Fraud is no answer to sinkhole risk, cost

The sinkhole-repair industry shouldn't be encouraging insurance fraud to fatten its bottom line. That is an accurate interpretation of advice offered in a Sept. 16 advertisement that told homeowners to file insurance claims "even if you do not believe that you have a sinkhole problem."

The advertisement in the Pasco and Hernando editions of the Times is from sinkhole.org, the Web site for two sinkhole-related businesses that stand to see fewer clients if new state legislation curbs claims and payouts as intended.

Despite the blatant pitch for potentially fraudulent business, the advertisement is correct about a significant point: Homeowners should consider carefully the suggestion of dropping sinkhole coverage in exchange for immediate relief from escalating premiums.

Lawmakers and insurers blame fraud and aggressive client recruitment by attorneys and others profiting from sinkhole claims for the higher premiums in Pasco and Hernando counties charged by Citizens Property Insurance Corp. The state-founded company paid $42-million on 516 sinkhole claims in Pasco and Hernando counties in 2005 and now is seeing a spike in claims in anticipation of the upcoming policy changes.

Citizens says its Pasco customers can save as much as 50 percent on premiums (40 percent in Hernando) if homeowners choose to drop standard sinkhole coverage. In doing so, homeowners would be on the hook for the cost of fixing cracks from settling in their foundations and other repairs. Claims would be paid only in the rare event of a catastrophic collapse that requires a government agency to condemn a home as uninhabitable.

It is not an inviting trade off. The state water management district identifies portions of the northern Tampa Bay region as prone to slow-developing sinkholes because naturally deteriorating limestone is close to the ground surface. It is incomprehensible to suggest sinkholes exist only in the minds of greedy attorneys.

Limiting payouts exclusively to when a house falls into a huge hole in the ground is unfair to homeowners in an area known for sinkhole activity. However, it is just as unfair to instigate fraudulent claims that will stimulate still-higher premiums.

Homeowners need to study their financial situations and tolerance for risk before deciding on their insurance needs. Third-party encouragement to file unwarranted claims should not factor into that decision.

[Last modified September 23, 2007, 20:30:21]