Florida Insurance Regulators Look at Sinkhole Claims

The Florida Office of Insurance Regulation will be conducting planned interviews with insurers in the state regarding their experiences with claims related to sinkholes.

Controversy has been simmering in Florida over the number of sinkholes forming and whether or not the phenomenon is actually increasing. Unquestionably, claims have. Citizens Property Insurance Corp. reported to the state Senate that the number of sinkhole-related cases it has processes has doubled since 2005.

Citizens reported taking in premiums for sinkhole coverage in the amount of $19.6 million in 2009, while paying out for losses and associated costs to the tune of $97 million.

As a result, property insurance premiums paid by Floridians have escalated sharply since January 2009. During that time, 140 insurers have been granted a rate increase, many as steep as 30 percent.

Insurance Commissioner Kevin McCarty has identified sinkhole claims as a major driver in the higher costs, but many critics say that there are no more instances of sinkholes forming in Florida than there have ever been.

Jack McDermott, speaking for the Office of Insurance Regulation said, “It is kind of surprising because you wouldn’t think that all of a sudden we would be getting a bunch of sinkhole claims. It is kind of an odd development. Our inclination is to think that geologically there is no more activity than there has been in the past.”

People who work in the sinkhole repair industry point to increased awareness of the claims as a lucrative endeavor rather than a geological cause. Many attorneys and public adjustors do a landslide business in instigating and processing sinkhole claims.

Some industry advocates, including Sam Miller, executive vice president of the Florida Insurance Council, would like to see a law stipulating that for a house to qualify for a sinkhole-related claim, verifiable foundation damage must be present. “We’re still paying out millions and millions of dollars,” he said. “We’re starting to see sinkhole claims where we have never had them before.”

While not technically fraudulent, many feel that if these claims are not regulated in some way, they will continue to increase the price of homeowners coverage in Florida, an expense already elevated by the potential for hurricane, wind, and flood damage.