GHS Property and Casualty won't renew on family's policy

[Guest guest]

http://www.newsok.com/cgi-bin/show_article?ID=923080 & TP=getbusiness

Insurance not renewed in mold dispute

2002-09-26

By Adam Wilmoth

The Oklahoman

EDMOND -- Terri on could not have imagined that seeing her home

destroyed by the May 3, 1999, tornado would seem easy compared to what she

has gone through with her new house. Seven months pregnant with her second

child, she and her husband, , now face the possibility of losing their

home because of a mold claim that has consumed much of the past two years.

Their insurance company, GHS Property and Casualty, has decided not to renew

its policy on the house, leaving the ons scrambling to find new

coverage.

If the ons don't get new insurance -- and they've been unsuccessful

after seven months of searching -- they could be forced to immediately repay

their home and business loans. It would be nearly impossible to sell the

house because it has a biohazard sign in the front lawn, and some experts

believe toxic mold is still growing inside. They're no longer living there.

When a homeowner loses homeowners insurance in the midst of a contentious

claim, few options are available, insurance experts said. Although rare,

such circumstances appear to be increasing.

The ons moved into their new home in Edmond in September 2000, and

just five months later, the ons discovered a roof leak and mold in

the house. They filed a claim with their insurance company, and after a

chain reaction of more mold discoveries and claims over the past year and a

half, the battle is still raging.

The ons and GHS have failed to reach an agreement on several issues,

and the ons have hired an attorney.

Fearing their insurance eventually would not be renewed, the ons

began searching for new insurance more than seven months ago. Their fears

were realized Aug. 1 when GHS notified them that they would not be renewed

when their policy expires Sunday, although the company recently granted them

a 30-day extension.

GHS has paid more than $170,000 for mold cleanup and rent for the house the

ons are living in and working from.

" The nonrenewal is based upon the fact that she has had numerous claims at

this point and no longer meets our underwriting guidelines, " GHS Group Vice

President Bert Marshall said.

The ons have been turned down by more than two dozen insurance

companies they have approached on their own, and even with the help of the

state Insurance Department's Marketing Assistance Program, they have been

denied five times.

The assistance program is made up of 34 insurance companies that participate

voluntarily and accept high-risk homes -- often at higher rates and

deductibles than normal.

The companies are not required to provide coverage, but program director

n Rook said everyone who has gone through the program since it was

created in 1986 has received coverage.

The ons have been turned down by five companies, but have not yet

been processed by the others. The problem is that each company has 10 days

to determine whether to write the policy. Each time the application is

denied, it is sent to another company, which also has 10 days to decide --

leaving little time for companies to review the ons' application

before their insurer's deadline.

But Rook and Oklahoma Insurance Commissioner Carroll Fisher said even the

assistance program can offer little help to people who still have an open

claim with their previous insurer.

" If there is an open claim, another company doesn't want to take it and have

to wait on the first company to settle it, " Rook said. " I don't know if

that's 100 percent true, but that's the general practice. "

The ons' problems multiplied earlier this month when the Small

Business Administration said that if they lost their insurance, they would

have to immediately repay a $350,000 home loan and $48,000 business loan.

The ons received their loan from the SBA because their home and

business in were destroyed in the tornado. SBA loans carry a 3.4

percent interest rate and can be repaid over 30 years. Unfortunately, the

house is collateral for both loans, so if the ons lose the house,

they lose the loans.

Most banks and other financial institutions offer what is called forced

placement insurance, which protects the mortgage company, but not the

homeowner, and costs nearly three times as much as regular insurance. It

does buy the homeowner more time to find regular insurance. Since the

ons' mortgage is held by the government, forced placement is not an

option.

More and more Oklahomans are finding themselves without homeowners insurance

as insurance companies restrict coverage and are less willing to renew

customers with multiple claims. The number of customers who have turned to

the Marketing Assistance Program has tripled in the past two months Rook

said. The program helped more than 800 homeowners find insurance in August,

he said.

Most of those customers have settled their claims before being nonrenewed,

although the number dropped while in the midst of a claim also may be

increasing.

" I'm seeing it more than I care to, " Fisher said. " I don't mind if they drop

somebody. I don't set those underwriting rules. If you're wanting off the

risk, I understand that, but don't put them in harm's way by canceling them

like that. "

Fisher said he would like to see companies give policyholders a temporary

extension until claims are settled. He said he is considering pushing for

legislation next year on the issue.

Insurance companies, however, are not as keen on the idea.

" Our company would not wish to have our other policyholders subsidize this

house, " Marshall said of continuing the on's insurance until the

claim is settled. " There are issues with this house. I personally would not

want to do that. "

Snyder, assistant general council at the American Insurance

Association, agrees.

" I think that's a misguided approach, " he said. " That would invite

constantly filing new litigation to keep the claim in effect, and of course

that cost would be paid by other policyholders. "

Customers who file several sizable claims in a short amount of time

represent a disproportionate amount of an insurance company's claims

payments.

If the insurance company continues to service those customers, the rest of

the customers would have to pay higher premiums to cover the continued

costs.

But dropping customers during an open claim leaves the customers with few or

no alternatives.

Representatives from State Farm, Farmers and USAA all said they make the

decision not to renew based on the policyholder's claims history and that

they write policies on a 12-month period. State Farm, Farmers and GHS said

after they nonrenew policyholders, they leave it up to the former customers

to find their own insurance.

USAA, however, in most cases, provides its customers the option of accepting

insurance through its general agency. The rates are higher than USAA's

regular rates, but they are comparable to other high-risk policies, USAA

spokesman Berry said.

Customers who show better claims history then could be invited back to

USAA's regular policy, he said.

The ons have been unsuccessful in finding a new insurer, but GHS has

agreed to give them a 30-day extension. They also have received some

leniency from the Small Business Administration on repaying her loans.

In the mean time, the ons and GHS are working to settle the claim.

GHS has agreed to allow the on's microbiologist to reinspect the

house today.

" We are still making every effort, " Marshall said. " Leaving her high and dry

on a claim is not our goal. "

Either way, the ons are pushing for homeowners insurance reform and

encourage policyholders to ask questions.

" I thank God every day that we've been able to get this far, " Terri

on said. " We're exhausted, tired, sick, but not dead yet. I can still

call people and plead with them for help. People need to be proactive and

call their insurance companies and ask them if they cancel insurance during

a claim. "