During active hurricane seasons, coastal communities may face more than one named storm during a season. Named storm and hurricane deductions are very high, sometimes up to 5% of the insured value of the property, which amounts to thousands of dollars in a time of reduced resources. Some states have enacted laws to prohibit insurers from applying these high deductibles more than once during the calendar year. After Hurricanes Katrina and Rita affected Louisiana's coastal communities within two weeks of each other in 2005, Louisiana adopted its annual deductible law. ] 1
§1337. Homeowners' insurance deductions are applied to named storms, hurricanes and deductions for wind and hail
A. This section applies the following definitions:
(1) "hurricane" means a storm system that has been declared a hurricane by the National Weather Service or National Weather Service.
(2) "Named storm" means a storm system that has been declared a storm named by the National Hurricane Center of the National Weather Service.
(3) a particular weather event and may be expressed as a percentage of the insured value of the property or as a specific dollar amount and include hurricane, named storm, and deduction for wind and hail.
B. single or two-family owners in premises for fire and allied lines, issued or renewed by authorized insurance companies on or after 1 January 2010, each separate deductible that applies instead of other deductibles for loss or damage due to a named storm or hurricane shall be applied annually on all named storm or hurricane losses that are subject to the special deductible during the calendar year.
C. the insured suffers from named storms or hurricane losses from more than one named storm or hurricane during a calendar year covered by the separate deductible referred to in subsection B of this section, the insurer may apply a deductible to the subsequent names storms hurricanes equal to the remaining the amount of the separate deductible, or the sum of the deductible that applies to all hazards other than a named storm or hurricane, whichever is greater. Insurers may require policyholders to maintain receipts or other records of such losses in order to apply such losses to subsequently named storm or hurricane claims. hurricane deductible for the later named storm or hurricane during the same calendar year, or the amount of the other all risks deductible, whichever is greater. But with the tracing of tropical systems well inland, questions arose regarding the application of the annual deductible law to subtropical systems.
In June 2018, the Louisiana Department of Insurance (LDI) issued an advisory letter 2018-01 to clarify law:
Given that the insurance policy is an "agreement" between the insurer and the insured, both parties are governed by the terms, conditions and the definitions in the insurance. Each insurer may use the policy to determine the event that will "trigger" when a separate deductible is to be applied to a claim under the insurance and the amount of the separate deductible. the system of the National Hurricane Center of the National Weather Service to be the trigger for this separate deductible. Other insurers use their own insurance form to define when this separate deductible is to be applied.
La. R.S. 22: 1337 (A) (2) specifically defines a named storm as a storm system that has been declared a named storm by the National Hurricane Center of the National Weather Service.
Thus, for the policies that provide a separate & # 39; named deductible storm & # 39; applies, the operative trigger is if the storm system is assigned a & # 39; name & # 39; by the National Hurricane Center of the National Weather Service, whether classified as a subtropical storm, a tropical storm or a hurricane
On the other hand, if the policy states that a separate deductible applies to a storm system declared by the National Weather Center for National Weather Service as a tropical storm or hurricane, the separate deductible applies only if the storm system is classified as a tropical storm or hurricane by the National Weather Service in the National Weather Service.
In that case, if the storm system is classified as a subtropical storm, the separate deductible would not be triggered, regardless of the fact that the National Weather Center for National Weather Service assigns a & # 39; name & # 39; to the subtropical storm.
The importance of this, both for the insurer and the insured, is that the specific terms and conditions in the policy will be decisive for whether a separately named deduction for storms should be applied in any given situation. 2
When Louisiana again claims a possible double whammy with Hurricane Sally is expected to come after Hurricane Laura, it will be important for policyholders to have a full copy of their policy to understand the correct application of the deductible. . We hope for the best for all our friends on the Central Gulf Coast. Be sure!
If you would like more information or have questions about this topic and would like to learn more about assessment in Louisiana and Mississippi, please visit Tuesday at @ 2 With Chip Merlin this afternoon.
1 See LA Rev Stat § 22: 1337 (2019).
2 La. Inst. For ins. Advisory letter NO. 2018-01, 20 June 2018.