In the wake of Hurricane Sandy, the conversation has shifted more and more to the legal issues that will arise in the upcoming litigation over denied claims. In other words, homeowners who have suffered damage, and unfortunately had their insurance claims denied, are wondering if they will ultimately be paid for their losses.
Unfortunately, there is no general answer, because the determination is highly fact-sensitive, hinging on what type of damage was suffered and the particular language in an individual policy.
As a condition for getting a mortgage, some lenders required homeowners in flood areas to purchase flood insurance. However, not all homeowners in these areas have flood insurance. As a result, they are left to see if their homeowner policies will provide coverage. Often, this determination will turn on whether the damage was caused by wind or water. If the latter, the policyholder will in most cases be out of luck.
In fact, the standard homeowner policy contains a lengthy exclusionary clause that bars coverage for a whole host of flood and water conditions. It is extremely important in these cases to have the home inspected by a qualified expert engineer – and not one working for the insurance company – to determine how the damage was caused. There are undoubtedly many cases where what at first blush appeared to be flood damage was the result at least in part of wind damage.
Many commercial property owners are filing claims for business interruption, if available under their policies. This type of coverage extends beyond compensation for purely physical damage to the premises to cover the loss of income that results from the property damage caused by a covered event. Furthermore, contingent business interruption coverage typically provides coverage for loss of income in business operations caused by physical damage to a customer’s or supplier’s business due to a covered event. Some insurers also provide insurance coverage for business interruption loss caused by a loss of utilities or orders of a civil authority.
Many insurance consumers who are business owners are unaware of this type of coverage.
No doubt after the mass devastation inflicted by Hurricane Sandy, never before seen in this part of the country, many homeowners and business owners will reconsider their decision to go without flood insurance. Now is an opportune time to review your insurance policy and see if you are properly covered for the future.