Tag Archives: kentucky

Untimely Notice Sustains Denial of Claim

The U.S. District Court for the Eastern District of Kentucky recently held that an insurer properly denied coverage to a hospital because the hospital gave untimely notice of the claim. In Ashland Hospital Corporation v. RLI Insurance Company, Civil Action No. 13-143-DLB-EBA (E.D. Ky. Mar. 17, 2015), the insurer avoided exposure on a $10 million directors and officers (D&O) excess policy claim by successfully arguing that the insured, a hospital association, failed to give timely notice of the claim as required under the terms of the policy.

Background
The hospital purchased $15 million in primary D&O liability insurance for Oct. 1, 2010, through Oct. 1, 2011. The hospital also purchased a $10 million excess policy from another insurer covering the same one-year period. Both policies were written on a “claims-made” as opposed to an “occurrence” basis. In July 2011, the U.S. Department of Justice issued a subpoena to the hospital as part of a Health Insurance Portability and Accountability Act (HIPAA) investigation into allegations that the hospital billed federal healthcare programs for heart procedures that were not medically necessary. Ultimately, the hospital agreed to pay $40.9 million to resolve the allegations.

The hospital notified the primary carrier of the HIPAA investigation in December 2011, which was within the 90-day notice period required by the primary policy. In June 2012, after being informed that the primary carrier’s policy covered the investigation, the hospital notified the excess insurer of the HIPAA investigation. The insurer denied coverage because the hospital failed to provide timely notice during the policy period or within the applicable 90-day extended reporting period after the policy terminated in October 2011. The insurer claimed that the notice requirement was a condition precedent to establishing coverage and that it did not have to show prejudice to deny coverage. The hospital sued for breach of the insurance contract.

Decision
The insurer argued that it correctly denied coverage because the hospital failed to provide notice within the 90-day extended reporting period after the excess policy expired. The insurer argued the excess policy followed form to the primary policy, thereby incorporating the notice provisions of the primary policy that required notice within 90 days of the end of the policy. The hospital admitted the excess policy did follow form to the primary policy but claimed that the presence of notice provisions in both policies made the primary policy’s notice provisions ambiguous.

The Ashland court rejected the hospital’s argument, holding that the notice provisions in the primary and excess policies did not conflict; to the contrary, they coexisted. Therefore, the insurer’s denial of coverage was proper because the hospital failed to provide timely notice as required by the terms of the primary policy.

The court also held that the hospital violated the notice provisions of the insurer’s excess policy, which required the insured to provide notice when specified events occurred. The hospital claimed that the notice provisions were ambiguous and did not require it to provide the insurer with notice every time an event specified in the notice provisions took place, but rather only when the most recent event occurred. The insurer countered that the terms of the policy were clear and that the hospital was required to provide notice when any event specified in the policy took place. The insurer contended that, because the hospital provided notice only when the most recent event occurred and not when previous events occurred, the hospital was not entitled to coverage. The Ashland court held that the provisions were not ambiguous and that adopting the hospital’s interpretation would effectively render the terms meaningless. The court agreed with the insurer that for coverage to exist, the hospital had to provide timely notice to the insurer when all of the events specified by the provision took place, not merely when the most recent event occurred. Because the hospital failed to do so, it forfeited its right to coverage under the terms of the excess policy.

The Ashland court also considered and rejected the hospital’s alternative argument that the insurer had to show substantial prejudice to deny coverage. In so arguing, the hospital relied on Jones v. Bituminous Casualty Corporation, 821 S.W.2d 798 (Ky. 1991), which held that absent a showing of substantial prejudice a workers’ compensation insurer could not deny coverage because of an insured’s untimely compliance with a notice provision. The Ashland court noted that Kentucky courts have not addressed whether Jones applied to claims-made insurance policies but predicted that the Kentucky Supreme Court would not extend Jones to a claims-made policy because to do so would effectively rewrite the policy without justification.

