An Incorrect Focus on Fraud in Sinkhole Claims

In this morning's Miami Herald, columnist Fred Grimm, writes about the recent upswing in sinkhole cases in Florida.  The article is titled, "Sinkholes a New Frontier of Fraud".  The author cites Miami's experience recently with fraudulent staged auto accidents, and draws a comparison with the recent rise of sinkhole claims in Florida.  The author cites a Senate report that he says suggests that fraud accounts for the sinkhole epidemic.  The Florida Office of Insurance Regulation conducted a study that was released in November 2010.  In that study, the Office of Insurance Regulation found that less than 1% of sinkhole claims reported from 2006 through 2010 were reported to the Department of Financial Services Division of Insurance Fraud.  While fraudulent claims should certainly be rooted out and prosecuted, the less than 1% of claims based on fraud are not the main problem causing a rise in sinkhole claims in Florida.

The author further states that only one percent of sinkhole claims are paid out for "catastrophic" hole in the earth occurrences.  He seems to suggests that homeowners in Florida should not be able to have the damages to their home fixed unless the homes fall into the ground based on sinkhole activity.  The problem with this line of thinking is that homeowners insurance companies have made great sums of money based on homeowners policies that they have written that cover losses related to sinkholes.  Property damage in sinkhole cases is not limited to cases where large openings are visible at the surface, such as those in Guatemala City or in the landfill in Lithia, Florida last year.  Homeowners' damage from sinkholes includes cracked driveways, sloping and cracked floors, walls separating from ceilings, doors no longer able to open and close properly, stair step cracks in bricks holding their homes together, roofs no longer properly attached to walls.

In my opinion, Mr. Grimm's headline and article points to the wrong issue with sinkhole cases.  Fraud is not the problem.