2015 -- H 5423

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LC001265

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2015

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A N   A C T

RELATING TO INSURANCE - WEATHER RELATED LOSSES

     

     Introduced By: Representatives Kennedy, Tanzi, Azzinaro, Ruggiero, and Lally

     Date Introduced: February 12, 2015

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 27-76-1, 27-76-2, 27-76-3, 27-76-4, 27-76-5, 27-76-6, 27-76-7 and

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27-76-8 of the General Laws in Chapter 27-76 entitled "Weather Related Losses" are hereby

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amended to read as follows:

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     27-76-1. Applicability. -- Except for the provisions of § 27-76-6, the provisions of this

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chapter shall be applicable only to personal lines residential property insurance on dwelling

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houses and commercial property insurance; provided, however, that this chapter shall not apply to

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"commercial special risks" insurance policies as defined in § 27-65-1.

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     27-76-2. 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 for personal lines residential property insurance on dwelling houses, and effective January

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1, 2016, for commercial property insurance.

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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, or on commercial

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property insurance, the insurance company shall provide prominent and clear notice to insureds

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that shall be included in the policy issuance or renewal package and shall fully disclose all details

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pertaining to any such deductible and/or mitigation measure. The notice provision for commercial

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property insurance shall be effective January 1, 2016.

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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 on 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 27-76-2(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 § 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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     27-76-3. Residential property insurance hurricane deductible application

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Residential and commercial property insurance hurricane deduction application. -- (a) For

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all deductibles as provided for in § 27-76-2, and in accordance with the effective dates established

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under § 27-76-2, such deductible may only be applied once to all hurricane losses that are subject

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to the hurricane deductible during the calendar 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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     27-76-4. Notice of property loss. -- No insurance policy or contract covering damages to

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personal lines residential, or beginning January 1, 2016, to commercial property may be cancelled

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or nonrenewed, nor may the premium for such a policy be increased solely as a result of inquiries

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or claims made under the policy which resulted in no loss payout or resulted in a loss payout of

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less than five hundred dollars ($500). The provisions of this section shall not apply where more

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than one non-catastrophic claim is made under the policy in a three (3) year period which resulted

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in any loss payout.

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     27-76-5. Hurricane mediation. -- The department of business regulation is hereby

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

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procedure for the effective, fair, and timely handling of personal lines insurance claims and

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commercial property insurance claims arising out of damages to residential or commercial

 

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property caused by hurricanes. The provisions of this section shall not apply to disputes of

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coverage under the insurance policy.

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     27-76-6. State of emergency; effect upon insurance policies; rules. -- (a) The

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department of business regulation may promulgate regulations to take effect upon the declaration

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of a catastrophe, as declared by a nationally recognized catastrophe loss index provider, that

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address any of the following or other matters related to the catastrophe for insurance policies

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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

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by insureds (other than the duty to mitigate); and/or

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

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      (b) Subdivisions (a)(2) and (3) above apply to all insurance policies, regardless of the

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line of insurance, issued to residents and commercial property insurance policyholders of this

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state displaced as a result of the catastrophe. The regulations shall require the insurer to make

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reasonable efforts to contact the policyholder and provide the accommodations requested by the

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policyholder, within the limits of accommodations detailed in the regulation, upon confirmation

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that the policyholder has been displaced by the catastrophe.

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     27-76-7. 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 or beginning January 1, 2016, to commercial property based solely upon prior claim

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experience for property damage claims at the insured property while under the ownership of

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someone other than the current insured unless the risk from which the claim originated has not

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been mitigated.

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     27-76-8. 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 solely as a result of damages sustained in a catastrophic event;

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provided further, that on or after January 1, 2016, no insurer may refuse to insure, cancel,

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nonrenew or surcharge a policy or contract covering damages to commercial property solely as a

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result of damages sustained in a catastrophic event.

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     SECTION 2. This act shall take effect on January 1, 2016.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE - WEATHER RELATED LOSSES

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     This act would limit large windstorm insurance deductibles on commercial property

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insurance policies, and would also prohibit insurers from terminating commercial policies solely

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due to damages sustained from a catastrophic event.

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     This act would take effect on January 1, 2016.

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