2012 -- S 2597

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LC01531

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO INSURANCE - FIRE INSURANCE POLICIES AND RESERVES

     Introduced By: Senator Joshua Miller

     Date Introduced: March 01, 2012

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-5-3.7 of the General Laws in Chapter 27-5 entitled "Fire

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Insurance Policies and Reserves" is hereby repealed.

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     27-5-3.7. Hurricane deductibles, triggers and policyholder notice. -- (a) The

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provisions of this section shall be applicable to policies issuing or renewing on or after July 1,

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2008.

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      (b) In all instances where an insurance company licensed to do business in this state

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offers or includes any deductible and/or mitigation measure related to such deductible for any

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type of personal lines residential property insurance on dwelling houses, the insurance company

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shall provide prominent and clear notice to insureds, that shall be included in the policy issuance

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or renewal package and shall fully disclose all details pertaining to any such deductible and/or

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mitigation measure.

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      (c) The insurer may apply a deductible specific to windstorm coverage where:

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      (1) The deductible is specifically approved by the director and shall not exceed five

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percent (5%) of the insured value.

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      (2) The deductible shall be applicable to losses due to a hurricane during the period

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commencing with the issuance of a hurricane warning bulletin for any part of the state by the

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National Hurricane Center and concluding twenty-four (24) hours after the termination of the last

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hurricane warning bulletin for any part of the state.

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      (3) The deductible, whether it is a flat dollar deductible or a percentage deductible shall

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be presented by at least two (2) examples that illustrate the application of the deductible to the

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insured. Nothing herein shall prohibit the insurer from providing any additional information to the

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insured to assist in the insured's understanding of the deductible to be applied to the insured's

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policy.

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      (4) The deductible set forth above shall not be applied to any insured, if the insured has

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installed approved mitigation measures to protect against windstorm damage and the insurer has

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either inspected the property or the insured has submitted satisfactory proof of installation of the

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approved mitigation measures. The insurance commissioner, in consultation with the state

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building code commissioner, shall adopt and may amend or revise a list of mitigation measures,

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based so far as reasonably feasible on national standards for such measures and practices in other

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comparable states. The list of mitigation measures adopted by the insurance commissioner shall

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be considered approved mitigation measures for purposes of this subdivision.

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      (5) For the application of the hurricane deductible in Block Island, losses are due to a

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hurricane when a hurricane results in hurricane force sustained winds as reported by the national

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weather service for Block Island. For the application of the hurricane deductible in the remainder

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of the state, losses are due to a hurricane when a hurricane results in hurricane force sustained

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winds as reported by the national weather service for any other location in the state. All terms are

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as defined by the national weather service.

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      (d) Premium credits shall be applied to policies with deductibles as set forth in

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subsection 27-5-3.7(c).

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      (e) (1) An insurer may require mitigation measures to protect against windstorm damage

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only after specific approval of the substance of such mitigation measures by the director;

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      (2) Mitigation measures to be taken by an insured are clearly explained, including a

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complete illustration of the dollar impact upon the premiums to be charged to insureds if the

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requested mitigation activities are undertaken;

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      (3) No mandatory deductible for windstorm damage shall be included in the policy;

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      (4) An insurer shall write the requested coverage at the premium rate that includes the

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premium credit to be realized with the completion of the mitigation efforts;

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      (5) The insurer shall affirmatively state the length of time during which discount given

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for the mitigation efforts will apply; and

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      (6) No insurer shall subsequently non-renew an insured who has taken the mitigation

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steps requested by the insurer for reasons of the insurers exposure to catastrophe loss, unless for

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non-payment of premium, fraud, breach by the insured of a provision of the policy, reversal or a

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lack of maintenance of the mitigation steps, or insurer solvency concerns or adverse loss history.

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      (f) Penalties for failure to comply with the provisions of this section shall be

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administered by the director in accordance with the provisions of section 42-14-16.

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      (g) The department of business regulation shall have authority to adopt such rules,

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including emergency rules, as may be necessary or desirable to effectuate the purposes of this

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section.

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     SECTION 2. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 76

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WEATHER RELATED LOSSES

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     27-76-1. Hurricane deductibles, triggers and policyholder notice. -- (a) The

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provisions of this section shall be applicable to policies issuing or renewing on or after July 1,

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2008.

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     (b) In all instances where an insurance company licensed to do business in this state

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offers or includes any deductible and/or mitigation measure related to such deductible for any

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type of personal lines residential property insurance on dwelling houses, the insurance company

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shall provide prominent and clear notice to insureds that shall be included in the policy issuance

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or renewal package and shall fully disclose all details pertaining to any such deductible and/or

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mitigation measure.

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     (c) The insurer may apply a deductible specific to windstorm coverage where:

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     (1) The deductible is specifically approved by the director and shall not exceed five

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percent (5%) of the insured value.

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     (2) The deductible shall be applicable to losses due to a hurricane during the period

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commencing with the issuance of a hurricane warning bulletin for any part of the state by the

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National Hurricane Center and concluding twenty-four (24) hours after the termination of the last

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hurricane warning bulletin for any part of the state.

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     (3) The deductible, whether it is a flat dollar deductible or a percentage deductible shall

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be presented by at least two (2) examples that illustrate the application of the deductible to the

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insured. Nothing herein shall prohibit the insurer from providing any additional information to the

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insured to assist in the insured's understanding of the deductible to be applied to the insured's

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policy.

