We are continuing our discussion from our last post. The subject is a class action lawsuit filed in a Florida federal court in which the plaintiffs say their homeowners insurance company increased their coverage and raised their premiums without their consent. Generally, state law dictates that an insurance company notify policyholders of any change in coverage in writing, allowing policyholders enough time to cancel their policies without incurring penalties.
The insurer in this case raised the coverage following a change in Florida state law. The problem is not just that the insurer did not give policyholders any notice or ask for their consent before the coverage — and the premiums — increased, but also that the law did not require the change.
An insurance policy is a contract between the insurer and the policyholder. While the policyholder does not have a lot of room for negotiation of the particulars, the policyholder is protected by the insurance company’s obligation to perform under the contract. The policyholder is also protected by state laws that require insurers to include certain consumer-friendly provisions in their policies.
The coverage in question is “law and ordinance” coverage. Homeowners may not even realize their policies include this coverage, but it is actually quite important. The laws and ordinances referred to are building codes. Say your home was built in Miami in the late 1980s. Your contractor made sure everything was up to code. Ten years later, a fire destroyed the kitchen and part of the first floor.
Hurricane Andrew had changed everything in those 10 years. Building codes had been completely revamped. It would be a code violation to put your house back to the way it had been; you need to make sure everything is up to current building code. But the new materials are more expensive than the old ones would have been. Lucky for you, your homeowners insurance includes law and ordinance coverage that will pay the difference. The coverage’s limit is a certain percentage of the value of your home.
Which brings us right back to the lawsuit.
To be continued….
Source: Law 360, “USAA Hit With Suit Over Home Insurance Coverage Boost,” Linda Chiem, March 29, 2013Share