Who Protects The Citizens?

Perhaps one of the more colorful descriptions of insurance companies was espoused by Helen Hunt in the movie As Good As It Gets with her characterization of HMO insurance companies as being devoid of a certain parental heritage. While I don’t think she meant to imply that insurance companies are the offspring of illegitimate liaisons I certainly understand why her character felt that way. It was just this sort of thought that crossed my mind the other day following an inspection of a property.

My client had a homeowner’s policy that in the industry is called a Special Homeowners Policy. The word “Special” was coined in the aftermath of litigation over the words “all risk”. Now we both know that “all risk” in insurance policies is anything but ALL risk. There are exclusions for just about anything. However, they are still quite a bit more encompassing than a named peril policy. Or at least they used to be.

I went to the Insurance Information Institute website to get some information about homeowners losses. Here’s what I found. In 2005 out of $100 in premium collected, $16 went to pay for fire damage, $30 went towards wind damage (2005 was the year of Katrina) and $11 went towards water damage and freezing. Out of $100 in premium $57 dollars went towards just three types of loss: wind, fire and water (excluding flood) and in that order. Which gets me back to my story.

I’m inspecting this loss. It’s a simple straight forward pipe break: water damage to the kitchen and adjoining bathroom. This is just the type of claim you’d expect to have if you owned a house. There was only one problem: the policy did not cover this type of loss. Or rather it did not cover water damage from a pipe break if that break happened in a kitchen, bathroom or laundry room. Uh duh… where do you expect a pipe break to happen … in the kitchen, bathroom or laundry room. Now it seems insurance companies are sneaking exclusionary language into their insurance policies that exclude just these types of losses.

When you take into account percentage deductibles, exclusions for exterior paint, pool enclosures and now a wholesale exemption of pipe breaks the only people not catching a break are policyholders. So my question is this: Who is protecting the citizen from the “#%*@%% HMO Bastards”?