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

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

The bill, SB 408, is an omnibus property-insurance reform bill that addresses many of the same issues contained in SB 2044 last year—a bill that was vetoed by former Gov. Charlie Crist despite widespread support among lawmakers, regulators, trade groups and consumer advocates.

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

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

Wester says provisions put in place under former-Gov. Charlie Crist created incentives for people to embellish claims or to not use claims payments to make repairs.

Stander notes that the bill's restoration of replacement-cost holdbacks addresses one of these potential abuses. Before 2006, he says, insurers would pay a portion of a homeowners claim upfront, and then pay the rest after a repair was done. In 2006, that practice was prohibited and costs exploded as suspicious claims for large dollars were filed and paid before repairs were done. In many cases, he says, people would pocket the money and make no repairs.

Limits on how much time insureds have to file claims in certain instances should also help control costs, the insurer representatives say. For example, Wester says under current law, public adjusters wait three or four years after a hurricane and then solicit homeowners to re-open claims. Under this bill, he notes, policyholders must file claims within three years of a hurricane, including re-opened claims.

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

The recent rise in sinkhole claims has become a hot topic among Florida insurers.  A report on the issue by the Office of Insurance Regulation (OIR) shows that claims costs rose from $209 million in 2006 to $406 million in 2009. Of the claims, 66 percent came from what is known as the "sinkhole belt" consisting of Hernando, Pasco and Hillsborough counties. But the OIR study finds that claims reported from Miami-Dade and Broward counties have increased 4.2 percent as of November 2010. Plus, total loss and expenses were up to 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 a sinkhole to the point where claims included any cosmetic damage to the facade of a structure. This bill, he says, narrows that definition. Stander notes that what most people think of as a "sinkhole"—a drop in ground level that swallows a portion of a house—is considered "catastrophic ground collapse."

Wester says the most significant change to SB 408 during the legislative process was to strip out language that would have allowed insurers to make coverage for sinkholes optional. The tradeoff for getting rid of that language, he notes, was to make a narrow definition of what a sinkhole is, and for insureds to show proof of loss.

Liz Reynolds, Southeast state-affairs manager for the National Association of Mutual Insurance Companies (NAMIC), says in an e-mail that she expects Gov. Rick Scott to sign the bill. "While there were some provisions that didn't make the final bill, the finished product still accomplishes a great deal for consumers and companies," she says. "Bill sponsors and other legislative leaders worked long and hard to accomplish a satisfactory compromise, and we appreciate their efforts."

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