Egads! Our Homeowners Insurance Company Is Bankrupt: Any advice!

cupofkindnessAugust 2, 2006

We just found out that our homeowners insurance, through Texas Select Lloyds, has closed it's doors for good and filed for bankruptcy. This happened only two days before we made our semi annual (for a six month period) premium payment of nearly $1,000, which they have collected. How could they accept our payment two days after they filed for bankruptcy? Also, since we paid our premium with a Visa card, we are thinking about disputing the charge with our card issuer, and let them collect, since in effect we paid for goods that we will never, ever receive.

We want to start coverage asap with another company, and a letter promises a refund appeal process beginning after August 24, 2006. But we don't want to wait a month to find new coverage and we can't wait for a refund to pay the new premium. We want to buy a policy with a real company right now, because we imagine that since Lloyds is a fairly large company (until 6/28/06 it was the sixth largest homeowners insurer in the state of Texas), there will be a surge in the demand for new policies statewide beginning in a few short weeks that might result in higher prices.

Has anyone experienced this sort of problem before? Do you think I have any recourse with my credit card company? How should I handle this matter? Thank you in advance for your replies.

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Yes, if you paid with a credit card, dispute the charge immediately, and in writing. You can probably just add the newspaper story about the company's bankruptcy. I once had a plane ticket with an airline that ceased operations before my flight. I sent the newspaper item along with my letter disputing the charge, and it was handled promptly.

    Bookmark   August 2, 2006 at 11:38AM
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Cup, Dont even wait a moment to sign up. Some companies will not bind coverage if there is a hurricane "in the box". I don't know where you are in Texas but if you are somewhere on the coast then you want to make sure you get the coverage before Chris turns into a hurricane and starts coming your way.

    Bookmark   August 2, 2006 at 2:54PM
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Thank you for your quick replies. Speaking of hurricanes, jeerzegirl, I'm wondering if it was Katrina and Rita that caused the demise of our insurance company. Fairegold, I have the legal paperwork that shows that the company went under and that our coverage expires in August. It also shows that we'll get a refund, but makes no promises as to when that will happen. My take is like yours, I paid for a product that wasn't delivered and have no recourse to the merchant whatsoever. My five year old is crying, I need to sign off for now.


    Bookmark   August 2, 2006 at 4:52PM
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Go ahead and dispute the charge ASAP, or when you get your next bill, don't delay. You have a limited amount of time to do so (in writing), and yes, the company says that you will be refunded. Don't hold your breath.

    Bookmark   August 2, 2006 at 5:32PM
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Dispute charge immediately and don't pay the bill! Document everything.

Call Travelers. We have very good coverage with them. Also flood insurance as a precaution, which I find requires FEMA registration.

    Bookmark   August 2, 2006 at 8:21PM
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If you have a mortgage, your mortgage company won't let you go without insurance, so you'll have to get something by the end of the month. Good luck.

    Bookmark   August 2, 2006 at 9:07PM
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But don't rely on the mortgage company's insurance---it will be incredibly overpriced. And minimum coverage at best, only to protect the mortgage company.

    Bookmark   August 2, 2006 at 9:33PM
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We've got Nationwide, and have been happy with them as well.

Consumers Reports did a series on Homeowners Insurance a while back. The ones they rated highest (in order) that did business in Texas are:

Amica Mutual Insurance
Chubb Indemnity Insurance
Nationwide Mutual Fire Insurance
State Farm
Liberty Mutual Fire Insurance
Hartford Casualty Insurance
Nationwide Mutual Insurance
Metropolitan Property & Casualty Insurance

    Bookmark   August 2, 2006 at 10:06PM
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Definitely dispute the charge, and thank your lucky stars that you paid with a credit card!

    Bookmark   August 2, 2006 at 10:39PM
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We've had Amica for almost 20 years on our homes & cars ~ I highly recommend them. As I haven't shopped around alot, they may not offer the cheapest rates, BUT if you have an accident and/or loss, the claim is handled expeditiously, professionally and most of all, VERY fairly. You also get dividends back each year based on a profit scale!

