Florida Residential Underwriting – Mitigation Inspectors Misconduct
An authorized mitigation inspector that signs a uniform mitigation verification form may not commit misconduct in performing hurricane mitigation inspections or in completing the form that causes financial harm to a customer or their insurer; or that jeopardizes a customer’s health and safety. Misconduct occurs when an authorized mitigation inspector signs a form that:
- Falsely indicates that he or she personally inspected the structures listed on the form;
- Falsely indicates the existence of a feature which entitles an insured to a discount which the inspector knows does not exist or did not personally inspect;
- Contains erroneous information due to the gross negligence of the inspector; or
- Contains a pattern of demonstrably false information regarding the existence of mitigation features that could give an insured a false evaluation of the ability of the structure to withstand major damage from a hurricane endangering the safety of the insured’s life and property.
Authorized mitigation inspectors licensed under s. 471.015 or s. 489.111 are directly liable for the acts of employees that violate the above, as if the authorized mitigation inspector personally performed the inspection.
Any insurer, person, or other entity that obtains evidence of fraud or evidence that an authorized mitigation inspector or an employee authorized to conduct inspections, has made false statements in the completion of a mitigation inspection form must file a report with the Division of Insurance Fraud. They must provide all evidence in its possession that supports the allegation of fraud or falsity. An insurer, person, or other entity making the report will be immune from liability in accordance with s. 626.989, for any statements made in the report, during the investigation, or in connection with the report.
Reference: Florida Statute 627.711 (Effective 07/01/2010)
Florida Residential Underwriting – Inspections
There are many types of home inspections. The most common are listed below. If the insurer requests a 4-point or specialized inspection and it is not provided, they can refuse to provide certain coverage or may refuse to insure your property at all.
Underwriting Inspection (Insurer Pays):
An insurer may require a visual inspection prior to writing a policy. This inspection is done to verify the information given on the application about the home and property. They may verify the construction of the home and whether there are potential hazards on the property such as unacceptable animals, pools, trampolines, unrepaired steps, steps without handrails, etc. They also verify the maintenance of the home such as whether the property has any unrepaired damage. They look at whether the home is properly maintained, such as, overgrown grass and weeds, trees with dead limbs near home, non-operating vehicles on the property, etc.
Insurers hire their own inspectors or inspection firms to inspect the condition of a property prior to issuance or renewal of a policy. This is part of the underwriting process. These inspectors are hired and paid by the insurance company so they decide who to use and what qualifications they must meet. Florida law does not address who an insurance company can hire for their underwriting process. The Department of Financial Services would not have authority to intercede on an inspector’s behalf if they were denied employment/contracts with an insurer.
4-Point Inspection (Consumer Pays):
If you are insuring an older home, the insurer may require an inspection of the following items: The roof (to determine its life expectancy), the plumbing, electrical wiring, or heating and air. The insured/proposed insured pays for this inspection.
Specialized Inspection (Consumer Pays):
Sometimes, an insurer may request an inspection of only one item, such as the roof. The life expectancy of a roof is one of the most common inspections requested today. Another common inspection requested in certain areas is for sinkholes. The insured/proposed insured pays for this inspection.
Mitigation Inspection (Consumer Pays):
Many policyholders may elect to have an inspection to determine what wind mitigation credits they are entitled to receive on their homeowner’s premium (windstorm portion). These inspectors complete the OIR-B1-1802 inspection form for the insured to submit to their insurance company. Florida Statute 627.711states who can complete and sign this form. The consumer pays for this type of inspection. Please see Mitigation Notices, Inspections & Forms for additional information.
Florida Residential Underwriting – Mitigation Notices, Inspections & Forms
Admitted insurers are required to provide this notice of the mitigation credits available to their policyholders. (Insurance companies have been required by statute to provide notice of the mitigation credits available to their policyholders on new business and renewals beginning 10/01/2005.)
Since July 1, 2008, all admitted insurance carriers were required to accept a valid uniform mitigation verification form certified by the Department of Financial Services (DFS) or signed by certain licensee’s. In the beginning, this included inspectors certified by the My Safe Florida Home Program (MSFH). However, DFS no longer certifies MSFH inspectors because the program ended.
