Tag Archives: Denied Insurance Coverage

To File or Not To File: That Is the Question

How do I know if and/or when I should file a sinkhole claim?

Deciding to file a sinkhole claim for settlement damage is either really easy or really hard. The reason being that it is really easy if the damage to the home is immediate, material, and creating a potentially damaging environment for you and your family.

Conversely, if the damage is mild to moderate, located in isolated areas of your home, or just is not creating a specific problem for you, you may be mulling over whether you want to file a claim.

Questions you should be asking

The answer as to “when” to file a claim always depends on each situation. But, having said that, here are the primary issues you should resolve:

  1. If I file a sinkhole claim, and it turns out not to be a sinkhole, then what? Will my insurance be canceled?
  2. If I file a claim and there IS a sinkhole or sinkhole activity, then what?
  3. If I decide to wait and file a claim, does this impact my rights under my policy?

The answer to the question, if the investigation is a no, can be troubling. First, if you seek damage consistent with sinkhole activity (e.g. stair-step cracks, floor cracking, or doors “racking”), the insurance company is obligated under Florida law to investigate whether the damage is sinkhole related.

What your insurance company will do

Your insurance company will hire a sinkhole investigation company to conduct various engineering studies at your home, and a copy of the report will be provided to you. If they do not find sinkhole activity, then you will be told the most likely cause of the damage.

If you are not a “regular” filer of insurance claims, there is not usually a consequence, unless they determine there is something else, not insured, which you have to remedy.

What to be prepared for

If the investigation determines the cause of the damage IS sinkhole activity, be prepared for a ride. Most home insurance companies do a very poor job of managing sinkhole claims where there has been confirmed sinkhole activity.

In counties like Marion, Hernando, Pasco, and Pinellas, things can also be complicated by suggestions in the engineering report that the damage resulted from sinkhole activity and something else (e.g. expansive clay, organics). There is also a chance you will be arguing over underpinning versus grouting, for the subsurface repairs.

In most cases, insurance companies do not want to use underpinning, because it is expensive and often causes other damage to the house during the installation. This is one of the most common disputes among our clients, in all of the heavy counties where sinkhole claims are filed.

Have You Checked Your Insurance Policy for Sinkhole Coverage?

When a sinkhole occurs

Any unexpected and dramatic sinkhole damages to your home can be shocking and devastating. A homeowner can be overwhelmed with the multiple issues that arise from the startling and unanticipated effects of sinkhole activity producing property damage to your residence. Most homeowners wonder why such events are happening and what they should do next in these unfortunate situations.

The foremost concern of homeowners who have experienced sinkhole loss should be the safety of their families and being sure there is no risk of imminent harm due to a collapse of the surface soils. If there is any risk of a collapse of the ground around your home, you should immediately evacuate, and then contact the local authorities to secure the property.

What to learn from new sinkholes

Recently, several sinkholes have appeared in Tampa Bay, providing a clear reminder that homeowners need to review their home insurance policies in order to verify they are properly covered for sinkhole damages.

On January 1, 2010, a new law took effect that allows insurance companies to drop sinkhole insurance coverage on policy renewals in Pasco and Hernando counties. All policies will continue to provide coverage for catastrophic ground cover collapse, which applies to extensive sinkhole damages that leave the home in an uninhabitable condition.

If you do have an endorsement for sinkhole loss coverage, you should immediately contact your insurance agent or insurance company to report the claim.

What you should expect

Generally speaking, the claims adjustment and investigation process are slow. Unless you are unlucky enough to have your entire home (or a good portion of it) suffer extensive sinkhole damage, your insurance carrier will likely not be in any hurry to respond to a claim or, for that matter, rush out to visit your home to perform the initial investigation.

Only the appropriately trained and educated professionals (geologists, geotechnical engineers, and engineers) are able to determine if damage to your home is caused by sinkhole conditions.

The professionals are hired by your insurer, and then these experts contact the homeowner to schedule a date for testing at your property. Once the appropriate tests occur and the data is collected, the expert report is prepared that provides an opinion on whether or not sinkhole conditions are the cause of the damages to the home. After that, your insurance carrier should advise you whether or not you have a covered loss.

Completing an Insurance Application

I’m in the process of looking for a new insurance company. The application they provided asks a lot of questions about the condition of the property. I am aware that there are stories of confirmed sinkhole activity in my neighborhood. Do I have to tell them about these other sinkholes, even if I have never had one?

Simple answer first: tell the truth about each of the questions on the application. If they ask you about the age of your roof, tell them what you know. If they ask you about other claims for insurance coverage you may have filed in the past, tell them. The most important thing is that you answer the questions they ask truthfully, completely, and within the appearance of trying to mislead them.

