Florida Legislature Addresses Impact of Multiple Hurricane Deductibles
January 2005
Reacting to the fact that over 30,000 policy
owners were subjected to two or more percentage deductibles, the Florida Legislature,
sitting in special session, recently enacted House Bill 9A which provides for
relief for these homeowners in the form of cash reimbursement and sets out limitations
prospectively for the application of percentage deductibles in future, multi-hurricane
seasons. HB 9A was signed into law by Governor Jeb Bush on December 21, 2004,
and became effective immediately. Its contents should be of immediate significance
to brokers, agents, and underwriters.
by Doug
Berry
Butler Pappas
Weihmuller Katz Craig LLP
Following Hurricane Andrew in 1992, the Florida Legislature amended Fla.
Stat. § 627.701 to permit deductibles in residential policies for loss due to
hurricane or other named windstorm to be expressed as a percentage of the insured
value, typically between 2 to 5 percent. At the time, certainly no one foresaw
the summer of 2004 where not one but four hurricanes impacted the state of Florida
nor the resulting hardship on policyholders as a result of the application of
those large deductibles on homeowners whose properties were damaged by two or
more hurricanes occurring, in some instances, only days apart.
Reimbursement for Residential Property Owners
Policyholders of residential property insurance whose property was damaged
by two or more hurricanes and to which their insurer applied more than one deductible
are entitled to be reimbursed the amount of the claim which was not paid due
to application of the second or subsequent deductible. Application must be made
to the Department of Financial Services by March 1, 2005, and each claim will
be subject to a $100 deductible. In other words, the policyholder will be reimbursed
the amount of the second deductible, less $100. In no event will the reimbursement
exceed $10,000 per policy for application of the second deductible or $20,000
for damage due to three or more hurricanes.
Condominium associations may apply for reimbursement in an amount not to
exceed $3,000 times the number of condominium units, not to exceed $10,000 per
residential structure. However, reimbursement will not be made for losses for
which an association has assessed its members and for which the unit owners
have insurance coverage for the assessment.
Insurers are to mail a notice to residential policyholders who filed claims
for two or more hurricanes and who were subject to two or more deductibles informing
them of the procedures for seeking reimbursement. The Department of Financial
Services is to provide the form of the notice and claim forms.
The sum of $150 million was appropriated to fund these reimbursements. This
appropriation is, in turn, funded from contributions to the Florida Hurricane
Catastrophe Fund.
Application of Percentage Deductibles in Future Years
Rather than on a per occurrence basis, a single hurricane deductible will
now apply on a calendar year basis. In other words, only one percentage deductible
is to be applied in any one calendar year, regardless of how many hurricanes
may have affected the insured property. In the event of a second or subsequent
hurricane, the insurer may apply as a deductible the greater of (1) any remaining
hurricane deductible or (2) the policy deductible which would apply to perils
other than hurricane.
If, after a hurricane, a policyholder obtains a new, or renewed, policy with
a lower deductible, the policyholder must be notified in writing that the new,
lower deductible will not take effect until January 1 of the following calendar
year.
Conclusion
This past year, 2004, was an extraordinary year hurricane-wise in Florida
and extraordinary legislation resulted. While the impact of reimbursements for
multiple deductibles applied during 2004 will fade once the applications for
relief are made, processed, and paid, the impact on the future of underwriting
hurricane coverage in Florida in light of this new substantial limitation on
the relief promised INSURERS by enactment of the multiple deductibles 10 years
ago will be much more long-lasting.
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