What does catastrophic coverage actually cover?

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.

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