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     (4) The deductible set forth above shall not be applied to any insured, if the insured has

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installed approved mitigation measures to protect against windstorm damage and the insurer has

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either inspected the property or the insured has submitted satisfactory proof of installation of the

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approved mitigation measures. The insurance commissioner, in consultation with the state

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building code commissioner, shall adopt and may amend or revise a list of mitigation measures,

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based so far as reasonably feasible on national standards for such measures and practices in other

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comparable states. The list of mitigation measures adopted by the insurance commissioner shall

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be considered approved mitigation measures for purposes of this subdivision.

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     (5) For the application of the hurricane deductible in New Shoreham, losses are due to a

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hurricane when a hurricane results in hurricane force sustained winds as reported by the national

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weather service for New Shoreham. For the application of the hurricane deductible in the

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remainder of the state, losses are due to a hurricane when a hurricane results in hurricane force

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sustained winds as reported by the national weather service for any other location in the state. All

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terms are as defined by the national weather service.

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     (d) Premium credits shall be applied to policies with deductibles as set forth in subsection

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27-76-1(c).

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     (e)(1) An insurer may require mitigation measures to protect against windstorm damage

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only after specific approval of the substance of such mitigation measures by the director;

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     (2) Mitigation measures to be taken by an insured are clearly explained, including a

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complete illustration of the dollar impact upon the premiums to be charged to insureds if the

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requested mitigation activities are undertaken;

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     (3) No mandatory deductible for windstorm damage shall be included in the policy;

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     (4) An insurer shall write the requested coverage at the premium rate that includes the

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premium credit to be realized with the completion of the mitigation efforts;

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     (5) The insurer shall affirmatively state the length of time during which discount given

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for the mitigation efforts will apply; and

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     (6) No insurer shall subsequently non-renew an insured who has taken the mitigation

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steps requested by the insurer for reasons of the insurers exposure to catastrophe loss, unless for

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non-payment of premium, fraud, breach by the insured of a provision of the policy, reversal or a

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lack of maintenance of the mitigation steps, or insurer solvency concerns or adverse loss history.

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     (f) Penalties for failure to comply with the provisions of this section shall be administered

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by the director in accordance with the provisions of section 42-14-16.

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     (g) The department of business regulation shall have authority to adopt such rules,

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including emergency rules, as may be necessary or desirable to effectuate the purposes of this

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section.

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     27-76-2. Residential property insurance hurricane deductible application.--

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     (a) For all deductibles as provided in section 27-76-1, such deductible may only be

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applied once to all hurricane losses that are subject to the hurricane deductible during the calendar

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year.

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     (b) If an insured incurs a hurricane loss from more than one hurricane during a calendar

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year that are subject to the separate deductible referred to in subsection (a), the insurer may apply

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the deductible to the succeeding hurricane that is equal to the remaining amount of the separate

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deductible or the amount of the deductible that applies to all perils other than a hurricane,

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whichever is greater. Insurers may require policyholders to produce receipts or other records of

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such losses in order to apply such losses to subsequent hurricane claims.

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     27-76-3. Hurricane Mediation.-- The department of business regulation is hereby

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authorized to establish by regulation a non-adversarial alternative dispute resolution procedure for

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the effective, fair, and timely handling of personal lines insurance claims arising out of damages to

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residential property caused by hurricanes.

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     27-76-4. State of emergency; effect upon insurance policies; rules.--

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     (a) The department of business regulation may promulgate regulations to take effect upon

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the declaration of a catastrophe, as declared by a nationally recognized catastrophe loss index

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provider, that address any of the following or other matters related to the catastrophe for

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insurance policies issued in this state:

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     (1) Reporting requirements for claims related to the emergency;

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     (2) Grace periods for payment of insurance premiums and performance of other duties by

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insureds; and/or

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     (3) Temporary postponement of cancellations and nonrenewals of insurance policies.

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     27-76-5. Notice of Property Loss.-- No insurance policy or contract covering damages

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to personal lines residential property may be cancelled or nonrenewed, nor may the premium for

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such a policy be increased solely as a result of inquiries or claims made under the policy which

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resulted in no loss payout or resulted in a loss payout of less than five hundred dollars ($500).

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     27-76-6. Use of Prior Claim Experience of Insured Property.-- No insurer may refuse

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to insure, cancel, nonrenew or surcharge an insurance policy covering damages to personal lines

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residential property based solely upon prior claim experience of the insured property while under

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the ownership of someone other than the current insured unless the risk from which the claim

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originated has not been mitigated.

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     27-76-7. Use of Claim Experience resulting from Catastrophic Events.-- No insurer

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may refuse to insure, cancel, nonrenew or surcharge a policy or contract covering damages to

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personal lines residential property resulting solely from a catastrophic event.

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     27-76-8. Severability.-- If a court holds any section or portion of a section of this chapter

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or the applicability thereof to any person or circumstance invalid, the remainder of the chapter shall

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not be affected thereby.

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     SECTION 3. This act shall take effect upon passage.

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LC01531

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - FIRE INSURANCE POLICIES AND RESERVES

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     This act would relocate the existing section of law relative to hurricanes to a new chapter

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which would also include additional provisions for the processing of insurance claims for

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hurricane damage.

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     This act would take effect upon passage.

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LC01531

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