What is sinkhole?
Sinkholes are formed beneath the earth’s surface from fluctuations in the water-table as groundwater passes through soluble bedrock, usually carbonate rock such as limestone or dolomite. Eventually after enough erosion has occurred, these underground empty spaces collapse under their own weight causing a sinkhole. Florida has more sinkholes than any other states in the USA, most commonly in West Central Florida and Tampa Bay area.
Since 1981, insurers offering property insurance to homeowners in Florida have been required to offer coverage for damages resulting from all classifications of sinkholes, in one form or another. Recent changes in the sinkhole law have permitted insurance companies to exclude certain types of sinkhole losses, after the making certain statutorily required disclosures, if not specifically requested and paid for by the homeowner. Thus, while coverage for all forms of sinkhole loss was once mandatory and automatic, presently, only one type of sinkhole coverage is mandatory, with the remaining sinkhole coverage being optional.
Under the present statutory scheme, if requested by the homeowner, and in exchange for an additional premium, an insurance company must still provide sinkhole coverage for all insurable types of sinkhole losses. The optional sinkhole coverage, which must be provided upon request and in exchange for an addition premium, is known as “sinkhole loss” coverage. In addition to the optional “sinkhole loss” coverage, current law provides mandatory sinkhole coverage for “catastrophic collapse” coverage. The sinkhole coverage includes repairing the house, stabilizing the underlying land and foundation repairs.
Difference between collapse coverage and sinkhole loss coverage
The difference between “sinkhole loss” coverage and “catastrophic collapse” coverage is not readily distinguishable. Indeed, both types of coverage, at first glance, appear to insure against sinkhole losses, but there is a significant statutorily-created distinction. Accordingly, the place to begin the analysis of the different classifications of sinkhole coverage is with the statute itself. Initially, it is sufficient to note that “catastrophic collapse” is a narrower form of coverage, relatively speaking, when contrasted with the broader, more inclusive, “sinkhole loss” coverage. Let us begin our analysis by turning to the relevant sinkhole statute and the definitions contained therein.
By statute, “catastrophic collapse” is narrowly defined and limited to a sinkhole which (1) causes the abrupt collapse of the ground cover, (2) causing a depression which is visible to the naked eye, (3) that results in structural damaged to the building and foundation, and which (4) results in the structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure. If any one of the four prongs of the statutory definition is not met, the definitional threshold for “catastrophic collapse is not met, and the coverage grant is not implicated, as the loss will not be considered to be either “catastrophic” or a “cover collapse.”
Sinkhole loss coverage, on the other hand, is optional coverage that may be purchased, in exchange for an additional premium, by a homeowner and is much broader form of coverage. It, therefore, applies to many other, widespread types of sinkhole activity, even to those sinkholes that do not result in the ground cover collapsing. “Sinkhole loss” is statutory defined, simply, as structural damage to a building, including the foundation, caused by sinkhole activity. In turn, “sinkhole activity” is broadly defined as (1) the settlement or systemic weakening of the earth supporting such property (2) that results from the movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of water on a limestone or similar rock formation.
There is an entire body of law, known as the insurance code, which is incorporated into every policy of homeowners’ insurance, as a matter of Florida law. Although insurers are required to provide homeowner’s with a checklist of the coverage afforded by the policy, by virtue of statute, these coverage checklists cannot be relied upon to create any coverage not afforded by the policy itself. If a homeowner has a question about the sinkhole coverage provided by a homeowner’s policy, the homeowner would be best served by seeking the advice of an attorney familiar and experienced with both the insurance code and Florida’s sinkhole law.
To learn more about collapse coverage and sinkhole loss coverage in Florida, please contact us at DMG Insurance and Financial Services, Inc. (http://www.dmginsurance.com) at 543 N state Road 7, STE 106, Royal Palm Beach EL, 33411, phone 561 422 7071, Fax 561 422 7072.