Tag Archives: Sinkhole Repairs

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

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.

Insurance Policies and Coverage Issues, Repairing Sinkholes, Sinkhole News for Realtors

Sinkholes and Decreased Home Value

My home has a confirmed sinkhole, which the insurance company paid to repair.  However, there is no question that the value of my home, even after being fixed, is less than it was before my claim.  Can I get paid from the insurance company for the loss of value?

This is a hotly contested issue, with many homeowners unsuccessfully arguing for the loss of value.  Under most property insurance policies, homeowners are entitled to be paid for the accidental direct physical loss caused by a covered peril.  Because sinkholes and sinkhole damage are covered by your policy, you are entitled to be paid for the damage, as well as the displacement to your family while the home is being repaired.  A loss associated with the decrease is commonly referred to as “stigma” damages, as it is the stigma associated with the repairs that has caused the value to decline.  It is not the result of actual damage, but the concern a future owner that they, too, may have to deal with the sinkhole reactivating.  These kinds of economic damages have been found not to be recoverable.

This is not to say you cannot impact this issue.  First, make sure when you do the repairs, that you have completed all of the recommended repairs.  Do not cut corners, and make your insurance company pay for a competent general contractor once the subsurface repairs are done.  Second, make sure you have received a certification from the subsurface repair company, or the engineering firm supervising the repair, that the repairs have been completed appropriately.  Ask that they return a few months later, to again re-inspect the home for any additional damages that may have occurred.  If there is new damage, make sure the insurance company pays for it.  And, again, ask the engineering firm to prepare a follow up report to you.

By doing these extra steps, you can reduce the stigma associated with the repairs, and assure the new buyer that the repairs we done properly, inspected, and completed.  I have some other ideas, but they depend on the nature of the loss.

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.

Sinkhole News for Realtors

Realtor? Meet Sinkholes. Sinkhole? Meet Realtors.

We are very pleased with the enormous response we had recently to our efforts to reach out to realtors, real estate brokers, and others in the real estate field regarding our resources at Sinkholedamageblog.com. In the past week, we have been flooded with inquiries regarding the various issues realtors have to resolve in handling homes associated in any way with sinkhole activity. The legal issues between realtors, their buyers, and other sellers are very important and can create problems for all involved.

Currently, we are working on preparing a continuing education program for realtors, to assist them with these issues. We also intend on providing basic, fundamental training for realtors on sinkhole issues because real estate professionals often serve as a conduit for information. Our initial reaction to this idea has been overwhelming, as more than 2,500 realtors throughout Florida have made inquiries into sinkholedamageblog.com, in the past week. This tells us we are definitely onto something, and we intend on filling the need immediately.

If you are a realtor or are involved in the real estate profession in any way, we want to hear from you. We want to know what questions you are getting from your clients, your brokers, or if there is simply information you think we can provide to assist you in your work. We can provide you direct responses via email, and can also address the concerns you have in upcoming blog posts. We also want to hear about the areas in the State of Florida where these issues are coming up the most. We can provide you a Florida sinkhole map, which will likely provide you some sense of why this comes up in certain areas more than others, and we can provide you tips on how to handle sinkhole claims if your clients have these issues.

We look forward to hearing from you.

Sinkholes in the News

New Florida House Bill Seeks to Gut Sinkhole Insurance

What is Bill 1447

Bill 1447 is an insurance-backed bill designed to completely gut sinkhole insurance. While couched as a bill designed to reduce consumer insurance fraud, its contents are focused, among other things, in essentially ridding itself of sinkhole coverage for Florida homeowners, regardless of how much they want it.

The details: coverage

First, the bill does not expressly eliminate sinkhole coverage in property insurance policies. If it did that, the insurance company would be precluded from taking premiums for it. Instead, the bill seeks to limit coverage to twenty-five percent of the total coverage available.

Meaning, if your insurance coverage is $200,000, you would not be covered or more than $50,000 for the loss, regardless of how severe it may be. This renders sinkhole insurance coverage meaningless because virtually all confirmed sinkholes cost considerably more than this amount to repair.

Obviously, the larger the home (and the coverage), the more expensive the repair is. Even the most modest home with sinkhole coverage would not be able to be repaired for such a modest amount of the coverage.

Our insurance rights

Second, as we hear so much about keeping government out of our personal business, the bill patently interferes with our rights to buy and sell insurance. If an insurance company wants to sell insurance to me, for a premium, and I want to pay it, I should be entitled to do it. The insurance company sets their rates based upon their risks and accepts responsibility for it.

What right does the State of Florida have to preclude me from buying the insurance I believe is necessary to protect my home, which is my family’s largest investment?

