Articles Tagged with Property Damage and Hurricane Claims

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Over the last six months, South Louisiana residents and businesses have experienced unprecedented flooding events that exposed many property owners to the difficult process of filing a flood related insurance claim. While some of us learned these painful lessons in the aftermath of Hurricane Katrina and other storms, residents and businesses in many affected areas are new to the process and face dangerous pitfalls if their claims are not handled properly. This article is intended to give property owners a brief overview of what flood insurance is, what it isn’t, and some advice about dealing with your insurance company. For additional information about other forms of financial assistance, safety tips during clean up, and the first steps in filing a claim, please see here.

First, it is important to know how flood insurance is different from your homeowner’s or commercial building insurance. If your property is under mortgage, you are required to carry property insurance to protect your property against the risk of fire, wind damage, and certain other losses. If you are also in a designated flood zone, you are additionally required to carry separate flood coverage, because, as you probably know by now, flood damage is not covered by homeowner’s policies. Flood insurance policies may be provided from the National Flood Insurance Program (NFIP) directly or through private insurers, but, in either case, the federal government underwrites the policies and pays for covered losses. Regardless of the value of the property insured, these policies are capped at $250,000 for residential building coverage, $100,000 for contents, and $500,000 for commercial buildings (i.e., this is the most that the insurance will pay for a particular event).

Before your flood insurer will pay a claim, they will require a sworn proof of loss statement—essentially, a form itemizing all of your damages that you swear is true. The proof of loss statement must be provided within 60 days of the loss. The importance of this document cannot be overstated. If you do not file it timely, or if you fail to list all your damages, your right to recover for your losses could be gone forever.

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For those of you unfamiliar with insurance-related appraisal process, as an alternative method of resolving insurance disputes, you should note that most insurance policies provide that after an insurance company has had the opportunity to adjust a claim, if there is disagreement, either side may request a form of arbitration called “appraisal.” The time to request the appraisal is not limited, in most instances, and has been condoned by the courts even after law suits are filed and discovery has begun. It is common for insurance companies to assign a favorite son as their appraiser and to invite the insured-plaintiff to appoint an appraiser. The two appraisers select an Umpire, who is asked to decide the case if the appraisers are unable to agree on the amount of damages.

One would think that the appraisal process eliminates the need for the law suit, however, most policies provide that even after the appraisal process is completed, the Umpire has ruled, the case may be litigated by the insurance company. It need only refuse coverage, or deny the claim, requiring litigation. Delays by the insurance company appraiser are common place in our experience, driving to the extreme the time and cost of the adjustment process. Further delays without repairs under the first party property and casualty policy work in Texas without the real prospect of penalties for late payment. Where the prospect of penalties was present in the law suit, the delays and abuses of appraisal are seldom considered by Texas courts to justify penalties for arbitrary and capricious refusal to pay, even where the Umpire rules that the damages are due and is evident that the insurance company had no legitimate basis to refuse to pay.

Of course, by its very nature, the appraisal process calls for an expedited alternative dispute resolution process, however, because it is not final, because it leaves to the insurance company the right to accept or reject the findings and there are not any penalties for arbitrary and capricious refusal to pay in Texas, the process operates to frustrate claimants and the lawyers hired to help prosecute claims for the insured. The insurance company right to reject the appraisal process after it is completed is just one of the several obstacles placed in the way of legitimate claims. Another is the assertion without basis by insurance companies in Texas that the appraisal process should be handled like “baseball arbitration,” where the Umpire is limited to accepting either the insurance appraisal or the claimant appraisal. The recent case of Providence Lloyds Ins. Co. v. Crystal City Ind. School Dist., 877 S.W. 872 (Tex App. San Antonio 1994) shows the claim of an insurance company to baseball arbitration. In that case the appellate court reversed the trial court ruling with the following ruling against baseball arbitration:

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After Hurricane Ike, residents of Galveston and Bolivar Islands discovered they did not have the insurance their agent had told them they purchased. To recover, a claim must be brought against the agent.

Defense – Coverage Not Obtainable

Sometimes, the defendant in an action against an insurance agent or broker for failure to procure insurance coverage will attempt to avoid liability by showing that the client’s failure to obtain the desired coverage was not caused by any wrongdoing on the defendant’s part because the desired coverage was not obtainable from any source. Where such a claim is made, the defendant generally will bear the burden of proving it as an affirmative defense. Stevens v Wafer. The burden of proof is said to be placed on the defendant because an insurance agent or broker is in a better position than the client or the intended beneficiary to determine the availability of insurance coverage.
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