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Florida insurance company sues its own policyholders

Imagine having your house severely damaged in a storm, requiring major repairs.

Now, imagine that your insurance company sues you for not getting those repairs done by the "right" contractor -- meaning the one that they preferred you to use.

That's exactly what's happening to more than 70 policyholders of People's Trust, a Florida insurance firm.

According to the insurance company, the policyholders should have known it was coming. They agreed to use the insurance company's preferred contractor to repair any damages they suffered to their homes. The "preferred contractor" happens to be what the insurance company euphemistically calls its "affiliate." Both the insurance firm and the contractor's company share two major corporate officers.

In return for giving the insurance company the right to pick their contractor, policyholders were given -- at least according to the insurance company involved in the dispute -- a substantial discount off their insurance premiums.

What's brought about so much conflict between the insurance company and its policyholders? It could be a number of factors rolled together:

  • Insurance companies have long complained that contractors in certain areas of Florida overbill on purpose so that they can file a lawsuit when their claims are denied or underpaid.
  • Public adjusters, who come in as third parties, often promise policyholders that they can get them far more than the insurance company would otherwise offer.
  • Policyholders may be angling for cash settlements in lieu of repairs -- with no intention of making the repairs.

In return, policyholders often have to turn to attorneys for help if they feel that they're getting an unfair deal by the insurance company. Attorneys for policyholders say that the preferred-contractor system and steep rate hikes on premiums force insurers to take a "deal" they don't want and sticks them with substandard repairs when the preferred contractor cuts corners.

In other cases, insurance companies drag their heels getting the repairs done -- which negates the contract obliging the insured to use the preferred contractor. Attorneys say some of the lawsuits are designed to force policyholders back into line rather than fight for their legal rights.

One thing is for certain: If you're about to sign a policy for home insurance in Florida (or anywhere), be sure that you read the details concerning how repairs have to be done -- or be prepared for a legal fight with the insurance company in the future.

Source: Sun Sentinel, "People's Trust Insurance sues dozens of its own policyholders in claims disputes," Ron Hurtibise, Nov. 16, 2017

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