Public adjuster Guy Cohen and I discussed various issues of property insurance and adjustment at a recent lunch. He raised a very serious topic of coverage gaps being created in the small print of property insurance policies which Florida insurance regulators are allowing to be sold. He thinks that these coverage gaps are the most serious issues facing insurance consumers. He is not alone.
He provided me a number of samples. Here is one from Tower Hill:
This policy provides up to $10,000 of coverage due to Water Damage caused by accidental discharge of water from plumbing or appliance. All other Water Damage is excluded except Water Damage caused by water penetration into the house when the water penetration is a direct result of damage caused by wind or hail.
What are restoration contractors supposed to do when a significant water loss happens? A $10,000 limit does not do much for a policyholder when a major water loss occurs. While infrequent, I have seen homes completely destroyed from appliances which break, and water then pours throughout.
I remembered that the American Association of Public Insurance Adjusters (AAPIA) has made the issue of vanishing coverage and coverage gaps a major legislative and regulatory issue. So, I called AAPIA’s Holly Soffer about their agenda on this issue. I got an earful of information. She confirmed that there are many examples of insurance companies adding endorsements which remove standard coverages and limitations. She told me that AAPIA is supporting the efforts of Untied Policyholders in this arena.
I then discussed the issue with Amy Bach of United Policyholders. She told me that they are working with academics and the NAIC about the issue. Many of the insurers are filing forms which the various departments of insurance are not catching. These forms contain significant changes to standard policies. She told me that one endorsement excluded “wildfire” from the fire peril.
Propagandist insurers, especially the surplus and excess liens insurers, are using free market terms such as “consumer choice” and “custom coverage” to sell and justify these crazy policies. The surplus lines industry is even selling policies which make policyholders arbitrate claims far away from where the property is insured and include language that switches the applicable law to another state. Many of the endorsements effectively make the insurance being sold illegally less than what is required by federal mortgage regulations—both residential and commercial.
This has to stop. State legislatures, the NAIC, regulators and even federal banking regulators need to have a comprehensive plan to prevent this wholesale attack on what used to be standard and required property insurance coverages. I will write more about this burgeoning issue. I applaud Guy Cohen, AAPIA, and United Policyholders for raising the issue. I would suggest that like-minded contractors and public adjusters join us in this fight against coverage gaps caused by unfair endorsements with non-standard limitations and exclusions to traditional coverage.
Thought For The Day
Protest actions and propaganda are two slightly different things