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A federal appeals court Friday affirmed a jury award in favor of an Axa SA unit in litigation largely related to a Hurricane Irma claim.
The 11th U.S. Circuit Court of Appeals in Atlanta affirmed the Orlando, Florida, jury verdict in favor of Axa unit Indian Harbor Insurance Co. in a lawsuit filed by an Orlando real estate firm, SB Holdings I LLC, according to Friday’s ruling in SB Holdings I, LLC v. Indian Harbor Insurance Co.
The firm had sought $292,230.28 in connection with an August 2017 pipe leak, for which the insurer had paid $100,000, and an additional $2.3 million claim for a roof replacement and interior damages related to September 2017’s Hurricane Irma, according to court papers.
In upholding the November 2020 jury verdict in the insurer’s favor, a three-judge appeals court panel said SB Holdings had contended the district court erred by denying its motion to compel arbitration and allowing the case to proceed to trial.
Under Florida law, appraisal requirements in an insurance contract, which the coverage in question required, are treated as arbitration provisions, the ruling explained.
This was not a matter to be arbitrated, the appeals panel said. Florida courts have held that, when an insurance policy includes an appraisal requirement, any dispute regarding the amount of covered loss is a matter to be determined by an appraisal panel, “but a challenge to coverage itself remains a matter ‘for determination by a court,’” it said.
The district court did not err in refusing to compel an appraisal because Indian Harbor “has maintained throughout this litigation that there was no covered loss,” it said.
“Second, regardless of whether there was a covered loss, Indian Harbor also defended on the grounds that SB Holdings failed to comply with its post-loss obligations under the policy. This too was a coverage question for the court, not an amount-of-loss question that would have required an appraisal,” it said.
The panel also affirmed the lower court’s decision to prohibit two witnesses from offering their expert opinions.
Attorneys in the case did not respond to requests for comment.
In January, a Zurich Insurance Group Ltd. unit prevailed in litigation against a construction company over compensation for damage to a condominium caused by Irma.
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
Global reinsurers’ underwriting performance will continue to improve in 2022 as premium rate increases take hold, with further rate hikes expected as a result of higher catastrophe losses, continued low interest rates and mounting inflation concerns, according to Fitch Ratings in a new report.
Nevertheless, concerns remain about how future underwriting results will be affected by deteriorating loss-cost trends, rising social inflation and litigation costs as well as the pace of the global economic recovery, said Fitch in its report titled “Global Reinsurers: Mid-Year 2021 Results.”“Some of the largest price increases were in cyber reinsurance at 15%-40%, even for loss-free renewals,” Fitch noted. “Capacity is limited and very selective as reinsurers digest a recent sizable jump in ransomware claims.”
Non-life reinsurance net premiums written grew by a substantial 18.5% during the first half of 2021 on higher premium prices and demand, Fitch said, basing its calculations on the 17 reinsurers it monitors.
While reinsurance rates continued to harden in H1, pricing momentum slowed in 2021 following more than two years of improving rates, the report said. Fitch noted, however, that price increases are likely to continue at the January 2022 renewal, although at somewhat reduced high single-digit/low double-digit levels, as rate adequacy is approached.
However, the report said that European property rates could be poised for an uptick in 2022, given recent increased catastrophe losses in the region.
“Some of the largest price increases were in cyber reinsurance at 15%-40%, even for loss-free renewals,” Fitch noted.
“Capacity is limited and very selective as reinsurers digest a recent sizable jump in ransomware claims. Reinsurance demand is significant, with nearly 40% of cyber risk reinsured, and growing with rising cyber attacks.”
Current pricing is still inadequate in the face of rising catastrophes, said Fitch, noting that global re/insured natural catastrophe losses were a manageable $40 billion in H1, up from $35 billion for the same period in 2020 and above the $33 billion 10-year average (2011–2020) of insured losses in H1.
However, July flooding in Europe could add $8 billion to catastrophe losses in H2 2021, with potential additional losses from the active Atlantic hurricane season, the report went on to say.
