Insurance company anger

The only contract anyone has with an insurance company is spelled out in the policy. If your premiums are paid on time, the insurance company is required to pay valid claims on any losses covered by the policy. Failure to do so would be a breach of contract and the policy holder could have legal standing to sue. You might even have a case if you are cancelled before the end of the policy term just because you have a valid claim.

But so far as renewals are concerned, in no state that I know of are insurance companies required to sell you a policy or renew a policy unless guaraneed renewal is spelled out in the policy itself. (Each state has its own insurance commission governing insurance rules.) And I don't know of any insurance company that would guarantee renewal for any insurance except in the case of some forms of life and health insurance.

The average composition roof on a modest sized house probably costs $3000 to $4000 in most areas; a tar and gravel roof $4000 to $5000 in most areas. Most of us pay somewhere between $500 to $1000 per year for home owners insurance. Insurance companies try to spread the risk (not insuring side-by-side houses, etc.) in storm-prone areas and most have re-insurors to help absorb the hit in a major disaster such as a hurricane. But the average home owner who turns in several claims in a relatively short period can wipe out years of premiums and becomes a definite liability to the insurance company.

State Farm is notorious for cutting off any policy holder they see as an 'unacceptable risk'. Oddly, so far as homeowners insurance go, the next company usually doesn't consider the experience of the old company when they write the new policy.

Farmers Insurance Group locally has recently stopped writing workers compensation insurance for any business who has fewer than four employees. This is because they just can't collect enough premium to justify the risk with so small a group.

Insurance companies are in business to make money just like everybody else. The best we can do is hope they'll pay our claim without a hassle when we have one and then we can hope there is somebody who can sell us another affordable insurance policy.

Hint: If you put all your insurance with a company such as your homeowners, car insurance, business insurance, life insurance, maybe some investments, etc., you are far less likely to be cut loose if you have a claim on one or two of those policies.

Hint: If you have business property, a gun collection, a lot of cash or coins, valuable artwork, etc. be sure to have your agent review your coverages. Very often your policy will limit or exclude such things and you may need additional insurance for protection. Also personal property damaged or destroyed in an automobile accident will usually not be covered by your car insurance, but your home owners insurance will usually cover it.

Hi ehBeth:

The facts are different, but the law remains the same. You apply the law to your fact situation.

First, you look at the specific language of the insurance contract renewal clause--if there is one. Generally, an insurance policy is automatically renewed upon payment of the annual premium.

The policyholder (insured) may have a reasonable expectation that in the absence of misconduct (e.g., filing a fraudulent claim), that the policy will be renewed each each year. The insurance contract could be reasonably interpreted to provide automatic renewal every year unless the insurer is justified in determining it will not renew. The fact that the insured may have filed a legitimate claim in the past is not justification for nonrenewal in the future. One could even argue that "public policy" should prohibit an insurance company from dumping a insured merely because the insured did something the insured had a right to do--make a legitimate claim.

[This would be akin to a health insurance company dumping an insured because the insured got sick and made a claim. Maybe the health insurance company only wants to insure healthy people who never make claims in order to maximize profits, but if people who get sick are dumped, that defeats the purpose of having health insurance.]

Therefore, a insured might have a breach of contract claim based upon the breach of the automatic renewal clause.

What would be the measure of damages? The economic damages, e.g., the increased costs that the insured must pay to obtain equivalent coverage. If you end up having to pay thousands of dollars more every year for homeowner's insurance because your former insurance company labeled you as "high risk," your economic damages could be substantial.

Second, the insured may have a tort claim for "bad faith" for dumping the insured simply because the insured filed a legitimate claim, etc.,--see discussions above.

When determining whether you have a cause of action, you apply established law to your fact situation.

Debra writes:


I think your comments have been right on target Debra, except for that phrase. No state will require an insurance company to renew any policy. Some states require that there be an 'assigned risk' pool so that difficult to insure people have some place to go for insurance. Those companies who are assigned a risk are then required to insure it, but can usually charge a hefty surcharge on the policy.

No insurance company will do business in a state that otherwise requires them to insure anyone they do not consider an acceptable risk.

debra - it's not that simple. the examples you have been looking at relate to breach of contract. that is not the same as non-renewal, especially if appropriate notice was given. that is not considered breach of contract here.

simply put, no one here can/should expect automatic renewal. underwriters are expected to review each policy each year at least 3 months prior to renewal. this is audited by the provincial government (or an approved designate) every year. non-compliance in this area is one reason the license to sell insurance in this jurisdiction may be reviewed. automatic renews are not an option. haven't been for decades.