    Bookmark   August 3, 2006 at 5:51AM
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We live in the Northeast and have had Liberty Mutual for over 35 years with no problems. I see it's on the list above. We have filed numerous claims over the years (hey, 30 years is a long time!) and have never had them reject a claim. Granted, there were times their requirements/stipulations were slightly anal, but that's a small price to pay for continued coverage, great customer support, reasonable rates, immediate response, and all-is-all terrific service. BTW, my parents had them prior to my 'inheriting' them for my auto insurance (and then when I was grown, for all insurances). I have never felt the need to look elsewhere. Best of luck!

    Bookmark   August 3, 2006 at 8:23AM
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I wasn't suggesting she get insurance from her mortgage company, only to let her know that her mortgage company will be notified that her homeowners insurance has lapsed and will contact her about it.

You'll need to move quickly to make sure there is no lapse in coverage. That's usually when there is trouble! If you've had any claims on your homeowners insurance lately, you may find it a little difficult to get a new policy and it may cost more.

I have had USAA for 25+ years and been very pleased, but it's only available to curren/former military. I've only had one claim in that time, and I found a contractor that did the repair work for $5000 less than their own estimate, I don't think we even had to pay the deductible on that claim!

Good luck

    Bookmark   August 3, 2006 at 1:12PM
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Thank you for the great replies. Yes, I am thanking my lucky stars that I paid with a credit card. We were late with this payment, we tried to make it directly to our agent but he didn't return any of our calls. Now we know why. And we haven't had a claim since we moved in this house seven years ago, but at the time we moved in a shower pan leaked and the insurance company gave us a small amount of money for the repair. Hopefully that claim is old enough to put us in a low risk category.

I spoke with my husband about the "refund" mentioned in the official letter we received telling us that our company is now in receivership. I was worried that if the credit card company saw the word "refund" in the letter, they might refuse our request. But he told me that nowhere did it say that the refund would be the full amount of our payment, it could be 10¢ on the dollar. So I guess we'll cross the refund bridge if we ever get there. I'm very grateful for Consumers Report List, I'm calling at least Amica today to determine their rates.

I'm so angry about this! And with all the clout that my credit card company has and the high profile name of the bank behind it, and with all the time and energy they spend crafting elaborate fee schedules and interest rates, you would think that they could determine a way to track companies that are declaring bankruptcy and halt payments to them on behalf of their card holders.Moreoever, when I call the credit card company, I'm speaking to someone in India. Why is that so frustrating? I don't know, it just is. And then the individual that I'm speaking with, "Mary" or "Bob" who sometimes I can't even understand, becomes annoyed when I asked to be transferred to a supervisor back in the U.S. without explaining my problem to them in full. I've found that off-continent call center personnel usually do not have a lot of flexiblility in helping solve anything but the most routine problems. And since I'm ranting, why is it that I punch in my credit card number, say my mother's maiden name in the computer menu system, and then must repeat all of this information all over again once I get a real person on the line? I think these companies want me to hang up in frustration or just die of old age with a phone in my hand. Geeze Louise!

In any case, thanks again for your informative answers and suggestions. I really appreciate the time you took to post them. I'll keep you posted.

    Bookmark   August 3, 2006 at 4:10PM
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Bookmark this page, Or remember to google "get a real person" if you forget.

I had to call Verizon the other day, and followed the instructions, and it worked like a charm.

Here is a link that might be useful: How to reach a real person

    Bookmark   August 3, 2006 at 4:26PM
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What an awesome website, Fairegold. It's not only book marked, it's on my "bookmarks bar" at the top of my open webpage.

I don't mean to be sound so angry at my credit card company. That could be the only way we get any money back. Which I will be grateful for. What I'm mad about is a financial system that allows corporations to take money from consumers, who believe that they will receive the goods they are paying for, when in fact the corporation is no longer a going concern. That's unethical, as is the insurance company to take our $1,000 once they're in receivership (is that the same status as "in bankruptcy?").

    Bookmark   August 3, 2006 at 5:22PM
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what's really odd is their web site is still up and it says nothing about the bankruptcy.

    Bookmark   August 4, 2006 at 4:32PM
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You're right! That IS extremely odd. We just got the paperwork a week ago, perhaps Texas Select wanted to keep it quiet in order to collect premiums until the bitter end. Bitter for their customers, anyway. Those good for nothing scoundrels! I hope Texas Select pays their employees the wages that are owed to them. And to think, the top level executives of insurance company are paid a small fortune. They should refund my premium payment!

    Bookmark   August 4, 2006 at 5:29PM
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I am so sorry for the troubles you're experiencing.

