A broad property insurance bill allowing certain rate increases and eliminating a requirement that insurers offer full sinkhole coverage cleared its first legislative committee Tuesday after three hearings and intense debate.
Legislators and insurers who support the bill, SB 408, say it will reduce skyrocketing costs for claims, including those for sinkhole damage that is never repaired. Opponents, including some bankers and consumers, say the bill would hurt people with legitimate claims and require many homeowners with mortgages to buy pricey sinkhole insurance coverage obtained by their banks.
Much of the debate at the Senate's banking and insurance committee meeting Tuesday centered on a provision to allow insurers to decline coverage for any sinkhole damage other than when the property falls into a visible hole. Sen. Mike Fasano, R-New Port Richey, fought the idea.
Mark Delegal, a lobbyist for State Farm Florida, said the sinkhole coverage that insurers provide is not intended to cover hairline cracks. “I don’t see sinkholes in the middle of the highways,” he said. “What I see is manufactured, legally created sinkholes.”
Before voting, the Senate panel heard from several homeowners, including three with sinkhole damage. But for the third meeting in a row, it had to turn some people away.
“I drove four hours with my 2-year-old, and they gave me” a few minutes, said Ginny Stevans, of New Port Richey, after the meeting. “There were people who came from Miami who didn’t get to speak.”
Stevans told senators that the sinkhole damage that caused parts of her home’s ceiling to collapse would likely not be covered under the bill: “I’m angry that this totally anti-consumer bill would be considered by the people who we chose, we elected, to represent us…. In reading the bill, it is painfully obvious the disconnect between you and the people you serve.”
Another homeowner said his sinkhole claim was denied in 2007 and since then, the crack in his home has gotten so wide he can see the foil-like insulation through it. He said he had to drill a hole in his front door to fasten it closed because it would not stay shut otherwise.
Yet another homeowner said he put $50,000 of his own money into repairs after his insurer denied his sinkhole claim twice. Since then, the damage has worsened, and he is suing the company. He said the bill would eliminate his lawsuit retroactively, taking away his “right to be heard.”
An insurance agent who spoke at the hearing said that for every legitimate sinkhole claim, he can name a dozen that aren’t. Tim Abbey, a home and business owner in Safety Harbor, said he’s aware of many homeowners pocketing the money instead of making repairs. “That’s the abuse, that’s where the money is going, that’s the frustration with a lot of consumers like myself,” he said.
Legislators who support the bill say they expect it to help lower rates, but the legislation does not require the savings to be passed to consumers.
South Florida legislators who voted for the bill are Sens. Ellyn Bogdanoff, R-Fort Lauderdale; Chris Smith, D-Fort Lauderdale; and Joe Negron, R-Stuart. Those who voted against it are Sens. Eleanor Sobel, D-Hollywood; and Gwen Margolis, D-Miami.
The bill would, among other things:
Allow insurers to withhold a full payment for home insurance claims until policyholders enter into a contract for repairs and repairs are made. The provision wouldn't apply to homes that are destroyed.
Require homeowners to file or reopen hurricane claims within three years after a storm, as opposed to the current deadline of five years or more.
Allow insurers to raise rates if they can show they're losing money on discounts to policyholders who fortify their homes against hurricanes. It would give companies free rein on what they spend for advertising and agent commissions — costs that are sometimes questioned by regulators.
Require homeowners to pay
part of the $9,500 average cost of testing for sinkholes if the insurer
denies the claim.
Require a policyholder whose sinkhole claim is approved to enter into a contract for repairs within 90 days of approval and make the repairs within a year after entering into the contract.
Some of the debate centered on the extent to which regulation is needed. "I don't think markets work best when government forces someone to unwillingly sell something," Delegal said.
"We’ve been monkeying around socializing insurance for the last number of years and it has done nothing but make things worse," added Sen. J.D. Alexander, R-Lake Wales.
Sobel said certain requirements and regulations are needed to protect people from the insurance industry's incentive to collect as much in premiums and pay out as little in claims as possible. "Health insurance companies did not want to cover mammograms [until] it was mandated," she said.
Consumers interested in weighing in can contact their legislators.