Consumers find some insurance inquiries return to haunt them

By Peter Lewis
Seattle Times consumer-affairs reporter

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When she called her insurance company last spring about a sewer problem, Rita Nalette thought she was simply asking a question — was the old, collapsed pipe buried in her front yard something her homeowner's policy would cover?

Probably not, Pemco told her, but it would get back to her, Nalette recounted. However, the carrier never called back, she said, and Nalette paid the $9,000 repair bill herself.

She thought no more of it until last fall, when she was set to sell her West Seattle home. At closing, the real-estate deal nearly fell apart, she said, because the borrower could not obtain insurance for the property based on the still-outstanding "claim" Nalette had filed regarding the plumbing problem.

Unbeknownst to Nalette, Pemco had submitted her inquiry as a claim to a database known as C.L.U.E., according to records on file with the state Office of Insurance Commissioner.

C.L.U.E. stands for Comprehensive Loss Underwriting Exchange, a database of about 46 million consumer claims submitted by more than 600 carriers for home and auto policies. Carriers turn to the database to learn about claims when consumers consider switching companies and when real estate changes hands.

What's in your report? If you want to find out what insurance companies have submitted to consumer-reporting agencies about you and your auto or homeowner policies, there are two major databases — ChoicePoint's C.L.U.E. and Insurance Services Office's A-PLUS — that contain the information. Consumers can challenge information in the reports. They also can get free copies if they are harmed by information in them — if, for example, they are denied coverage. Otherwise, consumers must pay a fee to see the reports. Here's how to contact the consumer-reporting agencies. • Request copies of C.L.U.E. reports through www.consumerdisclosure.com, by calling toll-free at 866-527-2600, or by writing to: ChoicePoint Consumer Disclosure P.O. Box 105108 Atlanta, GA 30348-5108 Prices start at $9 and range upward, depending on the number and type of reports. • Request copies of A-PLUS loss-history reports by calling ISO toll-free at 800-709-8842, or by writing to: A-PLUS Consumer Inquiry Center, ISO 545 Washington Blvd., 22nd Floor Jersey City, NJ 07310-1686 Standard price for an A-PLUS report is $9 by mail, $13 by fax or $15 for both mail and faxed reports. Sources: ChoicePoint and ISO

From Nalette's point of view, Pemco interfered with her home sale — and added a ton of stress for her — by characterizing her inquiry as a claim. The burden then fell on her, she recalled, to provide proof that she had paid to fix the problem and to show that her property was in good shape.

Pemco spokesman Jon Osterberg said his company's privacy policy prohibited him from discussing specifics. Still, "I can tell you Pemco believes it did the right thing (in Nalette's case). ... Disputes sometimes happen. We work through them, relying on our values of fair play."

Even though Nalette maintains she only asked a question, Osterberg insisted that as a matter of company policy, Pemco reports only claims to C.L.U.E.

Still, accounts such as Nalette's are well known to real-estate agents, the state insurance commissioner and to state lawmakers, who this year introduced two bills to address the problem of consumers' inquiries morphing into claims. The regulatory push places Washington among a handful of states that have adopted such legislation or are considering it.

In Olympia, insurance carriers testified that such mistakes are the exception and generally result from improper employee training, recalled state Sen. Don Benton, R-Vancouver, whose Financial Services, Insurance & Housing Committee moved legislation (SB 6195) now pending in the House.

Benton's bill would bar consumer-reporting agencies like C.L.U.E. from adding "mere inquiries" to their databases, though the bill does not define inquiries.

Affected would be Georgia-based ChoicePoint, which operates C.L.U.E., and New Jersey-based Insurance Services Office (ISO), which operates A-PLUS, a similar database.

The point of the Senate bill is to make sure that only real claims land in such databases. But what some consumer advocates, including WashPIRG's Robert Pregulman, considered a tougher bill, HB 2836, failed to get through the House.

Instead of focusing on how C.L.U.E. and A-PLUS operate, it would have blocked carriers from reporting inquiries as claims, and subjected them to regulatory sanctions by the insurance commissioner.

"Easily, the House bill is superior to the Senate bill because it provides direct protection to the consumer and prevents this practice from happening," Pregulman said. "No one should be afraid or concerned to call their company."

The House bill, backed by Rep. Shay Schual-Berke, D-Normandy Park, made it out of committee but got held in Rules — one of many measures that died in the short session, she said.

Benton concedes his bill "may or may not be flawed because it lacks an enforcement mechanism. But it's better than no bill at all."

Benton and Schual-Berke agree that consumers have suffered with the status quo.

"It doesn't pass the smell test that you get dinged (by your carrier) because you asked a question," Schual-Berke said.

Spokesmen for C.L.U.E. and A-PLUS emphasized that they urge carriers not to include inquiry information as claims. But some carriers evidently do so anyway, as evidenced by the fact that the state Insurance Commissioner's Office last year logged 225 consumer inquiries related to information on file in such databases. Of those inquiries, only 66 turned into formal complaints.

Scott Jarvis, the office's deputy commissioner for consumer protection, noted that the number of inquiries declined sharply late last year. But it is unclear, he said, whether that resulted from pressure applied by his office on the consumer-reporting agencies, or if it merely reflected a dip in home shopping and sales, which traditionally peak in the spring and summer months.

Along with Nalette, those who complained to the insurance commissioner included:

• Steven Rude and Sandra Brettler of Seattle who stated that all they wanted to do was get information from State Farm when their bicycle was stolen in 2001. They were only doing research and never officially filed a claim, Brettler said. It wasn't until last year, when the couple were looking to switch carriers, that they learned from the prospective new carrier that State Farm had filed the inquiry as a claim that was still classified as "open," she added.

Citing privacy concerns, State Farm spokeswoman Melissa Rohlfs said she could not comment. But in response to concerns raised about information in loss-history reports, State Farm last September instructed its agents not to submit claims to the reporting agencies unless a consumer makes it clear that he or she intends to file one.

• Sally and Terry Mackle of Kirkland who contacted State Farm early last year with a question about water damage. They wanted to know if it was covered under their policy. Their agent told them it depended on whether the source of the damage was inside or outside, and if the latter, probably not, Sally Mackle recalled. Because the source was outside, the Mackles decided against filing and paid for foundation repairs themselves.

Nonetheless, a State Farm adjuster "pushed his way in" to the house to inspect the damage, she said. When the Mackles decided to shop around for another carrier last fall, they learned from another company about the C.L.U.E. report that listed their inquiry as a claim.

"I yelled and screamed at my agent," Mrs. Mackle said. "He pleaded innocent. ... We need to change some legislation here!"

Again, State Farm spokeswoman Rohlfs said she could not comment.

Another person with first-hand knowledge of what he regards as consumer abuses is Sen. Benton.

In a recent interview, Benton recalled that two years ago he received an inquiry from somebody who had tried to make a claim against his carrier as a result of a "slip and fall" accident in front of Benton's residence.

"But it wasn't my house, it was the property next door," Benton said.

About six months ago, Benton looked into switching carriers — and got rejected. Only then did he discover that the "accident" had somehow made its way into C.L.U.E.'s database as a claim.

Benton declined to name the carrier, and he did not file a complaint with the insurance commissioner. Still, he said, "it was pretty aggravating."

Peter Lewis: 206-464-2217 or plewis@seattletimes.com

Copyright © 2004 The Seattle Times Company