Tag Archives: Governor Crist

You Might Lose Sinkhole Coverage in Florida

Sinkhole coverage in Florida

You’ve purchased a home in Florida. You’ve been recommended a couple insurance policies, you’ve looked them over, and chosen one that you’re happy with. You shouldn’t have to worry about your coverage as long as you pay your premiums on time, right? Unfortunately not. As of January 1, 2010, you may lose your sinkhole coverage in Florida if you don’t pay attention.

Keep an eye on renewals

Homeowners insurance policies are annual policies that renew from the annual date you purchased them. Most of the time the process is without incident as homeowners usually pay their insurance through the escrow with their mortgage company.

When the policy renews, you will receive a notice from the insurance company about 45 days before the new period with changes noted in a large stack of endorsements, which are specific changes that will be made to the policy.

These are usually accompanied by a list of endorsements that apply as well. You can peruse these, and then decide whether or not you want to change the coverage. Of course, it’s generally advised that a homeowner looks over their policy even if they don’t wish to change it, but many don’t.

Don’t get tricked

For homeowners in Pinellas and Hernando Counties, a very significant thing occurred as of January 1, 2010. Due to a new law signed, there will be an automatic change to all homeowners policies in these counties. Under the new law, you will automatically lose your sinkhole coverage, unless you request that it be included into your policy.

Unlike other perils, such as fire or hurricane, the State of Florida is playing a game of cat and mouse – but only with the homeowners in these two counties. This was arguably because Citizens Property Insurance used their lobby to get the Florida Legislature to see how many homeowners they could catch who do not read their annual renewal notices.

It begs the question why they did this in two of the most common areas where sinkhole activity is found. Of course, they did it so that Citizens and other insurance companies can avoid their legal responsibility to offer sinkhole insurance coverage.

If you lose your sinkhole coverage in Florida

If you fail to notify your agent before your coverage lapses, you’re stuck in a pickle. Most companies are requiring that any insureds who allow a lapse in their sinkhole coverage can only get it back by paying for a cost-prohibitive sinkhole investigation. These cost between $8,000 and $12,000.

However, if you do one, in the hopes of getting coverage back, and the investigation finds some evidence of sinkhole activity of which you had no prior knowledge, you are most definitely going to be denied coverage. As you can see, insurance companies are handing you a double-edged sword if you don’t watch out.

Bill 742 Removes Sinkhole Coverage from Homeowners

Recent legislative action is bad news for Pasco and Hernando Counties

In most of the posts on this blog, I try and remain as neutral as I can, given the fact that people are on the site to gain well-rounded information, not just my perspective on things associated with sinkhole activity.

However, I must break from this for this particular post. Bill 742, signed into law by Florida Governor Crist, is playing a game of hide and seek with the citizens of Pasco and Hernando counties with sinkhole insurance coverage.

A recent history of sinkhole legislature

In 2007, the Florida legislature decided to allow insurance companies to offer an alternative to sinkhole insurance coverage. Instead of having sinkhole coverage, you can, if you wish, purchase “catastrophic ground cover collapse coverage”.

This alternative was designed to offer coverage for sinkhole activity, but only the damage of an immediate magnitude to cause the home to be condemned.

The false premise of the 2007 alternative, though, was the reality that large, open cavern sinkholes occur in less than one percent of the actual sinkholes. Because of this, most homeowners in areas with the most sinkhole claims (e.g. Hernando, Pasco, Marion, and Pinellas counties) elected to keep their coverage “as is” and reject the alternative.

What is Bill 742

Because so few people accepted it, Bill 742 pops its head again. Among other things, Bill 742 deletes “standard” sinkhole insurance coverage and inserts the alternate, catastrophic coverage. Then, if homeowners want to add sinkhole coverage back into their policy, they must notify their agent within 90 days of the renewal period.

Once the sinkhole coverage is gone, you cannot recover it. In essence, the Florida Legislature is trying to “catch homeowners asleep” after they rejected the new alternative. Frankly, this is pathetic.

Taking out important, standard sinkhole coverage, with the hope that people won’t notice, is no way to protect the interests of the people of Florida. Senator Fasono and Governor Crist, shame on you.

Protect yourself

Make sure you understand your insurance policy. It’s incredibly important that you have standard sinkhole coverage – otherwise, you may find yourself in a sticky situation.

If you’re unsure, contact your insurance carrier directly and discuss your concerns.

State Farm Insureds in Florida Facing Large Premium Increase

Is State Farm still providing sinkhole coverage to Floridians?

In prior posts, we’ve addressed legislative and regulatory developments impacting larger Florida insurers, such as State Farm. For instance, Florida Governor Charlie Crist has been quoted as saying “good riddance” to State Farm, and in June 2009, he vetoed the Florida Consumer Choice Act, which would have allowed insurers to establish rates different from those set by the Florida Office of Insurance Regulation (OIR). (Read my blog post, Governor Crist Vetoes “Consumer Choice Bill, for more information.)

Suffice to say, the political climate here in Florida has been unfavorable to State Farm and even forced them to issue a withdrawal plan in January 2009. However, on December 16, 2009, State Farm and the OIR entered into a consent order, which will allow State Farm to continue to do business in Florida. The agreement provides that State Farm will non-renew no more than 125,000 polices, approximately 15% of its 810,000 policies.

What happens to lost insureds

For the policies that are non-renewed, State Farm will allow its agents to directly place business with private carriers for which their agents have service agreements. Finally, the OIR accepted a 14.8% flat rate increase for State Farm’s homeowners and condominium unit owner’s policies.

According to State Farm, the terms of the consent order, along with an August agreement that allowed State Farm to eliminate certain discount premiums, enable the company to remain in the state and continue to protect against catastrophic losses.

