The Florida legislature has just added a law allowing insurance companies to offer a much needed type of insurance coverage. Florida’s new sinkhole law goes into effect on July 1, 2016, and under the new law, insurers may begin offering residential sinkhole coverage.
What Does Florida’s New Law Encompass?
Section 627.7151 allows insurance companies, if they desire, to provide a new limited type of insurance coverage to homeowners for sinkholes and “sinkhole losses.” The term “sinkhole loss” is defined to have a lower threshold of damage than the standard “catastrophic ground cover collapse” found in most standard insurance policies. The new term is defined in most policies as “structural damage to the covered building, including the foundation, caused by sinkhole activity.”
There is still a requirement that if the insured’s professional engineer finds that the necessary repairs are in excess of the policy limits, then the insurer either has to pay for the repairs or tender the full policy limits to the homeowner.
Statutory Requirements for Sinkhole Insurance
The new insurance coverage for sinkholes is subject to the statutory requirements for sinkhole insurance, with several exceptions and limitations. Sinkhole insurance coverage cannot be issued by Citizens Property Insurance Company.
That is because Citizens Property Insurance Corporation is a non-profit, tax-exempt government entity that provides insurance protection to Florida policyholders who are unable to secure property insurance coverage in the private market. Sinkhole coverage is only available for homeowners insurance, not for commercial lines.
Sinkhole coverage can be limited to repairs necessary to stabilize the building and repair the foundation. Insurers are not required to include coverage for additional living expenses or the contents of the property. The insurer and insured can reach whatever agreement they want regarding deductibles and policy limits, but there is a minimum policy limit of $50,000 — unless that amount exceeds the full replacement cost of the property being covered.
Insureds are required to sign special notices when purchasing sinkhole coverage which states that the insured understands what the limits of coverage are, even when the policy limits are lower than the full replacement cost of the property, or when the deductible exceeds the amount normally permitted under Florida Statute § 627.706(1)(b).
Should You Buy Sinkhole Coverage?
Florida has more sinkhole activity than any other state in the nation. Even before the new law, Florida law required all insurers in Florida to offer coverage for “ground cover collapse.” Sinkholes are not necessarily the same as ground coverage collapse, however, and are defined under the law as “landforms created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater.”
Ground collapse, on the other hand, is defined as geological activity which actually collapses the ground cover which results in the property being condemned and vacated. Sinkhole damage, while not necessarily as severe as ground cover collapse, was not covered under the existing statute.
If you live on a property with a risk of sinkholes, or you aren’t sure and would like to discuss whether or not you need sinkhole coverage with knowledgeable Broward County property damage attorneys, call us now at (954) 928-9568 or use our convenient online contact form.