No Hurricane Deductibles for Sandy Claims in New Jersey, Maryland

Hurricane deductibles will not be applicable for Sandy-related claims in New Jersey, the state where the superstorm made landfall late Monday.

New Jersey Department of Banking and Insurance Acting Commissioner Ken Kobylowski communicated to the insurance industry Tuesday night that hurricane deductibles will not apply, said department spokesman Marshall McKnight.

Acting Commissioner Kobylowski said the hurricane deductible trigger does not apply in New Jersey because the National Weather Service downgraded Sandy to “Post-Tropical Cyclone” before it reached land in New Jersey, according to the spokesman.

The lack of hurricane deductibles means insurers may have to pay out in greater amounts, since a typical hurricane deductible of 2 percent of a home’s insured value is often higher than a standard dollar deductible.

Maryland has also said hurricane deductibles would not be allowed in the state for Sandy-related claims. The Maryland Insurance Administration issued a bulletin Tuesday, addressed to all admitted property/casualty insurers, the Maryland Joint Insurance Association, and insurance producers.

“This bulletin serves to advise Maryland’s admitted Property & Casualty insurance carriers that deductibles equal to a percentage of the ‘Coverage A — Dwelling Limit’ of a homeowners policy in the case of a hurricane or other storm, (percentage deductible) do not apply to the weather event that impacted Maryland beginning on Oct. 29, 2012,” according to the Administration.

The bulletin noted that per section 19-209(b) “if an insurer has adopted an underwriting standard that requires a deductible equal to a percentage of the ‘Coverage A — Dwelling Limit’ of the policy in the case of a hurricane or other storm, the deductible may only be applicable 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.”

The National Hurricane Center of the National Weather Service did not issue a hurricane warning for the State of Maryland, the bulletin said. Hence, hurricane deductibles would not be applicable.

Connecticut has also issued a notice Tuesday, alerting the industry that companies may not impose a hurricane deductible on Connecticut claims related to Sandy because — based on information received from the National Hurricane Center and the National Weather Service — a ‘Hurricane Warning’ was not issued for the State of Connecticut nor did Connecticut sustain hurricane force winds as a result of Storm Sandy.