Copeland Insurance


Can I Get Sinkhole Coverage in Florida?

Good question and the answer is maybe, but probably not. Unfortunately, in the mid-2000s, the insurance industry had a crisis on their hands that caused some companies to leave Florida, or worse, became insolvent. There were some attorneys and public adjusters that started to “test” the language of the insurance policy which stated that a sinkhole was the “settlement and cracking that may be caused by a sinkhole”. Most homes in Florida have cracking or settlement damage. Our homes are usually built on clay and/or sand, but it may be a sinkhole.

Therefore, when the economy crashed, some attorneys would actually tell clients they could get them out of their debt by filing a sinkhole with their companies. Billboards in Pasco and Hernando started to pop up stating “Are you thinking about filing for Bankruptcy? Call us.” Another one stated “Do you have settlement or cracking? Could be a sinkhole. Call us”.

Once a sinkhole claim was filed, it became a regular practice that the insurance company would be required to send out a geoengineering firm to drill holes into the ground around the property checking for pockets and costing the companies $15,000 or more per claim. Not every claim was covered, but because attorneys and public adjusters would get a percentage of a “claim pay-out”, they would make money even if their client did not.

To stop the bleeding, most companies no longer covered “sinkholes”; they would only cover “catastrophic ground collapse” which is a visible sign of a sinkhole that makes the home condemned and unlivable. Other companies switched to a 10% sinkhole deductible, in hopes that the client would not file a fraudulent sinkhole claim knowing that they would have to pay the $20,000 engineering cost to investigate the property.

Today, some companies will offer sinkhole coverage with a 10% deductible, but they will require a sinkhole inspection in order to add this coverage. It costs the consumer about $150 and the inspector basically just counts the number of cracks in the home and on the driveway and sidewalk. Over 80% of the inspections do not pass, so we usually don’t even put our customers through this option. There are a few companies, like Progressive and Cabrillo, that will offer the sinkhole coverage (with 10% deductible) on new construction without the inspection, but overall the industry has not completely recovered.

As a side note, the industry has a new crisis on its hands and it’s called “Assignment of Benefits”. Unfortunately, when the well runs dry in one area, there are certain people that find another loophole to try and scam money from insurance companies. Yesterday’s sinkhole story is today’s roof and water damage.

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