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Layton Bordelon, left, and his son Kelly Bordelon, center, survey the water surrounding Kelly's home on Bordelon Road No. 2 in Lettsworth on MOnday, July 15, 2019, after sustained heavy rain from the remnants of Hurricane Barry caused problems around Lettsworth in Pointe Coupee parish; water threatened a number of houses, and got into a few to cause damage. The rain started in around 2:30 a.m., said Layton whose house on across the street was surrounded by water, but stayed dry inside; his son was not so lucky, getting a couple of inches of water inside his recently-remodeled home.

Louisiana's insurance commissioner issued an order Thursday to stop State Farm from imposing higher deductibles on homeowners who may have suffered damage last month before Barry was declared a hurricane.

The Louisiana Department of Insurance was acting off a complaint it received on July 17 from a State Farm policyholder, who claimed the insurer was requiring its higher hurricane deductible for damage that happened before the storm was officially declared a hurricane on July 13. The department says the hurricane deductible should not apply to damage inflicted before that date and that its cease and desist order benefits any State Farm customer who is facing the same situation.

The dispute centers on language regarding "hurricane duration" deductibles contained in homeowner policies issued by State Farm, which has about 300,000 customers in the state.

"For Hurricane Barry, the hurricane deductible applies starting at the point when a hurricane watch or warning was issued for any part of the state of Louisiana by the National Hurricane Center of the National Weather Service and ends 72 hours after the termination of the last hurricane watch or warning for any part of the state," State Farm said in a statement Thursday.

A hurricane watch was issued for Hurricane Barry on July 10 and a hurricane warning was issued on July 11, according to the National Weather Service National Hurricane Center. It was classified as a hurricane just before hitting Louisiana July 13.

Insurance Commissioner James Donelon, who is seeking re-election, said he has several discussion and met with State Farm officials to discuss the policyholder complaint. The company said that it would impose a hurricane deductible on the customer's losses rather than a less expensive out-of-pocket deductible known as "all peril" that traditionally covers fire and other damage. The all peril deductibles are typically $500 or $1,000.

Many insurers in the state also have hurricane deductibles written into policies that range from 2% to 5% of the value of the house. In State Farm's case, it has a 2% hurricane deductible, which it rolled back this past spring from 5%.

So a homeowner with a 2% hurricane deductible on a $300,000 house would pay up to $6,000 out of pocket before insurance kicks in to pay for property damage — as opposed to the traditional $500 or $1,000 all perils deductible.

State Farm has 30 days to appeal the cease and desist order against imposing the hurricane deductible to damage inflicted before July 13. 

"We fundamentally disagree with the (Department of Insurance's) position and rationale and we are exploring all of our options to address this order," State Farm said in its statement.

State Farm said that the Department of Insurance approved its policy language "many times without issue" and that  hurricane deductibles have contributed to keeping the price of homeowner premiums down in Louisiana.

The company also claims that eliminating its hurricane duration deductible or modifying its policy "would have a negative long-term impact on insurance affordability for over 300,000 State Farm customers in Louisiana."

Donelon said that State Farm's interpretation “ignores the irregular, but relevant aspects associated with the development of the Barry storm event prior to its designation as a hurricane.”

There were several complaints filed with the department after Hurricane Barry, but just one complaint related to hurricane deductibles, the Insurance Department said.

Its unclear how many damage claims were filed with State Farm. In a story after the hurricane, State Farm had said as of July 15 it had about 730 homeowner claims in the state for any loss, which includes wind, water or even tree damage. Homeowner policies don't cover flood water, which Barry primarily caused. Flood insurance is issued through a federal program.

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