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Sinkhole Cap Sinking

March 8th, 2010 by flanews

Every year in Florida insurance companies lose 100s of millions of dollars to fraudulent sinkhole claims. Legislation to cut down on insurance fraud would help companies curb their losses by limiting the amount of money theyre on the hook for, but as Whitney Ray tells us, the idea isnt very popular, because it could leave people with real claims hurting.

Mandatory sinkhole coverage was eliminated in 2008, because many people couldnt afford it and some people where scamming the system.

Many people were not getting the sinkholes fixed. They would just take the money and run. Many of them bragged about going to North Carolina and buying property up there, said State Senator Mike Fasano.

Earlier this year sinkholes damaged dozens of Florida homes. Estimated insurance claims exceed 200-million dollars. Industry expert Bob Lotane says some of those claims will likely turn out to be false.

A lot of people, often with the encouragement of trial lawyers or public adjusters, are filing claims that prove to be fraudulent, said Lotane.

And every claim filed has to be investigated. Each sinkhole claim costs insurance companies about 10-thousand dollars because they have to hire a geologist to investigate.

Legislation helping insurance companies make up for losses by capping pay outs at 25 percent has been filed Although now the sponsor says hell remove the cap from the bill. Lotane says legislation to fix the sinkhole fraud problem will likely appear before the end of session.

A lot of these bills are starting point. Sometimes they dont even pass and often they pass in a far different form, said Lotane.

Under the plan, someone with 50-thousand dollars in damage would get just over 12 thousand dollars. The plan would only effect policies with extra coverage that pays for cracks and foundation problems caused by sinkholes. Homes that are swallowed up by sinkholes are cover under policies with basic coverage.

Posted in Insurance, State News | 1 Comment »

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