Takeaways
There are two principal takeaways from the Ashland decision:

  • First, in Kentucky, excess insurers desiring to “follow” a primary policy would be well-advised to use language that ensures neither policy conflicts. While not mentioned by the Ashland court, a simple way to accomplish this result would be for the excess policy to include language in the “following form” clause confirming that, in the event of any conflict between the primary and excess wording, the primary language should control. Failure to take these steps could render some terms of the policies ambiguous and unenforceable.
  • The second takeaway concerns the Ashland court’s sustaining the enforceability of the claims-made and reporting provisions of the policy. Earlier this year, the state supreme courts in Colorado and Wisconsin reaffirmed that the claims-made and reporting requirements in D&O and professional liability policies are conditions precedent to coverage that cannot be trumped by the notice prejudice rule applicable to occurrence-based policies. (See Craft v. Philadelphia Ins. Co., 2015 CO 11 (Colo. Feb. 17, 2015); Anderson, et al. v. Aul, et al., 2015 WI 19 (Feb. 25, 2015). Thus, Ashland is illustrative of a continuing trend of recent decisions that have reached this same conclusion.

Wilson Elser will continue to monitor this and other cases involving primary and excess policy coverage disputes.

NOTE: Patrick C. Walsh (Law Clerk-Louisville) assisted in researching and drafting this Alert.

States of Confusion: Workers Comp Extraterritorial Issues

As states passed workers compensation laws, each state established its own system. This resulted in a mishmash of laws, benefits, compensability and eligibility from state to state. Courts have ruled that a state has the right to apply its own workers compensation rules and standards to each case. Hence, most states simply don’t care what other states allow, only what is required under their workers compensation laws. There is little meaningful cooperation or coordination among states. Challenges for agents, employers, insurance companies and adjusters include understanding:

  • When coverage is required in jurisdictions where the employer has operations or employees working, living or traveling in or through.
  • How coverage is provided for various jurisdictions.
  • What jurisdictional benefits an employee can collect.

The policy

The two items that reference what states are insured under a workers compensation policy are 3.A. and 3.C. on the information page. (Federal coverage can only be added by endorsement.) 3.A. is fairly simple. The insurance agent for the employer instructs the insurance carrier to list the states where the employer operates when the policy goes into effect or is renewed. 3.C. is a safety net – at least most of the time. That item lists states where an employer expects it may have employees traveling to or through or working in. If an employer begins work in any state listed in 3.C. after the effective date of the policy, all provisions of the policy apply as though the state were listed in 3.A. Notice must be given “at once” if work begins in any state listed in 3.C., although “at once” is not defined in the policy. If the employer has work in any state listed in 3.C. on the effective date of the policy, coverage will not be afforded for that state unless the carrier is notified within 30 days.

It should be noted the insurance policy does not determine what law applies at the time of injury. The law determines what is payable. In addition, note that the workers compensation policy does not apply to Ohio, North Dakota, Washington and Wyoming, “monopolistic” states where coverage may only be purchased from the state. Although larger employers may self-insure in Ohio and Washington (but not North Dakota or Wyoming), no private insurance carrier can write workers compensation coverage for an employer.

It would seem the safe bet is to add all states except monopolistic states to 3.A. However, most underwriters are unwilling to do this or even add the ideal wording for 3.C.: “All states, U.S. territories and possessions except Washington, Wyoming, North Dakota, Ohio, Puerto Rico and the U.S. Virgin Islands and states designated in Item 3.A. of this Information Page.” The reason for the underwriters’ unwillingness varies. Common reasons underwriters provide include:

Licensing issue

The insurer is not licensed in all states. Many regional insurers are only licensed in a handful of states while other carriers may only be licensed in one state…often for strategic reasons. Carriers frequently assert it is impossible — and possibly illegal — to list a state they are not licensed in (even though policies contain wording whose clear intent is to allow carriers to pay benefits in states where they are not licensed).

Underwriting considerations

The insurance carrier may not want to provide insurance in certain states it considers more challenging from a workers compensation standpoint or because carriers do not want to write in states where they have little or no claims adjusting experience, established provider networks and knowledge of the nuances of the law.

Underwriters’ lack of awareness or knowledge

Underwriters are not claims adjusters and do not always have a full understanding  of workers compensation’s jurisdictional complexity and the employer’s risk (no coverage) and agents’ risk (errors and omission claims) for not securing coverage for all states with potential exposure. Agents are often told the employer does not need coverage in the state in which the agent is requesting coverage — which the home or primary state benefits will pay. However, the chance that an employee will be successful in securing another state’s benefits — even if the employee is only there temporarily — is just too much of a risk.

