But a bigger surprise arrived when she submitted the bill to her insurance company, with which she had taken out a deluxe policy to cover such losses. Her agent invoked a “tropical cyclone” clause and increased her out-of-pocket deductible from $500 to $10,530.
That’s a 2,000 percent increase.
“I was upset,” Nowottnick said. “I’d never heard of the clause before.”
Other Maryland homeowners said their agents gave them the same painful news.
But now, it might be the insurance companies’ turn for an unwelcome surprise. Maryland statutes forbid such increases in counties not affected directly by the hurricane.
Asked if Nowottnick’s escalating deductible was prohibited by law, Maryland Insurance Administration spokeswoman Betsy Charlow wrote in an e-mail: “Because this homeowner lives in Anne Arundel County, and this county had no hurricane warning, his or her insurer may not invoke the hurricane deductible.”
A few hours after The Washington Post asked Maryland Insurance Commissioner Therese M. Goldsmith about the rising deductibles last week, she posted a warning to insurance companies on the state Web site.
“If an insured’s home is not located in a part of the State that was subject to a hurricane warning . . .a Percentage Deductible may not be imposed,” the warning said. The only counties where such deductibles applied are Caroline, Dorchester, Somerset, St. Mary’s, Talbot, Wicomico and Worcester.
Elsewhere, homeowners are not so lucky. In Virginia, companies may issue policies that increase deductibles for any “named storm,” or even for general wind damage. Insurers in the District also have a variety of options. Regulators there said homeowners should check their policies to ensure that any increases are valid.
“It can differ significantly from the mountains to the coast on whether companies require them,” said George Lyle of the Virginia Bureau of Insurance. “And each company can define when their deductible can kick in.”
Maryland regulators said they have fielded dozens of inquiries from homeowners about the deductibles since the storm and the subsequent warning to insurers. Regulators in the District and Virginia said that they have received no formal complaints yet.
Insurance companies first widely introduced percentage deductibles after earthquakes struck the western United States in the early 1990s. After Hurricane Isabel in 2003, companies began expanding their use to limit payouts for hurricanes in the South and East and for tornadoes and hail in the Midwest.
Today, more than a dozen states on the East and Gulf coasts allow hurricane deductibles. They typically range from 1 percent to 5 percent of the insured value of a home. In Nowottnick’s case, her home was insured for $351,000, so her 3 percent deductible would be more than $10,000. That means Nowottnick would be required to pay that amount before insurance kicked in to cover the remainder of the damages.
The higher deductibles weren’t in place in 2003, the last time a major hurricane-related storm rolled through the Washington region. Nowottnick said her $500 deductible was in force then.
“It’s a major change,” she said. “I think there were a lot of customers like me who were shocked at the news and didn’t know what to do about it.”
A Maryland law that was passed in 2008 requires insurers to provide their customers with an annual notice about the deductibles. Virginia introduced a notification requirement in 2004. “We were concerned it would surprise some people,” Lyle said.
But Nowottnick and other homeowners interviewed said they did not recall being warned.
“When you renew your policy every year, you get multiple pages. You don’t really notice,” Nowottnick said.
Goldsmith said she is looking into issues surrounding the deductibles, and she encouraged homeowners who did not receive the required notices to contact her office. Regulatorsalso recommended that consumers shop around to make sure they have the best policy for their particular situation.
Debbie Pickford, a spokesman for Allstate Insurance, said her company notified an unknown number of policyholders in Maryland in recent weeks that the higher hurricane deductible was in effect after Irene. “People were surprised,” she said.
Now, Allstate agents are contacting customers again in many counties to say the standard deductibles remain in effect after all.
“It was just a different interpretation of the way we thought hurricane deductibles would apply,” Pickford said. “But we took a look at it, agreed with Maryland, and now we’re contacting customers.”
Nowottnick’s case had a mixed ending. On Tuesday, her insurance agent sent her an e-mail. “I just got good news,” it read. “For Anne Arundel county, the regular deductible applies.”
Unfortunately, the agent added, the company would revoke the 15 percent discount Nowottnick had been receiving for not having filed a recent insurance claim.