NU Online News Service, May 6, 3:14 p.m.EDT

Insurer groups hailed the Florida Legislature's passage of awide-ranging property bill and have called on the governor to signthe legislation into law.

The bill, SB 408, is an omnibus property-insurance reform billthat addresses many of the same issues contained in SB 2044 lastyear—a bill that was vetoed by former Gov. Charlie Crist despite widespreadsupport among lawmakers, regulators, trade groups and consumeradvocates.

The bill addresses a range of issues, but William Stander,assistant vice president and regional manager for the PropertyCasualty Insurers Association of America (PCI), notes that it isaimed at driving down costs for insurers rather than a rate reformbill.

Gerald Wester, Florida counsel for the American InsuranceAssociation (AIA), says the bill contains "no homeruns anywhere,but when you put it all together, we have a lot of singles anddoubles."

Wester says provisions put in place under former-Gov. CharlieCrist created incentives for people to embellish claims or to notuse claims payments to make repairs.

Stander notes that the bill's restoration of replacement-costholdbacks addresses one of these potential abuses. Before 2006, hesays, insurers would pay a portion of a homeowners claim upfront,and then pay the rest after a repair was done. In 2006, thatpractice was prohibited and costs exploded as suspicious claims forlarge dollars were filed and paid before repairs were done. In manycases, he says, people would pocket the money and make norepairs.

Limits on how much time insureds have to file claims in certaininstances should also help control costs, the insurerrepresentatives say. For example, Wester says under current law,public adjusters wait three or four years after a hurricane andthen solicit homeowners to re-open claims. Under this bill, henotes, policyholders must file claims within three years of ahurricane, including re-opened claims.

The bill also establishes a two-year deadline to file sinkholeclaims. Stander says the bill contains a "large sinkhole section"that includes a repair mandate and strong definitions for whatconstitutes a sinkhole and repairable damage.

The recent rise in sinkhole claims has become a hot topic amongFlorida insurers.  A report on the issue by the Office of InsuranceRegulation (OIR) shows that claims costs rose from $209 million in2006 to $406 million in 2009. Of the claims, 66 percent came fromwhat is known as the "sinkhole belt" consisting of Hernando, Pascoand Hillsborough counties. But the OIR study finds that claimsreported from Miami-Dade and Broward counties have increased 4.2percent as of November 2010. Plus, total loss and expenses were upto about $3 million in 2010 from less than $250,000 in 2006.

The Florida Senate also released a study on sinkhole claims.

Stander says that courts have broadened the definition of asinkhole to the point where claims included any cosmetic damage tothe facade of a structure. This bill, he says, narrows thatdefinition. Stander notes that what most people think of as a"sinkhole"—a drop in ground level that swallows a portion of ahouse—is considered "catastrophic ground collapse."

Wester says the most significant change to SB 408 during thelegislative process was to strip out language that would haveallowed insurers to make coverage for sinkholes optional. Thetradeoff for getting rid of that language, he notes, was to make anarrow definition of what a sinkhole is, and for insureds to showproof of loss.

Liz Reynolds, Southeast state-affairs manager for the NationalAssociation of Mutual Insurance Companies (NAMIC), says in ane-mail that she expects Gov. Rick Scott to sign the bill. "Whilethere were some provisions that didn't make the final bill, thefinished product still accomplishes a great deal for consumers andcompanies," she says. "Bill sponsors and other legislative leadersworked long and hard to accomplish a satisfactory compromise, andwe appreciate their efforts."

She notes that work still needs to be done regarding the Floridainsurance market, particularly in the areas of no-fault insurancefraud, bad faith and restoring Citizens Property Insurance Corp. asa true market of last resort.