Florida insurance regulators imposed a $1.26 million fine on the state’s largest private insurer, Universal Property & Casualty, some time ago. The fine was related to unfair post-claim underwriting practices. One of these practices involved accepting premiums over a period of months or even years prior to indicating that coverage was being denied only after a claim was made by the insured. Many of these post-underwriting denials of coverage were based on omissions or inaccuracies in background information, including a homeowner’s failure to disclose an out of state tax lien that had been resolved several years prior to applying for the policy.
The Florida legislature took action to further protect homeowners from these types of sharp practices. The Florida legislature passed a bill that provides a bill of rights for homeowner’s and that prohibits this type of unethical sandbagging of policyholders. SB 708 passed unanimously in the Senate and passed 115-0 in the House and the Governor signed the bill. The legislation became effective July 1, 2014 as Florida Statute 627.7142.
While insurance companies clearly have the right to request background information that might be contained in a credit report, criminal background check and similar information, Universal failed to investigate such information in applications for coverage until after the insured filed a claim following a fire, water damage, storm or other loss. By the time the claim was actually filed, many policyholders had faithfully been making premium payments for years with an understanding they had been issued homeowner insurance coverage. The insurance company only investigated the so-called discrepancies or omissions in the application after the insured sought to have the insurance company cover a loss.
Because insurance companies essentially provide no product or services to consumers in exchange for premiums until a claim is made, these types of practices are extremely unfair for consumers. The insurance company can essentially collect premium payments indefinitely even though the carrier will ultimately deny any claim under the policy based on the inadvertent non-disclosure of a debt on a credit report. Because this information is readily available to the insurance company prior to deciding whether to provide coverage and calculate an appropriate premium based on the level of risk, insurance companies that engage in this form of unethical practice essentially provide nothing for the premiums collected.
The new law will also require insurance companies to provide homeowners with a one-page bill of rights when the insured files a claim. This resource will provide policyholders with information about their right and responsibilities when filing a claim.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].