As homeowners file insurance claims in the wake of Hurricanes Harvey and Irma, many could find their level of protection depends on the state where their damaged home is located, according to a research report released by the Rutgers Center for Risk and Responsibility at the Rutgers Law School in Camden, N.J.
The report, “State Rankings of Homeowners Insurance Protections: Consumer Remedies,” examines what claimants are surprised or disappointed by, and how some of the best states are protecting insurance consumers, said Jay Feinman, co-director of the Rutgers center and a professor at the law school.
The report is part of the Essential Protections for Policyholders legislative reform project, an initiative of the Rutgers Center for Risk and Responsibility in cooperation with United Policyholders, an advocacy organization and information resource for insurance consumers.
The two-year project focuses much of its research on consumers who file ordinary claims, with the goal to identify and expand on essential protections to strengthen what can be a complicated and challenging process.
There is a significant knowledge gap in how homeowners’ coverage varies nationally, according to Feinman. The project focuses on state legislation and regulation concerning the relationship between homeowners and insurance companies.
Protections found as essential for homeowners were selected by importance based on United Policyholders’ and Feinman’s experience in the insurance industry.
Feinman and Amy Bach, executive director at United Policyholders, advocates for the revision of state insurance laws to better protect disaster victims. This comes at a time when Florida and Texas have felt the effects of two major hurricanes.
Hurricane Harvey made landfall on August 25 as a category 3 hurricane with 130 mile-per-hour winds, just east of Corpus Christi, Texas, in the Rockport/Port Aransas communities. Harvey’s winds caused extensive damage in the area and farther inland, resulting in 70 deaths.
The Insurance Council of Texas (ICT) has placed the insured losses from Harvey at $19 billion, including an estimated $11 billion in flood losses insured by the National Flood Insurance Program.
Reuters also reported that Florida policyholders so far have filed nearly $2 billion in claims to insurers for damage from Hurricane Irma, according to the state’s insurance regulator.
According to Reuters’ reports, Irma was ranked as one of the most powerful Atlantic storms on record before striking the U.S. mainland as a Category 4 hurricane on September 10. The storm killed at least 33 in Florida.
Feinman’s research says half of the states in the U.S. allow policyholders to sue insurance companies only if they have intentionally or recklessly denied a claim. Nearly 15 states give consumers no remedy if insurers act wrongfully, making recovery from a natural disaster difficult.
“Insurance funds are make or break for an individual’s ability to rebound after a disaster,” Bach said. “History tells us that those funds don’t always flow as they should, and many have to fight to get the protection they’ve paid for.”
Feinman added that for an insurance policy to provide the protection and security it promises, the policyholder must have access to a fair and efficient process for resolving disputes and remedying improper conduct.
“Homeowners who do not receive prompt payment may have additional expenses due to being out of their homes, and may suffer extreme aggravation and distress,” Feinman says. “If policyholders have to pay attorneys and incur other litigation expenses to get what they are entitled to, they are never fully compensated for their losses.”
The report suggests that disaster victims should have flexibility in coverage provisions and the claims process; clear rules about causes of loss to avoid unfair gaps in coverage; and protection against sudden dislocations in the insurance market. It outlines current state laws and calls for updated statutory language to provide more certainty for insurance companies and better protection for policyholders.
The project also issued a series of rankings by state on what it identified as key issues in insurance regulation. The latest state rankings for the project are based on the protection and security that a homeowners policy provides when a policyholder files a claim, and what the project sees as key elements in providing policyholders with effective remedies for disputed claims.
Five stars served as the highest ranking in the report, and one star was the lowest. Hawaii and South Carolina ranked the best for consumer remedies, while New York, Wyoming, Washington, D.C., and Virginia ranked lowest.
In Hawaii, which received a five-star ranking, the Insurance Division at the Department of Commerce and Consumer Affairs protects consumers by maintaining a 13-month freeze for insurers from exiting the homeowners insurance market and allowing the state’s commissioner to reactivate the Hawaii Hurricane Relief Fund to ensure access to coverage should a large event occur.
“Hawaii residents mostly understand the susceptibility and isolation of the state during hurricane season, which leads to a generally more knowledgeable and prepared public,” Commissioner Gordon Ito said. “We will continue our efforts to better inform and protect consumers through appropriate platforms, outlets, methods and legislation.”
“For South Carolina, our statutes regarding homeowners insurance are certainly adequate. However, it’s not necessarily what the statute says; it’s how insurance companies serve their policyholders, and we are ever mindful of that,” South Carolina Department of Insurance Director Ray Farmer said. “Generally, the insurance industry does a fantastic job. It’s our time to shine, and it’s their time to shine after a natural disaster, and they do.”
When a state of emergency is declared by the Governor in the wake of a storm, it gives Farmer extra authority to issue an emergency regulation to allow adjusters to come in to the state and puts a moratorium on cancellation/ nonrenewals.
A spokesperson for the Virginia Bureau of Insurance, a state that ranked the lowest in the report, said the Bureau has an obligation to ensure licensed insurance companies comply with Virginia insurance law and applicable regulations.
“The Bureau of Insurance assists thousands of consumers each year by responding to inquiries and complaints regarding an insurance policy,” the spokesperson said. Between January and August 2017, its staff has handled 1,589 complaints and re-covered more than $1,219,752 for consumers. In addition, they have assisted 4,862 consumers who called the section for help.
In the future, the Rutgers project is advocating for more states to adopt a mediation program for property insurance disputes and an appraisal process providing neutral parties to assess aspects of a claim. It also calls for states to prohibit companies from including clauses in insurance policies that force policyholders to arbitrate claims instead of giving them a chance to have their case heard in court.
“We have been doing as much work as possible with the states,” Feinman said. “We’re in this for the long-term, and every little bit helps.”