PA 09-164—sHB 6447

Insurance and Real Estate Committee

AN ACT MITIGATING FIRE LOSSES FOR HOMEOWNERS AND BUSINESS OWNERS

SUMMARY: This act makes numerous changes to the standard fire insurance policy that insurers, by law, must write in Connecticut. Specifically, it shortens the time an insurer has to pay a claim from 60 to 30 days and increases the statute of limitations for filing a lawsuit relating to a claim from 12 to 18 months after sustaining a loss. Additionally, the act allows an insured person and the insurer to agree in writing to a partial claim payment in advance of final claim adjudication and requires an insurer to reduce the total amount due to an insured by the amount of any advance partial payment made. The act specifies that an advanced partial payment does not affect the 30-day time period for total payment.

Under prior law, commercial risk insurance policies, including those issued to a condominium association, could exclude coverage for losses caused, directly or indirectly, by terrorism (1) if the premiums charged for the policy reflect projected savings from the exclusion and (2) until the terrorism risk program established under federal law expires. The act instead requires a condominium association's master insurance policy to include coverage for losses caused by terrorism if the condominium was formed after 1976. It still permits other commercial risk insurance policies, including those issued to a condominium formed before 1977, to exclude the coverage, subject to the two conditions. (The law allows the insurance commissioner to define “terrorism. ” He has adopted the definition used in the 2007 federal law reauthorizing the federal program. )

EFFECTIVE DATE: October 1, 2009

TERRORISM COVERAGE

The act requires a condominium association's master policy to include coverage for terrorism if the condominium is subject to the Common Interest Ownership Act (CIOA) or the Condominium Act. If the condominium is subject to the Unit Ownership Act, it may exclude such coverage, subject to the conditions specified in the law.

Three different sets of laws govern condominiums, depending on when they were created. CIOA governs the creation, alteration, management, termination, and sale of condominiums and other common interest communities formed in Connecticut after December 31, 1983 (CGS 47-200 et seq. ).  The Condominium Act governs condominiums created from 1977 through 1983 (PA 76-308; CGS 47-68a to 47-90c). The Unit Ownership Act governs condominiums created before 1977 (PA 1963, No. 605, July 10, 1963; CGS 47-67 to 47-115 Rev. to 1975).

BACKGROUND

Federal Terrorism Risk Insurance Act

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.

The act defines “act of terrorism” as an act the treasury secretary certifies, in concurrence with the secretary of state and U. S. attorney general, to:

1. be an act of terrorism;

2. be violent or dangerous to human life, property, or infrastructure;

3. 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. 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 under the program is capped at $100 billion.

The act requires insurers to offer coverage for losses caused by terrorism to all commercial insureds at the initial policy offer and at renewal. It 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.

OLR Tracking: JLK: KM: JL: TS