Re: Prohibited and Deceptive Insurance Practices
Debra_Law: Your cases do not convince me that I'm wrong. The Colorado case, in particular, simply does not stand for the proposition that recovery of tort damages for "mental anguish" requires something less than "outrageous" conduct on the part of the defendant.

In my own review of case law, however, I conclude that, at least in some jurisdictions, you are correct: in a bad faith case against an insurer, a plaintiff can recover for "mental anguish" even if the defendant's behavior fell short of "outrageousness." The relevant case here is not Giampapa v. American Family Mut. Ins. but rather Goodson v. American Standard Ins. Co.. It appears, then, that mere bad faith, without much more, can entitle a plaintiff to both contractual and tort damages, including damages for "mental anguish." Thus, per my pledge, I will retract what I have previously said (at least with regard to this particular issue).

As to the availability of tort damages for an insurer's refusal to renew a policy, a few comments:


The reasonable expectation that one may have regarding the meaning of a contract is far different from whatever expectations one may have regarding the continuation of the contractual relationship. The presumption that one is entitled to renewal must be found in the contract: a prior course of dealings is not enough to create the presumption.


I must confess, this is a rather clever way around the problem. I don't think it would work in practice, but it is, at least, an intriguing possibility.


All very worthwhile concerns, but ones that are more properly addressed by the legislatures, not the courts.


Well, it seems that in Colorado and perhaps a few other jurisdictions (West Virginia is another one, I think), this low level of emotional distress is sufficient to form the basis for a tort claim.


To anyone who proceeds under this theory, I wish all the best of luck.

Hi Foxfyre:

Insurance laws will have slight variations from state to state, but I believe nonrenewal must be justified on grounds recognized by law. As an example, check out out the information from the Texas Commissioner of Insurance concerning homeowners insurance:

http://www.tdi.state.tx.us/commish/columns/cc0203.html

"If an insurance company decides not to renew your policy when it expires, it must give you at least 30 days´ notice before the policy ends. Companies may non-renew for reasons including allowing the property to deteriorate or if you´ve made three or more non-weather-related claims in the past three years. Those include losses from events such as fires, theft, or broken water pipes.

There are some exceptions. If your company did not warn you after the second claim that you could lose coverage, it cannot non-renew your policy as a result of a third claim. And if the company did not send out a notice of non-renewal 30 days before your policy expires, you can request an automatic renewal."

The original poster's homeowner's insurance was non-renewed because of three claims for weather-related losses incurred due to exceptionally harsh winter conditions. There was no warning that coverage would be lost due to making claims that a insured has a right to make in accordance with the policy.

In my state, under those circumstances, nonrenewal would be a prohibited and unfair practice . . . .

If we knew what state the original poster lives in, we could narrow our debate.

Insurance is organized crime in cooperation with the government IMO.

Debra, you are quite right that some (maybe many) states do require notification of non renewal and I have not looked closely at a Texas homeowners policy in years and they may be an anomaly. In fact, where insurance is concerned, they in fact are often an anomaly in many cases. Their workers compensation rules and regs for instance don't resemble any other I've seen anywhere.

Without going back to read the entire thread, I don't recall whether McG said State Farm gave him proper notice, but I would think that they did. It would be unusual, however, for any state to write regulations that would make it excessively difficult for an insurance company to extricate itself from what it considered an unacceptable risk. I don't have a clue what Florida's rules and regs are however.

New York State.

Oh right. New York. Well I haven't read the insurance rules and reg there either.

I spoke with the NYS insurance questions people in the government and they suggested I find a new insurer. They said State Farm is acting within the bounds of the law.

Bastards!

New York Insurance Statutes


Hi McGentrix:

Your NYS insurance people aren't very bright. They ought to know the law and they ought not misinform the public.

Based upon the New York statute, State Farm may not elect to non-renew your homeowner's policy during the required policy period (three years from the date of the last renewal) unless nonrenewal is based upon a ground for which the policy could have been cancelled (e.g., conviction of certain crimes, fraudulent claims, willful or reckless acts increasing the hazards, property deterioration which makes the property uninsurable.)

Here is a clip from your pertinent state statute:

New York State Consolidated Laws
Insurance - Index

http://assembly.state.ny.us/leg/?cl=52

ARTICLE 34 INSURANCE CONTRACTS-PROPERTY/CASUALTY

http://assembly.state.ny.us/leg/?cl=52&a=22

Relevant provisions:

§ 3425. Certain property/casualty insurance policies; cancellation and renewal provisions; agents` contracts and brokers` accounts.

(a) This section shall apply to covered policies of insurance as defined in paragraphs one, two and three hereof . . .

