Post-Loss Underwriting Is an Underhanded Insurer Practice That Merits Legal Advice

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

One of the most common questions we receive is whether legal representation is necessary to take on an insurance company in a homeowner’s insurance claims dispute.  This is an answer that requires some degree of nuance for complete accuracy.  By way of analogy, there is no law that prohibits homeowners from rewiring their own home, but the decision to do so can be costly and dangerous.  The decision to handle a contentious claims dispute with an insurance company without legal representation is even riskier.  Along with the possibility of running afoul of complex contractual language or legal requirements, insurance companies have a team of adjusters, investigators, experts, and attorneys all devoted to minimizing the amount carriers pay out in claims.  This blog post provides just one example of an underhanded strategy used by insurance companies to deny claims – post-claims underwriting.

The case of Mora v. Tower Hill Prime Ins. Co. involves a case of an insurance company sandbagging an insured by waiting until a claim is filed and then scouring the policy application to find a post-loss basis to rescind (i.e. cancel) the policy.  The insured’s residence was damaged by sinkhole activity.  The parties did not disagree that the damage to the home was caused by sinkhole activity or that the policy covered such a loss as a covered peril.  However, the insured was compelled to file a lawsuit because the parties could not reach an agreement regarding the value of the loss.

At some point in the claim, the insurer noticed a pre-closing inspection report that indicated the home had pre-existing cracks in the stucco and drywall.  Because the insured had not disclosed these minor cosmetic blemishes when applying for their policy, the insurer contended that the policyholder misrepresented the condition of the home in the policy application.  The insurance company had its underwriter prepare an affidavit claiming that the policy would not have been issued had the true condition of the premises been disclosed.

Based on these facts, the insurer denied the claim under Fla. Stat. Section 627.409 which permits an insurer to rescind a policy if an insurer misrepresents facts in a policy application.  However, this is only true if the facts would have been material to acceptance of the risk or knowledge of the actual facts pursuant to a policy requirement would have resulted in the insurer denying the application for coverage in good faith.

The trial judge granted the insurer’s motion for summary judgment on the grounds that non-disclosure of the cracks were material misrepresentations based on the underwriter’s conclusory statements in the affidavit.  However, the appellate court reversed the trial judge because the cracking was a minor defect that is present in almost all homes as a result of settling.  The appellate court pointed out that if the minor cracking, which the insurer did not contend was caused by sinkhole activity, would have resulted in the policy not being issued, virtually no homeowners would have insurance coverage because it is a common occurrence caused by settling in new homes.  The court also emphasized that the affidavit was not sufficient evidence that the cracks would have impacted the insurer’s decision regarding the risk because there was no information about how the undisclosed facts would have factored into the underwriting process.

The reasoning of this decision is sound because no insurer would in good faith deny coverage because a home has minor settlement cracks in stucco or drywall.  Our insurance claims law firm invites you to contact us if your insurance company is engaging in this type of sharp practices.  J.P. Gonzalez-Sirgo handles property damage claims and bad faith claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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