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AA FLORIDA PUBLIC ADJUSTING AGENCY

627.707 Investigation of Sinkholes Claims

627.707  Investigation of sinkhole claims; insurer payment; nonrenewals.—Upon receipt of a claim for a sinkhole loss to a covered building, an insurer must meet the following standards in investigating a claim:

(1)  The insurer must inspect the policyholder’s premises to determine if there is structural damage that may be the result of sinkhole activity.

(2)  If the insurer confirms that structural damage exists but is unable to identify a valid cause of such damage or discovers that such damage is consistent with sinkhole loss, the insurer shall engage a professional engineer or a professional geologist to conduct testing as provided in s.627.7072to determine the cause of the loss within a reasonable professional probability and issue a report as provided in s.627.7073, only if sinkhole loss is covered under the policy. Except as provided in subsections (4) and (6), the fees and costs of the professional engineer or professional geologist shall be paid by the insurer.

(3)  Following the initial inspection of the policyholder’s premises, the insurer shall provide written notice to the policyholder disclosing the following information:

(a) What the insurer has determined to be the cause of damage, if the insurer has made such a determination.

(b)  A statement of the circumstances under which the insurer is required to engage a professional engineer or a professional geologist to verify or eliminate sinkhole loss and to engage a professional engineer to make recommendations regarding land and building stabilization and foundation repair.

(c)  A statement regarding the right of the policyholder to request testing by a professional engineer or a professional geologist, the circumstances under which the policyholder may demand certain testing, and the circumstances under which the policyholder may incur costs associated with testing.

(4)(a) If the insurer determines that there is no sinkhole loss, the insurer may deny the claim.

(b) If coverage for sinkhole loss is available and the insurer denies the claim without performing testing under s.627.7072, the policyholder may demand testing by the insurer under s.627.7072.

1.  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.

2. The policyholder shall pay 50 percent of the actual costs of the analyses and services provided under ss.627.7072and627.7073or $2,500, whichever is less.

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

(5)  If a sinkhole loss is verified, the insurer shall pay to stabilize the land and building and repair the foundation in accordance with the recommendations of the professional engineer retained pursuant to subsection (2), with notice to the policyholder, subject to the coverage and terms of the policy. The insurer shall pay for other repairs to the structure and contents in accordance with the terms of the policy. 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.

(a)  The insurer may limit its total claims payment to the actual cash value of the sinkhole loss, which does not include underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs in accordance with the recommendations set forth in the insurer’s report issued pursuant to s.627.7073.

(b)  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.

(c)  After the policyholder enters into the contract for the performance of building stabilization and foundation repairs, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. The insurer may not require the policyholder to advance payment for such repairs. If repair covered by a personal lines residential property insurance policy has begun and the professional engineer selected or approved by the insurer determines that the repair cannot be completed within the policy limits, the insurer must complete the professional engineer’s recommended repair or tender the policy limits to the policyholder without a reduction for the repair expenses incurred.

(d)  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.

(e)  Upon the insurer’s obtaining the written approval of 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.

(f)  The policyholder may not accept a rebate from any person performing the repairs specified in this section. If a policyholder receives a rebate, coverage is void and the policyholder must refund the amount of the rebate to the insurer. Any person performing 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. As used in this paragraph, the term “rebate” means a remuneration, payment, gift, discount, or transfer of any item of value to the policyholder by or on behalf of a person performing the repairs specified in this section as an incentive or inducement to obtain repairs performed by that person.

(6) If the insurer obtains, pursuant to s.627.7073, written certification that there is no sinkhole loss or that the cause of the damage was not sinkhole activity, and if the policyholder has submitted the sinkhole claim without good faith grounds for submitting such claim, the policyholder shall reimburse the insurer for 50 percent of the actual costs of the analyses and services provided under ss.627.7072and627.7073; however, a policyholder is not required to reimburse an insurer more than $2,500 with respect to any claim. A policyholder is required to pay reimbursement under this subsection only if the policyholder requested the analysis and services provided under ss.627.7072and627.7073and the insurer, before ordering the analysis under s.627.7072, informs the policyholder in writing of the policyholder’s potential liability for reimbursement and gives the policyholder the opportunity to withdraw the claim.

(7)  An insurer may not nonrenew any policy of property insurance on the basis of filing of claims for sinkhole loss if the total of such payments does not equal or exceed the policy limits of coverage for the policy in effect on the date of loss, for property damage to the covered building, as set forth on the declarations page, or if the policyholder repaired the structure in accordance with the engineering recommendations made pursuant to subsection (2) upon which any payment or policy proceeds were based. If the insurer pays such limits, it may nonrenew the policy.

(8) The insurer may engage a professional structural engineer to make recommendations as to the repair of the structure.

