For Gov. Chris Christie of New Jersey, Hurricane Sandy was serious enough to destroy the Jersey Shore of “his youth” and to grovel publicly in press conferences with President Barack Obama for moral hazard-producing federal assistance.
But according to Christie’s office, the storm wasn’t serious enough to trigger insurance companies’ extra deductables for hurricanes:
Trenton, NJ - Taking action to save homeowners money following Hurricane Sandy, Governor Chris Christie signed Executive Order 107, prohibiting insurance companies from imposing costly hurricane deductibles on New Jersey homeowners. An important part of the recovery of New Jersey will be the influx of funds that occurs when insurers settle claims by New Jersey homeowners. This action will increase the total size of the payments made by the insurance industry, helping residents rebuild their homes and speed New Jersey’s path to recovery.
“We need to ensure that homeowners are not forced to pay higher out of pocket costs than required as they begin the rebuilding and repair process,” said Governor Christie. “While Hurricane Sandy was a devastating storm, it did not meet the regulatory threshold to trigger the application of hurricane deductibles by insurance companies in New Jersey. This executive order makes it clear that consumers do not have to pay these unusually large and often unexpected amounts.”
A hurricane deductible typically can be in the amount of two to five percent of a property’s insured value. Thus a $500,000 house with a four percent hurricane deductible would result in a homeowner being responsible for a $20,000 deductible, rather than a more standard deductible in the $500-2,000 range. The deductible is the amount the policyholder must pay before the insurer would start covering the loss. Insurers are permitted to charge hurricane deductibles in certain circumstances. However, as the National Weather Service classified Hurricane Sandy as a post-tropical storm prior to landfall in New Jersey, the storm did not meet the first regulatory threshold required to apply a hurricane deductible.
I’m not a lawyer and it could be that Christie is correct. After all, Sandy did not cross the 74 miles per hour threshold needed to be classified as a Category 1 hurricane once it crested land.
But it was a serious storm, causing billions in damage and claimed dozens of lives.
This reminds me of the lawsuits after Katrina, where it was debated if the damage was caused by flooding or by wind.
Regardless of if it was a true hurricane on land or not, this is a matter of private contracts and should be decided based on the terms of the agreement in front of a judge. If it doesn’t meet the legal definitions of a “hurricane” and violates New Jeresey state law, why is the executive order needed? If it was so clear, no insurance company would challenge it.
I think this shows Christie’s tendenacy to not be nearly as conservative as his well-managed YouTube persona.
And the next sound you hear is insurance companies raising preimums or stopping the offering coverage entirely.