reopened claim means any additional claim for recovery from the insurer for losses from the same hurricane or windstorm which the insurer has previously adjusted pursuant to the initial claim. This section has an effective date of June 1, 2011. (pg. 15)

– In the event of a loss for which a dwelling is insured for replacement costs: the insurer must initially pay at least the actual cash value of the insured loss, less any applicable deductible. The insurer shall pay any remaining amounts necessary to perform such repairs as work is performed and expenses are incurred. If a total loss of a dwelling occurs, the insurer shall pay the replacement cost coverage without reservation or holdback of any depreciation in value, pursuant to s. 627.702. (pg. 55)

– In the event of a loss for which personal property is insured for replacement costs: the insurer must offer coverage under which the insurer is obligated to pay the replacement cost without reservation or holdback for any depreciation in value, whether or not the insured replaces the property. (pg. 56)

– The insurer may also offer coverage under which the insurer may limit the initial payment to the actual cash value of the personal property to be replaced, require the insured to provide receipts for the purchase of the property financed by the initial payment, use such receipts to make the next payment requested by the insured for the replacement of insured property, and continue this process until the insured remits all receipts up to the policy limits for replacement costs. The insurer must provide clear notice of this process before the policy is bound. A policyholder must be provided an actuarially reasonable premium credit or discount for this coverage. The insurer may not require the policyholder to advance payment for the replaced property. (pg. 56)

Sinkhole Laws

– CPIC must provide that new or renewal policies issued by the corporation on or after January 1, 2012, which cover sinkhole loss do not include coverage for any loss to appurtenant structures, driveways, sidewalks, decks, or patios that are directly or indirectly caused by sinkhole activity. The corporation shall exclude such coverage using a notice of coverage change, which may be included with the policy renewal, and not by issuance of a notice of nonrenewal of the excluded coverage upon renewal of the current policy. (pg. 45)

– The insurer may require an inspection of the property before issuance of sinkhole loss coverage. (pg. 58)

– The insurer may restrict catastrophic ground cover collapse and sinkhole loss coverage to the principal building, as defined in the applicable policy. (pg. 58)

Changes to Definitions:

– Neutral evaluator is defined as a professional engineer or a professional geologist who has completed a course of study in alternative dispute resolution designed or approved by the department for use in the neutral evaluation proves and who is determined by the department to be fair and impartial. (pg. 59)

– Sinkhole activity means settlement or systematic weakening of the earth supporting the covered building only if the settlement or systematic weakening results from contemporaneous movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of water on a limestone or similar rock formation. (pg. 59)

– 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 as well as other potential causes of structural damage. (pgs. 59-60)

– Professional geologist means a person, as defined in s. 492.102, who has a bachelor’s degree or higher in geology or related earth science and expertise in the identification of 3093 sinkhole activity as well as other potential geologic causes of structural damage. (pg. 60)

– Structural damage means that a building has experienced the following:

1.      Interior floor displacement or deflection in excess of acceptable variances as defined in ACI 117-90 or the Florida Building Code, which results in settlement related damage to the interior such that the interior building structure or members become unfit for service or represents a safety hazard as defined within the Florida Building Code;

2.      Foundation displacement or deflection in excess of acceptable variances as defined in ACI 318-95 or the Florida Building Code, which results in settlement related damage to the primary structural members or primary structural systems that prevents those members or systems from supporting the loads and forces they were designed to support to the extent that stresses in those primary structural members or primary structural systems exceeds one and one-third the nominal strength allowed under the Florida Building Code for new buildings of similar structure, purpose, or location;

3.       Damage that results in listing, leaning, or buckling of the exterior load bearing walls or other vertical primary structural members to such an extent that a plumb line passing through the center of gravity does not fall inside the middle one-third of the base as defined within the Florida Building Code;

4.      Damage that results in the building, or any portion of the building containing primary structural members or primary structural systems, being significantly likely to imminently collapse because of the movement or instability of the ground within the influence zone of the supporting ground within the sheer plane necessary for the purpose of supporting such building as defined within the Florida Building Code; or

5.      Damage occurring on or after October 15, 2005, that qualifies as ―substantial structural damage as defined in the Florida Building Code.

(d) Primary structural member means a structural element designed to provide support and stability for the vertical or lateral loads of the overall structure.

(e) Primary structural system means an assemblage of primary structural members.  (pg. 60)

– Any claim, including, but not limited to, initial, supplemental, and reopened claims under an insurance policy that provides sinkhole coverage is barred unless notice of the claim was given to the insurer in accordance with the terms of the policy within 2 years after the policyholder knew or reasonably should have known about the sinkhole loss. (pg. 61).

Policyholder demand for testing:

– The policyholder’s demand for testing must be communicated to the insurer in writing within 60 days after the policyholder’s receipt of the insurer’s denial of the claim.

– The policyholder shall pay 50 percent of the actual costs of the analyses and services provided under ss. 627.7072 and 627.7073 or $2,500, whichever is less.