You may wish to review this webpage:

It's from the Texas Dept of Insurance's consumer website and it's entitled "If My Insurance Company Fails". There is lots of information on the webpage that may be helpful to you.

A receivership is similar to a bankruptcy in that both are insolvency proceedings; however, unlike a bankruptcy proceeding that would be administered by a federal court, the receivership of your insurance company will be administered by either a Texas state court or a Texas governemnt agency. This is because insurance companies are creatures of state law and are subject to regulation by the states, not the federal government.

By state law, most insurance companies are required to post and maintain a certain amount of money, called reserves, to cover liability associated with claims under existing insurance policies. Whereas your insurance company may not have sufficient assets to write new policies of insurance, that does not necessarily mean your insurance company is unable to pay claims on its existing policies of insurance due to its reserves. And if the reserves aren't sufficient to reimburse the policyholders, additionals funds may be available from the Texas Property and Casualty Guaranty Fund.

Hang in there and let us know how it's going.

    Bookmark   August 4, 2006 at 7:12PM
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Thanks Soupgirl, when my husband returns we'll read that link together. It looks good. We're still researching our options. One thing that occurred to me today was that I should be very, very thankful that I'm not in the middle of a claim at this point. We just need to hang on for three more weeks without a claim or begin or new policy asap, if that's possible. I'll keep you posted and thanks again.

    Bookmark   August 5, 2006 at 8:45AM
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Dear Cup, I should clarify something. When I said "claim" in my first post, I meant the claim you have against the insurance company for the unearned premium, not a claim under the policy relating to a casualty loss. According to the webpage, you should continue to have insurance coverage for a 30-day period after you received the written notice from the receiver that the insurance coverage is going to be cancelled, which, hopefully, gives you sufficient time to put new insurance coverage in place. And, if, God forbid, you suffer a casualty loss before the new insurance coverage takes effect, your casualty loss should be covered under your former insurance policy and/or the assets of the Texas Property and Casualty Guaranty Fund unless the failure to have new insurance coverage in place was an act of negligence on your part. Hopefully, you'll get 100% reimbursement of the unearned premium or if not 100%, something very close thereto. Good luck and keep us posted.

    Bookmark   August 5, 2006 at 9:26AM
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No, do not hang on for three more weeks. Get a new policy ASAP. No joke, no kidding, no messing around. In essence, right now, you are uninsured, whould something happen. Someone slips in your sidewalk, you have a kitchen fire, a tree falls on your roof...


Theer, I've shouted. Get a new policy Monday. Today if possible.

    Bookmark   August 5, 2006 at 9:51AM
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We have State Farm for auto and home and I could not be more happy with an insurance company. No problems at all with any claim.

    Bookmark   August 5, 2006 at 10:29AM
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Do place coverage ASAP.

Receivership is different from bankruptcy (insurance carriers are specifically prohibited from filing for bankruptcy protection). In a receivership, the state or state authorized entity generally takes over the remaining assets and resolves the claims. They try to make equitable distributions on claims -- similar to a bankruptcy.

I do know that in bankruptcy, the court filing creates a new legal entity and that the money you paid to the company after the filing is not even subject to the bankruptcy claims process in the same way as the pre-filing assets. You should be entitled to a full refund in that situation. How your state deals with insurance receiverships could be the same, similar or not.

I would dispute the charge with your credit card company --in writing and by telephone, but I would polace new insurance ASAP. You obviously paid for something you did not receive. The receivership may complicate your getting a refund from them, but I would expect you to get a refund one way or the other. It could take a while. Just be glad it wasn't two days before the receivership -- you might be hoping for pennies on the dollar.

Oh, one other thing -- if you should get a refund from both, don't keep the extra amount. Credit card issuing banks and state governments both have lots of lawyers who would fail to see the humor in the situation. Not worth the risk of having it discovered by them instead of you. Let them both know and let them figure out who gets what.

    Bookmark   August 9, 2006 at 1:44AM
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"I hope Texas Select pays their employees the wages that are owed to them."

Probably not - The employees are screwed as much as the other creditors. Paying their employees would be preferrential payment of creditors, and is, as I understand it, illegal.

