Iowa FAIR Plan and Standard Fire Policy

The Iowa FAIR Plan Association (Iowa Code 515F.31 through .38)

Iowa’s Fair Access to Insurance Requirements Plan — the Iowa FAIR Plan Association — provides essential property insurance for Iowa property owners who cannot obtain coverage in the voluntary market. Like FAIR Plans in other states, Iowa’s plan exists because some properties — older buildings, properties in higher-loss areas, properties with prior claim history — are difficult to insure in the standard market, but property owners still need coverage to obtain mortgages, satisfy lender requirements, and protect their investments.

Statutory Framework (Iowa Code 515F.31 through .38)

• Establishment (Iowa Code 515F.33 and 515F.34). Iowa Code creates the FAIR Plan as an association of all licensed property insurers in Iowa, required to participate as a condition of doing property business in the state.
• Purpose (Iowa Code 515F.31). To provide an avenue through which essential property insurance may be obtained by property owners who have been unable to procure such insurance in the voluntary market.
• Operations (Iowa Code 515F.36). Administered by a governing committee, subject to the Iowa Insurance Commissioner’s supervision, under a plan of operation and articles of association.
• Eligibility (Iowa Admin Rule 191-20.49). Property owners may apply after being unable to obtain voluntary-market coverage. Iowa FAIR Plan typically requires evidence that the property has been declined in the voluntary market.
• Coverage (Iowa Code 515F.32(1)). The FAIR Plan offers basic property insurance — the standard fire policy with extended coverage and vandalism and malicious mischief endorsements, and homeowners insurance — at premiums actuarially sound for the risk. Perils covered include fire, extended coverage (windstorm, hail, vehicle, smoke, explosion), and vandalism, depending on the form.
• Member assessments (Iowa Code 515F.36). Member insurers share in profits or losses based on their proportionate share of voluntary-market property premiums.
• Inspections (Iowa Admin Rule 191-20.50). Property may be subject to inspection as a condition of FAIR Plan coverage.
• Discrimination prohibited (Iowa Admin Rule 191-20.51). The Plan may decline a risk only for failing reasonable underwriting standards or pending reasonable improvements, and those standards may not include neighborhood or area location or any environmental hazard beyond the owner’s control.

The Standard Fire Policy (Iowa Code 515.109)

Iowa Code 515.109 codifies the Iowa Standard Fire Policy — Iowa’s adoption of the New York Standard Fire Policy framework that has been the foundation of American fire insurance since 1943. Every Iowa fire insurance policy must contain coverage no less favorable than the Standard Fire Policy on:

• Insuring agreement. The basic promise to indemnify against direct loss by fire, lightning, and removal.
• Concealment, fraud, suspension. The policy is void if the insured concealed or misrepresented material facts.
• Excluded property. Defined property is excluded (typically accounts, bills, currency, deeds, evidences of debt, money, securities).
• Conditions suspending coverage. Material change in occupancy or increase in hazard within the insured’s control.
• Other insurance clause.
• Loss settlement rules — actual cash value at the time of loss.
• Duties after loss. Notice of loss, protection of property from further damage, separation of damaged from undamaged property, inventory, examination under oath, production of records.
• Appraisal provision when the insured and insurer disagree on the amount of loss.
• Suit limitation. Time within which suit may be brought against the insurer.
• Subrogation. Insurer’s right of recovery against third parties.

Property Cancellation and Nonrenewal (Iowa Code 515.125 through .131 and 515D.4 through .7)

Iowa regulates property cancellation and nonrenewal carefully. Two parallel statutory tracks apply: Iowa Code 515.125 through .131 (general property cancellation rules) and Iowa Code 515D.4 through .7 (personal auto cancellation):

Cancellation Within the First 60 Days

During the first 60 days of a new policy, the insurer may cancel for almost any underwriting reason with the statutory notice period. This window allows the insurer time to complete its underwriting review without making a long-term commitment based on incomplete information.

Cancellation After 60 Days

After the first 60 days, cancellation is restricted to limited grounds:

• Nonpayment of premium. Defined notice period (typically 10 days).
• Material misrepresentation in the application.
• Substantial increase in the hazard insured against.
• Violation of a material policy condition.
• Loss of reinsurance affecting the policy (commercial lines only, and only if the commissioner finds the cancellation justified).

Nonrenewal

Nonrenewal of a personal lines policy such as homeowners requires advance written notice from the insurer — at least 60 days before the end of the policy period — with the specific reasons for nonrenewal stated (Iowa Code 515.129B); a commercial lines policy requires at least 45 days’ notice (Iowa Code 515.128). The insured then has time to seek alternative coverage.

Notice Requirements

Iowa’s cancellation and nonrenewal notices must be:

• Written. Delivered in person to the insured or sent by first-class mail to the insured’s last known address.
• Timely. Within the statutory notice period appropriate to the reason for cancellation.
• Specific. Stating the reason for cancellation or nonrenewal — in the notice itself for a personal lines nonrenewal or a commercial lines cancellation, and otherwise in writing on the insured’s timely request.
• Compliant with mortgagee notice requirements when applicable — the insurer must notify the mortgagee or other secured party in addition to the insured.