Kentucky Insurance Commissioner Orders New Rules Regarding Earthquake Damages

N/ANichols III, Insurance Commissioner for Kentucky, has announced that all insurers doing business in Kentucky and writing personal lines insurance covering homeowners, tenants, mobile homeowners and personal residential dwellings covered by a farm-owners policy, shall have an endorsement for earthquake insurance available if requested. Earthquake insurance will be written on risks on which homeowners insurance is written, regardless of the age or construction of the residential dwelling and will be added to a policy only on inception or renewal, unless the insurer chooses to endorse the policy upon the insured's request.

Nichols' announcement follows an increased demand for earthquake insurance in the states surrounding the New Madrid Seismic Zone, including Kentucky, where the occurrence of any significant earthquake could place a personal lines carrier conducting business in this Commonwealth in a hazardous financial condition.

The Commissioner also announced that deductibles for earthquake endorsements shall apply to the amount of insurance applicable to property damaged or destroyed as a result of the earthquake peril. Insurers will not be able to roll their existing book of business to a higher earthquake deductible.

For the purposes of writing deductibles, the Commonwealth has been divided into three regions; the "Far West Region," consisting of the counties of Ballard, Calloway, Carlisle, Fulton, Graves, Hickman, Marshall and McCracken; the "Near West Region," consisting of the counties of Butler, Caldwell, Crittenden, Daviess, Hancock, Henderson, Hopkins, Livingston, Lyon, McLean, Muhlenberg, Ohio, Trigg, Union and Webster and; the "Eastern Region," consisting of all of the remaining counties of the Commonwealth. Insurers will not be able to write deductibles exceeding twenty, fifteen and ten percent in these regions, respectively.

Any additional earthquake deductible options and their corresponding rate relativities need to be filed with the Kentucky Insurance Department. Any insurer who believes that the writing of additional earthquake coverage may place the insurer in a hazardous financial condition should also contact the department by submitting a written request to the Commissioner for an exception.

In the event of a seismic event of 4.0 or greater on the Richter scale, the Department will allow an insurer to impose a moratorium not to exceed thirty days on binding new earthquake insurance coverage.

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