Deltona, Fla. Sinkhole Panics Homeowners; Fla. Legislature Considers ‘Pool’

Gun-shy Florida homeowners have a new natural disaster to add to their list of concerns, sinkholes. Dec. 13, accompanied by the sounds of tree roots snapping and limestone collapsing, a 225 ft. wide and 50 ft. deep sinkhole engulf-ed a busy five-lane divided highway in Deltona, Fla. It took weeks and 1,282 truckloads of sand to fill the hole.

In the aftermath of 2004’s hurricane season, Deltona residents living near the sinkhole panicked, wondering if their homeowners insurance would cover the damage if the sinkhole swallowed nearby homes. Their worries were increased by rumors of insurance carriers denying coverage to homes in sinkhole-plagued areas.

Concerned homeowners swamped insurance agents’ phone lines with calls asking if their homeowners policies included coverage for sinkhole damage. Most callers wanted to find out if they were covered and some were worried about losing their insurance if a sinkhole occured in their neighborhood.

Florida’s most notorious sinkhole occurred in 1981 in Winter Park, where a car-hungry monster created a 320-ft.-wide lake, swallowed five Porsches at a repair shop and caused several million dollars in damage.

Damage normally covered
Agents contacted by Insurance Journal said that property damage caused by sinkholes is routinely covered by homeowners policies. Agents in some areas said they often have two or three sinkhole claims each year. Such claims are usually for sinkholes that formed slowly and are less than 10 feet across, resulting in claims for cracked walls and foundations, jammed windows and doors.

Homeowners insurance policies in Florida are required by law to cover sinkhole losses, including damage to the house and its contents.

Julie Sills, an insurance analyst with the Florida Department of Financial Services in Tallahassee said the cost of repairing the home and related expenses would be covered. She said the cost of demolishing and removing a wrecked house would also be covered, although it would be limited to a certain dollar amount, depending on the provisions of the policy.

However a basic homeowners policy does not include the property itself, so the cost of filling the sinkhole is usually the homeowner’s responsibility and those costs can amount to thousands of dollars. The cost depends on the depth and width of the sinkhole.

‘Sinkhole pool’ considered
Members of the Florida Legislature have been considering the creation of a new sinkhole insurance pool, similar to one covering coastal properties, for properties at high risk of sinkholes.

According to Rade Musulin, Florida Farm Bureau Insurance vice president in Gainesville, sinkholes pose “significant problems.” He said Florida legislators discussed establishing a sinkhole insurance pool during mid-January meetings in Tallahassee. The purpose of the meetings was to discuss hurricane concerns, but sinkholes were another major problem of concern to the legislators.

“My bottom line on forming a sinkhole pool is that it is easy to transfer money into such a fund, but first it’s essential to attack the root cause of the problem,” Musulin explained. “The first thing the state should do is establish a definition of a sinkhole.

“Is a sinkhole a crack in your slab or is it actually a hole?” he asked. “There are no clear-cut definitions for a sinkhole. There are a whole lot of claims made today for sinkholes, which five years ago would have just been considered a crack.”

Musulin suggested legislators should take things a step at a time. He said that first they should define what a sinkhole is and set up a database of where sinkholes have occurred. That way each claim won’t turn into a $25,000 engineering project to decide if it was caused by a sinkhole.

“If someone is the victim of a catastrophic or bedrock-collapsed sinkhole, then they will know right away,” Frank Rupert, district geologist for the Suwannee River District of the Florida Department of Environmental Protection, explained. He said bedrock collapse sinkholes easily grow 40 to 60 feet deep and wide, but are rare.

Map shows sinkhole-prone areas
The Florida Department of Environ-mental Protection and the U.S. Geological Survey produce a map to designate sinkhole-prone areas.
“If you look at our map, you can’t really say that just because one area is purple, that there will be numerous sinkholes,” Rupert said. “There are a lot of variables, including how dry or wet it has been, geological factors and the ground water table.”

According to Rupert, the map is a guide to what you could expect, rather than what you should expect. He said the map is a general guide, not a specific determinant that can be used to decide if someone will have a sinkhole.

He said to determine how sinkhole prone an area is, it’s necessary to do geological studies using ground radar and sophisticated tests.

“Builders don’t normally conduct such tests and the average homeowner doesn’t have the budget to do that,” Rupert said.

He said sinkholes form when a cavity develops in underlying limestone. It opens suddenly when the cavity has enlarged and its roof no longer has the strength to support the overlying sediment that at some point falls into the cavity.

“Sinkholes are caused by extended drought that causes the sediment to dry out and when it rains, the addition of water causes them to occur,” Rupert explained. “Sinkholes come and go during drought cycles and also when the water returns.”

S.W. Fla. homeowners refused policies
David Fisher, appointed in July by state Chief Financial Officer Tom Gallagher to study sinkhole-related insurance complaints by homeowners, said 50 to 60 homeowners, mostly with property in southwest Florida, have reported being unable to renew policies or get new coverage.

Sam Miller, spokesman for the Florida Insurance Council, an industry lobbying organization, acknowledged carriers have become “very reluctant to issue policies in areas where there are sinkholes.”

But Miller said that reluctance to write policies stems equally from the possibility of sinkhole risks as from suspected fraudulent claims that homeowners attribute to sinkholes.

Red-lining prohibited
State law prevents carriers from “red-lining” entire regions, Miller pointed out. “You can’t rule out an entire ZIP code,” he said.

Fisher says he’s unaware of any reports of companies refusing to cover homeowners within ZIP codes.

Tampa-area homeowners who were denied coverage have been forced to purchase higher-cost policies from Citizens Property Insurance, an agency originally created by the state to cover residents in hurricane-prone areas, according to Citizens spokesman Justin Glover.

“You can only obtain policies with Citizens if you are unable to get coverage in the private market,” Glover said. “It is the insurer of last resort.”

Policies written by the state carrier in the Tampa area increased from 1,012 in December 2001 to 142,424 in October 2004, Glover said. Sinkholes accounted for much of the increase, he said.

Chris Lee, founder of www.sinkhole.org, expects carriers to wait until engineers determine the cause of the Deltona sinkhole before deciding whether to continue writing policies in the area. Lee, the sales manager of a company that repairs sinkhole-damaged building foundations, has worked with insurers extensively and says carriers will be closely watching to determine how much sinkhole activity occurs in Deltona.

“I’m sure they’ll be doing a lot of investigation in that area to see if there are any other (sinkhole) claims,” he said.

Topics Florida Carriers Claims Homeowners