Missouri regulators have cautioned that some insurers will need to extend rebuild deadlines in order to avoid bad-faith accusations and possible legal action.
The Missouri Department of Insurance issued a bulletin urging insurers to instate moratoriums under which policyholders would have additional time to rebuild homes ravaged by the multiple-vortex twister that leveled Joplin, Mo. on May 22, 2011.
In the bulletin, John M. Huff, director of the Missouri Department of Insurance, explained the magnitude of devastation in the Joplin area created serious logistical complications, including delayed access to property, as well as a shortage of contractors and building materials. As a result, it has been virtually impossible for some owners of both residential and commercial properties to rebuild under the timelines stipulated by their insurance policies.
This is not the first time that state regulators have asked property and casualty (P&C) insurers to relax customary time limitations. Six months after the storm, which killed 159 people and generated $4.9 billion in insured losses, the department issued an industry bulletin stating that property owners should not be expected to rebuild “within the time limits required by some homeowners’ and commercial insurance policies.”
Although various insurance companies opted to extend deadlines to accommodate affected policyholders, others have not yet responded. To date, P&C insurers have doled out more than $1.1 billion in homeowners’, auto, and commercial property claims stemming from the Joplin tornado.
This number will likely approach $2 billion by the time all claims are settled.
In the bulletin, Huff praised the insurance industry for “a commendable job [in] responding to the tornado,” while explaining that adhering to rigid guidelines could jeopardize more than policyholder retention.
“Missouri law requires insurers to provide prompt, fair, and equitable settlements to their policyholders,” Huff cautioned. “Application of some policies’ shorter time limitations could result in an unfair settlement, which is illegal under [state] law.”
Huff further noted that insurers attempting to enforce deadlines of less than one year may face legal action by the department.
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