A Florida couple is leading the charge on behalf of an estimated 100,000 homeowners whose insurance coverage was increased without their approval. By upping the coverage, the plaintiffs say, the insurance company was able to raise premiums, again without the consent of the policyholders.
The breach of contract claim goes back to state laws enacted in 2005 and 2006. In the aftermath of the 2005 hurricane season, lawmakers modified the lower limit of law and ordinance coverage that insurance companies had to provide to Florida homeowners insurance policyholders. According to the plaintiffs, the defendant insurance company may have deliberately misinterpreted the law in order to impose rate hikes without policyholders' permission.
In 2005, the law was amended to require that insurers offer law and ordinance coverage for at least 50 percent of the overall coverage limit on the property. In 2006, another amendment was put in place, this time allowing policyholders to reject the coverage in writing; if, however, the policyholder did not reject the coverage, the policy would provide coverage at 25 percent.
This insurer then raised homeowners' coverage to the 50 percent level and increased their premiums to pay for the increase in risk. And, they did so without any written approval from the policyholders. The move was problematic for two reasons: First, the 50 percent coverage was not required by law, and, second, the insurance policy provides that policyholders must agree to any changes in coverage in writing.
We'll get into more detail about both in our next post.
Source: Law 360, "USAA Hit With Suit Over Home Insurance Coverage Boost," Linda Chiem, March 29, 2013
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