Florida’s Citizens Reaches Sinkhole Settlement

Florida’s state-backed property insurer said it has reached an agreement with more than 300 policyholders with sinkhole claims that officials say could save the insurer $30 million in legal fees.

Citizens Property Insurance Corp. officials said the tentative agreement is with the South Florida law firm of Boyette, Cummins & Nailes that represents the policyholders.

Under this deal, Citizens agreed to pay $2 million in legal fees and expenses that the law firm has already spent on closed claims. The law firm also agreed to be paid $10,000 per case on cases that are currently pending. Another $5,000 fee per case will be paid on cases that are in the discovery phases, but where no formal complaints have been filed.

Citizens General Counsel Dan Sumner said the agreement serves notice of the importance of addressing claims before resorting to legal action.

“I’m confident this decision represents a new focus by all parties on getting additional repairs instead of battling in court,” said Sumner.

In addition to paying the legal expenses, Citizens has agreed to pay for the underground sinkhole repairs based on recommendations of a professional engineer who will certify the correct repairs are made.

Policyholders will be able to choose a contractor from a list compiled by Citizens.

Citizens Board of Governors Chair Chris Gardner said the legal breakthrough allows Citizens to focus on repairing homes instead of engaging in legal battles.

“This agreement was made possible through the efforts of our coordinated counsel, which has had great success in requiring claims payments to be used to repair sinkhole damage and have that position upheld in court,” said Gardner.

Still, the current agreement between Citizens and the trial lawyers only goes so far. There are still another 1,900 sinkhole claims left to be litigated.

While Citizens presses forward with its effort to resolve hundreds of sinkhole claims, state lawmakers are attempting to entice policyholders to repair their homes rather than filing a claim and just pocketing the money.

The Senate Appropriation Subcommittee on General Government approved a bill (SB 416) that calls for Citizens to create a Sinkhole Stabilization Repair Program.

Under the program, Citizens would license sinkhole repair contractors that policyholders could then choose to make any necessary repairs. Each aspect of the repairs would be on a line-item basis that would reflect market prices. This would void the ability of contractors to just submit a total estimate of all repairs.

Citizens would then provide policyholders with a five-year warranty on any repairs in cases where the contractor is unable to honor its own warranty. Citizens would also be required to pay for all necessary repairs even if they exceed the policyholder’s policy limits.

The program also allows policyholders to request a neutral evaluation in cases where Citizens denies a sinkhole claim. Significantly, the evaluation would only determine whether the policyholder has incurred a sinkhole loss.

Under current law, the evaluation, in addition to ascertaining whether the policyholder has a valid sinkhole claim, also includes a recommendation as to what repairs are necessary and should be made.

State lawmakers, however, were split on whether the proposals would lower the costs of sinkhole repairs or merely prevent homeowners from seeking redress in the courts.

Senator Wilton Sampson (R-Tilby) said the program would remove some of the uncertainty that currently surrounds sinkhole and reduce the amount of litigation.

“It would give policyholders confidence that the work is going to be done correctly and in a timely manner,” said Sampson.

Other lawmakers, however, question whether the bill would just prevent policyholders from exercising their right to dispute any sinkhole claims in the court.

Senator Jack Latvala (R-Clearwater) expressed his support for the spirit of the proposals, which would ensure that necessary sinkhole claims are not only paid for, but actually completed.

However, Latvala questioned whether they infringe on homeowners’ rights.

“The proposals are not where they need to be for consumers,” said Latvala.

The lawmakers proposals are just the latest in a long-line of laws that have been enacted to rein-in Citizens’ sinkhole problems, especially in the so-called sinkhole alley that encompasses Hernando, Hillsborough, Pasco and Pinellas counties.

Those counties located just north of Tampa, account for roughly 90 percent of all sinkhole claims. According to Citizens’ records, as of August 2013, a sample of 204 sinkhole claims found that 56 percent are in litigation primarily over disputes on how to repair the property.

Citizens Spokesperson Michael Peltier said the insurer welcomes the concept of creating the stabilization program, which would be an extension of its attempt to better manage sinkhole claims.

“We have a voluntary program already in place, so extending it would not be too much of a burden on Citizens,” said Peltier.

Peltier also pointed out that the SB 408 that lawmakers enacted in 2011 has had a major impact on the costs of sinkhole repairs.

Among other things, that law required sinkhole claims to be evaluated by professional engineer to determine whether a property had incurred structural damage that qualify as a sinkhole loss. Citizens also made sinkhole coverage optional and implemented a 10 percent deductible on all sinkhole claims.

The impact on sinkhole claims has been significant.

Citizens reports that non-litigated claims between 2012 and 2013 have dropped from 3,082 to 1,157. Non-litigated pending claims are also down by 59.6 percent from 3,712 in 2012 to 1,500 in 2012. The total number of reported sinkhole claims has dropped from a high of 4,605 in 2011 to a projected 900 last year.

“SB 408 has had a dramatic impact on our sinkhole claims,” said Peltier.