Florida Insurance Law Blog

I have previously posted about the ongoing and anticipated effects of the current financial crisis on the insurance industry as a whole. Now, it's getting personal.

In 1984, my wife and I purchased Universal Life Insurance on both of our lives with Shenandoah Life Insurance Company. We have faithfully paid the premiums for the policies for the 25 years since that time. In fact, for a period of time we even paid more than the required minimum premium. In my calculation, we have paid at least $50,000 in premiums to them since the inception of the policy.

I just learned that the Virginia Department of Insurance has placed them under supervision. Here is the link to the documents in regard to the receivership.

According to the "Questions and Answers" document, the receivership was necessary due to the declining value of some of the company's investments. In other words, they took premiums from policyholders and invested the premiums, and the investments of those funds didn't pan out.

As I posted earlier, whether you are shopping for insurance, paying for an insurance policy, or making or litigating claims.......be aware of the insurance company's financial status.

Unfortunately for all of us, this ain't nearly over yet, we still can't see the bottom and how deep it is for the insurance industry.

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Posted In: Insurance News and Current Events

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Following on from an entry last week, The insurance industry continues to report that employees are being laid off, and the reviewing services seem to be constantly downgrading the financial strength ratings of the various insurers.

In times like these, the atmosphere is ripe for consumers to make the wrong decision when their insurance policy is either being trmeinated by the insurance company, or they are up for renewal, and they must decide whether to renew their present coverage, or to seek a cheaper alternative.

Recently an insurer called "Peoples Trust" has been aggressively advertising in Florida. Here is what the Florida Association of Insurance Agents has to say about Peoples Trust: "Peoples Trust Insurance Company, The Truth About Peoples Trust"

The old saw goes something like: "If it seems to good to be true, it probably is!". Insurance is too important to buy based on slick advertising, and bold promises. In this computerized, information age it is easy for a consumer to research an insurance company's track record, and financial solvency. Unfortunatley, when it comes to insurance a consumer finds out that they bought the wrong coverage, from the wrong insurance company when it is too late......when they actually need the coverage.

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We've been watching the homeowners insurance market in Florida for more than 20 years now. The latest news is that State Farm announced today that it will not renew any homeowners policies in Florida.
The impact on Florida homeowners is significant, 703,357 homeowners’ policies, written for $1,054,918,245.00, will be affected.

This follows a trend that began after Hurricane Andrew, in 1992. Prior to Hurricane Andrew, there had not been a major hurricane that had hit Florida for 25 years. That means that the homeowners insurers had made an enormous profit on the homeowners premiums for those 25 mild years. You would think that they would have been prudent and conservative with their policyholder's premiums during that time, so that they would be able to easily withstand a major hurricane loss....... (Do you really think that they were any better or smarter at investing your premiums then than they are now?)

Instead, after Hurricane Andrew, the homeowner insurers cried out that Hurricane Andrew had created huge money problems for them, and lobbied the Florida legislature for changes to the law, which permitted them to form "Florida" domiciled subsidiaries,like State Farm "Florida" thus allowing them to decouple their homeowners and auto business. The legislature also formed the state owned insurance company, Citizens, and subsequently the market has deteriorated to the point that all of the major carriers have now pulled out of the homeowners insurance market in Florida,

Homeowners have very little choice today, there have been problems with some of the smaller carriers that entered the market, and prices for homeowners insurance have done nothing but go up, and for less coverage.

This does not bode well for the availability and affordability of coverage, and it certainly will affect what happens if you are a homeowner with a smaller insurer in the event that you need to make a claim.

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Everybody should realize that insurance companies make money by investing the money they receve in premiums paid by their insureds. Does anyone think that insurance companies are any better at investing their money than any of the wall street investment banks that made such bad decisions?

Aside from all the press coverage of AIG's problems, the media has basically overlooked the fact that many insurance companies are having significant financial problems. In fact just by a little internet searching, I learned that AIG is not the only insurance company that is requesting Federal bailout money, and that A.M. Best has downgraded its credit ratings of some prominent insurance companies and their coprporate parents (your insurance company may be a subsidiary of a much larger group/holding company).

Over the years we have seen insurer's adjusting claims in indefensible ways when the insurance company is in financial trouble.

One example that sticks in my mind was a small one man roofing contractor, who basically worked out of his home. He had resurfaced a roof on a warehouse. We had several days of torrential rains, and the roof collapsed. The roofing contractor was sued, and he turned the claim in to his liability insurer. The insurer denied the claim on the silly basis that the only roof that the liability policy would cover was the roof on his own office!

We sued the carrier, and forced them to cover the suit and pay the loss, and very shortly after we finished, the insurer went into receivership, and was declared insolvent.

The point is, that whether you are an insured looking to your own insurance company to protect you, or you are a victim making a claim, the reality is you'd better be aware of the insurer's conduct, and pay attention to whether the conduct is because of financial problems the insurer is having outside of your personal situation.

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Posted In: Bad Faith Insurance Claims , Insurance News and Current Events

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We have been successfully litigating a Class Action against Medical Savings Insurance which was recently taken over by regulators. We believe this is the tip of the iceberg: Indiana regulator takes over 2nd insurer

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