You asked whether an insurance company could cancel, refuse to renew, or refuse to issue a homeowner’s policy solely because the property is located within a certain distance from the shore.

SUMMARY

According to Karen Romaro, a homeowner’s insurance expert at the Connecticut Insurance Department, insurance companies may not legally cancel, refuse to renew, or refuse to insure property solely because it is located within a certain distance from the shore. Anti-discrimination Insurance Department regulations prohibit insurance companies from doing this. (Copy enclosed. ) People can file a complaint with the department if they believe these regulations have been violated.

But the law allows insurance companies to consider a property’s location, including its proximity to the shore, as one of many underwriting factors when deciding whether to insure or renew insurance, or in setting a premium.

According to a recent Insurance Department bulletin, the majority of companies offering homeowner’s insurance consider distance from the coast or elevation, or both in combination with other underwriting considerations, such as strict adherence to building codes, use of shutters, type of construction, and loss history when deciding whether to offer insurance or what premium to impose. Some companies require that all properties in a flood zone carry a separate flood policy. Many companies offer separate windstorm deductibles to offset the increase of premium for coastal policyholders and to lower the company's overall risk exposure.

According to Romaro, the two insurers your question specified (Quincy Mutual Insurance and Nationwide) require homes to have hurricane shutters as a condition of providing insurance if they are located within 1,000 feet of the shore. Thus, these insurers can legally refuse to insure or renew insurance if homes are within 1,000 feet of the shore and do not have hurricane shutters. Quincy also requires homes to have hurricane resistant glass on all exterior walls. Thus, this insurer can also legally refuse to insure or renew insurance if homes are within 1,000 feet of the shore and do not have hurricane resistant glass.

Romaro believes that not all insurers have these requirements. She recommends that people use an insurance broker that has access to all or most insurers to find an insurer that will insure the property.

Romaro advised us that people who cannot find insurance in the normal insurance market could turn to the Connecticut Fair Access to Insurance Requirements Plan (FAIR). This plan is a market for those property owners in need of basic coverage and not eligible for coverage in the standard market. Romaro noted that the department monitors the FAIR plan’s coastal business to detect coastal availability problems in the standard market. She reported that the plan has not experienced a significant increase of coastal business.

INSURANCE BULLETIN

The Connecticut insurance commissioner issued a Bulletin on November 2, 1993, concerning the availability of homeowners’ insurance coverage for properties on the Connecticut coastline. According to Romaro, this bulletin continues to reflect the department’s policy. The Bulletin advised companies that it is unacceptable to decline coverage based solely on the geographic location of the risk. The department's position on this issue is based on Connecticut Regulation 38a-824-3(copy enclosed). The regulations makes refusing to issue homeowners policies solely because of location a defined act of unfair discrimination, if committed with such frequency as to indicate a general practice.

Exception

The commissioner established an exception to this rule. The commissioner recognized the risk to solvency of insurance companies that have an over -concentration of risk in a particular area. The commissioner allows companies that believe that they have an over concentration of risk on the coast to request a coastal exception plan. The Department reviews each plan on its own merits. Over the years, companies have implemented some type of coastal exception plan, which places underwriting restrictions or coverage requirements for coastal risks. According to Romaro, no companies currently have coastal exception plans. Thus, the two companies specified in your question do not have such a plan in place, and they are not exempt from the application of the anti-discrimination regulation.

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