New York Warns Insurers about Some Homeowners’ Cancellations

November 20, 2008

New York Department of Insurance has this advice for insurers in the Empire State: Stop canceling homeowners’ policies simply because a house in unoccupied.

That announcement came in the form a circular letter – essentially, an advisory bulletin to insurers – reiterating that cancellation of the policies solely on the basis of non-occupancy is illegal.

The warning follows numerous complaints made to the department by consumers about cancellation notices.

The Department said it investigated cancellation by a number of insurers that – after apparently determining a residence had become unoccupied – improperly cancelled the owners’ policies on the grounds that the lack of occupancy constituted physical changes within the meaning of the policy language.

One investigation even revealed an incident where an insurer improperly cancelled the policy of a husband and wife – who were residing at the time in a nursing home.

Another improper reason for cancellation? Foreclosures.

The circular letter also reiterated that insurers may not use the existence of a foreclosure action as a basis to cancel a homeowners’ insurance policy, since filings do not constitute a willful or reckless act or omission or increase the hazard of an insured property.

Superintendent Eric Dinallo is urging consumers who believe they may have illegally been issued cancellation notices to contact the Insurance Department.

“Consumers should know that the Insurance Department will act vigorously to protect homeowners,” he said. “This includes homeowners who may be involved in forfeiture proceedings, which have increased because of the troubled economy. Insurance companies need to understand that the insurance law protects all homeowners from improper non-occupancy cancellations.”

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