Expert Commentary

Florida Legislature Addresses Impact of Multiple Hurricane Deductibles

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.

Property Insurance
January 2005

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.


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.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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