Sinkhole insurance bill bashed as anti-consumer; still wins approval

Despite some bipartisan objections, the House has narrowly approved legislation that intended to reduce or prevent homeowner claims against insurance companies damages caused by sinkholes.

Sponsor Rep. Roger Kane, R-Knoxville, contended the bill (SB880) is needed to replace a 2006 statute modeled after Florida’s law on insurance coverage for sinkholes that led to a 1,200 percent increase in claims and “millions of dollars in unnecessary costs.” Florida revised its law in 2011, he said.

But the measure was roundly condemned as anti-consumer by other legislators in debate Monday night before it was approved on a 53-33 vote with more than a dozen perhaps confused lawmakers declining to vote either way. It has already passed the Senate on a 30-0 vote, but must now return to that chamber for concurrence on a minor amendment.

“This is a horrible bill,” said Rep. Curry Todd, R-Collierville, who said the measure allows insurance companies to cancel policies “in mid-term on anyone” if they feel a claim may develop. He also disputed Kane’s contention that the bill had been vetted thoroughly in committees of the House and Senate, saying he had reviewed tapes of the meetings and there was hardly any discussion at all.

“This is one of the most blatant bills I’ve seen to benefit one particular industry at the expense of the consumer,” said House Democratic Caucus Chairman Mike Turner of Nashville.

Rep. Ron Travis, R-Dayton, said the bill is a case of inappropriate government involvement in insurance and sets a bad precedent.

“Today’s it’s sinkholes. The next day it’s going to be earthquakes and the day after, it’s going to be hail,” Travis said.

Kane said the bill had been reviewed by the state Department of Commerce and Insurance and found “not consumer unfriendly.” He said most insurance companies also support the proposal. Both Kane and the Senate sponsor, Republican Sen. Jim Tracy of Shelbyville, are insurance agents by profession.

Responding to Turner’s claim that bill was unfair to consumers, he declared: “That’s not true, sir!”

Kane said most, but not all, policies now include sinkhole coverage. Critics said that, after passage, companies are likely to insure only homes at no risk of damage.

At one point in debate, Kane remarked, “This doesn’t change anything.”

Declared Todd in response: “Why are you putting this into statute if it doesn’t change anything?”

A legislative staff review of the bill says it “specifies that sinkhole loss coverage is not mandated to be included in homeowner property insurance policies” but must be offered by companies. Companies will also have a right to inspect property for potential sinkhole problems before agreeing to coverage or setting a rate.

It also puts in place an array of provisions governing the sinkhole loss damage for which an insurer is liable and rules for both insurers and policy holders in dealing with claims.