Consumers who bought homeowners insurance from Travelers Property Casualty Corp. are allegedly routinely sold excess coverage because the company misstates its risk estimates for physical damage, according to a class action suit filed in a New Jersey federal court.

Spotted on Law.com Radar: Instead of basing a policy’s dwelling liability limit solely on the risk of physical damage to the home, Travelers allegedly inflates that limit with the estimated cost of debris-removal expense that may be incurred, and the company does not inform the policyholder of that fact, according to the suit.

Travelers policies already provide debris-removal expense coverage sufficient for a policyholder’s needs, without increasing the liability limit to account for such expenses and without charging an additional premium, the suit claimed.

And the documents provided to policyholders before a new or renewal policy is issued allegedly describe liability limits as “Coverage A,” when they are, in fact, “Coverage A Plus Extra Debris Removal Coverage,” the suit claimed.

“As a result, year after year homeowners unwittingly pay for excessive and unnecessary coverage as a direct result of defendants’ unfair and deceptive practices,” the complaint said.

Counsel for Travelers has yet to enter an appearance. A Travelers spokeswoman did not respond to a request for comment about the suit.

Proposed multistate class

The suit was brought on behalf of a proposed New Jersey class and a multistate class consisting of consumers who bought Travelers homeowners policies on a New Jersey property and received a declaration that set liability limits based on reconstruction cost with debris removal.

The class representative, Carolyn Hurley of Mount Holly, New Jersey, bought her homeowners policy based on estimates of reconstruction costs that included the cost of removing debris from the premises following a total loss of the property.

The liability limits sold to Hurley as “Coverage A” were approximately 4.5% higher than they would have been had defendants based those limits on reconstruction cost without debris removal, the suit alleged.

Sign up for Law.com Radar to keep up with the latest news and lawsuits in a personalized legal news feed. Track federal litigation, deals and who’s getting the work by industry, practice area and region.

Hurley “was deceived and defrauded by being sold liability limits that were misrepresented in policy declarations as Coverage A when they were, in fact, ‘Coverage A Plus Extra Debris Removal Coverage’ limits that Defendants knew or should have known Plaintiff and class members did not need,” the suit claimed.

The suit alleged that Travelers Property Casualty Corp., Travelers Indemnity Co., St. Paul Fire and Marine Insurance Co. and St. Paul Protective Insurance Co. violated New Jersey’s Consumer Fraud Act, breached its contract and the implied covenant of good faith and fair dealing, and engaged in unjust enrichment.

The plaintiff and the putative class are represented by Kenneth Grunfeld and Kevin Fay of Golomb Spirt Grunfeld in Philadelphia, and Kenneth Quat of Quat Law Offices in Framingham, Massachusetts. They did not respond to requests for comment.

The Hurley suit is the second consumer class action recently filed against Travelers in the District of New Jersey.

The other, filed April 27, claimed Travelers shortchanged New Jersey auto policyholders who bring personal injury protection claims.

That suit alleged PIP payouts are unlawfully reduced by the deductible and co-payment amount, contrary to a recent court order.

Related:

Rhode Island High Court vacates ruling for Allstate, ordering stalled property appraisal after nearly a decade

Georgia law changes auto insurance rate filing rules

Insurance company’s mistake results in significant bad faith claim