Physical location

Carrier underwriters frequently cite the “physical location” — actually needing an address — as a roadblock to adding a state to 3.A. The National Council for Compensation Insurance (NCCI) has rules on this issue. Most states that follow NCCI rules allow entry of “no business location” — but not all.  States that follow NCCI rules (including the independent bureaus like Texas) will often modify some rules. Arizona, Kentucky, Montana and Texas do not allow “no business location.” It is a regulatory reporting issue. Possible solutions to secure 3.A. coverage include:

  • Providing an entry of “Any Street, Any Town” or “No Specific Location, Any City” for the state. Many carriers will use this.
  • Using an employee’s home address in the state if there is an employee working from home there.
  • Using the agent/brokers address if they have an office there.

Compliance

Only Texas and New Jersey have workers compensation laws that are elective. New Jersey employers still, in effect, cannot go without workers compensation insurance. In Texas, any employer can “unsubscribe” to the workers compensation system and “go bare” and be subject to the tort system. All other states require employers to purchase workers compensation insurance for their employees or qualify for self-insurance.

Which benefits apply? 

If an employer has employees traveling on a limited basis from their home states, the headquarters state may have established a time limit on coverage for out-of-state injuries. The most common limit is six months. This may be written into the statute or may be silent, but over time case law has made determinations. In other words, if an employee usually worked in Michigan but spent three months working on assignment in Kentucky and was injured in Kentucky, the employee would most likely still be eligible for Michigan benefits. In states with a timeline, an employee working in another state for more than the designated duration is no longer entitled to benefits in the home state, but the employee is probably entitled to the compensation in the state in which he or she is currently working.

One of the most important factors is that an employee injured outside of his state of residence may have selection of remedies (benefits) if he lives in one state and works in another. The Michigan employee injured in Kentucky may want Kentucky benefits because Kentucky has lifetime medical and Michigan does not. Or, an employee may have been injured on the way to work, and the state where she was injured does not allow for workers compensation in this circumstance even though this would be a compensable injury in the employee’s headquarters state. Perhaps there is a disqualification in one state because of, for example, an employee’s intoxication that would not be a disqualifier in another state. In addition, the maximum amount of income benefits available to employees varies considerably from state to state.

Piggybacking benefits

Piggybacking occurs when an employee files in one state and then in another state where he qualifies for additional benefits. What is allowed in additional payments will depend on the circumstances of the claim and the states involved. This issue has become particularly dangerous for employers that have not arranged coverage in other states because they are unaware there is an exposure there. The employer then becomes liable for the benefits due in the uninsured state, including all costs to adjust and defend the claim if litigated.

Typically, if an employee collects benefits in one state and is successful in perfecting a claim in another state with higher benefits, the benefits collected in the first state are offset from the second state’s benefits payment. For example, assume an employee collects $10,000 from Indiana then files in Illinois, which grants $18,000. Only the difference between $18,000 and $10,000, or an additional $8,000, would be paid. Employers with employees in both “wage-loss” and “impairment” states face an additional challenge: Employees could qualify for both states’ benefits with no offsets.

Most states don’t care what other states have allowed, only what is required under their laws. If the employee collected under another state’s law but qualifies in our state for additional benefits, well, so be it. If an employee has traveled to, through or lived or worked in another state to create a “substantial” relationship with the state, there is a very good chance he or she will be granted workers compensation benefits in that state.

State statutes, case law, common law and tests

State statutes, case law or the common law in a jurisdiction may influence what benefits an employee may collect. Various criteria that may apply include:

  • State of hire
  • State of residence
  • State of primary employment
  • State of pay
  • State of injury
  • State in agreement between employer and employee (unique to Ohio, and only Ohio and Indiana recognize the agreement)

The “WALSH” test is a good guide to questions to ask, in order of importance:

W   Worked – Where did the employee work most of the time?

A    Accident – Where did the accident occur?

L    Lived – Where is the employee’s home?

S    Salaried – Where is the employee getting paid from?

