Florida Property Law: Hurricane, Wind Mitigation, Sinkholes, Loss Assessment, and Flood (Florida outline area II, part 2)

The outline's property list under Florida law is: hurricane (coverage, windstorm, definition, deductible); wind mitigation and premium discounts; catastrophic ground cover collapse versus sinkholes; fungus; loss assessment (HO-6); exclusions; loss settlement; dispute resolution; loss payment; and flood. This chapter takes them in that order. If you remember one framework, make it this: in Florida, the legislature has written large parts of the homeowners contract into statute, and each statute answers a question the policy form leaves open: what is a hurricane, how much is the deductible, what must the insurer offer, how fast must it pay, and how are disputes resolved?

9.1 Hurricane: Coverage, Windstorm, Definition

Florida's statute defines the vocabulary for residential coverage policies (homeowner, mobile home owner, dwelling, tenant, condominium unit owner, cooperative unit owner, and similar policies, plus commercial residential: condominium association, apartment building, and similar). (s. 627.4025(1))

Three consequences follow. First, a loss from a storm that was never declared a hurricane (a tropical storm or a nor'easter) is not a hurricane loss and the hurricane deductible does not apply. Second, a loss that occurs within the defined hurricane period, even if the storm has moved away from the insured's county, is within the hurricane period if the National Hurricane Center's warning or watch for any part of Florida is still in effect or ended less than 72 hours earlier. Third, wind-driven rain that enters through an opening the wind did not create (an open window, a pre-existing roof leak) is not "hurricane coverage."

Windstorm coverage is required, unless rejected in writing

An insurer issuing a residential property insurance policy must provide windstorm coverage. A property insurer must make available, at the policyholder's option, an exclusion of windstorm coverage, but the exclusion is valid only if:

• a natural-person policyholder personally writes or types (and every other named insured signs and dates) the statement, "I do not want the insurance on my (home/mobile home/condominium unit) to pay for damage from windstorms. I will pay those costs. My insurance will not."; and
• if the structure has a mortgage or lien, the policyholder provides a written statement from the mortgageholder or lienholder approving the exclusion. (s. 627.712(1), (2))

An insurer must also make available an exclusion of contents coverage on residential policies (other than condominium unit owner and tenant policies), by a similar statement the policyholder personally writes or types and signs. (s. 627.712(3)) Citizens writes wind-only coverage for eligible coastal risks, which is why s. 627.712 treats those risks separately (Chapter 10).

9.2 The Hurricane Deductible

A property insurer's right to use a separate hurricane deductible is controlled by s. 627.701.

What must be offered

Before issuing a personal lines residential property policy, the insurer must offer alternative hurricane deductibles equal to $500, 2 percent, 5 percent, and 10 percent of the policy dwelling limits (unless the percentage deductible is less than $500). The written notice must specify the deductible that applies if the applicant does not choose, and the insurer must give notice of the availability of these deductibles with each renewal. Adjustments by value:

(s. 627.701(3))

Disclosure

A policy with a separate hurricane deductible must carry on its face, in boldfaced type no smaller than 18 points, the statement "THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." The insurer must compute and display the actual dollar value of the hurricane deductible on the declarations page at issuance and on the renewal declarations or premium renewal notice. For a policy with an inflation guard rider, the insurer must display the dollar value and warn that the deductible may be higher at loss time because of the inflation guard. (s. 627.701(4))

How the deductible is applied: once a calendar year

The hurricane deductible "shall apply on an annual basis to all covered hurricane losses that occur during the calendar year" for losses covered under one or more policies issued by the same insurer or an insurer in the same group. (s. 627.701(5)(a)1.)

So if a $400,000 dwelling has a 2% hurricane deductible ($8,000) and two hurricanes damage the home in one calendar year, the insured pays $8,000 in total across the two storms, not $8,000 per storm. If the first storm's loss was below the deductible, the insurer may require the insured to report that loss or keep receipts so it can be applied to the second storm. Commercial residential policies must have an alternative: the insurer must offer both an annual deductible and one that applies to each hurricane. (s. 627.701(5)(b))

A policyholder with a risk valued under $500,000 may not have a hurricane deductible above 10 percent of the dwelling limit unless the policyholder personally writes out a specified statement and signs it. (s. 627.701(4)(d))

