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Florida Senate Moves Against 'Abusive' Insurance Practice

4/27/2013
By: Charles Elmore
Palm Beach Post

The Florida Senate took action Friday to stop an insurance practice that “appalled” a key legislator — denying claims and canceling policies based on credit information left out of an application, even after a customer has paid premiums for years.

The Senate passed an amendment to HB 635 saying after 90 days insurers cannot use such information to deny claims or void coverage. The House and governor would have to concur, but it marks the most direct action yet on an issue spotlighted by reporting in The Palm Beach Post last month.

The state’s largest private property insurer, Universal Property & Casualty Insurance Co. of Fort Lauderdale, has canceled policies instead of paying claims in a growing number of cases, leaving consumers stunned and financially devastated after such events as fire or water damage that marred or destroyed homes, The Post found. Universal’s parent company reported profits grew 50 percent to $30 million last year, even as the insurer refused claims and dumped policies for matters consumers or agents said they did not know about, forgot or considered trivial, such as a tax lien paid off years before in another state.

“This practice should not occur in this state,” said Sen. Joe Negron, R-Stuart, whose advocacy helped turn a measure withdrawn in committee to a unanimous voice vote in support on the Senate floor.

Universal is Florida’s biggest insurer after state-run Citizens with more than 550,000 customers in Florida, and has more in Palm Beach (66,373) than any other county. A company spokesman had no immediate comment Friday, but Universal officials have defended the practice and said it was up to the customer to provide correct information on applications.

Former customer Michael Wyman, forced to pay out of pocket for more than $10,000 in water damage in Delray Beach, told The Post the company’s behavior is “horrible.” A Gainesville special-ed teacher said she lost the use of her home to fire but the company won’t pay.

Negron co-sponsored an amendment to HB 635, which comes up for a final vote in the Senate as early as Monday.

On the Senate floor Friday, Negron said a whistleblower who formerly worked at an unidentified company told the state’s insurance consumer advocate he was directed to find any reason in a consumer’s records to deny claims above a certain threshhold.

Robin Westcott, the state’s insurance consumer advocate, said checking records at sign-up is appropriate but using it to deny claims is “reprehensible.” She asked state regulators to investigate in October and has worked to get the measure included in legislation.

In a Senate committee last week, Universal lobbyist Steve Roddenberry said checking applications isn’t always a simple process, arguing the amendment had not been widely vetted and should have more time for consideration. Another industry lobbyist, Tim Meenan representing Nationwide Insurance, suggested if the practice is associated with one company rather than others, regulators should investigate that firm without necessarily requiring new law.

Westcott argued allowing the practice to go unchallenged could send a go-ahead signal to others.

At the time, Sen. Arthenia Joyner, D-Tampa, agreed to withdraw the amendment out of concern it could slow down a bill that deals with what types of insurance companies must contribute to the Florida Hurricane Catastrophe Fund. At that meeting, Negron questioned the need for the withdrawal and said it only takes five minutes to run a credit report, for example.

But waiting to check when a claim is filed could enrich a company at the customer’s expense, he said.

“It’s nice to have in your hip pocket,” Negron said, “if you don’t want to pay a claim.”

What It Says

The amendment to HB 635 passed Friday by the Senate says “an insurer that uses a credit report, public record or other public information to determine whether there is a misstatement or omission in the application for insurance related to the insured’s credit history must make such determination within 90 days after the effective date of the policy. After such 90 day period, an insurer may not cancel or rescind the policy or deny coverage for a claim based on a misstatement or omission in the application regarding the insured’s credit history which the insurer could have reasonably discovered by a review of the insured’s credit report, public records, or other public information.”

In March, The Palm Beach Post featured a front page report on Universal with interviews of customers, adjusters and others who said their claims were denied and policies canceled because of “horrible” company practices.