At the same time, you are only obligated to answer their questions on the application and nothing more. You are under no obligation to supplement or “rewrite” their application for them. If they do not ask you about sinkhole activity next to your home, or elsewhere, you are under no obligation to tender that information. In many cases, when a claim is filed, an insurance company will go back and review your application for misinformation. If they are able to demonstrate that you misled them by not answering their question truthfully, they can deny a claim on that basis alone, subject to some legal conditions.

However, they cannot deny a claim because you did not include information not sought in the application. I am aware that at least one insurance company asks you about whether you know about sinkhole activity on an “adjacent” property. If you know that there is sinkhole activity, you would answer it appropriately. However, you are not obligated, if you do not know, to go interview your neighbors and ask them about cracks in their foundation and whether they know anything about sinkholes.

What is a sinkhole?

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

Role of the Neutral Evaluation Program in Sinkhole Claims

What appeal options do I have if I disagree with the findings of my home insurance company

Following the completion of a sinkhole investigation, your home insurance company will provide you with a copy of the engineering report regarding the findings and conclusion as to whether there is a sinkhole in your yard. Sometimes you will be happy if the answer is “no sink hole,” especially when the actual damage is minor. Oftentimes, however, when you have significant damage or other reasons why you filed the claim (e.g. neighbor has a sinkhole), you may disagree with the findings made by your home insurance company. (Read my tips on filing a sinkhole claim with your home insurance company.)

What Is an NEP, and how can my home insurance company challenge it?

Under a new law passed about two years ago, there is a process called a “neutral evaluation program (NEP).” Under this program, the State appoints a “neutral” party to examine the information provided by your home insurance company so that they can determine the accuracy of their findings. After the neutral evaluator does an investigation, s/he will issue a report, either agreeing with the home insurance company’s conclusions (if that is the source of the dispute) or commenting on the repair recommended by the insurance company (if the dispute is over the method of repair, most often underpinning or grouting).

The part that is most important about the NEP is that the findings of the neutral evaluation can be used against you later. For example, home insurance companies will often bring the engineer to the NEP, who they will pay to argue their position to the neutral evaluator. If the neutral evaluator is persuaded to keep the original opinion asserted by the home insurance company, the report of the neutral evaluation can be used later in a trial. This is very damaging to your claim, obviously, because they will be able to suggest that the neutral evaluator was a disinterested party. Most of the time, however, the engineers or geologists selected are working extensively with the home insurance companies, who pay for the vast majority of these sinkhole investigations. So, they are hardly neutral.

How We Can Help

We are able to assist clients three ways:

  1. Appearing at the neutral evaluation hearing with the home insurance company on their behalf
  2. Providing guidance on whether to object to particular neutrals, who are on the State approved list
  3. Providing the persuasive arguments at the hearing, so that we have a great opportunity to obtain a neutral report in your favor.

A lot of cases get settled because of these reports, in the insureds’ favors and sometimes not, so if you are facing one of these, move cautiously.

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

Home Insurance Coverage May Be Denied Due to Sinkhole Claim

We had a prior sinkhole investigation performed for a sinkhole claim, and the expert determined that there were only cosmetic cracks present on the house and there was no way to determine whether they were related to the sinkhole. The engineering firm recommended grouting and this was done. Now three years later, we are trying to sell the house. The buyer has been informed that because we filed a sinkhole claim, our property is now “blackballed” by all the Florida homeowner’s insurance companies, so the sale fell through. What have others done in this circumstance and what are our options?

First, on the loss issue, it is not scientifically possible to distinguish between damage that is “sinkhole” versus damage that is the result of other, shallow soil problems. No engineer in Florida would testify to that. Within the context of a subsidence investigation, the engineer should determine (1) the presence of sinkhole activity at the site (or nearby), and (2) whether the home has subsidence damage at all (regardless of what caused it). If, as in this sinkhole claim, the engineer was unable to determine one way of the other, the “tie goes to the runner (the insured).” An insurance company cannot deny a sinkhole claim based upon an opinion that “we can’t decide” whether it’s sinkhole activity.

Second, on the blackball issue, all parties who file Florida insurance claims are put in a database, accessible by all insurance companies. To that end, it is not good to have a subsidence claim, especially when the determination was “yes sinkhole,” but no payment. Without the payment and a subsequent repair, it may be very difficult to obtain Florida homeowner’s insurance coverage. In fact, there are even reports of Citizens not agreeing to cover homes in this context. The law was recently changed so that carriers are no longer required to provide sinkhole insurance coverage. This opens the door for carriers to agree to provide coverage on a home with a specific exclusion for sinkhole related damages, especially if the home has been grouted. In your case, you should certainly ensure that the buyer has all the appropriate documentation demonstrating that the home has been grouted and certified by an engineer. It may take some added effort by both the buyer and seller though.

Read more about the troubling trend of carriers cancelling or non-renewing homeowners in the middle of their sinkhole claim.