I’m a hoarder… don’t tell my home insurance company!

By Marilyn Lewis, Insure.com
Last updated Nov. 28, 2009

If you’ve got a TV, you probably know about “hoarding.” The compulsive collecting and storing of stuff, stuff, and more stuff is the focus of the A&E show “Hoarders” or countless local television specials. You may know that hoarding is a psychiatric disorder: To cope with anxiety and depression, some hoarders fill their living space with rotting waste and canyons of refuse reaching to the ceiling, with only narrow paths between.

According to the National Alliance on Mental Illness, people with a hoarding compulsion collect anything, including scraps, newspapers, clothing, containers, rocks, garbage and even excrement.

But did you know that hoarding is an insurance risk and that hoarders risk having their home insurance cancelled? Too much stuff signals trouble to an insurer, says Terry McConnell, vice president and manager of personal lines underwriting for Erie Insurance Group, in Erie, Pa. hoarding presents an insurance risk in three areas: fire, liability and overall neglect of the home.

Hoarding signals increased risk

When he trains agents to identify risk, McConnell tells a story to impress on them how important it is to get inside an insured house. Ten years ago, his company sent an agent to investigate a kitchen fire. The well-kept yard and brick exterior was “in a nice subdivision,” he tells the class. “The exterior was maintained properly. You’d think this was the ideal home.” At this point, McConnell says, he asks his agents how many think this is a good property to insure. Everybody raises their hand.

He continues the story: Inside the house, the insurance agent found a very different situation. Literally every room of the house was knee-deep to waist-deep in garbage bags of trash. “Now how many people think this is a great risk?” he asks the class. “Everybody immediately lowers their hands.”

The insurance company alerted police to the problem and, eventually, the home was condemned and the policy cancelled. “If you’d seen all the trash, it was amazing that the whole house didn’t catch on fire,” McConnell says. “Naturally this is an extreme. But over the years, these things pop up more often than you would think.”

Cases of hoarding pop up so often that Fairfax County in Virginia created a hoarding task force in 1998. They consider hoarding to be not only a personal health issue but also a public safety problem, because safety personnel’s’ access in and out of houses can be blocked.

The task force coordinates response among various public agencies when they discover a case of hoarding.

A hidden problem

When a home insurance agent writes your home insurance policy, hoarding may go unnoticed. Insurers usually require an agent (or a vendor) to inspect at least the outside of the home. But that doesn’t always get done. And when it does, the inspection typically covers only the exterior, a practice that misses evidence of hoarding within. Moreover, a homeowner might not begin hoarding until after the policy is written.

The best agents periodically “re-write” their accounts, giving them a chance to visit and inspect homes, says McConnell. But not all do this. Often, a home insurance claim unrelated to the hoarding triggers an inspection that reveals a home filled with hazards. An adjuster who’s called out to inspect roof damage from a fallen tree, for example, may find a yard filled with junked cars and appliances. Or, invited in to inspect water damage from a roof leak, the adjuster may find his way blocked by piles of boxes and garbage.

People hoard pets, too. McConnell sees cases of homes where 20 cats and dogs are living inside and no one cleans up after them. “We’ve seen some real extreme examples,” he says.

From an insurer’s point of view, hoarding is a risk that exposes the company to a variety of potential claims or lawsuits:

  • Homeowners or visitors might stumble or trip in the maze of stuff.
  • Junk left outdoors can be an “attractive nuisance” to passersby. Even a trespassing stranger who trips over a sharp car part or a child who locks himself in a discarded refrigerator can make a claim against the homeowner’s insurance policy.
  • The more trash and flammable materials accumulate in or around a home, the greater the chance a fire can ignite and, once started, spread quickly.
  • Hoarding often goes hand-in-hand with broader neglect of the home that can lead to leaks and other problems with the electrical, heating, plumbing and roofing systems. These problems may lead to damage for which the insurer can be held liable.

What home insurance companies can do

There are no official guidelines regarding homeowner hoarding. Each insurance company must decide whether a home full of stuff has become an insurance risk.

Once alerted to a hoarding problem, an insurance company considers whether and how to act. It consults the state’s laws to decide the next step. Each state insurance department has its own rules on how insurers may proceed.

Depending on the severity of the problem, the insurer could cancel the home insurance policy immediately. Or it may try to work with the homeowner to reduce the risk, especially if state law prevents cancellation right away. “In some states, you can’t cancel unless there is an increase in hazard,” says McConnell. If the debris was there when the policy was written, the law may require the insurer to send the household a notice spelling out the problem and warning that it must be cleaned up or the policy will be cancelled.

“If [the homeowners] don’t act on that, then you do have the right to cancel,” says McConnell. Other states require an insurer to wait until the policy’s term is up. The insurer can then decline to renew the policy, citing a “bad exposure” risk.

Who’s to judge your housekeeping?

In another generation, insurers might have cancelled a home insurance policy for what they called “poor housekeeping.” Today, a charge of “poor housekeeping” may not hold up to scrutiny if the customer appeals the policy termination. Insurers are understandably wary of criticizing their clients’ housekeeping.

The home insurance company has the burden of documenting the problem, usually with digital photos. It must be ready to defend its termination of a policy at a state insurance department hearing. “Any time you cancel, you give the insured the right to go to the [state] insurance department and appeal,” McConnell says.

Home insurance cancellation is a tough call, made easier in the case of a clear risk of fire. Otherwise, says McConnell, “the only rule of thumb I’ve given [to agents] is, ‘Would you live in the house?’”

About the author: Marilyn Lewis is a freelance journalist with a background in daily newspapers and online media. She specializes in writing about real estate, personal finance, and technology.

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