Legislative Update

ALERT! Florida’s sinkhole laws have recently changed… again! The rules have changed for losses that occur after July 1, 2006.  Learn how your rights have been impacted! Call our offices today to schedule a free consultation to discuss your rights under Florida law.

The landscape of Florida sinkhole law is constantly changing. Major changes are being made to the existing sinkhole statutes, which could significantly impact consumer’s rights. Essential to the law include new procedural mechanisms insurance companies can employ to delay the policyholder’s access to the courts, or alternatively, changing requirements that affect the policyholder’s right to recover their attorney’s fees from the insurance company when they prevail in court.

FLORIDA 2006 Nineteenth Legislature, Second Regular Session
Chapter 2006-12
Approved by the Governor May 16, 2006.

Unless otherwise indicated, as of 07/01/06, changes to the sinkhole laws were as follows:

Sinkhole Deductibles:

Effective October 1, 2006, §627.706, Fla. Stat. (2006), permits deductibles of 1, 2, 5, and 10 percent to be applied to residential property insurance policies.

Direct Payment to Contractor:

§627.707, Fla. Stat. (2006), permits an insurer, if approved in writing by the policyholder and any lien holders, to make direct payment to the persons selected by the policyholder to perform land and building stabilization and foundation repairs caused by a sinkhole.

Sinkhole Testing and Filing Requirements:

§627.7072, Fla. Stat. (2006), has been amended such that sinkhole testing by a geologist would no longer be required to be conducted in compliance with the Florida Geological Survey Special Publication No. 57 (2005). The standard for sinkhole testing that an insurer must perform after a claim is filed and the insurer is unable to determine the cause of loss, is that the professional geologist or professional engineer must perform such tests that are necessary to determine the presence or absence of sinkhole loss. Likewise, changes to §627.7073, Fla. Stat. (2006), permit sinkhole reports is to be filed with the clerk of court, instead of the county property appraiser, and does not create a cloud on the title of real property or create any cause of action.

“Neutral” Evaluation of Sinkhole Claims:

Effective October 1, 2006, newly enacted §627.7074, Fla. Stat. (2006), provides an alternative dispute resolution process for sinkhole claims. The neutral evaluation process is nonbinding, but mandatory if either the policyholder or insurer files a request with the Department of Financial Services (DFS) for neutral evaluation. Upon receipt of a request for neutral evaluation, the DFS will provide the parties a list of certified neutral evaluators, who must be engineers or geologists who have completed an alternative dispute resolution course designed or approved by the DFS. The parties have 10 days to select a neutral evaluator from this list. If the parties cannot agree, then the neutral evaluator will be assigned by the DFS. The neutral evaluation must be held within 45 days of the department's receipt of a request for evaluation, using procedures adopted by the department. For matters not resolved by the parties during the neutral evaluation, the neutral evaluator must prepare a report stating whether the sinkhole loss has been verified or eliminated. If the existence of sinkhole loss is verified, the report must include the evaluator's opinion regarding the need for estimated costs of stabilizing the land and any covered structures as well as appropriate remediation or structural repairs. The evaluator's report must be sent to all parties in attendance at the neutral evaluation and to the DFS. The neutral evaluator's written recommendation is admissible in any subsequent action or proceeding relating to the claim or the cause of action giving rise to the claim. However, evidence of an offer to settle a claim during neutral evaluation is inadmissible regarding liability or claim value. If the neutral evaluator recommends repairs that exceed the insurer's offer to pay, the insurer is liable to the policyholder for up to $2,500 in attorney's fees. If the insurer timely complies with the recommendation of the neutral evaluator, but the policyholder declines to do so, the insurer is not liable for extra-contractual bad faith damages related to issues determined by the neutral evaluation process. Nor is the insurer liable for attorney's fees under §627.428, Fla. Stat. (2006), or other provisions of the Florida Insurance Code, unless the policyholder obtains a judgment that is more favorable than the neutral evaluator's recommendation.

Illegal Solicitation of Sinkhole Claims:

Newly amended §877.02, Fla. Stat. (2006), prohibits a general contractor, subcontractor, or other business providing sinkhole remediation services from soliciting legal business for an attorney. Doing so is a first degree misdemeanor.

Required Rate Filing: