Daisetta Sinkhole

The answer to that question would probably be a definite “yes” if you live in Florida—the sinkhole capital of the United States—and “maybe” if you live in Texas, Pennsylvania, Alabama, Missouri, Kentucky or Tennessee. Sinkholes are especially common in these six states. Sinkholes” are depressions in the surface of the ground caused by an accumulation of water which dissolves porous underground rock such as limestone or carbonate and leaves a void in the underground area that eventually collapses from the weight of the top soil creating a hole.1
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Previously, Florida’s Second District Court of Appeal found that homeowners who had their sinkhole claim denied by their insurance company, but who ultimately prevailed at a jury trial could not be paid their $168,000.00 judgment until they entered a contract to repair their home.1 The court reasoned that because the policy and Florida sinkhole statutes provide for the immediate payment of Actual Cash Value (i.e., above ground repairs) but condition payment for foundation repair and ground stabilization on receiving a contract, the court must enforce that provision of the policy. The court found that since the homeowners chose to enforce the contract by suing Citizens for breach of contract, once the jury found there was coverage, the trial court was obligated to enforce the policy—even the policy’s restriction on Citizens payment to its insured, post-judgment.2
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Under a new law that takes effect July 1, 2016, insurers may offer a new type of personal lines residential sinkhole coverage. Florida Governor Rick Scott signed CS/CS/SB 1274 into law, which created Section 627.7151, Florida Statutes, allowing insurance companies, at their option, to provide limited sinkhole coverage for a “sinkhole loss” to homeowners—which is a lower threshold of damage than "catastrophic ground cover collapse"—and is defined as "structural damage to the covered building, including the foundation, caused by sinkhole activity."


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Suffering a sinkhole loss is already difficult enough, but for those homeowners with a claim being handled by FIGA, the process can often become even more complicated. This can occur when the terms of the insurance contract issued by the original, now insolvent, insurance carrier arguably conflict with FIGA’s duties and obligations under the Florida Insurance Guaranty Act (“FIGA Act”). In a recent opinion, Florida’s Second District Court of Appeal (“2nd DCA”) found such a gray area regarding a policy’s appraisal provision and FIGA’s obligation to pay a policyholder for their sinkhole loss.1


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A while back, my colleague, Shane Smith, wrote about a case, Herrera v. Tower Hill Preferred Insurance Company,1 where Florida’s Second District Court of Appeal considered – and then rejected – Tower Hill’s claim that its insured had violated the policy’s “Concealment or Fraud” and “Duties After Loss” provision by not disclosing their sinkhole expert’s report before filing suit.


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Florida’s Second District Court of Appeal recently reversed final judgment against a homeowner and remanded for a retrial after a jury was instructed that the insured had to prove the damages to his home were caused by a sinkhole. The case, Mejia v. Citizens Property Insurance Corporation,1 stemmed from an insurance claim brought by a homeowner under an all-risks policy issued by Citizens for a sinkhole loss. The homeowner filed suit for breach of contract after Citizens concluded the damages to the insured’s property was not caused by sinkhole activity and denied coverage.


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Gene Veno of the American Association of Public Adjusters recently sent out an alert about a neighborhood suffering severe sinkhole damage. We often see these reports for Florida and Tennessee – but Harrisburg, Pennsylvania is now suffering from sinkhole losses. Similar to the Sunshine State, Pennsylvania is one of the top states at risk for sinkholes and sinkhole activity associated with dissolving limestone. According to William White, Penn State University emeritus professor of geochemistry, the riskiest areas for these cover-subsidence sinkholes in Pennsylvania include the limestone valleys through central Pennsylvania – around State College, and also from the Maryland line up through Harrisburg and east to Allentown and Lancaster.1


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After yesterday’s legislative session in Tallahassee, it appears the Florida House of Representatives’ final vote on House Bill 129 – commonly referred to as the “Citizens Sinkhole Repair Bill” – may take place as soon as this Friday, April 11th. The proposed legislation seeks to change certain aspects of Florida’s sinkhole law, though only for claims submitted to Citizens. The most notable (and controversial) change is the mandatory “Citizens Sinkhole Repair Program.”


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If you thought the notion of taking a “time-out” only applied to sports, think again. In Florida, properly invoking neutral evaluation under Florida Statute § 627.7074 is similar to requesting a time-out because it stays, or pauses, sinkhole-related proceedings. Though the nonbinding, informal procedure is intended to help parties resolve disputed sinkhole insurance claims, unless an agreement is actually reached, the neutral evaluation process will merely lead to additional delays – many times, for several months.


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