The insurance departments of New York, New Jersey, Connecticut and Pennsylvania have each announced that homeowners cannot be charged costly hurricane deductibles on homeowners insurance claims arising from the recent storm, Sandy. The announcement may be the first bit of good news that tri-state homeowners have received since the storm arrived on Monday. The typical tri-state homeowners policy contains a hurricane deductible, separate from the "all perils" deductible, that requires a policyholder to pay the first 1 to 5 percent of the home's insured value before an insurer will begin to pay for hurricane damages. For a home insured for $300,000, that means a homeowner might have had to pay for the first $3,000 to $15,000 of damages caused by the storm.
On Tuesday, the Connecticut Insurance Department ("CID") declared that Connecticut homeowners insurers could not charge hurricane deductibles for damages arising from the recent storm. In a brief notice, the CID stated, "Based on information received from the National Hurricane Center and the National Weather Service a 'hurricane warning' was not issued for the state of Connecticut nor did Connecticut sustain hurricane force winds as a result of Storm Sandy." The CID also cited recently enacted Connecticut state law, which allows insurers to charge hurricane deductibles only if a hurricane warning is issued and the hurricane results in sustained winds of at least 74 mph. The CID noted that maximum sustained winds from Hurricane Sandy only reached 59 mph.
Later, on Tuesday night, the New Jersey Department of Banking and Insurance ("DOBI") issued a similar decree. DOBI Acting Commissioner Ken Kobylowski instructed insurers that hurricane deductibles would not apply. The DOBI said that the National Weather Service changed Sandy's storm designation from hurricane to post-tropical cyclone just before it hit the barrier islands on New Jersey's coastline. Hurricane deductibles, therefore, cannot be triggered.
A day later, the New York Department of Financial Services ("DFS"), which regulates the insurance industry in New York, came to the same conclusion. According to DFS Superintendent Benjamin Lawsky, the DFS instructed insurers that damages caused by Sandy should not trigger hurricane deductibles for policies issued in New York because Sandy did not have sustained hurricane-force winds when it made landfall. The DFS also reminded homeowners that flood damage (as opposed to, for example, wind damage) is covered by flood insurance, which is a federal program administered by FEMA. Homeowners who have flood insurance and have flood damage should make claims through that insurance policy.
Notably, the Professional Insurance Agents of New York State, a trade group for insurance agents and brokers in New York, recently lobbied the state legislature to pass a bill requiring the DFS to develop a protocol for triggering hurricane deductibles in homeowners policies. The bill, Assembly Bill 3283A, has not yet been passed, though it is sure to be a source of polemic in Albany in the coming months. According to the Insurance Information Institute, only 18 states allow insurers to charge hurricane deductibles.
On Thursday, Pennsylvania Governor Corbett announced good news for Pennsylvania homeowners as well: "Insurance companies have deployed catastrophe teams to Pennsylvania and they have been advised that hurricane deductibles should not be applied to any homeowner's insurance claims." Governor Corbett added that "insurance deductibles could have added significant costs to Pennsylvanians already struggling to clean up and rebuild after Hurricane Sandy." Insurance Commissioner Michael Consedine also promised that his department will "actively monitor the insurance industry to ensure they are fulfilling their commitments to their policyholders."