CAT Fund To Pay Florida Hurricane Deductibles

By Matt Brady

NU Online News Service, Dec. 16, 9 :58 p.m. EST? The Florida Legislature gave final passage to legislation today that reimburses homeowners who paid multiple deductibles on insurance claims they submitted after more than one hurricane battered their houses this summer.[@@]

Legislators adjourned their session after passing the measure, House Bill 9A.

The bill will fund reimbursements for about 36,000 affected homeowners through a loan from the Florida Hurricane Catastrophe Fund.

A provision in the bill allows the Catastrophe Fund to collect a cash buildup surcharge with the premiums that insurance companies are charged for participating in the fund over the next five years. The surcharge will be passed on to consumers.

As the legislation was in progress the insurance industry had argued that, as a matter of public policy, the program would be more appropriately funded by the state’s general revenue. Despite those objections it did not oppose the overall legislation, industry representatives said.

The industry’s main concern as the reimbursement program took shape, according to Property and Casualty Association of America regional manager William Stander, was “backing the Legislature off the concept of making us pay for the program and administering it.”

The industry was successful in that effort, and the program will instead be run by the Florida Department of Financial Services.

While insurers are not managing the program, Mr. Stander said that they will be required to cooperate with the state by providing claims information and to issue notices to policyholders.

Another aspect of the bill Mr. Stander said was “of concern, although not to the point of troubling,” is a prohibition against insurance companies retroactively changing their deductible policies.

Some companies, Mr. Stander noted, stated early in the Hurricane season that policyholders would not be required to pay multiple deductibles and instead absorbed those costs themselves.

Under the law, those companies are barred from charging the extra deductibles retroactively, for which the policyholders would have been reimbursed by the state.

“It’s interesting,” Mr. Stander said, “that the legislature chose to incentivise everything that’s wrong and disincentivise everything that’s right.”

Mr. Stander said the PCI supported the overall bill however, and was pleased with it’s passage.

Cecil Pearce, vice president of the southeast region for the American Insurance Association also praised the passage of HB 9, noting that there were unique circumstances this year.

“The unprecedented nature of the 2004 hurricane season, with over 1.5 million claims and up to $20 million in insured losses, inevitably meant that policymakers would want to review the statutes governing the state’s property insurance market,” Mr. Pearce said.

He noted that, “AIA stressed to the state’s political leadership that, overall, the post-Andrew insurance reforms ? including the hurricane deductible program and the CAT Fund ? had worked, that the industry has responded positively to the storms, and that due to the complicated nature of these programs, debate over major changes should be put off until the March 2005 regular session.”

“We are pleased that lawmakers agreed with our position,” Mr. Pearce concluded.

Lawmakers did include a forward looking provision in HB 9, which would establish only that only one deductible be charged for each hurricane season, but lawmakers also announced that a joint committee would be formed to examine property casualty insurance issues before the start of the next regular legislative session in March.

Mr. Stander said several issues the industry is hoping to have examined involve sinkholes, building codes and a possible lowering of insurance company thresholds before for collecting from the Hurricane CAT fund. For many companies, he said, no single hurricane of 2004 caused enough damage losses to trigger CAT fund payments, he said.