When a doctor told Jay and Luisa Carver to expect a new baby next August, they decided to expand their one-story home in Arlington's Ashton Heights neighborhood because it already was too cramped for the family of four.
"We love the neighborhood and we don't want to move," Jay Carver said. "So we decided to build an addition." Others had done so in the neighborhood, which has attracted young families in pursuit of older, more affordable houses with big yards and roomy porches.
But unlike their neighbors, the Carvers found that their decision to stay put and add on has plunged them into a nightmare: State Farm Fire and Casualty Co. canceled their homeowner's insurance policy.
As a result, the couple has been unable to get other insurance and faces the possibility that a bank may foreclose on the home they bought 16 years ago.
According to State Farm, the moral of the Carvers' story is: Never make improvements to a house without first notifying and winning the approval of the insurance company. If you don't, your insurance may be cancelled and you may be branded with the "scarlet letter" of the industry -- the refusal of other firms to insure the house.
"Do they [State Farm] mean a policy-holder can't remodel the house? Apparently yes," said Carver, director of the District's Pretrial Services Agency, which makes background reports for courts on suspects seeking bail.
Citing State Farm's motto, "Like a good neighbor, State Farm is there," Carver added, "I don't know what neighborhood State Farm lives in, but no neighbor in Ashton Heights would treat their neighbor this way."
Peter Synnott, a deputy commissioner of the Virginia Bureau of Insurance, said he's never heard of a similar case and expects that the agency, which is an arm of the State Corporation Commission, will investigate.
Synnott said it is illegal for an insurance company to deny coverage to someone simply because another firm canceled a policy.
The Carvers' predicament began several weeks ago when they refinanced their home at 3406 N. 3rd St. to pay the estimated $80,000 it is costing to add a four-bedroom second story and about five feet onto the back of their house, which was appraised at $133,000.
The construction, which began about a month ago and is nearly completed, has transformed the pale-yellow wooden house from a tiny one-bath and two-bedroom structure with a sun porch into a five-bedroom, three-bath house with a large family room that was converted from one of the old bedrooms. At least two other homeowners in the neighborhood have added second stories to their houses.
The Carvers notified State Farm that the house was being refinanced and arranged with their local agent to upgrade their insurance coverage and premiums. But on Jan. 27, the Carvers received a letter from State Farm's regional office in Charlottesville along with their premium check.
Don Bragg, State Farm's chief underwriter at that office, wrote that the company was not only refusing to upgrade the Carvers' policy but also was canceling it, effective March 1.
The reason: "Dwelling is currently undergoing remodeling. This is a greater exposure than that contemplated by our rate structure."
Bragg said in an interview that the ongoing renovation work had "significantly" increased the risks covered by the Carvers' policy and that it had begun without company knowledge or approval.
"It's one thing to finish off a downstairs family room and another to take a one-story house and make it a two-story house," Bragg said.
"Any time a significant change in risk is being made, the insurance company needs to be aware of it," he added. "A house that's undergoing remodeling has greater exposure to risk. . . . There are workers on the premises tearing out lines, more people around . . . a greatly increased liability."
He said that a house could be damaged structurally in such work, causing potential problems "down the road."
Bragg said that State Farm may not have canceled the Carvers' policy if they had waited until the work was finished before notifying the firm. But he warned that failure to notify the firm of ongoing work also could lead to a cancellation -- a situation he acknowledged was a "Catch-22."
"This is incredible," said Carver, adding that the general contractor he hired has insurance to cover any possible liability arising from the remodeling. "As to any possible risk to the structure of the house, we've continued to live in it and we're not exposed" to extra risks, he said. The ceiling was in place in the three days it took to put on a new roof, he said.
Carver said he never made a claim or a late payment in the 16 years he has had State Farm home insurance. Despite that record, the Carvers' only recourse now, according to State Farm, is to apply for fire insurance through the Virginia Property Insurance Association, which operates an assigned-risk fund similar to those for accident-prone drivers.
Because that coverage would be limited, Carver said he contacted the Geico and Allstate insurance companies, where agents sympathized with him, but cited policies against insuring a person whose insurance had been canceled by another company.
Agents at those firms told a reporter they were surprised by State Farm's action and added that they doubted their firms would have done likewise. The agents also said they specifically advise clients to boost their coverage during construction work.
Jay Angoff, attorney for the Alexandria-based National Insurance Consumer Organization, said the Carvers have virtually no legal recourse. Insurance companies are exempt from federal antitrust legislation, and state laws offer no practical protection for homeowners caught in such binds, he said.
The Carvers, meanwhile, face the possibility of foreclosure on their home.
"Probably the next thing that I get in the mail will be a foreclosure notice," Carver said.
"The irony is that, if we sell the house after all this, the new owner wouldn't have any problems getting insurance," he said.