Scott signs property insurance bill to limit sinkhole fraud
Florida Gov. Rick Scott moved quickly to sign into law the property insurance bill approved by the Legislature in the last week of the regular session. He signed SB 408 on May 17, 2011, just six days after it reached his desk and well before the May 26 deadline.
The House passed the bill 85-33 on May 4, and the Senate approved it 26-11 on May 5.
The new law makes numerous changes to property insurance practices, but the one we're focused on his Scott's campaign promise to "reduce insurance fraud involving sinkholes." His signature completes that promise.
The broad new law brought cheers from the industry and business community, who called it a big step forward for increased competition in the insurance market. The Florida Chamber of Commerce called it a bold act of leadership for Scott, considering he had received almost 400 letters, e-mails and phone calls about the bill in the past week – almost all of them opposing it.
Sen. Mike Fasano, R-New Port Richey, led the opposition to the bill, citing its potential to lead to rate increases and calling it a triumph of big business over the consumer.
The law allows insurance companies to pass on reinsurance costs to policyholders, trims the time homeowners have to apply for reimbursement of damages after hurricanes, allows insurers to make owners pay for the repairs first before being reimbursed, and lets insurers raise rates before state regulators approve them.
To fight sinkhole fraud, the new law also shortens the window for filing sinkhole damage claims, and limits claims for damage caused by sinkholes to primary structures. Starting Jan. 1, 2012, insurers will not cover damage to driveways, sidewalks, decks, patios or structures other than the home that are directly or indirectly caused by sinkholes.
Since lawmakers determined that some properties weren't being repaired even after insurers made payments – thus reducing the local property tax base and hurting the real estate market – the law also requires that the policyholder must sign a contract to stabilize the home and fix the foundation within 90 days after the insurer confirms it will pay for it.
The St. Petersburg Times reported that Scott signed the bill without ceremony, issuing a brief news release afterward that said the signing followed through on his "campaign promise to allow competition that gives consumers more insurance choices."
Indeed, Scott's promise in the campaign was to promote policies that would reduce fraud in sinkhole claims. The passage of the bill definitely does that. We rate this a Promise Kept.
St. Petersburg Times, "Gov. Rick Scott signs sweeping property insurance changes into law," May 18, 2011
Committee Substitute for SB 408
Sinkhole insurance reform talked up in the Senate
The Legislature appears ready to do some of the heavy lifting to deliver on Gov. Rick Scott's promise to bring sinkhole insurance reform to Florida.
During the campaign, Scott said sinkhole insurance claims are a major cost driver in insurance rates, and that claims are filled with abuse and fraud because insurance companies have little choice but to pay out.
"The current claims process for sinkholes is ineffective and riddled with abuse," Scott said as part of his property insurance platform. "Presently, for an insurance company to reject a sinkhole claim, an expert must verify with 100 percent certainty that a sinkhole did not cause the damage. There must be structural damage for an insurance company to be required to pay a claim, however, 'structural damage' is not currently defined in state law.
"As Governor, Rick Scott will promote policies to reduce the abuse and fraud that is driving our insurance costs up by proposing an objective measure of sinkhole damage and defining structural damage."
On Jan. 11, 2011, members of the Senate Banking and Insurance Committee discussed a detailed state report (You can view the report yourself here starting on Page 23.) on sinkhole insurance claims and suggested the exact types of changes Scott proposed.
• Creating a legal definition of "structural damage" based on scientific standards.
• Placing a time limit, or statute of limitations, on filing sinkhole claims.
• Eliminating the "one way" attorney's fee provision that requires an insurer to pay a homeowner's legal fees if it loses in court, but if the insurer wins, the homeowner isn't liable for fees.
• Requiring greater disclosure by home sellers to buyers on the amount of sinkhole claims and whether the money was used to repair the home.
"The magnitude of this problem is extreme," said the panel chairman, Sen. Garrett Richter, R-Naples. "It's affecting every homeowner in our state."
The talk of reform is enough to move this promise to In the Works.
St. Petersburg Times, Flimsy sinkhole insurance claims targeted by Legislature, Jan. 12, 2011
Florida Senate, sinkhole report, Jan. 11, 2011