ARCADIA - Farrier Chip Furr and his fiancee Tara McElveen were living in their Arcadia home less than a year when a water line underneath a bathroom sink sprang a leak.
"We bought a beautiful home, and it's not so pretty anymore," Furr told the ABC Action News I-Team.
Eight months later, the house is still not looking so good. Last fall's leak went undetected for hours, saturating the master bedroom carpet, which Furr and McElveen had to pull up. The water continued down a parquet hallway. The wood flooring was ruined as well.
The couple was insured by Universal Property and Casualty Co., or so they thought.
Universal's adjuster wanted to know if any liens had been filed against McElveen. "First question, right off the bat," she recalled. "I don't understand what that has to do with anything."
Tampa consumer lawyer James S. Constable says the question has everything to do with how Universal does business.
"When somebody applies for insurance, they fill out an application," Constable said. "Universal actually engages in a practice where every time a homeowner reports a claim, they run a credit history and background check on that homeowner.
"If anything in the application doesn't match what shows up in the background search or the credit history search, Universal will accuse that homeowner of application fraud."
In McElveen's case, a long-forgotten credit card default --- which she says she cured well before completing the insurance application --- popped up in Universal's research. Since McElveen had paid off the delinquency, she didn't mention it on her application or to the adjuster.
Universal's response: Claim denied.
"They wait until after a claim is reported before they investigate the application," said Constable, who has been retained by Furr and McElveen. "They're using it after the loss occurs as a way of avoiding coverage."
Constable and other Tampa Bay area consumer lawyers call the practice post-loss underwriting. And they say Furr and McElveen aren't alone.
"I've seen an 80-year-old couple have their house burnt down. It was a total loss," Constable said. "And the claim was denied because of a lien that they unintentionally didn't disclose in their application."
Messages left with executives at Universal's parent company, Fort Lauderdale-based Universal Insurance Holdings Inc., were returned by Tallahassee attorney Travis Miller, who contends insurers should have some recourse with deceptive customers.
"That is the heart of the issue," Miller said in a telephone interview. "If an applicant provided incorrect information, what's the impact for the company?"
State Sen. Arthenia Joyner is more worried about the impact on consumers. In April, the Tampa Democrat and a Republican Senate colleague, Joe Negron of Stuart, amended legislation at the state Capitol that would have given insurers no more than 90 days after issuing a policy to double-check a customer's background.
"You cannot give them carte blanche forever," Joyner told the I-Team. "They were going back and scrubbing all these apps to find a way to keep from paying the claims."
The Joyner-Negron amendment passed the Florida Senate, but died in the House of Representatives.
Within a month, state Insurance Commissioner Kevin McCarty imposed a $1.26 million fine on Universal, Florida's second largest home insurer after state-run Citizens Property Insurance Corp. Universal is appealing the fine.
That wasn't the first time Florida regulators have fined Universal. The company has paid more than $140,000 in state fines since 2004. McCarty's office has also ordered Universal to repay homeowners close to $650,000.
In the three years that ended April 30, an I-Team analysis of state records shows Universal customers or their lawyers filed 800 intent-to-sue notices against the insurer with McCarty's office. Customers of Citizens, the state's biggest home insurer, filed 614 such notices with the commissioner's office.
"The biggest concern is the amount of consumers in the state of Florida that are currently paying premiums to Universal Property & Casualty Insurance Co. and they will not know if their claim is going to be denied on so-called application fraud until after a loss occurs," said Constable. "Insurance companies are going to make more money when they can wait until after a claim or a loss occurs before they decide if they want to insure somebody. And that's exactly what they're doing here."
Universal Insurance Holdings, the parent company, reported net income of $30.3 million last year, a 51 percent jump over 2011.
In February, Universal Insurance Holdings founder Bradley I. Meier resigned as chairman, president and chief executive. Meier, 45, was given a consulting contract worth $1.6 million as well
as health and welfare benefits, an automobile allowance and reimbursement for travel, entertainment, mobile phone and related expenses through 2015, according to an I-Team analysis of federal securities filings. In addition, Universal Insurance Holdings has bought back much of his stake in the company for $28 million, the filings show.
Universal Property & Casualty Insurance Co. lawyer Miller, who declined an on-camera interview, pointed out that the insurer is more established than some of the outfits that have been assuming Florida homeowner policies from Citizens. Licensed by the state in 1997, Universal's surplus has grown from $4.5 million to $13.5 million, according to Miller.
"The company has demonstrated experience paying claims if hurricanes come," said Miller, citing the stormy years of 2004 and 2005.
Back in DeSoto County, Chip Furr and Tara McElveen just need their $20,000 insurance claim for water damage to be paid.
"That's what insurance is for, if something happens," said McElveen. "If it was a little fix, we could have fixed it. But it's kind of a big fix."
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