Insurance Machine

Dec 04,2008
After moving to upstate New York in August 2007, to live with her parents, Amy Rehbit intended to sell her Long Island home.
Every other weekend, the 35-year-old school teacher traveled from her new upstate home to check on the house. Those times that she couldn't make it, her parents drove back or a neighbor looked in. She had left the house furnished, with the cable TV still hooked up.
Since the house was left unoccupied, Rehbit received a letter from MetLife Inc., the biggest U.S. life insurer, canceling her homeowners’ insurance policy. MetLife company spokesman Ted Mitchell says that to determine whether the state of being unoccupied has led to an amplification in the hazards based on a willful or reckless act, or omission by the insured, the company looks at the totality of the circumstances.

On November 19th, the New York State Insurance Department warned companies not to terminate policies just because there is no one living in the house. The insurance department can consider occupancy when making the decision as to whether or not their risk has changed only in combination with other factors.

Steven Nachman, the insurance department’s deputy superintendent for frauds and consumer services in New York City, says that only after receiving dozens of complaints going back at least three years, did New York regulators act. He said that the way companies were canceling homeowners policies was depriving homeowners of their policy rights.

The Slump in House Prices
Now that homes were becoming harder to sell, homeowners were becoming more concerned about how to keep their policies in force. In the year ended Sept. 30, the S&P/Case- Shiller index of house prices for 20 U.S. cities had declined at the fastest pace ever.
According to the U.S. Census Bureau, by the end of June, the number of vacant houses in the U.S. hadreached an all-time high of 18.6 million. It is the agency’s estimate that 2.8 percent of all U.S. housing inventory is vacant and for sale, as compared with the figure of 1.8 percent for the first half of 2005.

According to New York state insurance officials, the canceling of policies for unoccupied houses isn’t special to the state. Nevertheless, insurance regulators are working to reverse the trend as market conditions continue to deteriorate and home-loan defaults increase throughout the U.S.

Nachman says that it is possible that although insurers will be tempted to act in situations where foreclosures are becoming likely, it is still important they adhere to the insurance law.

The New York insurance department has requested that companies act to restore coverage. While many have complied, still others have required some prodding, according to Nachman.