TALLAHASSEE — Complaining about fraud, frivolous claims and people who spend insurance payouts on items other than home repairs, insurance companies have persuaded lawmakers to free them from providing comprehensive sinkhole coverage.
But look at the numbers and it's clear the recent increase in sinkhole claims has less to do with fraud and more to do with an increase in the number of sinkholes because of weather, geologists say.
In fact, from 2006 to 2010, only 203 sinkhole claims were reported to the Department of Financial Services Division of Insurance Fraud — less than 1 percent of total claims reported, according to the state Office of Insurance Regulation. The number of alleged fraudulent claims peaked in 2007 at about 2 percent.
Meanwhile, the total number of sinkhole claims increased 184 percent from 2,360 to 6,694, and that number is expected to rise.
That shouldn't be surprising.
The number of sinkholes reported to the Department of Environmental Protection increased nearly 420 percent, from 33 in 2006 to 171 in 2010.
Nearly 150 of those in 2010 occurred in Hillsborough County, where a drought followed by a cold winter during which farmers pumped water to protect their crops created a climate ripe for sinkhole formation.
Hillsborough is on the edge of "Sinkhole Alley," an area that includes Pasco and Hernando counties, where the unique geological makeup of the land is already prone to sinkholes.
"You can almost predict sinkholes will occur when it's dry and lots of pumping occurs or when water levels are low and we get a big rain, or when there's a need to pump large quantities of groundwater over a short period of time," said Ann Tihansky, a scientist with the U.S. Geological Survey. "They are definitely tied to specific conditions or events."
From 1991 to 1998, a period of relatively normal rainfall, an average of 55 sinkholes were reported each year to the DEP.
From 1999 to 2001, when the state faced drought conditions, the average was 93 a year.
What's the real problem, sinkholes or insurance?
Nevertheless, in a legislative session with a focus on deregulation and an interest in making the state as hospitable to businesses as possible, bills that would eliminate a requirement for insurance companies to offer comprehensive sinkhole insurance are moving through the House and Senate.
Rep. John Wood, R-Winter Haven, sponsor of a House bill that dramatically revises the state's sinkhole insurance laws, dismissed the suggestion that sinkhole claims might be related to an increase in the number of sinkholes.
"We don't have a sinkhole problem. We have a sinkhole insurance problem," he said.
Property owners, he said, too frequently use their policies as a piggy bank for things other than fixing sinkholes, which forces insurance companies to raise rates to cover their losses.
A 2010 Office of Insurance Regulation survey of insurance company sinkhole claims concluded only about 20 percent of claimants used money they received under their policies to make home repairs. The survey included no data on actual sinkhole incidence — weather or geological conditions were outside the scope of the report, OIR spokeswoman Brittany Perez said.
Sinkhole insurance changes proposed in HB 803 and SB 408 would require insurers to offer coverage only for total ground cover collapse, which is when a structure essentially falls into the earth.
That happens in about 1 percent of all cases.
The problem: Some banks require that Florida homeowners carry sinkhole insurance.
The solution offered by lawmakers: Force the state-run Citizens Property Insurance to provide comprehensive sinkhole coverage. Other bills would allow Citizens to help cover losses by increasing its premiums by up to 25 percent a year, loosening a current 10 percent annual cap.
Better focus advocated for sinkhole prevention
Sandy Nettles, a Palm Harbor geologist who often serves as an expert witness in sinkhole cases, said expensive building damage caused by sinkholes could be prevented by strengthening building codes.
Foundations, he said, can be built to withstand sinkholes. But it adds thousands of dollars to the cost of construction, and builders prefer to spend that money on more visible enhancements, such as fancy cabinets and countertops.
"It's amazing when I see someone building a $1 million home, and they don't want to spend an extra $10,000 on a foundation," Nettles said. "The building industry has a big, powerful lobby in Florida, and they don't want to pay to do the testing and pilings that are necessary because it adds to the cost of the house."
The problem is exacerbated, he said, by development that requires pumping more water to serve residents, which pulls water from cavities that collapse and create sinkholes, or filling in wetlands to build.
"All those wetlands are sinkholes," Nettles said. "Every time you build on a wetland, you guarantee there are going to be sinkholes. Every time I see them level a cypress wetland to build more houses, I think, 'That's more work for me.' "
Janet Zink can be reached at firstname.lastname@example.org or (850) 224-7263.