Wind/Hail and Hurricane Deductible Notices

Karen Weldin Stewart, CIR-ML Commissioner  Delaware Department of Insurance ## DOMESTIC/FOREIGN INSURERS BULLETIN NO. 58 TO: ALL INSURERS LICENSED TO AND WRITING RESIDENTIAL PROPERTY INSURANCE IN DELAWARE RE: Wind/Hail and Hurricane Deductible Notices DATED: December 7, 2012 Following Hurricane Irene in August 2011 and storm Sandy in late October 2012, it has come to the attention of the Insurance Department that many Delaware insureds do not understand that their residential property insurance policies contain a separate deductible for losses caused by the perils of wind/hail or hurricanes. The Department of Insurance believes it is important for insureds to understand the coverage they have purchased. The purpose of the Bulletin is to assure that the insureds will have the information necessary to make an informed decision concerning coverages and deductibles and will have information that will assist them in preparing financially for a loss. On August 2, 2012, Governor Markell signed SB 202 w/SA1 requiring all insurers licensed to and writing residential property insurance in Delaware to provide prominent notice to residential property policyholders as to the existence of such deductibles, sample language guidance provided as follows: - Insurers are required to provide clear and prominent notice of all wind/hail and hurricane deductibles. Such notice shall be included with the policy at issuance or renewal, or may be sent by a separate mailing. Such notice may be sent via electronic mail to any policyholder who has consented to receive such notices electronically. [The Commissioner recommends insurers to use red ink for this policy language.] - The notice shall clearly disclose relevant details pertaining to such wind/hail and hurricane deductibles, including the trigger of the deductible, and how the deductible is applied, regardless of whether it is stated as a percentage or otherwise. [The Commissioner recommends insurers to use red ink for this policy language.] 841 Silver Lake Blvd., Dover, DE 19904-2465 • www.delawareinsurance.gov (302) 674-7300 Dover • (302) 739-5280 fax • (302) 577-5280 Wilmington 1 - If there is a percentage deductible, the insurer must provide an example. The example does not have to be tailored to the insured value of the specific property, but must show clearly how the deductible works (e.g., a two percent (2%) deductible on a house insured for $300,000 means the policyholder is responsible for the first $6,000 of the wind/hail or hurricane loss). [The Commissioner recommends insurers to use red ink for this policy language example.] Senate Bill 202 w/SA1 shall be effective to all Delaware residential insurance policies issued or renewed after January 1, 2013. The information in this Bulletin provides the minimum information that must be included in the notice. Insurers may provide any other information to assist their insureds in understanding wind/hail and hurricane deductibles and their application to the insurance policy. This Bulletin shall be effective immediately. Karen Weldin Stewart, CIR-ML Delaware Insurance Commissioner 2 SPONSOR: Sen. Bushweller & Rep. B. Short DELAWARE STATE SENATE 146th GENERAL ASSEMBLY SENATE BILL NO. 202 AS AMENDED BY SENATE AMENDMENT NO. 1 AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO PROPERTY INSURANCE CONTRACTS (DECLINATIONS, RENEWALS AND CANCELLATIONS OF PROPERTY INSURANCE CONTRACTS). BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE: Section 1. Amend Chapter 41 of Title 18 of the Delaware Code by making insertions as shown by underlining and deletions as shown by strike through as follows: Subchapter IV. Wind, Hail and Hurricanes. § 4140. Notice Regarding Deductibles. (a) All insurers licensed to and writing residential property insurance in Delaware shall provide clear and prominent notice to residential property insurance policyholders as to the existence of deductibles for losses caused by wind, hail or hurricanes, as follows: i. The Notice shall be included: 1. With regard to any policy in effect before January 1, 2013, with the first renewal on or after that date. 2. On or after January 1, 2013, with a policy at first issuance and with the first renewal after any insurer-initiated change in the deductibles for losses caused by wind/hail or hurricanes. ii. Such notice may be sent electronically to any policyholder who has consented to receive such notices electronically. iii. The notice shall clearly disclose relevant details pertaining to the wind/hail and hurricane deductibles, including the trigger of the deductible, regardless of whether it is stated as a percentage or as a dollar amount. Page 1 of 2 SD : TGW : acs:2431460027 LC : JWH : RAY:0661460205 iv. If there is a percentage deductible, the insurer must provide an example of how it applies to the loss. The example does not have to be tailored to the insured value of the specific property, but must show clearly how the deductible works (e.g., a two percent (2%) deductible on a house insured for $300,000 means the policy holder is responsible for $6,000 of the wind, hail or hurricane loss). v. If there is not a separate deductible for wind/hail or hurricane losses, the insurer is not required to provide a notice. (b) This section sets forth the minimum information that must be included in the notice. Insurers may provide any other information to assist their insureds in understanding wind/hail and hurricane deductibles and their application to the insurance policy. (c) For purposes of this section, “residential property insurance” means insurance that provides coverage for: i. a one-, two-, three-, or four-family dwelling primarily intended for occupancy as living quarters; ii. a condominium unit primarily intended for occupancy as living quarters; iii. non-business personal property of a tenant insured on an unscheduled basis and primarily located in the living quarters occupied by the tenant; iv. a manufactured home situated in a fixed location and intended for occupancy as living quarters. However, “residential property insurance” does not include insurance provided using Commercial Multiple-Peril or Commercial Property policy forms. Section 2. Effective date. This law shall apply to all residential property insurance policies issued or renewed on or after January 1, 2013. SD : TGW : acs:2431460027 LC : JWH : RAY:0661460205 Page 2 of 2