Insurance Coverage Concerns During Hurricane Season
In the wake of Hurricanes Harvey and Irma (and in anticipation of the remainder of hurricane season) homeowners and businesses will turn to their insurance companies. However, most policies do not provide flood coverage. If the past is any indicator, there will be an influx of coverage disputes and related litigation stemming from the damage caused by these storms.
Where the damages are covered, both insurance companies and their policyholders must be prepared to deal with potential application of named storm deductibles. However, in many circumstances, hurricanes often raise other issues that can complicate coverage investigations.
As we saw with Superstorm Sandy, problems can arise due to concurrent causation, where covered (wind) and excluded (flood) perils combine to cause a loss. Some courts, but not all, enforce policy language designed to circumvent this issue. Our survey of state law regarding enforceability of anti-concurrent causation clauses can be found here.
Civil Authority Coverage may also be an important consideration. This type of coverage applies to situations where access to a policyholder’s business is prevented or prohibited by an order of a civil authority that is issued as a direct result of physical damage to other properties near the policyholder’s property. In these circumstances, the policyholder will often seek to recover the income lost as a result of the civil authority order.
Thankfully, storms that cause devastation to the degree seen with Hurricanes Harvey and Irma are relatively infrequent. As a result, the law in these areas can be underdeveloped. It is important for policyholders to document their losses for their insurance company. It is equally important for insurance companies to conduct a detailed investigation when there is a dispute over the cause of the damage or the extent of the loss.
Timoney Knox will continue to monitor these important issues and report any significant developments. Please contact any member of our Insurance Industry Group for more information or inquiries.