One, almost comical, issue that has arisen with many of my clients recently is that insurance companies are requiring homeowners to repair homes with denied sinkhole claims. Yes, you heard that right. Homeowners will file a claim for sinkhole related damages. The carrier will investigate. The engineer will determine that sinkhole activity does not exist at the property. In many instances the homeowners will undergo a neutral evaluation to have that expert also agree there is no sinkhole activity causing damage to the home. The next letter that comes in the mail is incredibly surprising. The same insurance company who is so adamant that there is not a covered loss, i.e. sinkhole activity at the house is now requiring the homeowners to repair the damage to the home or they will drop their coverage. In short, the insurance company is telling insureds that they have no sinkhole issues, will not be paying them anything to repair the damage but, they want, actually insist, that the homeowners come out of pocket to pay cash to repair the damage. My personal belief is that this tactic is nothing more than a retaliatory tool to punish the homeowner and get off the insurance policy as quickly as they can. It is incredibly unfair but difficult f0r a homeowner to prove. Florida law does state that a carrier should not non-renew an insured on the basis of the homeowner filing the claim but also indicates that this rule shall really only apply if and when the homeowners have repaired the property. We are taking a hard look at this rising issue to determine what is the best way to protect homeowner’s against this dirty tactic.

This is a story that came out in December but for those that have not heard or read about it, it does show how scary and sudden sinkholes can be. A large sinkhole opened up at a rest stop near Polk City, on I4. The hole appeared in the morning of December 29, 2011 and grew quickly to about 12 feet deep and 30 feet wide. The hole opened up in the parking lot area directly beneath several cars and ended up swallowing an SUV and almost got a second one that was lucky enough to be pulled from the hole before it grew. This car was still drivable but both were towed away later that afternoon. The sinkhole, which occurred around mile marker 46, was still growing and no one knew how large it would get but the rest area remained open.

Q: I have a pending sinkhole claim with Homewise and now the Florida Gauranty association is on the job. Received a letter today confirming their involvement, and that any payments made on the claim will be paid directly to contractors performing the repairs. The insured will be resposible for the any amounts over the policy limits. I read that the new bill specifies that if a covered building suffers a sinkhole loss or catastrophic ground cover collapse, the insured must repair such damage in accordance with the insurer’s professional engineer’s recommended repairs. However, if repairs cannot be completed within policy limits, the insurer has the option to either pay to complete the recommended repairs or tender policy limits. Does the Florida Gauranty association have another set of laws or what?

I have received the same letter in the past several days on all my Homewise client’s files. Frankly, we are happy to see some movement, any movement on these files. What FIGA, or the Florida Insurance Guaranty Association, is citing in their letters is, and has been, the law here in florida for some time so I would not expect anything contained in the new law to play a role in these cases. To answer your question in short, yes, FIGA does play by different rules  than insurance carriers. It abides by a separate set of Statutes and has numerous protections afforded by the State contained in these statutes. For example, FIGA has a limit of liability of $300,000. It will never be required to pay more than that. FIGA also can not be threatened with attorney fee exposure like we typically see with insurance carriers. For Homweise insureds who receive these letters the most important point is that you only have one year to either get the claim resolved with FIGA or to file a lawsuit so pay attention to your timelines and don’t get lost in the shuffle, be proactive.

This office has been handling a travesty of a case for several years now. The factual scenario is that an insured who does not speak, read or write English was provided a Citizens policy after she was told it contained sinkhole coverage. Of course, not being able to read the policy she assumed she did have coverage as she was told. As a side note, Citizens does not offer any forms other than in English. This places a huge emphasis on the importance of the insurance agents selling these policies as the homeowners have to rely on their word when purchasing coverage.

Some time later, the homeowner reported a potential sinkhole claim. Citizens investigated it, took the examinations of her and three of her family members, did a full geotechnical investigation and eventually even paid her a sum of money to begin the cosmetic repairs to her home. For eighteen months Citizens told her she had coverage for sinkhole activity and at every stage represented to her she would be ok. Eighteen months later, Citizens for the first time, advised her that she actually did not have coverage under her policy and demanded the cosmetic money back. Money she had already spent to fix her house.

