Staying Covered in Wind v. Flood Property Insurance Disputes

 
 

wind

Many policyholders have wind coverage, but not flood coverage. With some insurance policies, the distinction between the two and the timing of resulting damage can be crucial in successfully obtaining insurance dollars to offset losses when the worst happens. Unfortunately, reports commissioned by insurance companies too often overlook facts that could give rise to coverage (e.g., instances where the actual cause of the loss was wind-derived damage that may have subsequently allowed flooding).

Competing causes are of particular concern when it comes to property insurance policies that contain so-called anti-concurrent causation clauses, which insurance companies often rely on to deny coverage when wind and flood are in play. Where wind and water combine, therefore, policyholders are well advised to take a close look at how two or more causes interact. Even in insurance policies without anti-concurrent causation clauses, some insurance policies contain provisions that purport to both provide coverage and exclude coverage stemming from flooding with complicated (and often unclear) terms that focus on the sequence of the damage and the interplay of two or more perils. Thus, policyholders are wise to inspect these policy terms closely when considering the circumstances of their property loss or damage.

Anti-concurrent clauses stand traditional policyholder protections on their head by purporting to preclude all coverage where at least one uncovered cause allegedly contributes to a loss. These clauses are so questionable that draft legislation is presently circulating in New York to curtail their use, if not ban them altogether. Some courts have held that they violate public policy.

Even in those jurisdictions that permit the use of such clauses, where damage can be separated in time or causally, a thorough review of the facts by a neutral engineer or meteorologist may establish insurance coverage for a claim even where flooding was a factor and the policy does not include flood coverage.

Efficient Proximate Cause
Over the years, courts generally have looked to the “efficient proximate cause” in evaluating what caused a loss. Efficient proximate cause may sound complicated, but is really just a fancy way of saying that for coverage to apply, a “covered peril,” such as wind, had to be the actual cause of all or part of the loss, not merely one link in an extended chain of causation leading up to damage.

For the reasons mentioned above, coverage disputes involving wind and water may boil down to the competing testimony of one “expert” against another. Many experts obtain their bread and butter through the insurance business they generate. Recently, a policyholder significantly helped support its own claim following a substantial Sandy loss by hiring a meteorologist to address the assertions of the insurance company’s expert. The meteorologist’s report showed that the initial insurance company report did not rely upon official data. In fact, some of the data was not even derived from nearby collection points. The insurance company report also ignored the timing of the actual storm development and minimized the potential damage from wind shear, despite evidence of high winds near the ground and whipping around structures.

That Asserted Coverage Defense May Be Indefensible
The fundamental points, as with almost all coverage disputes: 1) do not just take no for an answer; 2) review the insurance company rationales with an appropriate air of skepticism and consider retaining your own expert; 3) always re-read the policy language. Denial letters have been known to selectively quote policy terms and conditions and may also take exclusionary language out of context. A fact that appears to favor a coverage defense at first blush often can be construed in a way favorable to coverage.

A favorable interpretation where insurance policy language is unclear is your right as a policyholder, especially when it comes to terms that seek to limit or bar coverage. Such policy provisions must also be set forth clearly and are to be construed narrowly. Ambiguities in policy language or structure (e.g., conflicting language in two or more places) must be interpreted in the policyholder’s favor. Most insurance policy language is essentially offered on a take-it-or-leave-it basis and thus insurance policies are routinely referred to as contracts of adhesion. The law in almost every state requires that unclear policy language be construed against the insurance company. In fact, the Florida Supreme Court recently reaffirmed this point in an important insurance coverage ruling.

Storm claims can be particularly complicated where certain evidence is not readily available or is otherwise in dispute, such as when wind damage precedes water damage. You and your property may be all wet after a loss, but you need not stay that way. Dry yourself off, stick to your guns and show your insurance company that you have the same kind of resolve in pursuing your claim as it may have in finding reasons to deny it.

 

 
Joshua Gold

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About the Author

Joshua Gold, a shareholder in Anderson Kill's New York office and chair of Anderson Kill’s Cyber Insurance Recovery Group. He regularly represents policyholders in insurance coverage matters and disputes concerning arbitration, time element insurance, electronic data and other property/casualty insurance coverage issues.

John G. Nevius

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About the Author

John G. Nevius is a shareholder in the New York office of Anderson Kill & Olick, P.C. He is also a registerered professional engineer, has successfully resolved and litigated a variety of legal and technical matters, most of which involve insurance coverage. He provides advice and scientific expertise to clients on a wide range of engineering issues and has represented numerous Fortune 500 companies.

 
 

4 Comments

  • Insurance sector stability depends on the consumer and the customer of it. There is a particular age to do insurance in your name and also which type of insurance you should do these all are important. Also insurance are of two type short term and long term. So before doing any insurance you should be confirmed first about that. From my own experience insurance should be very particular and should be a profitable one.

     
  • This is very insightful. People who are living in frequently flooded and stormed communities/zones should know about this. Thank you, Joshua and John, for raising awareness about this topic.

     
  • Living in flooded areas is hard. Preparation is what you really need to prevent life losses. It's better to live in a secured and peaceful place than to live in coastal areas.

     
  • After the wettest year in the UK flood victims are having a huge battle with insurance companies. As you would expect insurance companies are overwhelmed with claims running in from around the country…however the UK government have come under fire due to poor responses and poor floor defences.

     
 

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