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Changes in Sinkhole Insurance Law Causing Havoc in Florida

Pekar Law, P.A. Oct. 22, 2015

Sinkholes are a common occurrence in Florida, especially in Hernando and Pasco Counties. So much in fact that the state had to change the law to limit liability for sinkhole claims.

Between the years of 2007 and 2011, sinkhole insurance claims increased dramatically and in 2011, state owned and operated Citizens Property Insurance paid out ten times what they collected in premiums. In 2011, the legislature decided to reform the law so that insurers would not be liable for as many claims, to the benefit of insurance companies. The changes have significantly restricted sinkhole claims. The new law separates sinkhole insurance coverage from coverage for other perils under homeowners insurance. It has attempted to limit payouts to cases where there is near total destruction. It also provides that sinkhole insurance does not have to cover structures other than homes, allows insurers to choose the engineer that makes the decision regarding coverage and makes policyholders responsible for up to $2,500 if they challenge the engineer’s decision.

Also in 2011, an existing Florida statute relating to sinkhole insurance coverage was notably changed. The definition of the term structural damage was narrowed to include only certain types of harm to property. Therefore, if the damage to the property is outside of this restricted definition, a claim will be denied. The holding of a recent Federal case has affirmed that the statutory definitions are incorporated into the policy, even if not explicitly stated in the policy.

All of these changes in the law have caused sinkhole insurance premiums to skyrocket and has made it exceptionally difficult for policyholders to receive a payout on a claim. An example of this is the case of Harry and Iris Irizarry. The Irizarry’s are New Yorkers that own a home in Hernando County. The home is falling victim to a sinkhole, causing cracks and other dangerous conditions in and around the structure. The couple holds a Citizen’s Property Insurance sinkhole policy, but when an engineer came to inspect the property he informed them they were not eligible for coverage, even though he found a sinkhole. Now the Irizarry’s cannot afford to repair the home and cannot sell it as the value has dropped significantly due to the damage. These circumstances are not unique and many Floridian’s are suffering due to changes in the sinkhole insurance laws.

If your property has been damaged by a sinkhole and you have an insurance claim, Tampa, Florida Jeff Pekar can help. Call us for a free initial consultation.