History.—s. 1, ch. 92-146; s. 4, ch. 93-401; s. 19, ch. 2005-111; s. 26, ch. 2006-12; s. 25, ch. 2011-39; s. 15, ch. 2012-15

627.706 Sinkhole insurance; catastrophic ground cover collapse; definitions

(1)(a)  Every insurer authorized to transact property insurance in this state must provide coverage for a catastrophic ground cover collapse.

(b)  The insurer shall make available, for an appropriate additional premium, coverage for sinkhole losses on any structure, including the contents of personal property contained therein, to the extent provided in the form to which the coverage attaches. The insurer may require an inspection of the property before issuance of sinkhole loss coverage. A policy for residential property insurance may include a deductible amount applicable to sinkhole losses equal to 1 percent, 2 percent, 5 percent, or 10 percent of the policy dwelling limits, with appropriate premium discounts offered with each deductible amount.

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

(2) As used in ss.627.706-627.7074, and as used in connection with any policy providing coverage for a catastrophic ground cover collapse or for sinkhole losses, the term:

(a) “Catastrophic ground cover collapse” means geological activity that results in all the following:

1. The abrupt collapse of the ground cover;

2. A depression in the ground cover clearly visible to the naked eye;

3. Structural damage to the covered building, including the foundation; and

4.  The insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure.

Contents coverage applies if there is a loss resulting from a catastrophic ground cover collapse. Damage consisting merely of the settling or cracking of a foundation, structure, or building does not constitute a loss resulting from a catastrophic ground cover collapse.

(b) “Neutral evaluation” means the alternative dispute resolution provided in s.627.7074.

(c)  “Neutral evaluator” means 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 process and who is determined by the department to be fair and impartial.

(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.

(f) “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.

(g) “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 experience and expertise in the identification of sinkhole activity as well as other potential geologic causes of structural damage.

(h)  “Sinkhole” means a landform created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater. A sinkhole forms by collapse into subterranean voids created by dissolution of limestone or dolostone or by subsidence as these strata are dissolved.

(i)  “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.

(j)  “Sinkhole loss” means structural damage to the covered building, including the foundation, caused by sinkhole activity. Contents coverage and additional living expenses apply only if there is structural damage to the covered building caused by sinkhole activity.

(k) “Structural damage” means a covered building, regardless of the date of its construction, 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.

(3)  Insurers offering policies that exclude coverage for sinkhole losses must inform policyholders in bold type of not less than 14 points as follows: “YOUR POLICY PROVIDES COVERAGE FOR A CATASTROPHIC GROUND COVER COLLAPSE THAT RESULTS IN THE PROPERTY BEING CONDEMNED AND UNINHABITABLE. OTHERWISE, YOUR POLICY DOES NOT PROVIDE COVERAGE FOR SINKHOLE LOSSES. YOU MAY PURCHASE ADDITIONAL COVERAGE FOR SINKHOLE LOSSES FOR AN ADDITIONAL PREMIUM.”

(4)  An insurer offering sinkhole coverage to policyholders before or after the adoption of s. 30, chapter 2007-1, Laws of Florida, may nonrenew the policies of policyholders maintaining sinkhole coverage at the option of the insurer, and provide an offer of coverage that includes catastrophic ground cover collapse and excludes sinkhole coverage. Insurers acting in accordance with this subsection are subject to the following requirements:

(a)  Policyholders must be notified that a nonrenewal is for purposes of removing sinkhole coverage, and that the policyholder is being offered a policy that provides coverage for catastrophic ground cover collapse.

(b)  Policyholders must be provided an actuarially reasonable premium credit or discount for the removal of sinkhole coverage and provision of only catastrophic ground cover collapse.

(c)  Subject to the provisions of this subsection and the insurer’s approved underwriting or insurability guidelines, the insurer shall provide each policyholder with the opportunity to purchase an endorsement to his or her policy providing sinkhole coverage and may require an inspection of the property before issuance of a sinkhole coverage endorsement.

(d) Section624.4305does not apply to nonrenewal notices issued pursuant to this subsection.

(5)  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.

History.—s. 2, ch. 81-280; s. 809(2nd), ch. 82-243; s. 79, ch. 82-386; s. 114, ch. 92-318; s. 8, ch. 2000-333; s. 1189, ch. 2003-261; s. 17, ch. 2005-111; s. 25, ch. 2006-12; s. 30, ch. 2007-1; s. 1, ch. 2009-178; s. 3, ch. 2011-11; s. 22, ch. 2011-39.

