Tag Archives: Denied Insurance Coverage

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.

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.

When Expansive Clay Soil Damage Constitutes a Sinkhole Claim

Are there common causes of settlement damage?

During most sinkhole investigations, engineering firms examine the deeper soils as well as the soil material in the shallow areas near the home. Sinkhole activity requires deeper borings, to depths as deep as 100 feet below the surface. The limestone is the primary area of concern, with an examination as to whether the rock is dissolving. At the same time the limestone is being examined, most engineering firms will also do shallow borings, called hand augers, to extract the surface materials for expansive clays or organic material. (Read more about what constitutes a sinkhole.)

Things to Keep in Mind if Expansive Clay Soil Is Found

The issue of expansive clay soils, or “shrink swell” clays is a common distraction for deciding whether a home is being impacted by sinkhole activity. If you or someone you know has been told there is no sinkhole activity and the damage is being caused by expansive clay, here are the most important things to keep in mind:

    1. Even if expansive clay soil was found at the site, this does not mean the home is not being impacted by sinkholes. This is complicated, but it is associated with the manner in which expansive clay and sinkholes are formed.
  1. Many sinkhole investigations are “denied” claims more because they are incomplete, not because they necessarily excluded sinkhole. Thus, while the sinkhole investigation may not be complete, the presence of expansive clay soil often results in a denial of the claim simply because they found clay near the surface.
  2. Lastly, for expansive clay to be the cause of the damage, several things have to be true:
  • It has to be of a particular kind.
  • It must be at a particular depth.
  • It must be of a sufficient percentage of the soil to actually impact the movement of the home.

Suffice to say, we read a lot of engineering reports where the insurance dispute can be found quickly. If we see something we do not fully understand on technical matters such as this litmus test applied to the presence of expansive clay soils, then we can find an appropriate professional who can assist our clients.

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

Tips on Filing a Sinkhole Claim

Do you have any tips on filing sinkhole claims? Any mistakes I should be sure to avoid?

Once you decide to file a sinkhole insurance claim for sinkhole damage, it is very much you against the insurance company. Most of our clients, regardless of whether they are in Ocala or Spring Hill, tell us that they feel an adverse relationship with their insurance company right out of the gate. Unlike water claims or even small fires, confirmed sinkhole activity can cause considerable damage and require the active participation of your insurance company.

Some carriers, like anything else, take better care of their insureds than others. Regardless, there are important tips to consider in filing sinkhole insurance claims like this:

Consider the Safety of Your Family

If the damage to the home is considerable, notify your insurance company that you wish to be moved to another location while the testing requisite to sinkhole insurance claims is pending. In most cases, this is not usually required. While damage can appear rapidly, like it did recently in Hudson, Florida, most sinkhole damage or sinkhole activity does not cause noticeable damage to the home.

Make Sure That All Communication with Your Insurance Company Is in Writing

When we counsel clients who are awaiting sinkhole insurance claim decisions, we confirm everything in writing. The insurance company is noting everything you say, and will likely be asking to record portions of your personal statement. As such, you should confirm everything they tell you as well.

For example, in a recent sinkhole insurance claim in Ocala, we had an insured who could not get the insurance company to conduct an investigation in a timely manner. The insured told us she had been told the investigation would start within a week. The insurance company, however, told us they had told her it would be at least 6 to 8 weeks. At the time they told her it would be a week, confirming it in writing would have made the investigation occur much faster. A lot of times, we serve this role as we act as the voice of the insured, trying to get the claim resolved as quickly as possible.

Read my considerations you should weigh before filing a sinkhole claim.

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

Sinkhole Repairs for Other Structures on Property

Other than the property coverage provided for under my insurance policy, does my insurance policy cover sinkhole repairs for other things, such as my driveway and other parts of my home?

Quite frequently sinkhole damage can occur to areas of an insured property that are separate and apart from the dwelling residence. Depending on your policy, there may be coverage for additional structures on the property. Typically, this would potentially include a guesthouse, driveway or other permanent improvement to the land.

In our experience, insurance companies will sometimes attempt to include the sinkhole repairs to damages for additional insured structures under the coverage for the main dwelling residence. This unfairly deprives the insured of other available coverage, which is separate from the insurance for the dwelling on the insured property.

For instance, an engineer hired by the insurance company confirmed sinkhole activity affecting the property and prepared a  sinkhole repair plan calling for grout to be injected under several points under the driveway. This grouting, by necessity, involved the separately insured other structure (the driveway), yet the insurance company failed to apply the other available coverage to this portion of the sinkhole repair. Instead, the insurer unfairly attempted to “lump” this segment of the sinkhole repair under the coverage for the main dwelling.

