The New York State Department of Financial Services (DFS) has posted a draft of an amended regulation on hurricane deductible triggers. The department has asked interested parties to provide comments by April 10.
The draft regulation would implement a law enacted last year. That law, which Big I New York supported, requires the department to “by regulation establish standards for hurricane windstorm deductibles, which create, to the greatest extent possible, uniformity in the operation of such deductibles with respect to the triggering event." The law was intended to respond to concerns that homeowners in the same town or village might face vastly different hurricane deductibles because of the difference in policy conditions regarding what triggers them.
The DFS draft, which is not yet in final proposal form, would make these requirements:
- Carriers would have to provide insureds notices about hurricane deductibles at policy issuance and renewal. The notices would be subject to DFS approval. The draft provides standards for the notices to meet.
- Carriers would have to demonstrate to DFS that there is sufficient exposure to hurricane risk in that geographic area before a policy could contain a hurricane deductible.
- The deductible could be triggered only when the National Weather Service (NWS) has determined that a hurricane made landfall ("the intersection of the surface center of a tropical cyclone with a coastline") in New York.
- The deductible would apply to direct damage caused by winds from twelve hours before landfall until twelve hours after NWS cancels the last hurricane warning or watch for New York for a specific hurricane.
- Carriers would be able to vary deductibles by county, a property’s proximity to the coastline ("distance measured from mean high water"), or both. The maximum permissible deductible would be 5% of the dwelling limit of insurance.
- Carrier would have to aggregate all covered losses (dwelling, other structures, and personal property) when determining whether the loss exceeds the hurricane deductible.
- If multiple deductibles apply, the carrier would be able to apply only one, and that can be the highest one.
- Carriers would not be permitted to apply hurricane deductible to loss of use coverage.
- The requirements would take effect 180 days after the department formally adopts them and would apply to homeowners and dwelling policies issued or renewed on or after that date.
The draft is not a formal proposal. Rather, DFS is seeking immediate reactions to it. The version they ultimately propose may differ. Anyone wishing to submit comments should send them to joana.lucashuk@dfs.ny.gov by April 10.