Tag Archives: Citizens Property Insurance

Material Misrepresentation in Insurance

What is material misrepresentation in insurance?

When filing an insurance claim, it might be a shock to be informed that your insurance company is attempting to assert a material misrepresentation defense against you, instead of interviewing you about your claim. So what is material misrepresentation in insurance? Should you be concerned?

When your claim can be canceled

In the state of Florida, an insurance company may rescind (or cancel as though it never existed) your insurance policy if they determine you have mispresented the underlying facts of your home and its history. If your insurance company believes that you withheld facts from them that would either cause them to deny your policy or charge you a higher premium, they can state they are not obligated to cover your claim or even your policy.

While this is a scary thought, keep in mind that while they may feel this is within the realm of possibilities, they must prove that you purposefully lied to them, and this is very difficult. This is because they must prove that you specifically told them something in your description of your home that was untrue.

What qualifies as lying?

This is where you’re likely in luck. As aforementioned, they must prove that you reported something that was untrue. Therefore, if your home had prior sinkhole damage but you didn’t know, you cannot be held liable for this information.

Second, you cannot be held liable for information that the insurance company did not ask for. If, for example, you were aware of a sinkhole that had opened next door to the house, but the insurance company never asked if there was a sinkhole next door, you cannot be held responsible for the insurance company’s negligence. It was their duty to get a well-rounded picture of your home, not yours!

Third, only information that has been confirmed and stated can be used against you. For example, if someone advised that “you better have that checked out” in reference to a crack in the foundation, it does not state that there are any issues with the foundation, nor any history of issues. There is no reason to expect a layperson to understand what a crack in the foundation might mean so it cannot be assumed that you withheld information.

Your home’s background is the insurance company’s responsibility

The basic idea is that material misrepresentation in insurance cannot be claimed about information that your insurance company did not directly ask you for. As long as you answered all the questions that were presented to you to the best of your ability, you have no reason to be concerned about your claim or policy being canceled.

While insurance applications tend to be ambiguous and poorly written, it must be proved that you outright lied in order to confirm material misrepresentation, and this is very difficult to do.

Once they press you for whether or not you told them any particular facts about the home, questions like the following arise:

  • Did they inspect the home?
  • Was the appearance of the damage normal for homes of its age?
  • Did you buy the home for a reasonable value?

If you bought the house at its actual market value and later it is determined the damage was sinkhole related, who would believe you would do this intentionally?

You Might Lose Sinkhole Coverage in Florida

Sinkhole coverage in Florida

You’ve purchased a home in Florida. You’ve been recommended a couple insurance policies, you’ve looked them over, and chosen one that you’re happy with. You shouldn’t have to worry about your coverage as long as you pay your premiums on time, right? Unfortunately not. As of January 1, 2010, you may lose your sinkhole coverage in Florida if you don’t pay attention.

Keep an eye on renewals

Homeowners insurance policies are annual policies that renew from the annual date you purchased them. Most of the time the process is without incident as homeowners usually pay their insurance through the escrow with their mortgage company.

When the policy renews, you will receive a notice from the insurance company about 45 days before the new period with changes noted in a large stack of endorsements, which are specific changes that will be made to the policy.

These are usually accompanied by a list of endorsements that apply as well. You can peruse these, and then decide whether or not you want to change the coverage. Of course, it’s generally advised that a homeowner looks over their policy even if they don’t wish to change it, but many don’t.

Don’t get tricked

For homeowners in Pinellas and Hernando Counties, a very significant thing occurred as of January 1, 2010. Due to a new law signed, there will be an automatic change to all homeowners policies in these counties. Under the new law, you will automatically lose your sinkhole coverage, unless you request that it be included into your policy.

Unlike other perils, such as fire or hurricane, the State of Florida is playing a game of cat and mouse – but only with the homeowners in these two counties. This was arguably because Citizens Property Insurance used their lobby to get the Florida Legislature to see how many homeowners they could catch who do not read their annual renewal notices.

It begs the question why they did this in two of the most common areas where sinkhole activity is found. Of course, they did it so that Citizens and other insurance companies can avoid their legal responsibility to offer sinkhole insurance coverage.

If you lose your sinkhole coverage in Florida

If you fail to notify your agent before your coverage lapses, you’re stuck in a pickle. Most companies are requiring that any insureds who allow a lapse in their sinkhole coverage can only get it back by paying for a cost-prohibitive sinkhole investigation. These cost between $8,000 and $12,000.

However, if you do one, in the hopes of getting coverage back, and the investigation finds some evidence of sinkhole activity of which you had no prior knowledge, you are most definitely going to be denied coverage. As you can see, insurance companies are handing you a double-edged sword if you don’t watch out.

How Much Insurance Coverage Do I Need?

How much insurance coverage do I need?

