By Lloyd Dunkelberger, Sarasota Herald-Tribune
TALLAHASSEE Some Florida consumers trying to make a claim on their long-held property insurance policies have had their claims denied and coverage canceled because of an old credit report. Others face lengthy legal proceedings — involving lawyers and court reporters — when they make a claim and also risk losing their policies if they don’t participate in the hearings.
Those and other issues were reviewed Wednesday by the Homeowners’ Policy and Claims Bill of Rights Working Group, a panel developing consumer-protection recommendations to offer the Legislature heading into next year’s session.
Florida Insurance Consumer Advocate Robin Smith Westcott, who is leading the group, said the aim is to heighten consumer awareness of the issues, as well as develop potential legislation. Many of the consumer complaints were heard in a series of public hearings that Westcott conducted with the Division of Consumer Services in the Department of Financial Services.
Some of the issues were also raised in the state’s recent decision to levy a $1.26 million fine against the state’s second-largest property insurer — Universal Property and Casualty Insurance Co. — for wrongly denying claims and canceling policies without adequate notice. Universal is challenging the state’s allegations.
The state’s order cited Universal for using information from their customers’ credit history to deny claims long after the underwriting process should have been completed — a practice known as “post-claim underwriting.”
Lawmakers also debated the issue this spring when Sens. Joe Negron, R-Stuart, and Arthenia Joyner, D-Tampa, managed to amend a bill to limit the use of credit records to deny coverage to 90 days after the policy is written. The bill failed to pass.
Insurance company representatives on the panel questioned how widespread the practice was and noted that the state seemed to have the authority to crack down on the practice as exemplified by the Universal fine — although that is being litigated.
But Westcott Universal’s use of the practice on some its roughly 550,000 policyholders underscored the need for a reform.
“Consumers are very vulnerable in this process,” Westcott said. “We can make it very clear in the law what we will accept and not accept, so consumers who are going through the everyday process are protected.
”Group members acknowledged the need for insurance companies to be able to question information originally provided by policyholders to prevent fraud or misrepresentation. Westcott said a legitimate example would be a case in which a homeowner failed to disclose a welding business on the property before making a fire-damage claim.
The working group may need to define what information would be “material” in allowing an insurance company to deny a claim based on the information in the original policy application.
Bill Newton, head of the Florida Consumer Action Network, said consumers need “certainty” in the claims process. “We need to know if we’re paying our premiums that our house is insured,” he said.
The working group also discussed the growing use of a practice known as an “examination under oath.” It happens after a claim is filed and the insurance company requests policyholders to appear in a deposition-like proceeding where they can be questioned by lawyers, with the proceeding formally recorded by a court reporter.
If the policyholder “unreasonably” refuses to participate they could face not only the rejection of their claim but the loss of their policy.
Lawyers who represent policyholders said the use of the formal examinations is growing and that some companies are using them to discourage claims.
But Melissa Burt DeVriere, a lawyer for Security First Insurance Co., another major Florida property insurer, said her company rarely uses the procedure because it can be costly. Over the last 2-plus DeVriere said her company, which has 180,000 policyholders, has only used it 138 times.
“It is in the insurance companies’ best interest to settle meritorious claims,” DeVriere said. “We want to make sure our customers are happy.”
Westcott said consumers can protect themselves by following two basic guidelines. The first is to contact their insurance company and file a claim if they have a problem. The claims process sets in place a set of guidelines for the insurer as well as the insured, she said.
Second, Westcott cautioned consumers who are in the middle of a damaged home or property from immediately signing contracts with contractors, adjusters and other groups that are offering aid. “That has led to many, many things going wrong in this claims process,” she said.
“Consumers beware,” she said.