Thread: Insurance Coverage Rejection

I inspected a 105 year old house about 6 weeks ago. The report was approximately 80 pages as the house had lots of issues. The basement entry was a poured concrete stairway from the exterior of the building. The stairway was covered by a small enclosure addition to the home. On the concrete wall of the stairway was a vertical crack, not in the house foundation but on the stairway. I called it out in the report stating to monitor the crack for future repairs as it was not actually in the house foundation and showed no signs of shifting.

The buyer then had an FHA appraisal who did not mention the crack in their report at all. However, there were several repair items called out.

The buyer's insurance company sent an inspector to the home after he contacted them to purchase insurance. Before they issued the binder they insisted on having their inspector look at the home. The insurance inspector did not mention the crack, but did call out a couple of repair items also.

The seller made the repairs required by the appraiser and insurance inspector. The client received his binder and closed on the house. Four days later the insurance company notified the buyer that if the crack was not fixed in 20 days that they would cancel his insurance.

I know insurance companies will cancel or reject the policies due to information obtained on C.L.U.E. reports. I'm just wondering if anyone else has encountered similar issues with insurance companies?

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Then in another 60 days there could be another demand by the Ins Co. after they send someone back to check on the crack repair.

Ken, are they busting your chops or just looking for advice? It seams the easiest answer is to grout and paint the crack, but concrete work in the next 20 days might be a problem in Minnesota huh.

Originally Posted by Vern Heiler

Ken, are they busting your chops or just looking for advice? It seams the easiest answer is to grout and paint the crack, but concrete work in the next 20 days might be a problem in Minnesota huh.

No, their not busting my chops. The agent and buyer are very happy with my inspection. The agent just wanted to let me know what was going on and wondered if I had heard of such actions by insurance companies in the past.

The agent, in an attempt to help his client, did forward a copy of my report and the appraisal to the insurance agent after the insurance agent demanded the foundation repair. So he wanted to give me a heads up of the insurance agent contacted me.

Yeah, a little difficult to repair the concrete that is actually exterior to the actual building foundation, no heat source and below freezing temps.

Underwriters, both mortgage and insurance, seem to have become very proficient at requiring repairs and/or evaluation by specialists. I think they look for code words in appraisal reports and potential issues in photographs.

I've also noticed many/most underwriters do not accept a home inspectors report as authoritative even when the inspector may be a licensed inspector. An evaluation by a licensed engineer or builder is generally required.

Ken, if you client needs that additional license I may be able to assist.

I had a buyer call me two months after closing and his insurance carrier was cancelling him because they didn't like the flashing on the dorma. (I had called out a flashing problem on the dorma, the buyer had asked for repair and the seller had a roofer repair the flashing prior to closing) The guy was a first time buyer and was in a panic. I told him to call some other companies and he had no problem getting insurance. There are lots of insurance companies and your client needs to start calling around.

Originally Posted by Lon Henderson

I told him to call some other companies and he had no problem getting insurance. There are lots of insurance companies and your client needs to start calling around.

That was my advise to my client.

Texas has a VIP program that will clear the path to insurance in most cases. I'm not sure if other state insurance departments have anything similar.
Licensed and Certified Voluntary Inspection Program (VIP) Inspectors

Originally Posted by Jim Luttrall

Texas has a VIP program that will clear the path to insurance in most cases. I'm not sure if other state insurance departments have anything similar.
Licensed and Certified Voluntary Inspection Program (VIP) Inspectors

If MN has something like that the people filling them out aren't home inspectors.

Ken: I see you've already advised the client to pursue other Insurance. You should also advise your client to pursue another agent. You profiled yet another situation of an ignorant agent and an even more ignorant underwriter (or clerk). Skilled agents and underwriters do not make comments on, or require rectification of property defects leading to claims which are excluded by every homeowner's policy. If your client is really annoyed, let that Co. cancel and file a complaint against them with the Ins. Dept. But at the least, advise them to pursue another agent.

Originally Posted by Ken Rowe

If MN has something like that the people filling them out aren't home inspectors.

I don't know how HI's got on the list of approved people to do the VIP certificates here, just lucky I guess. There are about 5 other approved classes of professionals that can be licensed by the TDI to do the inspections. Very basic walk through inspection with minimal standards.
Not much money in it though "2013 inspection fees are limited to $113.78, plus an additional $56.89 if you need a follow-up inspection... "

Originally Posted by John Cain

Ken: I see you've already advised the client to pursue other Insurance. You should also advise your client to pursue another agent. You profiled yet another situation of an ignorant agent and an even more ignorant underwriter (or clerk). Skilled agents and underwriters do not make comments on, or require rectification of property defects leading to claims which are excluded by every homeowner's policy. If your client is really annoyed, let that Co. cancel and file a complaint against them with the Ins. Dept. But at the least, advise them to pursue another agent.

When you say "agent" I'm not sure if you're talking about his Real Estate Agent or Insurance Agent. His RE agent is going above and beyond by trying to assist him in this situation after the purchase has closed.

If you're referring to his insurance agent, I agree. The RE agent mentioned that he thought the insurance agent was "redlining" the property and / or client. I had never heard this term before so asked him to explain. He told me its a real estate term to describe prejudices based on location, religion, ethnicity etc. Basically his thoughts are that because they found out the home was in a "bad" neighborhood and / or the client was Asian they were making them just through hoops until they gave up and went with a different insurance company.