Barry Joseph of Forest Hills, New York had his homeowner’s insurance
policy with State Farm cancelled. The company cited the fact that he had
made too many claims in a short period. Barry made two small claims in
the past two years: one for a ceiling fan that fell from the ceiling and
one for a stolen bike. Joseph was not compensated by State Farm for either
claim. To put it another way, Barry Joseph paid homeowner’s insurance
premiums to State Farm for years, the company never paid him a dime to
compensate him for his losses, and now his policy was cancelled. What
is the possible reason for this?
The New York Times reached out to State Farm for an explanation. Rachel Risinger, media contact
for state farm responded, “Decisions to nonrenew are never made
lightly because we absolutely value the relationships we have with our
policyholders, and multiple factors are considered when making these decisions.
Every policy has its own unique circumstance and is reviewed on a case-by-case
basis.” That statement does not provide much of an explanation.
So… Why Might Your Insurance Policy Get Cancelled After Filing a
This situation is not uncommon; many people have dealt with a similar situation
with State Farm, as well as other insurers. They have submitted a couple
small claims, and then received a notification of nonrenewal. Basically,
the reason for this is that according to insurance companies, people who
submit insurance claims at a higher frequency (yes – two small claims
in two years is considered frequent) are more likely to submit larger
claims eventually. Therefore, Barry Joseph (and others in a similar situation)
signaled to State Farm he is likely to file a major homeowner’s
insurance claim at some point. Burr Daniel, an expert on insurance, explained
that policyholders’ strategy should be to submit only substantial
claims, as homeowner’s insurance is designed to protect from large
loss, not say, a stolen bike. Burns said, “Homeowner’s insurance
isn’t designed for small claims. It’s for the big stuff. You
have to define what big is, of course. For some people that might be $5,000,
for others $10,000 or more. But it’s not smart business to nitpick
an insurance company with small claims. It’s not a maintenance contract.
The insurance mechanism is designed to protect you from larger losses.”
Not only is it legal for insurance companies to drop policyholders after
filing two small claims in two years, but companies can also drop policyholders
before even filing a claim, based on future risk. For example, insurance
companies have dropped people located in high-risk areas (i.e., flood,
hurricane, etc.) based on future risk to their bottom line. There are
no established criteria for what makes a person a potential liability
for insurance companies. For some, its Barry Joseph’s situation,
for others it can be even less. If you are dropped by your insurance company,
the harsh reality is that finding a new policy can be difficult, as you
may also look high-risk to other potential insurers.
Contact Goldstein & Hayes, P.C.
Georgia law requires insurance companies to act in good faith toward their
insured. If this duty has been breached, we can help. The skilled attorneys
at Goldstein & Hayes, P.C. are here to assist you if you have experienced
bad faith practices by your insurance company. Call our Atlanta attorneys today for a free