Florida Catastrophic Ground Cover Collapse | Sinkhole Coverage

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What is the difference between Sinkhole Coverage and Catastrophic Ground Collapse Coverage?

  • Florida law defines a sinkhole as “a land form created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater. A sinkhole may form by collapse into subterranean voids created by dissolution (the dissolving) of limestone or dolostone or by the subsidence as these strata are dissolved.”
  • “Catastrophic ground cover collapse” is defined as “geological activity that results in all of the following:
    1). The abrupt collapse of the ground cover;
    2). A depression in the ground cover clearly visible to the naked eye;
    3). Structural damage to the building including the foundation; and
    4). The insured structure being condemned and ordered to be vacated by the government agency authorized by law to issue such an order for that structure.”
  • This means that if your home is damaged by sinkhole activity, but does not meet all four criteria for catastrophic ground cover collapse – for instance, you may have foundation cracks, but the home is still livable – your insurance may not pay for the damage if you do not have sinkhole coverage.

Source: www.myfloridacfo.com


Senate Bill 408 & How It Affects Florida Homeowners Insurance

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We’ve all heard that homeowners insurance in Florida has been largely affected by hurricane damage. Recently the spotlight has shifted away from hurricanes and on to sinkholes. Sinkhole claims have more than quadrupled in the last 6 years. Drive down any major highway in our area and you’ll see the billboards asking you to call to file a sinkhole claim.

Building in Florida almost always means settling and cracking. Foundations, driveways, and exterior walls crack from settling. These cracks have been fraudulently translated by some to be considered as sinkhole damage under the current Florida homeowners insurance policy description. There are firms that charge 20% or more of the total claim amount they are able to obtain from an insurer. An insurer will typically pay $10,000 to investigate a sinkhole claim. The average sinkhole claim for Citizens (our state insurance program) costs nearly $85,000. Citizens paid out $97 million last year in sinkhole claims and almost $2 billion to date. In 2010 Citizens averaged about 100 sinkhole claims a month and this year’s average is about 200 a month according to The Wall Street Journal Online.

Many legitimate sinkhole claims have been filed through the years, but there have been many more claims that have been solicited by public adjusters. For that reason we have seen insurance rates increase in our area to record highs. We’ve also seen reductions in sinkhole coverage in an attempt to try to avoid the solicitation of sinkhole claims. While sinkhole coverage can still be purchased, most carriers have eliminated the coverage entirely. They have replaced it with Catastrophic Ground Collapse coverage. This provides coverage for damage due to a sinkhole only if the home is condemned.

Recent legislation has attempted to address this issue as well. SB 408 was recently signed into law. You may read the entire bill or the summary here.

I will point out a few highlights here:

• The bill provides for more scrutiny in a sinkhole investigation, limits the amount of time a claim can be filed, and limits the amount of compensation that can be paid to solicitors.
• Citizens policies issued or renewed on or after January 1, 2012, which cover sinkhole loss may not include coverage for losses to appurtenant structures, sidewalks, decks, or patios that are caused by sinkhole activity.
• If the policyholder requests such testing, they must pay the insurer 50 percent of the sinkhole testing costs up to $2,500. If the requested testing confirms a sinkhole loss the insurer must reimburse the testing costs to the policyholder.
• As of January 2012 Citizens policyholders are subject to a Citizens policyholder surcharge of up to 45 percent of premium and emergency assessments.