H    Hired – Where was the contract of hire initiated?

Just about all jurisdictions indicate an employee is entitled to the benefits of their state if the employee was working principally localized in the state, was working under a contract of hire made in the state or was domiciled in the state at the time of the accident. This is why “worked” and “accident” are given the most weight.

Reciprocity

Several states will reciprocate another state’s extraterritorial provisions. Each state has its own reciprocal agreements, with as few as a half-dozen states or as many as 30. For as many states that cooperate with reciprocity, just as many states will not.

In addition, not all reciprocity agreements address the “claims” aspect of compliance. In other words, the reciprocity means the employer does not have to secure “coverage” for an employee temporarily in another state; however, it does not mean that the employee could not pursue a claim in that state. If the employer was relying on the reciprocity provisions of the state law and did not secure coverage in that other state, the employer may be without coverage for that state and may also become “non-compliant” with the state and be subject to fines. The employer (or its agent) has decided to rely on the employee accepting his home state benefits. If the injured employee goes back to her home state for benefits, no harm, no foul.  However, if the employee perfects a claim in another state or in some instances simply chooses to file a claim in that state, then the employer would be considered a non-complying employer and could be subject to penalties.

Washington does not reciprocate in construction employment unless there is an agreement in place. Washington has these agreements with Oregon, Idaho, North Dakota, South Dakota, Montana, Wyoming and Nevada.

Some specifics

Massachusetts, Nevada, New Hampshire New Mexico, New York, Montana, and Wisconsin require coverage in 3.A.

Kentucky allows no exceptions for family members, temporary, part time or out-of-state employers performing any work in the state of Kentucky. Kentucky does not accept the Ohio C110 form.

New York made a significant change in its workers compensation law [Section 6 of the 2007 Reform Act (A.6163/S.3322)] that affected employers if they conducted any work in New York or employed any person whose duties involve activities that took place in New York. Effective Feb. 1, 2011, the New York board clarified coverage requirements. Detailed information can be found on the New York Workers Compensation Board’s website: http://www.wcb.ny.gov/content/main/onthejob/CoverageSituations/outOfStateEmployers.jsp

Florida, Nevada and Montana require all employers working in the construction industry to have specific coverage for their state in 3.A. Ohio and Washington require that employers purchase coverage from the state for all employers working in the construction industry. Otherwise, Florida, Nevada, Montana, Ohio and Washington will honor coverage for temporary work from other jurisdictions. Florida also requires the coverage be written with a licensed Florida carrier. 3.A. coverage status is required for any employer having three or more employees in New Mexico and Wisconsin even on a temporary basis.

The standard workers compensation policy exclusion for bodily injury occurring outside the U.S., its territories or possessions and Canada does not apply to bodily injury to a citizen or resident of the U.S. or Canada who is temporarily outside these countries. State workers compensation will apply, however, for those employers that have employees regularly traveling out of the country; the Foreign Workers Compensation and Employers Liability endorsement should be added to their workers compensation policy. This endorsement is used for U.S.-hired employees who are traveling or residing temporarily outside the U.S. The coverage is limited to 90 days. For employees out of the country for long periods or permanently, coverage needs to be arranged under an international policy.

The extraterritorial issues arise because many states — Alabama, Alaska, California, Connecticut, Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee and Wisconsin — permit concurrent jurisdiction between State and Longshore coverage. Some states — notably Florida, Louisiana, Maryland, Mississippi, New Jersey, Texas, Virginia and Washington —  do not permit this concurrent jurisdiction, and Longshore becomes the sole remedy. In concurrent jurisdictions, the employee can file in both state and federal court, and the employer must defend both.

Summary

  • Recognize that having employees who work, live or are temporarily traveling to or through other states creates premium and coverage challenges for employers and agents.
  • Take time to understand the rules of the state where there is potential exposure.
  • States requiring coverage in 3.A. for some or all situations tend to be strict and impose severe penalties for non-compliance. Many carriers are often aware of the challenges these states present and will work with the agent/employer and add on an “if any” exposure basis.
  • Always attempt to secure the broadest coverage possible under the workers compensation policy, adding to 3.A. as many states with even minimal exposure. As a fallback, get the state in 3.C.
  • Obtain coverage for operations in monopolistic states separately.
  • Address out-of-state exposures when insured by a state-specific state fund or regional carrier that only writes in one or a few states. Remember, the 3.C. wording is designed to pay benefits — by reimbursing the employer — if the carrier cannot pay directly to the employee.
  • Check for employees traveling out of the country and arrange to expand coverage with the foreign endorsement or through an international policy.
  • Check with a marine expert to assess the exposure to the Longshore Act and whether coverage is required.  Longshore is very employee-friendly.

