Citizens Sells Fewer Sinkhole Policies

Mar 24, 2008

The Tampa Tribune--Mar. 24, 2008
By CHRISTIAN M. WADE The Tampa Tribune

NEW PORT RICHEY – Thousands more homeowners in "sinkhole alley" are going uncovered.

In what is becoming a trend, customers of Citizens Property Insurance Corp. continue to forgo standard sinkhole coverage under the state-run company’s new policy guidelines.

Of the estimated 6,834 homeowners policies renewed with Citizens in Pasco and Hernando counties in January and February, at least 5,802 customers declined to carry the optional coverage, according to company figures.

"Clearly, there are a lot of people out there who don’t want to pay the extra money for sinkhole coverage," Citizens spokeswoman Christine Turner said. "So it’s working."

The latest figures, combined with those from previous months, indicate that a growing number of homeowners in the two counties are choosing to go without standard sinkhole coverage since the "insurer of last resort" stopped automatically offering it in October.

Of the 22,216 renewals for November and December, 18,165 – or 82 percent – dispensed with sinkhole coverage. That translates into an estimated total savings of more than $5.3 million for those policyholders, Turner said.

Over the next year, she said, Citizens expects more customers to decline the coverage.

Those who want it can "opt in," but it costs extra. In other counties across the state, Citizens customers must opt out if they don’t want to be covered.

If a sinkhole damages a home or commercial property so badly that it is condemned by local authorities and residents are ordered to vacate, Citizens will cover it even if the homeowner opted out. That is called a "catastrophic ground cover collapse."

For anything short of that, like cracks in the ceiling, residents will have to pay for the repairs, which can run into the tens of thousands of dollars.

Pasco and Hernando have the distinction of being part of "sinkhole alley," an area prone to ground settlement and voids. Sinkholes, usually caused by limestone fissures, range from small depressions to gaping holes, although typically they do not swallow homes.

Despite that, the number of sinkhole claims has increased dramatically in recent years.

In 2001, Citizens paid out $180,000. In 2005, that figure was close to $45 million. Of the 1,067 claims Citizens handled last year, 510 were in Pasco County, 281 were in Orange County, 158 were in Hillsborough and 82 were in Pinellas.

Of the 1.3 million Citizens policyholders, more than 52,000 live in Pasco.

Local lawmakers had pushed for the changes in the way Citizens offers coverage for sinkholes as part of an effort to reduce premiums and fraudulent insurance claims.

According to the Florida Office of Insurance Regulation, policyholders in Pasco are expected to save as much as 60 percent on their premiums without the coverage.

Critics argue that property owners are taking a big gamble by choosing to go without coverage in the state’s most vulnerable sinkhole regions.

Meanwhile, two local bills being considered by the state Legislature this session seek to reduce fraudulent claims and sinkhole rates among private insurers in Pasco.

One bill, offered by state Rep. John Legg, R-Port Richey, would require the insurance regulation office to take into account county sinkhole ordinances when approving rates. That, in theory, would force most private insurers to lower premiums.

The other bill would strengthen county codes to require stronger foundations for all new construction. The legislation is aimed at reducing the number of sinkhole claims by improving building standards and housing stock in unincorporated areas.