Florida Renewals
Pointing to the June/July 2021 Florida renewals, Fitch explained that reinsurers offered more capacity and better pricing to the higher-quality accounts at the expense of poor performers.
“Lower layers that have been hit more frequently in recent years priced up much more than remote upper layers that were not affected by losses,” Fitch explained. “Reinsurers reduced their overall Florida exposure, particularly to the vulnerable Florida specialist companies.”
Casualty reinsurance rate increases at the mid-year 2021 renewals were similar to January 2021 and should continue to rise into 2022 as rates are generally not exceeding loss trends, the report said.
“Primary rate increases continue to drive reinsurance pricing, with cedents increasing retentions and switching to excess of loss from quota share to keep more of the profitable business,” it continued. “As a result, reinsurers are paying 1-3 points higher ceding commissions up to the mid-30s percent to access this business.”
Thus far, renewals largely have not taken into consideration pandemic-related losses, but this could change in 2022 as more clarity is developed around the ultimate losses, although communicable disease exclusions remain widespread in property reinsurance treaties, Fitch continued.
Fitch said that non-life reinsurers saw considerable year-on-year improvement in H1 2021 underwriting results, shifting to an underwriting gain as pandemic-driven losses subsided. The 17 non-life reinsurers monitored by Fitch posted an aggregate reinsurance calendar year combined ratio of 94.5% in H1, down 11 percentage points from 105.9% in H1 2020, which included $6.1 billion of COVID-19 pandemic-related reinsurance losses, or 11.3 percentage points of earned premiums. (Combined ratios below 100% indicate underwriting profits).
Fitch expects underlying combined ratio improvement to persist into 2022.
Insurance works best when a party that suffers a covered loss is fairly compensated for a loss that is eligible under a given insurance policy.
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Insurance works best when a party that suffers a covered loss is fairly compensated for a loss that is eligible under a given insurance policy. Typically, such situations involve prompt notification to an insurer; quick, efficient investigation by claims personnel; and then, payment.
We know that, commonly, a paid claim may not be the end. Ideally, the party that is responsible for injury or damage to others should, financially, be held accountable. If another party is identified, insurers may use its policyholder’s right to subrogate. Subrogation refers to an insurer standing in the place of the policyholder and seeking repayment from the party that caused the loss and its financial harm.
See below for a litigated incident where an insurance company discovers information it believes to be relevant. Specifically, it found the information on the previous owner of the covered property justified its seeking restitution. The courts had their perspectives on whether the insurer was obligated to respond.
DNJ, Inc., purchased a forage chopper from Burks Tractor Company, Inc. The chopper was made by Krone North America, Inc., and was the subject of two warranties: the New equipment Limited Warranty and the Krone North America Crown Guarantee. On October 15, 2012, the chopper was destroyed by fire. Western Community Insurance Co., (Western) DNJ’s insurer paid it $440,779 for the loss. Western then brought a subrogation action in which it advanced theories of express warranties found in the two warranties provided by Krone, breach of the covenant of good faith, and violations of the Idaho Consumer Protection Act (ICPA). The court dismissed Western’s ICPA claims against Krone and Burks, holding that that they were prohibited under that act.
Although all parties’ pleadings identified Burks as the chopper’s owner when it was sold to DNJ, shortly before trial Krone revealed that the chopper actually had been owned by Krone. Western filed an amended complaint that reflected this new information. In response, Burks filed an answer that included several new affirmative defenses. Western filed a motion to strike the new defenses. The court denied the motion, finding that the amendments did not prejudice Western.
At trial, a jury found for Krone on all counts. Afterwards, Western filed motions for reconsideration and a new trial. The court denied both motions. On appeal, the court held that the trial court erred in dismissing Western’s claim and in relying on a case that was markedly different than the current action. It did agree with the lower court’s denial of the motion for a new trial.
The court found further that the lower court did not abuse its discretion by denying Western’s motion to strike and permitting Burks to assert new legal and factual defense before trial after it was discovered that Krone, rather than Burks, actually owned the chopper. The higher court found no errors in any of the other rulings made by the lower court, including its decision to enter a directed verdict in Burks’ favor. The judgment of the lower court was affirmed and Burks and Krone were awarded attorney fees and costs.
