HURRICANE SANDY - New Jersey Insurance Issues

Hurricane Sandy caused an assed $36.9 billion in damages to the State of New Jersey.  This figure includes $29.4 billion in repair, response and restoration costs, plus another $7.4 billion in mitigation and prevention costs.

1. Executive Order 107

In anticipation of the overwhelming number of insurance claims that would be filed in the wake of Hurricane Sandy, Gov. Christie signed Executive Order 107, which prohibits insurance companies from imposing large hurricane deductibles on New Jersey homeowners. Click here to view the article. The order directs the Commissioner of the New Jersey Department of Banking and Insurance (“NJDBI”) to take specified action pursuant to N.J.S.A. App. A:7-1, which permits the Commissioner to impose conditions upon the conduct of any insurance company. Under N.J.S.A. 17:36-5.34 and N.J.S.A. 17:1-15, the Commissioner also has wide authority to establish by regulation uniform policy language regarding the applicability of hurricane deductibles.

Pursuant to this authority, Gov. Christie ordered that the Commissioner make it a violation of N.J.S.A. 11:2-42.7 for any insurer to apply a mandatory or optional hurricane deductible to the payment of claims for property damage attributable to Hurricane Sandy. Additionally, Gov. Christie permitted the Commissioner to effectuate this order by allowing property and casualty insurers to make payments for claims via alternative means, including prepaid debit cards, electronic transfer or other comparable method, where four conditions are met: (1) the claimant must agree to the alternate payment method; (2) the payment is not subject to fees that will diminish the full amount of the claim payment; (3) the insured is permitted to convert the balance to cash or opt-out of the alternative payment method; and (4) the insured or claimant is notified of any applicable terms and conditions. A typical hurricane deductible can be approximately 2-5% of a property’s insured value, meaning that a $500,000 home with a 4% deductible, for instance, would be responsible for a $20,000 deductible. Click here to view the article. The standard deductible, by contrast, would be within the $500-$2,000 range. The imposition of such a high deductible is triggered by the classification of a storm as a “hurricane.” Hurricane Sandy was classified as a “post-tropical storm” prior to landfall in New Jersey, meaning that this regulatory requirement was not met. Nevertheless, Gov. Christie’s order makes clear that “consumers do not have to pay these unusually large and often unexpected amounts” as a predicate to coverage.

Executive Order 107 also separately directs “insurers, banks, savings and loans, mortgage bankers and brokers, insurance producers, real estate brokers” to consider the difficulties related to Sandy and “exercise forbearances on collection, cancellation, documentation and” other regulations not limited to “notifications of hospital admissions; due dates for claim filings, premium and loan payments and late fees; prior authorization requirements; and limitations of prescription refills.” The order essentially requires insurers to be flexible with respect to typical claims filing requirements, such as notifications and time restrains, imposed upon consumers by contract. Gov. Christie justified these requirements by citing the difficulties faced by individuals following Sandy’s devastation.

2. Producer and Adjuster Licensing Changes

Due to the damage caused by the hurricane, the NJDBI has relaxed many of the licensing regulations that typically apply to insurance producers (brokers) and public adjusters by making such services more readily available to individuals impacted by the storm. Click here to view the regulations.

First, the NJDBI extended the expiration date for insurance producer licenses for those producers who maintain licenses set to expire on October 31, 2012 or November 30, 2012.  Any producer with a license expiring on those dates will maintain active status until December 31, 2012 regardless of the expiration date listed on the license. Second, the NJDBI issued 90 day Temporary Public Adjuster licenses in response to the State of Emergency announced by Gov. Christie on October 27, 2012. To obtain a Temporary Public Adjuster Sublicense, an individual is required to: (1) complete an application form; (2) produce proof of licensing in another state or proof of five years employment experience as a public adjuster in any state; (3) bond coverage under N.J.A.C. 11:1-37.9, a sponsor statement; and (4) a $150 fee.

3. Claims Reporting Process

Pursuant to the Commissioner’s statutory authority under N.J.S.A. 17:1-8.1 et seq. and N.J.S.A. 17:23-20 et seq., the NJDBI issued Order No. A:12-113, establishing a claims reporting process called a  “data call.” Click here to view the order.  This process was established to review claims of coverage received by property and casualty insurers with a total of $5,000,000 or more written property and casualty insurance premiums in New Jersey in order to “assess the extent to which damages caused by the storm have affected the volume of claims submitted to such insurers.” After October 1, 2012, qualifying insurers must provide this information to the NJDBI by filing an initial report of property damage claims, received on a consolidated group basis, using the form attached here. Each insurer is required to file an initial report of claims reported as of November 16, 2012, to be filed with the NJDBI by November 20, 2012. Failure to comply with this Order may result in penalties under N.J.S.A. 17:33-2. The NJDBI guarantees that any information submitted through this process is confidential.

4. Consumer Guidance

The Commissioner of the NJDBI offered advice to consumers recommending the prompt filing of claims related to property damage caused by Hurricane Sandy. While not directly related to an insurer’s claims handling, the advice is worth noting as information upon which insureds will rely during the claims process. The Commissioner’s guidance can be located here.

5. Federal Assistance

Following Hurricane Sandy, Gov. Christie encouraged New Jersey residents to apply for disaster assistance, which may cover damages that is not covered by insurance. Click here for more information. The deadline for assistance was recently extended to January 30, 2013. Because the Federal Emergency Management Agency (“FEMA”) cannot duplicate coverage afforded by an insurance policy, Gov. Christie urged those impacted by the storm to file insurance claims immediately and then register for FEMA disaster assistance. The governor outlined the following situations that may qualify an individual for FEMA assistance: (1) delay in insurance settlement; (2) insufficient settlement amount, and (3) exhaustion of Additional Living Expenses under an insurance policy. By the end of November, over 233,000 people had registered with FEMA for individual assistance. Lastly, Gov. Christie highlighted the availability of low-interest loans available from the U.S. Treasury for businesses and individuals whose insurance shortfall renders them unable to recover from damage caused by Hurricane Sandy.