Tag Archives: Insurance Company

Insurance Policies and Coverage Issues

Selling Your Sinkhole Home

I see advertisements for companies that buy sinkhole homes. Is that a good option for me?

Selling to a sinkhole-distressed investment company is a very good option for some of our clients. Of course, the financial aspect must work out for you, and the numbers must add up. These companies will typically purchase a sinkhole-distressed property that has not been repaired for a significantly low value and then fix it and sell it for a profit.

These companies can be useful in a couple ways: First, they provide homeowners a easy way out of what seems to be an impossible situation. Second, they repair homes that, under most circumstances, would have gone unrepaired. This helps the homeowner as well as the community get back on its feet.

Oftentimes, the devil is in the details. I’d have to know what they want and what they are giving you. Sometimes, the company buying the sinkhole home will require that you assign your insurance claim to them. This may not be good for you. However, it could be the fastest way to resolve it. You also want to make sure that if you have a confirmed sinkhole, the insurance company is not going to give you grief about any additional insurance benefits to which you may be entitled. Be careful on these.

Read my tips on filling out a sinkhole claim.

Have a burning question you’d like to ask about sinkholes? Let us know.

Repairing Sinkholes

How to Handle Recurring Sinkhole Damage

My home had confirmed sinkhole damage about two years ago, which [name withheld] insurance company paid to fix. I am noticing damage again. What do I do now?

You should know that when an insurance company pays to fix sinkhole damage (or “sink hole”), they are responsible for any failure to fix it. It sounds odd, but it’s the way the insurance policies are written. Generally, the law makes the insurance company responsible for sinkhole damage so that they will take all steps necessary to fix it. Otherwise, they could (not saying they would) intentionally underpay you, and when the fix fails, blame you for not doing the right thing to fix it. (Get tips on filing a claim for sinkhole damage.)

I would prepare a letter, detailing the sinkhole damage, and send it to the engineering firm you hired to fix it, along with your insurance agent. They should inspect the property immediately. If they do not, they are not doing what they are required to do. And, remember, it is not your responsibility to explain why the damage is there, as that is the responsibility of the engineering firm. Most times, lawyers representing insurance companies (we should know – we used to represent them) will try and blame the engineering firm, and tell you to take it up with them. No. The sinkhole damage is the responsibility of your insurance company and they should re-inspect.

Have a burning question you’d like to ask about sinkholes? Let us know.

Insurance Policies and Coverage Issues

Difference Between Standard and Catastrophic Coverage

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What’s the difference between standard sinkhole insurance coverage and catastrophic ground cover collapse?

Prior to 2008, every insurance company that sells property insurance in Florida was mandated to provide sinkhole insurance coverage, as provided for pursuant to Section 627.706, Florida Statutes. Under that statute, sinkhole activity was defined as “the sudden settlement or collapse of earth supporting such property resulting from the creation of subterranean voids created by the action of water on a limestone or other similar rock formation.”

That’s a lot of geology to come to this: There are rock layers beneath your home, which water can actually dissolve. When this happens, holes open up beneath the ground and can actually impact the surface where your home is located.

Before and After Catastrophic Collapse Option

Sinkhole insurance coverage for property insurance losses has been around for decades. However, in the past two years, the State of Florida authorized insurance companies to offer an option, which will save some property owners in some counties on their insurance premiums. This new coverage, which substitutes for sinkhole damage coverage, is called catastrophic ground cover collapse.

Previously, if sinkhole activity damaged your house, it was covered by the homeowner’s sinkhole insurance plan, even if the actual damage to your house was limited or gradual in nature. Nearly all geologists agree that sinkhole losses, when they do occur, do not result in catastrophic losses. Instead, the damage presents itself as stair-step cracks, internal tile damage, or deflection in the roof.

In my experience as a sinkhole lawyer, fewer than one percent of losses result in a cataclysmic event, where the home becomes uninhabitable, rendering this sinkhole insurance coverage nearly useless to homeowners.

Read more about the dangers of relying on catastrophic ground cover collapse for your sinkhole insurance needs.

Have a burning question you’d like to ask about sinkholes? Let us know.

Insurance Policies and Coverage Issues

Difference Between Legal and Scientific Definition of Sinkhole

What exactly is a sinkhole?

