When policyholders obtain insurance to cover their residence for damage from fire, storms or other perils, they reasonably assume the policy provides the agreed upon coverage. The average homeowner insurance policy can be an incomprehensible and voluminous document. However, mistakes do occur when policies are drafted that can have devastating consequences for homeowners who experience damage from a covered peril. Sometimes these mistakes are an unintentional failure to include agreed upon forms of coverage or typos involving critical information. The bottom line is that policyholders should review their policy in its entirety.
What If the Policy Includes Mistakes?
An insurance policy is essentially a contract between parties of radically different bargaining power. The policyholder has obligations, such as the payment of premiums while the insurance company agrees to pay for the cost of specified damage to the policyholder’s property.
The insurance company drafts the contract terms without input on the drafting from the policyholder. However, the policy should memorialize the agreement between the insured and the insurance company. The superior bargaining power of the insurance company combined with the fact that the insurance company drafts the policy means that ambiguities generally will be construed in favor of the insured. However, errors that are not caught when this agreement is reduced to a written contract (i.e. the insurance policy) can result in the denial of claims and potential litigation. An example of such mistakes might include:
- An incorrect street address for the property subject to coverage
- Omission of a type of coverage, such as extended business interruption insurance, which is intended to cover continuing losses until a business has fully rebounded from its period of non-operation
- Policy limits that do not comply with the agreement between the insured and the insurance company
These are only a few examples of the ways that your insurance policy can be inaccurate. Obviously, any of these types of mistakes could cost a policyholder tens of thousands if not hundreds of thousands of dollars.
What Is Reformation of an Insurance Policy?
When a mistake occurs during the process of reducing the agreement to writing, the parties by agreement, or a judge when the parties cannot agree, have the power to reform the terms of the policy. As one might imagine, insurance companies become less than cooperative about such changes once an insured must make a claim for damage to the covered residence. The anticipated non-cooperation of an insurance company upon filing of a claim is predictable, so an insured needs to read the policy as soon as it is received. If the insurance policy is not an accurate reflection of the agreement between the parties, the policyholder should alert the insurance agent and seek to have the error corrected immediately.
While a homeowner policy might make less than scintillating reading, you do not want to get sandbagged by your insurance company when you need to make a claim. If you have questions about your property damage claim, I can analyze your situation and advise you of your options. My law firm handles disputed claims 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.