Florida, of late, has had many recent trends in civil litigation and requests for new legislation, particularly in the context of expert witnesses. See, e.g. Helicon Foundation Repair, “Fraudulent Sinkhole Claims Increase as Geologists Blame Current Weather Trends,” Seffner, FL: Sinkhole News, (retrieved Jun. 3, 2013). Many Florida residents have “been accused of spending insurance payouts on items not connected to foundation and cosmetic home repairs dues to sinkhole claims,” and, moreover, “insurance companies are requesting….legislatures change…laws concerning sinkhole claims.” Id. A “sinkhole” is a phenomenon, whereby groundwater dissolves and creates a void. See Claims Journal, “Florida Property Insurer’s Board Reviewing Sinkhole Rates” (Oct. 13, 2011).
At issue is the testimony and explanations of geologists and geological experts, who have attempted to scientifically explain the dramatic increase of sinkhole claims. See id. As Florida’s Department of Environmental Protection (FLDEP) expresses, sinkhole claims are relatively common, due to the fact that “Sinkholes are a common feature of Florida’s landscape…. .[S]ubterranean events can cause holes, depressions, or subsistence of the land surface which may mimic sinkhole activity.” “Geology Topics: Sinkholes,” (May 1, 2013). The reason why so-called “sinkhole litigation” is so important in Florida is because it involves a conflict of two concerns: homeowner interests in not having their property damaged by sinkholes (also referred to as “subsisdence incidents”), and the risk insurance companies face with some, at best, questionable and, at worst, fraudulent claims being made based upon individual claims that their property is somehow damaged at risk because it is a “sinkhole area.” See “Florida Geological Survey-Frequently Asked Questions: Sinkhole Questions,” FLDEP (May 2, 2013).
Plaintiffs’ attorneys face several issues, which insurance companies and their attorneys must then respond to and grapple with. While The Florida Geological Survey does keep a database of all known sinkhole incidents, these reports only indicate occurrences “officially reported by observers.” Id. However, many of these reports only mention particular areas or communities where sinkholes are commonly found, rather than including data as to whether a specific dwelling may be located on or near a sinkhole. See id. While this information is of some use to homeowners, many “subsisdence incidents” take place in places where they are not seen or reported. Id. Finally, many sinkhole incidents are simply not recorded, so there may be some merit to a homeowner’s claim or concern that, when purchasing a home in Florida, information pertaining to sinkholes is simply not readily available. See id.
On the one hand, the FLDEP does maintain a “Subsisdence Incident Reports” (SIR) database on its website, which shows prospective homebuyers available information, about sinkholes, in which counties and specific addresses, where subsistence incidents have been recorded and reported are identified. See id. However, while there are over 2000 such incidents on record in the database, so many sinkhole episodes are unreported, that it may be unlikely for potential homeowners to locate the information they wish to glean, by merely entering their hypothetical new street address and information in the SIR. See id. While most current sellers’ disclosure reports in Florida do include a sinkhole disclosure statement, this information is frequently overlooked or unanswered during real-estate negotiations. Id. Further, for prospective buyers who wish to purchase new and/or custom-built homes, the majority of “new” construction sites are NOT tested, with regards to sinkholes in residential areas because of the expenses involved. Moreover, Most Florida building codes do not require such testing of these construction sites, although “in some cases public building construction sires in sinkhole areas may be tested and reinforced as needed for safety and liability reasons.” Id.; (emphasis added).
The largest legal clash typically arises between homeowners and their insurance providers. One claim that has arisen deals with whether an insurance company is required to issue a homeowner’s policy that covers sinkhole areas. See id. Although in the status quo, Florida does have insurers provide “catastrophic ground coverage,” unless very particular “criteria are met, this would not include sinkhole damage,” according to the FLDEP. Id. Policyholders can purchase specific policies for protection against sinkholes, but different insurers each make their own determinations as to what kind and level of coverage they wish to offer, as well as how comprehensive that coverage will be. See id.
