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Sinkhole Alley Homeowners Struggle with Insurance Claims

Years ago, policyholders who encountered sinkholes on their property, ruining their homes, could easily get the matter resolved with their insurance companies. However, since 2011 the era of easy sinkhole claims is over with an overhaul of Florida’s insurance law regarding sinkhole problems. The new laws were meant to stem the flow of sinkhole insurance claims that came predominantly from Hernando and Pasco County.

New Florida Sinkhole Insurance Law

The new sinkhole law requires homeowners to use payouts to fix sinkhole damage, but it also mandates a long list of other requirements. It sets standards for structural damage that are almost impossible to meet unless there is a catastrophic collapse. The new laws also allow insurers to pick the engineers who decide whether homes meet that standard and limits coverage to homes only. It excludes driveways, patios and cabanas.

It gave insurers more power to deny sinkhole coverage and made sinkhole insurance separate from a base homeowner’s policy. This, in turn, helped drive up insurance companies’ average sinkhole premiums between 2011 and 2013 from $1,105 to $1,955 in Hernando County and from $1,449 to $2,105 in Pasco County. The reasoning came from thousands of policyholders filing claims for legitimate sinkhole damage in addition to not as significant claims like a cracked driveway.

Causes for the Changes

The reason why lawmakers passed the new insurance laws regarding sinkholes was because a drastic increase in claims. Between 2007 and 2011, the number of sinkhole claims filed with one insurance company ballooned from 1,432 to 4,032, and almost half of those claims came from Hernando County alone.

That same Florida insurance company incurred $537 million in sinkhole losses in 2011 while collecting only $52 million in premiums from its policyholders. This was due partially because about 60 percent of homeowners in Hernando County had pocketed the payments rather than making repairs. As a result, the county lost more than $110 million in taxable property value in 2011.

However, the problem went from insurance companies being too loose with their claim payments to far too tight. Now, many homes with serious sinkhole damage are going unfixed, driving down the property values in these counties. The numbers do not lie: in two years, the number of Hernando, Pasco and Hillsborough homeowners who have sinkhole coverage through one insurance company has shriveled by more than 50 percent.

Before the new sinkhole insurance law in 2011, known as SB 408, that same insurance company was averaging 500 to 600 sinkhole claims per month; now it’s seeing 25 to 35 claims monthly. In addition, State Farm insurance in Florida has seen similar shrinkage, from handling 769 claims in 2011 to just 107 last year.

Contact an Insurance Claim Lawyer Today

If you have been denied claims under your homeowner’s policy for sinkholes or for other valid purposes in Orlando, Tampa, Jacksonville, Fort Myers, West Palm Beach, or the surrounding areas, let the insurance claim lawyers at The Pendas Law Firm help. Reach out to us today for assistance with your case.

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