Western Community Insurance Co., Vs. Burks Tractor Co. Inc., Supreme Court of Idaho. No. 44372. Filed September 6, 2018. Affirmed.
COVERAGE DECISIONS MUST REST ON RELEVANT POINTS
The insured/insurer relationship is contractual. This is reflected initially in the policy’s insuring agreement. The agreement varies little among the myriad lines of business. The applicable policy may cover any of the following:• Homeowners • Mobile Equipment • Commercial Property • Money & Securities • Recreational Vehicles • Business AutomobilesRegardless, the operative insuring agreement is, essentially, a brief description of how the policy’s coverage obligation is triggered.
Here is a discussion of a policy insuring agreement/coverage. The excerpt is from ISO’s EB 00 20-Equipment Breakdown Protection Coverage Form Analysis under PF&M found in Advantage Plus.
INTRODUCTION
The Insurance Services Office (ISO) Boiler and Machinery Coverage Form was revised with the 07 01 edition and renamed Equipment Breakdown Protection Coverage Form. This name more accurately and completely responds to insureds’ coverage needs in the 21st century. This change required developing completely new forms, provisions, and endorsements. This analysis is of the 01 13 edition of EB 00 20. Changes from the 09 11 edition are in bold.
EB 00 20–EQUIPMENT BREAKDOWN PROTECTION COVERAGE FORM ANALYSIS
The coverage form opens by stating that certain provisions in it restrict coverage. It encourages careful reading of the entire policy in order to understand the rights and duties of both the named insured and the insurance company as well as to determine what is covered and what is not covered. It also points out that the insurance company uses the terms you and your to refer to the named insured and the terms we, us and our refer to the insurance company that provides coverage. Additional terms are also defined, but their definitions are found in F. Definitions later in this analysis.
A. COVERAGE
1. COVERED CAUSE OF LOSS
The only covered cause of loss is a breakdown of covered equipment.
Note: Breakdown and covered equipment are both defined terms and are explained in detail in F. Definitions.
2. COVERAGES PROVIDED
Insurance applies to only coverages that have a limit or the word INCLUDED entered in the spaces provided on the declarations. There is no coverage if there is no entry in that space.
The limit of insurance entered for each coverage is the primary limit. If INCLUDED is entered next to the coverage on the declarations, that coverage is included in the total limit per breakdown.
Each coverage provided applies to only the part of any loss that results directly from the covered cause of loss. There are ten coverages.
INSURABLE INTEREST IS MORE IMPORTANT THAN PURCHASE DETAILS
We frequently discuss the contract aspect of insurance. We do so because it is of foundational importance. Policyholders are expected to fulfill their obligations with regard to both when they apply for coverage as well as afterwards, when an insurer provides them with protection. Meeting contractual responsibilities is not only the right behavior, it also a legal requirement.
When an insured fails to comply with expected actions or with duties that are laid out in a policy, there can be significant consequences including possible loss of coverage. One principal element of insurance is that the person seeking coverage must have a bonafide financial stake in property that is lost, damaged, or destroyed. In the court case featured in this month’s In Action, the insurer argued that their obligation to provide coverage was affected by the policyholder providing incorrect information about who owned the covered property prior to their acquisition. The court rightfully questioned the relevance and determined that it didn’t affect the policy provisions.
Below is a discussion of insurance as a contract from Gordis on Insurance found in Advantage Plus.
The insurance contract is an agreement where one party obligates itself to make good the financial loss or damage sustained by a second party when a designated event occurs. The event must be fortuitous and happen by accident. The named insured must have insurable interest at the time of loss. One final point is that in order for any contract to be considered insurance, there must be a risk of loss.
FORTUITOUS EVENT An occurrence largely beyond the control of any involved party; happening by chance; accidental; for example: fire, lightning, windstorm, explosion, or flood.
