Is This How Homeowners Insurance Normally Works?

Recently I handled a breach of contract in a homeowners insurance case.  The facts seemed straightforward enough but the way the homeowners insurance address the matter seem strange.  The insurance company is one of the major players in the American market.  I don't think I need to name them because I believe it could've been any of the companies.

The facts are as follows.  The homeowner was in his 70s and had been with this company for several decades.  He had owned his home for more than 50 years.  He was a veteran who was honorably discharged and he was retired.  He may have been widowed, he was living alone.  Early on in 2014 he had a heart attack.  That heart attack put him in the hospital for several weeks.  After he was discharged from the hospital he was put into a rehabilitation center for several months.  Early on in the hospital one of his relatives told him that the roof of his home it sprung a leak through the roof.  They promptly contacted his homeowners insurance company.  Several weeks after contact the homeowners insurance contracted with a company to put a tarp over the roof.  By that time the water had entered the home and damage was done and there was a mold problem.

Rather than tackle the problem immediately the homeowners company kept dragging their feet.  The man's relatives would give estimates to the insurance company for the work that needed to be done.  For whatever reason they would not pay the estimates.  The home was uninhabitable.  When the man was done with rehabilitation he had to live in a hotel.  The homeowners insurance was paying that but they would not take care of the home.

Finally in September or October of this year the family hires me because the insurance company wants to take an examination under oath of the homeowner.  An examination under oath is similar to a deposition.  It is normally in the insurance policy that the insured has an obligation to reasonably cooperate with the insurance company.  Why they wanted to take this examination of this man was not clear to me.

After I was hired I contacted the insurance company and requested the full policy.  The policy was approximately 20 pages long.  It seemed like a fairly standard policy in that the first couple of pages provided the benefits that the insured would receive in case of a loss and the next 18 pages systematically limited or withdrew those benefits.  There were sections in the policy about lack of coverage if the home is vacant.  There were other sections about lack of coverage if there was lack of maintenance.

I was thinking that they would deny coverage because the home was vacant and he was in the hospital.  I was thinking they would try to deny coverage because perhaps they would argue that he was negligent in maintaining his roof.  In either case I was thinking this is outrageous.  The man pays premiums for decades and has a heart attack and they're going to claim that he had left his property vacant?  They were going to claim that he was negligent in not maintaining his roof?  His roof was watertight, he had no evidence or notice that there was any problem until the leaking began.  I was thinking this was a wonderful case to present to a jury for breach of contract.  Retired war veteran is insured for decades with his company and it takes them more than one half of the year to resolve the problem.

The attorney that took the examination of the insured was decent.  She was just following orders.  She took her information.  When she was done with the examination I made it quite clear that this was outrageous conduct on behalf of the insurance company.  They kept this man many months out of his home because they were looking for ways to deny coverage.

Ultimately they agreed to pay one of the estimates that the homeowners had provided.  It was one of the medium estimates.

Strangely, along with the check payment came a full release.  The full release made no sense to me.  What if during the repair of the home they discovered more damage from the water leak.  My client would be prohibited from making a further claim.  I spoke to a colleague who regularly represents insurance companies and he advised this is quite normal.  It makes no sense to me.  For a contract to be valid there must be consideration.  Consideration is a legal term meaning there needs to be something of value exchanged during the contract.  The insurance company wasn't giving anything extra, they were providing what they were obligated to provide in exchange for the premiums.  They were obligated to provide coverage.  They provided that coverage.  If there was more damage they should be obligated to pay for the extra damage.  My client was tired of fighting and he accepted the release.

I also argued to the insurance company that they must guarantee that they will not cancel his coverage because of the claim.  It is not unusual in a homeowners claim for the insurance company to cancel the policy after the claim.  What a business.  Can you imagine going to a restaurant, ordering the food, receiving the food and then only being able to look at it.  You can't touch the food.  Kind of like homeowners insurance.  If you use it you lose it.  The insurance company would not guarantee that either.

At least I got my client coverage for his loss.  I wish I could've done more.

I think that the take away from this is read your homeowners policy.  You might have much less coverage than you think you really do.