Legislation closing loophole in hurricane insurance rules signed into law


Providence, RI – June 25, 2009 – (RealEstateRama) — Legislation approved by the General Assembly — to close a loophole in state law regulating hurricane insurance deductibles – has been signed into law and will, according to the bills’ prime sponsors, correct language that could have proved unnecessarily costly to Rhode Island homeowners.

The legislation was signed this week by the governor and will take effect on August 1. Rep. Brian Patrick Kennedy (D-Dist. 38, Hopkinton, Westerly) sponsored the bill in the House, (2009-H5275A), and Sen. David E. Bates (R-Dist. 32, Barrington, Bristol) introduced the bill in the Senate, (2009-S0231aa).

The new language will provide for the application of the hurricane deductible for losses to property from hurricane force sustained winds reported by the National Weather Service, only if a hurricane actually strikes the state.

In 2007 and 2008, the General Assembly enacted comprehensive legislation to address the issue of hurricane deductibles in Rhode Island and when they apply to homeowner insurance policies. The legislation stemmed from the work of an ad hoc study commission that addressed the extraordinarily high insurance premium increases being experienced by homeowners following the devastation of Hurricane Katrina along the Gulf Coast.

While that law became a model for other states along the eastern seaboard, Representative Kennedy and Senator Bates said a review of the statute turned up an unintended loophole that could have been financially devastating to policy holders. The bills approved this session rectify the law’s language and should protect consumers from having to pay out high deductibles when not necessary.

The current law triggers when a hurricane warning has been issued and, for the next 24-hour period, the hurricane deductible applies to any losses, even if there is significant wind damage without an actual hurricane. Although hurricanes can veer out to sea before reaching and actually striking Rhode Island, the state can still feel the effects. Under the present law, a hurricane deductible would apply if a property owner suffered damage, even if the hurricane never actually reached the shores of the Ocean State.

The Kennedy/Bates bill will ensure that if a hurricane does not actually hit the state – even though the state may feel gale force winds, or a stronger microburst or Nor’easter – the damages will be covered by the regular insurance policy and homeowners will not be forced to pay the higher hurricane deductibles, which can be anywhere from 1 percent to 5 percent of the total insured value of their homes.

For more information, contact:
Randall T. Szyba, Publicist
State House Room 20
Providence, RI 02903
(401) 222-2457


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