– The insurer shall reimburse the policyholder for the costs if the insurer’s engineer or geologist provides written certification pursuant to s. 627.7073 that there is sinkhole loss. (pg. 63)


– If a covered building suffers a sinkhole loss or a catastrophic ground cover collapse, the insured must repair such damage or loss in accordance with the insurer’s professional engineer’s recommended repairs. However, if the insurer’s professional engineer determines that the repair cannot be completed within policy limits, the insurer must pay to complete the repairs recommended by the insurer’s professional engineer or tender the policy limits to the policyholder. (pg. 63)

In order to prevent additional damage to the building or structure, the policyholder must enter into a contract for the performance of building stabilization and foundation repairs within 90 days after the insurance company confirms coverage for the sinkhole loss and notifies the policyholder of such confirmation. This time period is tolled if either party invokes the neutral evaluation process, and begins again 10 days after the conclusion of the neutral evaluation process. (pg. 63)

– The stabilization and all other repairs to the structure and contents must be completed within 12 months after entering into the contract for repairs described in paragraph (b) unless:

1. There is a mutual agreement between the insurer and the policyholder;

2. The claim is involved with the neutral evaluation process;

3. The claim is in litigation; or

4. The claim is under appraisal or mediation.

Upon the insurer’s obtaining the written approval any lienholder, the insurer may make payment directly to the persons selected by the policyholder to perform the land and building stabilization and foundation repairs. The decision by the insurer to make payment to such persons does not hold the insurer liable for the work performed. The policyholder may not accept a rebate from any person performing the repairs specified in this section. If a policyholder does receive a rebate, coverage is void and the policyholder must refund the amount of the rebate to the insurer. Any person making the repairs specified in this section who offers a rebate commits insurance fraud punishable as a third degree felony as provided in s. 775.082, s. 775.083, or s. 775.084. (pg. 64)

As a precondition to accepting payment for a sinkhole loss, the policyholder must file a copy of any sinkhole report regarding the insured property which was prepared on behalf or at the request of the policyholder. The policyholder shall bear the cost of filing and recording the sinkhole report. The recording of the report does not:

1.      Constitute a lien, encumbrance, or restriction on the title to the real property or constitute a defect in the title to the real property;

2.      Create any cause of action or liability against any grantor of the real property for breach of any warranty of good title or warranty against encumbrances; or

3.      Create any cause of action or liability against a title insurer that insures the title to the real property (pgs. 66-67)

Neutral Evaluation:

– Neutral evaluation is available to either party if a sinkhole report has been issued pursuant to s. 627.7073. At a minimum, neutral evaluation must determine:

(a) Causation;

(b) All methods of stabilization and repair both above and below ground;

(c) The costs for stabilization and all repairs; and

(d) Information necessary to carry out subsection (12). (pg. 68)

– Neutral evaluation supersedes the alternative dispute resolution process under s. 627.7015, but does not invalidate the appraisal clause of the insurance policy. (pg. 68)

– The neutral evaluator must be allowed reasonable access to the interior and exterior of insured structures to be evaluated or for which a claim has been made. Any reports initiated by the policyholder, or an agent of the policyholder, confirming a sinkhole loss or disputing another sinkhole report regarding insured structures must be provided to the neutral evaluator before the evaluator’s physical inspection of the insured property. (pg. 68)

– The department shall allow the parties to submit requests to disqualify evaluators on the list for cause. The department shall disqualify neutral evaluators for cause based only on any of the following grounds:

1. A familial relationship exists between the neutral evaluator and either party or a representative of either party within the third degree.

2. The proposed neutral evaluator has, in a professional capacity, previously represented either party or a representative of either party, in the same or a substantially related matter.

3. The proposed neutral evaluator has, in a professional capacity, represented another person in the same or a substantially related matter and that person’s interests are materially adverse to the interests of the parties. The term “substantially related matter” means participation by the neutral evaluator on the same claim, property, or adjacent property.

4. The proposed neutral evaluator has, within the preceding 5 years, worked as an employer or employee of any party to the case.

– The parties shall appoint a neutral evaluator from the department list and promptly inform the department. If the parties cannot agree to a neutral evaluator within 14 business days, the department shall appoint a neutral evaluator from the list of certified neutral evaluators. The department shall allow each party to disqualify two neutral evaluators without cause. Upon selection or appointment, the department shall promptly refer the request to the neutral evaluator. (pg. 69)

-Within 14 business days after the referral, the neutral evaluator shall notify the policyholder and the insurer of the date, time, and place of the neutral evaluation conference. The conference may be held by telephone, if feasible and desirable. The neutral evaluator shall make reasonable efforts to hold the conference within 90 days after the receipt of the request by the department. Failure of the neutral evaluator to hold the conference within 90 days does not invalidate either party’s right to neutral evaluation or to a neutral evaluation conference held outside this timeframe. (pg. 69)

