As we have seen with the tragedy earlier this year in Seffner, sinkholes can sometimes cause more than property damage. In the past several months, there have been painful reminders of the importance for homeowners to move quickly to properly make repairs after a sinkhole threatens their home.
While holes can be filled and homes rebuilt, lives and lifelong personal treasures cannot be replaced. As the state's insurer of last resort, Citizens Property Insurance Corp. is trying to do its part to minimize the chance of such tragedies.
Citizens has embarked on an effort to resolve some of the 1,300 pending sinkhole claims in which we have found sinkhole activity and agreed to cover the claim but repairs have not been made. Instead, those claims are now tied up in litigation. Citizens, through this settlement proposal, is making a good-faith effort to resolve these claims by providing homeowners with the assurance that their properties will be fully and completely repaired.
Under current Florida law, Citizens is required to make claims payments in sinkhole cases based on recommendations from a qualified engineer sent in to investigate possible sinkhole activity. Payments are made only after a contract has been signed with a repair company.
In some cases, however, policyholders have hired attorneys who have brought in another engineer whose opinion on method or repair differs from the original engineer's findings. In some of those cases, the competing plans have gone to a neutral evaluator, who considers the evidence and recommends a course of action.
The recommendations, however helpful, are not binding. Frankly, in many of those cases, Citizens has refused to follow the neutral evaluator's plan. Well, those days are over.
Under a proposal mailed earlier this month to affected policyholders, Citizens has taken a major step toward settling pending litigated claims by agreeing to abide by a neutral evaluator's decision, regardless of which side prevails. Further, Citizens has agreed to pay for repairs over and above policy limits, when needed, to ensure the home is safe. If additional cosmetic repairs are needed above ground because of the stabilization underneath, we will pay for that too.
Finally, Citizens has agreed that homeowners who drop pending lawsuits and settle will not lose their right to seek additional repairs and other legal remedies if the repair work is unsatisfactory. We think the offer, made in good faith, may help most policyholders gain the peace of mind that comes with knowing that their home is safe.
What Citizens won't do is write a blank check. We've done that before and it doesn't work. Here's why.
An analysis completed in 2010 for the Florida Legislature found that an alarming percentage of sinkhole claimants did not repair sinkhole damage after receiving a claim check from Citizens. With housing prices falling and the economy in the tank, the prospect of a cash payment was too tempting for many homeowners, who used the money for other priorities.
The result? Unrepaired sinkholes remained, endangering not only the homeowner but his or her neighbors. In addition, those unrepaired properties dragged down property values not only for the homeowner but for the neighbors, whose most important investment lost value through no fault of their own.
In Pasco County, the loss in property value attributed to unrepaired sinkholes is $67 million. That translates into a loss of millions in tax revenue for schools, roads, police and other essential public endeavors.
That's why Citizens has taken a hard line on making sure that sinkhole claims payments are spent to actually make repairs. In most cases, the outcomes have been outstanding, with homeowners and future buyers again able to sleep soundly knowing their families are safe and their homes secure.
So why the push to settle these outstanding cases? Yes, it will save everyone money, including Citizens. But most importantly, we want to settle because it is in the best interest of our policyholders and those who live around them.
Citizens will not return to the days when it simply wrote a check and walked away. We owe it to our policyholders, their neighbors and the people of Florida to ensure that lives are not lost and neighborhoods degraded because repairs are not made. We don't want to litigate, but we do want sinkhole damage fixed — quickly and completely. After all, isn't that why people buy insurance in the first place?
Chris Gardner is chairman of Citizens Property Insurance Corp.'s board of directors.