Suit Says Lloyd’s “Steered” Hawaii Homeowners, Many Were Left with Lava Exclusions

January 11, 2019

A federal class action lawsuit alleges that Lloyd’s of London and its affiliated insurance brokers “steered” Hawaiian homeowners throughout the state away from comprehensive home insurance coverage established by the state, and that as a result many of these homeowners were left with policies that had lava exclusions.

The lawsuit states that Lloyd’s and its agents deceived consumers, offering Lloyd’s surplus lines insurance without performing the due diligence required under Hawaii law to place surplus lines insurance.

According to the suit, Lloyd’s and its agents knew that they were not allowed to place surplus lines insurance unless other insurance was not available and the insurance coverage amounts exceeded the coverage available through traditional insurance carriers, including the government-established insurance coverage offered through the Hawaii Property Insurance Association.

Consumers could have qualified for HPIA-sponsored insurance, but Lloyd’s artificially inflated coverage limits beyond the $350,000 dwelling coverage limit offered through HPIA, the suit alleges.

In addition, the lawsuit alleges that insurance brokers “received kickbacks from Lloyd’s for steering [homeowners] to the Lloyd’s surplus lines policies in the form of increased commissions.”

The complaint, filed Dec. 21, 2018, alleges that Hawaiian homeowners were steered “into purchasing Lloyd’s surplus lines homeowner’s insurance to insure their homes against peril.”

According to the suit, these Lloyd’s surplus lines insurance policies contained numerous exclusions, including a lava exclusion.

Many homes on Hawaii were damaged or destroyed by lava flows in June 2018 when Kilauea volcano erupted. After the flows it was unclear whether homeowners were covered.

A Lloyd’s spokesman issued the following comment:

“It would be inappropriate for Lloyd’s to comment on specific legal proceedings. However, policyholders can be sure that the Lloyd’s market is always committed to meeting its obligations and that Lloyd’s underwriters review all claims as swiftly as possible. So far, the Lloyd’s market has paid $84m in respect of homeowners’ claims in Hawaii and hard work is going into resolving all other outstanding claims. The Lloyd’s market has approached all these claims in good faith. This approach has included paying claims where there is no or limited cover, as well as providing indemnity for damaged contents and additional living expenses. Only a small number have been declined and only for legitimate reasons.”

The case is Aquilina and Lane v. Certain Underwriters at Lloyd’s London et al. A complaint filed on Dec. 21 does not state the amount of damages being sought.

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