R.I. Enacts New Law to Assist Homeowners With Hurricane-Related Claims

Rhode Island Gov. Lincoln Chafee on Tuesday signed into law legislation designed to provide additional protection to homeowners when they suffer damages from hurricanes.

The legislation (House bill 2012-H7484A and Senate bill 2012-S2597A) also includes additional consumer protections for the processing of insurance claims for hurricane damage.

The new law will take effect beginning January 2013. It will be applicable to policies issued or renewed on or after January 1, 2013.

The Rhode Island General Assembly stated that in the immediate aftermath of Hurricane Katrina in 2005, the reinsurance market made an exodus from various marketplaces, which caused insurers that provided homeowner insurance in Rhode Island to retract from the marketplace, especially in coastal areas.

Lawmakers said many Rhode Island homeowner policies were not renewed and other insurance companies changed the traditional dollar-based deductibles for storm damage to a percentage-based deductible, leaving homeowners facing the potential for enormous costs for any damage from future, serious storms.

The newly-enacted legislation addresses several related issues that should provide additional homeowner protections:

• The legislation limits a hurricane deductible to only once per hurricane season, so that a homeowner cannot be hit with a second deductible in the unlikely event that a second hurricane hits the state during a hurricane season.

• It also provides a hurricane mediation process as a non-adversarial and non-binding alternative dispute resolution process for claims arising from a hurricane in which the property owner and the insurance company will work to resolve potential claims.

• And under the new law, the Department of Business Regulation will promulgate a regulation to address the declaration of a catastrophe in Rhode Island in which homeowners may not be able to receive notice from insurers. This regulation would provide the necessary procedure for reporting requirements for claims related to the emergency, provide a grace period for payment of insurance premiums, and provide a temporary postponement for cancellations and non-renewals for insurance policies.

• The legislation will also limit de minimus surcharges against a homeowner’s policy. For example, because of the extended power outages associated with Tropical Storm Irene, many Rhode Islanders suffered food spoilage. But the General Assembly noted that when some people submitted claims for $400 in food losses, their insurance company hit them with a $500 rate increase for reporting the loss that they were entitled to.

Copies of the legislation (House bill 2012-H7484A and Senate bill 2012-S2597A) can be found on Rhode Island General Assembly’s website.