All binding authority is automatically suspended by insurance companies during times of an impending disaster and during times of disaster. Examples of disasters that cause automatic suspension are: wildfire, hail, tornado, hurricane, riot, civil commotion, or earthquake. In this instance, the burning of wildfires located throughout Colorado has been determined as a cause to immediately suspend binding of insurance for the affected areas.
The suspension of binding authority applies to all real estate transactions, (new business, reinstatements, increased coverage and additional coverage). Insurance companies restrict this authority so that they do not bind a risk where insurance is being purchased through fear of loss, due to any increase in normal hazard from any source. Limitation is applied to help the insurance companies control their exposure to high-risk conditions and allow them to focus on the needs of, and obligations to, their existing customers during the time of disaster. No insurance coverage shall be bound, no applications accepted, or no coverage increased in any areas determined by the insurance company at risk for damage by fire or smoke.
After any other disaster event, binding authority is restored when notification is received from the Service Center. There is no blanket restoration, rather it occurs on a company-by-company basis. Zip codes are evaluated (both restricted and released) individually. Insurance companies will continue to evaluate the situation and once an area has been deemed safe from further damage from the specific fire (including potential smoke damage), authority will be reinstated and real estate transactions may resume. Note: Insurance binding restriction was an issue in Larimer County during the High Park fire. The entire 80538 zip code was affected, impacting the City of Loveland as well as parts of Larimer County that were not in danger from the fire.