Who thinks Section 627.7011 of the Florida Statutes (entitled Homeowners’ policies; offer of replacement cost coverage and law and ordinance coverage) applies, or was at least meant to apply, to all types of residential insurance policies? I do, but my recent experiences suggest that…
…most, if not all, insurers do not. In a Hitchcock-like voice, “this is a cautionary tale.”
There once was an insured named John Doe. Mr. Doe’s house was insured under a dwelling policy. One day, Mr. Doe’s roof was damaged. The next day, Mr. Doe notified his insurer of the loss. Months later, the insurer said “yep, Mr. Doe, your roof needs to be replaced and that will cost $20,000, but we are only going to pay $13,000 because $7,000 is needed to comply with applicable ordinances or laws and your dwelling policy does not include such coverage… so, yeah, good luck with that.” Mr. Doe was blindsided by the insurer’s denial of the ordinance or law coverage needed to effectuate roof replacement. Why was Mr. Doe blindsided? Because the insurer did not, prior to binding Mr. Doe’s dwelling policy, offer ordinance or law coverage to him or obtain his written rejection of such coverage. Why did the insurer behave this way? The insurer contended that dwelling policies are not subject to Section 627.7011’s pre-binding requirements (a/k/a/ policyholder safeguards). The insurer’s tunnel-vision, of course, was focused on Subsection 5 of Section 627.7011, which provides that
(5) This section does not:
(a) Apply to policies not considered to be ‘homeowners’ policies,’ as that term is commonly understood in the insurance industry.
And, not surprisingly, the insurer contended that “homeowners’ polices” are commonly understood to include only HO (insert number) policies. I believe, however, that “homeowners’ policies” are commonly understood to include all kinds of residential insurance policies, and it seems the Florida Office of Insurance Regulation shares my belief.
It appears the Legislature may have heard the OIR, at least a little bit. The above-hyperlinked OIR article was written in January 2006. In 2006, the Florida Insurance Code (Florida Statutes, Title XXXVII, Ch. 624-651) was amended to include a definition of “homeowner’s insurance.” More specifically, Subsection 5 was added to Section 631.54 and provides that “homeowner’s insurance” is “personal lines residential property insurance coverage that consists of the type of coverage provided under homeowner’s, dwelling, and similar policies for repair or replacement of the insured structure and contents, which policies are written directly to the individual homeowner.”
Statutory construction and legislative intent arguments, however, should be your last resort. Your first resort is to heed this cautionary tale so as to avoid having the wool pulled over your eyes during the pre-binding process.