We provide analysis and answers to our insured clients about this and many other types of insurance policy questions.

Read our tips on filling out a sinkhole claim.

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

Property Insurance Cancelled vs. Non-Renewal Part 2

What is the difference between having your insurance policy “cancelled” versus “non-renewed” and, does either impact your future ability to get insured?-Part Two

As noted in the previous post on this topic, there is a difference between being cancelled and being non-renewed. While being non-renewed is common, being cancelled is a negative scar on your insurance record, and may result in a battle between you and your insurance company. An insurance company may have a variety of reasons why they think they should cancel your policy, none of which may be true and are usually subjective. The most common complaint we hear from insureds is that they are cancelled because of “frequency of claims.” This drives insureds crazy, as most insureds only file claims when there are major issues to address (e.g. sinkhole claims). The problem with being cancelled is that to a future insurance company, a cancellation is a statement that you either did not do something you were supposed to do, or somehow your home was a sufficient problem and fell outside common underwriting guidelines. As most insurance companies use the same or similar guidelines, this would then be an issue for most insurance companies. I have seen homes cancelled for relatively minor and alterable reason (e.g. insurance company discovered a trampoline), or for more material, and disquieting bases (e.g. previous, unrepaired sinkhole not disclosed on application).

Frequently, cancellations will be used as a defense against a pending claim. If, for example, the insurance company discovers the presence of sinkhole or sinkhole activity, they may go back to the application after the claim is submitted to determine if there could be a reason to deny your claim. If they then discover something they believe to be a sufficient basis, they will then cancel your coverage and look to deny your claim. All this considered, cancellations are a fertile ground for arguments between insurance companies and their insureds. Read our tips on filing a sinkhole claim. Have a burning question you’d like to ask about sinkholes? Let us know.

The Effect of Past Sinkhole Claims on a Current Sinkhole Claim

Question: After I discovered damage to my home that I thought might be sinkhole related, I found out my house had confirmed sinkhole activity before I bought it. Does this impact my sinkhole claim?

What to know about past sinkholes on your new home

If a property previously experienced sinkhole activity or was involved in a sinkhole claim, the insurance company will attempt to defend the new claim by alleging the damage is all pre-existing or was related to the past claim. A seller of property in Florida who made a prior sinkhole claim or received any settlement proceeds for a sinkhole claim will need to fully disclose the relevant details of the claim to the purchaser of such property. This would include:

  • A description of the magnitude of the sinkhole damages
  • The extent of any repairs completed at the property
  • The amount of the sinkhole claim settlement proceeds that were utilized for any repairs

An insurance company will want to know the information concerning the past sinkhole claim and if the dwelling demonstrates new evidence of continued progression of damage due to the past failed repair attempt. Having the details of any past sinkhole claim is critical to pursuing any renewed or new claim by the insured homeowner.

As long as the insured honestly puts forth all noteworthy facts to his/her home insurance company and discloses all material information about the history of the home, there should be little reason for an insurance company to not perform a fair investigation into the sinkhole claim.

Because of our experience working for the insurance carriers, we are familiar with certain tactics frequently employed by the insurance companies in fighting sinkhole claims, and we know what to expect.

Please contact us to discuss your legal options and to how to best protect your rights under the insurance contract and Florida law.

Sinkhole Insurance Claim Delays

Question: The experts say there’s sinkhole activity on my property but does it necessarily mean the insurance company will cover the damage?

We have recently received a fair amount of inquiries from homeowners who have reported a sinkhole claim, have had the property tested, have been told by the engineering firm that sinkhole activity is present at their property, but they are still waiting for their insurance company to decide if they will be covering the loss.

How to know what insurance will cover

It is often difficult for people to understand why a report discovering sinkhole activity does not automatically qualify them for the sinkhole insurance benefits in their policy. As we have discussed previously, there are many reasons why an insurance company can deny sinkhole coverage such as misrepresentations on applications or prior damages.

If you have had your home tested and instead of issuing payments, your insurance company demands you provide a truckload of documents such as home inspection reports, mortgage information, seller disclosure forms or photographs, be cautious. This most likely means your sinkhole insurance carrier is looking for alternative ways to deny your claim and get out of paying you benefits.

When to be skeptical if your insurance carrier

This is a slippery slope and sometimes a homeowner’s honesty and willingness to cooperate can be used against them. Of course, you do have a duty to cooperate and the insurance company is usually entitled to this information if you have it.

