Imagine losing your home in a devastating accidental house fire. Shock and devastation consume you. Now, imagine receiving a letter from your insurance company (the company that promised to cover this type of claim) denying your total loss, and even worse, the insurance company is accusing you of lying on your insurance application. This may seem an inconceivable nightmare, but it this has become reality for some insureds in Florida who thought they were covered by Universal Property and Casualty Insurance Company.
From talking to clients and working on these types of cases, we have learned that once a claim is called in, Universal starts the investigation with a very specific recorded interview. The adjuster taking the statement will generally ask questions about the loss but will also ask insureds about their background, financial condition, etc. The adjuster will ask underwriting questions from the insurance application. Universal also does a public records search on the insureds looking for judgments, liens, bankruptcies, arrests, etc. These searches go back five years from the date the original policy of insurance was purchased. Depending on these searches and the responses on the application and recorded statements, covered claims are denied because of an alleged application misrepresentation. The denial letter from Universal explains Universal believes material facts were misrepresented at the time of the application and alleges that had it known the true facts, it would not have issued the policy. The letter then includes the public record that Universal is purportedly relying on for the rescission. This document is generally a public record that was available to Universal at the policy inception and yet, Universal did not raise these issues until after a claim was submitted.
Insureds in Florida need to be extremely cautious because Universal may also send a check along with the denial letter. The check is not for a claim payment, it is the premium refund. Policyholders should not accept or negotiate this check if they want to dispute Universal’s denial. An acceptance of the premium refund can be considered an acceptance of the rescission. This check should not be deposited, and insureds need to pursue their legal rights.
The Consumer Advocate’s office is currently investigating these cases, but as reported in Claims Journal, only ten instances have been presented to the office. These alleged application misrepresentation cases are not just happening to fire victims, we are hearing from policyholders with various types of cases with various amounts of damage. If you know a Floridian who has received this type of response from Universal, share this blog post and ask them to contact the Office of the Consumer Advocate. I also invite you to post your comments and experiences below or send an email with your information.