The reason the word “sinkhole” is one word is that scientifically, and legally, the real issue is not usually whether something is an actual hole in the ground but whether or not it is being impacted by sinkhole “activity.” Because the most common issue associated with sinkhole activity is whether or not it is covered by insurance, Florida legally decided the definition of sinkhole and what constitutes “sinkhole loss.”

Definition of Sinkhole

You can find the : (b) Sinkhole is defined as a landform created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater. A sinkhole may form by collapse into subterranean voids created by dissolution of limestone or dolostone or by subsidence as these strata are dissolved.

Definition of Sinkhole Loss

Within the world of property insurance, “Sinkhole loss” is defined as structural damage to the building, including the foundation, caused by sinkhole activity (Section 627.706, Florida Statutes).

In layman’s terms, a sinkhole forms when rock beneath ground dissolves. Soil, due to gravity, falls into the holes in the rock. When the soil moves, the surface shifts, damaging the home.

Difference Between Legal and Scientific Definition of Sinkhole

Oftentimes, the reason why insurance company sinkhole investigations reveal “no sinkhole,” while others say “yes sinkhole,” relates to the differences between the legal and scientific definitions. When Florida adopted the sinkhole definition many years ago because it became an insurance issue, the definition was not necessarily lifted from the scientific literature.

Many times, when we retain experts for our clients, who are either disputing how to repair a sinkhole, or whether there is a sinkhole, the problem comes down to how the insurance company defines sinkhole. Most of the time, we are able to get the insurance company to change their position by demonstrating that you can have a sinkhole loss, even if there is not a large, gaping sinkhole in your yard.

Read my tips on how to file a sinkhole claim with your insurance company.

Have a burning question you’d like to ask about sinkholes? Let us know.

Repairing Sinkholes

Mortgage Companies Approach Repairing Sinkholes Differently

I’ve heard that when the insurance company pays you for a sinkhole claim, the mortgage lender makes you repair the home with the money. Is this true?

The answer is simply that it depends on your lender and its policies, the amount and type of damage to your home, and how much you owe on the principle.

Every lender has a different policy, but it is true that a large portion of the lenders will make you use some, or all, of the money to repair the sinkhole damage to your home unless you have enough to pay off the mortgage in full. Other lenders will allow you to put some or all of the money toward your mortgage, but very few lenders will simply allow you to keep the cash for yourself. The lender has just as much of an interest in ensuring that your home’s resale value is protected as you do.

The question you will need to answer for yourself is whether you want to do the repairs or whether you want to try and live with the damage. As some damage by sinkhole activity is less severe, some people do some of the cosmetic sinkhole repairs and leave the subsurface alone. This drives property insurance companies crazy, but that’s their problem – it’s your house and your money. If you want to do the sinkhole repairs, make sure when you submit the payments to the mortgage company that you clearly state your intentions (repair vs. pay down mortgage). Most mortgage companies have two different departments, one for escrowing money for repairs and another for paying down your loan. If the money goes to the wrong department, it can be a huge hassle.

Have a burning question you’d like to ask about sinkholes? Let us know.

Sinkholes in the News

Burden of Proof Placed on Home Insurance Company

If I file a claim, do I have to prove there is a sinkhole in my yard, or does the insurance company have to prove otherwise?

The Second District Court of Appeal (DCA) recently issued an opinion that held that the home insurance company bears the burden of proof in showing that property damage did not result from the presence of sinkholes. In Warfel v. Universal Insurance Co., the homeowner filed a sinkhole claim with his insurance company after noticing damage to the walls and floors in his home. The insurance company completed a geotechnical inspection pursuant to Florida Statutes §627.707 and found property damage was not the result of a sinkhole. As a result, the homeowner sued his insurance company.

Ruling Puts Burden of Proof for Sinkhole Damage on Homeowner

At trial, the homeowner’s insurance company asked the court to instruct the jury that section 90.304 and 627.7073(1)(c), Florida Statutes creates a rebuttable presumption in which the insurance company”s geotechnical report would be presumed correct, and in which the homeowner would be required to show that it was wrong. The insurance company presented expert evidence from the company that completed the geotechnical inspection, and the homeowner presented expert testimony that reviewed these findings but did not conduct his own investigation. Following the presentation of evidence, the trial judge instructed the jury that the homeowner had the burden of proving property damage resulted from a sinkhole, and the jury found in favor of the insurance company.

