understanding my rights with insurance company canceling my policy with an open claim Jennifer Ketelaar Modugno asked 6 months ago
understanding my rights with insurance company canceling my policy with an open claim

I received a non renewal notice from Mercury Insurance for home and earthquake insurance with an open claim. I am writing to understand my rights, as given the unique circumstances this seems unlawful to me.

Background:

Besides home and earthquake insurance with Mercury I have a $2m umbrella, car insurance for 2 cars and renters insurance for the temporary house I’m in because of the water damage to my house. The water damage claim I have is still active. The job is expected to take six months. I need Mercury to continue paying for the temporary living that I’m in until the job is done as well as I need them to cover my insurance policy until the claim is closed or ideally for 3 years as no other insurance company will insure my home with an open claim. What makes this a unique circumstance is that the damage to my house was caused by the contractor Mercury chose and paid for directly to tarp my roof. I had a small leak in one bedroom with minor damage, but Mercury hired a contractor to tarp my roof, but the contractor did that incorrectly, causing water to be trapped on my roof, the size of a swimming pool which caved in and flooded my house. So 99% of my claim is due to the damage caused by the contractor Mercury hired. Just to complete the story Mercury is subrogating the loss and going after the contractor. I was interviewed by consultant and have not heard back, but I have a letter from Mercury saying they’re subrogating including my deductible and depreciation. So Mercury will have zero payout on the claim.

 

1 Answers
United Policyholders Staff answered 4 weeks ago

Dear Jennifer,

Thank you for reaching out to United Policyholders. We apologize for the long delay in responding. Broadly speaking, an open claim would not be a valid reason for non-renewal of the policy. In fact, such an action by the insurer may be considered illegal. Non-renewals must be based on specific, objective issues related to the risk of loss.

However, an open claim where the policyholder has delayed taking an action within their control to repair the damage and that damage poses an increased hazard or risk of further loss – like a hole in the roof or a broken water pipe – would be a valid reason to non-renew. Or, if the claim exposed that the home has a condition that does not meet the insurer’s current eligibility criteria – such as overhanging tree limbs or overgrown vegetation close to the dwelling or an older roof that has not been replaced, then the non-renewal would also generally be allowed.
The insurer must cite the reason for non-renewal in a notice of non-renewal sent out at least 75 days before the expiration date of the policy. It’s very likely your non-renewal is not the result of an open claim, in today’s market the most common reason for non-renewal is that the insurer has increased its restrictions on the level of wildfire risk it is willing to write.

Depending on the situation, the California Department of Insurance (CDI) looks at two potential laws.

  1. The CDI primarily references 675.1 if the property was a total loss as a result of disaster and still under construction, specifically subsections (a)(1) and (a)(3).
  2. In general, with regard to any other loss type, for either the existing company or one to which a new application is being submitted, is based upon is whatever caused the loss for which the claim is still open substantially related to the insured’s continuing loss exposure?

The main issue is what eligibility guidelines the insurer has in place and how do they relate to the open claim. Do they have a specific broad rule that makes homes with “open claims” ineligible (which is not too common)? Or, do they have certain specific objective rules that relate back to the type of open claim.  For example, if there is an open water damage claim due to older pipes and the insurer has a specific guideline relating to older or unmaintained pipes, there may be a valid basis to refuse to write that applicant. Open maintenance-type claims and liability claims are the two most common types of open claims the CDI sees in their complaints.

Please let us know if you have any other questions,

United Policyholders