Last week I made a brief reference to a bad experience that I recently had with a Farmers Insurance agent.  Here's how the sordid little drama played out. ¹

 The characters

	the Investor is played by Christopher Smith
	the Lender is played by Wells Fargo
	the Insurer (aka, the Villain) is played by a Houston based Farmers Insurance Agent 2

The setting: 

The Investor makes a New Years Resolution to sell a high-end rental property and use a 1031 exchange to reinvest in a multi-family property.  He sells property the property to the current tenant and identifies a fourplex to buy, negotiates a deal, and heads to closing. 

Act I:  Week of closing

The Investor calls the Insurer for a quote.  The Insurer provides a written Farmers quote.  The Investor accepts the quote and asks the Insurer to proceed and provide coverage.  The Investor calls the Insurer several times to ensure everything is in place; the Insurer assures the Investor that everything is in order.  The Insurer says they're having some problems getting the printout, but not to worry. 

Act II:  The closing - Friday the 13th of April

At closing the Lender calls the title company to inquire about the insurance binder, which hasn't been received.  The title company calls the Insurer.  The Insurer gives verbal confirmation of coverage.  Based on verbal confirmation the Lender instructs the title company to proceed with the closing. 

But…drumroll…it turns out that the Insurer had quoted the Investor in error, but for some reason doesn't want to admit his mistake.  Farmers, as it turns out, is not writing coverage for multi-family properties in Houston. 

Instead of admitting his mistake, the Insurer scrambles around to find a quote from a third party carrier but doesn't tell the Investor; he just tries to slip a revised invoice to the title company after the closing - considerably more money for less coverage. 

However, the Insurer takes no steps to bind the policy.  None of the paperwork is in place.  Based on the Insurer's fraudulent statements the property closes with no insurance in place. 

The Investor now owns the property, but unbeknownst to him (and the Lender) there is no coverage. 

Act III: The cleanup

On Wednesday of the following week the Investor gets a call from the Lender.  "Hey man," the Lender states, "you need to call your insurance guys."  So the Investor calls the Insurer.

The Investor gets insurance with another carrier on the 18th of April, five days after closing.

 --------------------

The moral of the play: 

We like to assume that representatives of major companies will behave like responsible, ethical professionals, but sometimes this is not the case. In order to avoid revealing his mistake, the Farmers Insurance agent wove a web of lies over a five day period which resulted me assuming a huge risk. 

Had a fire occurred during the uninsured period I would have entered a hellish maze of he-said-she-said which would have made a bunch of lawyers a lot of money.  Something seemed fishy from the start; had I followed up more aggressively I would have uncovered one of the agent's lies at an earlier stage.

Footnote ¹:  This of course is a stylized account of the course of events, but my official complaints to Farmers Insurance and to the State Insurance Regulatory Agency will document the Agent's fraud in explicit, meticulous, gory detail, along with supporting witnesses. 

Footnote ²:  I debated long and hard about whether or not to reveal the name of the Farmers Agent on this blog.  In the end I decided not to.  If you're a Houston based investor and want to steer clear of this guy then send me a note via the contacts page. 

Footnote ³:  In the text above I didn't list all of the false statements that the agent made.  This is just a sample of one.  And no, the agent didn't send any forms to the title company. 

I got through my Friday the 13th closing with no problems, so I'm now the happy owner of a new four-unit property in the Montrose section of Houston. 

A last hitch was getting the place insured, and to my surprise I found a dearth of companies willing to quote me a rate.  Here in a nutshell are my experiences.  Note that insurer rules and policies vary from state to state, but here's what I ran into trying to get a policy for a fourplex in Houston:

	Nationwide:  was willing to make me a quote for a policy, but required me to switch the insurance policy for my primary residence to Nationwide as a prerequisite.  I'm happy with my current insurer (USAA) so this was a non-starter.  No quote.
	Allstate:  The "good hands" people.  Refused to insure any property with galvanized plumbing.  This property has been thoroughly rennovated, including much of the plumbing - but the building was built in the '30s, which essentially insures that there is still some of the stuff around.  No quote.
	State Farm:  Agent informed me that they consider a four-unit multi-family residence to be an apartment - meaning: commercial.  The agent referred me to a relative of his who got me a quote from a small carrier which was prohibatively expensive. .
	USAA:  I've used USAA before and have generally been hapy with them.  But unfortunately there is a limited number of non-owner occupied properties that they're willing to invest for any individual, and I'm already maxed out.  No quote.
	Farmers:  Gave me a fast on-the-spot quote over the phone at a good rate. ***see update, below

So the winner: Farmers. I'm a new customer.   ****  Update:  See below

Lesson:  I waited too late in the game to take care of this so I caused myself some unnecessary stress.  Do yourself a favor; start early and give yourself some slack time. 

**** April 18th Update - Farmers: run for your life.  I'm in the middle of a post-closing horror story that I'll write about soon (when I have time).  But consider this an official revocation of the blue ribbon that I'd awarded Farmers.  Stay tuned...