Typical of the socialist liberals in New England to socialize a problem that should be the responsibility of the individual. When the house structure begins to fail due to bad foundations then all policyholders (through their insurers) will be expected to take on the cost.
Being an insurance claims professional in CT, I can tell you that this issue is a much larger, and more complex issue than you or this article give credit for.
There are as many as 10,000 homes in CT with foundations poured in the 80’s and 90’s by a company called J.J. Mottes. JJ Mottes used aggregate contiaining high(er) levels of pyrrhotite, or iron sulfide. Over time the iron oxidizes and expands causing first small fractures, then larger cracks and eventually crumbling. These foundations are failing from within, and there is literally nothing that can be done to slow, stop or prevent this.
The DOI is not forcing insurers to pay for this, its pretty much blatantly excluded in the HO policies. All they are doing is stating that the policy(ies) cannot be canceled or non-renewed for this problem, which has really zero bearing on coverage other than “collapse” as defined in the policy, and even then, coverage is still questionable. The DOI is doing its job making sure that fire, wind, and other coverages not impacted by this foundation issue remain in place.
Come on Whiz. They got 1 complaint. That should be enough to make a new rule that burdens insurance companies, increases loss potential, and makes them look like they care about the people of their great state.
Collapse is covered under an HO3. If the home suffers any structural damage from this you know that the homeowners will file a claim and will likely file a lawsuit if the claim is denied. Then it will be up to the insurer to prove that the foundation had been weakening over time. Lawyers, time and money. I don’t think this is a costless decision by the DOI.
The claims that have been brought forward, and rightfully denied to date, are those for damages to the foundations themselves under the exclusions for latent defect, inherent vice, and cracking of foundations.
Agreed, collapse is covered under the standard HO-3 policy. In 1987 the CT courts determined that “collapse” means “substantial impairment of the structural integrity of the building”. Since that time the language in the HO-3 has been updated to define “collapse” as “…an apbrupt falling down or caving in of a building…” At this time it is not know which standard which would be applied, or if these foundations meet either standard.
That said, I think you missed my point. The CT DOI has barred the non-renewal of these policies for the sole purpose of maintaining the coverage on the other exposures, namely Fire. It will be interesting to see how this plays out, and what the 1,000 lbs gorrillas in town (Travelers & Hartford) do to make a deal on this issue with the DOI.
I was attempting to put myself in the shoes of the insurer. Why would they cancel policies even if the knew that the potential problem was excluded under their forms? The only answer I could think of was that they see this as a potential litigious issue that will cost them one way or another. And in my personal view, that should be all the reason they need to not renew the policy. What the DOI has done is not cost-free.
Agreed, there will be some cost to the insurers as a result of this. As someone who has had to deal with knee-jerk reactions by DOI’s in the past, I think CT got it right this time, on this issue. Had they not, there could suddenly be 10,000 families in CT without insurance, either property or liability. The fall out would have the potential to be catastropic to the already fragile (another issue all together) economy, mortgage industry, and housing market here in CT.
Typical of the socialist liberals in New England to socialize a problem that should be the responsibility of the individual. When the house structure begins to fail due to bad foundations then all policyholders (through their insurers) will be expected to take on the cost.
Whiz,
Being an insurance claims professional in CT, I can tell you that this issue is a much larger, and more complex issue than you or this article give credit for.
There are as many as 10,000 homes in CT with foundations poured in the 80’s and 90’s by a company called J.J. Mottes. JJ Mottes used aggregate contiaining high(er) levels of pyrrhotite, or iron sulfide. Over time the iron oxidizes and expands causing first small fractures, then larger cracks and eventually crumbling. These foundations are failing from within, and there is literally nothing that can be done to slow, stop or prevent this.
The DOI is not forcing insurers to pay for this, its pretty much blatantly excluded in the HO policies. All they are doing is stating that the policy(ies) cannot be canceled or non-renewed for this problem, which has really zero bearing on coverage other than “collapse” as defined in the policy, and even then, coverage is still questionable. The DOI is doing its job making sure that fire, wind, and other coverages not impacted by this foundation issue remain in place.
Come on Whiz. They got 1 complaint. That should be enough to make a new rule that burdens insurance companies, increases loss potential, and makes them look like they care about the people of their great state.
Matt
Collapse is covered under an HO3. If the home suffers any structural damage from this you know that the homeowners will file a claim and will likely file a lawsuit if the claim is denied. Then it will be up to the insurer to prove that the foundation had been weakening over time. Lawyers, time and money. I don’t think this is a costless decision by the DOI.
Buco,
The claims that have been brought forward, and rightfully denied to date, are those for damages to the foundations themselves under the exclusions for latent defect, inherent vice, and cracking of foundations.
Agreed, collapse is covered under the standard HO-3 policy. In 1987 the CT courts determined that “collapse” means “substantial impairment of the structural integrity of the building”. Since that time the language in the HO-3 has been updated to define “collapse” as “…an apbrupt falling down or caving in of a building…” At this time it is not know which standard which would be applied, or if these foundations meet either standard.
That said, I think you missed my point. The CT DOI has barred the non-renewal of these policies for the sole purpose of maintaining the coverage on the other exposures, namely Fire. It will be interesting to see how this plays out, and what the 1,000 lbs gorrillas in town (Travelers & Hartford) do to make a deal on this issue with the DOI.
Matt
Thanks for the reply.
I was attempting to put myself in the shoes of the insurer. Why would they cancel policies even if the knew that the potential problem was excluded under their forms? The only answer I could think of was that they see this as a potential litigious issue that will cost them one way or another. And in my personal view, that should be all the reason they need to not renew the policy. What the DOI has done is not cost-free.
Buco,
Agreed, there will be some cost to the insurers as a result of this. As someone who has had to deal with knee-jerk reactions by DOI’s in the past, I think CT got it right this time, on this issue. Had they not, there could suddenly be 10,000 families in CT without insurance, either property or liability. The fall out would have the potential to be catastropic to the already fragile (another issue all together) economy, mortgage industry, and housing market here in CT.
Harkens back to the construction defect claims that hammered carriers out west.