Sinkhole claims spike (mostly) expected
State-run Citizens feels "taken advantage of,'' but lawmakers expected a rush after changes.
By DAVID DeCAMP, Times Staff Writer
Published November 1, 2007
Sinkhole damage claims to Citizens Property Insurance Corp. have already reached a record high this year, spurred by a new law that allows companies to drop the coverage.
State-run Citizens has received 1,248 sinkhole claims since Jan. 1 - already surpassing the previous annual high of 810 claims in 2004.
The rush came despite three years of lawmakers tinkering with insurance law and regulations.
For renewals since Oct. 1 in Hernando and Pasco, Citizens automatically drops standard sinkhole coverage unless customers choose to keep it. Everywhere else, customers can choose to opt out of coverage. Insurers blame sinkhole claims for raising rates.
Tampa Bay area communities again are leading the surge. Pasco accounted for 510 of the sinkhole claims to Citizens through September, compared to 465 all of last year. Hernando has had 281 claims this year, surpassing last year's total of 132 sinkhole claims.
Together, the two counties lead the state, accounting for 74 percent of Citizens' sinkhole claims this year. That's just below the 80 percent rate in 2006.
In fact, sinkhole claims have spread. Citizens reports claims from 19 other counties this year, including Hillsborough 158 claims and Pinellas (81 claims), where sinkhole claims are also rising. In 2006, only eight other counties besides Pasco and Hernando had claims.
Surprised at the spike?
Not the lawmaker most pressing the change, state Sen. Mike Fasano, R-New Port Richey, nor a leading sinkhole attorney, Alan Marshall of Trinity. But it did rattle Citizens board chairman Bruce Douglas, who called for a "summit" with the insurers attorneys and Fasano to address the rush.
"In the last 90 days, we've seen an explosion of sinkhole claims. ... It's absurd. We are being taken advantage of," Douglas said last week.
Since Aug. 1, Citizens has received 478 claims.
For the insurer, the claims are expensive. The average payout for closed claims is $70,107 so far this year, according to Citizens. That's easily the most expensive type of claim. Citizens, created in 2002, has grown to be the largest insurer in both counties, accounting for 35 percent of policies.
"He [Douglas] sees what we expected. Sadly, what we expected is happening," Fasano said.
While Fasano said he is willing to meet with Citizens officials, he said the best route is waiting, because people are dropping sinkhole coverage to cut their premiums.
"This time next year, you'll have a dramatic drop in sinkhole claims because of the changes we've made," said Fasano, whose district includes parts of Pasco and Hernando counties.
By dropping the coverage, the policyholder shoulders the risk unless a collapse leaves a home uninhabitable. The vast majority sinkhole claims involve settling and cracking of homes in west-central Florida, which geologists say has soil more prone to sinkholes.
Since summer, Citizens, sinkhole repair companies, consumer activists and specialists have run newspaper ads and put on forums warning customers of the risks in dropping coverage. The Florida Association of Sinkhole Stabilization Specialists, for example, will have a forum at 6 p.m. Nov. 7 at Spartan Manor in New Port Richey.
In September, one ad told readers to file an insurance claim "even if you do not believe that you have a sinkhole problem," only to be changed after Fasano and Citizens officials complained. On Thursday, Douglas blamed an attorney he did not identify for being involved in 89 claims averaging $104,000.
Marshall said publicity, plus Citizens notices to customers, has spurred the increase. He predicted claims will eventually drop. But he also blamed tough treatment by Citizens of their customers for increasing the involvement of attorneys.
Once a customer makes a claim, Citizens will investigate the claim so aggressively that people turn to attorneys, said Marshall, whose firm counts 190 Citizens claims among its 467 active claims.
"Nobody wants a sinkhole," Marshall said.
Times staff writer Tom Zucco contributed to this report. David DeCamp can be reached at ddecamp@sptimes.com or (800) 333-7505, ext. 6232
FAST FACTS:
Sinkhole claims
Sinkhole damage claims are spiking for Citizens Property Insurance Corp. Most claims come from Pasco and Hernando counties.
Year Claims
2007 1,248*
2006 758
2005 632
2004 810
2003 323
2002 12
* year to date
Source: Citizens Property Insurance Corp.