A four-page unsolicited letter I received last week from an attorney filled me in on some of the inner workings of the powers to be in Tallahassee and reminded me of this famous line from the Forrest Gump movie. This letter was like a box of chocolates as each paragraph revealed something new. Apparently, he has been following some of my writings, specifically about the reduction in coverage for the  water peril, the most frequent cause of losses for property damage and wanted to give me some background on how this all went down. 

While the letter is too broad in scope to go into here, I think it is newsworthy to report on how the Office of Insurance Regulation approved (according to him) one of the worst consumer endorsements I have seen in my career. The endorsement I am referring to is the language that allows insurance companies to deny a water loss if the loss is over 14 days old. This endorsement as written has impacted policyholders across Florida and especially our winter residents that provide a very significant economic impact to our economy.

Think about this.  If a water loss occurs in your home or business while you are away, or if the water loss is not apparent until damage is first noticed, your insurance company will deny your claim.  Folks, this is no small matter as we have seen water losses far exceed other perils such as a fire, etc., in scope and price to repair.  So the question I have to always ask is; how do you date a water loss, and what about the first 13 days? Is the loss that occurred during that period covered?  The typical response is some mumbling and turning of the adjuster’s head so as not to have to engage me in a face-to-face conversation about those first 13 days.

So how did this happen?  Well, according to him this “travesty belongs entirely to OIR” (Office of Insurance Regulation).  Apparently six years ago, this attorney (who was legal counsel for Citizens) was contacted by the OIR due to a South Florida legislator who had a number of condominium associations in his district and was lobbying to allow this language in insurance policies in order to combat frequent water losses that were happening in snow birds’ condos.  Even though this attorney did not support the measure, apparently the insurance lobby won out and ultimately the 14 day water loss exclusion was made a part of a lot of Florida’s insurance policies. So is appears that a south Florida legislator influenced the OIR at the expense of tens of thousands of Florida homeowners.   But my question is, who was representing the insured policyholder to argue against this draconian take away?

But wait, there’s more! Now we are hearing of property insurance policy forms with approved forms from the OIR that exclude water damage if the property is unoccupied or vacant (depending on the policy language or interruption) beyond 30 days . This just published article in the Ft. Myers Free Press Away? Burst Pipes Can Still Soak You goes into the details and in my opinion, is causing confusion amongst some licensed insurance practitioners and regulators.

So what should the insured property owners do given this background?  First, I would recommend a visit with your insurance agent or broker and have that person explain under what circumstances a water loss will be covered or excluded given the policy forms and endorsements in YOUR policy.  I would then memorialize in writing back to the agent or broker either through email or a written letter exactly what was said to you.

As pointed out in the Ft. Myers Free Press article, water losses are frequent and costly.  If your insurance company will not cover you, take steps to mitigate your exposure. Unfortunately, one of those steps may be the additional cost of having your home routinely inspected by an outside vendor while you are away. Finally, if you are waiting for a discount or lower premiums because the frequency of water losses may fall, I would like to talk with you about a good real estate investment on a bridge for sale in Brooklyn, New York.

When it comes to property insurance coverage in Florida, it’s Caveat Emptor (buyer beware)!

Let us know what you think.