Before the Hurricanes of 2004 and 2005, few people showed up for insurance related legislation and committee hearings. When some suggested I get to the meeting early to make certain I could find a seat, it was obvious that times had changed.
State Senator Mike Fasano made an impassioned argument for the proposition that insurance companies must offer sinkhole coverage. Florida public policy and law has long mandated that sinkhole coverage is offered. Senator Fasano’s district is plagued by this peril. In Senate Bill 408, proposed by Naples Senator Richter, the insurance industry successfully lobbied to make sinkhole coverage optional. Significantly, the law allows Citizens Property Insurance Corporation to decline to offer this coverage.
Senator Joseph Negron showed a remarkable understanding of the subtle nuances of coverage and why public policy requires mandated insurance coverage. Historically, many insurance companies refused to offer insurance coverage for perils associated with earth sinking or movement. This obviously caused problems in areas where sinkholes are common.
Senator Fasano pointed out that the banking industry requires coverage be provided for such common perils. He read a letter from a banking executive concerned that Florida regulations were slowly changing to allow insurance which does not cover the perils commonly faced in Florida. It suggested that the proposed law makes Florida a less desirable location to provide inexpensive mortgages because the collateral could be damaged without a financial backstop provided by insurance.
My impression from the questioning is the Florida Senate has bought, hook, line, and sinker, into the insurance industry’s view of the world. Senator Alexander made a statement that reflected the insurance company view of how insurance should be bought, sold and operated. His view is not consumer friendly, and is widely shared in the leadership of the Florida Senate. Under this view, policyholders making claims for sinkhole losses are, without a shred of evidence, essentially viewed as frauds or bad people. Further, this view supports little or no insurance regulation. It believes that a free market will solve the insurance issues.
Historically, this view has met with catastrophe for policyholders and society. Free markets are far from perfect in some industries. We witnessed this in the banking industry just two years ago. Insurance regulation has long been allowed and required because the private insurance free market has proven it cannot work and has resulted in numerous insurer bankruptcies and illusory protections for consumers.
On the other side of the coin, Florida legislators are faced with a difficult insurance issue to which there is no easy answer. The statistics seem to indicate that many insurers have been losing significant money to the sinkhole peril. Some change seems needed. In the Florida Senate Banking and Insurance Committee, it has been pretty obvious that the insurance industry has successfully won the debate over how to accomplish that change.
A number of policyholders were given a very limited time to explain their plight. A firefighter whose home was damaged and whose insurer denied coverage, explained how the hairline crack grew and grew until he could see outside through the crack. He cannot get the $210,000 loan necessary to fix the problem. Senator Alexander left the room before his testimony.
One policyholder expressed outrage that elected officials were more interested with taking care of the insurance companies than the people who elected them. She explained that her mortgage company required her to keep sinkhole coverage. She noted that her front door would not open and her ceiling was falling, and the damage would not be classified as a sinkhole under the proposed law.
As predicted in Are Florida Policyholders With Sinkhole Losses Doomed Without Coverage?, SB 408 passed the committee. There was only ten to fifteen minutes of public testimony at each of the three committee meetings. Some policyholders drove from as far away as Key West and never had a chance to speak. The Senators gave about 15 minutes to State Farm’s lobbyist and limited time to the remaining speakers.
Florida HB 803, filed by Representative John Wood, has the same language. If the insurance industry is permitted to exclude sinkhole loss as it did before the coverage was mandated, Florida homeowners will have no coverage for this peril. The proposed change in the law leaves every Florida family one tragedy away from financial ruin.
