No great legal insight here, just a notice that we are moving our offices as of June 13th. We have purchased a building just for us and our growing law firm (now five lawyers). The new office address is 6812 W. Linebaugh Ave, Tampa, Florida 33625. Phone numbers and emails will all remain the same and of course the website and blog are still great ways to reach us. While you are at it, we revamped our webpage so go take a took at that too.
Surplus lines insurance carriers and basically insurance companies that are willing to take on large and/or riskier properties. Because they do so, they typically don’t have to be qualified by the State and therefore don’t necessarily have to follow the same guidelines that your typical domestic, private insurance company does. Whether that is good or bad remains to be seen how the case goes but, it will be different. Most surplus carriers we have dealt with in the sinkhole arena have very odd (for lack of better term) language. Many have older, antiquated definitions of what sinkhole activity is that really no one else uses any more. Many of them offer “sinkhole collapse” coverage verse “sinkhole loss” coverage. These often come with arbitrary and again odd definitions of what is required to qualify as a collapse. Some even go as far as describing how big the hole has to be (5 feet by 5 feet for example). Many require that the collapse have occurred suddenly, within a short time frame to qualify. In other words, these coverages are very different than the typical slow reacting sinkhole activity below the ground that gradually causes cracking damage. These policies try to limit their coverage to when an actual hole opens up out of nowhere. Lastly, many of these policies contain the same antiquated and odd language when describing what the coverage actually pays for. Many of these policies say that they don’t “fill holes” or that they don’t insure the land and try to really limit what they have to pay for. How you can fix a true sinkhole collapse without filling a hole is beyond me plus there is much debate about the purpose of filling a hole or whether underpinning a building is the same as filling a hole. To make matters even more complex, if the insurance company investigates the sinkhole claim by the Florida Statutes they may waive their right to use their own policy language. Long story short, these can be really complex cases because of the ambiguous language and antiquated processes that these carriers use. You really got to know what you are doing to handle these cases and be prepared for several legal battles over the policy terms. I certainly understand that many people and business are forced to turn to these types of policies but if you don’t have to, I wouldn’t recommend it.
The coverage itself is usually quite similar. Remember that the sinkhole insurance offered here in Florida is written by Statute so all domestic insurance companies follow the same guidelines. Big differences in the coverage can arise when you have surplus lines carriers which often are the only options for a large, riskier commercial property. (More on surplus lines in another post). Commercial properties will still have to prove the presence of structural damage and sinkhole activity. In our experience structural damage is more common to find at a commercial building than residential. When you consider the increased amount traffic coming in and out of the building, the different ingress and egress flows and code requirements and ADA restrictions, etc. safety hazards are much more common. Commercial properties can also have very unique issues you would never see at a residence. For example, performing sinkhole repairs at a gas station was a task that took some real time and creativity to work on. Also, many commercial structures are multi-story and sometimes multi-unit, allowing for more ways for damage to express itself in the structure.
The biggest differences in commercial projects we have worked on usually is procedural due to the sheer volume of money, time and people involved. Apartment complexes for example require a ton of time in just scheduling alone to be able to inspect the different units. Often these types of properties are overseen by property management companies and homeowners associations which can create a different dynamic as far as communication goes. Have a smooth system of interfacing with everybody involved is critical. Finally, the amount of money necessary to properly work a larger case up can be daunting sometimes. We settled a large case in 2013 that our firm had invested three quarters of a million dollars into. In short, if you have a large commercial property or a property with very unique issues make sure you hire a firm with the financial resources to take on the task and with the time and attorney resources to properly work it up.
Should I pay the $2,500 to get the sinkhole testing done when they tell me I don’t have “structural damage”?
I say no usually. Of course every situation has to be looked at uniquely but I frequently deter people away from this option. To make sure we understand what it is we are talking about, the current law requires a structural evaluation to determine whether structural damage is present at your home first. If they do not find what they believe to be structural damage then they can deny your claim without ever testing for sinkhole activity at all. The statute does say that the homeowner has the option of requesting that the testing for sinkhole activity be performed but, will have to pay out of pocket $2,500 of the cost. Unless you are just simply curious and have money to throw away, why would you do this? Remember, your claim was already denied. Even if they find sinkhole problems below the ground they have still already determined that the damage is not sever enough to qualify for coverage. Plus remember that they are just going to send out the same engineers that already said you don’t have any damage to be concerned about. Haven’t they already told you they don’t think you have an issue to be worried about? So why would we think they would lean in favor of the homeowner in any way no matter what they find below the ground. Remember that sinkhole activity is a matter of opinion after all. The likely result is you waste $2,500 for them to gave you a biased opinion that you don’t have sinkhole issues or if they do in fact find sinkhole activity, what good did that do you because your claim is still denied. If you don’t want a sinkhole or don’t want to fight the insurance company, walk away. Don’t waste your money. If you think you have a real issue and want to challenge their denial of your claim, then hire a lawyer. A lawyer can help from the cost of the testing and have the testing performed by an engineer not working for the insurance company. The value a lawyer has by simply having the financial resources and knowing the right people is often equal to their legal skills in a courtroom can be.