INSURABLE INTEREST In order to recover from a loss to property, the holder must have an insurable interest in the property at the time of the event or occurrence. An insurable interest is any right, title, or interest in property where the holder of that right, title or interest sustains financial loss if the property is damaged or destroyed. Any lawful and substantial economic interest in the safety or preservation of the property from loss, destruction or damage also constitutes an insurable interest.
An entity does not have to be the property owner to have an insurable interest in it. Examples include, but are not limited to, mortgagees, trustees, vendors, lessees and bailees. Insurable interest for any entity must exist at the time the loss occurs.
RISK OF LOSS If property could never be destroyed, there is no risk of loss. If property must necessarily disintegrate or be destroyed, there is no risk of loss. Between these two extremes is the exposure of risk that can be insured.
BINDERS (not mentioned in the policy) A binder provides immediate coverage on a risk. A binder may be written or oral and is temporary evidence of coverage. It is issued to show evidence of insurance coverage subject to the policy being issued, is usually effective for a 30-day period and remains in force for this period of time unless cancelled or replaced by the actual policy.
Special Legal Concepts Affecting Insurance Contracts
ADHESION A contract of adhesion is basically one prepared by one party to be accepted by the second party. As a result, any ambiguity in the contract is construed against the preparer; in this case, the insurance company.
ALEATORY This is a contract whose performance depends on chance. Insurance policies are always considered aleatory contracts because they promise to perform only if certain events happen.
SOMETIMES INSURERS FORGET WHAT’S IMPORTANT
Insurance professionals commonly understand that the occurrence of a loss is where the “rubber meets the road.” In other words, insurance most matters when it’s called upon to respond to a claim. It’s important that a proper response often includes denying a claim. Though bitter to handle, policyholders can accept such decisions when they’re justified. However, dissatisfaction results when there’s a perception that an insurer is not acting fairly.
For example, again referring to our feature court case, the insurer resisted payment when it discovered that some information provided to it before the policy was issued was incorrect. However, it was decided, via a lawsuit, that the incorrect was immaterial. In the end, the loss involved property that was eligible for coverage and the policyholders were, at the time of loss, the legitimate owners of the property. This was an instance where an insurer permitted a technicality to affect its actions. Increasingly, courts show less tolerance for minor items that don’t prejudice (significantly harm) an insurer’s rights. Sometimes insurers act in a manner that is mistaken, but other times the behavior may be considered acting in bad faith. Either the fact or the perception of such is a common reason for lawsuits.
Here you can read part one of a two-part discussion of insurance company claims settlement from Emarketing for Agencies found in Advantage Plus.
UNFAIR CLAIMS PRACTICE – PART 1
Faithfully handling your premium payments creates the expectation that your insurance company will investigate and, if applicable, pay for a loss. Loss payment includes taking care of expenses associated with settling a loss, including handling the defense costs of a lawsuit.
In most instances, disputes with an insurance company are legitimate disagreements. Parties may, justifiably, hold different positions on whether a certain loss is covered or, if covered, the amount of the loss. It is unfortunate, but sometimes an insurance company may have an attitude toward paying claims that fails to meet your expectations. In fact, a company may deal with you unfairly. Your right to fair treatment is, generally, protected under state law. State agencies, typically via a special insurance or commerce division, are responsible for seeing that insurance companies and agents are true to the commitment represented by the insurance policy.
Most states actively enforce the requirement that insurers fairly settle valid claims against their policies. Insurance companies and agents operating within a state are also provided with complete information regarding unacceptable claims practices. A state’s rules on settling claims are based on the National Association of Insurance Commissioners (NAIC) Unfair Trade Practices Model Act. The guidelines, developed from the original act and other regulations (which vary by state) are meant to shield you from practices that are misleading, unfair, or deceptive.
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Two attorneys and two doctors are charged in a $31 million insurance fraud scheme where plaintiffs were allegedly recruited from New York City homeless shelters to stage accidents at locations with identified trip hazards, federal prosecutors say.
The conspirators left behind a string of e-mails that revealed the doctors cooperated with the lawyers and a litigation funding company to perform surgeries on some 400 “patients” who had filed injury claims, according to a press release by the U.S. Attorney for Southern District of New York. The patients paid from $1,000 to $1,500 after they competed surgeries.