The white paper on which this article was based can be found here.

Sinkhole Peril: Reducing Exposure And Managing Risk

The sensational news of Jeff Bush, swallowed by the earth while he slept, has been widely reported by the media.1 Such dramatic incidents receive a great deal of attention, likely because they are so rare. Sinkholes, however, are not rare. They do not usually threaten lives, but in Florida they have often threatened insurance companies' balance sheets, endangering their profitability and — in at least one case — their solvency.

First we must distinguish between how the terms “sinkhole” and “catastrophic ground collapse” are used in insurance in Florida. According to Florida statutes, “'Sinkhole' means a landform created by subsidence of soil, sediment, or rock as underlying strata are dissolved by groundwater.” A “catastrophic ground collapse,” by comparison, exists when all of the following four criteria are met:

  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 covered 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.2

Sinkholes are fairly common in Florida and even ubiquitous in some areas. But what happened to Jeff Bush was a catastrophic ground collapse, and that's rare, even in Florida.

Much of the subsurface geology in Florida consists of limestone or dolomite and both are susceptible to gradual erosion when exposed to acidic water, which arises from a chemical reaction between rainwater percolating through the soil and decaying vegetation. This erosion can produce underground voids that are not visible on the surface and these voids will expand, usually very slowly. This slow expansion leads to a subsiding surface, which can cause cracking and other damage to structures. Very occasionally, a large void will lead to sudden collapse of the surface above it.3 A well-known historical example of this is the Winter Park sinkhole.4 A more recent example is the sinkhole into which Jeff Bush's house collapsed.

Although the process that produces sinkholes occurs naturally over tens of thousands of years, it can be accelerated by human-induced depletion of underground aquifers. In Tampa, the problem has become so significant that one of the first desalination plants in the United States has been built to reduce the use of underground water supplies.5 The groundwater depletion that has resulted from increased water use has in part contributed to extremely frequent sinkholes in Pasco and Hernando counties.6

Initial Legislative Efforts
In 1981, Florida passed a law mandating that insurance companies cover the sinkhole peril as part of home insurance.7 By 2006, the sinkhole loss ratio in Hernando County for Citizens Property Insurance Corporation, an insurer created by the state for those who cannot acquire coverage elsewhere, had reached 242%. The average sinkhole claim for Citizens was about $139,000.8 Claims were often not for catastrophic ground collapse or even damage that affected the load-bearing capacity of the structure, but were cosmetic in nature. There came to be a widespread perception in the industry that marginal claims were being paid out, partially as a result of aggressive solicitation of insureds by public adjusters.

In response, Florida lawmakers passed legislation that still required insurers to offer sinkhole coverage, but allowed policyholders to exclude it. The territories that Citizens used for rating the sinkhole peril were the same as it used for other perils — generally counties divided into a coastal region and an inland region. This method did not adequately capture the differentiation in sinkhole risk and once policyholders were allowed to exclude sinkhole coverage, those who believed they were at lower risk chose to do so.

The losses for the remaining, higher-risk insureds had to be spread over a smaller amount of premium, pushing the loss ratio up, and causing Citizens to file for rate increases. Those rate increases encouraged more low-risk insureds to opt out of sinkhole coverage, creating a self-reinforcing cycle of adverse selection. The sinkhole loss ratio, especially in the area of the state susceptible to sinkholes, increased. By 2009, it had reached 683% in Hernando County. The number of sinkhole claims for Citizens in Hernando county alone had increased from 186 in 2006 to 520 in 2009 — nearly tripled — while premiums to cover them had decreased from about $9.2 million to about $6.0 million.

