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State Farm Receives Cease and Desist Over Hurricane Barry Deductibles in Louisiana

Posted in Our Blog on September 13, 2019

Louisiana is a state where hurricanes occur quite often compared to other places in the country, and insurances companies need to prepare themselves for the damage that occurs in this state. However, victims of the 2019 Hurricane Barry reported facing higher deductibles from the insurance company State Farm before the storm reached hurricane status – and the issue grew to the point where the Louisiana Department of Insurance had to issue a cease-and-desist to the company.

Hurricane Deductibles Before Hurricane Designation

Hurricane Barry began on July 11th, 2019 and continued until July 19th. The storm led to damage throughout the Southeastern United States, having a profound impact on Louisiana residents. While the storm was raging through the state already, experts at the National Weather Service National Hurricane Center did not declare the storm a hurricane until July 13th.

Like all hurricanes, Barry led to significant damage to homes throughout Louisiana, from roof destruction to water damage and everything in between. Under most circumstances, insurance companies cannot impose higher deductibles for a hurricane if the storm is not technically a hurricane – and Barry did not receive that designation until July 13th.

However, State Farm still began imposing its higher hurricane deductibles on homeowners seeking compensation for damage prior to July 13th. Although Hurricane Barry was not technically a hurricane at that point, State Farm was still requiring homeowners to pay higher amounts before the company would help repair home damage – leading to further damage to an already vulnerable population.

How High Were the Deductibles?

Insurance companies like State Farm require policyholders to pay a certain amount out-of-pocket before they can help reimburse damage to a home. For natural disasters like hurricanes, these deductibles are higher because the damage is often larger. However, these companies cannot impose hurricane deductibles on normal storms – but State Farm did.

Depending on the type of policy that the homeowner had, hurricane deductibles could range from 2% to 5% of the total value of the home. For traditional coverage, which will usually cover the cost of damages suffered during a normal storm, the deductible usually ranges from $500 to $1,000. In the case of Hurricane Barry, State Farm imposed a 2% deductible.

The imposition of higher deductibles led to homeowners paying thousands of dollars more for damages than they normally would under their regular policies. For example, a 2% hurricane deductible on a $400,000 home would be a $8,000 out-of-pocket cost for the homeowner – compared to a $500 out-of-pocket cost for a regular storm.

The Louisiana Department of Insurance Issues Cease-and-Desist

Hurricane Barry was not officially a hurricane until July 13th, although State Farm argued the contrary. Since the damage that homeowners suffered prior to this date was not part of an official hurricane, they should not pay the higher hurricane deductible – and the Louisiana Department of Insurance agreed with this fact.

In August 2019, the insurance commissioner of Louisiana ordered a cease-and-desist against State Farm after receiving complaints from policyholders about this decision. The department states that State Farm should not impose hurricane deductibles on damage inflicted before July 13th.

State Farm claims that its decision was sound, since the National Weather Center issued a hurricane warning for Barry on July 10th. However, the storm was not officially a hurricane until the 13th – and any damage sustained by homeowners during that time is not technically hurricane damage. The company has 30 days to appeal this decision, and State Farm may fight this decision.

Can You Reverse an Unfair Hurricane Deductible?

State Farm imposing higher deductibles on victims of Hurricane Barry was not a sound decision. Experts did not deem the storm a hurricane until July 13th, and any damage prior to that designation should not apply to homeowners.

If you are a victim of questionable insurance practices like the imposition of higher deductibles before Hurricane Barry became an official hurricane, contact a New Orleans attorney as soon as possible. You can also file a complaint with the Louisiana Department of Insurance to help reverse the decision and lower your deductible in similar situations.