Last month, the Florida Senate Appropriations Committee unanimously passed Senate Bill 708. If the bill becomes law, part of the language would curb Universal Property Insurance Company, and all insurance companies in the state, from alleging certain application misrepresentations.

Currently, Florida residential property insurance companies have 90 days to perform underwriting on an insurance risk – the specific dwelling and insured it is offering insurance coverage for – but what happens during the 90 day period seems to vary greatly depending on the insurance company.

As a way of background, the 90 day underwriting period is a time for the insurance company to truly look at the property and evaluate whether insuring that property is a gamble it wants to take. Typically an underwriter working for an insurance company will use specialized software to calculate risk, analyze and rate insurance applications, recommend approval or denial, and set the premium accordingly. Insurance underwriters set the criteria to screen applicants, and then either approve or refute the final decisions. Automated software systems are often used.

The current language in this bill regarding application issues begins on line 134:

For residential property insurance, if a policy or contract has been in effect for more than 90 days, a claim filed by the insured cannot be denied based on credit information available in public record.

Universal Property Insurance Company’s application includes the following background questions:

As you can see from this sample redacted application, the X’s marked in the boxes are not handwritten but are computer generated. The applicants do not fill this policy out online, so it is either Universal or the insurance agent that fills in the X’s, or they are pre-filled on the form. Because of the way applications are filled out and the locations of the signatures on these forms, I am a firm believer that the applicants/Florida homeowners are not always asked these questions before insurance is quoted and bound.

As you can see from the application, Universal wants to know about bankruptcies, liens, judgments, repossessions, felony convictions, suspended drivers licenses, prior lawsuits against an auto insurance or a homeowners insurance company, DUI arrests, assault, battery, disorderly conduct arrests, and what types of dogs potential insureds have on the property.

I will let you in on a little insider information…Universal is asking these questions because it does not want to insure you if you answer “yes” to any of these background questions (besides the question about dogs; then the answer is: it depends).

Since Universal apparently bases its acceptance of your home for insurance on how you answer these background questions, the agent should spend extra time going over these important questions, Floridians should tell the truth, and Universal should do an underwriting workup on these questions within the first 90 days. But if Universal did this…it wouldn’t make as much money in premium dollars.

Today we can Google online court records and use Facebook or other social media to obtain a lot of information about both property and people with just a few key strokes. Not long ago this research may have required a lot of time and even travel to obtain, but it is now available on your smart phone. Think about this in the context of the second largest residential property insurer in Florida, with all sorts of access to records, databases, apps, and connections with other insurance companies at the touch of a button. However, for some reason, it appears Universal doesn’t look into the background of its applicants turned insureds or check to verify information until a claim is called in and money might actually have to be paid out instead of collected.

Once a homeowner makes a claim, the first thing that the adjusters seem to be trained to do is ask the panic stricken homeowners these specific background questions during a recorded statement. Universal often finds some kind of discrepancy and then alleges an application misrepresentation. Universal has been popped for this post-claim underwriting, the practice of looking for a reason not to insure the property after the claim. In many of the files we have reviewed, Universal does its review of the applicants from many public sources or easily attainable insurance records after the loss and then uses this information as a basis to deny the claim. The process of reviewing an application submitted by a policyholder is underwriting, but this must be done within 90 days of binding the policy.

Many policyholders that have shared their applications and denial letters with Merlin Law Group demonstrate this trend. Universal sends a denial letter to the insureds and includes some document that it has found showing the homeowner did have one of the conditions listed in the background questions at the time of the loss (e.g., a bankruptcy or lien, etc.). Universal uses this as the reason not to pay the otherwise covered claim, and alleges that the insured lied on the application. Sometimes the denial letter includes the supposed lie, but other letters do not. Universal claims that if the insured had not made this alleged misrepresentation, it would have never issued insurance, and then the policy premium is refunded back to the insured. The documents that are often provided with the denial letters are easily accessible records, court filings, or other documents that were available online for anyone to see at the time the insurance was purchased. Universal’s representatives found this information right away after the claim was denied, so it is not as if this was difficult information to uncover. Or perhaps, Universal had this information all along and was just holding it in its file for future use.

Some of our industry readers may think it is a problem that a homeowner failed to disclose something as important as a lien or a judgment. The flip-side argument is if a lien or a judgment is so critical, the carrier should check the records and make sure before the 90 days is over. The filing of a lien or a judgment doesn’t always mean a policyholder had adequate notice, understood what the document was legally classified as, or may be unaware of something filed by a co-applicant.

But it Gets Worse

What may be most troubling is, despite what one may think is important to an insurance company, (open debts) Universal has voided policies when the applicants have been found to have satisfied liens and judgments in their background. The way the questions are written is very troubling because its not clear that Universal will count a satisfied liens against you. Consider this scenario: if I pay a contractor for work on my home and the contractor fails to pay a subcontractor, the subcontractor may file a lien against me, the homeowner. The situation gets worked out and eventually the subcontractor gets paid and withdraws the lien. I never failed to live up to my contractual obligations, I don’t pay for the work twice, and I am in good financial standing.

Years later, when trying to find a company besides Citizens to insure my house, I look at the question on the insurance application that asks,

Has any prospective insured been subject to any lien in the past 60 months?

I answer “No” – I was not subject to a lien and it is withdrawn or satisfied now.

But Universal doesn’t agree and has denied claims for satisfied liens. And remember, this is all public record Universal could have looked at and discussed with its applicant if it had an issue with the lien. A proper insurance company would have sorted this out during the first 90 days.

In May 2013, Universal Property & Casualty was fined 1.26 million dollars after an extended market review found new and repeated statutory insurance violations of this nature. Although Universal initially challenged the fine, a consent order was signed last week and Universal paid this slap on the wrist.

In prior posts I have spotlighted Universal Property and Casualty for this practice:

Universal is not the only insurance company that has raised public information or insurance industry information as a basis for not paying a claim. Thankfully, the Senate has recognized this bad act but the bill needs to be passed in order for this chapter of “illusion of insurance coverage until you really need it” to close. If you have received a denial of your claim for an application issue, please contact experienced coverage counsel.