In both 2020 and 2021 the residents of Colorado experienced severe and catastrophic wildfires causing extensive damage to over 1,500 structures. Because of the magnitude of these damages, the insurance department anticipates the need for extended timelines for homeowners to repair or replace their damaged property, especially as there are labor and material shortages due to the COVID-19 public health emergency.
Therefore the department has issued an emergency regulation effective December 29, 2022 that overrides earlier emergency regulations from January, May, and September. The regulation applies to insurers when a catastrophic disaster has occurred as outlined below.
Waiver of Waiting Periods
Insurers are required to waive any waiting periods related to ALE benefits for insureds whose residence has been damaged and the insured needs to repair, replace, or permanently relocate.
Consideration of Adverse Circumstances
Insurers are also required to consider any adverse circumstances beyond an insured's control that may require maintaining and extending insured benefits beyond the timelines in the policy. Insurers are to act in good faith and consider all circumstances affecting the claim such as labor and material shortages and other factors affecting the claim that may not be directly caused by the catastrophe. Of particular concern to the department are ALE benefits and time limits on repair or replacement for recoverable depreciation coverage.
In Case of Unreasonable Delay
If an insurer causes an unreasonable delay in the settlement of the claim, the insurer is required to toll the ALE limits for the duration of time to repair or replace the property and toll the policy time limits for the insured to complete the repair/replacement of the damaged property for issuance of replacement cost value payment.
If the insurer has caused delays in providing the initial estimate of damages and the actual cash value payment, again the insurer is required to toll the time period an insured can recover ALE benefits and recoverable depreciation equivalent to the delay caused by the insurer.
Failure to Toll Time Limits
Failure to toll policy time limits for ALE or recoverable depreciation benefits beyond the policy time limits, after causing an unreasonable delay in settlement, may constitute an unfair claim settlement practice.
Noncompliance
Noncompliance with any part of this regulation may result in the imposition of sanctions from the department including civil penalties, cease and desist orders, license suspensions or other actions. A copy of the regulation may be found here.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.