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Home insurance vs. sinkholes

By Jay MacDonald · Bankrate.com
Friday, March 8, 2013
Posted: 6 am ET

I live about 30 minutes from Seffner, Fla., the small town where a sinkhole recently opened up in the middle of the night and swallowed 37-year-old Jeff Bush along with most of the contents of his bedroom.

While the tragedy unfolded on TV to the abject horror of anyone with a heart, it held additional significance for Florida homeowners who have anxiously watched their homeowners insurance rates climb in recent years, in large part to cover just such a nightmare.

A recent state survey of 211 home insurers operating in Florida found that sinkhole claims nearly tripled between 2006 and 2010, from 2,360 to 6,694. The combined five-year total of 24,671 claims cost insurers about $1.4 billion.

What's with all the sudden sinkhole claims? Unchecked development onto questionable land, weak building regulation, the annual drawdown of localized water tables for agricultural purposes, and the inherent unpredictability of ground collapse are generally cited as contributing factors.

That said, those of us who reside in one of Florida's 10 most sinkhole-prone counties, the bulk of which are located in the greater Tampa Bay area, worry less about losing our homes than losing our home insurance, and with good reason. While it's highly unlikely that a sinkhole will swallow my house, the odds that the cost of sinkhole coverage will swallow my income are growing daily.

What the TV coverage of the Jeff Bush tragedy didn't show is the muddle we've made of sinkhole coverage here in Florida.

Under state law, every insurer authorized to sell homeowners insurance in Florida must provide coverage for "catastrophic ground cover collapse," which basically means that any sighted person strolling by your house would pause and observe, "That place don't look right."

Unfortunately, state lawmakers then went on to define a sinkhole with such specificity that it miraculously turned into a loophole large enough for any home insurer with a sentient legal team to fit through with ease.

In 2011, under pressure from the insurance lobby that fraudulent sinkhole claims were the real culprit, the state legislature passed a law that states that if an insurer denies your sinkhole claim, it will now cost you, the homeowner, up to $2,500 to obtain scientific proof that your sunken living room was not designed that way.

To shift even more risk back onto homeowners, Citizens Property Insurance Corp., the state's largest carrier and home insurer of last resort, notified its 1.4 million customers last year that it was adding a 10 percent sinkhole deductible on top of a 10.8 percent rate increase.

Insurers have made it crystal clear they want out of the sinkhole coverage requirement. The question on Florida's collective kitchen table is: If property and casualty insurance companies can't or don't care to share the sinkhole risk, what's a homeowner to do?

Any suggestions would be greatly appreciated. And by all means, please copy Tallahassee.

Follow me on Twitter: @omnisaurus

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28 Comments
Jim
March 11, 2013 at 10:46 am

People in Florida shouldn't worry about it. With global warming Florida will soon be under water anyway.

Dave
March 11, 2013 at 10:36 am

Insurance wants your money. It does not want to help you.

Chris
March 11, 2013 at 9:48 am

More like legalized robbery.

Anthony Gilbert
March 11, 2013 at 6:37 am

Florida is a state that is and has been rising out of the ocean for many many (millions)of years. It seems to be a sponge rising and drying out as we extract more and more water from the water table beneath the surface. Just as in California with mudslides, Florida suffers from sink holes. This appears to be nothing more nor less than a mudslide that is totally underground. The insurance companies are taking advantage of it's clients with their slithering rising rates. They only payout less than 10% of what they take in as premiums. The rest go towards the high salaries, bonuses, and other privileges, such as golf club, boating club, junkets, and many other corporate deductible benefits that the beneficiaries pay no tax on.

Merlin
March 11, 2013 at 6:03 am

Insurance is nothing but legalized gambling. So far, (for me that is), our home has been hit by two major hurricanes in the past seven years and hasn't lost so much as a shingle. Though feeling blessed by this fact, we're now required to pay for separate coverage for "windstorm protection" and "flood protection" offered by the government. (The lobbyists for the typical insurance carriers opted out of those categories just as Florida's carriers would like to do with sinkholes.) I would hate to see what would happen if I actually had to file a claim for windstorm damage. I'm betting the government carrier would "welch" or make the procedure to file so complicated, most folks would give up. I just love to pay for three different carriers on one home. I just wonder when carriers will want to opt out of fire and theft protection and still want to be paid for doing nothing at all... As I said above, legalized gambling...

David Longanbach
March 11, 2013 at 5:39 am

The sinkhole insurance can be made available by the Feds similar to flood insurance, or the formation of a mutual to address just sinkhole claims

Ted Beck
March 11, 2013 at 5:36 am

Sinkholes are not covered on homeowner policies here in Texas. It is covered under commercial policies. Although there are not many instances of these catastrophies in our state, I would think the coverage for homeowners would be available in the Excess and Surplus Insurance markets such as LLoyds Of London.
Front Line companies or what we call admitted insurance markets like Allstate, State Farm just don't want this exposure.

Bonnie
March 11, 2013 at 3:09 am

In California, my flood insurance also covered landslides. I think it could be argued that a sinkhole is a landslide.

tramky
March 11, 2013 at 2:10 am

Of course, some people have serious issues with the very concept of insurance. It can be viewed as something of a protection racket, especially with a LOT of government intervention.

Melanie
March 10, 2013 at 11:52 pm

This is a terrible situation. In Pennsylvania, we deal with a somewhat similar occurrence, mine subsidence. Much of the land is under-mined and, although we have never had a tragic occurrence of someone being swallowed into the ground, great damage does occur. Mine subsidence insurance is available and is relatively inexpensive. However, very few people carry the coverage. I often wonder, if the risk was spread over every home that was under-mined, how much lower would the premium be? Perhaps the insurance carriers (or legislation) needs to require the coverage be mandatory. By spreading the risk to everyone, the costs could be greatly reduced.