Florida Second District Court of Appeal Finds Homeowner Policy Includes Unambiguous Exclusion of Sinkhole Damage

If you have attempted to read your entire insurance policy from front to back, you know that the terms of an insurance policy can be ambiguous and even incomprehensible.  Despite the dense reading and awkward use of language, policyholders should try to understand their policy to avoid unpleasant surprises when their home is damaged by a covered hazard.  Many policies appear to grant coverage for certain types of threats in one part of the policy while denying such coverage in another part of the policy.  While ambiguity in an insurance policy generally is construed against the policyholder, ambiguity can depend on the eye of the beholder.

The recent 2nd District case of Florida Peninsula Insurance Co. v. Maricela provides an example of why homeowners need an experienced Florida insurance attorney to prove the terms of a policy are ambiguous.  The policyholders filed a lawsuit against their insurer for denying the insureds’ sinkhole claim.  The insurer moved for summary judgment on the grounds that the policy expressly excluded the policyholders’ claim for sinkhole damage.  The trial court ruled in favor of the insured based on the contention that the policy was ambiguous regarding sinkhole coverage and the insured was awarded $125,400. 

The appellate court reversed the trial court finding that the policy unambiguously excluded sinkhole damage.  The policy contained the following endorsement:

“YOUR POLICY PROVIDES COVERAGE FOR A CATASTROPHIC GROUND COVER COLLAPSE THAT RESULTS IN THE PROPERTY BEING CONDEMNED AND UNINHABITABLE.  OTHERWISE, YOUR POLICY DOES NOT PROVIDE COVERAGE FOR SINKHOLE LOSSES.  YOU MAY PURCHASE ADDITIONAL COVERAGE FOR SINKHOLE LOSSES FOR AN ADDITIONAL PREMIUM.”

The special endorsement provisions also included:

“The following Exclusion 1.1 is added to Section I – Exclusion:

i.Loss caused by ‘sinkhole . . .

(c) This exclusion does not apply to the peril of ‘Catastrophic Ground Cover Collapse.’

The policy also included language advising the policyholders could add sinkhole damage coverage for an additional premium.

The special endorsements provision of the policy also contained the following language:

“Catastrophic ground cover collapse means geological activity that results in all of the following:

(1)The abrupt collapse of ground cover;

(2)A depression in the ground cover clearly visible to the naked eye;

(3)Structural damage to the 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.”

The language of this policy mirrors a change in Florida statutory insurance law in 2007.  Prior to this time, Florida insurance carriers were required to include coverage for sinkhole damage as part of the standard homeowners policy.  Under this prior statutory framework, the extent of sinkhole damage did not impact whether the insurer had to provide coverage.  In 2007, the Florida legislature modified the law, so insurance companies only had to provide sinkhole coverage for catastrophic ground cover collapse. 

The concurring opinion in the Maricela case comments on the Florida insurance industry practice of continuing to use the phrase “catastrophic ground cover collapse,” which could be confusing for typical consumers.  The bottom line is that Florida policyholders who need sinkhole coverage should consider paying the extra premium.  When you review your policy, you should seek legal advice if you are not sure whether the policy covers damage caused by sinkhole activity.

If you have questions about Miami-Dade homeowners insurance claims, you are welcome to contact our experienced Miami homeowners insurance attorneys.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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