Colorado home insurance policyholders will have to wait and see if a new bill will be effective at getting insurers to provide significant discounts for mitigating wildfire risk on their properties, according to a longtime insurance attorney based in the state.
"The clarity of the specific mitigation efforts which an insurer says can lead to a discount is so critical because the legislation necessarily is broad and vague," said Chris Mosley, partner in the insurance recovery group at Reed Smith.
Colorado House Bill 1182, introduced February 10, saw the House approve Senate amendments on April 11. The bill requires insurers to share information on wildfire risk models, catastrophe models or scoring methods that they use, with the state's insurance regulator and the public. The bill also requires insurers to give homeowners discounts in return for mitigation efforts.
"Right now, the way this bill is set up, homeowners are going to pay for the mitigation expenses. If you're going to clear out vegetation, and harden the exterior of your home with fire resistant materials, that costs a lot of money," Mosley said. "If they spend $5,000 doing that, and the insurance company says that's terrific, but that's not what they wanted done, now the homeowner's got a problem."
Without specifics on what mitigation work will qualify and the extent of the resulting discounts, Colorado homeowners won't know if wildfire mitigation is worth the investment until 1182 is passed and implemented, according to Mosley. "If it costs me $5,000 to do that mitigation work, what's my premium reduction going to be? Is it going to be $500 or is it going to be $10,000?" he said.
Under the bill, policyholders' appeals of mitigation discount rejections or scoring of their risk will be up to insurers' discretion, Mosley pointed out. "If a homeowner believes that the information is in error, the homeowner can appeal, but the appeal goes to the insurance company, and so it's a matter of, 'I think you got it wrong. Can you take a second look at it?' I hope that works. I always have a little bit of skepticism when an entity is judge and jury of its own determinations."
The provisions in House Bill 1182 will apply to private homeowners' insurance as well as Colorado's new FAIR Plan for homeowners who cannot get traditional coverage. The Colorado FAIR Plan launched April 10.
In a related development, the Colorado Division of Insurance, the state's insurance regulator, has scheduled a
