Typically, my posts address the findings of courts across the country, both state and federal, regarding bad faith allegations against insurance companies. This week, I’m writing about a complaint filed by a homeowner alleging that a bad faith mistake made by the carrier resulted in a huge financial loss to the insured.

Rosemary Clampitt obtained homeowner’s insurance coverage with Hartford for her 3,400 square foot lakefront property. In June 2009, a fire at her home resulted in a total loss so she filed a claim with Hartford. The insurance adjuster said that coverage for her home and contents was based on a 1,600 square foot home. It was then that Ms. Clampitt learned that Hartford seemingly made an error and issued a policy reflecting the wrong square footage of her home; the square footage that the policy was issued to cover was less than half the size of her home. Ms. Clampitt asked for a copy of the entire policy because she had not previously been provided with one. She then filed suit in the U.S. District Court for the Eastern District of Arkansas, alleging bad faith against Hartford. The lawsuit was initiated recently and it will be interesting to see the outcome of this case.

The circumstances in Ms. Clampitt’s situation bring to mind the importance of making sure that we get what we pay for. When applying for new insurance or even when simply renewing an existing policy, it is very important for homeowners to obtain a copy of the entire policy that was issued. Homeowners should read the Declarations Page and make sure to check even the little things:

  • Did the carrier get the address right for the insured property?
  • If Hurricane/Wind Coverage was requested, is that type of coverage reflected in the policy?
  • Are the "Named Insured(s)" correct?
  • Is the "Mortgagee" correct?

There are times when the lender has changed since the insurance policy was initially issued. If the insured does not advise the insurance company of the change and an insurance claim check is later issued reflecting the wrong lender, there can be a tremendous amount of difficulty negotiating the insurance claim check.

These seemingly little, insignificant details might not appear to have a tremendous amount of importance, but clearly Ms. Clampitt would disagree. When a small mistake results in half the coverage one expected, it is a pretty big deal. It is always very important to review your policies and coverages to make sure that the coverage issued is not only what you paid for, but what you need.