With the current state of the law many people are often confused about what their insurance company will do when they report a claim. In short, don’t talk to your neighbors that had a sinkhole claim years ago because their experiences will be very different than yours. Under the current state of the law when you report a claim the insurance company is supposed to begin the process by sending an adjuster out to look at the damages. At that tine they may take a statement from you, document damage and even write a preliminary estimate of the damages they see. The adjuster is supposed to evaluate the damages and see if there is an obvious cause for the damage other than sinkhole. Rarely, if ever, has an insurance adjuster by themselves been able to look at damage and say for sure that it is not caused by sinkhole activity. Because of this, some insurance companies skip this first step and go right to hiring an engineer or they may hire the engineer the same day they inspect the house.
If the insurance company denies your claim without ever sending an engineer out, call a lawyer. Something is wrong. Either that most likely means you don’t have sinkhole insurance at all, they found some other unusual reason to deny you or they didn’t do the proper investigation. If they can’t tell whether the damage is sinkhole related or not then they are supposed to hire an engineer. That engineer will be asked to determine whether the damage rises to the level of being “structural damage”. If they determine it is not then their investigation is complete and your claim is denied without any further testing. If they do determine that the damage is structural then they will do further testing below the ground to determine whether sinkhole activity is the cause of the damage. If sinkhole activity is found to be the cause, they pay the claim (absent some other issue). If they don’t find sinkhole activity then they deny your claim.
As you can see, there are several opportunities for the carrier to deny your claim. I commonly refer to theses as the three “gates” you have two pass through. Right at the outset they can say the damages clearly aren’t sinkhole related or find some other unrelated issue such as the damages pre-existed their policy period or that you misrepresent something on your application with them. Get through that gate and they send the engineer out who can say the damage isn’t structural (the majority of claims shut down at this stage). If you have made it that far, then they can say the structural damage is not from sinkhole activity. The odds are good one of these gates gets slammed in your face.
We see many types of insurance policies but insurance that is force placed is often the most difficult to wrap your head around. These types of policies are actually purchased by the mortgage company when the homeowner fails to get insurance on the home themselves. Essentially, the mortgage company buys insurance for itself. This means the mortgage company is the “insured”, not the homeowner. The homeowner is usually named as only the “borrower”. That means the mortgage company gets first right to any and all insurance benefits paid out and the homeowner is a spectator. That can be an especially tough pill to swallow considering most homes with forced placed policies are already in foreclosure as not paying the mortgage usually goes hand in hand with not getting insurance. These homeowners are watching the same mortgage company taking their home away collect the insurance benefits too.
In addition, the policies are often taken out only for what is owed on the mortgage and not the value of the cost to replace the home. This means if the house burns down, the mortgage company will collect what it owes on the mortgage and move on with no chance the home gets rebuilt. These policies are really meant to protect the banks own money more than to protect the house or the homeowner.
In short, if you have a a forced placed policy and can afford to get private insurance, do it immediately. These are the worst types of policies to have. If you are not sure of what type of insurance you have, the most common forced placed insurance polices are usually Balboa, QBE or American Security/Assurant. Most of these companies are actually owned by the same mortgage mortgage company on the home.
Where or not homeowners are entitled to monetary awards or whether they are forced to actually repair their home with any insurance benefits paid out has been a hotly contested debate for years. The debate stems from language in the sinkhole statutes that says insurance companies do not have to issue payment for the “sinkhole” or below ground repairs until the homeowner enters into a contract with a contractor to start those repairs. Then, and only then, will the insurance company release that money which will payable directly to the contractors. In Florida, centuries of common law dictates that when you have a contract and someone breaches that contract, they can no longer come back and force the other person to comply with their part of the contract. That was the argument in these cases. “Look insurance company, you didn’t do what you were supposed to do first so now its too late to come tell me what I have to do”. In the past year there have been several decisions from Florida appellate courts on this issue. All of the decisions have been pretty decisive that yes, homeowners will have to repair their homes even if their own insurance breached the contract first. Unless the issue is accepted by the Florida Supreme Court, this issue is relatively established now in Florida law and insurance companies will use it to their advantage.
