Florida targets sinkhole insurance fraud

5:24 PM, Jan 25, 2011   |    comments
Dec. 30, 2010
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Tallahassee, Fla. -- State lawmakers are considering changing the rules over sinkhole insurance claims.

The number of sinkhole claims in Florida has more than tripled in three years and insurers say it's not because of a sudden increase in sinkholes.  They blame increasing fraud and outdated laws.

Sen. Garrett Richter believes too many people are trying to make a profit off of insurance companies for damage that's not caused by sinkholes.

He says some homeowners are getting insurance payments for cracks in walls and driveways and then using that cash to pay bills or other expenses.

"Right now, people are receiving payments from insurance companies and they're paying off their mortgage.  That serves to reduce the value of the entire neighborhood, the entire tax base.  So everybody is penalized when the property values drop."

Richter has put together a sprawling, 113-page bill on property insurance.  It includes new rules such as changing what kind of damage is covered by sinkhole insurance, requiring homeowners to file claims within two years of damage instead of the current five year limit, and allowing insurance companies to make partial payments on claims until a homeowner proves the repairs have been made.

It also would permit insurance companies to make partial payments on claims until a policyholder produces receipts to prove the repairs have been made.

Richter insists his bill would not affect legitimate sinkhole claims.

"The intent is to remove the profit motive on cracks in driveways, cracks in walls, where public adjusters and attorneys are coming in and they're requiring insurance companies to spend thousands and thousands of dollars to come out and say it is, or it is not, a sinkhole claim."

Lawyers are concerned about the legislation.  Gary Farmer of the Florida Justice Association says the bill tilts too far in favor of the insurance industry and lawyers want assurances that homeowners with legitimate sinkhole losses will get prompt insurance payments.

"We need to ensure that the process for the handling of sinkhole claims is fair to all involved.  Consumers who have legitimate catastrophic losses need to be able to get paid, they need to be paid promptly and if the insurance company doesn't pay them promptly there needs to be a system in place so that can get effective redress and get on with their lives."

Sen. Richter says his bill is currently at the starting line and he expects plenty of changes in the coming months to get the plan right.

A similar bill passed the House and Senate last year but was vetoed by Gov. Charlie Crist.

Dave Heller

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