High deductibles Following windstorm or hailstorm losses are becoming the normal state of affairs. Insurance agents as a matter of course should explore and offer their clients “deductible buy down “ coverage. But what happens and how does a policyholder pay for the otherwise huge deductibles which are becoming commonplace?
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Deductibles are an unavoidable part of residential insurance policies. Florida case law defines a “deductible” as “a clause in an insurance policy that relieves the insurer of responsibility for an initial specified loss of the kind insured against.”1 Following a loss, a policyholder must first take on the financial responsibility of the deductible before the insurance company becomes liable.
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The Problem: Waiving insurance policy deductibles (“you scratch my back and I’ll scratch yours”) has been common place in Texas since 1989 and came about as the result of a poorly worded statute passed that same year that contractors have basically ignored. Contractors who have broken the 1989 law by waving deductibles (primarily roofing contractors) are known as “deductible eaters.” Homeowners were lured into signing contracts with the deductible eaters based on promises, for example, of a “free roof.” And then, homeowners/policyholders were duped into committing insurance fraud when in submitting a request pursuant to their policy for replacement cost (RCV) hold-back, they failed to tell their insurance company that the deductible part of the claim had not been incurred. What this means, again for example, before the new law, is that the roof job a homeowner got where the $2000 deductible was waived or “forgiven” and buried in other ways in the contractor’s paperwork, will now be required as payment out-of-pocket and proof that it was paid before the insurer will pay the RCV hold-back.
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HOUSTON, TX – AUGUST 30: Flooded homes are shown near Lake Houston following Hurricane Harvey August 30, 2017 in Houston, Texas. (Photo by Win McNamee/Getty Images)

Named Windstorm deductibles are fairly common in areas prone to hurricanes. Instead of a policyholder being responsible for deductibles which can regularly rise to several thousand dollars, in the event of a named storm, which tropical storms and hurricanes become, a higher Named Windstorm Deductible applies and usually results in a very high deductible. Many Named Windstorm deductibles are on a percentage basis.
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A relatively inexperienced attorney from another law firm asked in an open forum whether a Category 5 hurricane mandates that no hurricane deductible can be applied and if Hurricane Michael policyholders can get a return of their hurricane deductible. Corey Harris has been involved in hurricane work with our firm since 2005. He quickly replied that the deductible is going to be returned only if the Easter Bunny is bringing a present.
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Louisiana’s Department of Insurance, through its Commissioner, James J. Donelon, issued an Advisory Letter No. 2018-01 on June 18, 2018, to inform all property and casualty insurers how the separate named storm deductibles or hurricane deductibles are to be interpreted and applied to claims resulting from a subtropical storm named by the National Hurricane Center of the National Weather Service.
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For those of us that practice in the area of property damage in Colorado, June 6, 2012, is a day with much notoriety. A large wind and hail storm passed through the state, causing extraordinary damage. Even though it was classified as a catastrophic event, many insurers still challenged damages, so I represented a high volume of clients from this storm. However, this was not the only thing that happened on this date in Colorado. Governor Hickenlooper also signed into effect Senate Bill 12-038, “Concerning Measures to Protect Consumers who Engage a Roofing Contractor to Perform Roofing Services on Residential Property.” The full act is available online, but I wanted to draw your attention to certain parts of it as they have been topics of many recent phone calls.


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