The current licensee’s who may sign a mitigation verification form:
- A home inspector licensed under s. 468.8314; who has completed at least 3 hours of hurricane mitigation training which includes hurricane mitigation techniques and compliance with the uniform mitigation verification form and completion of a proficiency exam. Thereafter, licensed home inspectors must complete at least 2 hours of continuing education each year, related to mitigation inspection and the uniform mitigation form;
- A building code inspector licensed under s. 468.607;
- A general, building, or residential contractor licensed under s. 489.111;
- A professional engineer licensed under s. 471.015;
- A professional architect licensed under s. 481.213;
- Effective 05/27/09, any other individual or entity recognized by the insurer as possessing the necessary qualifications to properly complete a uniform mitigation verification form.
A person who is authorized to sign a mitigation verification form must inspect the structures referenced personally, not through employees or other persons, and must certify or attest to personal inspection of the structures referenced by the form. However, licensees under s. 471.015 or s. 489.111 may authorize a direct employee, who is not an independent contractor, and who possesses the required skill, knowledge and experience to conduct an inspection. Insurers have the right to request and obtain information from the authorized mitigation inspector, regarding any authorized employee’s qualifications prior to accepting a mitigation verification form performed by an employee that is not licensed under s. 471.015 or s. 489.111.
Insurer’s Right to Verify:
At the insurer’s expense, they may require that any uniform mitigation verification form provided by an authorized mitigation inspector or inspection company be independently verified by an inspector, inspection company or an independent third-party quality assurance provider which does possess a quality assurance program prior to accepting the uniform mitigation verification form as valid.
Effective 02/01/2012: OIR-B1-1802 (Rev. 01/12) This revised inspection form was approved by the Financial Services Commission (FSC) on December 6, 2011. The Office of Insurance Regulation (OIR) notified all insurers via Informational Memorandum OIR-12-01M to begin using this form on February 1, 2012. This form has gone through several workshops where all concerned parties could provide input about the form. Since the workshops are over and the form has been approved by the FSC, the review period has been exhausted. All mitigation inspectors must use this form and the insurers must accept it after the effective date provided by the OIR.
Effective 04/21/2010 through 01/31/2012:
OIR-B1-1802 form (Rev. 02/10) was effective April 21, 2010. After that date, homeowners were required to use this form. This inspection form requests a signed statement by the licensed professional who performed the inspection as well as the homeowner’s signature. In addition, photo documentation is required for sections 3 through 9 on the form. Insurance companies were instructed by The Office of Insurance Regulation (OIR) to use the new form via this bulletin. http://www.floir.com/siteDocuments/OIR-10-02M.pdf
Effective 07/01/2008 through 04/20/2010:
- If your inspection was performed earlier than 04/21/2010 and you remain with the same insurer, the old version of the form may be good for up to 5 years and may be used unless there has been a change in the construction features of the home. Also, if an insured changes insurers the new company has a right to require the current 1802 form be completed and the cost assumed by the insured.
The original OIR-B1-1802, Uniform Mitigation Verification Form, was required from 07/01/08 through 04/20/2010. Click here for a copy of the old Mitigation Form
Reference: Florida Statute 627.711
Replacement Cost and Co-Insurance, Why Underinsuring Your Home is a Bad Idea
Underwriting rules require that all building coverage limits be based on 100 percent of the replacement cost value (RCV) for each separately scheduled and insured item. Although 80, 90 and 100 percent coinsurance options are available, agents should review annually the current coverage limit(s), coinsurance election and coinsurance policy provisions to ensure adequate coverage exists and to avoid any potential reduced claims payment in the event of loss.
The following example illustrates the potential impact of underinsuring a risk:
- Building value (at the time of loss) $250,000
- Limit of insurance (at the time of loss) $100,000
- Coinsurance election 80 percent
- Amount of loss $40,000
- Policy deductible $500
Step 1 Determine the amount needed to comply with the coinsurance requirement:
$250,000 x .80 = $200,000
(minimum amount needed to meet the coinsurance requirement)
Step 2 Calculate the percentage by which the final loss settlement may be reduced:
$100,000 ÷ $200,000 = .50
Step 3 Calculate the payable loss amount:
$40,000 x .50 = $20,000
Step 4 Subtract the policy’s deductible to determine the final loss settlement amount:
$20,000 – $500 = $19,500
The final loss settlement is $19,500 because the limit of insurance was not at least 80 percent of the value of the covered property at the time of the loss.
The final loss settlement would have been 100 percent of the loss (minus deductible) or $39,500 if the limit of insurance had been at least 80 percent of the value of the covered property at the time of the loss.