The real issue here is that under Florida law when you have a confirmed sinkhole, the report is filed with the county property appraiser office to avoid any potential fraud. So this lady has a publicly known confirmed and un-repaired sinkhole at her house. She does not have the money to repair it and it has lost approximately 80% of its market value. What does Citizens do? They walk away and when we bring a lawsuit, they not only offer nothing to compensate her, they sue her for the money back they paid her previously.

This case was set for trial this Monday morning and due to Citizens procedural posturing it had to be continued to a later date just before the jury was ready to be selected. The real headline of this story is that Citizens openly admitted they made a mistake, the damage to my client is as clear as can be and Citizens response to the judge was that it is protected from having to pay this lady anything because the State of Florida provides Citizens immunity from bad faith or punitive damages. This issue has to be addressed by the State and our court system. Citizens is an insurance company and a corporation. It should be allowed to simply get away with everything. There will undoubtedly be much more to come on this case as it appears to be postured for several more years of litigation and appeals. Citizens has refused to back down and neither will we. Its the right thing to do.

The following is a post from the website of Ted Corless, Esquire at czlegal.com who asks some interesting questions of St Johns insurance company and their newer tactics. We are seeing this growing trend amongst insurance companies.

“Like many people in Florida, St. Johns Insurance Company rejected me as an insured in Hillsborough County. I suppose this is because although St. Johns is a highly profitable company, St. Johns wants to avoid paying any claims for sinkhole damage in this area. Their offer was pretty bizarre and I think, we shall see, illegal.

Why illegal? Because under Florida law, all insurers who conduct business in this state must offer sinkhole coverage. Yes, St. Johns “offered” us sinkhole coverage but only if we pass their “Sinkhole Claim Index” test. Of course, no one we can find ever passes it, and they decline everyone we are aware of. Sure, there may be people out there who pass this test after they pay for the inspection but none we can find. Why? Because I have seen one report back, which indicated no damage and nothing to indicate a high risk for sinkhole. But, St. Johns denied it anyway.

More on the St. Johns later.

As I am not in the pool of Citizens insureds, we are doing the best can. They will not insure us for the full value of our home, unless we spend $25,000 on hurricane shutters for the entire home. Also, we have to pay for an “inspection,” so that Citizens can ask a bunch of questions so they can use these answers to justify a needless examination under oath if we ever conjure the audacity of filing a claim on the miserably expensive coverage we have.

Why do I feel like a criminal? We feel this way because there is an undeclared war between St. Johns, and most other carriers, who only want our premiums if they know they are not likely to have a claim to pay. I know many of the people who have worked for St. Johns, and respect them. At the same time, can they really push me out unless I agree to waive my legally entitled coverage for sinkhole activity? I say no, and plan to prove it.”

I will say with honesty that how an insurance company determines how much coverage you are required to carry or how much to charge in premiums is something that I will never understand. I have had numerous situations both before and after I represented insurance companies that insurance adjusters and their supervisors have admitted to me that they don’t understand how these numbers are calculated. It is really a magical formula that the underwriting departments keep a secret and every insurance company may use a slightly different formula. We know this, insurance companies are numbers driven both when determining how much to charge a homeowner and how much to pay a homeowner and they are very good at calculating potential risk. Being good as assuming risks is how they make money. Insurance companies are very good gamblers in other words. Generally I can tell you that they try to evaluate what it would cost to rebuild the home should it be totally destroyed. This will vary based on the size, construction and finishes of the home as well the current construction and materials costs in the market place. I can give this piece of advice, always have more coverage than what you owe on the house. Imagine your house burning down or being swallowed by a sinkhole and you are insured for $100,000 but owe $200,000 on the home. Those insurance benefits may not be all that much help to you. Sinkholes are different than any other insurance claim as the problematic conditions may linger for decades even after repair and may well exceed the policy limits. If a home burns down, it is easy to figure how much it will costs to rebuild it and once it is rebuilt, the case is closed. But the cost to repair sinkhole conditions may be infinite and may never completely repair the problem. If you do not have enough insurance to do repair the house, you should at least make sure you can pay the house off and get out of dodge. The insurance companies might not want to hear that but it is reality.