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Insurance chief leery of sinkhole option

Published Jul. 28, 2007

Florida's top insurance regulator has signaled that the plan by Citizens Property Insurance Corp. to make sinkhole coverage optional needs a few tweaks.

Insurance Commissioner Kevin McCarty said he prefers that homeowners fill out a form to opt out of sinkhole coverage instead of coverage being automatically left out of policies unless customers sign up for it.

"I am in some disagreement on having that automatically be dropped," McCarty said Monday night after a state hearing in New Port Richey marked by confusion and resident complaints about policy standards. "People who are not as informed wouldn't understand what's going on."

Citizens, the state-run insurer, wants to change its standard policies to eliminate sinkhole coverage statewide starting March 1. Standard policies would cover only catastrophic collapses. Coverage for lesser damage, now part of all policies, would cost extra.

Dropping sinkhole coverage would bring rate decreases upward of 58 percent in claim-prone coastal Pasco County. Rates would drop 45 percent in coastal Hernando; northern Pinellas also would see a decrease. Areas with few claims would get little or no rate relief.

Sinkhole claims have driven rates up in those Tampa Bay areas, particularly Pasco, where two-thirds of more than 600 Citizens sinkhole claims were filed last year.

McCarty also said he is concerned with Citizens' definition of a catastrophic collapse. Under the insurer's proposal, homes would have to drop at least 5 feet within seven days to be covered. McCarty would simply require that the house be condemned.

Backlash over that limit prompted state Sen. Mike Fasano and state Rep. John Legg to remove a 5-foot/seven-day standard from a bill they are drafting. The bill would allow private insurers to make sinkhole coverage optional, too. Like McCarty's plan, it would only require a home be condemned.

Citizens officials say they were looking for a standard that eliminates claims for cracking and settling that don't involve true sinkhole activity.

McCarty also said regulators will review Citizens' proposed rate decreases. Pasco County officials and their actuary, Allan Schwartz of New Jersey, said the rate cuts should be 20 to 45 percent more, depending on policy types.

A decision is expected in January, McCarty said, although Citizens officials asked for approval by the end of December. The state is allowing comment and evidence to be submitted until Dec. 28.

David DeCamp can be reached at (727) 869-6232 or