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State Farm Latest Insurer to Bail on Long Island Homeowners

Feb 15, 2008 | Parker Waichman LLP State Farm is canceling homeowner policies on Long Island, forcing customers to look for new—and often costlier—insurance options.  Senator Charles Schumer (D-NY) said that State Farm has become the latest giant insurance company to notify customers on Long Island that their homeowner's policies will be terminated. In a press release, Schumer, said his office had "received several calls in the last six months from Long Island residents who received word from State Farm that their policies would be terminated and they would be forced to find new, more costly insurance."

State Farm isn’t the only insurer to be taking these measures.  Last year Allstate, MetLife, Nationwide, and several other insurers said they would be sharply cutting the number of homes they would be covering on Long Island, in New York City, and in Westchester County.  The insurers site the reason for these cuts as because of the fear of intense storms and huge damage claims.  The result is of this insurance chaos is higher premiums for Long Island homeowners.  For instance, when Wading River resident Walter Buhner was dropped by State Farm, two insurance brokers worked for a month looking for another carrier before one found Narragansett Bay Insurance Co., in Pawtucket, R.I., to insure Buhner’s house.  The yearly price for the insurance policy came in at $2,048 a year for premiums, 75 percent more than his $1,172 policy with State Farm Insurance.

Buhner, 57, is a law enforcement officer who was also was insured with State Farm for his car but switched to Travelers following the notice of cancellation on his homeowner’s policy. "I'm not going to give my business to State Farm if they don't want to take care of my home."

Buhner said his home is a tenth of a mile from the Long Island Sound but 300 feet above sea level.

Schumer said that some Long Island homeowners might be forced to take out so-called "extreme insurance," usually reserved for fireworks stores, which he said can carry very high premiums that are more than double the cost of other policies.  In his announcement, Schumer said his office had receive calls from homeowners in both Nassau and Suffolk counties "reporting that their State Farm policies had been suddenly terminated."

Schumer said he sent a letter of protest to Edward Rust Jr., State Farm Insurance’s chief executive officer urging "the arbitrary and capricious decisions to cancel existing policies should be stopped immediately."

Schumer said he will propose two new bills.  In one bill he will look to increase coverage limits in high-cost areas, such as Long Island.  He said he will also propose a Commission on National Risk Management and Insurance to study "the growing crises of insurers abandoning communities with perceived risks, like Long Island."

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