Florida Farm Bureau Casualty Insurance Company v. Office of Insurance Regulation, ___ So. 3d ___, 38 Fla. L. Weekly D597 (Fla. 1st DCA March 13, 2013)

The Office of Insurance Regulation denied the insurance company’s request for approval of a proposed amendment to its sinkhole endorsement limiting the amount of coverage offered to 25 percent of the base policy limits.  Section 627.706, Florida Statutes, states, “Every insurer authorized to transact property insurance in this state must provide coverage for a catastrophic ground cover collapse.”  Subsection (1)(a) goes on to state, “The insurer shall make available, for an appropriate additional premium, coverage for sinkhole losses on any structure . . . to the extent provided in the form to which the coverage attaches” and permits deductibles in the amount of 1, 2, 5, or 10 percent “of the policy dwelling limits.”  The insurance company construed the italicized language to confer upon the insurer the discretion to determine the amount of sinkhole coverage to offer, but the Office of Insurance Regulation construed the word “form” to refer to the base policy.  The appellate court affirmed the Office of Insurance Regulation’s interpretation because it was not clearly erroneous; rather, it “within the permissible range of interpretations.”  “The term ‘form’ is not defined in either section 627.706 or elsewhere in the [insurance] Code,” but Section 627.410(1), Florida Statutes, relating to the mandatory submission of all insurance forms to the Office of Insurance Regulation, includes the basic policy, endorsements, and other policy documents within the rubric of “forms.”  Because Section 627.706(1)(a) ties the amount of sinkhole deductibles to specified percentages of the base policy limits, “it is reasonable to conclude that the amount of sinkhole loss coverage is intended to be the same as the amount of casualty coverage provided for in the base policy.”  Setting the maximum deductible at 10 percent reflects a legislative intent to provide “meaningful sinkhole loss coverage,” but the 25% coverage limit proposed by the insurance company would “make the optional coverage valueless.”  By arguing that the 2007 amendments to Section 627.706 “gave property insurers the discretion to set their own coverage limits,” Farm Bureau impliedly conceded that it lacked this discretion before the amendments took effect.