Insurance canceling after tenant fire

8 Replies

Before I go running to my attorney and shelling out more money, I'd like to see if I can get any good feedback or experiences from you guys.

Earlier in the year my tenants burned down my rental property. It was a complete loss and due to their negligence (confirmed by the fire report). Long story short, my insurance company paid out the full claim and are currently in subrogation with the tenants insurance companies. I do have an attorney working with me because the damage exceeded the amount I received from the insurance.

Several months later (about 4 months ago) I renewed my home owners insurance from the same company. While the start was slow, the house is coming along and is expected to be completed in late December (finally)! 

About a month ago I get a notice from my insurance company that they are cancelling the policy due to "substantial change in the exposure of the insured risk: Total fire loss." 

I am so confused about this because (1) They were well aware of the fire several months BEFORE they sent me a renewal, (2) They had already paid me out and (3) They are cancelling a policy through no fault of my own AFTER they requested and accepted my money. I am nearing 5 months into a 1 year policy and it seems backwards to insure me when I had an inhabitable house vs a house that is now almost completed.

Right now I'm running around trying to figure out if I should get the insurance company to come back out to look at the property and extend my policy or get a new policy all together.

Any advice is greatly appreciated especially anyone in the insurance field that can help me better understand this.

Thanks

Been there, done that, feel your pain.  Just get insurance from another company.

BTW, if you haven't already, look at getting a public adjuster.  You will likely get a lot more money out of your (prior) insurance company.

Pay for an insurance adjuster/advocate (homely a percent of additional moneys collected.) Also look at replacement cost insurance in the future. It would probably cost you $5-$10/mo. Max.  Otherwise pick an agreed upon value that is safely above replacement value though they would only pay actual money spent to the best of my knowledge. 

It's not unusual for insurance companies to cancel long after the fact. I have an owner with four properties (40 apartments) under one insurance company for 15 years. He filed a few claims in 2018 and 2019. In 2021 I was told their underwriting policies changed and he no longer qualified for their company so I had 60 days to find a new insurance provider.

No need to run to your attorney and shell out more money, this is 100% common and expected practice by your insurance company.  Have had it happen to me and to countless clients.  Never happens quick and often after a renewal.  Also had it happen to a lot of clients out of the blue with no claims, they are just dropped because this reason or that.  Just find a new company and be done with it.  Not worth getting a lawyer involved.

@Marina Loos cancellation of insurance due to risk can be very serious. You may need to disclose that to other insurance companies and claims are tracked in a database, so future companies can see your claims history and the properties claims history. In extreme cases you can even become uninsurable or stuck on risk policies.

You are a higher risk, because you rented to a negligent tenant. You manage the property, so the fire is your fault and on your record. Better screening or better management greatly reduces risk. I know you may be unhappy to hear this, but I am just sharing how the insurance company views the situation. Their risk formula determined you are likely to have future claims above average and that is why they dropped you.

This is why I recommend NEVER placing claims if possible. Obviously in a total loss situation, you had to file the claim. The problem is people will file other smaller claims, then when combined with a total loss, it could result in policy closure. Do you have any other insurance claims on your record?

They are within their rights to cancel your policy at any time and refund the balance. Your attorney cannot force them to bind coverage with you. It is best to shop for another carrier and be completely transparent about what happened at this property. 

I am not in the insurance field, but I have had three fires and had policies cancelled. I was outraged, but learned quickly how the system works. As far as those three fires, only one was reported to insurance. I carry maximum deductible and I wouldn't place a claim for anything under $10K, especially if negligence is involved. Natural disasters are viewed differently.

UPDATE:

Hi everyone. Thank you for your opinions, advice, and insight. @Greg Scott & @Bill Brandt I learned about Public Adjusters a little late in the game. Before I got fully paid out I called 2 of them and neither of them returned my calls. 

While I was making attempts to have my insurance reinstated, I was also trying to figure out which new insurance company route to take. I found a good deal with Foremost and honestly it seemed a tad bit better. I provided them with all the proper information they needed and the underwriters gave me 48 hours to get back with me. In the meantime, my current insurance had already received the information they requested from me (fire report, photos of the house in it's current state, and verification that I will not re-rent to the same tenants) and they literally just called me now and said that my insurance was being reinstated and sent me a verification email. 

I know that going through this is a pretty crappy experience for anyone but I tried to keep a positive attitude. I initially had a horrible adjuster but once I got a new one everything seemed to move very quickly. Again, at that time I wish I got on here sooner and found out about Public Adjusters. I've been learning up about them lately. 

Thank you everyone.

@Marina Loos . Standard operating procedure for an insurance company. Pay out a claim, then drop you a few months later.

No sense in arguing with them or getting attorneys involved, just shop for new insurance.