Controversy Over Hurricane Deductibles May Just Be Beginning

By Beth Pinsker Gladstone | November 2, 2012

  • November 2, 2012 at 11:44 am
    Pete Moraga says:
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    The deductibles are based on the structure coverage limit of the policy, not the “value of the home.” Even though a home may be worth $500,000 that doesn’t necessarily mean the insurance limit is $500,000. The limit on the policy may be less.

    • November 2, 2012 at 1:30 pm
      don't skim the article says:
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      It does state in the article “covered value of the home”. I don’t say this to thumb my nose at your comment, just trying to give Insurancel Journal some credit, they usually have it half-a$$ed! Have a great day :)

    • November 2, 2012 at 1:38 pm
      reader says:
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      However, if there’s a motgagee, the “limit” may include the value of the land since it is included in the mortgage amount. This is going to be very tricky from a co-insurance, ITV and deductible standpoint. The intent is to cover the structure only but…E&O’s may come into play!

      • November 5, 2012 at 8:52 am
        munch says:
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        Mortgagees recognize that insurance doesn’t insure the land itself. Regardless of how the limit might have been established (market value, loan value), lenders understand that the insurance coverage is for the cost to repair/replace the structure. E&O would only come into play if someone in the chain of insurance procurement failed to identify an appropriate insurable value for the building.

      • November 5, 2012 at 1:23 pm
        John Scrader says:
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        I don’t live on the East Coast, but it’s insurance 101 that land is not included on any policy. An agents E&O comes into play if the agent unknowingly set up his client to have a co-insurance issue-or-an agent trusted his client’s advice and used the client’s figure for the home value and not documenting it…

      • November 12, 2012 at 5:23 pm
        MrInsBrokerSF says:
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        Try again. Lender or not, policies don’t cover or include the value of land unless they specify they do.

  • November 2, 2012 at 1:43 pm
    Scott Romoser says:
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    The damage to my Auto resulting from a collision with a tree isn’t subject to a collision deductible because the actual cause of loss was an unanticipated surrender of voluntary control.

    • November 2, 2012 at 5:01 pm
      However, Scott says:
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      It depends upon the reason for the collision with the tree. If you ran into it, your deductible will apply. If it fell on your car, your Comp deductible would apply.

    • November 15, 2012 at 1:20 pm
      Company says:
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      Sounds like you have no knowledge or commercial property language, etc.

      • November 20, 2012 at 4:24 pm
        I hate commenters says:
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        @Company – Scott Romoser never said if it was a personal or commerical auto. If it’s a personal auto, Scott’s “tree fall on car = comp deductible” reply is accurate.

  • November 2, 2012 at 1:49 pm
    CB says:
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    So what’s Governor Cuomo’s next move, is he going to prohibit Windstorm Deductibles all together for this event? If so, can insurers bill the policyholders for the difference in premium they would have had to pay if their policy had been rated without said deductible? I’m sure insurers won’t do that, but it’s the principle of this that bothers me. Insurers are always viewed as “the bad guy” in these cases when we are the industry that actually gets people back in their homes, cars, etc. I’m not saying that there are not some unethical folks out there, but I think the vast majority of professionals I know are out to do the right thing by their customers. When government interferes like this, it just ends up costing all insureds more in the long run.

    • November 12, 2012 at 5:31 pm
      MrInsBrokerSF says:
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      It’s one thing if a Governor has met with industry representatives
      and been advised by them what their policies include and require,
      then used his platform to spread their message, and support them,
      and quite another when a politician seizes on a catastrophe to cut
      a leg off of the economy’s financial infrastructure (capital, banking, insurance).

      One of my customers told me I’m doom and gloom, because my job is to ask people to think about what can go wrong, in order to plan
      for how they will financially react in case it happens. I don’t
      use fear to sell, I just try to prepare people. If they choose to
      not insure something, I’m fine with it. If their choice later
      proves ill advised, I’m not responsible for their informed choice.

  • November 2, 2012 at 1:49 pm
    bob says:
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    there ain’t no free lunch, and for the insurance industry to stay viable and be solvent to pay future claims, the additional costs will have to be addressed. if not now with the deductible, then in future rates when the loss is made up.

    • November 3, 2012 at 9:12 am
      AutoPM says:
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      Rate increases are not implemented to “make up” for losses. Insurance pricing is prospective in that the company tries to predict the types of losses they may pay in the future. Yes, Sandy will now change the view of how much premium is needed to pay for future losses, but companies don’t try to “make up” for losses and regulators don’t allow it.