Private insurers began withdrawing from the market in Pasco and Hernando counties entirely, and the share of the market for Citizens increased rapidly. Between 2008 and 2010, the number of policies Citizens wrote in Hernando County increased by 50%.9 HomeWise Insurance Company was forced into liquidation in 2011, despite no hurricanes affecting Florida since 2005, because of sinkhole claims.10 The insurance of damage from sinkholes led to an insurance crisis in Florida.

Bill SB408
Although there had been several previous rounds of legislation to address the crisis in 2005, 2006, 2007, and 2009, the crisis only worsened.11 Another bill, SB408, was passed in 2011. An analysis performed by Insurance Services Office (ISO) on behalf of Citizens estimated that this bill would reduce losses by about 54.7% based on several changes:12

  • The majority of the expected savings came from a change in definition; instead of covering “physical damage,” sinkhole coverage would now cover “structural damage.” The report estimated the impact of this change in definition by reviewing a random sample of closed claims and estimating what the loss would have been under the new definition.
  • Previously, many policyholders did not use the proceeds they received from their sinkhole claims to repair damage, but instead used it to pay off their mortgages or for some other purpose. In a sample of claims from HomeWise, for example, only 27% of insureds used the money to make repairs.13 SB408 requires that loss payments be used to repair sinkhole damage based on the specifications of an engineer's report.
  • When the insured uses a public adjuster, claims for which a sinkhole is not confirmed have much higher losses than when the insured does not use a public adjuster. In the analysis performed by ISO, it was determined that the losses for claims of Citizens with no confirmed sinkhole activity were 140% higher when a public adjuster was involved. SB408 limits public adjuster compensation to reduce the incentive to inflate sinkhole claims.14
  • SB408 excludes sinkhole damage to appurtenant structures, such as driveways, sidewalks, decks, or patios.
  • Policyholders with a previously denied sinkhole claim were granted the right to sinkhole testing at the expense of the insurance company. Under SB408, the policyholder must pay part of the cost of this testing, which is reimbursed if the testing demonstrates that a sinkhole exists.

In addition to these provisions, companies can exclude sinkhole coverage until an inspection is performed. If there is evidence of prior sinkhole activity, they can exclude the sinkhole peril from coverage. They can also now require a sinkhole deductible equal to 10% of coverage A for HO-3 policies.15

The cumulative impact of these reforms and improvements in underwriting is unclear. Although the reaction in the industry has been positive, it has been less than two years since SB408 was implemented and it will take time to see if it results in a real decrease in costs. In 2006, SB1980, another sinkhole reform bill, was passed and was expected to produce up to 14.4% savings, according to a report from Deloitte commissioned by the Florida Office of Insurance Regulation.16 As it turned out, this was just before a rapid escalation in sinkhole costs. It is very difficult to predict the impact of legislation, and while there is a lot of favorable anecdotal evidence, it is probably too soon to say for certain whether the Florida sinkhole crisis is over.

What Insurers Can Do To Manage Their Risk
Excluding sinkhole coverage and offering it as a buyback with a 10% mandatory sinkhole deductible after an inspection is one of the most important tools that insurers currently have. However, the dramatic example of adverse selection that occurred in recent years in Pasco and Hernando counties should serve as a reminder of the importance of risk differentiation. Adverse selection occurs because policyholders or competitors have more information about an insured risk. Insurers can reduce this risk by adopting granular rating plans that align the premium charged as closely as possible with the expected loss.

Because insurers based their calculations on territories designed for wind risk — consisting of a coastal and inland region — they failed to adequately differentiate risk within these counties based on underlying geology, changes in underground aquifers, and claim patterns. Further, since sinkhole claims are relatively uncommon, albeit very severe, companies often lack credible data, which encourages them to utilize territories that are not homogenous.

SB408 has diminished the sense of crisis in the industry and creates an opportunity for insurers to get ahead of the risks they face. Companies are now able to charge a separate premium for the sinkhole peril and they should begin utilizing territories that better reflect the variation in the underlying risk from that peril. Doing so, coupled with other important risk management strategies, will decrease the likelihood that they will have the sort of unfavorable experience that has been so damaging to the industry in recent years.