“In carrying out the scheme, the defendants allegedly preyed upon the most vulnerable members of society,” stated Manhattan U.S. Attorney Audrey Strauss. “Now, thanks to the FBI, the defendants are in custody and facing federal charges.”
Attorneys George Constantine and Marc Elefant and physicians Andrew Dowd and Sady Ribeiro were charged with conspiracy to commit mail fraud and wire fraud, mail fraud and wire fraud in a grand jury indictment unsealed on Wednesday.
Prosecutors say recruiters for the lawyers would find extremely poor individuals to participate in the scheme, often by visiting homeless shelters. They would direct participants to go to stage trip-and-fall accidents by deliberately falling in specific locations, typically places there were openings for cellar doors, potholes or cracks on sidewalks. The “victims” were told to visit specific attorneys, including Constantine and Elefant.
The attorneys, in turn, would file fraudulent lawsuits and direct the plaintiffs to visit specific physicians, including Dowd and Ribeiro. The purported victims were told they would have to undergo surgeries—typically two—before they were paid, prosecutors say.
FBI investigators say they uncovered emails that reveal the nature of the scheme. For example, Ribeiro allegedly sent this message to an unidentified litigation funding company in New Jersey: “I will play very honest ‘game’ with you . . . I see the patient and I generate a very good dictation that justifies the treatment—there is a cost for that and I hope a profit.”
The scheme organizers also gave explicit directions in emails to the doctors. For example, one of the participants in the scheme instructed Dowd to “write us an additional report today stating that (a patient’s) Lt. shoulder has worsened (so that I can) book this surgery for you.”
Dowd provided the requested report and recommended that the patient undergo arthroscopic surgery, according to the press release.
Prosecutors say the funding companies paid the fraudsters’ referral fees, typically $1,000 to $2,500, for each patient who signed a funding agreement. In exchange for paying for medical and legal costs, the funding companies charged the patients high interest rates, sometimes up to 50% on medical loans and up to 100% on personal loans, the indictment says.
“The interest rates were so high that oftentimes the majority (if not all) of the proceeds that were awarded in the fraudulent lawsuits were paid to the funding companies, Constantine, Elefant, Dowd, Ribeiro and others, with the patients receiving a much smaller percentage of the remaining recovery,” the press release says.
Constantine, 58, and Elefant, 49, are New York-licensed attorneys who allegedly filed hundreds of fraudulent lawsuits, prosecutors say. Dowd, 45, is an orthopedic surgeon who performed hundreds of knee and shoulder surgeries at an average cost of $9,500. Ribeiro, 51, is a pain management physician who paid kickbacks in exchange for patient referrals and treated nearly 200 patients during the fraud scheme, prosecutors say.
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
Louisiana Declares Emergency for Possible Hurricane Ida; Southeast States Also Warned
Louisiana has declared a state of emergency in preparation for what the National Hurricane Center warns could be a major hurricane. Florida, Mississippi and Alabama are also being warned to prepare for heavy rains and flooding.
Tropical Storm Ida is forecast to become a hurricane over the southeastern Gulf of Mexico in a day or two and to be at or near major hurricane strength when it approaches the northern Gulf coast. On Sunday or early Monday, Ida could make landfall as a category 3 hurricane with winds of up to 111 miles (178 km) per hour.
There is an increasing risk of dangerous hurricane-force winds beginning Sunday along the portions of the coasts of Louisiana and Mississippi, including metropolitan New Orleans, where a Hurricane Watch is in effect.Ida on the Move: At 800 a.m. EDT, the National Hurricane Center reported that the center of Tropical Storm Ida was located on Grand Cayman, moving toward the northwest near 15 mph (24 km/h) and this general motion should continue over the next few days. On the forecast track, the center of Ida will move away from the Cayman Islands this morning, pass near or over the Isle of Youth and western Cuba later today, and move over the southeastern and central Gulf of Mexico tonight and Saturday. The system is forecast to approach the U.S. northern Gulf coast on Sunday.
Ida is the ninth named storm of the current Atlantic hurricane season.
