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Slow Insurance Settlements Leading to Lawsuits

Original article By Bill Kossler
March 22, 2018


Many Virgin Islanders are seeing long delays and low settlement offers as they negotiate insurance claims to repair their homes.  With hurricane season arriving again in June, this is stressful. There are two current lawsuits over residents’ insurance problems and possibly more on the way.

As of Feb. 15, 53% of the territory’s 10,114 insurance claims filed as a result of Hurricane Irma have been closed, 4,738 with payment, and 596 without.  Only 46 percent of the 6,002 claims filed as a result of Hurricane Maria have been closed, 2,221 with payment and 523 without, according to the Division of Banking, Insurance and Financial Regulation under the Office of the Lieutenant Governor.

It seems that a higher number of insurance claimants than the division expected were underinsured when the storms hit. This applies to homeowners who had insurance policies that covered less than 80 percent of their property’s appraised replacement cost.

One reason a homeowner may not be aware they are underinsured is if they made improvements to an insured property without disclosing it to their agent and updating their policy. Another reason may be if construction rates per square foot, which are market based and used to determine replacement costs, have increased since a policy was purchased without the policyholder being informed.

Brady said an emergency order issued by her division was to get to the bottom of why so many residents have claimed being unfairly treated, and why so many were underinsured in September. A second review of each of those cases has already begun.

High claims will mean insurance companies will have to pay higher premiums in the future, just as homeowners will have to pay higher premiums after their insurance pays out,

The insurance broker can help a policy holder work with the insurance company to iron these things out.  A number of residents who were underinsured at the time of Hurricanes Irma and Maria had what is known as “force-placed insurance, or insurance put in place by a bank or lender when the owner has not insured a property themselves.

Some residents’ difficulties with their force-placed policy claims led to a class action lawsuit filed Feb. 14 in the District Court of the Virgin Islands. Daryl Richards and Loretta Belardo, both of St. Croix, filed the lawsuit against the Bank of Nova Scotia on behalf of themselves and others covered by insurance force-placed by the bank, who they allege refuses to file such claims and “is stonewalling borrower’s attempts to get information.”

“It has been five months since the hurricanes and, on information and belief, Scotiabank has not resolved a single claim on behalf of a borrower with force-placed insurance,” a filing in the case reads.

More plaintiffs joined the suit and filed an amended complaint March 19. The eight plaintiffs now say the Bank of Nova Scotia delayed its responses because in reality it took payment from borrowers for force-placed insurance but never bought insurance.

In the amended complaint, the plaintiffs allege “Scotiabank allowed its force-placed insurance policy to lapse in August 2017 without informing its borrowers, who continued to pay premiums for nonexistent coverage. When the borrowers made claims under the force- placed policy after Hurricanes Irma and Maria damaged their homes, Scotiabank engaged in a pattern of deception and delay, falsely telling borrowers it was processing their claims even though Scotiabank knew there was no coverage.” The court will determine whether that assertion is accurate or not.