Opting Out Could Halve Citizens' Bill

By RANDY DIAMOND The Tampa Tribune

Published: Oct 27, 2006

TAMPA - Pasco County homeowners' insurance bills with Citizens Property Insurance Corp. will be cut by more than half if policyholders opt out of sinkhole coverage, Citizens officials said Thursday.

But rate relief for Pasco residents, who pay among the highest insurance rates in Florida, still depends on the state Office of Insurance Regulation approving Citizens' plans.

Insurance Commissioner Kevin McCarty has said the office must review Citizens' proposal, which was announced last winter. Citizens, the state-sponsored insurer and the only choice for many Pasco residents, wants to implement rates by March.

Citizens officials, who met in Tampa on Thursday, said the average noncoastal Pasco County policyholder dropping sinkhole coverage would see a 56.5 percent drop in their annual premiums, from $2,505 to $1,090.

Rate savings also would be significant in Hernando County, with premiums dropping an average of 43.9 percent, from $1,712 to $961.

Statewide, Citizens policyholders would see an average 7.8 percent rate cut if they dropped sinkhole coverage, officials said.

Citizens has paid more than 550 sinkhole claims in the first nine months of 2006, primarily in Pasco and Hernando, costing the insurer $35 million. Citizens officials insist that 90 percent of the claims are not legitimate because cracks in house foundations and walls are because of normal house settlement, not sinkholes.

Trial lawyers have pushed homeowners to file claims so they and homeowners can share in lucrative cash settlements, said Ray Walton, Citizens' director of claims.

"The driving force to sinkhole claims is the cash incentive, which leads to many homes not being repaired in accordance with engineering protocols or not being repaired at all," he said.

Still, the 10 percent of claims that Citizens now attributes to sinkholes would not be covered if a homeowner were to skip the coverage, Walton said.

Citizens would pay if a house was swallowed by a sinkhole, even if the policyholder opted out of coverage, Walton said. But that might not offer a lot of comfort for homeowners because Citizens has never had such a severe claim in its three years of operation, Walton said.

Chip Merlin, a Tampa lawyer specializing in homeowners insurance cases, said Citizens' proposal would mean financial ruin for homeowners who opted out of coverage and ended up with a sinkhole claim.

"It's extraordinarily dangerous," Merlin said.

Citizens officials said homeowners would still have a choice of buying full sinkhole coverage, though their rates would go up. They say the majority of policyholders who want lower rates will be the ones benefiting from their proposal.

Reporter Randy Diamond can be reached at (813) 259-8144 or rdiamond@tampatrib.com.