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Schumer challenges insurance firms for trying to downgrade storm

Sen. Charles Schumer. AP Photo

Senator Charles Schumer is warning insurance companies not to try and skirt their obligations to policyholders.

Already, reports indicate that these companies are pushing to have the storm reclassified as a hurricane, rather than a “post tropical cyclone,” as declared by the National Weather Service, according to Schumer.

“This move, if successful, will increase deductibles for homeown- ers by tens of thousands of dollars,” Schumer said, adding that homeowners across the New York region have paid thousands of dollars in premiums and they should be receiving worldclass service from the companies in this time of crisis.

“Superstorm Sandy left many homeowners’ lives in shambles, and private insurance companies — which have collected thousands and thousands of dollars in premiums — should be doing everything possible to help them clean up the mess and rebuild, not trying to skirt their obligations,” he said. “The state and federal government both classified this storm as a post-tropical cyclone, not a hurricane, and insurance companies shouldn’t try to alter reality to save money on the backs of homeowners.”

Homeowner’s insurance policies frequently have special deductibles for storms classified as “hurricanes.” In almost all cases, these deductibles are far higher than those for other types of storms, according to Schumer, who noted that a typical hurricane deductible is between 1 percent and 5 percent of the value of a home, amounts that easily run into the tens of thousands of dollars in expensive real estate markets such as New York.

Non-hurricane deductibles, on the other hand, are usually a fixed amount, oftentimes less than $1,000.

In declaring the storm a post tropical cyclone, the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service (NWS) declared that insurance companies cannot trigger the higher hurricane deductibles.

The New York State Department of Financial Services, based on that determination, also told insurance companies operating in New York State that they cannot use the higher hurricane deductibles, according to Schumer.

“Despite the rulings to the contrary, published reports indicate that insurance companies plan to challenge the determination directly with NOAA, through the courts, or simply by disregarding the ruling and charging homeowners the higher deductible,” said Schumer.

In a letter, Schumer warned insurance companies not to go down this road, saying that “elected officials and regulators at all levels of government were watching.”

Schumer also told the NOAA that they should stand firm in their determination, and if the agency continued to classify the storm as a non-hurricane, it would make it more challenging for insurance companies to challenge the designation at both the state level and in the courts. 

November 13, 2012 - 1:11pm


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