The argument

Of course, the argument will be that Citizens Property Insurance Corporation, the “insurer of last resort” needs the break from covering sinkhole losses. If that is the reason for this bill, then Representative Bryan Nelson (who is an insurance agent) should be honest about the bill and call it what it is: an attempt to get rid of sinkhole coverage.

However, doing that would require him to make an honest statement about his intentions, where consumers could be misled into believing that twenty-five percent of the coverage would ever cover a sinkhole loss because it just would not.

Question for Representative Nelson: How many reported sinkhole losses would be fixable with less than twenty-five percent of the coverage? Answer: none.

Shame on you, Representative Nelson. House Bill 1447 is a rip off.

Finding Sinkholes, Insurance Policies and Coverage Issues

Protect Your Sinkhole Claim from Your Mortgage Company

Mortgage company listed on your insurance policy

While you may be concerned to find that your homeowner’s insurance policy includes your mortgage company as a beneficiary, rest assured that this is completely normal.

Your mortgage requires you to insure the mortgaged property. Therefore, most homeowners insurance policies identify the mortgage company or mortgagee as an additional insured.

Why this is the norm

Most standard homeowners insurance policies provide that if a mortgagee is named in the policy, any loss payable under the real property coverage of the policy shall be paid to the mortgagee and the policy holder “as interests appear.”

This means that your mortgage company has an interest in the proceeds of the insurance policy up to the balance of the mortgage. Your insurance company is therefore contractually obligated to protect the interest of the mortgage company when it pays your claim.

When would this happen?

For example, let’s say the balance of your mortgage is $60,000 and your mortgage company is listed as an additional insured/mortgagee on your policy. Eventually, you and your insurance company agree to settle a claim for $100,000.

In this case, the insurance company would then most likely issue two checks; the first check would be payable to you and your mortgage company in the amount of $60,000, and the second check would be made payable to you (and your attorney, if one is involved) in the amount of $40,000.

When to be concerned

Frankly, many mortgage documents (the mortgage itself or the promissory note) do not deal with this issue well. Many of these documents were drafted by out-of-state lawyers who would never have anticipated situations such as this.

The language in these agreements frequently deals with less complicated repair issues (e.g. fire, flood). Sinkholes, because of their repair nature, involve a lot of other issues.

Bottom line: do not permit a loan officer to tell you what to do, unless they have a basis to do so. If you want to repair the home and not pay down the mortgage, you should be able to do so. If you want to pay down the loan and not repair, you should be able to do that as well. But do not allow the bank/lender to tell you that you have to do something because “it’s our policy!”

Finding Sinkholes, Insurance Policies and Coverage Issues

Sinkhole Repairs and Policy Limits

When your insurance policy doesn’t cover your repairs

Question: My insurance company confirmed sinkhole activity but is telling me I have to sign the contract for repairs. But my contractor is telling me the costs of the sinkhole repair may exceed the limits of my insurance policy. Help!

Once your insurance company has determined that the damage to your home was caused by sinkhole activity, the insurance company must pay for stabilization of the ground and repair of the foundation of your house, as well as repair of the actual damage to your house (for example, cracks in your walls and ceiling).

However, the insurance company may withhold payment for building stabilization or foundation repairs until you sign a contract to have that work performed.

What will happen

This means that generally after a sinkhole loss is confirmed, the insurance company will issue a check to cover the cost of the cosmetic damage to the home. The company will typically send a letter with this check advising you to obtain at least two bids for the subsurface stabilization work from contractors who perform such projects.

When you provide a signed contract for the subsurface stabilization work, the insurance company will pay for that work as the work is performed and the expenses are incurred.

What your insurance company must do

The insurance company may not require you to pay in advance for subsurface stabilization. And, most significantly, if repairs have begun and the engineer selected or approved by the insurance company determines that the repairs cannot be completed within the policy limits, the insurance company must do one of two things:

  1. either pay to complete the engineer’s recommended sinkhole repair or;
  2.  pay you the policy limits without a reduction for the repair expenses incurred.

Therefore, you can rest assured that even if your insurance policy does not cover the number that the engineer has come to, you will not be left with a house you are unable to live in.

Sinkholes in the News

Sinkhole Attorney Morgan Barfield Appears on Channel 10 News To Discuss New Legislation Designed to Limit Sinkhole Coverage

I spoke last week to a reporter at Channel 10, discussing the new Bill 1447 by Representative Bryan Nelson and why I think it is bad for Florida homeowners. Under the new legislation, residents will automatically lose their sinkhole coverage, unless they request that it be included into their policy.

resume writer service

To learn more about how Bill 1447 will hurt residents in Pinellas and Hernando Counties, read my posts, Florida Representative Bryan Nelson Sponsors Anti-Consumer Choice Bill on Sinkhole Insurance and Renewal Alert for Homeowners in Pinellas and Hernando County.

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