Hurricane Aftermath: Florida’s Multiple Deductible Reimbursement Program

The Multiple Deductible Reimbursement Program was created by the Florida Legislature in response to the financial hardships faced by many Floridians when catastrophic hurricanes swept across the state during August and September of 2004. Due to the financial devastation Floridians have suffered, many of them may not be able to afford to repair or rebuild their homes. This law was passed during a special legislative session during mid-December 2004. The new law says that residential policyholders will have to pay only one annual hurricane deductible even in the event of multiple storms. The Legislature found that the public health, safety, and welfare demand that residential structures damaged or destroyed in a catastrophe be repaired or reconstructed as soon as possible. The application of multiple hurricane deductibles delays or prevents such reconstruction, hinders the economic recovery of the state and its citizens, and endangers public health, safety, and welfare. HB 9A, 2004 Leg., 1d Spec. Sess. (Fla. 2004 lines 64-71). Hence, in response to the public outcry for relief, up to $150 million dollars has been appropriated from the Florida Hurricane Catastrophe Relief Fund to the Insurance Regulatory Trust Fund under the Department of Financial Services to provide funding for reimbursements. The Florida Hurricane Catastrophe Relief fund is a hurricane trust fund that insurers pay into that subsidizes the payment of claims in case of major storms. The Multiple Deductible Reimbursement Program will be administered by DFS.

This new law requires financial assistance first be paid to Floridians who have paid two or more full deductibles. Separate hurricane deductibles can result in significant out-of-pocket expense and financial hardship. (HB 9A lines 57-59). Next in line for assistance are Floridians who paid a portion of a second or third deductible. Persons eligible for the program include homeowners, renters, owners of manufactured homes, condominium unit homeowners and condominium associations who paid one full deductible for hurricane losses and then incurred additional deductibles from subsequent hurricanes during the 2004 hurricane season. This program only applies to deductibles paid under homeowners policies, dwelling fire policies, mobile/manufactured home policies, condominium unit owner policies, condominium association policies, and commercial residential (apartment) policies. All other risks such as commercial structures do not qualify.

To be eligible for reimbursement, a policyholder must have had their property damaged by two or more hurricanes in 2004 and been required to pay more than one hurricane deductible in the adjustment of their insurance claims. The reimbursement shall be the amount of the claim that was not paid due to the application of the second or subsequent deductible. A policyholder must meet the prior criteria and must apply to DFS by March 1, 2005, clearly delineating in their application 1) the net amount of the claims paid by the insurer, per hurricane, 2) the amount of the deductible that was applied to each claim, and 3) any additional information which the department may require to verify the claim for reimbursement, including but not limited to documentation from the insurer. Further, the insured must have incurred damages in excess of the full amount of a single hurricane deductible. In addition, the insured must also pay a $100 deductible for a second or subsequent claim. To insure a prompt processing of the claim, the insured must also provide written authorization for DFS to obtain information from the policyholder’s insurer relative to the claim for reimbursement. It is important to note that reimbursement may be provided ONLY for damages that would have otherwise been paid under the policy if not for the application of the deductible. The maximum reimbursements under the program shall be limited to the amount of the policyholder’s loss in excess of one full deductible, but not more than $10,000 per policy for damage caused by two hurricanes and up to $20,000 per policy for damage caused by three or more hurricanes. Condominium associations are eligible to recover a maximum of $3,000 per unit.

DFS has promulgated a rule and printed forms that policyholders must use to obtain reimbursement. First, it is the responsibility of the insurance company, not DFS, to provide forms to policyholders. Second, policyholders must submit the forms to Florida’s Department of Financial Services, not to the insurance agency or company. The final deadline for submission of the forms is March 1, 2005. When a form is received by the Department, it will go through a verification process to make certain the amount requested for reimbursement is correct. Processing time will depend on the number of reimbursement requests received by the Department. It should be noted that the reimbursement comes from the State of Florida, not the insurance company or agency. All moneys transferred from the Florida Hurricane Catastrophe Fund to the Insurance Regulatory Trust Fund under this act which remain unexpended as of December 31, 2005, shall revert back to the Florida Hurricane Catastrophe Fund. Time is of the essence for policyholders. Insurance companies should note their primary responsibility under this law is to provide the reimbursement forms to policyholders. All contacts and the decision-making on reimbursement of policyholders will then be the sole responsibility of DFS. It should be noted that the $150 million designated for this reimbursement fund is the maximum allowance for funding. If the amount appropriated for this fund is inadequate to pay all eligible policyholders the maximum reimbursement allotments, the department shall then provide reimbursement on a pro-rata basis so that each policyholder receives an equal percentage of the amount of the reimbursement claim that is approved. (HB 9A lines 144-149).