– If, based upon his or her professional training and credentials, a neutral evaluator is qualified to determine only disputes relating to causation or method of repair, the department shall allow the neutral evaluator to enlist the assistance of another professional from the neutral evaluators list not previously stricken, who, based upon his or her professional training and credentials, is able to provide an opinion as to other disputed issues. A professional who would be disqualified for any reason listed in subsection (7) must be disqualified. The neutral evaluator may also use the services of professional engineers and professional geologists who are not certified as neutral evaluators, as well as licensed building contractors, in order to ensure that all items in dispute are addressed and the neutral evaluation can be completed. Any professional engineer, professional geologist, or licensed building contractor retained may be disqualified for any of the reasons listed in subsection (7). The neutral evaluator may request the entity that performed the investigation pursuant to s. 627.7072 perform such additional and reasonable testing as deemed necessary in the professional opinion of the neutral evaluator. (pg. 70)

– The evaluator’s report shall be sent to all parties in attendance at the neutral evaluation and to the department, within 14 days after completing the neutral evaluation conference. (pg. 70)

– Neutral evaluator’s written recommendation, oral testimony, and full report shall be admitted in any action, litigation, or proceeding relating to the claim. (pg 70)

– Neutral evaluators are deemed to be agents of the department and have immunity from suit as provided in s. 44.107. (pg. 71)

– The department shall adopt rules of procedure for the neutral evaluation process. (pg. 71)

– FIGA may not pay for attorney’s fees or public adjuster’s fees in connection with a sinkhole loss. (pg. 72)

Legal Analysis

The following legislative finding regarding sinkholes is contained in SB 408/Chapter Law 2011-39 (p. 57-59):

The Legislature finds and declares:

(1) There is a compelling state interest in maintaining a viable and orderly private-sector market for property insurance in this state. The lack of a viable and orderly property market reduces the availability of property insurance coverage to state residents, increases the cost of property insurance, and increases the state’s reliance on a residual property insurance market and its potential for imposing assessments on policyholders throughout the state.

(2) In 2005, the Legislature revised ss. 627.706–627.7074, 2992 Florida Statutes, to adopt certain geological or technical terms; to increase reliance on objective, scientific testing requirements; and generally to reduce the number of sinkhole claims and related disputes arising under prior law. The Legislature determined that since the enactment of these statutory revisions, both private-sector insurers and Citizens Property Insurance Corporation have, nevertheless, continued to experience high claims frequency and severity for sinkhole insurance claims. In addition, many properties remain unrepaired even after loss payments, which reduces the local property tax base and adversely affects the real estate market. Therefore, the Legislature finds that losses associated with sinkhole claims adversely affect the public health, safety, and welfare of this state and its citizens.

(3) Pursuant to sections 22 through 27 of this act, technical or scientific definitions adopted in the 2005 legislation are clarified to implement and advance the Legislature’s intended reduction of sinkhole claims and disputes. Certain other revisions to ss. 627.706–627.7074, Florida Statutes, are enacted to advance legislative intent to rely on scientific or technical determinations relating to sinkholes and sinkhole claims, reduce the number and cost of disputes relating to sinkhole claims, and ensure that repairs are made commensurate with the scientific and technical determinations and insurance claims payments.

The Legislature included these “clarifications” in an attempt to make certain changes retroactive. [I]t is generally accepted that the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.” Hassen v. State Farm Mut. Auto. Ins. Co., 674 So.2d 106, 108 (Fla. 1996) (citing Lumbermens Mut. Cas. Co. v. Ceballos, 440 So.2d 612, 613 (Fla. 3d DCA 1983)); see Esancy v. Hodges, 727 So.2d 308, 309 (Fla. 2d DCA 1999). Undoubtedly, insurers will claim that the sinkhole clarifications contained in SB 408 are merely procedural and can be applied retroactively.  In Menendez v. Progressive Express Insurance Co., 35 So.3d 873 (Fla. 2010), the supreme court outlined a two-part test to determine whether a statute that was enacted after the issuance of an insurance policy should have retroactive effect on claims arising out of that policy. First, a court must determine whether the legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the court must determine whether the retroactive application would violate any constitutional principles. Id.at 877 (citing Metro. Dade Cnty. v. Chase Fed. Hous. Corp., 737 So.2d 494, 499 (Fla.1999)).  The Menendez court concluded that the Legislature intended for the statutory provision in that case to be applied retroactively but rejected the application:

In agreeing with the insureds that the statute cannot be applied retroactively, we conclude that the most problematic provisions of the statute are those which (1) impose a penalty, (2) implicate attorneys’ fees, (3) grant an insurer additional time to pay benefits, and (4) delay the insured’s right to institute a cause of action. We first note that this Court has generally held that statutes with provisions that impose additional penalties for noncompliance or limitations on the right to recover attorneys’ fees do not apply retroactively. In Laforet, this Court held that section 627.727(10), Florida Statutes, which imposed a penalty on insurers who in bad faith failed to settle uninsured motorist claims, could not be applied retroactively “because it [was], in substance, a penalty.” Laforet, 658 So.2d at 61.

Menendez v. Progressive Exp. Ins. Co., Inc., 35 So.3d 873, 878 (Fla. 2010). A similar argument could be made regarding the sinkhole “clarifications” contained in SB 408.