Condo sues State Farm
An owners association
is claiming the insurer
overinsured the property
The owners of a Honolulu condominium filed suit against State Farm Insurance Co. yesterday, alleging the company overinsured the property by more than $10 million.
The Association of Apartment Owners of the Bougainville, an apartment complex in Aiea, are also seeking class action status from the court for their suit.
State Farm officials said they had not received a copy of the suit.
"If and when we do we'll obviously respond," said company spokeswoman Carolyn Fujioka.
The suit, filed by law firm Davis Levin Livingston Grande, alleges that State Farm placed an automatic inflation clause in its insurance contract, which meant the limits of insurance would go up every year.
"Raising the limits of insurance also raises the premiums that are paid," said attorney Thomas Grande.
Grande said that even though the property was valued at $19 million, State Farm was charging for $31 million in insurance coverage while only required to insure for the replacement value of the property.
Grande said State Farm's inflation clause violates a Hawaii state statute that prohibits overinsurance.
Grande said the Bougainville insurance policy, including the inflation index, had been in force since 1985 -- hence the disparity between the building's value of $19 million and the $31 million insured value the association was paying premiums on.
Grande said other insurance companies may well issue the same kinds of policies that include an automatic inflation index.
"I can't say the inflation index is unique to State Farm and it's not a matter of the rate they initially charged being excessive. It's how they automatically increased the rate thereafter," he said.
Grande said he has already been contacted by home owners insured with at least one other insurance company and that other law firms are investigating possible action against that company.
"Although the circumstances are different, the effect is the same -- Hawaii homeowners have been paying much more in insurance coverage than necessary," he said.