Insurance companies are ordering more home inspections. Here’s what to expect

With financial losses mounting over recent years, insurance companies in Florida are ordering more home inspections. Their aim is to force homeowners to fix potential problems or find justifications to dump risky properties.

John Strautman, owner of an expansive home in Fort Lauderdale’s historic Colee Hammock neighborhood, learned this the hard way several months after switching from his longtime insurance company to one with a lower annual rate.

Strautman was stunned several weeks ago when his new insurer, Sunrise-based Monarch National Insurance, sent him a letter ordering him to remove one of several historic live oak trees surrounding the home he built in 2010. The letter demanded he remove “a large tree within close contact of the dwelling.”

“Please provide color photos showing the tree has been completely removed,” the letter stated. “Requested documentation is required within 15 days to prevent further underwriting action.”

Only later did the insurer clarify which tree it wanted to be removed, but by then the 15 days had expired and Monarch followed up with a letter stating that because of his failure to remove the tree, it would not renew his policy after it expires in March.

Now John Strautman and his wife Catherine will have to find another insurance company who will let them keep their cherished trees. They don’t understand why Monarch demanded that they remove one when their previous insurer never objected to any of them. Officials of Monarch, which is owned by FedNat, did not respond to requests to discuss the Strautmans' case.

Complying with Monarch’s removal order is not an option, John Strautman said. “It would be tragic. Once we remove one of our majestic natural resources such as a healthy and vibrant live oak tree from our neighborhood, it can never be replaced.”

Other homeowners are finding themselves in similar straits in today’s tightening insurance market.

A combination of financial blows to the industry are, as usual, being laid on the shoulders of customers, mostly in the form of steep rate increases.

Claims costs from 2017u2032s Hurricane Irma have been accruing to levels far exceeding original estimates -- $17.4 billion compared to 2018 estimates of $9 billion. Irma was followed in 2018 by Hurricane Michael, which cost insurers $7.4 billion. Numerous smaller weather events since then have compounded those losses. And opportunistic litigation remains at high levels and has spread throughout the state after formerly being confined to South Florida.

As a result, companies that sell reinsurance -- which insurance companies are required to buy to guarantee they can pay out claims after a catastrophe -- hiked their rates 20% to 30% just prior to this year’s hurricane season.

Those increased costs have led many insurers to refuse to write new or renewal business in ZIP codes and even entire counties where claims and lawsuits have skyrocketed in recent years. Deerfield Beach-based People’s Trust Insurance Co., for example, recently alerted agents that it has temporarily stopped writing new policies statewide until revenue from rate hikes catches up with increased costs of claims and reinsurance.

Some companies refuse to sell coverage to homes over a specific age or with roofs more than 10 years old. Some won’t cover homes with problematic plumbing material or whose owners have filed previous claims for non-weather-related water damage.

And homeowners who can find companies willing to cover them are being subjected to more property inspections, where those companies might find previously unknown risks that will compel them to cancel or opt not to renew those policies if customers cannot or will not remove the risk.

“Across the state, carriers are being more diligent about the types of risks they will insure,” said Paul Handerhan, president of the Federal Association for Insurance Reform, a consumer-focused watchdog group based in Fort Lauderdale.

Security First Insurance Co., based in Ormond Beach, is requiring inspections for all new policies and ordering more frequent inspections of renewing policies, said Kerrie Ruland, the company’s vice president of business development. She’s told that other insurers are doing the same, she said.

“It’s important now more than ever to evaluate risks upon renewal,” she said. “Where companies used to go three or four years without requesting inspections, now they seek them more often.”

Under state law, insurers have 90 days after a new customers signs a contract to verify that the information that the customer put in their application is correct and to determine if the risk is worth covering. During those first 90 days, the insurer can cancel the policy for any reason and refund any premium that was paid.

Typically, the insurer will conduct the initial inspection by reviewing satellite photos of the property and either sending an inspector to the home or, as is happening more often during the COVID-19 era, asking the customer to walk through their homes and take photos with their cellphone cameras.

“We’ll ask them to take pictures of the [manufacturing] date stickers on their water heaters. We’ll have them take pictures of the outside of their houses showing the front and left corner and then the rear and right corner.” Ruland said.

Insurers also will request photos of the roofline to verify the type of roof. Inside, customers will be asked to photograph plumbing connections and ceilings to prove there are no leaks. Insurers are keen to look for potential leak problems because that’s how a majority of non-weather-related losses occur, particularly in neighborhoods with older houses.

Toilets, kitchen and bathroom plumbing, electric panel boxes and air conditioning units are other points of interest, she said.

If an insurance company decides to inspect a home more than 90 days after issuing the policy -- as Monarch did at the Strautmans' home -- state law prevents them from canceling the policy if they find an unacceptable risk, like the Strautmans' trees, that existed all along.

After 90 days, an insurer can cancel a policy for only one of three reasons:

The customer misrepresented facts in their application.

The customer failed to adhere to guidelines established in the first 90 days -- such as failing to make a repair ordered after an initial inspection.

There’s a substantial change to the risk.

Otherwise, the insurer is limited to deciding not to renew the policy after its yearlong term expires. That’s what happened to the Strautmans. While the couple didn’t lose their insurance in the middle of hurricane season when they decided not to remove any trees, they will be required to shop for a new insurer before March.

If no domestic insurer will cover them, they could be forced to shop for insurance in the “surplus and excess lines market.” Those are companies, typically global in scope, that cater to multimillion-dollar homes that smaller companies won’t cover. They’re the companies like Lloyds of London and AIG willing to insure expensive collector cars, high-dollar jewelry and high-priced art. They’re also much more expensive than a typical insurance company, Handerhan said.

The Strautmans don’t yet know whether they’ll have difficulty finding another insurer who will allow them to keep their tree.

Few companies order removal of healthy trees, according to Gary Manly, an arborist in Wilton Manors who maintains the Strautmans’ trees. Most of the time, he said, companies will require homeowners to keep branches trimmed so they don’t touch the roof or hang over the top of the roof.

But the tree that Monarch demanded the Strautmans remove isn’t typical. It stands little more than a foot from the front of the couple’s garage. And while John Strautman says he pays Manly to keep it trimmed and balanced, Handerhan said after seeing a photo of it that he can understand why an insurer might not want to take the risk.

“That tree is very close to the house,” he said. “The concern is that it will fall over in a storm and cause major structural damage. I would imagine that would give pause to most insurance companies.”

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