This contract's binding, right?

July 31, 2006 11:49 AM

Insurance Underwriting. Property. Florida. These three statements combined can cause poodles to faint, white to change to black, AC to become DC, and various flora to mutate in the Tropics. My question: If an underwriter actually agrees to bind a policy, are they legally bound to follow their own document?

I am one of many Floridian residents (see here for example) who has had to deal with property insurance in Florida.

I have had to search far and wide to find suitable replacement coverage after the majors have decided they don't want to write new business for my kind of building - a 2 unit condo. A knight in shining youthful underwriting armor has shown up and say "Well, heck! I'll insure you... as a Duplex!"

I've read all their bylaws and even referred it to a real estate lawyer, and it all seems to stick. Because there are really only 2 units to the building, and they're making each unit sign its own "half" policy, they're stating they will insure it. No problem.

I guess my fear is we sign with them and then 2 months later one of their lawyers goes "Heyyy wait a minute! That's not a duplex! We're not going to cover it! Ha ha!"

Can they "unbind" themselves in a situation like that? Just wondering if there are any experienced insurance folks out there..

posted by cavalier to law & government (4 comments total)

I'm a former underwriter, though I can only speak for Maryland, Virginia, and DC practices.

Coverage is always conditionally bound, subject to the policy truthfully and accurately representing the nature of the insurable asset. This is known as a material misrepresentation. If you call your auto insurance company to get a 1984 Volvo covered, coverage is bound, and you wreck it the next day only to mention that it's actually a 2006 Ferrari, that coverage don't mean squat.

If the underwriter has binding authority with the insurer, and the underwriter has accurately described the coverage on the policy, then you're in good shape. If no to either, ask that an inspection be done by the insurer, just to be safe. Because the alternative isn't having your policy cancelled - it's paying for insurance that, when you have a loss, won't be there. And if that's all you want, hell, I'll sell you a piece of piece of paper for $100 that says you've got the Waldo Insurance.
posted by waldo at 12:54 PM on July 31, 2006

Right, you've hit my fear square on the head. Even though I've been confereced with their underwriting dept and the agent, I have this lingering doubt that they will take the loophole of "Oops, our bad, condominium!" even though they're telling me right now they're willing to cover it.

Their rationale right now is that they're making each of us, as unit owner, sign a policy in our names for 'half' the amount of the building. They'll only do it if both of us sign with them together. In this sense they're trying to fudge coverage together, IMO, but hey -- they're the ones fudging! Guh.

I'll see if they want to consider inspecting it.

They cautioned that I would not carry any Directors/Executive Officer insurance, and that means bull crap to me, because in a 2 unit condo there's going to be much politicing or the like.
posted by cavalier at 1:18 PM on July 31, 2006

Yes, Condo D&O is useless for your situation. :)

It sounds to me that your agent is just looking for a clever way to solve your problem. And that's often a good sign of an engaged, intelligent agent, which is a rare treat.

Are you working directly with the insurer, or going through an independent agent? If the latter, you'll want to make sure that the insurer is aware of the arrangement and is OK with it. In either case, you might ask for something in writing that explicitly states that the coverage is a clever solution to a problem, and not an attempt to circumvent policy standards.
posted by waldo at 3:13 PM on July 31, 2006

Yeah, he's definitely engaged, which was a definite plus from the 20 other leads that called me.

However... I just called him back with the Underwriter's group (he was independent) and the Underwriter found out about the Association (mr. eager beaver hadn't told him), and pretty much nixed the deal.

So I guess this question is pretty much dead. I need to figure out a way to a) dissolve the Condo or b) Magically invent a commercial policy writer. I'm trying A with a real estate lawyer tomorrow.

Thanks Waldo!
posted by cavalier at 5:38 PM on July 31, 2006