In recent weeks, Florida has repeatedly made the news for sinkhole-related disasters. Most recently, several buildings in a resort near Disney World crumbled when a sinkhole opened on the resort grounds. Luckily, news reports indicate that nobody was hurt in the latest collapse – at least not physically. The owner of the resort, however, could be staring at some pretty painful (read: expensive) property damage.
Here’s a look at how Property Insurance works when sinkholes are involved and what kind of protection you need if you’re in an area prone to this phenomenon.
Protecting Your Business from Sinkhole Damage
What exactly are sinkholes? They’re a geological phenomenon that causes the ground to open up, often suddenly and in wide swaths. Triggered by the motion of water, soil, and rock in a process called suffosion or by the collapse of underground mines and caves, they usually happen unexpectedly and fast.
When a sinkhole opens, property damage can be sweeping: collapse of buildings, loss of land, and destruction of any equipment or materials contained in the buildings affected. But property owners in a sinkhole-prone area likely have more to worry about than the damage a sinkhole can cause to their grounds.
Here’s a look at the various kinds of liability a sinkhole can expose you to:
- Property: This is the obvious risk. Structures, land, and anything stored on that land (cars, furniture, equipment, etc.) can easily be swallowed in or ruined by a sinkhole.
- General Liability: If customers are on your property when a sinkhole opens, they’ll likely face injuries and damage to their property – and depending on the circumstances, you might be held liable for those injuries and damages.
- Professional Liability: If your business had a hand in building, planning, or designing a building that collapses, you might face Professional Liability (aka Errors & Omissions) charges in the event of sinkhole damage. While it’s hard to predict exactly when a sinkhole will open, existing resources give us some sense of which areas of the country are susceptible to them and how we can minimize associated damage through savvy planning and construction.
Does Your Business Need Sinkhole Insurance?
To determine whether you need sinkhole insurance, it’s important to consider two factors. The first is where you operate your business. While sinkholes have been documented all over the world, they are more common in some areas (including Florida) than others. If you’re not sure about the sinkhole risk in your area, consult your insurance agent, who can help you identify the geography-related risks you face.
The second factor is what kinds of events are covered by any existing insurance policies you have. In most cases, for example, Property Insurance policies specifically exclude damage from sinkholes. So if your business is in a sinkhole hotbed, you may be wise to invest in sinkhole-specific coverage to supplement what you already have. If you’re not in an area prone to sinkholes, you may not need to worry about this extra coverage.