At the request of the 11th U.S. Circuit Court of Appeals, Florida's Supreme Court has handed down a decision that commentators say is clearly anti-consumer. The case involved the language of a hurricane insurance policy that did not comply with Florida law. The plaintiff also alleged the insurer had breached the implied covenant of good faith and fair dealing.
As we have said often, insurance is a highly regulated industry. What many consumers may not realize is how far that regulation goes. For example, it wouldn't really surprise anyone that insurance companies have to meet certain financial standards -- they have our money, and we want to make sure they can cover our claims.
But few may be aware that Insurance companies must also submit rates and forms to the state insurance office for approval. And when it comes to forms, state law gets pretty specific: Application forms and insurance policies must contain certain language, and the state requires some passages to be writ large.
The laws are there to protect consumers. The terms of insurance policies are not as negotiable as other contracts -- it's usually the insurance company that decides what will be covered and how much it will be covered for. The consumer has two choices: yes or no. You rarely see a driver, say, and his insurance agent haggling over rates and policy terms. Insurance is more of a "take it or leave it" proposition.
To make sure insurance companies don't pull a fast one, then -- or, for cynics, just to lower the odds of that happening -- lawmakers and regulators ask for important things to be placed on the first page or in bold type. In Florida, a hurricane policy with a large deductible must include the following: "This policy contains a separate deductible for hurricane losses, which may result in high out-of-pocket expenses to you." The warning must be typed in all capital letters (THIS POLICY...), and the font must be headline-sized (18 pt. or larger).
In the case we're discussing, the question before the Florida Supreme Court was essentially, "So, what happens if an insurance company doesn't include the exact wording in 18 pt. type?"
In our next post, we'll discuss the court's response.
Source: The Republic, "Fla. justices rule no penalty for insurance companies that violate deduction notification law," Bill Kaczor, May 31, 2012