All across Florida, insurers have been subtly making moves for years to limit coverage for water losses. Without a major hurricane in a decade, Florida’s insurers now complain that water loss claims are their highest risk and have in Pac-Man™ fashion chomped away water loss coverage until all that remains in many “all risk” policies is a little blinking blue ghost of coverages past. At first, seepage and leakage was excluded only if one of the insureds knew about it. Now, it may only be covered if you can prove it has existed for no more than 14 days. But, wait, it gets worse.
Some insurers are completely forgoing this more subtle approach and out-right eliminating water loss coverage on older homes, instead offering only limited $10,000 added endorsements. Can anyone smell the mold on that limit? This is a real killer if a homeowner has a major appliance failure or a pipe-break that floods the laundry room or kitchen. The homeowner has a $30,000 to $80,000 loss and $10,000 in coverage. Surprise, all risk just became all the homeowner’s risk. What is more, eliminating or capping such coverage for even sudden and accidental events makes no sense and certainly should not be accepted by either the OIR or Florida policyholders. There is no increased risk of having an appliance failure because of the age of your home. Nevertheless, numerous insurers in Florida have done just that, throwing the proverbial “water loss baby” out with the bathwater.
And, do not expect Citizens to come to the rescue and provide policyholders with the coverage they need. Citizens is hacking away at its “all risk” water loss coverage too. Just last month, Citizens’ board approved changes to limit water loss coverage including dollar amount coverage caps on emergency and temporary repairs, a 72 hour notice requirement linked to when an insured “should have known” about a leak, and limited repair obligations undercutting the matching statute. Fla. Stat. § 626.9744. SEE: Blaming the fraudulent practices of some contractors and accompanying assignment of benefits scams, Citizens’ proposed policy changes, in reality, will do little to stop fraud, but they will certainly trap unsuspecting homeowners.
EXAMPLE: A homeowner comes home from work to find a weird puddle in the utility room, and figures there must be something wrong with the washing machine. After checking the connections and fill, though, the homeowner cannot figure it out. The homeowner dries up the water and makes a mental note to make sure to run the washer that evening after the kids are in bed to see if it happens again. No puddle. Things seem fine. Must have been a fluke. A week later, the homeowner notices even more water on the utility room floor again. Again, the homeowner cleans up the water. This time the homeowner calls the local handyman who after charging the homeowner $80 assures said homeowner that the washing machine and connections are fine – and suggests the homeowner call a plumber. The plumber comes out the next day and determines that the homeowner must have a broken pipe, but has to open up the wall behind the washer dryer to check. The plumber finds a broken pipe and tells the homeowner it has been filling the wall with water and water has probably gone under the hardwood floors in the kitchen and damaged the kitchen cabinets.
Well – watch out now homeowner! If Citizens’ new water loss policy changes are approved, there is only $2500.00 to mitigate the damages or make temporary repairs, but if the homeowner does not mitigate the damages Citizens may deny or limit the claim for failure to mitigate. (TRAP 1).
But, that’s not even the worst part, because Citizens would be able to claim the homeowner “should have known” about it a week ago when he/she first saw a puddle. Since the homeowner has now “waited” more than 72 hours to report the loss the claim may be DENIED. (TRAP 2).
And, by the way, even if Citizens decided to pay the claim, it will not be its concern if the floors or cabinets do not match anymore. From this lawyers’ perspective, it is difficult to see how these limitations will stop fraud; but they have a good shot at trapping homeowners and increasing litigation. (TRAP 3).
Policyholders should oppose these changes. So, what is the answer? Keep it simple. All risk policies should be all risk. If aging pipe systems are the real problem, then insurers can inspect them (or portions of them anyway) before they issue a policy. As for the alleged fraud, it can be stopped simply by eliminating/voiding all assignment of benefits to a contractor, subcontractor, or repair person who performs or intends to perform covered work. The legislature could easily handle that one. Finally, Citizens’ current policy already protects them well enough from legitimate water losses. Water losses should be covered. Let’s get the ghost out of Florida’s all risk policies and resurrect water loss coverage.