After landfall, Ida should weaken as it moves through the lower Mississippi and Tennessee River valleys. Forecasters are warning that of an increasing risk of life-threatening storm surge inundation along the coasts of Louisiana, Mississippi, and Alabama, where a Storm Surge Watch is in effect.
Ida is expected to produce heavy rains across the central Gulf Coast from southeast Louisiana to coastal Mississippi, Alabama, as well as the Lower Mississippi Valley starting Sunday into Monday, resulting in considerable flash, urban, small stream, and riverine flooding.
The Hurricane Watch is in effect for Cameron, Louisiana to the Mississippi/Alabama border as well as Lake Pontchartrain, Lake Maurepas, and Metropolitan New Orleans.
The Tropical Storm Watch is in effect for Mississippi/Alabama border to the Alabama/Florida border.
“Now is the time for people to finalize their emergency game plan, which should take into account the ongoing COVID-19 pandemic,” Louisiana Gov. John Bel Edwards said. “This type of threat contains additional problems because the window to prepare is so short. By Saturday evening, everyone should be in the location where they intend to ride out the storm.”
He warned of potential major power outages and limited travel.
Reuters reported that energy companies have begun airlifting workers from Gulf of Mexico oil platforms and moved vessels in anticipation of the storm.
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Things as certain as death and taxes can be firmly believed. Believable, too, is that life is volatile and the cost of living highly variable. Because of these things, protecting your estate from taxation is one of several reasons why life insurance exists. How you structure this protection, transferring ownership of your policy and ensuring the payment of premiums while excluding this asset from your estate, is critical. That you act is critical, as the Biden administration wants to change major portions of the estate tax.
To start, the Tax Cuts and Jobs Act (TCJA) of 2017 exempts estates valued at up to $11.7 million. Whether life insurance proceeds are part of the taxable estate depends on who owns the policy at the time of the insured’s death. If you want to preserve your legacy, the owner and beneficiary of the proceeds from your life insurance policy must be another person or legal entity.
Choose wisely, because the owner of the policy is the person who is responsible for maintaining the policy. Because you do not want the policy to lapse due to failure on the owner’s part, or if the owner is a minor who is not able to pay the premiums without the approval of a legal guardian or trustee, make sure procedures are in place — perform the necessary due diligence — to make ownership convenient and secure.
An irrevocable life insurance trust (ILIT) is another means to a similar end, regarding estates and specific tax thresholds. In this case, the policy is owned by a trust. The proceeds are not part of your estate, nor are you a trustee in charge of the trust. You do not retain any rights to run or revoke the trust. The advantage here is the assurance that what must be done will be done, that premiums will be paid without delay, that the trust will honor its legal responsibilities.
An estate planning adviser can also determine if you can transfer money — funds relating to gifts — to the trust, thus reducing whatever taxes your estate may owe.
If the beneficiary is a child or an adult with special needs, an ILIT lets you name the trustee — a person you trust — to whom you entrust the handling of money on behalf of your child or children, according to the terms of the trust document.
In a word, documentation is key to any estate plan.
Documentation is verification of trust, affording you the peace of mind you deserve. Regardless of who owns the policy, whether the owner is an individual or an institution such as a legal trust, proof is in the paperwork; legal documentation is proof of ownership.
Do not tarry in attending to this work, lest the government be fastidious in its work of taxing the proceeds of your estate.
Trust, too, that the government will tax your estate unless you safeguard your estate.
For the good of your estate, with the opportunity for future generations to continue to do good, do what is right.
Exercise the rights life insurance provides.
About the Author
Jason Mandel is founder and CEO of ESG Insurance Solutions, a risk management and business consulting firm.
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
Both floods and storm surge involve significant amounts of water, but their characteristics and behavior are quite distinct. In 2018, Market and Water Streets in Wilmington, North Carolina, experienced significant flooding from storm surges. (Photo: Shutterstock)
Flooding is the most common natural disaster in the United States, with every state having experienced some aspect of it in recent years. Storm surge flooding, which occurs particularly in coastal areas as the result of offshore winds from tropical storms, has great potential to impact both personal safety and property.
