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Understanding Sinkholes

If you live in Florida, you are more than familiar with the term “sinkhole”. Many of us fear sinkhole activity because it can cause significant damage to our homes. Especially if you live in “Sinkhole Alley,”(Hernando, Pasco and Hillsborough Counties), you’ve seen sinkholes become a common occurrence costing homeowners, insurance companies and developers a lotof money.

Beginning in 1981 by Florida Statute, admitted insurance carriers were required to include sinkhole coverage on property policies. Admitted Insurers are insurance companies that have been formally licensed to operate by the state and are subject to state regulations.

In 2007, new legislation was passed creating a second type of coverage called “Castastrophic Ground Cover Collapse”. This new legislation mandated that insurers must include Catastrophic Ground Cover Collapse Coverage on property policies, and allowed them to exclude Sinkhole Coverage. However, the insurers must offer a process for an insured to apply for Sinkhole Coverage by endorsement.

What’s the difference between Catastrophic Ground Cover Collapse and Sinkhole? Let’s take a look at the definitions in Florida Statute 27.706:

Definition of Catastrophic Ground Cover Collapse

(a) “Catastrophic ground cover collapse” means geological activity that results in all the following [emphasis ours]:

1. The abrupt collapse of the ground cover;

2. A depression in the ground cover clearly visible to the naked eye;

3. Structural damage to the building, including the foundation; and

4. The insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure. Contents coverage applies if there is a loss resulting from a catastrophic ground cover collapse.Structural damage consisting merely of the settling or cracking of a foundation, structure, or building does not constitute a loss resulting from a catastrophic ground cover collapse.

Definition of Sinkhole

(b) “Sinkhole” means a land form created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater. A sinkhole may form by collapse into subterranean voids created by dissolution of limestone or dolostone or by subsidence as the sestrata are dissolved.

 (c) “Sinkhole loss” means structural damage to the building, including the foundation, caused by sinkhole activity. Contents coverage shall apply only if there is structural damage to the building caused by sinkhole activity.

(d) “Sinkhole activity” means settlement or systematic weakening of the earth supporting such property only when such settlement or systematic weakening results from movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of water on a limestone or similar rock formation.


A close reading of the two definitions reveals that Catastrophic Ground Cover Collapse is more limited than Sinkhole Coverage,because all four of the stipulations in the definition must be met before coverage will effect. So, for example, if sinkhole activity creates foundation cracks or damage that requires repairs but you are not ordered to vacate the property, Sinkhole might cover it but Catastrophic Ground Collapse would not.


Understanding the difference between these two types of coverage is important. And the reality is that even if you apply for Sinkhole Coverage you may not be able to get it due to the pre-inspection process that is involved.

Make a point to discuss this in depth with your insurance agent especially to understand the difference in the two types of coverage. Keep in mind that sinkhole activity in parts of Florida is frequent and that it’s important to know how your policy will respond.

This information is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.  Should you have any questions or would like to discuss your risk exposure with your homeowner’s insurance, please contact the insurance pros at ARCW Insurance.  We are here to help.