Beware of Homeowner Insurance Claims Before You Make Them

In 2001 our school spring break occurred in the second week of April. I took my children to visit my folks for few days and returned to my Victorian home in a small town in central Illinois on a Thursday. We went to bed kind of early but I woke up in the middle of the night sensing that something was wrong. My room seemed the same, there was no funny smell or sound, but something was wrong. It was red. Or orange. Everything was a funny color. And then I realized that the color of the world outside my bedroom window was red-something was on fire. It had to be the bathroom at the back of the house and I woke my husband as I jumped from the bed and ran toward the door. But the bathroom was not on fire, the garage across the alley from our garage was and we could see it from our bathroom window.

I called 911 as my husband went to hose down our garage roof. The volunteer fire department was on its way and within an hour the fire was out. The other garage was destroyed but ours had been spared destruction-just the roof on the north side and the two sections of wooden fence next to the garage were beyond repair. Pretty lucky. Or so we thought as we returned to bed.

We had lived in our house for 11 years at the time and had always carried homeowner’s insurance. This, however, had not been our fire so we filed a claim with the other people’s company for $1800. We dutifully got an estimate on roof repair but only claimed enough to do the work ourselves. Their agent called and wanted some information from our fire chief which I gave him. When I didn’t hear anything I called him back. He was, to say the least, brusque as he informed me that it was not his insurance which had to pay, but ours. Well that seemed silly so I called our agent. He informed me that, indeed, it was our agency which had to pay and they would do so. They did and we repaired the roof ourselves that summer (believe me when I say repairing a roof is not pleasant work).

That fall we chose to move our auto insurance policies to a different company and were informed just after Christmas that our homeowner’s insurance company was dropping us. They gave two reasons for this: 1) we had had three claims ($250, $300 and $1800) over the last 11 years, and 2) they were no longer going to insure those who did not have multiple policies with their company. What a sham! We had paid these people over $6000 and they were refusing our policy because of a fire which wasn’t even on our property! Well, good riddance to bad rubbish. We would just get a new insurance company.

Or not. I made several phone calls and was informed that because we had a fire on our record most companies would not insure us. I started to feel like the town indigent and turned to the time honored practice of ignoring the issue. Time passed and we continued to live with no insurance. Our bank told us that fire insurance would be placed on our home. That sounded good because, really, fire was the biggest threat so having that covered would be a huge relief. We lived with that for awhile. When we received an offer of homeowner’s insurance from the National Education Association, of which I am a member, I thought we were all set. I called and the very nice man told me that we didn’t qualify (thanks to our fire), but for the first time someone did take the time to explain to me that our insurance record showed that the fire claim was under abrogation-which meant that our old company was still holding out hope that they would retrieve the claim money from the neighbor’s company. He suggested I call them and explain everything and ask if the claim could go away if it wasn’t going to be settled. He also said that if they said no the record should go away on its own in five years. Great.

I called the old company. They told me that it was indeed, under abrogation, but that they had no hope of ever actually getting their money back. So I asked what I thought was a life-saving question: could they, then, remove it from our record? Well, no, she said, because then it would look as if it were settled and it wasn’t settled. “But,” I pointed out, “you just told me it isn’t going to be settled.”

“That’s right it isn’t. But we can’t just act as if it was never on your record.”

“But why not? It wasn’t even our fire?”

“I’m sorry, but we just can’t.”

Well that was that. Then one day in the summer of 2003 I saw a sign for the fire insurance company our bank had placed us with and I hatched what I thought was a brilliant plan. I would just go ask them to insure everything. After all, they already had the most dangerous part of the gamble covered. The woman who spoke with me was very kind as she explained, much as you would to a five year old, that their company did not actually insure our home for us. They insured it for the bank. If we ever had a fire the bank’s loss would be taken care of-we would get nothing. Now I felt like a stupid indigent. However, she did suggest that I call the Illinois state insurance board and ask them what to do and she even gave me the number.

I called and the guy told me that we were pretty much out of luck. He said we might be able to get one company to insure us because they specialized in uninsurable cases, but that it would cost a lot-and a lot we didn’t have. He also told me that whomever had told me the record would go away in five years was sadly mistaken-records were kept by a company out of Atlanta and might go on deep background but never actually went away. And he didn’t think fire even went on deep background. He was also kind enough to inform me that if a fire is not arson then the owner of the damaged home is almost always responsible for their own damage (a fact our fire chief was surprised to learn) and, furthermore, that our home would be probably be uninsurable for future potential buyers as well.

My husband and I could not believe it-and no one else did either. It was like a bad movie or the book of Job and it wouldn’t end. We lived through another winter and the fourth tornado season with no insurance. And then in April our Allstate agent sent us a letter requesting that we switch our homeowner’s insurance to them. They had already rejected us once but I sent a detailed letter and informed them that they were more than welcome to insure our autos as well as our house but that they didn’t appear to want to. The agent called two days later to say that Allstate would gladly take on our home.

The saga ended when, two months ago, they removed the money from our escrow account and agreed to cover us. The message I have since been shouting to anyone who will listen is simple: unless you have suffered catastrophic loss do NOT file a claim-even very small ones can lead to a company refusing to insure your home and all of them, especially fire, go on a permanent record. A colleague recently told me they had a branch fall on part of their fence and were going to claim $1000 from the insurance. I just looked at her and shook my head. Good luck.