Appeal Rules Against Insurance Company

On appeal, the Court found that this instruction was improper because the statute did not demonstrate a clear legislative intent to require the homeowner to bear the burden of proof for sinkhole damage. The dissent pointed to other statutory schemes in which the legislature created rebuttable presumptions that shifted the burden of proof without expressly stating so.

Similarly, it found that section 627.707 of the Florida Statutes created uniform geotechnical investigation procedures so as to address the economic challenges of increased filing of sinkhole claims. According to the dissent, the majority approach is illogical because it allows the homeowner to overcome the presumption of correctness given to the insurance company’s geotechnical opinions by obtaining experts to review but not conduct their own independent investigation.

Benefit of Ruling to Homeowners

The holding in Warfel gives homeowners an advantage at trial in sinkhole-related suits. Judges are no longer allowed to instruct jurors as to the presumption of correctness for insurance companies geotechnical reports, even in light of a homeowner”s presentation of conflicting expert testimony.

Read my tips on filing a sinkhole claim.

Have a burning question you’d like to ask about sinkholes? Let us know.

Insurance Policies and Coverage Issues, Repairing Sinkholes

Sinkhole Activity Not Limited to Areas of Florida with Limestone

I mostly hear about sinkhole claims in Pasco and Hernando County. I live in the Miami, Dade County area and have noticed some cracking. But I’ve heard that because there’s not limestone in this area, the cracking can’t be the result of sinkhole activity. Is that true?

I believe what you’re alluding to is the fact that people commonly think of sinkholes as dissolved limestone. In fact, the statutes on sinkhole activity, as defined by the State of Florida, do not necessarily limit sinkhole activity to only the dissolution of limestone. (Learn more about Florida’s legal definition of sinkhole.) The definitions mention other rock and underlying strata. It is true that many parts of South Florida and the Dade County or Miami areas “The creation of new primary schools districts is an excellent example of how the borough council continues to invest in our schools districts and their pupils. do no sit on a true layer of limestone but do sit on other forms of rock, which we believe, if suffering from dissolution, satisfy the definition of a sinkhole.

In fact, the primary reason damage due to sinkhole activity is covered by insurance relates to a large, cover collapse sinkhole that occurred in Winter Park, outside of Orlando. Additionally, of all the clients we currently represent, the largest increase in claims has been in the “less expected” areas, such as Ocala (Marion County) and South Florida. There may not be a scientific explanation for this; it could be that there’s just an increased awareness by the property owners.

The focus should be less on whether your cracking could or couldn’t be attributed to sinkhole activity and more on getting whatever is causing the damage resolved. Under Florida law, an insurance company must not only determine whether it is a sinkhole, but also whether or not there is an alternative cause for the damage (e.g. organic soils, clayey soils, construction defects). You may find yourself in a situation where you are presenting minimal evidence of sinkhole activity, but the claim has to be paid because the engineering firm cannot determine the cause of the damage with any reasonable degree of specificity.

Have a burning question you’d like to ask about sinkholes? Let us know.

Insurance Policies and Coverage Issues, Repairing Sinkholes

Grout Cracks and Sinkhole Damage

What causes grout cracks, and how do I know if they’re the result of sinkhole damage?

Sinkholes and sinkhole activity are associated with the movement of soils, into areas created after the underlying rock is dissolved. When the rock beneath the home deteriorates, it weakens and fails to provide the support needed from the initial construction of the home, causing grout cracking, among other problems.

In so doing, the house no longer sits on a level, competent base but instead is prone to shifting, settling, cracking, and even heaving, as the weight distribution in the foundation occurs. This is why sinkholes may actually cause some portions of the home to appear to rise, as the foundation is pushed upwards toward the sky. This is because another, less prominent area is shifting down and causing the other area to rise.