      • November 12, 2012 at 5:19 pm
        MrInsBrokerSF says:
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        You are probably technically correct, but practically, you are wrong. That’s why all the years when insurers are piling up billions in profits when they dodge catastrophies, regulators are
        always playing the game of how much of an increase to approve.
        And they don’t call insurers in after record profits, and force
        them to issue refund checks to policyholders.

        Some people would clearly prefer a national co-op where all the
        policies are issued online, and assigned in random to local insurers for claims adjusting – ala Medicare. Cuts out the agents
        100%, pays the insurers to handle claims as defined by the Feds.
        Would it work? Does Medicare work? Yes, and Medicare has a
        estimated 40% fraud rate. Well, who cares? It’s not like it’s
        our money being stolen. It’s taxpayer’s money!

  • November 2, 2012 at 2:01 pm
    Brokie says:
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    …can’t wait until the policyholders realize what the co-insurance penalty is. There’s always a big scream about that. Will the governors waive THAT? I’m personally irritated with Gov. Cuomo’s action considering that it takes FOREVER to get a filing approved in New York – even a rate reduction, or a coverage that is advantageous to our insureds.

    • November 2, 2012 at 3:06 pm
      SWFL Agent says:
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      Good point. However we found in Fla that companies were reluctant to exercise the co-insurance rules back in 2004. That would have created more negative publicity than the hurricane deductible issues. Good luck.

  • November 2, 2012 at 2:36 pm
    boonedoggle says:
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    Presuming that Governor Cuomo’s action will provide extra-contractual benefits to the NY policyholders, perhaps the good Governor is intending to pay the windfall difference out of State funds.

    • November 2, 2012 at 3:10 pm
      reader says:
      Hot debate. What do you think?
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      He’s the almighty now. Big proponent of the chicken little- I mean- global warming propoganda. The planet has taken on changes throughiout centuries due to natural adaptations to ever changing weather. Oh…I’m sorry did I say WEATHER! Good grief! Go hug a tree, Cuomo!!!!!!!!!!!!!!!!!!

      • November 2, 2012 at 7:30 pm
        Poseidon says:
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        Hidden due to low comment rating. Click here to see.

        • November 5, 2012 at 11:11 am
          Mr. Solvent says:
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          Maybe you’re too young for it, but the same science community came to the same conclusion about Global Cooling in the 1970′s. The hole in the Ozone layer was going to kill everyone in the 80′s.

          I’m not bold enough to claim that they are right or wrong this time…but perhaps we should look at history as a guide as opposed to new “science.”

        • November 12, 2012 at 5:09 pm
          MrInsBrokerSF says:
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          Calm down – this forum need not be so testy.
          Science has recorded many climate changes over millions of years.
          Science has also been wrong many times, but it tends to self correct.

          If the current global warming is all due to man (probably not since
          volcanic activity has also increased), we may not have the solutions to stop our contributions, let alone reverse them.

          We’d all benefit from learning more, rather than looking for facts
          that seem to suppost the conclusions we personally prefer.

  • November 2, 2012 at 3:22 pm
    Libby says:
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    I’ve never seen a “hurricane” deductible before. I’ve seen a Windstorm &/or Hail deductible and a Named Storm deductible but not one specifically listing hurricane. Is there such a thing?

  • November 3, 2012 at 4:31 pm
    Amazed says:
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    I’m amazed that this action is being taken. The ruling will take standard insurance carriers out of the market if they can’t enforce the terms and conditions of the insurance contract. After all, if the insurer knew going in that they would not be able to enforce the wind deductible, it’s likely that the policy never would have been written.

    What is wrong with this picture?

    • November 5, 2012 at 9:59 am
      ExciteBiker says:
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      Is it amazing, though? I looked up the definition of a post-tropical storm. It has a specific (and pre-defined) definition based on scientific measurements like maximum sustained wind speed. It appears the storm struck some areas as a hurricane but weakened into a post-tropical storm prior to making landfall in the northeast. Are they saying a % Wind/Hail deductible will not be applicable? Or just that specifically a % Hurricane deductible will not apply because the wind speeds were tropical storm and not hurricane? I wonder if they have % Named Storm and if that would apply, since usually the Named Storm wording would include a named tropical storm such as this.

      • November 5, 2012 at 10:01 am
        Libby says:
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        That was my question. I’ve never heard of a “hurricane” deductible. Only wind &/or Hail and Named Storm. Anyone out there in hurricane territory care to chime in?

