Your Home’s Rap Sheet Can Mean Costly Insurance

Pamela Dieterichs’ house has a record, and it’s jeopardizing her homeowners coverage on the Newbury Park residence.

Dieterichs knows about her home’s rap sheet for a simple reason: Her insurer spelled it out for her in a warning letter. She filed three claims in seven years. If she files another claim, she can kiss her coverage goodbye.

“I haven’t been canceled yet,” she said. “They’re just threatening to cancel.”

Unbeknownst to many homeowners, about one-third of the houses in America are similarly tagged. In the last decade, there has been a growing effort by insurers to keep track of claims filed on houses. About 600 insurers, representing about 90% of the homeowner market, feed into a national database called the Comprehensive Loss Underwriting Exchange, or CLUE. There are other insurance loss databases, but none as large or as widely used.

The CLUE database, maintained by Georgia firm ChoicePoint Inc., contains about 40 million claims records on homes in every state. The records show insurance claims for the last five years for damage caused by, among other things, water, wind or fire. Thirty percent to 40% of the homes in America have a loss history, according to ChoicePoint spokesman Chuck Jones.

As insurance losses have ballooned in the last few years, this data is being used to label certain homes as recidivist money losers, virtually uninsurable in the regular market. Although coverage can be found through high-risk insurers, a CLUE rap sheet can cause the search to become more time-consuming and the insurance more costly.

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Buyers Paying More

A bad report can delay escrow when it’s time to sell a house, and that has real estate agents in tight insurance markets up in arms about CLUE.

“We don’t have a lot of scientific numbers, but we keep hearing anecdotes,” said Stan Wieg, legislative advocate for the California Assn. of Realtors. “I have asked members to send in personal experiences.

“So far, I’m not seeing a lot of situations where escrows actually failed because of a failure to get coverage. But we are seeing situations where buyers had to look a lot more diligently and pay a lot more” for insurance.

Insurers counter that loss data are important information for home buyers. If a home generated several water-damage claims, potential buyers might want to inspect the pipes and repaired damage. A series of theft claims might signal neighborhood crime problems that a buyer might otherwise learn about the hard way.

“On average, our policy holders file one claim every 12 years,” said Bill Sirola, a spokesman for State Farm Insurance Cos. “If you are seeing a claim a year, or two claims a year, we would have to think that there’s something seriously wrong with that house.”

California insurance regulators, who held hearings last week about the role played by insurance loss reports in the availability of homeowners coverage, determined that keeping loss records isn’t necessarily a problem. However, there may be an issue with which records are kept. In most states, insurers keep only records on claims. But in California, making an inquiry to your agent -- asking whether it would make sense to file a claim for a few lost shingles, for example -- generates a report.

That, however, may not actually hurt the home’s insurability, experts said.

In some cases, insurers will consider a series of losses to be a reflection on the homeowner, and thus unimportant when considering covering a house that’s being sold to a new owner. In other cases, claims are considered to be a reflection of serious maintenance problems, which could generate more claims. In those cases, availability of coverage could decline.

In fact, there’s one type of claim -- water damage -- that almost all insurers consider a warning. That’s mainly because mold claims have become the insurance industry’s fastest-growing money-loser.

“Water claims are driving a lot of interest in CLUE,” said Joseph Annotti, vice president of public affairs at the National Assn. of Independent Insurers in Chicago. “That’s directly related to mold and the fear of mold because the cost for settling those claims has quadrupled in the past three or four years.”

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Too Many Claims

That’s a bit of information Sharon Meyer of Agoura Hills wishes she had known earlier. Meyer said her insurance agent recently called with a warning: Her homeowners policy, which usually comes up for renewal in May, would be canceled instead. And she has been warned that finding new coverage won’t be easy. She has had three or four relatively small water-related claims in the last decade.

“I thought that was why you had insurance. I didn’t realize that if you had too many claims, they’d just cancel you,” she said. “It’s not like they’re telling me that my premium’s going to rise $100. They’re completely cutting me off. Where are you supposed to go from here?”

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Check Home Background

Wondering whether your house has a record? Here’s how to find out:

* You can get a copy of your home’s insurance claims report, known as a CLUE report, from ChoicePoint for $12.95 for an electronic copy or $9 for a mailed copy. Contact the company online at www.choicetrust.com or call 866-527-2600.

* You can’t get a CLUE report for someone else’s home. However, if you’re buying a house, the sale can be made contingent on the seller providing the report.

* If there is an error on your CLUE report, notify ChoicePoint. An item in dispute will be sent back to the reporting insurer for verification. If the item is not removed, you have the right to append a statement to the report.

* Unlike a credit report, there is no “score” that’s universally considered good or bad. However, because of the risk of mold, water claims are generally considered more serious than others.

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Times staff writer Kathy M. Kristof, author of “Investing 101” (Bloomberg Press, 2000), welcomes your comments and suggestions but regrets that she cannot respond individually to letters or calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For past Personal Finance columns visit The Times’ Web site at www.latimes.com/perfin.