By STEVE YAHN, who has been a reporter and editor for national publications
When 37-year-old Jeff Bush was swallowed up by a giant gap in the earth when he was sleeping in his bedroom in his central Florida home in late February, his death spotlighted a natural disaster occurrence in the state that may even rival hurricanes: sinkholes.
The number of residential sinkhole claims filed with state-run Citizens Property Insurance Corp., which insures more Florida homeowners than any other company, has nearly tripled in the past five years, from 1,482 in 2007 to 4,024 in 2012. Citizens' average claim costs it nearly $90,000.
Sinkholes in Florida are caused by the state's porous geological bedrock, according to the Florida Department of Environmental Protection. Acidic rainwater filters into the ground, dissolving the rock and causing erosion that can cause sinkholes when the rock collapses.
Many legitimate sinkhole claims have been filed through the years, but there have been many more claims that have been solicited by public adjusters, engineers and attorneys, according to experts involved in sinkhole coverage in the state.
The majority of carriers have gone to Catastrophic Ground Coverage, which requires that the home must be condemned, said Mark Capes, principal at Dade City, Fla.-based Statewide Insurance, an independent agency representing multiple carriers throughout the state.
"So the coverage available would not take care of cosmetic issues, like cracks in the floors or walls," said Capes. "The insurance would extend coverage once a home has become such a danger that it is uninhabitable and it has to be condemned by a local building inspector."
Nevertheless, sinkhole claims are piling up in the state, especially in central Florida. Hernando County, as described by county appraiser John Emerson as "the sinkhole capital of the world," reported 1,957 claims in 2012, versus nearly zero in 2005. Of the 2012 claims, 908 of them were repaired while 54 percent were not repaired.
Why the giant increase? It's not actually more sinkholes but more attention being paid to them by attorneys and engineers, say experts.
"They're paying out enormous policy payments on these things," Emerson observed. "A lot of people are getting attorneys involved. It's become a big, big business."
Homeowners attorney Ted Corless of Tampa-based Corless Barfield Trial Group agreed that insurers are loading up on lawyers and engineers.
He cited a recent case in which his opponents hired an engineering firm that had two experts at the outset, but by the time they got to trial they had seven. "They had two animations to prove their point and spent about $100,000 in consulting fees to defeat a case where we were arguing over $175,000," he said.
"The insurance industry has hired a lot of public relations firms who have argued that many people who have filed sinkhole claims are perpetuating a scam, that the damage wasn't that severe," Corless said.
A good share of the reason that sinkhole insurance is still available throughout the state is because of the passage of Senate bill 408, which allowed sinkhole coverage to be separated from a basic policy.
"It can be added as an endorsement," said Michael Peltier, a spokesperson for Citizens about the June, 2011 law. "Obviously if you add an endorsement for sinkholes it's going to increase your premium."
Catastrophic ground collapse coverage is still a requirement of all insurance policies in Florida, Peltier said. "Our customers have that as a part of their basic rate of protection."
Through non-litigated pending inventory reduction efforts, Citizens was able to close 6,542 sinkhole claims through year-end 2012, compared to 4,112 through year-end 2011, an increase of 55 percent, said Peltier.
Statewide Insurance's Capes said that before Senate bill 408, there often was no way for insurers to dispute that the potential for a sinkhole wasn't there.
"This caused homeowners' rates to skyrocket," Capes said. "It got to the point where people were losing their homes because their insurance was factored into their mortgage through their escrow and then their insurance rates were skyrocketing and so were their mortgage payments."
To keep people in their homes, lawmakers agreed on the catastrophic ground collapse definition to try to minimize the number of solicitations.
George C. Sinn Jr., president and principal engineer at Clearwater, Fla.-based Central Florida Testing Laboratories, Inc. a geotechnical engineering firm, identified four factors built into the definition of catastrophic ground collapse coverage:
* Abrupt collapse of the ground cover.
* A depression in the ground cover, clearly visible to the naked eye.
* Structural damage to the covered building, including the foundation.
* The insured structure being condemned by the government agency authorized by law to issue such an order for the structure.
Corless said he spoke to three engineers who were involved in the Jeff Bush case and under the new definition of what constitutes a sinkhole loss, that house was excluded because the four walls remained but the foundation dropped.
"The engineers claimed," he said, "that damage to the slab is not covered under the sinkhole legislation."
March 11, 2013
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