Imagine if you were required to pay for insurance on a home that is no longer inhabitable because the insurance company to whom you make those payments refuses to provide funding for its repair.

For Mr. and Mrs. David Pete, that scenario has been a reality for three and a half years, since Hurricane Rita hit their hometown of Beaumont, Texas. Today, the Petes are still paying the mortgage on a home left uninhabitable by the storm.

What’s more, the Petes now pay an additional mortgage on the house they were forced to buy when their home became uninhabitable after the storm.  How does a situation like this occur? The answer is simple – bad faith insurance practices.

After Hurricane Rita, the Pete family made a claim under their Texas Homeowners’ Insurance Policy with National Lloyds. During the storm, a tree had fallen onto their home causing substantial structural damages. The damaged roof allowed water to enter the interior of the home causing damages to the sheet rock, insulation and generally allowed moisture to enter into the entire structure. The damages were to such a degree that the family had to move out and find a place to rent.

Though Mr. and Mrs. Pete received a payment from National Lloyds in November 2005 to cover structural, personal property and additional living expenses, the payment was less than a third of the value of the dwelling limit alone.

When the Petes took action to dispute the amounts paid, National Lloyds dismissed the Petes estimates for repair because they were not “itemized.”  National Lloyds denied further liability on the claim and no further payment was issued.

With a clear message from National Lloyds that they would not pay any more for the hurricane related damages, the Petes were forced to file a complaint with the Texas Department of Insurance. On April 11, 2006, Mr. Pete complained to the Department that although they were still not able to inhabit their home, National Lloyds refused to pay for the additional living expenses. The insurance policy allowed for $7,000 to be paid for out of pocket living expenses, of which only $1,000 had been paid. Mr. Pete also complained that the amounts paid under the insurance policy were no where near the amount of money needed to cover the estimates for repairs.

National Lloyds responded on April 20, 2006  that actions taken were appropriate and denied any further liability on the claim. The Petes returned home even though the damages were still present and commenced what repairs they could afford.

Mr. Pete again contacted National Lloyds on October 1, 2006, informing them of additional storm-related damages discovered by their contractor.  Mr. Pete informed National Lloyds that his family would again have to move from their home while the new issues were resolved. Mr. Pete requested that National Lloyds pay for the additional living expenses.  On October 6, 2006, Mr. Pete received a letter from National Lloyds which stated the following:

“The 261st District Court of the State of Texas has ruled that unless there was physical damage to the covered property causing the residence premises to be wholly or partially untenantable, the extension of coverage for Loss of Use will not apply.”

The letter concluded by denying Mr. Pete’s request for living expenses based upon this provision. National Lloyds’ position was that there was no physical damage to the risk making it untenantable therefore no right to living expenses.

Three and a half years later, the Petes are faced with a hard choice- they either have to pay National Lloyds for insurance on the home they can no longer live in or risk having the house foreclosed on because their mortgage company requires insurance on it. Even more disturbing is the fact that no other insurer will cover the home due to the state of its disrepair. The Petes are now stuck paying money to the same company that has so greatly damaged their lives. This all on a house that the Petes have not lived in for years. The Pete’s reality today is that they just have to keep working hard so that they can continue to pay their two mortgages, their two homeowners’ insurance policies, and hope they can still afford the rearing and education of their two children.

The Petes recently traveled to Austin, Texas, to testify before the Senate committee on insurance in opposition to proposed legislation which would allow for Lloyds companies, such as National Lloyds, to write a greater percentage of policies in this State. National Lloyds is in active litigation with the Petes and still refuses that they engaged in any wrongful conduct in relation to this claim.