Compatibility of roof and interior requirements has been a thorny issue in the property insurance industry for years. Recent developments show how insurers and regulators in several southeastern states are handling the mandates.
In Kentucky, the state department of insurance last week issued an advisory opinion clarifying the intent of the state’s matching law. On the one hand, Kentucky law does not allow a “line of sight” rule for roofs: “If the shingles on a pitch of a residential roof must be replaced due to damage covered by an applicable property insurance policy, and there are no matching shingles available that would make the pitch reasonably uniform with the rest of the roof, then an entirely new roof must be installed,” wrote state Insurance Commissioner Sharon Clark in her 17 October bulletin.
On the other hand, as long as the replacement shingles are the same make and model, even if the colour doesn’t quite match the older shingles due to age and fading, a complete roof replacement is not required, Clark said.
“In situations where the existing roofing shingles are still in production and available, the use of the same shingles, despite any discolouration due to normal aging or wear from use, will satisfy the regulation,” the opinion states.
It gives insurers a bit more leeway: “If the same shingles are not available, the Department would review the quality, colour and size of the replacement shingles to determine whether a reasonable match has been made.”
However, the commissioner noted that any insurer not following the procedures or using incorrect forms should amend their submissions by September 2024. This includes insurers using endorsements that impose sub-limits on matching undamaged areas of a home.
In Florida, where insurers have blamed a cottage industry of roof scams for helping to implode the insurance industry, several carriers are now relying on newly approved endorsements to limit what they will pay to match undamaged materials.
The Florida Office of Insurance Regulation has approved policy forms filed by no fewer than eight property insurers that limit the amount the carriers will pay to replace undamaged materials to create a matching, uniform appearance after repairs, state records show.
The matching requirement has been a hot-button issue in Florida’s property market, where two-thirds of the premium for homeowners policies that cover wind damage goes to Citizens Property Insurance Corp., the state’s carrier of last resort, according to market share data. Olympus Insurance Co. filed a lawsuit against OIR in 2021 after regulators disapproved a policy form that would have limited payouts for matching materials.
This endorsement approved for Century National Insurance Co. is typical: “The aggregate limit of liability for Coverage A is 1% of the limit of liability for Coverage A for repairs or replacement of any undamaged part of the building or its components solely to match repairs made to damage resulting from a covered loss.
Florida statute 626.9744 states that “unless otherwise provided in the policy”, property insurers must make “reasonable repairs” or replace undamaged items in adjacent areas if the replaced items “do not match in quality, colour, or size”.
Policyholder advocates say the law protects homeowners by ensuring their property is restored to its previous, and presumably matching, condition. Insurers, on the other hand, say the matching requirement is also used by unscrupulous contractors to drive up costs.
The wording of the statute implies that insurers can get around the matching requirement by writing alternative wording into their policies. Olympus attempted to do just that in 2021 when it submitted a policy form to limit the amount spent on matching materials, but the OIR refused to approve the form.
Olympus withdrew the claim in early 2022 and made no public comment. However, on 1 April 2022, the OIR approved a policy form submitted by Olympus that includes the phrase “matching limitations” in the search function for the OIR database. The form is marked as a “trade secret” and is not available for public inspection.
Other insurers used a different tactic to limit payments for matching repairs in form submissions approved in 2022. Citizens, for example, requires policyholders to pay for matching repairs out of pocket and then file a claim for reimbursement.
Nieman and Ciabattoni said Citizens’ filed its form limiting payments for matching expenses after the court ruling.
The Florida Legislature in 2022 made it easier for insurers to repair sections of roofs rather than replace entire roofs. Senate Bill 4D, passed in a special session, changed the state’s building code, which had long required full replacement if just 25% of a roof’s area was damaged.