You've just weathered a post-tropical cyclone. Your garage is flattened. Do you have a hurricane deductible? Or will your regular deductible apply? The answer can be worth thousands of dollars as a hurricane deductible is not a fixed amount but is calculated based on a percentage of your home’s insured value. These questions loom large as the process of recovery from what-was-at-one-time-known-as Hurricane-Sandy gathers steam and homeowners get the lights back on. The news services and trade press have been all over this topic in the last few days with the governors of New York, New Jersey, Pennsylvania and Connecticut (as well as their Departments of Insurance) weighing in and advising that hurricane deductibles cannot be applied because the storm that started in the south as a hurricane, was no longer a hurricane when it arrived in their respective states.
Would that it were so easy. All you need to determine the meaning of your policy is the ipse dixit of the governor. Not quite.
What actually was going on was this: the governor was getting advice from his department of insurance, which in turn had reviewed the weather reports and the hurricane deductible form or regulation that had been approved months or years ago. New Jersey for example issued an executive order, which referenced the applicable regulation. N.J.A.C. 11:2-42.7 provides:
"This deductible applies, as described below, in the event of direct physical loss to property covered under this policy, caused directly or indirectly in the event of a hurricane named by the National Weather Service or its successor from which sustained hurricane force winds of 74 miles per hour or greater have been measured in New Jersey by the National Weather Service (regardless of whether the sustained hurricane-force winds reach the risk insured under the policy) and shall replace any other applicable deductible in that event.”
New York hasn’t codified its hurricane deductible rule and the policy language very much matters. In the case of one insurer in New York, for example, for a hurricane deductible to apply, a number of things are necessary. One needs
A windstorm of tropical origin;
Winds of 74 miles per hour or greater;
Those winds must by confirmed by the National Weather Service at a landfall in specified counties.
Because Sandy could not muster 74 mile per hour winds as it entered New York, the hurricane deductible could not be applied. But suppose the winds had reached 74 mph, what then? It gets complex fast.
First, according to NASA Sandy packed tropical storm force winds across almost 1000 miles. The hurricane deductible under this insurer’s policy applies to any insured property “regardless of [its] specific location.” So, all that is needed is a trace of a hurricane in Montauk at the tip of Long Island and the good citizens of Albany could be facing hurricane deductibles for whatever windstorm loss occurs as the tropical storm ultimately demises, regardless of how violent the winds were (or weren’t).
Second, the deductible applies 12 hours before the hurricane gets there and “ends 12 hours after a hurricane …” – whatever that means.
Third, maybe you don’t care about the hurricane deductible because your policy is only triggered by a Category 2 storm or requires that the hurricane force winds be within your county.
Fourth, or maybe you are at the opposite end of the spectrum and your policy applies the deductible if hurricane force winds are in any county in New York, not just coastal counties, or worse, if hurricane force winds are in a contiguous state.
The point is that the terms of your policy matter and they may vary widely. The Department of Financial Services in New York put together a table outlining all the permutations of coverage. We assume that one is likely to have to pay for the differences where more risk is shifted to the insurer.
And these wide differences can get even wider as one changes states. Maryland, for example, requires by statute that the hurricane deductible may only apply “beginning at the time the National Hurricane Center of the National Weather Service issues a hurricane warning for any part of the State where the insured's home is located and ending 24 hours following the termination of the last hurricane warning issued for any part of the State in which the insured's home is located.” Md. Insurance Code § 19-209(b). In plainer English, the hurricane warning has to be for the county where your home is, not just any place in Maryland. (With regard to Sandy, the Maryland Insurance Administration echoed what the governors were doing. Bulletin 12-24 advised that hurricane deductibles would not apply because "The National Hurricane Center of the National Weather Service did not issue a hurricane warning for the State of Maryland.")
Florida, as might be expected, has its own rules. A hurricane deductible can only apply per calendar year, and can be a fixed amount, or 2%, 5% or 10% of the home’s value. The hurricane period is extended out to 72 hours after the last hurricane warning.
Hurricane deductibles are ubiquitous but they are not all the same. Even where the language is mandated by state law, insurers can always provide more coverage than is required. You should check that, but also check the premium.
Florida’s hurricane deductible popped up after Hurricane Andrew in 1992. Its calendar year requirement was enacted after Charley, Frances, Ivan and Jeanne wreaked their havoc in 2005. Connecticut revised its hurricane deductible law following Hurricane Irene. The meteorologists tells us Sandy was a unique megastorm: a tropical storm, combined with a winter storm, combined with frigid Canadian air, combined with a high tide. Unique or no, we expect revisions to state hurricane deductible laws as a result.