The U.S. Virgin Islands Office of the Lieutenant Governor, Division of Banking, Insurance and Financial Regulation, has issued a guidance to all property and casualty insurance companies regarding how these entities should notify insured individuals of “underinsurance.”

According to the guidance, the Government of the Virgin Islands encourages all insurers to “use all available means” to provide quick relief to insureds, while noting that there have been numerous complaints of insureds being told that they do not have enough insurance to cover the damage done to their properties. With all the devastation caused by hurricane season this past fall, this has placed many policyholders in a precarious situation.

Responding to consumer confusion

The Division, regulates the Territory’s insurance industry, has found that many insureds are unaware of what it means to be “underinsured”. This is especially true for those who thought they were fully insured, only to find out that amendments to the formulas used to determine their properties’ value have changed.

This, according to the guidance, has resulted in a need for the Division of Banking, Insurance and Financial Regulation and insurance companies to better educate policyholders on what it means to be underinsured and how it may affect their claims when damage does occur.

To that end, the Division calls on insurance companies to take the following steps:

  • Provide homeowners’ insurance policyholders with a full explanation of underinsurance, along with examples of how it could affect their ability to collect on a claim.
  • Ensure that policyholders are fully notified of whether or not they are underinsured, and how their status might impact a potential claim in the future.
  • Require that all policyholders review and sign an official Notice of Conditions of Underinsurance whenever they are obtaining or renewing a homeowners’ insurance policy.
  • Inform policyholders of all the common factors that could lead to being underinsured.

Additionally, the Division is directing all insurance companies to provide policyholders with the option to receive a midterm endorsement to increase their policy limit “to an adequate level using a pro rata share” before this year’s hurricane season. These policies may not be back-dated, however.

To be sure, these issues are of particular importance to insurance companies and consumers in the aftermath of Hurricanes Irma and Maria—and the enormous amount of damage they caused throughout the U.S. Virgin Islands. If you have questions about how this guidance could impact your homeowners’ insurance policy or claims process, speak with a skilled insurance law attorney right away.

Mark A. Kragel is a senior attorney in BoltNagi’s Civil Litigation Practice Group with a concentration in insurance defense. BoltNagi PC is a full service business law firm serving the U.S. Virgin Islands.