Hurricane Sandy Raises Familiar Questions of Insurance Coverage
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UPDATED: Oct 31, 2012
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As the Northeast recovers from the damage caused by Hurricane Sandy, many residents and business owners now look to a new challenge – recovering the costs of the damage from their insurance company. While the cost of the losses resulting from Sandy will not be fully determined for some time, it is likely they will far exceed the billions of dollars in damage caused by Hurricane Irene last year. In the face of staggering losses, residents face a long and potentially contentious process of collecting insurance money.
Insurance Coverage for Hurricane Damage
The problem that hurricanes like Sandy create with insurance coverage comes down to how the damage was caused. Most insurance policies have coverage for damage caused by wind, fire, and theft, but it is not common for a home or business insurance policy to include flood damage – in fact, policies specifically exclude it. Because hurricanes cause water damage that is typically excluded from an insurance policy, home and business owners could see their claims denied or face settlement offers that don’t come close to covering the cost of damage.
When insurance companies face such a costly disaster, it is not uncommon for them to find ways to deny or short pay claims. Knowing this, it is important that anyone working with an insurance company be wary of claims denied in bad faith without fair review of how the damage was caused. Every state has laws against bad faith insurance denials, and residents and business owners may have the option of pursuing legal action against their insurance company for claims that have been unfairly denied.
Bad Faith Insurance Litigation
Accusations of bad faith claims denials that result in legal action following a hurricane are nothing new. In the wake of Hurricane Katrina, thousands of home and business owners faced denials or low settlement offers from their insurance companies. Many of these people disputed the reason for their denials, and filed bad faith insurance lawsuits that took several years to resolve. Not every suit went in favor of the insured parties claiming bad faith, but some lawsuits did net a higher return for home and business owners who lost everything.
Lawsuits against insurance companies require the courts to examine how the damage was caused, and determine if the insurance company fairly denied coverage. In some cases, insured parties can argue that the damage was caused concurrently by wind and by flooding, which then should qualify them for at least partial coverage. In other cases, the insured can dispute what caused each specific loss as some might be by flood and others by wind. In any lawsuit, success will depend on the insured party’s ability to show that the insurance company did not fairly review the claim before denying it or offering an inadequate settlement.
Preparing for Insurance Claims After Hurricane Sandy
Collecting insurance after Hurricane Katrina evolved into a separate story of disaster for residents attempting to pick up the pieces, and the same scenario looms for the victims of Hurricane Sandy. Insured parties affected by Hurricane Sandy need to be aware that insurance companies will receive thousands of claims for millions of dollars, and most policies give the company an easy way to deny coverage or offer low settlements. Insurance companies recognize that they are dealing with a vulnerable population desparate for any sum of money to help them recover from the damage, and it is not difficult to low ball residents and business owners who don’t understand the insurance process. While many residents may also pursue federal government recovery funds, those hit hardest by Hurricane Sandy will need to take every step possible to collect insurance money.
Part of recovering from Hurricane Sandy should involve thorough documentation of damage that indicates cause, mitigation of ongoing damages (such as mold) as required by law, and preparation for a potentially difficult fight with the insurance company. Before filing a claim with the insurance company, it is important to inventory all damage, identify its cause, know what the policy covers, and take the time to make a thorough claim that demonstrates why the policy should cover the losses suffered. Anyone who can afford to hold out should be wary of the initial settlement offer, and be ready and willing to pursue litigation for bad faith insurance denial. The occurrence of bad faith insurance litigation after a hurricane is as reliable as death and taxes, and an insured party who feels they have been wronged can find a qualified attorney ready to listen.