Buyer Beware

The company I work for has one neighbor.  That neighboring business is a not for profit type that has many people coming and going.  Often, their customers use our parking lot.

It is worse on the weekends.  They literally take over.  They park in two spots, on sidewalks, and our loading zones.  Any request to move or stop is met with vulgarity and/or violence.

Scouting a location for a business or a home is very similar to looking at a new risk.  You have to ask questions, fill out the forms, and make the best decision before you accept the money.

Marketing matters

thoushal not

Who is our neighbor – the local church?  There are two ways to complain in the town we domicile.  (1) Initiate a formal complaint to our land lord and (2) submit a complaint to the town.  Our landlord is fully aware of the problem.  Speculation is that he is a member of the Church.

So, why not the town?  Because I think our marketing team would leave us.  A complaint to the town or a call to the police would equal a whole lot of bad publicity.  People see that as picking on the little guy.

That is why when I saw a recent news article about a minister and his wife being denied coverage due to, of all things, misrepresentation – I was blown away.

Taking a page from the Pharisees

The minister and his wife suffered a fire which wiped out the entire house and all their worldly possessions.  Now, they are homeless and have no way to become whole again because their coverage has been denied.

The article states coverage was denied because they failed to disclose a basement rental unit which makes their house a two family home, not a single family home.  In order to make the material misrepresentation stick, they need to show the physical proof of the misrepresentation and that the insured knew they were producing a misrepresentation.

The wife of the minister says they do have house guests from time to time.  This goes back to what is the occupation question on the application.  If you know church people, then you know this is what they do.  They provide food, housing, help, and charitable care for the downtrodden.

See article here: http://abc7ny.com/news/insurance-nightmare-for-queens-family-after-house-fire/1461803/

The news article does not cover how the fire started and it also does not show us a copy of the denial letter.  That leaves me skeptical.  Further, homeowner’s policies have renewal questionnaires where the insured can reveal or explain certain situations in the household.  We do not know how they responded there.

They do show footage of the supposed entrance to this apartment or second family home as a rusted bilco door with two master locks on it. I suppose there is interior proof – but the majority would probably be gone.

Bad mojo, bad press, and more money

money shute

Even more damning in a court of public opinion (and making all of us insurance people look bad) – the insurer does not return calls to the reporter.

The insured has hired a public adjuster.  With what we know, who wouldn’t?  That also means whatever the loss was going to cost before they denied it now just increased by at least 10% (to cover his fee).

The minister and his wife hired an attorney who will be suing for breach of contract.  In their state, they cannot sue for bad faith.  And now, in addition to increasing the claim by 10%, add 50% due to attorney costs defending their decision.  If the claim was $100,000 – the total cost now is going to be closer to $250,000.

Misrepresentation is a hard bit to follow

You know who knows about misrepresentation – your local real estate agent.  They see these types of lawsuits a great deal against them or against the prior owners of houses they sold.  Their customers may say they misrepresented the condition or value of the property.

As an example, consider the Westfield, New Jersey home where the new owners began receiving letters from a ‘watcher’ who had a ‘disturbed fixation’ and ‘claimed ownership’.  The new owners contend the former owners knew about the letters.

See the Watcher article here: http://abc7ny.com/realestate/photos-watcher-house-in-new-jersey-back-on-the-market/1268977/

So far, the case against the real estate agent is off the table.  The case against the owners, still in play, but it took a huge amount of money and lawyering to get to this point.

In my career, I have seen one denial due to misrepresentation.  Why?  Because when it comes to misrepresentation it’s better and cheaper just to have good underwriting and walk away before inception.

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