Last Friday the Florida Senate amended CS/CS/HB-635 and will send it back to the House for final approval. Of course, it may not pass the House (as amended) and thus may never become law, but…the practice one of the Senate amendments is designed to stop should be voluntarily abandoned by the one carrier whose actions gave rise to it in the first place.
The carrier is Florida’s largest private home insurer, Universal Property & Casualty Insurance Company (Universal). It’s practice, “post claims underwriting”, was the subject of a blog I wrote (A Rubik’s Cube: Post Claims Underwriting) in which I was careful to extol both the pros and cons of what Universal was doing.
The middle of the road, however, has never been comfortable for me and now that both the media and lawmakers have taken up Robin Westcott’s torch, it has turned painful. (See NOTE #1 below)
Besides, not only have Universal’s arguments begun to pale a bit, but… lawmakers are now involved which often means consequences well beyond the repair of one carrier’s alleged “egregious” behavior.
For me the tipping point was realizing that, regardless of price, coverage or financial security, I would not buy my insurance from Universal as long as it continued the practice.
You see, a number of years ago I put a concrete patio in my back yard. After the concrete was poured and I paid the contractor, he defaulted on his payment to the concrete company and a lien was placed on my house. I told the concrete company what happened thinking that was the end of it. None the less, and unbeknownst to me, the lien surfaced again five years later when I applied to the OIR for approval to be on the board of an insurance company. The OIR, the insurance company and the concrete company all understood my explanation and the lien was quickly removed and the matter resolved.
BUT…
…had I been insured by Universal, this episode could’ve lead to the denial of a total loss to my home from an unrelated peril, a fire for example. It should surprise no one that, if that occurred, my anger would not have been assuaged one scintilla by Universal’s adjuster explaining that the denial of my claim was…legal! In fact, I would’ve immediately called a lawyer (or two), Robin Westcott, the CFO and the Governor before drafting an amendment similar to the one adopted last week by the Senate. (See NOTE #2 below).
Heck, I might have even called a Public Adjuster!!
Again, I want to be fair to Universal, so…read my previous blog for all the details on its practice and the rationale supporting it. In doing so you may disagree with my updated point of view. But, you’ll also find it comes down to whether Universal (and other carriers so inclined) should use the 90-day “free look” period to conduct due diligence on the information provided in the application, or…wait and see if there’s a claim and then perform the due diligence–in essence, using the threat of a claim denial as incentive for the honest and careful completion of the application.
Conversely… Universal (and other carriers so inclined) could do what equally responsible insurance companies have been doing for almost a hundred years; charge a premium that reflects the additional cost of an admittedly few claims being paid because of your own lack of due diligence during the 90-day “free look” period!
Please note: my opposition to the practice is in spite of the company’s good intentions and uniform application of the concept.
Sometimes… financially sound, legal underwriting, even the kind that helps responsible consumers pay less, isn’t worth the bad press and the unintended consequences of legislated solutions.
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NOTE #1: Recent news accounts on Universal’s post-claims underwriting practices are not helpful to an industry that already has a horrible reputation:
Florida Senate moves against ‘abusive’ insurance practice
‘Reprehensible’ insurance practice sparks call for insurance commissioner, legislators to act
Customers protest tactics at state’s biggest private property insurer
State Insurance Consumer Advocate (ICA) Robin Westcott sent a letter to Insurance Commissioner, Kevin McCarty, requesting an investigation of Universal Property & Casualty’s claim practices and saying:
In the three cases that have been handled in my office, the policyholders have had insurance coverage with Universal Property and Casualty Insurance Company (Universal) for at least 18 months and up to four years and have had their policies cancelled or rescinded as of the original policy’s effective date for misrepresentation after they filed a claim. All cases involved previous financial issues such as bankruptcy or a lien which occurred up to four years before the consumer applied for insurance coverage with Universal.
NOTE #2: Senators Negron and Joyner moved the following amendment to CS/CS/HB-635, which was adopted.
…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…
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Another thing to consider on this is that the date of the “offense” is only used when compared to the date the application is signed not in regards to the claim date. Many of these denials would have been acceptable if the applications had been signed more recently. A judgement, bankruptcy, etc is a factor for 60 months. but that is from the application date. If a client was 48 months post judgement when they applied and in the 3rd year of coverage when the claim occurred they are more than 60 months out. if they had applied 1 or 2 years prior to the claim they would be covered. It is difficult when a carrier does everything they can to deny a claim but not until the claim occurs. These people (and their agents) thought they had coverage for years only to be rejected for something that has no bearing on the loss. Love your Blog.
John, your comments are very informative and helpful.
Now that we know the fix did not pass the legislature, it will be interesting to see how Universal handles it; either stubbornly pursuing its current course or doing what I think a majority of the industry would prefer, and…voluntarily abandoning the practice
It’s a cinch that the more that egregious cases come up, the more likely it is that the practice will be statutorily prohibited…eventually.
Thanks for reading.
Scott