With no recent hurricanes to blame for raising property insurance rates, insurers have a new excuse to seek big breaks from a compliant Legislature: sinkholes. There is compelling evidence that sinkhole claims are going through the roof and reforms are needed. But private insurers should not be allowed to stop providing sinkhole coverage. That would leave homeowners with legitimate claims in the lurch, and there are fairer ways to tackle the problem.
The Senate approved anticonsumer legislation on Thursday that would enable private insurers to stop offering optional coverage for sinkholes. If they don't have to offer it, you can bet they won't. That would leave homeowners who want sinkhole coverage with only one realistic option: the state-run Citizens Property Insurance Corp., Florida's largest property insurer and the very one that legislators want to shrink to reduce the public's liability. It makes no sense to let private insurers off the hook and saddle Citizens with more problems. Sens. Paula Dockery, R-Lakeland; Mike Fasano, R-New Port Richey; Arthenia Joyner, D-Tampa; and Ronda Storms, R-Valrico, were among those who stood up for consumers and voted against the bill.
Yet the status quo in sinkhole coverage is unsustainable, and there is clear evidence that geology cannot be entirely responsible for the surge in claims. Three times as many sinkhole claims were filed in 2009 as in 2006, and Hillsborough, Pasco and Hernando counties accounted for two-thirds of the claims during that period. The total premiums collected for sinkhole coverage statewide did not cover the losses in either Pasco or Hernando. So the number of claims and the size of the losses are rising even as the portion of homeowners opting for sinkhole coverage is falling. The math doesn't come close to working.
But the solution is not for private insurers to stop covering sinkhole damage and leave homeowners to fend for themselves. First, both the House and Senate bills (HB 803 and SB 408) would require homeowners to spend any sinkhole damage awards to make repairs. That alone should cut down on homeowners seeking claims for minor damage just to pocket some cash. It also would slow the decline in property values in Pasco and Hernando due to homes tied to sinkhole claims that were not repaired.
While they could stand some refinements, other parts of the legislation also could ease the sinkhole crisis and reduce fraud. Sinkhole coverage could be limited to primary buildings, and the legal definitions of sinkholes and structural damage could be tightened. Regulation could be increased for public adjustors who encourage homeowners to file claims for cracks and minor issues they never would have filed on their own.
There is other mischief in these bills unrelated to sinkholes. The insurance industry is once again trying to change the rules for actual replacement cost coverage in ways that harm policyholders. The Senate bill would change the name of Citizens to make a political point. It also would force Citizens to keep a high number of wind-only policies along the coast lines when the entire homeowners policy should be assumed by either a private insurer or by Citizens.
In the last week of the session, the House should reject the Senate's pro-industry bill and lawmakers should focus on other ways to reform the sinkhole coverage. There are ways to reduce fraud and the number of claims besides letting private insurers walk away.