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Sinkhole Damage Claims

Are Florida Policyholders With Sinkhole Losses Doomed Without Coverage?

Article by the Merlin Law Group

The fix appears to be in for sinkhole losses. The insurance industry and lobby worked hard to set the rhetoric in its favor. Florida’s Insurance Commissioner seems to now be more concerned about appeasing the insurance industry to keep his job rather than taking on an industry he used to battle. Many policyholders with property in sinkhole prone areas of Florida will financially be doomed given the scenario painted in the Florida Senate Committee on Banking and Insurance Interim Report, “Issues Relating to Sinkhole Insurance.”

The financial statistics, if accurate, show the reason for my pessimism. Despite my belief that much of the report is propaganda without policyholder input, the statistics demonstrate that something has to be done because insuring this peril because it is not financially sustainable. For example, for Citizens Property Insurance Corporation during the years 2005 through 2009, the sinkhole peril had a premium earned of approximately $211 million. The reported indemnity paid for that period was approximately $442 million. That is a huge loss for a peril that happens on a repetitive basis.

The results are a little skewed because the Florida legislature, wrongly in my opinion and as demonstrated by the statistics, allowed Floridians to opt out of sinkhole coverage or purchase inferior coverage. There are fewer risks in the pool in the years the losses were incurred because many simply opted out. The population left is more prone to sinkhole loss and fewer premium dollars are earned before losses are incurred. Yet, this is trivial compared to the large underwriting loss for the sinkhole peril. If anybody else views the statistics in a light much more favorable to the policyholder, let me know because that is extraordinarily important.

One solution may be to require Citizens Property Insurance Corporation to write the sinkhole peril to an actuarially sound sinkhole rate—so it would have a chance to break even. This one change may allow other private insurers to compete with Citizens, if they desire, without having to worry about doing away with the rate regulation laws or other changes. There will be a huge uproar because the rates will go up a lot—but that might be a fair scenario for the risky population Citizens is forced to write because our regulators have allowed private insurers a form of geographic sinkhole redlining for the last decade. Citizens Property Insurance Corporation has the worst sinkhole prone structures because Florida allowed private insurers to leave those geographic markets.

The report explains that Citizens’ sinkhole operating loss will continue unless Florida law changes and that the losses are caused by Citizens having more policies in the worst sinkhole prone areas:

The actual premium that Citizens charges its policyholders, however, is only a small part of Citizens’ actual sinkhole costs. This deficiency in premiums is worsening because Florida law prohibits Citizens from increasing the rate of any policyholder by more than approximately 10 percent, even as losses continue to rise at a much faster pace. Thus, Citizens’ already deficient sinkhole premiums will fall even further behind its sinkhole losses. As a result, Citizens’ surplus continues to be eroded by the deficiency in sinkhole premiums. The deficiency in Citizens’ sinkhole premiums can be seen graphically on the following pages. Each of the four graphs displays the difference between the average pure premium (average loss per policyholder) for a defined geographic region and the actual premium that Citizens is allowed to collect in that region.

David Beasley, President of the Florida Association of Public Insurance Adjusters, also indicated the interim report was not hopeful or helpful to Florida’s policyholders in Adjusters: Legislative Proposals on Sinkhole Insurance Harm Homeowners:

Proposed legislative changes in sinkhole insurance regulations would undermine consumers and unfairly benefit the industry, an adjusters’ group charged Tuesday.

“While the recommendations for changes in the Florida Building Code have merit, the report as a whole lends great weight to insurance company interests at the expense of Florida homeowners,” said David Beasley, president of the Florida Association of Public Insurance Adjusters.

Beasley said the call for a single-peril repair program includes “onerous conditions” that would force consumers who dispute a claim to do so with no representation by public adjusters or attorneys sworn to protect their interests.

“Further, the concept that insured consumers must put all claim payments toward repairs flies in the face of established precedent, and would require many homeowners to remain in homes that even after repairs would have drastically lower property values,” Beasley contended.

“This new requirement, not found with water, fire or windstorm losses, would have a drastic impact on individual property rights,” Beasley said of the staff recommendations by the Senate Committee on Banking and Insurance.

Beasley said the staff report “appears to be based heavily on unproven allegations by some insurers that the increase in sinkhole claims is somehow fraudulent.”

But a November report by the Office of Insurance Regulation actually found a drastic decrease in claims reported for investigation, and the staff report acknowledged that neutral evaluators confirmed sinkhole losses in a majority of completed cases.

“It is our hope that the Florida Legislature puts consumer interests first when considering any future changes in sinkhole coverage. Putting the interests of insurance companies ahead of those of the Florida residents they are supposed to protect is unconscionable,” Beasley said. (emphasis added)

In State Panel Makes Sinkhole Recommendations, the Miami Herald listed a good summary of the recommendations:

Among the committee’s proposals for lawmakers to consider this spring:


Create a state-run sinkhole repair program. Instead of homeowners getting checks based on their insurance claims, their houses would be fixed. Insurance companies have said many homeowners who file sinkhole claims do not use the money to fix their houses.


