One common issue we run into is the timing of sinkhole damage and the timeliness of when a homeowner reports the problems to their carrier. While most sinkhole damage appears gradually and gradually worsens over time and most homeowners don’t inspect their house all day every day, homeowners are still expected and required to give their insurance company prompt notice of their claim. In the legal world prompt is very vague and the courts have generally interpreted it loosely. Still, the late or untimely reporting of a claim can be problematic.
Lets look at an example using these facts: You the homeowner see cracks to your walls in January. Your policy expires in June and renews with a new company. You call the claim in to your old carrier in December. The worst case is your new policy that came about in June doesn’t have sinkhole coverage. Now you call your old carrier who has long forgotten you existed and tell them you want to report a claim from a year ago yet you have no proof that the damages were actually there a year ago. Your insurance company will say too late and we can’t go back in time to tell you whether you had a claim back then or not and your new carrier doesn’t even cover sinkhole. Under another scenario you still have sinkhole insurance with the new carrier. You could a) call it in to the new carrier who will say call your old carrier if the damages occurred back then and deny you as pre-existing damage or b) call your old carrier and they tell you the same as a above, too late. The point is pay attention to when your policy expires and/or renews and make that a good time to check the house out for any issues. If you fear you have sinkhole damages then waiting to report the claim only causes more problems for you.
I have posted numerous times on this but I can’t get enough of it and apparently no one listens to me. Forced placed policies are policies purchased by your mortgage company when you fail to buy a policy on your own. Forced placed policies often go hand in hand with homeowners that are in foreclosure or having trouble paying their mortgage. When the bank buys the policy several bad things happen for the homeowner. 1) The bank is only going to buy enough coverage to cover the mortgage. Typically policies will be enough to cover the cost of rebuilding the home should it be demolished to the ground. The mortgage amount rarely matches up with what it costs to rebuild the house. 2) Because the bank is only worried about covering its own money it usually means it cares very little about the policy coverages. Usually what the policy covers as far as causes of damage are limited and any coverages for your personal belongings inside the home will be minimal to none at all. The bank doesn’t care about your stuff. 3) The policy will be taken in the banks name, meaning you the homeowner play second fiddle and the bank gets to run the show and collect all the money first should you have an insurance claim. 4) If you are listed secondarily as a borrower on the forced placed policy you may not even have legal rights to recover attorney fees if you have to sue to recover insurance benefits. This is because the law protects insureds and reimburses insureds for their legal fees if they have to sue, and win, their insurance company. When you are a borrower and not an insured, many courts have taken the position that your lawyer doesn’t get paid. This makes it harder to find a lawyer who may potentially work for free and also makes it harder to settle your case because the insurance company has less risk in going to trial. Please, if you can, get away from a forced placed policy asap.
In light of some recent discussions on catastrophic ground cover collapse (or CGCC) it may be a good time to recap what that coverage actually covers. CGCC is a mandatory coverage included in all Florida policies as long as it is a policy written by a domestic carrier (companies like Loyds of London or surplus carriers may not have to supply this coverage). It is different than sinkhole insurance in many ways. Coverage for sinkhole activity which is a more subtle event that can cause serious but not devastating damage is an add on to your policy. Please make sure you carry that coverage if you are in a sinkhole prone area.
Essentially there are four components that must be necessary for CGCC coverage to apply. 1) There must be a sudden collapse of the ground surface. Seems like this would be easy to identify but what exactly does “sudden” mean? Insurance carriers may say within hours or days while many geologists say sudden in geological history can be decades. The interesting and often forgotten part about this portion is that the collapse must be the result of geologic activity, that means sinkhole activity plus any other ground condition can trigger this coverage. People often think CGCC is a “sinkhole” coverage. While sinkhole is the primary reason the ground will collapse, it is not the only reason. 2) There must be structural damage. This is often a forgone conclusion when a house has collapsed or is facing collapse into a hole but, again what definition of structural damage are we to use? There is always something to debate. 3) There must be a ground depression visible to the naked eye. This seems a bit cumulative to #1 and generally is 1 is present then this is also present.
4) This is the big one….the home must be condemned and ordered to be vacated by a governmental agency. This is probably the most black and white trigger of the four and usually if this happens the claim gets paid. However, we have run into questions of who is the governmental agency with the power to take this action or what if the agency just orders the home to be vacated temporarily and not permanently condemened? Also most agencies don’t want to condemn homes because they throw families out and by law may have to spend government money to come in and demo the house themselves to protect the public. We have run into situations where some governments have refused to condemn the home simply because they didn’t have the money to demo it. The point is….its never easy and CGCC is very rarely triggered.
Bahama Bay, a condo resort community just miles from Disney World experienced a terrifying event none of us hope to be a part of. A 30 foot sinkhole opened up the morning of Friday December 9th and forced the evacuation of the building which has since been declared uninhabitable in its current state. Our firm assumed the representation of the community after it was discovered the property did not carry coverage for sinkhole activity but only carried the minimum catastrophic ground cover collapse coverage. Based on the fact that the hole did not actually take the building down combined with the fact that the property only carried catastrophic coverage, the carrier gave all indications before we were involved that the claim was going to be denied. After some back and forth it looks like the carrier will be extending insurance coverage for the immediate safety concerns at least. Surely there will be a much monger discussion coming on many other coverage issues including looking at a more permanent fix. Yet another example of how important it is to carry sinkhole coverage and how problematic the catastrophic coverage can be.
