New law designed to speed up payments, stabilize market, ease confusion
Florida Gov. Jeb Bush last week signed into law legislation designed to clarify windstorm insurance coverage and speed up the claims process after a storm.
Under the legislation, known as SB 1486, insurers are required to offer plain-language policies, including financial disclosures and a checklist that details what is, and what is not covered.
"Last year's difficult hurricane season emphasized the importance of being prepared for disasters–especially the need to be properly informed on insurance coverage," Gov. Bush said. "The legislation I sign today provides added protections and requires insurance companies to give their customers clear explanations of their coverage. By reviewing this information and having a plan, Floridians will be better prepared to face the possibility of another destructive hurricane season."
Insurers in the state are also prohibited under the new law from non-renewing policies until at least 90 days beyond the completion of storm repairs, and it mandates that claims be paid or communication on the claim be established within 14 days. Payments for repairs and replacement costs must also be paid up front.
Additionally, insurers are required to increase the amount of coverage they must offer to cover the costs of rebuilding a home to meet new building codes from 25-to-50 percent.
"The unprecedented string of four catastrophic hurricanes Florida weathered last year revealed gaps where homeowners encountered surprises in their policies due to confusing language or inadequate disclosures," said the state's chief financial officer, Tom Gallagher, adding that the need for clearer policy language was expressed in town hall meetings held by the Department of Financial Services. "This law answers that need."
Despite the new restrictions, the law also offers several positives for insurers. Most notable among these is what has been referred to as the "Mierzwa fix."
In December 2004, the Florida 4th Circuit Court of Appeals ruled in the case of Mierzwa vs. Florida Windstorm Underwriting Association that an insurer could be forced to pay for damages caused by both wind and flood damage, even if flood damage was excluded in the policy. The new law establishes that insurers can only be required to cover damages from perils specifically included in windstorm policies.
The new law also expands the current mediation program for claims disputes to allow commercial residential insureds to participate, and creates a low-interest loan program offering up to $1 million for homeowners to make changes to their homes to reduce potential hurricane losses, while requiring insurers to notify policyholders of the benefits of such changes.
The legislation would reset the Florida Hurricane Catastrophe Fund retention level to $4.5 billion, which would apply to the two largest storms of the season.
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The new law would require insurers to offer plain-language policies and delay non-renewals, while limiting coverage to hurricane damage.
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