Let’s examine flooding and storm surges and identify their unique characteristics as well as measures taken to help protect people and property from their effects. First, we will address the difference between general flooding and storm surge flooding. While they both involve water, their characteristics — including when and where they typically occur — are quite different.
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Many homeowners, especially rookies who are new to the game, have no clue what their homeowner’s insurance policies cover. Buyers know they must have insurance, or their lender won’t provide the financing. And they should know they must keep coverage in place, or the lender could call their loans due and payable in full. (As an alternative, the lender could put a policy in place at a much higher premium, tacking the extra cost onto the owner’s monthly house payment.)
But as for knowing what’s covered? Most people don’t even read their policies. That’s understandable, considering most policies are written in legal gobbledygook that few of us can understand. But when you don’t know what’s covered and what’s not, you could be in for a big surprise when the time comes to make a claim.
A standard homeowner’s policy has four types of coverage: the structure itself, your personal belongings, liability and additional living expenses.
Structural coverage pays for repairing or rebuilding the house if it is damaged by fire, lightning, wind, hurricane or other disaster listed in the policy. The most popular policy, known as HO-3, offers the broadest coverage, protecting against 16 enumerated perils.
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The personal belongings section covers your furniture, clothing and other personal items if they are stolen, or if they are destroyed by an insured disaster.
Liability coverage protects you from lawsuits for injury or damage caused to other people by you, your family members or even your pets. It also pays for the cost of defending you, as well as any court awards, up to the policy’s limit. And it covers not just your house, but you — anywhere in the world. If your house is uninhabitable because of damage from a listed peril, the insurer typically will pay for your hotel, restaurant meals and other living expenses while the place is being rebuilt. If your house is a rental, and your tenants are unable to live there during repairs, the policy may even cover “loss of use” — meaning it will pay you the rent you couldn’t receive during your tenants’ absence.
While an HO-3 policy is the most popular, others are available. An HO-1 policy sets bare-bones coverage, while an HO-2 offers slightly more (but less than an HO-3). An HO-4 policy is for people who rent single-family houses, and covers their personal belongings against all 16 perils. And an HO-6 policy is for those who own condominiums, covering their belongings and the parts of the structure they own.
As important as what’s covered by your policy is what’s not covered. Floods are not, for example, so you’ll need a separate policy for that. Sometimes, flood coverage is required to obtain and maintain financing, but even if it’s not, it’s a good idea to give it a long, hard look. Floods can occur anytime, anywhere — and not just from gigantic storms. Other typical exclusions include damage from earthquakes, war, pollution, nuclear accidents, intentional damage, normal wear and tear, construction defects, vehicles parked on the property, frozen pipes and vandalism.
Once you settle on the specific policy, you need to choose one of three levels of coverage:
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▪ Actual cash value: Pays to replace or repair the home and replace your possessions, less a deduction for depreciation.
▪ Replacement cost: Pays the same as above but without deducting for depreciation. Note: Whereas replacement-cost policies cover the structure, they do not cover anything above the actual cash value of your possessions.
▪ Guaranteed or extended replacement cost: As the highest level of protection, guaranteed coverage pays whatever it costs to rebuild the house as it was, even if it exceeds the policy’s limits. An extended policy pays for a certain percentage — usually 20% to 25% — over the limit. While this protects against sudden increases in construction costs when there’s a shortage of materials after a major, widespread disaster, it won’t pay to bring your place up to current building codes. For that, you’ll need an “ordinance or law endorsement,” which will help pay the extra freight.
Obviously, the more coverage you purchase, the higher your premium. The amount you pay also is governed by your deductible: The larger the deductible, the lower the rate. But you shouldn’t stop there. Beyond flood coverage, you’ll want to add riders, aka endorsements, to your coverage to cover any items you may have that are excluded from your standard policy. The list of excluded items is a long one: jewelry, business equipment, wine collections, luxury rugs, antiques, furs, silverware, watercrafts and fine art, to name a few.