Florida Mediation Statute - 627.7015

627.7015 Alternative procedure for resolution of disputed property insurance claims.—

(1)  This section sets forth a nonadversarial alternative dispute resolution procedure for a mediated claim resolution conference prompted by the need for effective, fair, and timely handling of property insurance claims. There is a particular need for an informal, nonthreatening forum for helping parties who elect this procedure to resolve their claims disputes because most homeowner’s and commercial residential insurance policies obligate policyholders to participate in a potentially expensive and time-consuming adversarial appraisal process before litigation. The procedure set forth in this section is designed to bring the parties together for a mediated claims settlement conference without any of the trappings or drawbacks of an adversarial process. Before resorting to these procedures, policyholders and insurers are encouraged to resolve claims as quickly and fairly as possible. This section is available with respect to claims under personal lines and commercial residential policies before commencing the appraisal process, or before commencing litigation. Mediation may be requested only by the policyholder, as a first-party claimant, or the insurer. If requested by the policyholder, participation by legal counsel is permitted. Mediation under this section is also available to litigants referred to the department by a county court or circuit court. This section does not apply to commercial coverages, to private passenger motor vehicle insurance coverages, or to disputes relating to liability coverages in policies of property insurance.

(2)  At the time a first-party claim within the scope of this section is filed by the policyholder, the insurer shall notify the policyholder of its right to participate in the mediation program under this section. The department shall prepare a consumer information pamphlet for distribution to persons participating in mediation.

(3)  The costs of mediation shall be reasonable, and the insurer shall bear all of the cost of conducting mediation conferences, except as otherwise provided in this section. If an insured fails to appear at the conference, the conference shall be rescheduled upon the insured’s payment of the costs of a rescheduled conference. If the insurer fails to appear at the conference, the insurer shall pay the insured’s actual cash expenses incurred in attending the conference if the insurer’s failure to attend was not due to a good cause acceptable to the department. An insurer will be deemed to have failed to appear if the insurer’s representative lacks authority to settle the full value of the claim. The insurer shall incur an additional fee for a rescheduled conference necessitated by the insurer’s failure to appear at a scheduled conference. The fees assessed by the administrator shall include a charge necessary to defray the expenses of the department related to its duties under this section and shall be deposited in the Insurance Regulatory Trust Fund.

(4)  The department shall adopt by rule a property insurance mediation program to be administered by the department or its designee. The department may also adopt special rules which are applicable in cases of an emergency within the state. The rules shall be modeled after practices and procedures set forth in mediation rules of procedure adopted by the Supreme Court. The rules shall provide for:

(a) Reasonable requirement for processing and scheduling of requests for mediation.

(b) Qualifications of mediators as provided in s.627.745and in the Florida Rules of Certified and Court Appointed Mediators, and for such other individuals as are qualified by education, training, or experience as the department determines to be appropriate.

(c) Provisions governing who may attend mediation conferences.

(d) Selection of mediators.

(e) Criteria for the conduct of mediation conferences.

(f) Right to legal counsel.

(5)  All statements made and documents produced at a mediation conference shall be deemed to be settlement negotiations in anticipation of litigation within the scope of s.90.408. All parties to the mediation must negotiate in good faith and must have the authority to immediately settle the claim. Mediators are deemed to be agents of the department and shall have the immunity from suit provided in s.44.107.

(6)  Mediation is nonbinding; however, if a written settlement is reached, the insured has 3 business days within which the insured may rescind the settlement unless the insured has cashed or deposited any check or draft disbursed to the insured for the disputed matters as a result of the conference. If a settlement agreement is reached and is not rescinded, it shall be binding and act as a release of all specific claims that were presented in that mediation conference.

(7)  If the insurer fails to comply with subsection (2) by failing to notify a policyholder of its right to participate in the mediation program under this section or if the insurer requests the mediation, and the mediation results are rejected by either party, the policyholder is not required to submit to or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action for breach of contract against the insurer for its failure to pay the policyholder’s claims covered by the policy.

(8)  The department may designate an entity or person to serve as administrator to carry out any of the provisions of this section and may take this action by means of a written contract or agreement.

(9)  For purposes of this section, the term “claim” refers to any dispute between an insurer and a policyholder relating to a material issue of fact other than a dispute:

(a) With respect to which the insurer has a reasonable basis to suspect fraud;

(b) Where, based on agreed-upon facts as to the cause of loss, there is no coverage under the policy;

(c)  With respect to which the insurer has a reasonable basis to believe that the policyholder has intentionally made a material misrepresentation of fact which is relevant to the claim, and the entire request for payment of a loss has been denied on the basis of the material misrepresentation;

(d)  With respect to which the amount in controversy is less than $500, unless the parties agree to mediate a dispute involving a lesser amount; or

(e) With respect to a windstorm or hurricane loss that does not comply with s.627.70132.

