I wonder how our clients, the Leeds, would feel if they had purchased only catastrophic sinkhole coverage or no sinkhole coverage, rather than the normal sinkhole coverage required when they purchased their "all-risk" insurance policy. Their home slowly but surely cracked, drooped, and sank over several years before it was condemned. If they "saved" money on their premium as Florida Senator Mike Fasano successfully pushed for in legislation, they would have lost the entire investment on their home. They would also still owe money on the mortgage, possibly causing bankruptcy.
I like and respect Senator Mike Fasano. He worries about the people without a lot of financial means. He is a good public servant who is not trying to use his office for personal financial gain.
While we see eye to eye on many issues, I respectfully disagree on the issue of allowing policyholders to "opt out" of sinkhole coverage. It is a very risky proposition–like opting out of "cancer treatment" to save on health insurance premiums. Chances are you won’t get it. But, if you do…..
I also think the legislation leads many Floridians into violating most mortgage agreements. Sinkhole coverage is available and most mortgages require broad all-risk coverage to be purchased. I have heard some claim that the banks will purchase sinkhole coverage as "forced placed" and charge a significant amount back to the policyholder anyway. So where’s the savings in that scenario?
And, aren’t we just begging for people that get stuck with slow moving sinkholes and no coverage to walk from their properties? The properties will not get fixed. Lower property values and blighted neighborhoods will also result from legislation. In this scenario, even the people who did not purchase sinkhole coverage lose. Neighbors are financially harmed when others are allowed to be cheap.
The sinkholes will continue. Many are tempted into a significant gamble of not paying some money today in return for an unlikely financial disaster tomorrow. Fasano’s legislation makes many policyholders into gamblers with the financial bet of their lifetimes.
Still, I understand Fasano’s concern. If people are driven from their homes because of escalating insurance costs and from other non-discretionary expenses, there is another real social problem. This is especially so for the fixed income retirees in his district. He made a choice and felt this was his best, possibly only, option to combat that issue. I suggest he keep working on other alternatives.
I disagree because he equates "savings" of premiums without also taking away the total impact of policyholders not having insurance when the "big one" starts destroying their nest egg investment. He should also factor the total impact the legislation has on all our property values when people walk away from or cannot fix their sinkhole damaged homes. My guess is that if he made such a calculation, the positive number he cites in the following discourse with the Tampa Tribune would be a large negative loss for individuals and our community at large.
Choice in sinkhole coverage
The Tampa Tribune
Published: October 24, 2009Regarding "A sinking feeling in Pasco and Hernando" (Our Opinion, Sept. 28):
I disagree with your claim that "property owners in sinkhole-prone Pasco and Hernando counties are getting shafted by the governor and the Legislature." Allowing residents in these two counties to choose for themselves whether they want full sinkhole coverage or catastrophic ground cover collapse coverage gives them economic freedom that was previously prohibited by law.
When I sponsored legislation in 2007 to allow Citizens Property Insurance Corp. customers the option of choosing to drop full sinkhole coverage, it was because insurance rates were extremely high in these two counties due to the number of sinkhole-related claims.
Residents who live in areas that were not sinkhole prone were stuck paying the same rates as those who were more likely to experience sinkhole activity. This was not a "stunt" as you proclaim but an opportunity to give people more choice and control over the decisions they make based on their budget situations and geographic location.
At my request, Citizens supplied some information to demonstrate just how successful the sinkhole option has been. As of June 30 of this year Citizens had a total of 43,881 policies written in Pasco. Of those policies 80.5 percent of homeowners chose to exclude sinkhole coverage. This resulted in a total premium savings of $38,792,481.
During the same period, a total of 22,014 homeowners were covered by Citizens in Hernando County. Of that number, 65.5 percent of residents chose to not purchase full sinkhole coverage. This translates into a savings of $12,417,368.
Combined, homeowners in both counties saved $51,209,849 in premiums.
The $51 million saved in premiums are dollars that remained in the pockets and bank accounts of everyday people. Many of these individuals are seniors living on fixed incomes, families struggling through tough economic times and those trying to make ends meet week after week.
This past spring the Legislature passed a bill that allows private companies in Pasco and Hernando counties to do what Citizens was given the opportunity to do in 2007. With the possibility of premium savings being in the millions of dollars, the "stench" and "scheme" you call this legislation is totally unfounded. I doubt any resident who chooses to have their premiums nearly halved would argue in favor of being forced to keep full sinkhole coverage.
Mike Fasano of New Port Richey represents District 11 in the Florida Senate
