Homeowners insurance is an invaluable form of financial security against damage to the family home and its contents. Although the loss of homeowner's insurance can create significant hardships, the loss of coverage can take different forms. While homeowners should move quickly to replace coverage when it is lost, non-renewal and cancellation are very different. Policyholders are advised to understand the difference between these distinct ways that a policyholder can suddenly lose coverage.
Generally, insurers cannot cancel a homeowner's policy that has been in place for longer than sixty days unless evidence establishes either of the following:
- The insured significantly misrepresented facts or engaged in fraud when providing information in the policy application.
- The insured fails to pay the policy premium.
By contrast, there are no similar restrictions on the insurance company’s right to decline to renew a policy where the term of the policy has expired. While state laws vary on the precise rules, insurers must give notice a minimum number of days before expiration and provide an explanation for the decision not to renew the policy. An insured who feels that he or she has received an inadequate explanation for the decision to drop a policy or an unfair excuse might want to contact the insurer’s consumer affairs department. If the insured is not satisfied with the response from the insurance company, the next step is to contact the state insurance department.
Common justifications provided for the decision to drop a policyholder include the discontinuation of a particular type of coverage or the decision to reduce the insurer’s number of policyholders in a specific geographic region. For example, Citizens, Florida’s homeowners insurance carrier of last resort, recently off-loaded a significant number of policies by shifting clients to “take-out insurers.” In other words, many decisions not to renew a policy have nothing to do with the status or actions of the insured. If a policyholder misrepresented facts or otherwise did something that significantly impacts the magnitude of risk for the insurer under the policy, the policyholder may experience a significant increase in premiums or a notice indicating that the coverage will not be renewed.
Policyholders sometimes receive a notice that their claim is being denied and that the policy is being rescinded because of misrepresentation in the application or an alleged failure to make a premium payment. Sometimes these grounds for denying a claim constitute mere “pretext” to avoid paying a legitimate claim. Florida law has recently changed to protect policyholders whose homeowner's policy is conveniently “rescinded” based on background information that was a matter of public record at the time the application was submitted. The purpose of this reform was to prevent insurance companies from accepting premiums month after month from policyholders when no claims are being filed only to deny a claim based on such information at the time of a loss.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgoby 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].