History.—s. 20, ch. 93-410; s. 1186, ch. 2003-261; s. 2, ch. 2003-267; s. 2, ch. 2003-281; s. 15, ch. 2005-111; s. 14, ch. 2012-15

627.702 Valued policy law

(1)(a) In the event of the total loss of any building, structure, mobile home as defined in s.320.01(2), or manufactured building as defined in s.553.36(13), located in this state and insured by any insurer as to a covered peril, in the absence of any change increasing the risk without the insurer’s consent and in the absence of fraudulent or criminal fault on the part of the insured or one acting in her or his behalf, the insurer’s liability under the policy for such total loss, if caused by a covered peril, shall be in the amount of money for which such property was so insured as specified in the policy and for which a premium has been charged and paid.

(b)  The intent of this subsection is not to deprive an insurer of any proper defense under the policy, to create new or additional coverage under the policy, or to require an insurer to pay for a loss caused by a peril other than the covered peril. In furtherance of such legislative intent, when a loss was caused in part by a covered peril and in part by a noncovered peril, paragraph (a) does not apply. In such circumstances, the insurer’s liability under this section shall be limited to the amount of the loss caused by the covered peril. However, if the covered perils alone would have caused the total loss, paragraph (a) shall apply. The insurer is never liable for more than the amount necessary to repair, rebuild, or replace the structure following the total loss, after considering all other benefits actually paid for the total loss.

(c)  It is the intent of the Legislature that the amendment to this section shall not be applied retroactively and shall apply only to claims filed after the effective date of such amendment.

(2)  In the case of a partial loss by fire or lightning of any such property, the insurer’s liability, if any, under the policy shall be for the actual amount of such loss but shall not exceed the amount of insurance specified in the policy as to such property and such peril.

(3) The provisions of subsections (1) and (2) do not apply when:

(a)  Insurance policies are issued or renewed by more than one company insuring the same building, structure, mobile home, or manufactured building, and the existence of such additional insurance is not disclosed by the insured to all insurers issuing such policies;

(b)  Two or more buildings, structures, mobile homes, or manufactured buildings are insured under a blanket form for a single amount of insurance; or

(c)  The completed value of a building, structure, mobile home, or manufactured building is insured under a builder’s risk policy.

(4)  The amount of any loss referred to in subsection (1) or subsection (2) shall be subject to any coinsurance clause contained in the policy pursuant to s.627.701.

(5)  This section does not apply as to personal property or any interest therein, except with respect to mobile homes as defined in s.320.01(2) or manufactured buildings as defined in s.553.36(13). Nor does this section apply to coverage of an appurtenant structure or other structure or any coverage or claim in which the dollar amount of coverage available as to the structure involved is not directly stated in the policy as a dollar amount specifically applicable to that particular structure.

(6)  With regard to mobile homes included in subsection (1), any total loss shall be adjusted on the basis of the amount of money for which such property was insured as specified in the policy, whether on an actual cash value basis, replacement cost basis, or stated amount, and for which a premium has been charged and paid only if the insured has elected to purchase such coverage at the inception of the policy. However, when coverage is written for a mobile home on any basis other than stated value, a complete disclosure of the relative cost between that policy and the stated value policy shall be made to the insured on a form and in a format approved by the office. Such forms shall disclose and describe the differences between the types of policies and shall be signed by the insured. Copies shall be maintained in the insurer’s file, and a copy shall be made available to the insured. Each insurer licensed to write insurance covering mobile homes shall make such stated value coverage available at the option of the insured.

(7)  Nothing herein shall be construed as prohibiting an insurer from repairing or replacing damaged property at its own expense and without contribution on the part of the insured except, as provided in subsection (6), when an insured has elected to purchase stated value coverage. Such repair or replacement of damaged property shall be in lieu of any liability created by subsection (1); and any insurer so repairing or replacing shall have no liability pursuant to subsection (1), provided such insurer returns to the named insured a portion of the premium, for all policy terms during which the policy limits were the same as those in effect on the date on which the loss occurred, equal to that portion of the premium paid for limits of insurance on the structure in excess of the cost of replacement.

(8)  Any property insurer may, by an appropriate rider or endorsement or otherwise, provide insurance indemnifying the insured for the difference between the insurable value of the insured property at the time any loss or damage occurs, and the amount actually expended to repair, rebuild, or replace within this state, with new materials of like size, kind, and quality, such property as has been damaged or destroyed.

History.—ss. 606, 608, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 1, 2, ch. 79-237; ss. 1, 2, ch. 80-326; s. 1, ch. 81-280; ss. 2, 3, ch. 81-318; ss. 539, 541, 809(2nd), ch. 82-243; ss. 65, 79, ch. 82-386; s. 1, ch. 83-191; s. 114, ch. 92-318; s. 357, ch. 97-102; s. 98, ch. 2002-1; s. 1188, ch. 2003-261; s. 16, ch. 2005-111; s. 14, ch. 2007-55.

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