When purchasing property insurance, you should make sure to insure the home for an amount that would permit you to reconstruct the home, if necessary. This would include the cost of the home when you paid for it or the amount you paid if you constructed it yourself.

You should consider any improvements or enhancements, which would include simple things, such as new light fixtures, draperies, fixtures, flooring, paint treatments, or anything else that would increase the value of the home.

For luxury homes

For more expensive homes, it is often difficult to increase the coverage for the value of the land itself because the land is not insured, only the house is. But this does not mean that you cannot ask for increased coverage for these issues.

Suffice to say, you never want to under-insure your property – not only because you may need it, but also because the increased premium for more coverage is very little. As odd as that sounds, increasing the amount of property insurance coverage itself does not impact the premiums as much as changing the kind of coverage you have.

Your best bet

The best thing to do is to ask how much more the premium is for a particular amount and see how much it would increase for more coverage.

Your focus should be on the “Coverage A” limit on your policy. While you should assure that the “Replacement Cost” endorsement is in your property insurance policy, do not rely on it as a basis to state the amount of coverage you have.

What your insurance company wants

Insurance companies are funny; they want your money but not too much. They want you to believe these “supplemental” endorsements are good enough to avoid increasing the amount of Coverage A coverage under the policy.

If an insurance agent tries to get you to limit your coverage in any way, you should shop around. As a public service, we often consult with property owners regarding the amount of coverage they need, and there is almost always a great deal of misinformation floating around about how your property insurance policy covers you. If you find you have sinkhole damage later, it is going to get pretty interesting.

Florida Legislators Reintroduce 2010 Consumer Choice Act

Is the Florida legislature doing anything to resolve the current insurance crisis?

In June 2009, Florida Governor Charlie Crist vetoed the Consumer Choice Act, which would have allowed private insurers to establish rates independent of the Office of Insurance Regulation (OIR). In his veto message, Crist reasoned that the bill would allow larger, private insurers to “cherry pick,” or sell only to profitable policy holders, while forcing smaller, less capitalized companies and state-run insurer Citizens Property Insurance to underwrite riskier policies. This was and is an important issue in the sinkhole claim arena, especially in counties like Pasco, Pinellas, and Marion, where sinkhole activity is common.

On December 9, 2009, Sen. Bennett and Rep. Proctor introduced the 2010 Consumer Choice Act, which includes changes to the previously vetoed act. The provisions of the proposed legislation are as follows:

  • Allows private insurers to use rates different from rates otherwise set by the OIR. This provision, however, does not apply to policies that are subject to consent decrees or other agreements. For instance, the legislation would likely prohibit State Farm from obtaining increased rates for those policies affected by its consent agreement with the OIR allowing for a flat rate increase of 14.8%.
  • Addresses deficits incurred by Citizens Corporation and requires the imposition of uniform policyholder surcharges of up to 15 percent of policy premiums to curb yearly deficits, before emergency surcharges are assessed.
  • Requires Citizens to obtain a signed acknowledgment of surcharge and assessment liability from insureds who obtain or renew their policies.

Supporters of the legislation believe that these changes adequately address past concerns and will allow all private homeowners’ insurers to offer a policy at a rate that the provider believes will adequately protect the consumer.

Have a burning question you’d like to ask about sinkholes? Let us know.

Is Citizens Home Insurance Good for Sinkhole Coverage?

What is Citizens Home Insurance?

Citizens Home Insurance is one of the options you can elect for when it comes to ensuring your home. We have supported a variety of clients in claims against Citizens, so it’s safe to say we’re not a fan. You may be wondering: if we know Citizens is so bad, why do homeowners choose their coverage?

Citizens is a state-sponsored insurance company

The difference between Citizens and any other homeowner’s insurance company is that Citizens is not a company formed by private investors, but sponsored by the state. Citizens Home Insurance was created by the State of Florida in response to private insurance companies electing not to cover properties located in certain areas.

In areas like the coasts of Florida, homes are at a significantly higher risk of damage. Because of this, private insurance companies did not want to cover areas where the risk of potential damage exceeded the market. However, homes need home insurance. Therefore, Citizens Home Insurance was born. This company is essentially the “last resort” when it comes to covering your home for damage, which is also why you cannot depend on them to protect your home.

Can I sue Citizens for negligence?

Unfortunately, because they are not a private company, they do not have to play by the rules that private companies must play by. This means that it’s much more difficult to get the care you deserve if Citizens is not providing decent coverage; even if you sue them for breach of contract, you cannot seek any kind of punitive damage against them.

Because Citizens is state-sponsored, insureds under their care may be subjected to the legislative whims of the State of Florida. Further, fighting for what you deserve means fighting the State, not a private company, and is therefore that much more difficult. The State is obviously much more protective of their own insurance company, and may not be so quick to bend for customer service.

If your home is covered by Citizen’s Insurance and you are not getting the care you need, please do not hesitate to contact us for a free consultation