You might not be able to insure against SINKHOLES!
Hear Jeff Katz interview John Byrne on the iPlay above! John Byrne is a Florida attorney and founder of SinkTeam (www.sinkteam.com), a public insurance adjusting and consulting firm based in Tampa, Florida.
H.B. 1447, deceptively titled the “Comprehensive Insurance Fraud Investigation and Prevention Act of 2010,” seeks to effectively eliminate sinkhole coverage from property insurance in Florida. Introduced by Rep. Bryan Nelson (R-Apopka) in the hope of reducing non-existent sinkhole related insurance fraud, H.B. 1447 limits homeowners’ maximum recovery for sinkhole damage to just 25% of the home’s insured value – even though 99% of the time that is not enough money to even partially repair the sinkhole. H.B. 1447 would financially devastate thousands of Florida families, it would cause known sinkholes to be left dangerously unrepaired in neighborhoods, and it would make millions of dollars in profit for the insurance companies who have donated heavily to Rep. Nelson.
CURRENT SINKHOLE LAWS. Insurance pays costs to repair scientifically proven sinkholes, up to 100% of the homeowner’s policy, just like for fire, hurricane, water damage, etc. When a homeowner reports sinkhole damage, insurance company hires geologist or engineer to test for sinkhole activity below ground. Sinkhole activity must be scientifically proven! If geologist or engineer cannot prove sinkhole activity below ground, claim is denied and not paid. In other words, it is virtually impossible to “fake” a sinkhole claim – either the scientific fact says it exists, or it doesn’t!
25% CAP IMPOSED IN H.B. 1447. H.B. 1447 prohibits insurance company from paying more than 25% of a home’s insured value for sinkhole repair. In probably 99% of sinkhole damaged homes, 25% of the policy will not be enough to even begin repair. For example, if a home has an insured value of $150,000, 25% is only $37,500. Below ground repairs will likely cost at least $100,000, and home repairs probably $20,000 more, for a total of $120,000. If insurance covers only 25%, or $37,500, the homeowner would have to pay over $80,000 out of pocket just to fix the home! Few people have $80,000 sitting around that they don’t need. Without money to pay for repairs, homeowners will have to dangerously live in unrepaired homes, borrow (and pay back) money to make repairs, tap into retirement accounts, or just give up and walk away from the almost worthless sinkhole home and file bankruptcy.
H.B. 1447 PUNISHES ALL HOMEOWNERS FOR NON-EXISTENT SINKHOLE-RELATED FRAUD. Even if sinkhole-related fraud existed (of which there are no examples), it is unfair to punish all Florida homeowners for the sins of a few fraudsters. It is unfair to impose 25% cap by law on sinkhole damage payments to honest, hardworking Floridians. No law exists that says, “Because people commit arson, or because people file false hurricane claims, or because people fake car accidents, we are capping all insurance payments to 25%.” If there are people committing sinkhole-related fraud, the way to solve the problem is to investigate, catch and prosecute the fraudsters – not to impose an arbitrary 25% cap that isn’t enough to fix sinkhole damages.
H.B. 1447 TAKES AWAY INDIVIDUAL CHOICE. Under current sinkhole law, homeowners can choose to pay extra for sinkhole coverage, or they can choose to not have sinkhole coverage at all. H.B. 1447 violates American and free-market principles by essentially saying, even if a person wants 100% sinkhole coverage and wants to pay for it, by law the State of Florida will not let them buy 100% sinkhole coverage.
WHAT IS SINKHOLE LOSS? According to Fla. Statute 627.706, “sinkhole loss” occurs when a home is structurally damaged by sinkhole activity. “Sinkhole activity” occurs when the soils and earth gravitate down into voids in the limestone bedrock. The very slow downward gravitation of the soil into the limestone voids can cause a hole on the surface to open (very rare), or it can cause the surface soils to very slowly shift, move or ripple (like a wave) millimeters or inches, almost undetectable to the human eye.
HOW SINKHOLE ACTIVITY DAMAGES HOME. When the surface soils ripple or move under a home, even inches, it shifts the foundation in a way the foundation was never built to withstand, which can cause serious structural damage and weakening of the home. An actual surface hole doesn’t need to open up and the home doesn’t have to collapse to cause serious structural damage – it’s not just the hole that causes the damage, it’s the movement of the soils and earth. Symptoms or signs of the damage include cracks that get wider and worse over time as walls and floors move, broken plumbing systems as pipes shift and break, high electric and water bills, roof leaks, and separation of walls, ceilings, floors and counters. Unrepaired sinkhole impacted homes likely lose 50% to 80% of their market value, and neighborhood home values will decline as well. Insurance companies may drop unrepaired sinkhole homes, making it difficult for homeowner to get coverage for fire, hurricane, premises liability, etc.
COST OF SINKHOLE REPAIRS. Sinkhole repair requires 2 parts: 1. Stopping the sinkhole and soil movement below ground – unless stopped, the sinkhole will continue to cause soil movement and continue to cause damage to homes above it; and 2. Repairing the cracks and damage to the home itself. Stopping the sinkhole movement likely costs, on average, at least $100,000 – the larger the home, the more it will likely cost. Repairing the cracks and damage to the home likely costs, on average, between $5,000 to $50,000 or more, depending on the amount of damage (some homes more seriously damaged than others), the size of the home, etc.
REPAIR MONEY WITHHELD UNTIL REPAIRS START. If expert scientifically proves existence of sinkhole activity, Florida Statute 627.707 permits insurance company to withhold payment until homeowner signs a contract with repair company to fix sinkhole, and then insurance company may pay repair company directly – or insurance company may even choose to make the repairs themselves! This is designed to force repairs to home and prevent repair money from being wasted on new cars, trips, etc.
SINKHOLE-RELATED FRAUD VIRTUALLY NON-EXISTENT. Rep. Nelson claims 25% cap needed to prevent sinkhole related insurance fraud. But extensive research turns up NO instances of arrest or conviction for filing a false sinkhole insurance claim. It is virtually impossible to “fake” a sinkhole claim, unlike fire (arson) or hurricane (falsify damage) claims where fraud is rampart – either a licensed professional engineer or geologist finds proof of sinkhole activity or the claim is denied! A homeowner can’t really fake scientific proof of sinkhole activity deep below the ground. For more information, please visit www.SinkholeTruth.com.
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