While many plaintiffs’ attorneys, whose clients are affected by sinkhole damages to their property, may truly believe there is a genuine and reasonable claim against insurers, defense attorneys and insurance companies have repeatedly argued, in court and before the legislature, that many sinkhole claims are simply fraudulent and are perpetuated by inappropriate or prejudiced experts in the geological field. These requests by insurers and their attorneys are quite likely due to a 184% increase in sinkhole claims from 2006-2010. See Helicon Foundation Repair, supra.
From 2006-2010, “203 fraudulent sinkhole claims were reported to the Department of Financial Service Division of Insurance Fraud,” which “represents less than one percent of the total sinkhole claims reported.” Id. More importantly, perhaps, when the Florida Office of Insurance Regulation surveyed this issue in 2010, it found that many of the funds paid out by insurance companies to successful plaintiffs were misallocated; “only about 20 percent of the insured people utilized the funds properly.” Id.
Geologists and geological experts play a critical role in the ensuing litigation in Florida. Some geologists have asserted that the current weather trends are responsible for the increasing number of recent sinkhole claims. See id. Because of large and extreme variations between massive rainfall and droughts in Florida, from 1991-2001, some experts argue that these conditions were and/or are, in fact, the cause of the massive increase of sinkhole damage reported to the FLDEP.
Experts on this issue have somewhat divided opinions. Some feel that more stringent building codes could, in fact, prevent extensive and costly building damage. See Helicon Foundation Repair, supra. Other experts take the position that the sinkhole damage is primarily, if not entirely due to “acts of nature” (e.g.-the heavy rainfall, followed by droughts, Florida’s coastal location and sea level, etc.), which means insurers have perhaps little, if any legal responsibility for sinkholes, unless an underwritten policy expressly includes coverage for sinkholes. See, e.g., id.
Florida’s legislature attempted to grapple with these issues in 2011, by defining sinkholes and arguably attempting to limit the number of sinkhole claims property owners could bring against insurers. Denise Johnson, “Florida’s Sinkhole Statute Continues to Evolve,” Claims Journal (May 4, 2012). One attorney for the Florida’s Citizens Property insurance Corp., which is Florida’s largest property insurer, gave a presentation to its board, regarding increasing insurance company rates for sinkhole coverage and, further, the board ultimately voted to increase its rates for sinkhole coverage by 50% in 2012, phasing in myriad and additional rate hikes over the next several years.” See id.; See also Claims Journal, supra.
So, what does sinkhole legislation, litigation, and geological expertise mean for plaintiffs and defendants alike? First of all, Florida has placed a statute of limitations on sinkhole claims: The date of alleged loss must be within two years of the date litigation is brought. Claims Journal, supra. However, the statute also offers incentives for those who suffered actual damage to their property because of sinkholes. The Florida Catastrophe Fund (Cat Fund) is required to reimburse every loss that is incurred, “including amounts paid as fees on behalf of the policyholder.” The Florida Senate, “CS.CS/CS/SB 408—Property and Casualty Insurance,” www.flsenategov/Committees/BillSummaries/2011/html/0408BI (retrieved Jun. 4, 2013).
Ultimately, for attorneys, sinkhole litigation will continue, with plaintiffs suing their insurers and insurers claiming that either policyholders did not (or should not) have anticipated sinkhole coverage in their insurance policies, and/or that if the plaintiff claims to be in a “sinkhole area” or to have experienced property damage, but then used the funds an insurer paid out for other purposes, some form of misappropriation has occurred and, therefore, the insurance company may be off the hook.
In sum, sinkhole litigation will persist and Florida sinkhole legislation may continue to involve, but the key to each case will consist of having the best possible geological experts. Whether the sinkhole damage was the fault of a construction company, a failure to disclose known defects during a property, an act of nature, an insurer’s fault, or the responsibility of the plaintiff, will be a question that only the most competent expert witnesses can properly answer. In the meantime, attorneys should be aware of the trends with respect to sinkhole litigation in Florida and should prepare themselves to advance their claims as well as possible.
By: Kat Hatziavramidis, Attorney-at-Law