Deductibles

For someone in Grand Prairie, Arlington, Fort Worth, Hurst, Euless, Bedford, Grapevine, Colleyville, Keller, Roanoke, Saginaw, or anywhere else in Tarrant County or Texas, knowing and understanding the deductibles in an insurance policy is important.
The Washington Post ran an article on September 8, 2011, titled “Irene Storm Damage Led Insurers To Apply Prohibited Deductible Charges.”
The article, written by Joe Stephens, tells about some insurers incorrectly applying deductibles to claims resulting from Irene damages in Maryland. The person in the story, Judi Nowottnick, a school teacher, lost electrical power for eight days She had two refrigerators containing four dozen crabs and $1,000 of other food which spoiled. On top of that, she spent an additional $400 on fast food while the electricity was out.
After submitting a claim for the $1,400, her insurance company, with which she had taken out a deluxe policy to cover such losses, invoked a “tropical cyclone” clause and increased her out-of-pocket deductible from $500 to $10,530.
Guess what? That’s a 2,000 percent increase!
After doing this to Nowottnick and other Maryland homeowners who submitted similar claims, the Maryland Insurance Administration, informed the insurers that this was improper.
While the clause itself is proper, the application of the clause was illegal because Nowottnick was living in a county to which the clause did not apply.
For the clause to apply, a county had to be located in a part of the State that was subject to a hurricane warning and the county Nowottnick lived was not subject to the hurricane warning.
Policy’s in different states will have different clauses that apply depending on the circumstances. For example, in Virginia, companies may issue policies that increase deductibles for any “named storm,” even for general wind damage. Insurance companies in Washington, D.C. also have a variety of options. Of course, this points out why homeowners need to make sure they understand what their policies cover and what they do not cover. Depending on the coverage, some homeowners may want to purchase other types of policies or have additional endorsements to existing policies.
Insurance companies first widely introduced percentage deductibles after earthquakes struck the western United States in the early 1990’s. After Hurricane Isabel in 2003, companies began expanding their use to limit payouts for hurricanes in the South and East and for tornadoes and hail in the Midwest.
In the United States today, more than a dozen states on the East and Gulf coasts allow hurricane deductibles. They typically range from 1 percent to 5 percent of the insured value of a home. In Nottwick’s case, her home was insured for $351,000, so her 3 percent deductible would be more than $10,000. That meant Nowottnick would have been required to pay that amount before insurance kicked in to cover the remainder of the damages.
In this case, a Maryland law that was passed in 2008 requires insurers to provide their customers with an annual notice about the deductibles. Virginia introduced a notification requirement in 2004.
Neither Nowottnick nor other homeowners interviewed for the article said they recalled being warned.
What happens is that homeowners get all these papers explaining the deductibles and changes in the mail but are unable to understand what they mean.
Each state has its own laws regulating how changes are made in policies and how notice of these changes are to be communicated to policyholders. In Texas, the Texas Department of Insurance regulates this issue.
One thing to keep in mind. Whenever you run into a situation where it does not seem that you are being treated properly by your insurance company, you should consult with an experienced Insurance Law Attorney.