Article Courtesy of The Tampa Bay Times
By Susan Taylor Martin and Dan DeWitt
Despite repeated attempts, the Florida Legislature has yet to write a sinkhole insurance law that prevents abuses yet ensures affordable coverage for homeowners with legitimate sinkhole damage.
That is the conclusion many readers and officials came to after reading "Cracks in the System," a Tampa Bay Times series revealing that hundreds of homeowners in Florida's "sinkhole alley'' — Hernando, Pasco, Hillsborough and Pinellas counties — received big insurance payouts but never made repairs.
Sen. Mike Fasano, R-New Port Richey, said recent changes to state law won't solve the no-repair problem because they still allow a "major out'' for insurers.
If tests show it would cost more to fix sinkhole damage than the policy covers, "insurance companies can just write a check'' to the homeowner, Fasano said. The result: Homeowners might still take payouts but use the money for something other than repairs.
In Hernando County, which leads Florida in sinkhole claims, the Times found that almost half of homeowners who got payouts from Citizens Property Insurance Corp. in 2008, 2009 and 2010 never fixed their houses. Hernando property values have plunged nearly $284 million in the past seven years because of sinkhole damage, much of it unrepaired.
"I don't want communities to be devastated because they have a half dozen homeowners who never get their sinkholes fixed,'' Fasano said. "That's why the check must be made payable to the homeowner and the company approved to fix the sinkhole.''
Hernando County Property Appraiser Alvin Mazourek said he hoped that public exposure of people who took six-figure payouts but didn't make repairs would discourage their neighbors from doing the same.
But he acknowledged that some homeowners still might use the money for other purposes, like paying off mortgages.
"With the economy the way it is, a lot of people are under water,'' Mazourek said. "I'm not sure social pressure is going to do a whole lot.''
Since 2005, the Florida Legislature has made numerous changes to the sinkhole law, mostly recently with Senate Bill 408 in May. But claims and insurance losses continue to soar.
State-run Citizens received 4,025 claims from Tampa Bay homeowners last year, nearly triple the amount of five years ago. In the first nine months of 2011, Citizens took in $37 million in sinkhole premiums but paid out almost $314 million to settle claims, according to the insurer.
Mounting losses mean higher premiums for all of Citizens nearly 1.5 million policyholders. Even homeowners who have policies with private insurers would be liable for a 6 percent surcharge.
In Pasco, second to Hernando in sinkhole claims, a group says Florida's new sinkhole law is biased in favor of insurers and should be repealed. An online petition drive (hpdemocrats.com) has collected hundreds of signatures, according to organizer Lynn Lindeman.
"Insurance companies and lobbyists wrote the law for one reason — to eliminate claims — but the claims are legitimate,'' said Lindeman, a retired college dean. "The problem is that Florida has sinkholes, building went on in sinkhole areas and the people who own houses need to be able to have some kind of affordable protection.''
Lindeman and Mazourek think Florida lawmakers should consider creating a special fund to handle sinkhole claims, similar to funds in other states that insure property in areas where the ground is prone to collapse into abandoned mines.
For $300,000 worth of mine-subsidence coverage, annual premiums are $187 in Pennsylvania, $111 in Illinois and $60 in Kentucky. By comparison, Citizens' premiums for sinkhole coverage average $833 in Hernando and $1,087 in Pasco.
"Who can afford to pay these premiums?'' Lindeman said. "I think the (Florida) law needs to be replaced, and I was interested in reading what other parts of the country are doing.''
Among the private insurers still writing sinkhole coverage is State Farm, which says alleged fraud in sinkhole repairs is driving up costs for homeowners and insurers alike.
In a lawsuit filed two weeks ago in Hillsborough County, State Farm accuses three companies — Advanced Pier Technology of Brooksville, A&M Contracting of Oviedo and Mike Tannous Engineering of Casselberry — of "duping'' State Farm into paying for more work than was actually done at houses in the Tampa Bay and Orlando areas.
Bishar "Mike"' Tannous did not respond to a call for comment. State Farm says his firm, which was supposed to monitor the repair sites, "falsely certified" the scope of work performed.
The owner of A&M Contracting, Michael Dean Hodge, was arrested in August on charges of racketeering and insurance fraud for allegedly overbilling State Farm by $202,000. He has pleaded not guilty.
Taylor Yarkosky, co-owner of Advanced Pier Technology, accused State Farm of staging a "witch hunt'' against his company. He noted that judges had dismissed similar suits by State Farm that sought records from Advanced Pier and others.