MINE SUBSIDENCE DISCLOSURE ACT
by Sandra Pulley, ATG Law Clerk

Although Illinois' Mine Subsidence Disclosure Act has no effect on title insurance policies, attorneys involved with real estate transactions should be able to explain the disclosure requirements of this legislation to their clients.

Under the act, any transferor of real property has a duty to disclose in writing all of the insurance claims paid to the transferor for mine subsidence damage. 765 ILCS 95/3. These disclosures must be made to both the transferee and the lender.

The act defines mine subsidence as any lateral or vertical ground movement that directly damages a structure or that results from the collapse of a man-made underground mine. Movement caused by earthquakes, landslides, volcanic eruptions, soil conditions, construction defects, the roots of trees and shrubs, or the collapse of drains and rapid transit tunnels does not fall under the disclosure requirements.

If the required disclosures are not made or the transferor knowingly makes a false disclosure, 765 ILCS 95/4 allows both the transferee and the lender to recover any damages suffered within five years of the transfer.

Additionally, clients should be informed of insurance options available to protect against possible subsidence damage. The Mine Subsidence Insurance Act requires that all residential or commercial policies issued after January 1, 1994, contain mine subsidence coverage unless the insured waives the required insurance in writing. The insurance companies can refuse to provide insurance only when there is evidence of unrepaired subsidence damage on the property.

Insurers are protected by a state-created fund that reimburses companies for their losses. For residential or commercial buildings, the amount of reinsurance available from the fund is not less than $200,000 and not more than $350,000. 215 ILCS 5/805.1(c). For living units, the available reinsurance is $15,000.

The residential coverage provided may also cover those living expenses reasonably and necessarily incurred when a homeowner is temporarily displaced as a direct result of subsidence damage. This provision applies only when the underlying insurance policy also covers this type of loss. No insurance company is required to offer subsidence insurance in excess of the reinsured limits.

All residences, living units, or commercial buildings located in any county of 1,000,000 or more inhabitants, or any county contiguous to any such county, are exempt from these insurance requirements. Upon request, the fund director may also approve exemptions from paragraph 805.1 of the act for property in other counties.

Other states have different subsidence policies. Wisconsin has no legislation requiring subsidence disclosure nor a mandatory insurance fund. Although Indiana does not have a subsidence disclosure requirement, a similar insurance fund is available. In contrast to the Illinois plan, the Indiana statute makes the state-backed subsidence insurance available only for structures in certain counties. These counties are ones identified by the Department of Natural Resources as being located at least partially within the Illinois Coal Basin or underlain by a coal-bearing rock formation of the Pennsylvania system. IC 27-7-9-6.

Under the Indiana plan, subsidence insurance must be available for structures in these counties. The insurance must indemnify the insured to the full extent of the cash value of the structure minus a two percent deductible.

Additionally, the Indiana system requires the insurer to deny coverage if the structure evidences unrepaired mine damage. Indiana further allows the insurer to decline coverage if the company has declined to issue or renew the underlying policy or has canceled all coverage under the policy for underwriting reasons unrelated to subsidence.

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