From:      Jay Angoff, Director

Re:          Cancellation of Flood Victims Insurance

Date:       September 30, 1993

Some insurers have asked whether cancellations of dwellingowners' and homeowners' insurance covering property subject to the recent floods are authorized by state law on the grounds that physical changes in the property insured have increased the hazards originally insured.

Section 375.002(4), RSMo 1986, does not authorize insurers to cancel dwellingowners' and homeowners' insurance because the insured property has been the subject of floods. The Missouri Department of Insurance's (MDI's) position, which the MDI also believes is the correct judicial interpretation, is that a flood does not cause physical changes in the property insured which increase the hazards originally insured against. No demonstrable causal connection exists between a flood and increase in insured perils. A flood does not increase the odds of an occurrence of a fire or other insured hazard.

Cancellation of flood victims' dwellingowners' and homeowners' insurance merely because of flood will be treated by MDI as a willful statutory violation, subjecting the insurer to cease and desist orders and monetary penalties under sections 374.046 and 374.280, RSMo.