Liberty Mutual dropped his home soon after he canceled his auto policy.
By TOM ZUCCO
Published November 14, 2006
Frank Pallini had his suspicions, but he took the gamble anyway.
The day Pallini canceled his auto insurance with Liberty Mutual so he could save nearly $1,000 by going with another company, he joked to his wife, "You watch, Liberty Mutual is going to cancel our homeowners policy."
About a month later, that's exactly what happened.
Pallini, a 52-year-old St. Petersburg real estate consultant, was notified last week that the homeowners policy he has had with Liberty Mutual for 17 years would not be renewed, even though it is not up for renewal until late August.
Pallini's dilemma spotlights the question of whether property insurers can essentially hold a policyholder hostage by threatening, either directly or indirectly, to cancel a homeowners policy if an auto policy is dropped.
The question becomes even more important as Florida's property insurance market continues to dry up while the auto market becomes more competitive, and as auto-only insurers make a frontal assault for more business.
Pallini says he never got a solid reason from Liberty Mutual why he was dropped. But he suspects he was being punished by the company. His crime: disloyalty.
In one of his conversations with a Liberty Mutual representative before he was dropped, Pallini said the agent told him he would be "more susceptible to being canceled" if he moved his auto policy to another company.
"She didn't say I would be canceled," Pallini said, referring to the agent, "but the inference was clear."
Because his home was built in 1965 and is not far from Tampa Bay, Pallini's only alternative now is Citizens Property Insurance, the state insurer of last resort. His property insurance will more than double to about $3,000, wiping out any savings he'll get from the cheaper auto policy.
Florida law prohibits insurance companies from tying one line of business, such as homeowners insurance, to another, such as auto.
But how often that happens is difficult to say.
"We've always taken the position that state law prohibits a carrier from threatening to pull coverage based on another insurance product being purchased," said Bob Lotane, a spokesman for the Florida Office of Insurance Regulation.
"But in reality, we don't have blinders on. Do carriers consider auto in underwriting homeowners? They probably do. But to come out and threaten someone, that's prohibited by statute."
There are no set penalties for violating the statue, although regulators could impose a fine.
But complaints are few, Lotane said, at least in part because property insurance is so difficult to find and keep, and customers are afraid of being dropped.
"We often may not hear about it because some people would gladly consider placing their auto with a company if they could avoid going to Citizens."
Lotane said it would be unusual for a policyholder to be given a nonrenewal notice nearly a year before his policy expires.
"They (insurers) have 90 days to notify a customer," he said, "and that's usually where they operate."
Liberty Mutual officials said Pallini was affected by the company's decision in August to not renew about 5,000 of its 120,000 homeowner policies statewide, most of them properties located within 5 miles of the coast.
Pallini's home, which is valued at about $210,000, is about 1,000 feet from a canal leading to Tampa Bay.
"And we don't use the presence of another line of insurance as a criteria in our homeowner underwriting," said Liberty Mutual spokesman John Cusolito.
The timing of the cancellation, Cusolito said, is purely coincidental. "We have been reaching out to our customers (who will be canceled) throughout the summer," he said.
Sam Miller, executive vice president of the Florida Insurance Council, the industry's state trade association, said he knows of no cases similar to Pallini's.
"If OIR got evidence of it, they would hammer the heck out of the insurer," Miller said, referring to the Florida Office of Insurance Regulation.
Miller added that to keep their customers from straying to auto-only insurers, most property insurers offer premium discounts if policyholders keep several lines, such as life and health, with the company.
Those discounts, Miller said, often match the savings from cheaper auto insurance.
Still, Pallini can't help but tie the two actions together: He dropped them, so they dropped him. This week, he complained to state regulators, who told him they will look into the matter.
And he heard from Liberty Mutual again. In the mail on Thursday, he got a Thanksgiving card from the company.
"We're thankful," it reads, "for the privilege of protecting you."
Tom Zucco can be reached at firstname.lastname@example.org or (727)893-8247.