Sinkhole claims have become a serious problem in Florida, with thousands being filed for a problem that may not be as serious as the media is reporting. In a new article recently published in the South Florida Sun Sentinel, Don Brown, a senior fellow with The Heartland Institute, discusses the growing number of sinkhole claims in Florida and how trial lawyers and public adjusters are gaming the insurance system to their advantage.
“OIR has estimated that when the remaining sinkhole claims still pending are settled, losses will reach the realm of $2.4 billion. This reaches the financial impact of a hurricane.
The reason why there’s a huge increase in sinkhole claims is not the sudden swallowing up of thousands of homes by giant sinkholes, but trial lawyers and public adjusters who are “gaming” the system. When a sinkhole claim is paid, about 20 percent of the settlement goes to the trial lawyer or public adjuster. That’s a huge financial incentive.”
Brown, a former chairman of the Florida House Insurance Committee, contends the claims created in this scheme hurt consumers and place an even greater burden on the state-run insurer, Citizens Property Insurance Corporation. A collapse of Citizens could bankrupt the state.
“The state-run insurer, Citizens Property Insurance Corp., reports that for every dollar it collected in sinkhole premiums, it has paid out approximately $6.30 in sinkhole claims. Evidence suggests that these claims usually covered minor cracks and damage to the appearance of a home, with an extremely low percentage covering catastrophic collapse. In fact, catastrophic collapses accounted for only 1 percent of sinkhole claims.
We haven’t had a hurricane in over five years, so trial lawyers and public adjusters have latched onto a new cash cow. We must curb this unsustainable cycle before the system completely collapses, which is teetering on the brink.”
Don Brown’s article, “Sinkholes Are Big Business for Lawyers, Public Adjusters,” was orignally published in the Sun Sentinel February 26 and is available online at: http://www.sun-sentinel.com/news/opinion/fl-dbcol-sinkhole-claims-forum-20110226,0,1361439.story