The Comprehensive Disaster Insurance Protection Act (CDIPA) Law I would propose

 

The Comprehensive Disaster Insurance Protection Act (CDIPA)

Section 1. Short Title.
This Act may be cited as the “Comprehensive Disaster Insurance Protection Act” or CDIPA.

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Section 2. Findings and Purpose.
(a) Findings:

1. Severe natural disasters, such as hurricanes, earthquakes, wildfires, and floods, cause major disruptions to the lives and property of Americans.
2. Insurance protection is critical to the financial stability of individuals and communities after such disasters.
3. Certain practices by insurance providers—such as abrupt policy cancellations, denial of valid claims, and rate spikes in low-risk areas—undermine public confidence and hamper recovery efforts.

(b) Purpose:

1. To ensure fair and comprehensive coverage for policyholders affected by major disasters.
2. To set standards and restrictions on policy cancellations, denials of claims, and excessive premium increases.

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Section 3. Definitions.
For purposes of this Act:

1. Major Disaster: Any incident formally declared a “major disaster” by the President of the United States under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122(2)) or any successor statute.
2. Insurance Provider: Any insurer, re-insurer, or underwriting entity that issues property or casualty insurance policies in the United States.
3. High-Risk Area: An area officially designated by the Federal Emergency Management Agency (FEMA), or another relevant federal agency, as prone to frequent or severe disasters.

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Section 4. Mandatory Coverage of Losses in Major Disasters.
(a) Coverage Requirement:

1. An Insurance Provider must extend coverage to all policyholders for direct physical losses and damages arising from a Major Disaster, consistent with the terms of their existing policies.
2. Any attempt to limit or exclude coverage for Major Disasters, once the policy has been issued, shall be deemed void and unenforceable except when a specific written exclusion was agreed upon by both parties at policy inception (and is not otherwise prohibited by law).

(b) Full Payment of Claims:

1. When a loss is determined to be covered, the Insurance Provider shall pay the claim promptly according to the policy terms.
2. Insurance Providers are prohibited from placing arbitrary or excessive documentation requirements on claimants in an effort to avoid paying legitimate claims.

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Section 5. Prohibition on Certain Policy Cancellations.
(a) Cancellation Moratorium:

1. An Insurance Provider shall not cancel or refuse to renew a policy for any reason related to a Major Disaster for which a claim has been filed, except in cases of fraud or nonpayment of premiums.
2. Cancellation for nonpayment of premiums shall be permitted only if the policyholder is at least ten (10) days past the due date without making any payment.

(b) Notice Requirement:

1. Before canceling or non-renewing a policy, an Insurance Provider must provide a written notice to the policyholder via mail or electronic communication, at least fifteen (15) days before the effective date of cancellation or non-renewal.

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Section 6. Stricter Standards for Claim Denials.
(a) Burden of Proof:

1. The burden of proving that a claim is not covered lies with the Insurance Provider.
2. The Provider must cite specific policy provisions and present clear and convincing evidence as to why a claim is not covered.

(b) Documentation and Explanation:

1. Any denial of a claim must be accompanied by a detailed explanation of the denial grounds, including the policy language relied upon and the facts supporting the denial.
2. Failure to provide adequate explanations, or any denial deemed to be in bad faith, shall subject the Provider to regulatory penalties under Section 8.

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Section 7. Restriction on Premium Rate Hikes in Non–High-Risk Areas.
(a) Prohibited Practices:

1. An Insurance Provider shall not implement excessive or unwarranted premium rate increases on properties located outside of designated High-Risk Areas.
2. Any proposed rate increase greater than ten percent (10%) in a twelve-month period for policies in non–High-Risk Areas must be filed with the relevant State Insurance Commissioner and accompanied by actuarial data justifying the increase.

(b) Review Process:

1. Upon filing, the State Insurance Commissioner shall review the proposed rate increase to ensure it is neither arbitrary nor excessive.
2. If the Commissioner determines the increase to be unjustified, the Commissioner shall reject or modify the requested rate.

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Section 8. Enforcement and Penalties.
(a) Enforcement Authority:

1. The Federal Trade Commission (FTC) and the relevant State Insurance Commissioners shall have joint authority to enforce the provisions of this Act.
2. They may issue cease-and-desist orders, impose civil penalties, or seek injunctive relief in federal court against any Insurance Provider found to be in violation.

(b) Penalties:

1. Civil penalties may include fines of up to $100,000 per violation or up to $1,000,000 for repeated or willful violations.
2. Insurance Providers that engage in a pattern of bad-faith claims denials or cancellations may be subject to additional penalties, including the suspension or revocation of their license to operate in one or more states.

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Section 9. Effective Date.
This Act shall take effect one hundred and eighty (180) days after its enactment.

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Section 10. Severability.
If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.