The impact of the Hurricane Delta six weeks later, and within 15 miles of the same road as Hurricane Laura's landfall in southwest Louisiana, has many policyholders questioning the application of Louisiana homeowners' hurricane, Named-Storms, and Wind and Hail Deductible Law. 1 We have received many calls from policyholders and public adjusters regarding different interpretations of the law, in particular the misconception that it allows insurers to apply only one deductible during a calendar year. In recent blogs, we discussed the law and its triggers. Today, we want to help Louisiana policyholders understand the legislative intent and proper application of deductibles if more than one hurricane, named storm, or wind and hail loss affects their covered property during the same calendar year.
First, a deductible is the policyholder's share of the loss to be assumed or paid before the insurance company pays for coverage under the insurance. Typically, there are standard deductions or "other hazards" deductibles of $ 500.00 or $ 1
After seeing billions of dollars in storm losses since Hurricane Andrew in 1992, including Hurricane Katrina in 2005, insurance companies sought ways to reduce their potential losses and began transferring some of the risk back to policyholders via Specified or separate deductibles called hurricane deductibles or Named-Storm deductibles. 2 These separate deductibles are calculated as a percentage of housing or building coverage, usually at 1%, 2% or 5%, although some are even higher.
According to the Insurance Information Institute (III), nineteen states and the District of Columbia have now approved the introduction of hurricanes or named storm deductions in insurance 3 After Hurricanes Gustav and Ike 2008, less than two weeks apart, landed on Louisiana coast, Louisiana lawmakers realized the enormous and unfair impan. ct on the policyholders in Louisiana if the insurers were allowed to transfer their risks through several, high percentage deductibles to the policyholders. During the 2009 legislative session, House Bill 333 was introduced to express the desire to protect policyholders:
Proposed legislation stipulates that any separate deductible that applies in lieu of any other deductible for loss or damage as a result of a named storm or hurricane shall be applied on an annual basis for all named storm or hurricane losses that are subject to hurricane / named storm deductions. Proposed legislation also provides that if an insured person suffers from named storms or hurricane losses from more than one named storm or hurricane during a calendar year (subject to separate deductibles), the insurer may apply a deductible to subsequent named storms or hurricanes that are equivalent to the remaining 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. 4
The above intent for Louisiana lawmakers was signed by the governor and approved as law 134 and later codified as La Rev. State. § 22: 1337. This charter, also known as Louisiana Houseowners & # 39; Hurricane, Named-Storms and Wind and Hail Deductible Law, deals with both the trigger and the application of the specified or separate hurricane, Named-Storms, and Wind and Hail Deductibles in issued policies for homeowners in Louisiana. [Note: It does not apply to commercial property policies—those policies define the trigger and application for their deductibles.]
§1337. Homeowners' insurance deductions are applied to named storms, hurricanes and wind and hail reductions
A. For the purposes of this section, the following definitions apply:
(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 designated a named storm by the National Weather Service of the National Weather Service.
(3) "Separate deductible" means a deductible that applies to damages incurred during 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 includes hurricane, named storm and wind. and hailstones.
B. For all homeowners' insurance or other insurance that insures a single or two-family owner in premises for fire and allied lines, issued or renewed by authorized insurance companies on or after January 1, 2010, each separate deductible applies in lieu of other deductions for loss or damage to consequence of a named storm or hurricane shall be applied annually to all named storm or hurricane losses that are subject to the special deductible during the calendar year.
C. If an 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 or hurricanes that are equal with the remaining 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 subsequent named storm or hurricane claims. June 25, 2009.
We previously discussed the triggers. Let's now look at a practical application based on some recently estimated Hurricane Laura estimates received by policyholders in Lake Charles. The policyholder has a homeowner policy with home coverage of $ 400,000.00, with a standard or "other hazards" (fire, theft, etc.) deductible of $ 1,000.00 and a hurricane deductible of 5% of the home coverage of a hurricane deductible of $ 20,000.00. $ 000.00.  The insurance company's adjuster writes an estimate of hurricane-related damages of $ 16,400.00 and advises the policyholder that the damages are less than the deductible and that no payment will be issued. (Hurricane Deductible $ 20,000.00 – Damage $ 16,400.00 = $ 3,600.00 Remaining Deductible Amount). Then, for example, Hurricane Delta lands six weeks later (within the same calendar year) and causes separate and distinct hurricane-related damage to the same insured property in the amount of $ 10,000.00. If the Louisiana Houseowner Hurricane, Named-Storms, and Wind and Hail Deductible Law were not in place, the policyholder would not receive any benefits or income under the policy for both events, as $ 10,000.00 for hurricane damage is again below Hurricane 5% Deductible. $ 20,000.00.
With a one-time hurricane application or named storm deductible during a calendar year, the policyholder's deductible hurricane portion would be greater than the remaining deductible amount for Hurricane Laura of $ 3,600.00, or standard or "other hazards" deductible for the insurance by an amount at $ 1,000.00. In this scenario, the deductible Hurricane Delta would be $ 3,600.00, whichever is greater.
Another example for the same insurance terms in the scenario above: If the insurance company's adjuster writes an estimate of Hurricane Laura wind-related damage of $ 100,000.00 and deducts or empties the entire hurricane deductible in Hurricane Laura, then subsequent hurricane-related wind-related damage of 10,000 .00 dollars are covered by the standard or "other hazards" deductible of $ 1,000.00, as it is the largest of zero left after the application of Hurricane Laura Deductible.
The application of deductibles can prove to be complex with different triggers and applications according to statutes and approved policy conditions. The language of the insurance must be approved by the State Insurance Department, taking into account the laws and regulations of the state in which it is issued. Sometimes, however, the governing language is found in an amendment or disclosure attached to the policy. We always suggest that policyholders request a complete copy of their insurance policies, including all forms and claims, so that they can obtain complete information on rights and obligations under their insurance policies. We are committed to helping policyholders in their recovery efforts. Our thoughts and prayers are directed to those affected by Hurricanes Laura and Delta. May God bless you all.
1 La. Pastor Stat. § 22: 1337 (2019).
2 https://www.iii.org/article/background-on-hurricane-and-windstorm-deductibles, 27 August 2020.
3  Id. "Nineteen states and the District of Columbia have hurricane deductions: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington DC. ”
4 La. Bone. Session 2009, law 134, legislative tax, HB 333 named storm deductions, notified.