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OPINIONS
Jill Cranston Bentz: City insurance proposal will create more problems
Someone once said that "for every difficult problem, there's a solution that's quick, easy -- and wrong." A proposed insurance ordinance now pending before Huntington City Council is a good example.
The problem is that when houses or businesses are ravaged by fire, some property owners collect their insurance money but make no effort to demolish the fire-damaged structures. Unfortunately, the "solution" being considered by City Council is one that, if approved, could result in higher insurance premiums, fewer choices and payment delays for property owners.
The ordinance would require insurance companies to withhold $2,000 from every $15,000 of benefits payable to a policyholder on every total fire loss within the city. This withheld money would be held in escrow by the city and not released until all debris from a fire loss has been cleared from the site.
In other words, if a fire destroys a house or building in Huntington, then the city will take about 13 percent of the insurance proceeds and keep it until the owner of the house or building gets a "certification" from the city that it has cleaned up the property. Another provision in the ordinance also would allow the city to retain this 13 percent to cover any back taxes or fees the owner-policyholder may owe the city.
The West Virginia Insurance Federation's member companies are concerned that this proposed ordinance will create more problems than it will solve.
The ordinance will be difficult to enact and costly for companies to maintain; it will create legal conflicts between insurance companies and their own policyholders; it is contrary to the regulatory authority of the state insurance commissioner; and it could result in the unintended consequence of reducing the number of insurers willing to write homeowners' policies in Huntington because it is just too difficult to administer.
Rather than create a new procedure requiring insurance companies to withhold money that is legally owed to their policyholders, the city could utilize laws that already exist.
West Virginia law already requires insurance companies to provide written notice to their policyholders explaining the debris-removal benefits that are available under their policies in the event of a total loss. Insurers also are required to send copies of these letters to the city and county where the total loss is located. These notice letters are currently being sent by insurance companies to Huntington City Hall.
West Virginia law also provides that an insurer may pay its debris removal benefits directly to a city or county, rather than to the policyholder, if such government entity incurs the costs for debris removal. So, the city already has the legal ability to invoice an insurance company for the cost of debris removal and clean-up if the city steps in and incurs that cost.
Huntington residents should ask, "Why aren't our officials using these existing laws and procedures to recover city funds that are currently being spent on debris removal?"
Insurance rates and policies and contracts for homeowners' insurance must be approved by the state insurance commissioner. These insurance policies are private contracts between an insurance company and its policyholder. Cities and counties are not parties to these private contracts. Insurance companies also are concerned about the legality of a city ordinance modifying these regulated contracts, even an ordinance passed pursuant to Huntington's new pilot home rule authority.
Approval of this ordinance could result in one or more insurers challenging the validity of the ordinance, which, in turn, could result in a general challenge to the validity of the home rule program itself. This could produce years of costly litigation.
Our member companies are sympathetic to the problem Huntington is trying to address. We have been working with city representatives and members of the insurance commissioner's staff over the past several months, trying to reach consensus on a solution that works for everyone.
We believe existing state laws can be used by the city to address this problem without the need to implement a new and burdensome ordinance. Indeed, the insurance industry has offered to address this issue on a statewide level to solve the problem in a uniform and consistent way across the state rather than a patchwork of different ordinances in various cities.
This proposed ordinance on the agenda for council's meeting on Monday is unnecessary and problematic. We urge Huntington residents to contact their council members and request the ordinance be tabled.
Jill Cranston Bentz is president of the West Virginia Insurance Federation, the state trade association for property and casualty insurance companies.
