Florida Investigates Use of Credit History to Deny Claims

November 9, 2012

Florida consumer advocate Robin Westcott has called for an investigation into the practice of insurers using homeowner’s previous credit history to retroactively cancel policies and deny claims, even when premiums have been paid on time for years.

According to Westcott, some property insurers in her state are using old credit histories, which may include bankruptcies, foreclosures or other liens that occurred years before policies were even purchased, a practice which violates state law.

Under Florida law, insurers are only allowed to void policies and cancel them from their inception if the initial payment check was bad.

In a letter to Insurance Commissioner Kevin McCarty, Westcott wrote, “I believe that the practice described to void coverage and/or deny claims for misstatements relative to credit history is an abusive practice that should be consider an unfair trade practice.”

She added, “This activity threatens not only homeowners’ financial stability but also the state’s economic recovery.”

While her letter only cited three cases, Westcott said her office has actually received ten complaints about such practices, all of which involved Universal Property and Casualty Insurance Co., one of Florida’s largest insurers.

Universal did not respond to local media representatives’ requests for comment.