        • November 5, 2012 at 11:24 am
          Mr. Solvent says:
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          In Florida we have hurricane deductibles. Statutes are generally clear about what constitutes a hurricane although there was some confusion with Isaac.

        • November 6, 2012 at 1:42 pm
          Hurricane Prone VA says:
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          Libby, yes, in your more Southern East Coast states (FL, SC, NC, VA, GA) companies have taken to 1. Hurricane Deductibles- stating that it is an actual hurricane (most companies use the defined wind speed by the NWS)that makes landfall for the deducitble to apply 2. Named Storm- stating that any storm that is named makes landfall and the deductible applies 3. Wind/Hail- stating any wind/hail storm, named or not, Nor-easter or hurricane this deductible would apply. Hope that helps, have a great day all!

          • November 6, 2012 at 1:48 pm
            Libby says:
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            Thanks, Hurricane. That clears it up!

  • November 3, 2012 at 11:39 pm
    Back Doctor says:
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    Hidden due to low comment rating. Click here to see.

    • November 4, 2012 at 11:56 am
      KB says:
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      Florida’s former Governor chased out all of the major insurance carriers when they froze premiums after 4 major hurricanes struck the State. Now you only have local carriers. The same will happen in NY, NJ and CT. Soon after more politicians override contracts, no major carriers will offer hurricane or wind coverage. So, if you don’t like Florida…move to NY and enjoy their nice State income tax.

      • November 12, 2012 at 4:46 pm
        MrInsBrokerSF says:
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        Sometimes instead of politicians they seem to act more like polluticians – craming the books with badly written ill conceived
        laws that create a need for even more of the same.

        Politicians ought to be forced to take a oath like MDs: I will vote for no law that does damage to my fellow citizens even if
        it’s good for my personal constituents, and particularly if it’s
        backed over whelmingly by campaign donations.

      • November 12, 2012 at 4:57 pm
        MrInsBrokerSF says:
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        If we didn’t have the standard dynamic of everyone out for themselves in the six ring circus of federal, state, banking, insurance, agents, and consumer advocates, maybe we could design
        products that filled the people’s needs without, being unfair,
        and without putting any of us out of business? I’ve watched this
        zoo for over 40 years, and it’s not getting better.

  • November 4, 2012 at 9:14 am
    Curtis says:
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    Looks like the writer doesn’t understand concurrent causation

  • November 5, 2012 at 10:20 am
    Exadjuster says:
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    I remember working Hurricane Fredrick in Mobile Alabama for a major carrier that included coverage for fences caused by wind damage, At that time another major carrier, (I won’t name it, but it has good hands) didn’t cover them.

    A week into the storm the Governor of the state made a declaration that all HO policies would cover wind damage to fences. That was that.

  • November 5, 2012 at 11:40 am
    Pedro says:
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    Since the writer quotes Robert Hunter as though he is an authority, I have very little confidence in what has been written. Robert Hunter is just an idiot that loves to run his mouth. The Insurance Journal should understand that his opinion is worthless bilge.

  • November 5, 2012 at 12:25 pm
    bob says:
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    “autopm” takes exception to my comments about rates increasing, but todays headlines in another insurance magazine, from a very high person in the insurance industry, sayss exactly the same thing. if a company’s surplus shows a decline due to loss payments, then rates are going up and underwriting will tighten. no matter what regulations say about being proactive in rates, heavy losses to surplus and capital have to be made up in the future. again, there ain’t no free lunch.

  • November 5, 2012 at 2:38 pm
    KentU says:
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    As a Farmers agent in Texas we have a named storm or cyclone deductible. Basically, if the storm has been given a name – tropical storm or hurricane – it carries this deductible as long as it is a named storm and for 24 hours afterwards. The true devil is in the detail. The deductible clause reads that if the storm causes damage within 24 hours of when it was down graded from a named storm status that the named storm deductible will still apply. Example: Hurricane Ike was down graded from a named tropical storm to a no-name tropical depression just after it headed north of Bryan-College Station, Texas. It hit the Dallas-Fort Worth Metroplex 5 to 6 hours later – which is about 120 miles to the north. Thus, damages in the metroplex were paid using the named storm deductible because it had been a named storm less than 24 hours before hitting that area.

    • November 10, 2012 at 9:50 pm
      Claim Hawk says:
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      Robert Hunter – Actuary, People/Consumer Advocate, Good Man.