Still with State Farm? You will pay more

Because of the removal of discounts on premiums and the flat rate increase, homeowners insured by State Farm will likely experience increased premiums, especially in those areas susceptible to catastrophic losses, such as hurricanes and sinkholes.

This is an especially important issue for people who may later suffer from sinkhole losses because any insured who now cannot afford these higher premiums will likely change insurance companies. In that scenario, you can find yourself in a “whose claim is this” problem between the two companies. As such, be careful in the manner in which you seek new coverage.

Florida Sinkhole Laws in Flux

Will the sinkhole laws in Florida change anymore in the next couple of years?

This is the question everyone is asking, and while I can’t be completely certain, my guess is that sinkhole laws will continue to change for the foreseeable future. Fortunately, as State Farm will continue to insure Florida residents, we will see some stability; if they had left, those residents would have been left to Citizens Property Insurance, a state-funded entity and the last resort.

Why changing laws are good

While we would never suggest a homeowner opt for a Citizens Insurance policy, the more Citizens is affected, the better the chance the government will make some changes – Citizens is funded by the state, so these changes directly impact the wallet of Florida’s government.

The sinkhole laws in Florida seem to morph every other year or so, and they will probably continue to do so. There is no perfect answer to the sinkhole problem in Florida, so we will simply try to make the best of it and adapt accordingly.

My recommendation is that, as a member of the community, you contact your legislator as sinkhole laws morph and insist that they protect our rights and choices as consumers. (Search for your legislators by zip code.) A lot of legislative activity in the past two years has not been “honest”, and the fact that these laws are not set in stone means there is an opportunity for positive change.

Why homeowners need to fight back

For example, Bill 742 reversed the sinkhole coverage for Hernando and Pasco counties. I say “reversed” because it was automatically taken out of your policy, and you had to request to have it reinstated. (Read more about this legerdemain in my post, Bill 742 Removes Sinkhole Coverage from Homeowners.)

Many homeowners in those counties will be caught unaware, which I think is unfair. As with most consumer issues, it is important to understand your rights and to contact your agent to discuss your coverage for sinkhole activity.

In addition, it’s important to contact your legislator and make your voice heard. Demand fair and reasonable sinkhole coverage for your home while you can!

Florida Legislators Reintroduce 2010 Consumer Choice Act

Is the Florida legislature doing anything to resolve the current insurance crisis?

In June 2009, Florida Governor Charlie Crist vetoed the Consumer Choice Act, which would have allowed private insurers to establish rates independent of the Office of Insurance Regulation (OIR). In his veto message, Crist reasoned that the bill would allow larger, private insurers to “cherry pick,” or sell only to profitable policy holders, while forcing smaller, less capitalized companies and state-run insurer Citizens Property Insurance to underwrite riskier policies. This was and is an important issue in the sinkhole claim arena, especially in counties like Pasco, Pinellas, and Marion, where sinkhole activity is common.

On December 9, 2009, Sen. Bennett and Rep. Proctor introduced the 2010 Consumer Choice Act, which includes changes to the previously vetoed act. The provisions of the proposed legislation are as follows:

  • Allows private insurers to use rates different from rates otherwise set by the OIR. This provision, however, does not apply to policies that are subject to consent decrees or other agreements. For instance, the legislation would likely prohibit State Farm from obtaining increased rates for those policies affected by its consent agreement with the OIR allowing for a flat rate increase of 14.8%.
  • Addresses deficits incurred by Citizens Corporation and requires the imposition of uniform policyholder surcharges of up to 15 percent of policy premiums to curb yearly deficits, before emergency surcharges are assessed.
  • Requires Citizens to obtain a signed acknowledgment of surcharge and assessment liability from insureds who obtain or renew their policies.

Supporters of the legislation believe that these changes adequately address past concerns and will allow all private homeowners’ insurers to offer a policy at a rate that the provider believes will adequately protect the consumer.

Have a burning question you’d like to ask about sinkholes? Let us know.

State Farm’s Departure from Florida Impacts Sinkhole Insurance

How will State Farm’s departure from Florida creates pressure on Florida sinkhole insurance showdown?

Charlie Crist opened the door wide open for State Farm to leave the state of Florida, telling State Farm in response to their announcement, “Good riddance.” Governor Crist is not an especially easy politician to follow, having also commented that the proposed Obama healthcare plan was “cockamamie.” (Cockamamie: something ridiculous or implausible). While these words may provide an outlet for the State of Florida in its dealings with these larger, broader based issues, homeowners may be facing dramatic changes in their Florida sinkhole insurance coverage before this dispute with State Farm is over. (What is a sinkhole?)

I’m unsure exactly how many policies State Farm currently provides in Florida, but they are unquestionably the largest private insurer. I use the word “private” because Citizens Property Insurance Corporation may have more policies, but they are actually an extension of the State and people of Florida. Whereas other, private insurance companies are ultimately supported by the investments and value of the company itself, the people of the State of Florida own Citizens. And while Governor Crist is out lamenting “cockamamie” plans and telling large private insurers “good riddance,” there is no active solution being proposed to resolve the skyrocketing premiums and the instability in the insurance market.

Regardless of whether people in Florida like State Farm or not, the real question remains simple: If the market in Florida – a state facing perils greater than the average bear, like hurricanes and sinkhole damage – is so unstable that we cannot support a large company like State Farm that provides Florida homeowners with sinkhole insurance coverage, then what? Counties with the highest frequency of Florida sinkhole insurance claims – such as Hernando, Pasco, and Pinellas – are finding added pressure to remove their sinkhole coverage entirely. This is unwise and leaves the problem at the threshold of the Florida homeowner.

Have a burning question you’d like to ask about sinkholes? Let us know.