The law and reality are not always one in the same. The reality is some insurance companies will stand strongly behind this proposition while others not so much. It really depends on the insurance company and the situation. If it appears to be twice the policy limits to repair a home, most insurance companies would prefer not to repair it and save the money by just paying you the policy limits. Some insurance companies just flat don’t have it in their business model to spend the time and money repairing the sinkholes and would prefer to resolve their cases via a cash settlement. Others, like Citizens, absolutely stand strong behind the right to force repairs because Citizens has a very different business models than private insurance companies do. Every situation can be unique but from the Court’s perspective, if your insurance company wants to force you to repair, they can.
The Supreme Court recently heard arguments in the case of Johnson v. Omega Insurance. Kathy Johnson came to our firm with a denied sinkhole claim. Despite severe damage to the building itself, the insurance company claimed that the damage was not covered under the policy and sinkhole activity was not discovered. We identified that certain tests were deficient and hired another engineering firm to do additional testing. After that testing, clear evidence of a sinkhole problem was identified and a lawsuit was filed against Omega for denying the insurance benefits.
After the lawsuit was filed, Omega conceded that in fact there was sinkhole activity present that was not previously identified during their investigation and Ms. Johnson was able to get her home repaired at a cost of over $300,000. Our firm went to the trial judge in Ocala Florida and asked that he require Omega to pay our attorney fees and costs on behalf of Ms. Johnson. The trial judge agreed that it was fair and reasonable to do so. Omega filed an appeal.
The appeal was heard by the Fifth District Court of Appeals who disagreed with the trial judge in Ocala. The appeals Court argued that the law in Florida is that an insured must prove that the insurance company “wrongfully” refused to pay benefits and that the new sinkhole statutes actually protected the insurance companies from being found “wrong” as long as they did an investigation of some sort. In other words, the appeals Court seemed to be more concerned with the process of the investigation than whether the actual result was right or not. Our position was different. The law of Florida, as cited by the Supreme Court in a 2000 case, is that an insurance company should pay attorney fees when its decision to deny insurance benefits was “incorrect” despite the rationale on why it was incorrect. After all, the insurance company holds all the power to do the investigation including who it hires to do it. We appealed this ruling on behalf of Ms. Johnson to the Florida Supreme Court who accepted the case. The acceptance of a case like this is extremely rare.
At the Supreme Court arguments it was clear the Supreme Court Justices did not agree with Omega’s position and reiterated that incorrectly denying someone insurance benefits is the same as wrongfully denying them insurance benefits. Arguments were also made that the sinkhole statutes were not intended to act as a shield to later protect the insurance companies if their decision to deny insurance benefits was incorrect. The opinion may take months to be released but the consensus amongst those who watched the arguments was that the Supreme Court was going to reverse the Appeals Court decision which would be a huge win for Florida homeowners.
We are seeing more and more clients coming in with the 10% sinkhole deductible in their policies. My piece of advice is simply avoid this if at all possible. Unlike other situations where they simply deduct the 10% from the cost to repair, a sinkhole deductible can actually stop and prevent you from doing any repairs. This is typically because many insurance companies these days require you to begin the repairs before they issue any payments. This means you have to come out of pocket for the 10% deductible amount before you can even start the repairs. In other situations this is not such a big deal. For a hurricane claim for example, if you have $50,000 in damage and a $10,000 deductible they write you a check for $40,000 and now you just have to cut back on some of the repairs or get them done cheaper. With a sinkhole however, if you don’t come up with that $10,000 up front, the contractor can’t start the repair and the carrier won’t pay for their partial work. I know the deductible can save money but if you have already elected to purchase the optional sinkhole coverage you must pay the little extra to not
have a deductible or to have a very low deductible. Otherwise, this will seriously come back to haunt you.
