How insurance departments are responding to Ida
Part 2 of 2: Some state insurance departments are adopting emergency rules that impact insurance coverage.
Editor’s Note: Part one of the series explores Ida’s impact on homeowners and business insurance policies.
After a major storm, such as Hurricane Ida, it is common for insurance departments to issue bulletins and notices to both consumers and carriers with advice on what to do. The Louisiana Department of Insurance has a storm damage resource center for insureds, guiding them on what to expect and what to do after the damage has occurred.
Additionally, the department has also adopted emergency rule 47 from Aug. 26, 2021, through Sept. 27, 2021, unless it is terminated sooner. Emergency rule 47 provides that cancellations, nonrenewals, nonreinstatements or other notices are suspended as of Aug. 26, 2021, and such notices are null and void with no force of effect. The notices can be reissued after emergency rule 47 expires with the normal requirements for notification.
Policies may be canceled for nonpayment during the rule. Once a cancellation notice is issued, the applicable notice period begins to run, but cancellation itself cannot take effect until after the expiration of emergency rule 47. Policies may not be canceled or nonrenrewed solely because an insured filed a claim during or because of Hurricane Ida and the aftermath.
The only cancellation, nonrenewal or nonreinstatement provisions that may be enforced are those relating to acts or practices constituting fraud or intentional material misrepresentation on the part of the insured. Cancellations at the request of the insured may be honored. Emergency rule 47 does not prevent an insurer from canceling or terminating a policy for fraud or material misrepresentation.
Renewals are treated similarly. Renewals are suspended during emergency rule 47 and are deferred until the rule expires. Policies subject to renewal afterward will continue in full force at the previously established premium until rule 47 expires.
Normal claim notification procedures are suspended, including normal procedures related to the period within which to initiate a claim or loss settlement. Insurers have 60 days to initiate loss adjustment of a property claim after notification of loss by an insured. Insurers are required to promptly identify, evaluate and resolve claims resulting from Hurricane Ida. They must promptly acknowledge receipt of claims and make appropriate adjuster assignments.
If an insured owes premium funds, carriers may offset claims settlement by the amount due for the loss. Insureds are still obligated to pay their premiums; the rule simply extends a grace period. Insurers are to work with insureds impacted by the storm where payments would have become due by establishing a payment plan for any unpaid premium or providing a further extension for the payment of that unpaid premium. Fees, penalties or other charges are suspended during rule 47.
Following Hurricane Ida, the Louisiana Department of Insurance issued bulletin 2021-07 to remind insurers that policyholders should be treated fairly and that insurers should honor the spirit and intent of additional living expense (ALE) coverage due to the loss of use of their premises following the issuance, or lack thereof, of civil authority as a result of Hurricane Ida. The bulletin notes that Ida formed so rapidly that many civil authorities could not issue mandatory evacuation orders. Many policyholders correctly identified the risk and left on their own accord.
The bulletin states that insurers should waive the language requiring mandatory evacuation to trigger civil authority coverage for the 25 parishes listed in emergency rule 47.
This brings up an issue; the policy language for ALE and civil authority relies on physical damage on a nearby or insured property to trigger coverage. We agree with the commissioner that insurers should be lenient, but hurricanes are not a new hazard, and our ability to predict the path of the storm and expected damage has only improved over the years. It seems like rates could be developed so that the policies could be modified to allow coverage when a civil authority requires an evacuation for certain predicted damage to local areas, even when damage hasn’t occurred. Something carriers and ISO might want to consider thinking about. It’s better to develop rates and adapt coverages than have insurance departments override policy language; that’s a path I don’t think the industry wants to travel down.
There is yet another complication; even with an order to pay ALE and civil authority coverages, there is the issue of not just the regular deductible, but the hurricane/wind deductible, which is often a percentage of the Coverage A amount, either 1-10% or a dollar amount beginning at $1,000 with optional $2,000,$5,000, $7,500 or $10,000 amounts. Nothing in the policy, the deductible forms, or the manual itself indicates that the deductibles do not apply to ALE or civil authority coverage. So even with the order from the insurance department, insureds will still not be compensated until their deductible has been met.
The New York Department of Financial Services has a disaster and flood resource center, a disaster hotline number and information on filing a claim after a loss. It has also issued a circular to expedite claims and allow temporary permits to out-of-state independent insurance adjusters.
The Mississippi Department of Insurance has general advice for various weather disasters.
The New Jersey Department of Insurance has issued a news release advising insureds on how to file and claim and understand flood insurance.
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