The Louisiana Insurance Commissioner recently issued a cease and desist order to State Farm, which insures many properties in Louisiana. The cease and desist order relates to the insurance carrier’s interpretation of its policy in light of Hurricane Barry, which caused damage on the Louisiana coast earlier this year.

The insurance company was attempting to collect a special hurricane deductible from those customers who were claiming damage to their property from the storm. The hurricane deductible is usually a percentage of the property’s value instead of being a standard amount like $500 or $1,000.

The Commissioner disagreed with the company’s practice and issued its order, which the company says it plans to continue to challenge in legal forums. For now, the order prohibits the company from collecting the hurricane deductible from customers who are claiming damage from a time before Barry was officially classified as a hurricane, that is, a tropical cyclone with maximum winds of around 75 miles per hour.

The difference between deductibles is significant. For instance, for damage where the hurricane deductible does not apply, a Louisiana homeowner with $10,000 damage and a $1,000 standard deductible would have $9,000 of the loss covered. If a 5% hurricane deductible applied, however, and the home is worth $300,000, then the homeowner is responsible for the first $15,000 in damage. In other words, for a $10,000 loss, this homeowner’s insurance is worthless from a practical standpoint.

The application of a deductible is just one of many questions over which a property owner and insurance company may disagree during the claims process. This story serves as an example of why a Louisiana resident may want to have the help of an attorney when filing a hurricane property damage insurance claim.