Sinkhole vs Catastrophic Ground Cover Collapse Coverage

If you’ve lived in Florida for any length of time you are familiar with the risk posed by the peril of sinkholes. Florida has more sinkholes than any state in the nation. Over the last couple decades sinkhole losses have become a primary concern for insurers, homeowners, and developers, especially in “Sinkhole Alley” which consists of Hernando, Pasco and Hillsborough counties.

Originating in 1981, Florida statutes have mandated that all property policies issued by Admitted Insurers must include coverage for the peril of sinkhole. Then, in 2007, legislation introduced a new restrictive coverage known as Catastrophic Ground Cover Collapse which replaced the mandatory sinkhole coverage. Under the revised law, Florida property insurance policies issued by Admitted Insurers must include catastrophic ground cover collapse coverage and offer sinkhole coverage as an endorsement for an additional premium.

Let’s take a look at the Florida statutes to get a better understanding of these coverages and how they affect the insured. The full statute can be found here.

According to the 2015 Florida Statute 627.706, the coverages are defined as follows:

Catastrophic Ground Cover Collapse	Sinkhole
Definition: geological activity that results in the following: 1. The abrupt collapse of the ground cover; 2. A depression in the ground cover clearly visible to the naked eye; 3. Structural damage to the covered building, including the foundation; and 4. The insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure.	Definition: settlement or systematic weakening of the earth supporting the covered building only if the settlement or systematic weakening results from contemporaneous movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of water on a limestone or similar rock formation.
Coverage: Contents coverage applies if there is a loss resulting from a catastrophic ground cover collapse. Damage consisting merely of the settling or cracking of a foundation, structure, or building does not constitute a loss resulting from a catastrophic ground cover collapse.	Coverage: A Sinkhole loss means structural damage to the covered building, including the foundation, caused by sinkhole activity. Contents coverage and additional living expenses apply only if there is structural damage to the covered building caused by sinkhole activity.

 

By looking at the coverages in comparison it is clear to see that qualification for a catastrophic ground cover collapse loss is no easy task. All 4 stipulations must be met. Settling or cracking of the structure or foundation does not constitute a catastrophic collapse loss. Contrarily, sinkhole coverage is much broader. This stark contrast between coverages makes it imperative for insurance agents to not only comprehend these coverages but to also explain them to their insureds as this would be a tough lesson to learn at the time of filing a claim.

In Summary

• Catastrophic Ground Cover Collapse coverage is very restrictive and must meet all 4 stipulations to qualify for a loss.
• Florida property insurance policies issued by admitted carriers must include catastrophic ground cover collapse coverage.
• Admitted carriers must offer sinkhole coverage, if requested, for an additional premium.