      Pedro – Wears and sells aluminum cone headgear (@^@).
      ~

  • November 7, 2012 at 8:30 am
    Jay says:
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    Way to go Muckraking! The hurricane deductible DOES NOT APPLY , PERIOD. Wind deductibles are separate.

  • November 7, 2012 at 3:29 pm
    rocket88 says:
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    From now on…”It’s Obama’s fault”!

    • November 12, 2012 at 4:38 pm
      MrInsBrokerSF says:
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      It’s far easier to talk the talk than to walk the walk!

  • November 8, 2012 at 10:40 am
    Bob Trotta says:
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    I don’t live on the water. I don’t live on the edge of a cliff. I don’t live on an earthquake fault. I don’t live in a fire zone. I don’t live in tornado alley and I don’t live in a mudslide zone, SO WHY does MY homeowner’s insurance keep going UP with NO claims from ME! I have ALREADY been informed, that next August, my homeowner’s insurance -Danbury Insurance- will increase by approximately 68%! That is on top of a $300.00+ increase this year! That increase ALSO involved making my Umbrella Policy SEPARATE from my homeowner’s policy which cost me another $200.00+! WHY!

    People who live or want to live in these danger zones should be the ones paying the TRUE premium to cover their property that keeps getting destroyed time after time after time! If the insurance companies keep covering them then they are just as irresponsible!

    it’s getting to point where you need a DEGREE in SEMANTICS from YALE to decipher your insurance policies!

    • November 8, 2012 at 12:08 pm
      Libby says:
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      You are forgetting the number 1 rule of why and how insurance works. The law of large numbers.

    • November 12, 2012 at 4:27 pm
      MrInsBrokerSF says:
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      Mr. Trotta:

      You didn’t say where you live, just that you’re not subject to the
      standard list of catastrophies. For insurance to work, whatever
      risks are chosen to be covered need to be spread far and wide with
      enough money collected to pay the expecte losses, and deliver a profit to insurers.

      The problem is the conflicts that arrise when government allows the
      building of substandard housing in catastrophes prone areas, then
      either fails to assure that private insurance will be affordable,
      or where it isn’t, the government subsidizes National Flood policies. Every pays for government subsidies through taxes, we
      just never know how much is costs us.

      If you’re in such a relatively low risk area, then why would you
      put up with such rate increases when so many other insurers ought
      to be competing for your business?

    • November 20, 2012 at 4:33 pm
      I hate commenters says:
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      Why are your rates going up? Why are you asking this question on a comment section when only your agent/carrier could possibly answer this question for you? Was there an addition to your home? Did you get a pitbull this year? Is your home (unknowingly to you) actually in a potential natural disater area (for example most people in MA don’t realize we’re right ontop of a fault line).

      I understand you’re frustrated, and you probably have good reason to be, but attempting to seek out answers from randoms online who don’t know your exact situation is pointless. You need to ask your carrier or agent to explain why rates are increasing for you.

  • November 8, 2012 at 11:06 am
    Rusty says:
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    Hurricne deductibles are one thing, but I personally have a real objection to all-wind deductibles. I don’t believe that windstorms cause as much widespread damage as hurricanes. Wind has traditionally been an insurable hazard while hurricanes have become less so due to the profusion of home now affected and that is understandable. But, if this “lasering” of policies keeps up, we might be going back to issuing fire-only insurance policies.

  • November 8, 2012 at 2:19 pm
    Jerry Smith says:
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    Section 10 of Article One of US Constitution says: “No State shall….pass any law impairing the Obligation of Contracts…”

    I presume the Constitution is no longer viable. Perhaps it’s just a late term abortion.

    • November 8, 2012 at 4:53 pm
      LiveFree says:
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      For as long as I have been alive the Constituion has been used as Washington D.C. toliet paper. The past decade has been the obviously the worst, it seems like a game now to see how much these politicans can get away with ignoring the Constituion.

  • November 8, 2012 at 3:31 pm
    Helga Schauer says:
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    Interesting article. I wonder how the Catastrophe reinsurance treaties and covers decide whether their contract applies.

    Might be an interesting subject to explore.

  • November 8, 2012 at 5:07 pm
    C R Blue says:
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    Is food loss a deductible on taxes? No one seems to know.

    • November 9, 2012 at 8:30 am
      Libby says:
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      Food loss due to the storm? I think losses from any type of uncovered claim are deductible, including loss of food. But there is a threshold you have to reach before you can claim loss.

      Probably more a question for a tax journal blog.



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