In January of 2016, a 64-year-old Spring Hill couple was sentenced in federal court on a conviction for federal wire fraud arising from their failure to disclose to the buyers of their home a $154,745 sinkhole insurance settlement they received. As a result, the buyers, a couple with five children, unknowingly took out a mortgage on an unrepaired sinkhole home. The sellers narrowly escaped prison time and are subject to 5 years’ probation with 6 months of house arrest, a $30,000 fine, forfeiture to the government of the $60,069 profit arising from the sale, and negotiations are ongoing regarding restitution to the victims.
This tragic situation further highlights the value of having legal representation for your insurance claim. Any good lawyer representing this couple on their sinkhole claim would have advised them of their duty to disclose upon resolution of the claim.
Although I am not a real estate attorney, I do know that Florida imposes a broad duty on sellers of real property to disclose material facts to buyers. Johnson v. Davis, 480 So. 2d 625 (Fla. 1985) (sellers wrongfully failed to disclose problems with roof of house). It is always prudent to keep a file of all the investigative reports regarding your insurance claim (engineers, roofers, general contractors, etc.) and documentation of the measures you took to make the repairs. These records should be shared with potential buyers, and you should get their signatures proving you did so.
Sinkhole claims in particular are now subject to their own disclosure statutes.
- Florida Statute §627.7073(2)(c) states that, “The seller of real property upon which a sinkhole claim has been made by the seller and paid by the insurer must disclose to the buyer of such property, before the closing, that a claim has been paid and whether or not the full amount of the proceeds was used to repair the sinkhole damage.”
- Florida Statute §627.7073(2)(b) states that, “As a precondition to accepting payment for a sinkhole loss, the policy holder must file a copy of any sinkhole report regarding the insured property which was prepared on behalf or at the request of the policyholder. The policyholders shall bear the cost of filing and recording the sinkhole report.”
This requirement is particularly worrisome in that—even if a seller discloses the sinkhole conditions to a direct buyer—it leaves one wondering if failing to record your sinkhole report could result in ramifications to you, the seller, from subsequent buyers down the line who might not receive the sinkhole disclosure from subsequent sellers. Thus, with sinkhole claims it is always prudent to record your expert reports in compliance with this statute in addition to disclosing the reports in the real estate transaction.
One of the benefits of hiring an insurance claims attorney is having the opportunity to discuss the reports and disclosures required from an insurance claim.
Kristin Demers-Crowell has dedicated her career to helping homeowners and businesses recover from catastrophes and forcing insurance companies to keep their promises.