Cancelled by Citizens Insurance due to Material Misrepresentation

[Jamesr10]

What is the name of your state? Florida

Hello Everyone,

We purchased a home in May of last year. During the inspection period, the home inspection found mold under the kitchen sink baseboard. We paid a mold remediation company to give us a quote to repair the issue. We paid $250 for them to come out and quote the repairs. They quoted us an additional $250 to tear out and replace the affected areas. Around the same time, our real estate agent connected us with an insurance broker. Due to an out of date electrical panel (which has now been replaced), the only company they could find to insure us was Citizens. The Citizens application was filled out by the insurance broker and sent to me to look over and sign. For the question "Does the dwelling have existing damage, it was marked "No". I spoke to our real estate agent about this and was counseled to leave it as a no. I did feel pressured to sign the application due to the time crunch of the inspection period, being told by the real estate agent that we may not get the house if we brought up the mold issue. From my perspective, the mold remediation company only needed an additional $250 to correct the issue so I signed it.

On the first day of owning the house, we had the mold remediation company come out to make the repairs. A different employee came out and upon inspection, more affected areas were found. We were quoted a much higher cost to make the repairs. We also were told that the employee that quoted us had been fired for not being good at their job. Full disclosure, the quote did have a line indicating that the quoted cost was just an estimate and could change. Due to this higher quoted price, we filed a claim with Citizens. Fast forward many months, I was deposed by a lawyer representing Citizens. The questioning mostly centered around the application. A few months later, Citizens voided our insurance, claiming "Material Misrepresentation. From the cancelation letter "Had your application informed that the dwelling had existing damage, you would have been required to submit documentation of when repairs would have been completed".We are now having a hard time finding home insurance we can afford. The Citizens premium was around $1000 a year and these new quotes are around $5000.

Does anyone have advice for us? I understand that I signed the application but as a first time home buyer, I feel like we were taken advantage of somewhat. The real estate agent had worked many times with the insurance broker and I cant help feeling that our best interests were not taken into account. Also, I feel that the mold remediation company dropped the ball on the estimate.

Thanks for your time!

 

[Zigner]

I'll start with your last statement. Regardless of the quote from the mold remediation company, you lied on your application.

Beyond that, you'll probably have to bite the bullet and pay for your insurance. Any claim you make against the agent will almost certainly be met with a denial of your assertion that the agent verbally advised you to lie on the form.

 

[Taxing Matters]

You read the form, you saw that it contained a material error, and signed it anyway. That falls squarely on you as every home insurance policy clearly states that the insurance may be canceled if you misrepresent the facts to the insurance company. You're an adult and it's up to stand up to the pressure of sales people. Some sales people will tell you anything you want to hear to get the deal to go through and get their fee/commission. So I don't see a claim against the insurance company for this.

You'd likely have a claim for negligence or misrepresentation against the inspector who failed to notice the wider mold problem and might have a claim against the company he worked for, too. But that claim would be limited to the increased cost of the mold remediation. I don't see it helping you on the insurance problem since you effectively lied to the insurance company. I suggest you consult a civil litigation attorney about what remedies might be open to you against the mold remediation company and what you might expect to win out of it, how likely that it is that you'd get that, and what it cost you in attorneys fees and other costs of litigation.

There is something else you've kind of danced around. You said that no other insurance company would even consider granting a policy for this house. Why is that? It suggests to me that they thought there were problems with this property that they didn't want to deal with or had concerns about the accuracy of information you gave them. Insurance companies want more business and don't turn down prospective customers on a whim. Thus, it suggests to me that there may be greater problems going on than just the mold issue.

It is still clearly a seller's housing market in most areas of the country despite the signs of weakening demand in some markets. Don't get so obsessed with the idea of getting a home that you either cut corners in the process, cave into paying more than the property is really worth or buy a property that's not really a good fit for you due to sales pressure, and don't commit the sin of making false statements to insurance companies and others in a desperate attempt to get the deal to go through. Doing any of that can come back to bite you, as you've seen from this situation.

 

[adjusterjack]

I feel like we were taken advantage of somewhat.

You were. By an unscrupulous realtor. Lesson for future home buying. Realtors, whether they be buyer agents or seller agents, are in it for the commission. Never believe anything they tell you without verifying it. They are often worse than car dealers.

Beyond that, Taxing Matters has told you everything I would have told you about the insurance issue, albeit more eloquently.

I have had rare occasions to deny claims and rescind policies due to material misrepresentations.

 

[stealth2]

Realtors, whether they be buyer agents or seller agents, are in it for the commission. Never believe anything they tell you without verifying it.

Yup. BTDT....

 

[Ohiogal]

You were. By an unscrupulous realtor. Lesson for future home buying. Realtors, whether they be buyer agents or seller agents, are in it for the commission. Never believe anything they tell you without verifying it. They are often worse than car dealers.

Beyond that, Taxing Matters has told you everything I would have told you about the insurance issue, albeit more eloquently.

I have had rare occasions to deny claims and rescind policies due to material misrepresentations.

I disagree that they were taken advantage of because they could read and they signed the contract willingly. They knew there were issues and they lied about it. And then they decided to stick the insurance company with fixing the mold issue that they knew of PRIOR to buying the house. They should have sucked it up and made the repairs themselves. They were trying to take advantage of the insurance company.

 

[stealth2]

I disagree that they were taken advantage of because they could read and they signed the contract willingly. They knew there were issues and they lied about it. And then they decided to stick the insurance company with fixing the mold issue that they knew of PRIOR to buying the house. They should have sucked it up and made the repairs themselves. They were trying to take advantage of the insurance company.

I'm actually surprised they'd even write a policy w/o assurances that the mold (I assume black) was remediated.

 

[Ohiogal]

I'm actually surprised they'd even write a policy w/o assurances that the mold (I assume black) was remediated.

I don't think they were told anything about mold.

 

[stealth2]

I don't think they were told anything about mold.

That right there would kill the deal, IMO.

ETA: I had a mold problem in the basement a number of years ago. Just around the time the insurance was up for renewal. The insurance company required a certification from the remediation firm (which I did tell them about - because they were sending out an inspector anyway. Same as I told them about my dogs - they had to be cleared, too...) before they'd renew.

I'm in the process of buying a new home, and have told the insurance agent(s) that I can't answer some questions until I'm physically there, and would prefer to have either an agent (and) or inspector come out from the get-go to avoid just these issues. Cards on the table, as it were.

 

[adjusterjack]

I'm in the process of buying a new home, and have told the insurance agent(s) that I can't answer some questions until I'm physically there, and would prefer to have either an agent (and) or inspector come out from the get-go to avoid just these issues.

I would be surprised if that came to pass. Insurance companies don't have the resources for pre-issue inspections. They rely on the application. They also rely on laws that allow cancellation of new policies within 60 days if something turns up that doesn't meet underwriting standards. Later on, there is always the misrepresentation thing, already discussed.

If there is an item on the insurance application that you don't know the answer to, the time to resolve the issue is during the inspection contingency period addressed in your purchase contract.

 

[stealth2]

I would be surprised if that came to pass. Insurance companies don't have the resources for pre-issue inspections. They rely on the application. They also rely on laws that allow cancellation of new policies within 60 days if something turns up that doesn't meet underwriting standards. Later on, there is always the misrepresentation thing, already discussed.

If there is an item on the insurance application that you don't know the answer to, the time to resolve the issue is during the inspection contingency period addressed in your purchase contract.

I figure it can never hurt to ask. If they say no? It’s no. But they will hopefully understand I’m operating in good faith and nothing’s being hidden.