US Virgin Islands residents fight to receive homeowners insurance payments

Citizens of the United States Virgin Islands are now facing new challenges related to the two devastating hurricanes that rocked the territory in September 2017. As residents are attempting to repair and rebuild their homes, many of which suffered severe damage as a result of the storms, they are now caught up in a battle with insurance companies, banks, and lenders that are accused of denying a significant amount of homeowners insurance claims.

On February 3, Senator Alicia Hansen of St. Croix, and attorney Lee Rohn announced that they would be collaborating to work on a class action lawsuit on behalf of residents on the islands who claimed to have been mistreated by insurance companies following the hurricanes. Senator Hansen and Rohn are challenging the insurance companies since officials had been receiving a large number of complaints from residents who were being told by insurance companies that they were “underinsured” and would not be eligible for full coverage for the storm damage. Typically, if a property is deemed “underinsured,’ this means that the amount of homeowners insurance taken out is not enough to cover the total amount of losses to the property. The release also stated that Mr. Harper “ultimately admitted” to Mrs. Hansen and Ms. Rohn that there were disparities with the way insurance adjusters treat claims in the territory. When Marshall & Sterling Insurance President, John Harper, heard about the class action suit, he contacted Senator Hansen and requested that she allow him to address the policyholders’ questions and concerns on Hansen’s morning talk show called “Keeping in Touch.” Following the show,  Mr. Harper admitted that there was a problem; he agreed that all Marshall & Sterling insurance claims should be reassessed, and that he would immediately begin that process

During a  press conference on January 30, Lieutenant Governor Osbert Potter, whose office includes the Division of Banking and Insurance (DBI), revealed that there were 9,332 claims filed for Hurricane Irma as of January 10, of which 3,013 claims were closed, and the total number of claims filed for Hurricane Maria was 5,549 as of January 10, of which 1,314 claims were closed. For the future, the DBI will require that insurance companies must provide a catastrophe response plan if they want to receive a license to operate on the islands. Mr. Potter also told residents: “It is your responsibility as a homeowner to really seriously don’t continue to sign on the dotted line and move on and feel like everything is fine. It’s your responsibility to understand your   policy,” which is great financial advice, but it doesn’t provide any relief for people who are desperate to rebuild their lives now 5 months after the hurricanes hit the islands.

The DBI and Financial Regulation held a meeting with the Virgin Islands Bankers Association on February 7, to discuss insurance problems related to the hurricanes, and senior officials from Banco Popular; Bank of St. Croix (a Division of United Fidelity Bank); Firstbank; Merchants Commercial Bank; and Scotiabank, all of which are members of the association, attended the meeting as well. Essentially, the DBI performs two important tasks: it regulates the banking industry and it protects consumer interests. The two major issues discussed in the meeting were  the release of homeowners insurance settlement funds payable to both the bank’s mortgage customer and the contractor, and claims handling for the banks’ force-placed program. The latter is a more complicated issue because force-placed insurance, also known as creditor-placed insurance, is an insurance policy placed by a lender, bank or loan servicer on a home when the property owners’ own insurance is cancelled, has lapsed, or is deemed insufficient and the borrower does not secure a replacement policy. This type of insurance is often more expensive, and it protects a lender’s financial interests over that of the property owner. According to the release from the meeting, claims concerning properties in the force-placed programs are being adjusted. Potter encouraged customers to contact their bank immediately to discuss the release of their homeowners insurance settlement funds, arguing that each claim is different, depending upon issues such as past delinquency of payments, if the owner has a Fannie Mae-backed loan, or if repairs were started before receiving insurance settlement payments. .

On February 14, Potter made the announcement that he had issued an emergency order, declaring that “The order, which is effective immediately and dated February 12, 2018, requires insurance companies to conduct a second review of each Hurricane Irma and Hurricane Maria-related claim for which a determination of ‘underinsurance’ was made.” The order mandates that:

• The insured must be notified of the insurer’s finding in writing within three weeks after the second review is completed;
• Every property and casualty insurance company licensed and authorized by the commissioner of insurance to conduct insurance business in the territory is required to provide to its homeowner policyholders a full explanation of the term “underinsured”; and
• Each policyholder must sign a document evidencing that their agent has provided a full explanation of the term “underinsured” and how the conditions will affect their ability to receive the full benefits of insurance coverage in order to restore the insured property in the event of a catastrophe or any loss covered under their policy.

Again, although it would certainly benefit policyholders to be more aware of homeowners insurance details in the future, simply defining exactly how it is determined that a property is underinsured still doesn’t immediately assist those who need monetary help now as a means to reconstruct their homes. Perhaps this is why lawsuits are now necessary to force insurance companies to openly discuss policy discrepancies. Following this emergency order, it was revealed last week that Colianni & Colianni LLC have brought a class action suit against Scotiabank. The lawsuit alleges that after hurricanes Irma and Maria hit the territories, Scotiabank’s borrowers with force-placed insurance contacted Scotiabank to make property damage claims under the force-placed policy, but were denied because Scotiabank is the named insured under the policy, and therefore, the borrowers could not file their claims with the insurer. The lawsuit states that the bank has a contractual duty to file claims under its force-placed policy, and it also aledges that Scotiabank has implemented a company-wide policy of refusing to file or process any force-placed claims. There is hope that these suits will eventually provide much needed relief to residents who have been suffering for more than five months since the storms ravished the US Virgin Islands, but it will be a long, frustrating process for those battling those insurance companies that have both written and read the small print.