CHATTANOOGA, Tenn. — Tennesseans who file claims on property damaged by the outbreak of severe weather this month could be dropped by their insurance companies, experts say.
The number of claims insurance companies allow before canceling a policy is dropping, said Charlotte Lawhorn, president of Lawhorn & Associates Insurance in Hamilton County.
“With most major companies, it used to be two or three strikes and they cancel you,” she said. “Now, it’s one and they cancel you.”
George Rachels, whose Chattanooga house was flooded last week, has been without insurance for nearly a decade. He says he now faces at least $75,000 in damage.
“I wasn’t figuring on another ’73 flood,” he said, referring to the year of one of the city’s worst flood years. “It’s worse than it’s ever been before.”
In 1984, Rachels was dropped by his company for filing one too many claims, he said.
Officials at State Farm, Tennessee’s largest homeowners insurance company, said they don’t comment on their underwriting policies, but that any change in the industry is not related to the slowing economy.
“Policies are always subject to review or cancellation,” said Shawn Johnson, company spokesman based in Murfreesboro.
“We have a financial obligation to our owners to charge the appropriate rate and have the appropriate business. In that regard, we have to continually review policy holders’ claims history to review whether or nor we want to insure them,” he said.
Experts said filing claims is not the only way to jeopardize an insurance policy, just inquiring about damage can cause problems.
Doug Heller, with the Foundation for Taxpayer and Consumer Rights, a Santa Monica, California-based advocacy group, said a central insurance database codes inquiries as damage claims.
The risk of being dropped from flood insurance does not apply because flood policies are underwritten by the federal government.
“We pay our insurance policies year in and year out, and we know full well that if we miss a payment by a day we’ll be canceled,” Heller said. “Now they’re threatening if we have the gall to use the product we’re paying for, we’re going to lose it?”
In Chattanooga, 50 percent of the claims filed to State Farm from the storms in early May were on homeowners’ policies, not flood policies, Johnson said.
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