December 2012

Back in the good old days of yore (which, at this point, was approximately 4 years ago), whenever an insurance company provided you with a policy of homeowner’s insurance, it automatically included coverage for any damage caused by sinkhole activity.  In 2007, as part of the insurance industry’s never ending attempt to limit coverage to its clients, insurance company lobbyists convinced the legislators in Tallahassee to change this law and to make sinkhole coverage “optional”. 

In fact, after that initial revision to the law, if you lived in Pasco or Hernando counties specifically, sinkhole coverage was automatically excluded from your insurance policy, and if you wanted this coverage, you had to specifically request such coverage and pay an initial premium for it.  For the rest of the state, sinkhole coverage was still included in your policy, but you could opt out of such coverage – if you were feeling lucky!

As part of the insurance industry’s “bait and switch”, the Legislature allowed insurance companies to completely remove full sinkhole coverage from their policies in Florida and to provide Catastrophic Ground Cover Collapse Coverage instead.  In order to qualify for coverage under this new provision, property owners must meet a four prong test – the last of which states that coverage will only be allowed if the property is both “Condemned” and ordered “Vacated” by a “governmental entity”.  What? 

Needless to say, it is vitally important to thoroughly review your policy of insurance.  Should you find that the coverage provided by your policy provides insufficient protection, you should give a lot of thought to obtaining more complete coverage – preferably long before the need to place a claim arises!

Over the past several years, many homeowners in Florida have had the misfortune of incurring damage to their property as the result of sinkhole activity. For many homeowners, the headaches and inconvenience caused by having to undergo the initial repair of this damage turned out to only be the beginning of the battle.

In almost every claim, when an insurance company agrees to repair an insured’s property, the insurance company will only agree to provide coverage for the repair protocol set forth by its chosen expert. Not surprisingly, the insurance company’s chosen expert will usually choose the least expensive repair method for the home. (It goes without saying that, were the expert to recommend a more complete repair method, he would not be the insurance company’s “chosen expert” for very long!) Faced with the insurance company’s mandate, the homeowner often agrees to allow the insurance company to repair the home pursuant to the insurance company’s chosen method.

The problem which has now arisen for numerous property owners is that the repair method mandated by the insurance company is insufficient to fully repair the property. Even though the insurance company’s version of the repairs have been completed, the property owner continues to incur damage to the home as the result of the sinkhole activity. Unfortunately, when this additional damage is pointed out to the insurance company, the carrier will deny any further repair to the property and state that the issue has been resolved – regardless of the existence of this new damage.

Fortunately, these property owners continue to have rights under their policies of insurance. Under Florida law, if an insurance carrier mandates that an insured repair his property pursuant to the insurance company’s chosen repair method, the insurance company must fully warrant those repairs. In other words, if the insurance company’s chosen repair fails to fully solve the problem, the insurance company is responsible to pay for any additional repairs necessary in order to bring the property to its pre-loss condition.

If you’ve filed an insurance claim for sinkhole related damage in the past few years in Florida, you’ve most likely seen the term “neutral evaluation” in various correspondence or heard the term mentioned by an insurance adjuster.  A few years ago, the Florida Legislature enacted a law whereby if there is a disagreement as to whether sinkhole activity is present on the property or as to the appropriate method to repair the damage, either party to the claim can elect to submit the claim to the neutral evaluation process.  During the neutral evaluation process, a third-party expert chosen from a list maintained by the Department of Financial Services reviews all the investigative reports, inspects the property, and then renders a non-binding “third-party” opinion as to the issue in dispute.  Although the report issued by the neutral evaluator is non-binding, the law states that his report is automatically admissible in any legal proceeding relating to the claim.

Sounds pretty straight forward, right?  Perhaps not.  Exactly what standard does a neutral evaluator have meet in order to be considered “neutral”?  When the neutral evaluation process first began, the Florida Legislature (or perhaps, the insurance company lobbyists?) set forth that an expert would be deemed “neutral” if that expert received 90% or less of their income from insurance companies.  So, in light of this definition, an expert who received 89% of his livelihood from an insurance company would not be seen as being biased in favor of insurance companies.  Hmm – how odd.

Recently, the insurance company lobbyists – er, I mean, the Florida Legislature – further refined the definition as to what would be deemed “neutral”.  Currently, the only “neutral” qualification they must meet is that the expert be, “determined by the department (of financial services) to be impartial”.  Apparently, the Legislature believed that the 90% cut-off requirement was too restrictive and that experts who received in excess of  90% of their income from insurance companies should still be considered “neutral” for this process.  Who are we to question that logic!

Clearly, the use of the word “neutral” in the neutral evaluation process is subject to scrutiny.  Although this process may have been sold to the general public as a way to have sinkhole claim disputes resolved by an “impartial” third party, the reality may be that the “independent” expert may be very beholden to the insurance industry.

After watching scores of television commercials and other paid advertisements touting the supporting and nurturing nature of insurance companies, one can’t help but feel that the “good hands people” will always act “like a good neighbor” once a policy holder incurs a loss.  After years of practicing insurance claims law, we have learned the unfortunate truth that insurance companies – like all big corporations – are only after one thing.  Profit!  Unfortunately, the way the insurance companies make this profit is by collecting insurance premiums from its insureds for years and then, upon the placement of a claim by its insured, denying or otherwise minimizing the payment the insurance company makes to the insured on the claim.

A perfect example of this attitute was reflected in a claim we recently resolved for one of our clients.  Our client was a 90 year old gentleman who had served his country honorably in the military for decades and had even parachuted into France the day before D-Day!  He was one of the original members of USAA Property and Casualty Insurance and had been insured by them for 60 years – without ever having made a claim!  After noticing a substantial amount of cracking to his house, he placed a sinkhole claim with his insurance company, only to be summarily denied – in spite of the fact that the report from the insurance company’s expert clearly reflected sinkhole activity and that sinkhole activity had been confirmed to be a cause of loss to all of the other houses in his neighborhood!  After vigorously pursuing this matter for our client, the insurance company eventually agreed to a substantial settlement which allowed our client to finally repair his home.

Although insurance companies will often try to do the right thing, their judgment is too often clouded by their desire to keep your premium dollars in the insurance company’s coffers.  If you ever have the unfortunate experience of incurring a loss or other damage, make sure you seek the advice and counsel of an insurance claim professional who can explain your rights and make sure you are appropriately compensated for your loss.