It has been five months since Hurricanes Irma and Maria wreaked widespread havoc on the U.S. Virgin Islands. The Category 5 hurricanes damaged buildings of all shapes and types – residences, businesses, places of worship, warehouses and commercial buildings. Those with insurance coverage filed claims, presumably expecting prompt and fair responses from their insurance companies. Have these policyholders received a timely response?

The most recent data on insurance claims provided by the Virgin Island Division of Banking, Insurance & Financial Regulation1 suggests that the response by the insurance carriers has been lackluster to say the least:

Hurricane Irma:
Total Claims Reported: 9,332
Total Claims Closed with Payment: 3,032
Total Percent of Claims Closed: 38%

Hurricane Maria:
Total Claims Reported: 5,549
Total Claims Closed with Payment: 1,314
Total Percent of Claims Closed: 32%

Since the two hurricanes, the Division has also received and processed over 1,000 customer complaints. A significant portion of the complaints came from insureds told that they were underinsured and many insureds neither were aware of nor understood the applicability of the coinsurance provision. These complaints were so pervasive that the Division issued Bulletin 2018-01.2 Bulletin 2018-01 notes that:

Policyholders in the Territory must be educated on the meaning of “underinsurance” and the impact that underinsurance will have on their ability to receive the full benefit of property and casualty insurance coverage following a loss. It is the responsibility of the insurance company, through its agents and authorized representatives, to ensure that public education takes place.

The Bulletin specifically requires all property and casualty insurance companies licensed and authorized to conduct insurance business in the Territory to provide to its homeowner policyholders a full explanation of the term “underinsurance,” to include examples of conditions under which a property may be determined to be underinsured and how this will affect the policyholder’s ability to collect on an insurance claim for damages to their property. It also mandates that insurers inform policyholders of the many factors that can cause a policyholder to be underinsured.

Equally significant, Bulletin 2018-01 also allows policyholders whose policies were renewed in 2017 after Hurricanes Irma and Maria and who are not scheduled to renew before the next hurricane season, to elect to receive a midterm endorsement to increase their policy limit, if necessary, to an adequate level using a pro rata share going forward.

Contemporaneously with Bulletin 2018-01, the Division issued an Emergency Order on Underinsurance, effective February 12, 2018, which requires insurance companies to conduct a second review of each Hurricane Irma and Maria related claim for which a determination of “underinsurance” was made.3 The Emergency Order mandates that the insured must be notified of the insurer’s finding in writing within three weeks after the second review is completed. These claimants will also be asked to sign a document evidencing that their agent has provided a full explanation of the term “underinsured” and how the conditions will affect their ability to receive the full benefits of insurance coverage in order to restore the insured’s property in the event of a catastrophe or any loss covered under their policy.

As with any other document, policyholders should make sure that they understand what they are signing. If a policyholder continues to have concerns, the policyholder should contact the Division or a knowledgeable insurance law attorney.
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1 Data reported in Press Release No. 004-18, which is available at http://ltg.gov.vi/press-releases/hurricane-insurance-claims-press-conference.html (last accessed February 18, 2018).
2 Bulletin 2018-01 is available at http://ltg.gov.vi/downloads/forms/b&i/Bulletins/Bulletin_2018_01.pdf (last accessed February 18, 2018).
3 Information on the Emergency Order on Underinsurance is available at http://ltg.gov.vi/press-releases/emergency-order-on-underinsurance-8.html (last accessed February 18, 2018).

  • Frank Lombard

    I want to suggest one major reason some policyholders are being considered “underinsured” is insurers are basing required amounts of insurance on inflated “Reconstruction Cost” estimates- the cost to rebuild “following” a loss. The policy terms, however, base required amounts of insurance on the Replacement Cost of the structure- the current cost to build a similar structure immediately “before” the loss.

    Somebody should make an effort to raise this question and help these unfortunate people out. Integrity is supposed to be the foundation of the insurance industry.