The non-hurricane deductible and the roof deductible

The insurer must offer a $500 deductible for perils other than hurricane, and must give notice of its availability at least once every 3 years. (s. 627.701(7)) A separate roof deductible is allowed only if: the insurer has complied with the $500 offer; the roof deductible does not exceed the lesser of 2 percent of the Coverage A limit or 50 percent of the cost to replace the roof; the premium includes an actuarially sound credit; the claim is adjusted on a replacement cost basis; and the deductible does not apply to a total loss to the primary structure under the valued policy law, a hurricane roof loss, a roof loss from a tree fall or hazard that punctures the roof deck, or a roof loss requiring repair of less than 50 percent of the roof. If the roof deductible applies, no other deductible applies to that loss. The policy must carry a bold 18-point warning on the page after the declarations page. (s. 627.701(10), (4)(e))

9.3 Wind Mitigation and Premium Discounts

Florida requires rate filings for residential property insurance to include actuarially reasonable discounts, credits, or other rate differentials, or appropriate reductions in deductibles, for properties on which fixtures or construction techniques that reduce windstorm loss have been installed: for example, features that improve wind uplift prevention, roof strength, roof covering performance, roof-to-wall strength, opening protection (shutters, impact windows), and window, door, and skylight strength. OIR must reevaluate the list of mitigation features and the discounts by January 1, 2025, and every 5 years thereafter. (s. 627.0629(1))

The insurer must notify an applicant or policyholder, using an OIR-prescribed form at issuance and at each renewal, of the availability and range of each discount, credit, or deductible reduction. The Financial Services Commission prescribes a uniform mitigation verification inspection form that all insurers must use when policyholders submit it to receive wind discounts. (s. 627.711) When a policyholder has taken appropriate hurricane mitigation measures, the insurer must give the insured the option of an appropriate reduction in the hurricane deductible or the discount credit. (s. 627.701(9)) An insurer must also describe the available hurricane mitigation discounts on its website (effective October 1, 2023). (s. 627.0629(1))

For mobile homes, the statute requires discounts for homes constructed to the HUD wind standard it names (ANSI/ASCE 7-88, adopted July 13, 1994) that also meet the tie-down requirements. (s. 627.0629(3))

9.4 Catastrophic Ground Cover Collapse Versus Sinkhole Loss

Florida's limestone geology produces sinkholes, and the law distinguishes two coverages.

(s. 627.706(1), (2))

"Damage consisting merely of the settling or cracking of a foundation, structure, or building does not constitute a loss resulting from a catastrophic ground cover collapse." Sinkhole activity is settlement or systematic weakening of the earth supporting the covered building resulting from contemporaneous movement or raveling of soils, sediments, or rock into subterranean voids created by the effect of water on limestone or similar rock. A sinkhole is defined as a landform created by subsidence as underlying strata are dissolved by groundwater. The insurer may restrict CGCC and sinkhole coverage to the principal building. (s. 627.706(1)(c), (2))

Sinkhole claims

On receiving a sinkhole claim the insurer must inspect the premises; if structural damage exists and the cause cannot be identified or is consistent with sinkhole loss, it must engage a professional engineer or professional geologist to test (at the insurer's cost, in the usual case) and issue a report. The insurer must send a written notice disclosing its determination and the policyholder's rights. If the insurer denies a claim without testing, the policyholder may demand testing within 60 days of the denial, and pays 50 percent of the costs or $2,500, whichever is less (reimbursed if the report certifies sinkhole loss). If sinkhole loss is verified, the insurer must pay to stabilize the land and building and repair the foundation. (s. 627.707(1)–(5)) A neutral evaluation program, run by DFS with certified engineers or geologists, resolves disputes on causation and repair methods. (s. 627.7074)

A frequent exam pairing. "Which coverage must every insurer provide?" CGCC. "Which coverage is offered for additional premium?" Sinkhole loss. "Which requires that the building be condemned and vacated?" CGCC.

9.5 Fungus

The outline lists fungus among the Florida property topics. Fungus, mold, wet or dry rot, and bacteria are a recurring Florida homeowners issue because of humidity and storm water intrusion. The Florida statutes read for this edition do not fix a dollar limit for fungus coverage. What the statutes do is require disclosure: a private passenger auto or basic homeowner policy may not be delivered unless an outline of coverage is delivered before issuance or accompanies the policy, and the statute's list of the perils to be identified in the outline includes mold (for the dwelling and for personal property). (s. 627.4143(1))

So the exam-ready rule is: a standard homeowners policy treats mold as an excluded cause of loss, subject to a policy-specific limited-coverage grant that varies by insurer; the policy and its outline of coverage state whether fungus is covered and to what limit; the agent's job is to disclose the limit and not to promise coverage. In the standard structure (Chapter 1) the exclusion for mold and rot is a "wear, tear and deterioration" style exclusion with an ensuing-loss exception. Confirm any specific fungus limit in the policy; this book does not state one.