Tag Archives: Sinkhole Coverage

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.

Insurance Policies and Coverage Issues

Insurance Companies and Denial of Insurance Coverage

My insurance company is asking me to tell them when the damage “first appeared.”  I really do not know, and am not sure if some damages I previously thought were “normal” are sinkhole damage.  Thoughts on this?

We have touched on this issue in prior posts but it seems to have become such an issue that we feel the need to detail this trend in a separate post.

Let this also serve in a way as a warning to homeowners involved in a sinkhole claim.

When a sinkhole claim is filed one of the first steps is for an adjuster from the carrier to come out and inspect the damage. During this initial inspection these adjusters almost always request that the homeowner submit to a recorded statement. We say that the carrier requests the statement but in reality, you are required to cooperate with any reasonable investigation or your insurance company could deny you coverage, so you are really forced to provide a statement.

During the course of these recorded statements, the adjusters often ask when the homeowner first noticed any cracks. This question has characteristically been innocent but, now it seems to take on a different role. Many adjusters are now influencing the homeowner to identify the first sign of cracking they ever noticed and then using the homeowners own words, the adjuster will unilaterally assign the date of the loss in the year the homeowner first saw even a semblance of a crack. We have even heard homeowners say their adjuster refused to continue adjusting the loss until they provided a date.

Several Serious Issues Arise

First, the limits on a homeowner’s insurance policy almost always increase as the years go by. Your policy limits now may be tens of thousands of dollars more than what your limits were several years ago. If the adjuster assigns your date of loss to a date several years ago, the carrier will only pay you the amount of your policy limits back then, precluding you from collecting on thousands of dollars you may need to repair your property.

Second, by assigning the date of loss to a date years ago, this limits the amount of time a homeowner has to file a lawsuit. As with any civil action, there is a time limit on how long a homeowner has to sue their carrier. A date of loss many years ago may automatically preclude you from filing a lawsuit if something goes wrong and it gives your carrier even more incentive to delay the claim to preclude you from suing them.

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.

Repairing Sinkholes

Does Homeowner’s Insurance Cover Sinkholes?

Does homeowner’s insurance cover sinkholes?

Many homeowners look to their home insurance to fix every problem that occurs. Unfortunately, this is sometimes not the case and depends on your own insurance policy and your level of coverage. For example, if you elected only for catastrophic sinkhole coverage, your insurance will only be there for you if the damage is so bad, your home is condemned. That being said, what should you expect from your insurance? Does homeowner’s insurance cover sinkholes?

What is standard sinkhole coverage?

It is highly recommended that you spring for standard sinkhole coverage; though it’s pricier, and you may not think you’ll ever need sinkhole insurance, sinkholes are not easy to predict and even more difficult to pay for repairs.

If you did opt for standard sinkhole coverage, your insurance policy will cover the cost to stabilize the land and the foundation of your home. On top of that, they must also pay you the cost of any cosmetic damages resulting from the sinkhole.

The grouting loophole

Does homeowner’s insurance cover sinkholes? Well, yes, but always be aware that insurance companies are in the business to make money, and will take advantage of you if you allow them to.

One common loophole is the manner in which your land and your home are repaired. Insurance companies will usually pay to grout the soil, which is essentially one of the only ways to stabilize it. To grout the soil, a cement-based material is injected around the perimeter of the home and to an appropriate depth beneath it.

While this may sound great, this is not an appropriate repair, and your home will likely fail in the future. This is because while some areas have been stabilized, the upper 10 to 15 feet of your soil are likely unaffected by grout, leaving your home susceptible to another sinkhole. To fix this problem, the appropriate repair is underpinning, which connects your home to the ground with poles. While the right choice, this is expensive, so your insurance company is likely to avoid this route if possible.

The cosmetic damage loophole

Lastly, the insurance company must pay for the cosmetic damages to the home. This usually includes the cracking to the interior and exterior, as well as to the floors and the foundation itself.  To be exact, your insurance company is obligated to pay what is required to bring your home back to its pre-sinkhole state.

It is important that you do not receive this check until the repairs are completed because any of these cracks are not visible until the repairs are completed. If you receive payment before anything is fixed, it may feel nice to get some money to help out with your sinkhole repairs, but it is impossible for your insurance company to accurately assess how expensive repairs will be until all the damage is made clear.