Grout Cracks in Some Counties Are More Suggestive of Sinkhole Activity

For most homeowners, the damage can be very subtle. In counties where sinkhole damage is common – such as Marion, Hernando, Pinellas, and Pasco – homes are most likely to present cracking in unusual places, such as at wall joints in the interior, or in stucco on the exterior of the structure. The significance of this is that the home is losing the support provided by the soil beneath the home, causing the perimeter to shift and crack.

Observing grout cracks in a “stair step” formation on the exterior of the home along the grout lines of block is a significant sign of sinkhole activity. While counties or cities like Marion or Ocala often have other, plausible explanations for such damage (e.g. expansive clay, organic soils, loose surface soils), these alternative explanations do not rule out sinkhole activity as a cause. Most often, these kinds of other causes are working side by side, to create the appearance of sinkhole damage.

What is a sinkhole, according to Florida law?

Have a burning question you’d like to ask about sinkholes? Let us know.

Repairing Sinkholes

What To Do About a Failed Sinkhole Repair

My home was repaired for sinkhole settlement about two years ago. I was relatively happy with the repairs, although it took forever to complete. But now I’m noticing additional cracking in places where we had damage before and some other places as well. What should I do?

I would notify your insurance company immediately – not necessarily because you are in danger, but because you want to put them on notice as soon as you find damage. It is not uncommon for homes repaired by sinkhole damage to have subsequent damage and sometimes even worsen over time. Depending on how bad the damage is, the insurance company may do additional tests or evaluate the home with other engineers.

This process can get complicated because some sinkhole repairs are only done to stabilize the home and have done nothing for sinkhole activity elsewhere on the property. There are cases where the home, after being repaired, is declared a “total loss” or a “failed repair.” If this happens, you still have rights under the policy and may be able to get additional coverage amounts for the new damage.

If, however, the home is declared a failed repair, you may be entitled to the limits of your policy, regardless of how much was paid to repair your house. (Read my blog post, The Failed Sinkhole Repair, to learn more.)

The sinkhole laws in Florida are very favorable to the insureds and place the burden of repairing the home properly on the insurance company, even if you signed the construction contract. In 2005, the Florida State Legislature made a big push for people to repair their sinkhole-damaged homes. The downside of that for insurance companies was that more houses got repaired, which increased the number of failed repairs. When that occurred, more people were able to make second claims, many of which forced the insurance company to pay their limits again.

Again, call your insurance company. If you have a new insurance company, call both the one who paid your claim and also your new one. That way, everyone knows what is going on.

Read our tips on filing a sinkhole claim.

Have a burning question you’d like to ask about sinkholes? Let us know.

Insurance Policies and Coverage Issues

Property Coverage and Sinkhole Investigation Reports

My insurance company just sent me the report following my sinkhole investigation, along with a letter that really tells me nothing. When I read this, what should I be looking for?

Reports prepared by geologists and geotechnical engineers following the investigation of a sinkhole claim can be very difficult to understand. They contain a voluminous amount of general information, much of which is of a highly technical nature. However, there are certain issues to look for in reviewing a sinkhole investigation report prepared by your insurance company’s consultants.

The Florida Statues require professional engineers and professional geologists performing sinkhole investigations to “perform such tests as sufficient, in their professional opinion, to determine the presence or absence of sinkhole loss or other cause of damage within reasonable professional probability…”

Engineers and geologists performing sinkhole investigations typically perform tests including geophysical surveys, such as ground penetrating radar and electrical resistivity. These studies look for odd areas (called “anomalies”), which may or may not be sinkhole activity. At a minimum, the engineer or geologist should study these further.

There are several indicators of sinkhole activity, which may be uncovered by an SPT boring. First, the SPT borings may indicate the presence of subsurface voids or cavities (usually indicated in the boring logs as “weight-of-rod” or “weight-of-hammer” conditions).  Such voids or cavities often indicate sinkhole activity.  Second, there is often a “loss of circulation,” which is a movement of fluid in the drill rig showing a void. There are also more subjective indicators, which relate to the comparative density of the soil above and below various depths in the boring (very technical stuff). If you find any of these facts in a sinkhole investigation report prepared by your insurance company’s experts or have any other questions concerning the report, you should have the report reviewed by a competent professional.

Read my tips on filing a sinkhole claim.

Have a burning question you”™’d like to ask about sinkholes? Let us know.