Sinkhole coverage reforms should benefit residents, too

Article Courtesy of The Tampa Tribune

Published February 24, 2011


The Feb. 9 piece from the Personal Insurance Federation of Florida regarding sinkhole insurance is very interesting, especially considering the federation was formed Jan. 25, not by concerned homeowners but by three of Florida's largest insurance companies Allstate, Progressive and State Farm. ("Hurricane Sinkhole makes landfall in the Sunshine State," Other Views).

Federation President Mike Carlson blames an increase in sinkhole claims on a "330 percent increase in the number of public adjusters" licensed and extensively trained insurance experts who represent homeowners, often in negotiating settlements with Allstate, Progressive and State Farm.

Too bad he stopped his count in 2009. If he had given your readers current figures from the Department of Financial Services (which he served as deputy chief of staff until January 2011), they would learn that the number of public adjusters in Florida has actually decreased significantly, to less than 1,300 resident adjusters with active appointments.

Another number Carlson might have used is 0.12, the percentage of so-called "questionable" sinkhole claims in 2010 referred to state investigators for fraud investigation. Or perhaps 94.3, the percentage of sinkhole claims closed from 2006-10 without dispute. Both numbers come from a recent Office of Insurance Regulation report based on sinkhole claims information provided by insurers.

The truth is that, as consumer advocates lacking multibillion-dollar corporate budgets, public adjusters make convenient scapegoats on an issue that is highly complex. Few public adjusters even involve themselves in sinkhole claims because of their complexity. In fact, the Senate committee report Carlson references shows that public adjusters were involved in only a quarter of sinkhole claims handled by Florida's largest insurer.

Many homeowners with sinkhole damage do indeed choose not to use insurance payments to repair their homes, but Carlson neglects to share why this is often so: Even after expensive repairs, homeowners are left with homes that have a drastically reduced property value, often far lower than the value of their mortgage. These repairs are not guaranteed and often cause additional damage to the home. In fact, most insurers refuse to sell sinkhole insurance to homeowners after they have completed recommended repairs, leaving them with a "sinkhole-condition" home valued far below what they paid and lacking insurance for further damage.

We agree with Carlson that a legislative solution can be found to address the concerns of insurance companies, but strongly believe that any legislation should benefit not just the insurer, but also the insured. They deserve to have their voices heard, and their concerns addressed in any legislation that is developed.