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Home Insurance Bill Protects Against Dropped Coverage After Loss From Catastrophe


By MATTHEW STURDEVANT, msturdevant@courant.com

The Hartford Courant

9:43 AM EDT, June 4, 2013

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A bill awaiting Gov. Dannel P. Malloy's signature would make it illegal for home insurers to decline or cancel coverage — or refuse to renew a policy — based solely on losses from a tropical storm or other catastrophe.

Malloy supports the bill, as does the Insurance Department, which regulates the property-casualty industry.

"The legislation addresses important consumer protections for homeowners who incurred damage from catastrophic storms — something Gov. Malloy also strongly supports," Malloy spokeswoman Juliet Manalan said in an email. "As he does with all legislation, the governor will carefully review it when it gets to his desk."

If the governor signs the legislation, already approved in both the House and the Senate, it will take effect Oct. 1, 2013. The law would not apply to policyholders dropped before that date.

The legislation applies to damage from any storm causing a catastrophic loss as categorized by Property Claims Services, an industry source that reports disasters and determines the extent of damage. That could include tropical storms, but also snowstorms and other meteorological events.

A trade group for property-casualty insurers, the Insurance Association of Connecticut, was the only group to submit testimony opposing the bill. The association argued in its testimony that the history of losses an insurer pays to a homeowner, no matter the size or source, "is a strong indicator of the likelihood of future losses."

The association was unavailable Monday, and two national property-casualty trade groups declined to comment.

State Rep. Betty Boukus, D-Plainville, introduced the bill along with seven other legislators. Boukus said she and other legislators heard of constituents who had coverage problems after a string of damaging weather: ice and snow in late 2010 and early 2011, Tropical Storm Irene, the snowstorm of October 2011, and Storm Sandy.

Boukus said, "we've had so many events in the last few years that people are now looking to their insurance companies for assistance, and you can't blame them. I mean, the storms did some traumatic damage to homes."

Boukus said she believes the insurance companies did a great job responding to the storms of recent years.

The bill also prohibits an insurer from canceling or not renewing a homeowner's policy — or increasing a premium — solely because a policyholder made inquiries about the policy. The same applies if the insurer made a payment of less than $500.

State Rep. Robert Megna, D-New Haven, who is House chairman of the Insurance and Real Estate Committee, said Monday that legislators have heard "a lot" of complaints from homeowners near the coast about getting pushed into surplus lines, an insurance market for homeowners who are denied coverage by standard home insurers.

Surplus lines, he said, are intended for homeowners with an extensive claim history, or whose house is poorly maintained.

"You try to make it so that the carriers, through underwriting, can't get away from this," Megna said. "Surplus lines is really a terrible place for a homeowner. You lose all the protections … hurricane deductible, the standard fire policy. The policy could say whatever they want to sell you. So, it could be very, very limited coverage. It's always less coverage."

The state Insurance Department's director of property-casualty, George Bradner, said an insurer can still cancel coverage or decline to renew a policyholder for other reasons. For example, he said, an insurer could decline coverage if a home has damage that isn't fixed, or if the insurer discovers that the electric wiring is out of date.

"I believe that we've had a few complaints," Bradner said, adding that some policies affected by Storm Sandy last year might be coming up for renewal this summer.