A deductible is an important element of every insurance policy. It is the amount the policyholder agrees to pay before insurance coverage kicks in, or the portion of the risk the policyholder agrees to self insure. It is no secret that insurance carriers prefer to issue policies with higher deductibles for certain perils, including hurricane losses. In Florida, insurance carriers can require a separate and distinct deductible for hurricane losses and another deductible for other perils under the insurance policy. The bait for consumers to accept a higher deductible for hurricane losses is a lower affordable premium. Many times, policyholders are not even aware they have a separate deductible for hurricane losses and only find out after their hurricane loss. This exposes policyholders to potential financial ruin. To ensure that policyholders are aware of the separate and usually higher hurricane loss deductible, the Legislature requires admitted carriers to print a notice in bold font.
Florida Statute §627.701(4)(a) (2011) provides:
(4)(a) Any policy that contains a separate hurricane deductible must on its face include in boldfaced type no smaller than 18 points the following statement: “THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.” A policy containing a coinsurance provision applicable to hurricane losses must on its face include in boldfaced type no smaller than 18 points the following statement: “THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.”
Hurricane deductibles usually range from $500 up to 5% of the dwelling. If a policyholder owns a $200,000 property with a 5% hurricane deductible, she is agreeing to self-insure against a hurricane loss up to $10,000. Many, policyholders cannot bear this financial burden. What happens if the statutory language is omitted by the insurance carrier? This particular issue is currently under litigation, and there is no clear answer. However, the First District Court of Appeals addressed a similar issue in U.S. Fire Insurance Company v. Roberts.
In Roberts, the Court held that a fire policy’s coinsurance clause, which lacked the statutory required language referenced in Florida Statute §627.701, was void. The First District Court reasoned that the provisions of statutes enacted in the public interest should be given a liberal construction in favor of the public, so the consumer protection policy embodied in Florida Statute §627.701 must be given a liberal construction to insure that the public interest protection intended is effectuated.
If you are a policyholder, you need to be aware that you may have a separate hurricane loss deductible. If you have suffered a hurricane loss, verify whether the required statutory language is in your policy. If is not, then you should consider seeking guidance from an insurance professional because the deductible may be considered void.