Picture this. You have retained counsel to assist in enforcing your claim under your insurance policy. After a favorable appraisal, and payment of that award by the insurer, you receive a notice of nonrenewal stating that the insurer is electing not to renew the policy as “the risk no longer complies with underwriting guidelines.”
This is the situation many policyholders find themselves in after successfully disputing a claim against the insurer. The issue is whether there is any recourse for those who are left without coverage and unable to obtain a comparable policy.
While theoretically it may be possible to bring a bad faith nonrenewal action against an insurer, it remains virtually untested. However, Florida statutory law contains multiple provisions that could provide a basis for filing this type of claim. One example, as explained by Merlin Law Group attorney Larry Bache, shows that “Florida Law does not allow insurance companies to nonrenew your policy because you suffered a sinkhole loss.”1 Specifically, Florida Statute 627.707(7) states:
An insurer may not nonrenew any policy of property insurance on the basis of filing of claims for sinkhole loss if the total of such payments does not equal or exceed the policy limits of coverage for the policy in effect on the date of loss, for property damage to the covered building, as set forth on the declarations page, or if the policyholder repaired the structure in accordance with the engineering recommendations made pursuant to subsection (2) upon which any payment or policy proceeds were based. If the insurer pays such limits, it may nonrenew the policy.
This is likely welcome news for those afraid of losing their coverage due to proximity to a sinkhole, but what about policyholders who have incurred damage due to a hurricane? Florida Statute 627.4133(3) provides:
Claims on property insurance policies that are the result of an act of God may not be used as a cause for cancellation or nonrenewal, unless the insurer can demonstrate, by claims frequency or otherwise, that the insured has failed to take action reasonably necessary as requested by the insurer to prevent recurrence of damage to the insured property.
A similar prohibition on nonrenewal due to a successful water loss claim. Is found in Florida Statute 627.4133(6):
A single claim on a property insurance policy which is the result of water damage may not be used as the sole cause for cancellation or nonrenewal unless the insurer can demonstrate that the insured has failed to take action reasonably requested by the insurer to prevent a future similar occurrence of damage to the insured property.
Whether policyholders have suffered a hurricane loss, water loss, or other covered loss under their policy, it seems apparent by the language of the statute that insurers are prohibited from considering those claims as the sole justification in their decision to nonrenew a policy. Policyholders should be wary when their insurer sends a notice of nonrenewal immediately following a successful claim and should seek prompt legal assistance to best protect against financial burdens the nonrenewal may cause.
1 Larry Bache, Unless They Pay Policy Limits, Florida Law Does Not Allow Insurance Companies To Nonrenew Your Policy Because You Suffered A Sinkhole Loss, But This Does Not Stop Carriers From Trying, (April 13, 2015).