Define what kind of damage sinkholes could cause. Most of the claims homeowners have filed aren’t because a house was swallowed up by collapsing ground but for cracks in walls and other damage that is difficult to link directly to a sinkhole. The report also suggests limiting coverage to homes, leaving driveways, pools, decks and other structures without coverage.


Require sinkhole claims to be filed within two or three years after damage surfaces.


Allow insurance companies to not renew policies with sinkhole coverage or after paying a sinkhole claim.


Revise the Florida Building Code to require soil testing and foundation construction that would reduce sinkhole-related damage to buildings.


Cap fees for public adjusters who work with homeowners on insurance claims and make it an unfair and deceptive trade practice if public adjusters make misleading statements.

Many of these proposals are not new. Most of them were noted two years ago in Late Reported Claims, Public Adjuster Fee Caps, And Sinkhole Coverage, where I noted that legislation proposed the following:

1. Place a two year limitation to report a claim.
2. Cap public adjuster fees to 10% of paid amounts.
3. Eliminate mandated sinkhole coverage.

This is the same scenario today. Change is going to have to happen because the loss ratio cannot be sustained if Citizens Property Insurance Corporation or any entity is to keep most sinkhole prone policies. The insurance industry may be entitled to higher rates for this peril. My impression is that something has to give. The question is how draconian will the change be.

As I indicated in that two year old blog post, if you are a concerned person there is a suggested course of action:

The lesson is that people do make a difference in government. The system works best when people, and I mean folks, show up, write a letter, write an email, or send in a video. Even one person can make a point which can stop the “bad guys” from their agenda. I witnessed it first hand with this Task Force. Anybody who thinks that one person cannot make a difference is far too pessimistic about our democracy. The last thing the “sneaky bad guys” want is for their customers to participate in a process to show how very bad they are.


Call 1-888-872-2358 If You Have A Sinkhole Claim

How do I know if I have one?
Physical signs to your home such as cracks to exterior stucco and cinder blocks, cracks to windows sills and surrounding area, and cracks to patio areas, drive way/slab, and garage floor.

What should I do if I think I have a sinkhole?
You may want to contact us to discuss your options. Of course, there is no cost to you for consultation.

Will I be able to get coverage in the future?
It depends on a variety of factors, such as what county you reside, whether or not it is cost-prohibitive, or if insurance companies are still offering coverage.

Will my property value go down just for reporting a claim, even if I do not have a sinkhole?
No! Not if you do not have a sinkhole.

Will my insurance premiums go up drastically?
Whether or not a claim has been filed, most likely a homeowner's insurance premium will increase if sinkhole coverage is an elected peril.

If I do have a sinkhole, will my property value be negatively affected?
It is possible unless your damaged property is completely restored to its pre-loss condition.

What if my insurance company denies my claim?
You may want to contact us to discuss your options. Of course, there is no cost to you for our consultation. Should your circumstances require the need of an attorney, we can provide a list of attorneys who specialize in sinkhole litigation.

If I do have a sinkhole, how much will it cost to get it repaired?
Cost depends on the extent of the damage.

What if sinkhole activity coverage is no longer provided in my policy?
Unless you experience catastrophic damage to your home, such as it falling into a hole (collapse sinkhole), you have no coverage.


We welcome inquiries for our services on major and minor property damage claims.

  • We only get involved in claims where our services are needed.
  • We will help you through this difficult and stressful time.
  • When Sinkholes happen, we are here to help. We Have Adjusted More Sink Hole Claims Than Most Florida Public Adjusters Conbined. Our experts will work for you to maximize your recovery.
  • It is good to have professional help on your side, as Sinkhole claims can be tricky.
  • We will meet with your Insurance Company adjuster to review the damage and make sure the right experts are brought in to assist.
  • While we are busy detailing, appraising, and documenting your claim, you can begin to think about plans to replace your damaged property.
  • Our vast experience adjusting Sinkhole claims allows us to suggest ways you can turn this disaster to your advantage by repairing and replacing in ways that will enhance the use and value of your property.
  • Our staff recognizes the emotional aspects of a Sinkhole damage claim. We are experienced in dealing with the emotional as well as the financial and technical aspects of your claim.
  • We know what it takes to adjust your sinkhole claim.
  • We review your policy to identify all areas of coverage.
  • We prepare your claim to maximize your recovery!
  • Our services are cost effective making it a win / win situation for you

National Sinkhole Damage Adjusters

United States Adjusters are Sinkhole Adjusting experts! Our public adjusters have adjusted thousands of claims over the years and have extensive experience. Our Sinkhole adjusting expertise includes Residential losses & Commercial losses. With our Sinkhole Adjusting experience, our knowledge of insurance policies, and our knowledge of State Statutes & Codes, United States Adjusters are second to none when it comes to adjusting Sinkhole claims.




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