Q: I have confirmed sinkhole activity in two areas of my yard. One is directly behind my pool and the other in my driveway close to the surface. My insurance company has offered repair money and structural repair money. If grouting can result in further damage to the soil increasing the likelihood of more sinkhole activity, and I can no longer obtain sinkhole coverage whether repairs are completed or not, how does a homeowner decide whether to repair or simply sue the insurance company to pay off the mortgage? I plan on being in my home for another 10 years.

The heart of this question is the heart of the entire sinkhole industry right now: can insurance companies force homeowners to repair their house verse paying them the cash value of the repairs. The sinkhole industry is a rather unique one where insurance companies don’t have to pay you for the repairs. The argument from the insurance end is that the money is meant to fix the house, we insure the house not the person. If the house is not repaired it drives down home values as well as the taxable value of the home. I understand the argument that the State and respective counties are upset because once a home is declared a sinkhole it loses significant value and the county loses the property taxes. Should that really be  factor though? Because the county isn’t making enough money off homeowners? I don’t think so.

I understand the insurance perspective that we want homeowners to use the money to repair the house because they believe that homeowners are getting rich off these claims. This is the legal world though and not the real world. In reality, if a homeowner chooses to not repair the house and to pay the mortgage off instead, what have they gained? They owe nothing on the home, great. The home is worth nothing and is not repaired meaning it will actually continue to lose value over time still. So the homeowner broke even? If the homeowner uses $100,000 to repair the home, will their home be worth full market value again? No. The home is still tagged a sinkhole home even if repaired. They lose in this scenario. Moral of the story is homeowners are not winning anything in this battle. If they break even it is a victory.

From a business perspective I also don’t understand why carriers want all their insureds to repair their houses. It increases your potential exposure ten fold. If a homeowner elects to repair, that insurance company is responsible for paying whatever it costs to complete the repairs, even if it doubles the policy limits. Furthermore, the homeowner is not required to sign a release of any kind meaning the insurance company is still responsible for any additional damage that occurs for the next several years. Their liability could end up being triple the policy limits. If the insurance company elects to pay the repair costs, they can require the homeowner to sign a release, meaning that one check clears the entire claim off their books. No future exposure or wasted resources monitoring this claim for the next several years.

I don’t know who is right or wrong in this debate or even if there is a right or wrong but it seems to me that when a disaster strikes someone’s home and every possible end result is bad for that homeowner, give them the right to chose the best of the worst options and decide themselves how they want to try to piece their lives back together. This has to come to an end at some point……or does it?

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