When a former employer of mine declared bankruptcy, I had been working on an international project for them and had been staying in a luxury resort hotel for a month. (Resort consulting project, so appropriate, not excessive.) Anyway, I *personally* was out approximately $10,000 in unreimbursed travel expenses because of that trip. I also lost my health insurance with no self-pay continuing care options (because they were self-insured), and I was 6 months pregnant at the time.

Bankruptcies are hard on everyone.

    Bookmark   August 9, 2006 at 11:14AM
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Those poor employees! And poor you, sweeby, for being stuck with $10,000 in unreimbursed expenses. That's terrible. My husband I and disagree about when we should start coverage, but this process is taking so long that by the time we figure out which company to go with, it will be the 24th of August (the forced end of the current policy). Unlike the many years ago when we first took out this policy, companies now want to inspect our home. And since our security system died a few years ago, it needs to be repaired and tested. Plus we need to do some de-junking so that everything can be properly inspected. Next, we got a mailing from my alma mater grad school that offers a discount on your homeowners insurance just because I went to school there and the discount is decent. Finally, my DH wants to raise our deductibles, drop a car here, etc in order to bring our annual insurance expenditures down. He just got a company car, so we can take his pick up truck off the policy for the time being. You see, we have a senior in high school and need to minimize our expenses in order to eat while she's away at college next year.

Thanks again! All of you are awesome!


    Bookmark   August 9, 2006 at 3:37PM
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Sorry that you and your husband disagree about when to start new coverage, but this is no joking matter. If you are trusting that your current policy is ****good**** until 8/24, I have sad news for you. It is not good now. Today. If a tree fell on your house, if the neighbor slips on the sidewalk, YOU ARE NOT EFFECTIVELY COVERED AS OF RIGHT NOW.

    Bookmark   August 9, 2006 at 4:27PM
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A pipe breaks and floods half the house.
You're in Texas? The hurricane part of the state or the tornado part?
Lightning strikes the house during a storm.
You leave something on the range and the pot boils dry and starts a fire.
A wire in the wall shorts and starts a fire.

Want me to go on?

    Bookmark   August 9, 2006 at 4:45PM
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Fairegold: I agree 100%.

    Bookmark   August 10, 2006 at 9:33AM
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If your husband does not agree, ask him who he thinks will handle a claim between now and when the policy "expires"... those employees who might not be getting paid? And let him know that a claim will just be another debt for the company (I think) that might be paid off with pennies on the dollar.

    Bookmark   August 10, 2006 at 9:46AM
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I have great news! On November 17th, our credit card company, Citibank notified us that the dispute has been officially settled in our favor and the entire amount of our insurance premium has been permanently credited back to our account. Yippeee!

For us, the hard part was following through with the documentation. I guess that our insurance company is so disorganized at this point that they could not file a case against us (plus, what they did was wrong as well). In short, thank heaven that I used a credit card to pay the premium.

And speaking of credit cards, I wanted to say that several months ago I bought an item on eBay that the seller never mailed to me, nor would the seller communicate with me, even though I paid in full when the auction ended. I reported the transaction via Pay Pal (which is the only avenue eBay would let me take other than leaving negative feedback), which has a very mediocre, no, pitiful, disputes process. After a few weeks of waiting on Pay Pal to get somewhere, I finally told Pay Pal that I wanted my money back from the deadbeat seller. Here's the bad part: Pay Pal wanted to charge me $25 to pursue a claim (that's really about the amount I spent on the item), even though I'm the victim of a fraudulent seller. In fact, I believe the seller resold the item I bought in another auction. Well, if I had paid for the auction via Pay Pal's instant bank transfer method, I would have been stuck. But thanks again to my credit card (which I always use on Pay Pal, never, ever the instant bank account transfer because you don't have the same level of protection, obviously) I am disputing that charge as well. Moreover, disputing the charge via Citibank got eBays attention and they sent me a questionnaire about the transaction (what that will do, I have no idea). I'm very disappointed in eBay and in Pay Pal for the lack of support in the face of a very bad transaction, in fact, a criminal one. I am not the only one, the seller now has several negative feedback listing the same complaints as this one.

In any case, thanks for helping on this homeowners insurance dispute. What a great outcome.

    Bookmark   November 28, 2006 at 11:54AM
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cup, I'm very happy this was resolved in your favor! Thanks for the update.

    Bookmark   November 28, 2006 at 1:26PM
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Thanks Pecan! We are thrilled, to say the least.

    Bookmark   November 29, 2006 at 9:16AM
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