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Homeowners left high and dry by insurers that canceled coverage

After receiving word that a predominant Florida insurance company had begun canceling the policies of homeowners only after they filed a claim, the state's Consumer Advocate called for an investigation, resulting in one case of the company paying the insured's claim and another case in which they refused to pay.

Florida's Consumer Advocate received 10 complaints after homeowners insurance policies were canceled. In each case, the homeowners had filed an insurance claim, at which time the insurance company reviewed the credit history of each homeowner and then denied the claim and canceled the policies retroactively.

This was true even in cases in which the homeowners had faithfully paid their premiums for anywhere from 18 months to four years. The consumer advocate described this practice as both unfair and abusive, further noting it could harm not only homeowners' financial stability but the state's economic recovery as well.

According to Florida law, insurers can only void and cancel a policy from the date it was issued if the check written to cover the first premium is returned due to insufficient funds. Insurance companies are violating the law and engaging in an unfair trade practice when they void policies after they have been in effect for some time and after policyholders have paid their premiums.

While the insurance company argues homeowners must give truthful statements when applying for insurance, the consumer advocate counters that it is the responsibility of insurance companies to check credit reports before issuing policies. She adds that their failure to do so is not only lazy, but gives homeowners a false sense of security.

The denied claims and retroactively canceled policies may seem like plenty for homeowners to worry about. However once this happens, they are at a loss for insurance options. With their insurance void due to misrepresentation, other insurance companies typically won't cover them -- not even state-owned Citizens Property Insurance Corp. They are left with force-placed insurance as their only choice, and, as we have discussed in past posts, that can mean considerably higher premiums and less comprehensive coverage.

Source: Insurance Journal, "Florida Consumer Advocate Hits Use of Past Credit History to Deny Claims," Michael Adams, Nov. 2, 2012

Our firm works with Florida homeowners like the ones in this post whose insurance companies have wrongfully denied their claims. We invite you to visit our homeowners insurance disputes page for more information about our Miami-based practice.

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