You really are going to see four types of sinkhole policies these days. Where you want to look is at the separate sinkhole endorsement. This will typically be a one or two page form that is added to your policy packet and will not be included in the actual policy itself, which is usually about eighteen pages.
First, is the old version which will just simply state that a sinkhole loss is structural damage caused by sinkhole activity and no further definitions of structural are provided. These are most favorable for homeowners because they don”t define structural damage. The courts have consistently ruled that if it is not defined then structural damage means any damage to the structure. This is a wide open broad definition that is the simplest to prove.
The second kind of policy is what I call a hybrid. In these they contain a definition of structural damage but it is usually a one line short definition. It is often something like “Structural damage means damage that has affected the ability of the building or foundation to carry loads for which it was designed”. These are also relatively open ended definitions that are favorable for homeowners because this standard is very subjective and there is a lot of data to support even minimal damage can affect the load bearing capacity of a wall because that wall was not built to have cracks in it. Therefore, it is no longer doing what it was designed to do.
The third type of policy is a little more detailed and will have a two part definition of structural damage that will first require you to meet some standard for the floor elevation survey and then loss of load bearing capacity. These are a little tougher for homeowners to prove because you have one standard that is more (but not completely) objective (the floor elevation) and then one that is more subjective (loss of load bearing capacity). If a home has a floor elevation that is out of tolerance then the second part becomes easier to prove for the homeowner for the reasons stated above when talking about the second policy type.
The last type of policy we see is the full force new statutory language policy. This will include the full five part definition from the new statute. You can”t miss this one. It takes up a page and a half and is by far the most difficult for a homeowner to meet. These policies require us to examine the house personally and require the skills of a structural engineer’s evaluation up front. This definition includes multiple objective standards intermingled with some confusing subjective standards intermingled even more with some building codes. It is very complex but the good news is, it provides several different ways a homeowner can meet the standard and not just one. By this time next year, all policies will likely have been switched over to the new full force statutory language and the first three types will be phased out. That will start the new world order of sinkhole cases and life will be interesting for all of us in the business as we dive into murk waters yet again.