Once you put coverage in place, it’s a good idea to perform an annual insurance checkup to make sure your property is still protected at its current value — up or down — as opposed to what it was worth when you put the policy in place. To protect against that, consider an inflation guard endorsement so that coverage is automatically increased every year.
Your annual review should also cover your riders. Maybe you no longer own that beautiful mink coat, for example, or perhaps you bought a van Gogh to hang on your living room wall.
Next week: Flood coverage.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
Auto insurance rates depend on a lot of factors: your age, the car your drive, where you live, and your credit history. Lately, you may have noticed your rates rising.
“Now we have inflation and also auto insurance is coming back to pre-COVID rates because people are driving more and using their cars more. So that’s one of the reasons why we’re seeing this increase in auto insurance rates,” said Andrew Latham, certified finance counselor and managing editor of Supermoney.
Latham shared four tips on how to save on your premiums.
1.) Shop around and compare rates “You can lower your rate a lot just by asking three or four companies just to see what rates they offer,” said Latham.
2.) Increase your deductible “Just by increasing your deductible from $500 to $1,000, that can lower your auto insurance rate by up to 10%,” he told TMJ4 News.
3.) Ask your carrier for a rate reduction if you’re not driving as much
“If you can prove that you have lowered your mileage — maybe you are working from home whereas you used to commute, then many auto insurance companies will consider lowering your premium.”
4.) Consider dropping your comprehensive and collision coverage, especially if you have an older car
“A good rule of thumb is to drop extra coverage (e.g., collision and comprehensive) when your annual premium is 10% or more of the car’s Kelly Blue Book value. For example, if you are paying $1,500 a year in auto insurance and your car is worth $10,000, you probably should drop extra coverage.”
Please call Lee from USAsurance Powered by WeInsure & Calle Financial. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer. My email is lee@myUSAssurance.com
Surfside Collapse Victims File Consolidated Complaint Against Condo Association
Former residents of the Surfside, Fla. collapsed condominium have filed a consolidated amended class action complaint against the building’s condo association.
Plaintiffs allege that the Champlain Towers South Condominium Association breached its duty by neglecting to maintain, repair, and replace the building’s common elements and portions of condominium units that provided structural support to the building. By failing to keep the building in a safe condition and warning residents of unreasonable risks of harm, the association as a result caused the condominium collapse, which killed 98 people and led to the destruction of all 136 units.
“Together, these victims suffered damages estimated in the hundreds of millions of dollars” the plaintiffs said. “They have lost their loved ones, their homes, and nearly all their personal belongings.”
The consolidated complaint contains a liability class and a personal injury, wrongful death, and an economic and property damage subclass.
Two of the named plaintiffs, Raquel Azevedo de Oliveira and Kevin Spiegel, will ask the court to serve as representatives in the liability, personal injury and wrongful death subclass. Both lost family members in the collapse.
The suit alleges that the condominium association’s governing document imposes on the group the duty to maintain, repair and replace at its own expense “All common elements and limited common elements. . . . . (3) All portions of the units (except interior wall surfaces) contributing to the support of the building, which portions shall include, but not be limited to, the outside walls of the building, and load bearing columns.”
Plaintiffs said the association was aware, or should have been aware, that certain parts of the building’s structure were in failing or deteriorating condition for a period of years.
The consolidated complaint cites a 2018 structural engineering analysis report done by Morabito Consultants on behalf of the association which uncovered concrete spalling or cracking on the concrete slab edges of balconies.
Nearly half of the building’s balconies faced systemic deterioration. The report also found abundant cracking and spalling in the concrete columns, beams and walls of the parking garage. “Notwithstanding Morabito’s 2018 Report and prior complaints indicating significant structural problems that posed a risk to the life, safety, and property of unit owners, residents, occupants, and guests of Champlain Towers South, the Association failed to take action to make the necessary repairs,” the suit said.
A Florida Circuit Judge said in July that Surfside victims and families will expect to receive $150 million in initial compensation.
The sum includes $50 million in insurance and $100 million in proceeds from the sale of the property where the building once stood.
Since then, at least one bidder has offered $120 million for the property.
The Home Insurance Guru 