We are back to talking about the class action lawsuit filed in federal court against a homeowners property insurance company. The lead plaintiffs in the case estimate that as many as 100,000 policyholders could be the victims of the insurer's contract breach.
The case centers on coverage that the insurance company said was mandated by a change in Florida law. The company increased law and ordinance coverage and increased premiums without the consent of the policyholders, claiming later that state law mandated the coverage change. That, however, was not the case.
Florida's insurance regulations are complicated, for sure. The state is prone to natural disasters, especially hurricanes. The Legislature and state regulators have struggled to maintain balance between maintaining a vital insurance market and protecting the rights of residents and property owners. As a result, navigating the state's insurance regulations can be tough going.
The company in this case, though, is not an inexperienced start-up. This is a multi-billion dollar enterprise that represents members of the military and their families. This company covers 9.4 million members in all 50 states. The court will have to ask itself just how likely it is that a company like this could misunderstand a state law.
An insurance policy is a contract, but it is what the law calls an adhesion contract: One party has all the bargaining power. While a policyholder can negotiate certain terms, for the most part insurance is a take-it-or-leave-it proposition. For that reason, courts tend to look at adhesion contracts particularly carefully. The inequality of the bargaining positions creates an opportunity for unfairness, and courts can come down hard on the more powerful party for taking advantage of the weaker one.
At this point, however, no one is making any predictions about the outcome of the case. The insurance company has not responded to the court filing, and no court dates have been set.
Source: Law 360, "USAA Hit With Suit Over Home Insurance Coverage Boost," Linda Chiem, March 29, 2013
Our firm works with clients on insurance coverage disputes like the one in this series of posts. Please visit our website for more information about our Miami, Florida, practice.