Citizens has decided to try to restore its public image and send out “settlement” offers to every one of its insureds with a confirmed sinkhole claim. The offer is three pages long and is clearly a form letter with nothing but the dates and names changed. This “offer” is a joke and here is why. 1) Citizens entitles the letter “confidential settlement proposal to put grout in the ground”. You will notice that no Plaintiff lawyers have discussed these letters because they are confidential. By law in Florida all discussions of any kind concerning settlement or negotiation of a lawsuit are confidential. There can be serious repercussions associated with violating this rule. Citizens blatantly ignored the law of Florida and went straight to the media to tell them what they offered all their insureds. Every insured should speak to their lawyer about moving for sanctions against Citizens for blatantly violating the public trust and laws of this State. I only write this blog post as a response to Citizens going public. 2) Citizens’ letter is clearly nothing more than a public relations move to attempt to restore its reputation. Why would Citizens send out “confidential” letters to all of its clients then immediately turn around and tell the media about what they did? They want the public to know about it. They want a pat on the back. Clearly the attempt here is to make a media push to show the public how Citizens is trying really hard to work out all of these lawsuits they have been criticized for recently. Citizens likely doesn’t even care if
anyone takes the “offer”. As long as the general public sees just how great they are, Citizens is happy. It is shameful that an insurance company uses the media to intimidate and manipulate its own clients. 3) This is a demand to surrender. It is neither a “proposal” nor a “settlement”. Citizens guises this letter as some sort of a settlement offer. The term settlement infers that the two people that have a dispute have compromised to work out their differences. Do not be fooled, there is absolutely zero, none, zilch, nil, zippo, nothing in this letter or settlement offer that shows Citizens is willing to compromise anything to help its insureds. This is not a settlement offer, it is an ultimatum to surrender. A demand to give up or else. It is a threat not a compromise. Citizens offers to repair the home. Well that is what Citizens is required to do. But, Citizens only agrees to repair the home the way they want to do it and refuses to consider any other options. In return, the lucky insured who accepts the offer gets the opportunity (in the spirit of compromise of course) to dismiss their lawsuit and pay any legal fees or fees to engineers they hired themselves out of their own pocket. In other words: SURRENDER! In return for your surrender, Citizens will give you?.well?.lets see?.they will give you exactly what they were legally obligated to give you anyways! Nothing more. There is no compromise. Let me give you an example of this in the real world. You hire a contractor and agree to pay him to build you a deck on the back of your house, one that is sturdy and will last as long as you own the house. That contractor builds you a crappy deck, using cheap wood and duct tape. You see the deck, which clearly is going to collapse the second you walk on it, and argue with him that he needs to use solid materials and build you the deck he promised he would. You argue for years about this deck. Then one day he tells you, ok, lets work this out. I have a great offer, a compromise, one that you cannot refuse. You ready for this? You agree to accept the deck exactly how it is, agree that I was right and agree to not sue me. In return I will?well?.do nothing. What a deal! 4) The letter from Citizens is riddled with lies. The first statement that jumps out to me is that Citizens swears that if you undergo a neutral evaluation, they will abide by whatever that neutral evaluator recommends. Really? When did this plan begin? Would like a list of clients of mine that have had neutral evaluators tells Citizens they were wrong only for Citizens to ignore them? Listen to me, Citizens in the past year has rejected more neutral evaluation opinions than it has in the previous 20 years combined. To promise this is insulting when it has not lived up to this promise in the past. Next, if the neutral evaluation takes place and the homeowner prevails on the dispute, Citizens swears it will pay the cost of the homeowners attorney fees. First, this is a fee required by law, not some gesture of good will. Second, Citizens NEVER pays this fee! I have an entire in-box full of letters from Citizens telling me and my clients that it will not pay for this fee and I personally have attended numerous hearings where Citizens has made me go in front of the judge to just get paid this fee. By the way, the fee is only $2,500. Citizens will notoriously spend $5,000 on its own lawyers to fight a $2,500 fee for me. Finally, if you believe that after you grout the house Citizens will listen to your concerns and problems and just take care of them with no fight, you are mistaken. Again, I can provide you with a list of Citizens insureds we represent today that have grouted their house and are still having problems fighting Citizens for remaining insurance benefits. They fight tooth and nail before, during and after you repair your home. 5)Lastly, the letter is a standard form letter which ignores the facts and circumstances of each case. If anything, this letter proves that Citizens refuses to even consider they are ever wrong. How could Citizens make the exact same offer to thousands of people? Only one way, it didn’t look at their claims and assumed every claim was the same. This is typical for Citizens. In fact, we have recently been served with pleadings from Citizens’ lawyers that claims that Citizens has no obligation to even consider any other opinions from any other engineer other than its own. Citizens does not look at cases individually nor does it evaluate what truly is the proper and safe method of repairing a home. It treats every single case as if they were all the same and this letter proves that. If Citizens was so concerned about the public safety, limiting litigation and property fixing homes, why does it say in its own paperwork that it will refuse to consider any other repair plans other than its own? ?? ??