Fla. Emergency Order Reverses Pre-Tornado Nonrenewals

February 12, 2007

A Florida emergency insurance rule to aid victims of recent tornadoes has insurance companies and agents concerned because it affects some cancellations and non-renewals issued prior to those storms.

On Feb. 2, Insurance Commissioner Kevin McCarty filed an emergency order in response to a line of devastating tornados that ripped through Central Florida. The storms prompted a gubernatorial declaration of emergency in four affected counties: Lake, Seminole, Sumter and Volusia.

This emergency order prohibits insurance companies from canceling residential property insurance policies for victims of the tornadoes. The order also prohibits insurers from canceling or non-renewing policies based only on claims resulting from the tornadoes and extends deadlines for payment of insurance premiums and other required correspondence until April 15th.

The order states further that between Feb. 2 and April 15, no insurer shall cancel or non-renew a policy with damage claims damaged from the “February Tornadoes” unless requested by the insured.

The order also stipulates that all notices of cancellation issued or mailed the week preceding Feb. 2, affecting an insured who sustained damage in the February tornadoes, shall be withdrawn and reissued to insureds on or after April 15 – and any insurer who receives a claim from an insured owing premium may offset the premium due from any claim payment made under the policy.

McCarty’s tornado order immediately raised concerns with insurers and industry lobbyists, who questioned the specific wording that requires insurers to rescind notifications of cancellation or non-renewal issued prior to the tornadoes.

Prior to the storms, on Jan. 30, McCarty’s Office of Insurance Regulation had issued a separate emergency rule. This emergency rule – separate and apart from the Feb. 2 emergency order – stemmed from recent legislation designed to protect insureds from rising property insurance rates. This legislation, HB 1A, was passed during a special legislative session on insurance costs and hurricane preparedness. The Jan. 30 order freezes Florida homeowners insurance rates while disallowing cancellations and non-renewals pending insurers’ June 1 rate filings.

Following the passage of that legislation and the issuing of the Jan. 30 order, insurers announced plans to cut back or reconsider the number of policies they write in the state.

The Hartford Financial Services group said it will drop about 38,000 property insurance policies in the next 18 to 30 months, about a third of its business and personal policies in the state.

Tower Hill Insurance Group Inc. stopped writing new policies in 16 Florida counties.

The Hartford and the American Insurance Association declined comment at this time on the effect of the emergency orders.

Meanwhile, agents point out that policyholders who acted to get new coverage when they were canceled before the tornadoes wonder if they did so unnecessarily.

Based on the previously issued non-renewals or cancellations, some customers already went to “short-rate, non-regulated surplus lines carriers,” according to Jeff Grady, president of the Florida Association of Insurance Agents.

“There are still many questions that need answers,” Grady added. “We’re reporting to OIR for clarification.”

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