Just wanting to wish a happy new year and a thank you to everyone we worked with this year. 2016 was a fantastic year. We went undefeated in every trial, won a huge Supreme Court appeal and negotiated some truly remarkable settlements. 2017 looks just as good if not better with some large and interesting cases on the horizon and lots and lots of trials. Cant wait.
Many people come into my office with policies that their own mortgage company bought. Most don’t see what the big deal is and never even thought about changing it. These are bad, bad policies that no homeowner should carry unless absolutely faced with no other choice. Essentially, if you have a mortgage you have to have insurance. Some people fail to obtain insurance either because they are so far behind on their mortgage payments they can’t afford it or some just miss a deadline or a payment or just forget to get insurance. In this situation your mortgage company will buy insurance for itself and then force the payment onto the homeowner. The downsides are vast. First, they are expensive, usually much more than an average policy. Second, the coverage is usually minimal. Most forced placed policies are bought with just enough insurance coverage to cover the mortgage amount. This means if the house is worth $200,000 but the mortgage is $100,000 they will usually only insure the $100,000 because they just want their money back if the house is destroyed and the homeowner will never have enough money to actually fix the house. Third, most if not all of these policies do not insure the homeowner but the bank instead. This means that any payments made go to the bank and not the homeowner because they are not the “insured” that bought the policy. This also means that homeowners may have limited abilities to enforce the insurance if it is denied. Finally, there is case law that says even if a homeowner has to sue to enforce the insurance policy they may not even get the benefit of their legal fees paid. We have written about the positive law that has come down for homeowners and when they beat their insurance company that company has to pay their legal fees and costs. That statute only applies to protect an “insured” on a policy. As stated above, the bank is the insured, not the homeowner. Some Courts have said the homeowner is not entitled to the protections of the law. Long story short, if you are stuck with a forced placed policy please get away as fast as you can, they are not insurance for you and only benefit the banks interest.
We wrote about a case this firm handled from the trial court assisting up to the Florida Supreme Court in September. The case, Johnson v. Omega, has become a hallmark whenever attorney fee issues arise in sinkhole claims now. It really has set the standard moving forward and put insurance companies on notice to monitor their own conduct a little differently. The case has continued to grow stronger and branch out in a short period of time. Tow cases since September have come out supporting Johnson. The first is out for he Fifth District Court of Appeals, the same Court that was told they were wrong when they denied Mrs. Johnson attorney fees originally. The case, Garcia v. Tower Hill, is brief but states identical facts to Johnson: the claim was denied, the insured filed a lawsuit, after a neutral evaluation the insurance company changed its mind and accepted the claim. The Court states that under its prior rulings the Garcia’s would not be entitled to attorney fees but after the Supreme Court’s contrary opinion, they had no choice but to reevaluate it. In a more recent case from the Federal Middle District Court, Life Changing Ministries v. Canopius, the same facts played out and again the Court was asked to award attorney fees. In a long and interesting opinion from the Judge, it appears that he almost doesn’t want to award fees. Many comments made during the opinion appear that he personally doesn’t think they are entitled to attorney fees. Yet, in the end the Judge acknowledges that our Supreme Court has mandated that in these situations there is no choice but to compensate the homeowner and award the fees. The Judge essentially states that under the law the Supreme Court set forth, if the insurance company denies the claim, the homeowner files a lawsuit and the insurance company admits it was incorrect to deny the claim, that is all that is needed to award attorney fees.
Over the years our firm has become more and more active in the property and community management community. We have decided to join several organizations dedicated to providing services to property managers as well as HOA board members. It is such a fun group and very informative for us to learn the inner workings of what it takes to manage a community. So far we have been featured in a legal q&a session, have been asked to sit in advice booths during trade shows and have even been able to lecture specifically on large loss sinkhole claims with a course accredited by the state to apply towards continuing education credits. The expos and trade shows have been a great opportunity to meet and greet and the girls in the office sure enjoyed the Christmas party. We hope to build on this partnership even more in 2017 and we even have several additional courses that will be available for continuing education credits.
It has been a busy trial season and our trial team had another successful result in November. The trial was focused solely on the issue of whether structural damage was present or not, without anyone having even tested for sinkhole activity, the first of its kind as far as we can tell. The trial took place in Marion County, Ocala and was scheduled to last four days. The sides presented three days worth of evidence and were schedule to present closing arguments and receive the jury verdict on Thursday. The night before closings the two sides reached a settlement agreement that was extremely favorable for the homeowner, over three times what she demanded before trial to settle. Although there was never a verdict rendered this was certainly a tremendous result as evidenced by the homeowner shedding tears of happiness with the news.
Our firm took a denied sinkhole claim on a commercial property here in Tampa Florida to a jury last week and prevailed. The trial lasted four days and the jury returned a verdict in favor of our client, a local business owner, Thursday afternoon. The insurance company presented four experts and a corporate representative verse only tow experts presented by the business owner. The issues were extremely complex and at times confusing. The issues involved whether structural damage existed, whether sinkhole activity was a cause of those damages and whether sinkhole activity was the primary cause of the causes verse other excluded causes. We were proud to prevail on all of the issues on behalf of our client who was also extremely excited with the result