In Florida, when a policyholder reports a sinkhole loss, carriers are required to conduct a subsidence investigation. The purpose of this law is to protect Floridians’ lives and property. In this situation, policyholders are concerned damages to their properties are getting worse, and it is common for them to fear the worst, a catastrophic event.
Many of my clients have been insured with State Farm for years, often without reporting a single claim. Despite this, State Farm is refusing to conduct the required sinkhole investigation in many reported sinkhole claims, contending it has been prejudiced because of late notice. It appears State Farm is more concerned with playing the gotcha game instead of the safety of its policyholders. How can State Farm argue it is prejudiced without conducting the necessary investigation? I argue it cannot.
Here is an example. A policyholder reports a potential sinkhole loss to State Farm outside the current policy period. Because the claim is reported after the expiration of the policy, State Farm takes the position it has been irrefutably prejudiced and denies the claim without testing the property for sinkhole activity. This is State Farm’s position regardless if the claim is reported one policy after or more. State Farm’s position is frivolous for many reasons, including the fact that the applicable statute of limitations in many of these claims is five years.
State Farm’s refusal to test the properties is a serious problem because it punishes honest people who disclose to State Farm they noticed some of the damage a year or two before reporting the claim. The policyholder explains he or she was not aware the crack in the home could have been sinkhole related. After all, carriers notoriously argue certain damages are not related to sinkhole activity and instead the result of many other causes, including settlement and material shrinkage.
The truth is, those damages could be related to settlement, shrinkage, or sinkhole activity. People do not want to report an unfounded claim because they fear that their rates will jump or they fear that their policy will be non-renewed.
The date of loss for a sinkhole claim is a difficult issue to resolve. A crack in the driveway may be related to material shrinkage and noticed five years prior. Then, a policyholder returns home from work and notices the crack in the driveway has increased in size and width and is now a cause for concern.
I advise my clients to be honest. With every other carrier I deal with, that is what the carrier desires and testing is then conducted at the property. State Farm is the only carrier I am aware of that refuses to test properties for sinkhole activity. State Farm is violating basic adjusting principles in refusing to conduct the proper investigation, including (1) placing the insured’s interest at least equal to that of its own interest and (2) timely investigating a reported claim of loss.
I believe jurors will see right through State Farm’s antics and make State Farm pay for mistreating its policyholders.