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Hold on to your houses.
Legislation under consideration in Harrisburg could affect the home insurance policies of thousands of Philadelphians, namely those who live in blighted areas.
And the changes, according to the Mid-Atlantic Association of Public Insurance Adjusters, won’t be for the better.
Members of the state House of Representatives passed House Bill 1954 early last month, and the legislation now sits on the desk of the Senate banking and insurance committee.
The law would strengthen the Pennsylvania Unfair Insurance Practice Act, which prevents insurers from dropping policyholders because they live next to blighted or abandoned properties. It also would make the homeowner insurance laws consistent with the existing laws governing auto insurance.
But MAPIA members argue the bill’s real intent is dangerous to homeowners.
On its face, Bill 1954 is an "excellent piece of legislation," said Steven J. McCaffrey, MAPIA vice president. The problem, he added, is an amendment that would allow insurance companies to cancel a policy if a homeowner made two claims within a three-year span.
McCaffrey blames the Insurance Federation of Pennsylvania for lobbying politicians to add the amendment.
"Nothing put on that bill that is going to allow you to drop homeowners is going to be any good," he said.
MAPIA is a nonprofit organization of insurance adjusters with members from as far away as Pittsburgh, though most are from the Philadelphia area. An insurance policyholder would contact a public adjuster to negotiate a settlement with an insurer when that person believes he or she is not being properly compensated for a claim.
The bill’s primary sponsor was state Rep. Michael McGeehan (D-173rd Dist.). State Rep. Babette Josephs (D-182nd Dist.) was among the bill’s cosponsors. She defended the legislation, stating it promoted neighborhood stability by not allowing the insurance companies to drop policies of "good neighbors" because of the surrounding buildings.
"The modus operandi for the insurance industry in this state has become not to cover the risks that their policyholders are trying to insure against," Josephs said, "but to free up enough money for them to put into the market."
Since the stock market has taken a downward swing, she added, companies are looking to unload riskier policies that potentially could result in more settlements.
This not only discourages potential homeowners from purchasing a house next to an unoccupied building, but it penalizes residents who have stayed in a neighborhood that is "deteriorating due to factors beyond the homeowner’s control," said Josephs.
The legislator said she suspects the amendment limiting the number of claims was added to appease the state’s insurance companies, but she did not interpret the amendment as detrimental to homeowners.
"It seems a least a little bit more reasonable to me [to cap the number of claims]" than to drop a person’s insurance for "something that is not under the control of the property owner, like the condition of the building next door," she said.
The amendment to Bill 1954 would permit an insurer to cancel a policy if a person files two or more claims during a three-year period, unless one of the claims was the result of a weather-related catastrophe.
The Insurance Federation of Pennsylvania has predicted the amendment would affect 1 percent of policyholders. McCaffery questioned that statistic, but admitted the average homeowner files one insurance claim every nine years.
Why take the chance that lightning could strike twice? he posed.
"Every homeowner needs to be aware that this bill can affect him," he said.
MAPIA has been petitioning members of the state assembly to reexamine the bill, explaining the organization views it as bad for the city’s poor and thriving neighborhoods alike. The group has encouraged residents to do the same.
So far, said McCaffery, the organization has received support from state Sen. Christine Tartaglione (D-7th Dist.). No hearing dates have been set in the Senate to debate the bill.