It may be smart to keep in perspective what the insurance company plans to do with this information. If you’re ever unsure about what the information you’re being asked for has to do with your claim, contact an attorney. While you will not be paid unless you cooperate fully, you are not obligated to answer every question, and having an attorney on your side can help keep your claim on track.

Read our tips on filling out a sinkhole claim.

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

Material Misrepresentation in Insurance

What is material misrepresentation in insurance?

When filing an insurance claim, it might be a shock to be informed that your insurance company is attempting to assert a material misrepresentation defense against you, instead of interviewing you about your claim. So what is material misrepresentation in insurance? Should you be concerned?

When your claim can be canceled

In the state of Florida, an insurance company may rescind (or cancel as though it never existed) your insurance policy if they determine you have mispresented the underlying facts of your home and its history. If your insurance company believes that you withheld facts from them that would either cause them to deny your policy or charge you a higher premium, they can state they are not obligated to cover your claim or even your policy.

While this is a scary thought, keep in mind that while they may feel this is within the realm of possibilities, they must prove that you purposefully lied to them, and this is very difficult. This is because they must prove that you specifically told them something in your description of your home that was untrue.

What qualifies as lying?

This is where you’re likely in luck. As aforementioned, they must prove that you reported something that was untrue. Therefore, if your home had prior sinkhole damage but you didn’t know, you cannot be held liable for this information.

Second, you cannot be held liable for information that the insurance company did not ask for. If, for example, you were aware of a sinkhole that had opened next door to the house, but the insurance company never asked if there was a sinkhole next door, you cannot be held responsible for the insurance company’s negligence. It was their duty to get a well-rounded picture of your home, not yours!

Third, only information that has been confirmed and stated can be used against you. For example, if someone advised that “you better have that checked out” in reference to a crack in the foundation, it does not state that there are any issues with the foundation, nor any history of issues. There is no reason to expect a layperson to understand what a crack in the foundation might mean so it cannot be assumed that you withheld information.

Your home’s background is the insurance company’s responsibility

The basic idea is that material misrepresentation in insurance cannot be claimed about information that your insurance company did not directly ask you for. As long as you answered all the questions that were presented to you to the best of your ability, you have no reason to be concerned about your claim or policy being canceled.

While insurance applications tend to be ambiguous and poorly written, it must be proved that you outright lied in order to confirm material misrepresentation, and this is very difficult to do.

Once they press you for whether or not you told them any particular facts about the home, questions like the following arise:

  • Did they inspect the home?
  • Was the appearance of the damage normal for homes of its age?
  • Did you buy the home for a reasonable value?

If you bought the house at its actual market value and later it is determined the damage was sinkhole related, who would believe you would do this intentionally?

What is a Notification of Reservation of Rights

What is a notification of reservation of rights?

When you file an insurance claim, the first information you receive may be a notification of reservation of rights. This may be a bit confusing, and you may not be sure what exactly it means. While you shouldn’t be too anxious, it’s always best to be educated about your rights and the rights of your insurance company.

This notification covers your insurance company’s bases

First, receiving this letter does not necessarily mean anything about your insurance claim, nor do you need to respond to it. Put simply, your insurance company is obligated to inform you that there may be a reason why coverage regarding your claim may be barred. This document should provide you with a variety of exclusions, and these exclusions may or may not necessarily apply to your claim.

This letter is sent out as soon as is practical and is meant to protect your insurance company from any lawsuits from you regarding these exclusions. According to Florida law, a reservation of rights letter must do several things:

  1. Include the policy language in play
  2. State the purpose of the letter
  3. Summarize the facts leading to the reservation
  4. Quote the exclusionary language

In very simple terms, a reservation of rights letter serves the insurance company by saying, “We are looking into your claim, but it may not be covered.” Thus, they are seeking to limit any argument later that their conduct created a basis for insurance coverage for an otherwise excluded claim.

Does this mean your claim will be denied?

The short answer to your question is no, the reservation of rights letter for a sinkhole claim is not the same as a denial letter. Instead, the insurance company is telling you that its continued investigation into your claim, by hiring an engineering firm, cannot be construed as a waiver of any policy defense. Settlement damage to a home is excluded unless it is sinkhole activity. If it is something else, it may be excluded, based upon the language quoted in your letter.

When you should contact your lawyer

Sometimes reservation letters get a bit carried away, and if your notification of reservation of rights includes statements about your conduct or your failure to act, you should respond and request further information as to why they included your actions.  This letter should be a reminder of the exclusions stated in your insurance policy, not a collection of potential ways to get out of paying your claim.