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An Insurance Void in Sinkhole Coverage

Pekar Law, P.A. May 9, 2017

Property owners in Florida are well aware of the natural hazards of hurricanes, floods and high winds. Storms that bring these disasters are especially dangerous because they often come with little warning. However, another concerning risk for landowners can come with no forecast at all. What is this unseen threat to property owners?

Sinkholes, depressions in the ground caused by a collapse of the earth’s surface layer, are appearing around the country at an alarming rate. Locally, a report of sinkhole activity has down an events venue in Spring Hill as owners evaluate a solution to “the instability of the ground,” according to Tampa Bay Times.

Will an insurance company provide solid footing after a sinkhole collapse or will they pull the rug out from under a policyholder? A 2011 Florida state law changed the coverage options that insurance companies are required to offer related to sinkholes. Let’s take a closer look at the law.

Sinkhole vs. Sinkhole Activity

There’s good news and bad news related to the 2011 law change. The good news is that property owners will be covered for loss due to a catastrophic sinkhole collapse, but these represent less than one percent of all related claims. Instead, the law differentiates a sinkhole from “sinkhole activity,” the latter of which may not always be covered in a claim.

While the existence of a sinkhole means that a depression or void in the ground is present, “sinkhole activity” signals that property conditions could potentially lead to a sinkhole. Insurance coverage of the latter “activity” falls into a gray area, leading to higher premium costs and a potentially confusing web of legal language for property owners. The law also defines what constitutes “sinkhole loss” and “structural damage.”

Because the potential for a sinkhole is arguably just as concerning as the presence of one, owners need to understand the language of the law and their insurance policies. Making the necessary repairs to mitigate sinkhole activity can be lengthy and expensive. Likewise, the worry it can cause to the basic needs of a home can be detrimental to a person’s quality of life.

Don’t Get Sunk by Coverage

The costs of a sinkhole can leave a void in a home, family or business. No one wants their chance at recovery to be sunk by an insurance company. Therefore, a local attorney can help settle property damage denial or bad faith claims related to a sinkhole or sinkhole activity.