American Home Assurance v. Sebo is a pretty famous case in the insurance world but probably not known at all by your average insured. It is an important decision though that impacts homeowners drastically. The background on the case is complicated but essentially involved an expensive home that was built with numerous defects. In conjunction with this a large storm damaged the home and it was determined that the damage was as bad as it was because of the defects in the home.
Previously in Florida the rule on this was known as the concurring cause rule. This means that when two things cause damage to a home, one covered under insurance and one excluded from insurance, the insurance company would have to pay to fix all the damage. When Sebo first went up on appeal to the Second District Court of Appeals, the Second DCA applied another rule of law known as the efficient proximate cause theory. Under the same scenario above the homeowner would have to prove that the primary reason for the damage was the thing that was covered under insurance. If not, they may not get coverage for any of the damages at all.
The Florida Supreme Court accepted the case and thankfully ruled that the previous concurring cause rule was the appropriate standard here in Florida. This is important to sinkhole claims because almost always there is some other cause of damage in addition to the sinkhole conditions. For example, almost every home in Florida has some minor damages caused by just normal settlement or by simple construction related issues or by our harsh weather here in Florida. Had the original Sebo opinion survived, insurance companies would have tried to get out of these claims by arguing that the majority of the damage was from these other causes and they should not be required to pay the claim at all even though it was admitted that sinkhole activity had caused some damage to the home.
I honestly haven had a ton of interest in writing on this story because it has been all over the news and I won’t add anything that hasn’t already been reported. But, in case you missed it one of the larger sinkholes you will see opened up in a Land O Lakes community swallowing a home and a half. It started early in the morning with reports of just a boat sinking into the ground but not long after that it was realized that this was much more serious. There are videos circulating of the house itself coming down into what tis estimated to be a 50′ deep hole. The house next door also partially collapsed not too long after.
The backstory is just as interesting as apparently the home had been confirmed as a sinkhole loss and grouting was recommended to repair it. Not sure how it ended up being repaired other than the grouting was not done, only underpinning was. We have discussed the good and bad of underpins previously. Frankly, even if this house was grouted who knows if that would have saved the day. We also see that underpins can only do so much with a collapse of this magnitude.
The issue now that the sinkhole is stabilized is the ground water contamination and of course the massive cleanup efforts. Presumably these homes have coverage in the event of a catastrophic ground cover collapse of this nature which would presumably also include their expenses associated with having to live elsewhere while the homes are repaired and/or rebuilt. Once again, this all emphasizes the importance of having the right insurance.
Unfortunately for everyone except insurance companies, sinkhole claims have become harder and harder to win coverage for. This also means there have been less homes needing repair (or having the money to pay for repairs). This in turn has resulted in a large portion of the sinkhole remediation contractors in the state going out of business or turning their focus to other types of work. Generally, most of the contractors use similar materials that they get from many of the same places. So selecting a contractor is no different than any other business, customer service prevails. Make sure your contractor takes the time to explain the process to you, is responsive to your calls and listens to your concerns. A lot comes up during these repairs, some unexpected and sudden, so a responsive contractor is ever so important. Also, these days its even more important to check on the financial stability of the company. Ask how long they have been in business and verify any warranties or guaranties they offer.
Through the years we have represented several homeowners with damages caused by their neighbors repair. This is actually quite common. As they pump the grout mixture into the ground, they do so at high pressures which often can even cause the ground to heave upwards. Of course, when they are pumping the grout it is also difficult to predict sometimes where it is all going. We have had cases where neighbors even saw grout bubbling out of the ground in their yard. The result can often be cracking or heaving damage to the neighbors home. It can be minimal or dramatic.
Contractors and the engineers monitoring are supposed to be keeping a close eye on the pressures they are pumping at and also on the ground heaving. One problem is the contractors rarely monitor the neighboring homes, even though they probably should. So if something is going wrong elsewhere they are unlikely to catch it in a timely fashion.
So what is a homeowner to do? The first question is what caused the damage. It is entirely possible that the grouting process awakened some dormant sinkhole condition under the neighboring property. If you, the neighbor, have sinkhole coverage then reporting a claim to your carrier is a good place to start. If you do not have sinkhole insurance yourself then you must look to the contractor and engineer doing the work next door. Keep in mind that this stuff does happen and just because it did happen doesn’t mean the contractor was negligent. To win you would need to prove some negligence in which the contractor did the work next door. We have been successful in these types of claims in the past but it requires special attention to detail and is not a case that can just be rushed into blindly.
This is a scary story. An elderly woman was driving through a shopping plaza in Ocala when a massive sinkhole opened up taking the front half of her car down with it. Luckily she was able to escape but was visibly shaken. It appears the hole ruptured some water lines as well causing some flooding in the area.
