Colo. Bill Would Prohibit Insurers From Refusing to Issue Fire Policy in Disaster Area

July 12, 2002

The Colorado House gave initial approval July 10 to a Senate bill that would prohibit insurers from refusing to issue a fire insurance policy within a federally designated disaster area due to wildfire. The prohibition would not apply to property within an immediately threatened area as designated by the U.S. Forest Service.

National Association of Independent Insurers (NAII) Northwest Regional Manager Michael Harrold said insurers have been working with the chief proponents of Senate Bill 7, state Sen. Jim Isgar (D-Hesperus) and state Rep. Mark Larson (R-Cortez), to assure the legislation addresses the concerns of legislators and consumers without causing long-term damage to the market for homeowners insurance in Colorado.

“Many insurers are not going to be pleased with the restrictions imposed upon them by this legislation,” Harrold said. “But this is an extremely emotional issue in Colorado at this time, and we are glad that we were at least able to soften and better target what was originally a very over-reaching piece of legislation.”

The vastly improved bill still prohibits insurers from underwriting property in a federally designated disaster area based on zip code, county or distance from wildfire. But all other underwriting criteria are permitted.

The section of the bill dealing with renewal business also has been favorably amended, Harrold said. Insurers cannot nonrenew a policy in a federally designated disaster area based on a wildfire. However, insurers may require property owners to take reasonable actions to reduce the risk of fire. Insurers also preserved their rating freedom, which was denied them in the bill as introduced.

SB 7 also would require fire insurance policies to be kept in force for mortgaged property, adjusted for any increase or decrease in the value of the property. Such adjustment cannot conflict with a state law prohibiting a lender from requiring a borrower to obtain hazard insurance in an amount exceeding the replacement value of improvements on the property.

In a series of swift actions on Wednesday, the Senate passed SB 7, the House Business Affairs and Labor Committee approved it, and the House gave it a second reading, clearing the way for possible final legislative action today.

Legislators have indicated they hope to conclude the special session by July 12. Gov. Bill Owens called the session, which began July 8, primarily to rewrite the state’s death penalty law to conform to a recent U.S. Supreme Court decision.

Harrold said NAII will continue to work with legislators to assure SB 7 is fair to all residents and insurers alike.

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