Tag Archives: Sinkhole Claims

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.

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.

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.

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

How to Handle Living Expenses in Your Sinkhole Claims

If I have my home repaired for sinkhole damage, can I include the living expenses I incur while the repairs are being done in my sinkhole claim?

After an insurance company confirms a loss has occurred, the repairs to the property then follow. This phase of the sinkhole claim process is lengthy and wrought with obstacles to the insured. Primarily, an insured may have additional living expenses that are incurred due to temporarily vacating the residence during the repair work. Many of our clients cannot afford to continue to pay their monthly bills in addition to the costs of staying in a rental home or hotel during the completion of the repair work at their home.

A brief review of an insurance policy will identify whether such additional living expenses are provided, the limits of any such coverage, and how any such expenses will be reimbursed by the insurance company. These costs to the insured that are incidental to the repair work being performed are typically not paid by the insurance company until they are incurred (and not unless the insured demands payment for these covered expenses). In order to substantiate a sinkhole claim, it is important to save all receipts and other supporting documentation of any additional living expenses that may arise during the timeframe the insured is unable to reside in the home due to a covered sinkhole loss.

Read our tips on filling out a sinkhole claim.

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

Insurance Policies and Coverage Issues

What Kind of Claim Did I File, Anyway?

I called my insurance company about a major problem that developed when we were putting an addition on the home. It turns out I have a problem with too much organic materials (debris) in my soil. After several weeks of waiting, I received a denial letter, saying that I had no coverage, due to “settlement damage.” Later, I heard my neighbor say he has a confirmed sinkhole, and that maybe sinkhole activity had something to do with it. I am a bit lost!

The problem you are facing is common, in that many insurance companies will seek to limit their investigation to the nature of the claim “submitted” to them by the insured.

What had probably occurred was that the claim adjuster heard someone say that you were filing a claim, due to settlement damage, in part because of the debris found in your soil. But, understand this: claims do not come in any particular shapes, sizes, or flavors. Your claim was for the damage to the home, and you were under no requirement to submit a particular kind of claim. Instead, you are supposed to be able to submit your claim for the damage that is present, and the insurance company must either pay it, or tell you why they won’t. If the damage is consistent with sinkhole or sinkhole activity, they are required to do an investigation, regardless of how you submitted it or what you thought the damage was.

If you ever have a claim denied for other reasons, when the damage is settlement related, you should expect your insurance company to conduct a sinkhole investigation. If they do not, you are able to force them to do that, so that you can be assured that the damage is not related to sinkhole in any way.

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

How Much Personal Info Does My Insurance Need?

The insurance company told me that I was required to produce a copy of my personal financial information at the time I filed my sinkhole claim.  Can they do this?

Under most property insurance policies providing coverage for sinkholes, an insurance company is permitted to request copies of financial information relevant to the claim.

For example, if you had a claim where there was a potential dispute regarding whether you had completed repairs to the home, an insurance company could argue that this information would document whether you actually incurred the expense.  Note, this remains abusive, because they should not ask for bank records, but should instead simply ask you to produce the receipts and other materials.

Document. Document. Document.

Whenever an insurance company makes a request that you find invasive, abusive, or frankly just odd, it is important that you document you concerns in writing.

Describe your concerns, and demand that they tell you why the request is being made.  While they have contract rights to inquire and conduct their investigation of the sinkhole claim, they cannot use these rights in an abusive manner.

Assure the insurance company that you intend to comply with all reasonable requests, but that you are uncomfortable with what they are seeking.  By doing so, you can document your continued cooperation of the claim.  This is important because insurance companies can use any “alleged failure” to provide information as a separate defense of their failure to cooperate.  Keep copies of the letters in your own file, so you can produce these if litigation breaks out.

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

Insurance Policies and Coverage Issues

Mediation as a Means to Settle a Sinkhole Dispute

I was told I’m going to have to go to mediation. What is it, and what can I expect?

Sinkhole claims are often resolved in mediation. Mediation is a form of alternative dispute resolution – that is, a method of resolving a dispute that is an alternative to litigation. The parties to a dispute meet face-to-face and attempt to reach a compromise to settle the dispute. Insurance claims may be mediated by agreement prior to the filing of a lawsuit, although that is unusual. Typically, claims are mediated after a lawsuit is filed, and, in fact, courts require each case to go through mediation before trial.

A mediator who is specially trained in helping parties reach settlement agreements presides over the mediation conference. (Many mediators are former judges.) The mediator begins the mediation by describing the process to the parties. Then each of the parties, or their attorneys, describes their position in an opening statement. The Plaintiff or claimant usually includes a settlement demand in their opening statement. The parties go to separate rooms so that they can discuss their positions with their attorneys. The mediator conveys settlement offers between the parties until either a settlement is reached or it is determined that there is no possibility of settling the matter (referred to as an impasse).

Some insurance companies prefer to mediate claims early in the litigation process, while others prefer to wait until a later stage when discovery is complete. Either way, mediation usually offers the greatest chance of resolving a claim or lawsuit prior to trial.

Any settlement reached at mediation is entirely voluntary. The mediator cannot force any party to make a settlement demand or offer and cannot force any party to accept the other party’s demand or offer. One of the most significant characteristics of mediation is that everything said in mediation is confidential. That is, nothing that is said at mediation by any party may later be used in court. This makes mediation the only time in the litigation process where the parties can communicate freely with each other, making it more likely that a case will settle at mediation than at any other time.

Read my tips on filing a sinkhole claim.

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

Sinkhole News for Realtors

Sinkhole Claims and Public Information

My insurance company recently told me they are going to file a copy of my sinkhole report, where they found sinkhole activity, with the county.  Can they do this?

Pursuant to “any insurer that has paid a claim for sinkhole loss shall file a copy of the report with the clerk of court”, each county has its own clerk of court, where the information is then cataloged.  Note, the language of the statute only permits this to be done with “paid” sinkhole losses, not claims where the insurance company’s engineering firm fails to find sinkhole activity.

During the 2005 legislative session, A wide variety of new were adopted.  Before you think this change was to protect home buyers, it was not.  Instead, it was designed to mark homes with sinkhole damage, so that no future insurance company would insure it unless the proper repairs could be documented.

Sinkhole Houses Being Sold “As Is”

One issue they were dealing with was the fact that people were being paid for sinkhole claims, not repairing their houses, and then selling them “as is.”  Later, the insureds would have to file new sinkhole claims, which the insurance companies would have to pay again.

The “denied” claims are not to be filed.  I will tell you as a practical matter that many insurance companies are slow to file these reports, as it actually costs them money to do so.  Plus, the failure to file them is not a basis to sue them.  Meaning, if you buy a house with undisclosed sinkhole activity, you cannot sue the insurance company for failing to file a confirmed report.

As we counsel realtors on sinkholes, it is always a good idea to do a document search at the county before you buy a home, and to review your home’s file with the building department.  These materials are public record and can provide you important information when purchasing a house.

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