We asked this question in a recent lawsuit. Under the facts of this case the homeowners filed a sinkhole claim with their carrier. The carrier paid approximately $10,000 to an engineer to investigate whether they had sinkhole activity. That engineer found that they did in fact have sinkhole activity beneath the home and that it would cost close to $50,000 to repair it. That report was also filed with the County, making it public record. The insurance carrier then notified the homeowners that they actually did not have sinkhole insurance on their policy so the findings were irrelevant. The carrier admitted they never even looked at the policy until after they had already investigated. My clients position was simple, the insurance company was negligent and now their home is worth less money, potentially unable to be sold as is and is uninsurable.
Unfortunately, a Hillsborough County judge thought I was crazy and strongly sided with the carrier proclaiming that they did nothing wrong and that the sinkhole report could not impact the value of their home. The judge threw the case out after two years of litigation, one month before trial. Gladly, the homeowners have decided to appeal this decision. We will update the results of that appeal.
One common issue we run into is the timing of sinkhole damage and the timeliness of when a homeowner reports the problems to their carrier. While most sinkhole damage appears gradually and gradually worsens over time and most homeowners don’t inspect their house all day every day, homeowners are still expected and required to give their insurance company prompt notice of their claim. In the legal world prompt is very vague and the courts have generally interpreted it loosely. Still, the late or untimely reporting of a claim can be problematic.
Lets look at an example using these facts: You the homeowner see cracks to your walls in January. Your policy expires in June and renews with a new company. You call the claim in to your old carrier in December. The worst case is your new policy that came about in June doesn’t have sinkhole coverage. Now you call your old carrier who has long forgotten you existed and tell them you want to report a claim from a year ago yet you have no proof that the damages were actually there a year ago. Your insurance company will say too late and we can’t go back in time to tell you whether you had a claim back then or not and your new carrier doesn’t even cover sinkhole. Under another scenario you still have sinkhole insurance with the new carrier. You could a) call it in to the new carrier who will say call your old carrier if the damages occurred back then and deny you as pre-existing damage or b) call your old carrier and they tell you the same as a above, too late. The point is pay attention to when your policy expires and/or renews and make that a good time to check the house out for any issues. If you fear you have sinkhole damages then waiting to report the claim only causes more problems for you.
I have posted numerous times on this but I can’t get enough of it and apparently no one listens to me. Forced placed policies are policies purchased by your mortgage company when you fail to buy a policy on your own. Forced placed policies often go hand in hand with homeowners that are in foreclosure or having trouble paying their mortgage. When the bank buys the policy several bad things happen for the homeowner. 1) The bank is only going to buy enough coverage to cover the mortgage. Typically policies will be enough to cover the cost of rebuilding the home should it be demolished to the ground. The mortgage amount rarely matches up with what it costs to rebuild the house. 2) Because the bank is only worried about covering its own money it usually means it cares very little about the policy coverages. Usually what the policy covers as far as causes of damage are limited and any coverages for your personal belongings inside the home will be minimal to none at all. The bank doesn’t care about your stuff. 3) The policy will be taken in the banks name, meaning you the homeowner play second fiddle and the bank gets to run the show and collect all the money first should you have an insurance claim. 4) If you are listed secondarily as a borrower on the forced placed policy you may not even have legal rights to recover attorney fees if you have to sue to recover insurance benefits. This is because the law protects insureds and reimburses insureds for their legal fees if they have to sue, and win, their insurance company. When you are a borrower and not an insured, many courts have taken the position that your lawyer doesn’t get paid. This makes it harder to find a lawyer who may potentially work for free and also makes it harder to settle your case because the insurance company has less risk in going to trial. Please, if you can, get away from a forced placed policy asap.
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.
Bahama Bay, a condo resort community just miles from Disney World experienced a terrifying event none of us hope to be a part of. A 30 foot sinkhole opened up the morning of Friday December 9th and forced the evacuation of the building which has since been declared uninhabitable in its current state. Our firm assumed the representation of the community after it was discovered the property did not carry coverage for sinkhole activity but only carried the minimum catastrophic ground cover collapse coverage. Based on the fact that the hole did not actually take the building down combined with the fact that the property only carried catastrophic coverage, the carrier gave all indications before we were involved that the claim was going to be denied. After some back and forth it looks like the carrier will be extending insurance coverage for the immediate safety concerns at least. Surely there will be a much monger discussion coming on many other coverage issues including looking at a more permanent fix. Yet another example of how important it is to carry sinkhole coverage and how problematic the catastrophic coverage can be.