Should Insurance Companies Exclude Homeowners from Sinkhole Repair Decisions?

Cracked WallAs devastating sinkhole cases gain media attention, such as the February 2013 incident that claimed the life of Tampa-area resident Jeff Bush while he slept, Central Florida homeowners have become more wary of ignoring the warning signs that point to potential sinkhole activity.  What may seem like cosmetic issues on the surface, such as cracks in paint on exterior walls, may actually be precursors to much more serious problems. For residents in “Sinkhole Alley”—an area in the Tampa Bay region—preemptive action is often the safest measure to be taken. After an engineer conducts a geotechnical assessment and determines that sinkhole activity is occurring, homeowners are often faced with a choice of whether to conduct a “repair” or leave their property entirely.

While various methods exist to mitigate sinkhole activity, the most widely-used form of sinkhole “repair” involves injecting a grout mixture into the earth with the intent of replacing the eroded limestone under the home. This method is costly and, like all other methods, does not guarantee that sinkhole activity will completely stop. Another method involves driving long, steel piers deep into the limestone through the foundation of the home in order to stabilize it from the movement of weaker soils.

However, in Sinkhole Alley, the limestone is particularly thin compared to the thick, carbonous rock that supports other parts of the state like Pensacola. When a home sits on one of these fragile rock formations, destruction of the structure is nearly always a matter of “when,” not “if.” For some homeowners, no method of “repair” can alleviate the underlying sense of unease about the future of their property and loved ones while residing in these homes. And under a new bill proposed by Florida State Senator Wilton Simpson (R), Citizens Property Insurance Corporation policyholders might have little say in the matter.

Senator Simpson’s proposed legislation, SB 416, establishes a “Citizens Sinkhole Stabilization Program” that outlines how future sinkhole claims will be handled through Citizens. With the recent spike in sinkhole activity and claims in Central Florida, lawmakers have attempted to reduce the State-run corporation’s risk by restricting coverage and repairs. But is reducing risk in the best interest of Citizens policyholders and Florida residents?

While the bill asserts that the repair program is in the best interest of the public, it removes policyholders from most of the decision-making regarding the repairs of their homes. Of particular note, the bill establishes a select pool of pre-approved contractors that are authorized to complete sinkhole repairs. These contractors are then allowed to submit “offers” to perform the repairs for individual claims. After reviewing the offers within the pool, the corporation may include “any or all of the contractors on the list based on quality, cost-effectiveness, and such other criteria that the corporation deems appropriate” (SB 416). The policyholder then has up to 30 days to choose a contractor from that list. If the 30 days expires, then Citizens chooses the contractor. The bill also amends the Florida Statues to require that all policies for residential property insurance “must include a deductible for sinkhole loss equal to 1 percent, 2 percent, 5 percent, or 10 percent of the policy dwelling limits” with premium discounts for each deductible amount (SB 416).

Does this program really benefit the homeowners affected by sinkholes by dictating who is qualified to conduct repairs? Should these policyholders have the option to leave their homes if they feel that their dwellings are ultimately unsafe? Homeownership is a significant investment, both monetarily and personally, and insurance premiums are not inexpensive. Navigating insurance claims is complicated enough for most policyholders. Is the answer to the problem more bureaucracy? Did you have any difficult experiences dealing with contractors that the insurance companies chose after Hurricane Ivan?

The better question may be, “Would you want to sleep on a sinkhole?”

If you have any questions or need help understanding your homeowners insurance coverage, please feel free to contact us. We’ll be happy to assist you.

 

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