As many people are aware, property insurance policies often have a large deductible for hurricane losses. In Florida, the hurricane deductible can be a percentage of the dwelling policy limit: 2%, 5%, or even 10%. These percentage deductibles can be very large on personal lines residential claims where a policyholder’s house may be insured for several hundred thousand dollars. Policyholders must be aware that the Florida legislature has created a statute prohibiting an insurance carrier from applying a policy hurricane deductible more than once during a calendar year for personal lines residential claims.
It is particularly important for policyholders to be aware of this protection during active hurricane seasons. According to predictions, this will be one.
Specifically, Florida Statute §627.701(5)(a) states:
The hurricane deductible of any personal lines residential property insurance policy issued or renewed on or after May 1, 2005, shall be applied as follows:
1. The hurricane deductible shall apply on an annual basis to all covered hurricane losses that occur during the calendar year for losses that are covered under one or more policies issued by the same insurer…
3. If there was a hurricane loss for a prior hurricane or hurricanes during the calendar year, the insurer may apply a deductible to a subsequent hurricane which is the greater of the remaining amount of the hurricane deductible or the amount of the deductible that applies to perils other than a hurricane. Insurers may require policyholders to report hurricane losses that are below the hurricane deductible or to maintain receipts or other records of such hurricane losses in order to apply such losses to subsequent hurricane claims.
If more than one hurricane makes landfall during a calendar year, the storms can obviously have significant impact on residential property claimants in Florida. This happened in 2004 and 2005, where more than one storm affected the same areas of the state and numerous policyholders had more than one hurricane claim for those calendar years. According to Florida Statute §627.701(5)(a), if the insurance carrier applies the full hurricane deductible to the loss from the first hurricane during the calendar year, the insurer will only be able to apply the “other perils” deductible to a subsequent hurricane claim during the same calendar year.
This can be a significant difference between a percentage hurricane deductible and the “other perils” deductible, which is likely $500 or $1,000. Policyholders should keep records of repair expenses incurred following hurricane incidents to demonstrate their repair and mitigation efforts.