Although Florida has by far the highest rate of sinkholes in the United States, they also occur in many other parts of the country, such as Alabama, Kentucky, Missouri, Pennsylvania, Tennessee, and Texas — anywhere, in fact, where acidity erodes subsurface limestone. About 20% of the United States is susceptible to sinkholes.17 Less than two months after Jeff Bush was swallowed by the earth, a sinkhole in Chicago devoured three cars.18 Insurers would be wise to review their policy language and the law in all states where they have potential sinkhole exposure and consider steps to address this exposure. The most dangerous peril for any insurer is the one they did not realize they were covering.

Notes

1 New York Times (March 2, 2013). Crews halt effort to find man lost in Florida sinkhole that swallowed his room. Associated Press. Retrieved April 18, 2013, from http://www.nytimes.com/2013/03/03/us/florida-sinkhole-growing-as-engineers-investigate.html.

2 Section 627.706(2)(a), Florida Statutes.

3 Beck, B.F. & Sinclair, W.C. (1986). Sinkholes in Florida. Florida Sinkhole Research Institute, Universityi of Central Florida. Retrieved April 18, 2013, from http://publicfiles.dep.state.fl.us/FGS/FGS_Publications/FGS Library Documents/SinkholesInFlaAnIntroBeck1986a.pdf.

4 In May 1981, the Winter Park sinkhole in Central Florida swallowed a house, five Porsches, and part of the city's swimming pool. The sinkhole eventually measured 350 feet wide, 75 feet deep and had caused $4 million dollar in damage. Orlando Sentinel (November 13, 2013). Looking back at Winter Park's famous sinkhole. Retrieved April 18, 2013, from http://articles.orlandosentinel.com/2012-11-13/news/os-fla360-looking-back-at-winter-parks-famous-sinkhole-20121113_1_sinkhole-orlando-sentinel-winter-park

5 U.S. Geological Survey (November 2003). Ground-Water Depletion Across the Nation. Fact Sheet 103-03. Retrieved April 18, 2013, from http://pubs.usgs.gov/fs/fs-103-03/.

6 U.S. Geological Survey (January 2013). Groundwater Depletion. Retrieved April 18, 2013, from http://ga.water.usgs.gov/edu/gwdepletion.html.

7 Florida Senate (December 2010). Issues Relating to Sinkhole Insurance. Interim Report 2011-104. Retrieved April 18, 2013, from http://publicfiles.dep.state.fl.us/FGS/WEB/sinkholes/FlaSenateSinkholeIssues.pdf.

8 Florida Senate, ibid., p. 18.

9 Florida Senate, ibid., p. 26.

10 Florida Dept. of Financial Services (November 18, 2011). Notice of Liquidation of HomeWise Insurance Company. Retrieved April 18, 2013, from http://www.myfloridacfo.com/agents/industry/news/hwicliq.htm.

11 Florida Senate, ibid.

12 Ericksen, P. (July 19, 2012). Citizens Property Insurance Corporation: Senate Bill 408 Sinkhole Analysis. Insurance Services Office. Retrieved April 18, 2013, from https://www.citizensfla.com/about/mDetails_boardmtgs.cfm?show=PDF&link=/bnc_meet/docs/419/07AH_Citizens_SB408__Sinkhole__Analysis.pdf.

13 Florida Senate, ibid.

14 Ericksen, ibid.

15 Section 627.706 (1)(b), Florida Statutes. Retrieved April 18, 2013, from http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0600-0699/0627/Sections/0627.706.html.

16 Florida Office of Insurance Regulation (September 7, 2006). Press release: Sinkhole factor adoption will lead to consumer savings. Retrieved April 18, 2013, from http://www.floir.com/PressReleases/viewmediarelease.aspx?id=1480.

17 U.S. Geological Survey (March 11, 2013). The Science of Sinkholes. Science Feature. Retrieved April 18, 2013, from http://www.usgs.gov/blogs/features/usgs_top_story/the-science-of-sinkholes/.

18 Jamieson, A. (April 18, 2013). Sinkhole swallows three cars on Chicago's South Side. NBC News. Retrieved April 18, 2013, from http://usnews.nbcnews.com/_news/2013/04/18/17810648-sinkhole-swallows-three-cars-on-chicagos-south-side.