(2) "Covered policy" also means a contract of insurance, referred to in this section as "personal lines insurance", other than a contract of insurance defined in paragraph one hereof, issued or issued for delivery in this state, on a risk located or resident in this state, insuring any of the following contingencies: (A) loss of or damage to real property used predominantly for residential purposes . . . .

(6) "Renewal" or "to renew" means the issuance and delivery by an insurer, at the end of the policy period, of a policy superseding a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term; provided, however, that any policy with a policy period or term of less than one year shall, for the purpose of this section, be considered as if written for a policy period or term of one year, or any policy with no fixed expiration date, shall, for the purpose of this section, be considered as if written for successive policy periods or terms of one year.

(7) With respect to personal lines insurance, "required policy period" means a period of three years from the date as of which a covered policy is first issued or is voluntarily renewed. . . .

(10) "Nonpayment of premium" means the failure of the named insured to discharge any obligation in connection with the payment of premiums on a policy of insurance or any installment of such premium, whether the premium is payable directly to the insurer or its agent, or indirectly under any premium finance plan or extension of credit. Payment to the insurer, or to an agent or broker authorized to receive such payment, shall be timely, if made within fifteen days after the mailing to the insured of a notice of cancellation for nonpayment of premium . . . .

(b) During the first sixty days a covered policy is in effect, no notice of cancellation shall be issued or be effective unless it states or is accompanied by a statement of the specific reason or reasons for such cancellation.

(c) After a covered policy has been in effect for sixty days, or upon the effective date if the policy is a renewal, no notice of cancellation shall be issued to become effective unless required pursuant to a program approved by the superintendent as necessary because a continuation of the present premium volume would be hazardous to the interests of policyholders of the insurer, its creditors or the public, or unless it is based on one or more of the following:

(2) With respect to personal lines insurance policies:

(A) nonpayment of premium, provided, however, that a notice of cancellation on this ground shall inform the insured of the amount due;

(B) conviction of a crime arising out of acts increasing the hazard insured against;

(C) discovery of fraud or material misrepresentation in obtaining the policy or in the presentation of a claim thereunder;

(D) discovery of willful or reckless acts or omissions increasing the hazard insured against;

(E) physical changes in the property insured occurring after issuance or last annual anniversary date of the policy which result in the property becoming uninsurable in accordance with the insurer`s objective, uniformly applied underwriting standards in effect at the time the policy was issued or last voluntarily renewed; or

(F) a determination by the superintendent that the continuation of the policy would violate or would place the insurer in violation of this chapter.

(d)

(1) Unless the insurer, at least forty-five but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in or shall accompany the notice. . . .

(e) With respect to personal lines insurance policies, no notice of nonrenewal or conditional renewal of a covered policy shall be issued to become effective during the required policy period unless it is based upon a ground for which the policy could have been cancelled.

*******

Again, based upon the New York statute, State Farm may not elect to non-renew your homeowner's policy during the required policy period (three years from the date of the last renewal) unless nonrenewal is based upon a ground for which the policy could have been cancelled (e.g., conviction of certain crimes, fraudulent claims, willful or reckless acts increasing the hazards, property deterioration which make the property uninsurable.)

Dear Mr. McGentrix,

If you will file a formal complaint we will investigate the carrier's
actions and compliance with law and regulation. Go to the Consumer section
of our website (www.ins.state.ny.us) and you will find instructions to file
a complaint online or in hardcopy. We will advise you in writing of our
findings.

We can tell you briefly that the statutory period for a homeowner policy in
New York State is three years. At each three the anniversary the insurer
can review the risk and determine if it still meets there underwriting
standards. If they find the risk does not, they can choose to non-renew.
In your case, it appears the carrier is being ask to write a new policy so
they would have the opportunity to do intitial underwriting. Insurance
companies are free to develop their own underwriting standards as long as
they are not illegally discriminatory. This Department can only require
that insurers apply their standards consistently and impartially.

If you will file a formal complaint we will be pleased to review the
matter.

*sigh*

I believe the rule as defined in the letter State Farm sent McG is consistent with most state law. It sucks when you're stuck with finding another insurance company; however State Farm though pretty rigid is not necessarily unique. The only thing in the policy holder's favor is that in most cases the new company does not hold the prior insurance company's experience against the applicant.

See, that's the one thing about all this. all I have is a phone call they made to my wife. I have nothing in writting because our policy isn't up until August.

If you are asking your insurer to re-evaluate the risk (write a new policy), you're not even really in non-renew territory.

Have you talked to your agent McG? If not it's worth a shot. Could be a misunderstanding. But I would sure send a certified letter of inquiry to the agent. Be sure you have a photocopy. Then if you do not get the proper notice in writing and suffer any loss as a result of that, based on Debra's research of NY law, you might have a case.