AN ACT MITIGATING FIRE LOSSES FOR HOMEOWNERS AND BUSINESS OWNERS.

This bill makes numerous changes to the standard fire insurance policy that insurers, by law, must write in the state. Specifically, it:

1. shortens the time period an insurer has to pay a claim from 60 days to 30 days;

2. allows an insured person to agree in writing to a partial claim payment in advance of final claim adjudication;

3. requires an insurer to reduce the total amount due to an insured by the amount of any advance partial payment made; and

4. increases the statute of limitations for filing a law suit with respect to a claim under the policy from 12 to 18 months after sustaining a loss.

The bill requires a condominium master insurance policy to cover a loss caused, directly or indirectly, by terrorism, as the insurance commissioner defines it, until the federal terrorism risk program expires (see BACKGROUND). Under current law, commercial risk policies, including those issued to a condo association, may exclude coverage for such a loss (1) if the premiums charged for the policy reflect projected savings from the exclusion and (2) until the federal terrorism insurance program expires. (The commissioner has adopted the definition of terrorism used in the 2007 federal law reauthorizing the federal program. )

The 2002 federal Terrorism Risk Insurance Act created a temporary program under which the federal government shares the risk of loss from foreign terrorist attacks with the insurance industry. The 2007 Terrorism Risk Insurance Program Reauthorization Act revised several provisions of the initial act and extended the program until December 31, 2014.

Under the federal act, insurers must offer coverage for loss caused by terrorism to all commercial insureds at the initial policy offer and at renewal. The act prohibits the coverage from differing materially from the terms, amounts, and other limitations applicable to losses arising from non-terrorist acts.

The act requires insurers to give policyholders a disclosure containing specified information, including the amount of premium charged for losses caused by terrorism. If a policyholder does not pay the premium allocated for terrorism coverage, the policy will not take effect.

The act defines “act of terrorism” as an act certified by the treasury secretary, in concurrence with the secretary of state and U. S. attorney general, (1) to be an act of terrorism; (2) to be violent or dangerous to human life, property, or infrastructure; (3) to have resulted in damage within the United States (or outside the United States in the case of certain air carriers, vessels, or U. S. missions); and (4) to have been committed as part of an effort to coerce U. S. civilians or to influence the policy or affect the conduct of the U. S. government by coercion. An act will not be certified as an act of terrorism if (1) aggregate property and casualty insurance losses resulting from the event do not exceed $ 100 million or (2) it is committed in the course of a war declared by Congress. (This latter exclusion does not apply to workers' compensation claims. ) The federal payout is capped at $ 100 billion.

Yea

Nay

(02/24/2009)