Insurance and Real Estate Committee

JOINT FAVORABLE REPORT

SPONSORS OF BILL:

Rep. James M. Albis, 99th Dist.
Rep. Jonathan Steinberg, 136th Dist.

REASONS FOR BILL:

Section 1 of this bill will protect policyholders regarding their deductible in case of a tropical storm. They will not be charged a separate deductible except in the case of a hurricane.

Section 2 adds that any person who is performing mitigation work shall supply a written notice that has an estimated price of work on it or the contract is not legal.

Section 3 would make the provisions in a standard fire policy apply to both homeowner and commercial properties.

Section 4 removes the label of “disinterested” from the appraiser used incase of a dispute between the insured and insurer.

Section 5 removes the time constriction on the insured to repair or replace losses being covered by the insurer. They have 180 days to place the claim and no time limit to do repairs.

Section 6 the word 'fire' is replaced with 'an insured peril'

REASONS FOR SUBSTITUTE:

This clears up the definition of a Hurricane in section 1 and allows the Commissioner to adopt regulations in regards to subdivision 1 and the most current guidelines and bulletins as issued by the Insurance Department. Section 2 brings in from the standard fire insurance policy the parts of mortgagee, the definitions of actual cash value and depreciation, the time period for when a loss is payable after loss, and the time period for when a suit or action for recovery of a claim may be commenced.

RESPONSE FROM ADMINISTRATION/AGENCY:

State of Connecticut Insurance Department submitted testimony voicing their concerns with the bill in its current state. They support the intent of the bill but do not believe a statute related to hurricane deductible is needed, and that placing this language in statute reduces their ability to modify guidelines in a timely fashion. The department also was worried about removing the term “disinterested” from section 4, they had tried this before and found that disinterested supplied the meaning that was best suited for the explanation. Retaining the term “disinterested” ensures objectivity on the part of both the consumer and the company appraisers alike. The department also offered that the effective date be set for October 1, 2012 instead of the proposed July 1, 2012.

NATURE AND SOURCES OF SUPPORT:

James M. Albis, Representative 99^th District supports this bill as it takes steps to protect consumers from future storm losses and insurance industry abuses. He also believes that section 1 will respond to large hurricane and windstorm deductibles that many homeowners were charged after Tropical Storm Irene. He points out that many policies contained “windstorm” deductibles that were misled into believing that their deductibles applied only to damage from a hurricane. He also supports the removal of a time period that the insured has to repair or replace as directed by the insurer.

NATURE AND SOURCES OF OPPOSITION:

Paul T. Tetrault, National Association of Mutual Insurance Companies oppose this bill for the reason they see many of the provisions being unnecessary or problematic. They point out that section 1 has already been addressed by the Connecticut Insurance Department through a revision of its Filing Review Guidelines Related to Underwriting Coastal Homeowners Insurance Polices. They believe it is better to address such a problem through Department guidelines as those are more flexible to allow for changes in response to changing market conditions. They also worried that adding mitigation services to the list of services that require a notice would delay mitigation activities that would exacerbate a loss.

Property Casualty Insurers Association of America expressed concern that if this bill was enacted and there were future problems regarding hurricane deductibles, the legislature would have to come back to session and pass proposed language. They also were against having the hurricane deductible only apply to 24 hours after the hurricane as highly damaging winds will continue longer than the 24 hrs and they feel insurers should be authorized to impose hurricane deductibles during this period of high risk. They believe that the provisions in section 3 would add expenses and burdens on the insurers with no benefit to consumers. They think that section 5 contradicts the premise upon which replacement cost coverage is based, which is to ensure that the homeowner is able to rebuild the property. They urge the committee to not favorably advance this bill.

Insurance Association of Connecticut feels that this bill contains numerous unnecessary and confusing provisions which will do severe harm to the property insurance market in Connecticut for no reason or consumer benefit. In section 2 they think that requiring written notice prior to work commencing on mitigation work will have a onerous effect on insured's that want to start the recovery process to begin immediately. They feel that this bill contains terms and requirements that do not exist anywhere else in the country.