Q&A about SuperStorm Sandy Insurance Issues

Q. There have been a series of descriptions of Sandy, Hurricane, Superstorm, or Tropical Storm.  For insurance, does it matter what it is called.   Who will decide what it is called?
The National Weather Service determines whether a storm is called a hurricane, a tropical storm, or some other type of storm system. What a storm is called does matter for insurance as it determines the amount of deductible an insured is required to pay if insurance coverage is available under an insurance policy. Many states’ insurance departments permit or mandate that insurance companies create hurricane deductible programs for homeowners’ insurance. If a storm is determined to be a hurricane, an insured may be required to pay a hurricane deductible. Hurricane deductibles are significantly higher than standard deductibles as they are based on a percentage of the coverage limits of the insurance policy. For example, in New Jersey, the regulaits successor from which sustained hurricane force winds of 74 mph or greater have been measured in New Jersey by the National Weather Service….”  Superstorm Sandy was downgraded from a hurricane to a tropical storm right before it hit landfall. However, notwithstanding what Superstorm Sandy was called, New Jersey, New York, Pennsylvania and Connecticut issued executive orders prohibiting insurance companies from imposing more costly hurricane deductibles on homeowners.
I have also heard that the type of damage may affect coverage.  If it is wind damage, what will happen?
What type of damage an insured sustains and the cause of that damage does affect whether coverage will be provided and the scope of that coverage under an insurance policy. Consequently, wind damage will trigger a different coverage analysis under the terms of the policy than flood damage. Damage by wind storms is generally covered under a standard homeowners’ insurance policy or property policy.
Does it make a difference if it is flooding from a storm surge?
Insurance for flooding is excluded under most homeowner insurance and property policies. Insurance coverage for floods can be obtained through the National Flood Insurance Program (“NFIP”) which issues flood insurance policies to homeowners, renters and business owners. Policies issued under the NFIP define what constitutes a flood.  Generally speaking, flood insurance does provide insurance coverage for damages associated with a storm surge which is related to “overflow of inland or tidal waters” or an “unusual and rapid accumulation or runoff of subsurface waters from any source.”
What happens if the flood was from a storm surge, and I do not have flood insurance?
For homeowners and businesses who do not have flood insurance, more than likely there will be no insurance coverage for them through their respective homeowners’ insurance and property insurance policies.  If you do not have any insurance that will pay for the damages associated with the flood, you can apply for assistance to the Federal Emergency Management Agency (“FEMA”). FEMA provides financial assistance to eligible individuals who have no insurance to pay for their expenses as a result of a disaster. In order to obtain assistances from FEMA, individuals need to apply to FEMA who will process the application to determine eligibility and conduct any inspections of the property. Apply at www.disasterassistance.gov or 800-621-3362. It is important to understand that FEMA will not cover all of the losses from damage to an individual’s property; FEMA is designed to help only with critical expenses. Additionally, FEMA does not cover business related losses that result from the disaster.
Individuals and business can also obtain assistance in the form of loans from the Small Business Administration.
It seems that I have insurance that will cover the loss.  Will it cover replacement of my house and everything in it?
The scope of coverage depends upon the type of policy (flood or homeowners/property), the nature of the policy (replacement cost vs. actual cash value) and the limits of the policy. A standard homeowners’ insurance policy generally covers storm damage to the home, its contents and other structures, such as a garages, as well as covering costs associated with the removal of debris. Whether your insurance policy will replace your entire home depends upon the type of coverage you elected. Policies can provide replacement cost or actual cash value.  If your policy provides coverage on a replacement cost basis, coverage will be provided for the actual cost to repair or replace your property subject to your policy limit. If your policy provides coverage on an actual cash value, coverage provided will include an amount for depreciation for the age of your home and contents.
The scope of coverage provided by flood insurance also depends upon whether you elected: building and/or personal contents.
The NFIP advises that flood insurance provides the following coverage:
BUILDING

• The insured building and its foundation
• Electrical and plumbing systems
• Central air conditioning equipment, furnaces
• and water heaters
• Refrigerators, cooking stoves and built-in appliances such as dishwashers
• Permanently installed carpeting over unfinished flooring
• Permanently installed paneling, wallboard, bookcases and cabinets
• Window blinds
• Detached garages (up to 10 percent of building property coverage); detached buildings (other than garages) require a separate building property policy
• Debris removal

 
PERSONAL CONTENTS

• Personal belongings, such as clothing, furniture and electronic equipment
• Curtains
• Portable and window air conditioners
• Portable microwave ovens and portable dishwashers
• Carpets that are not included in building coverage
• Clothing washers and dryers
• Food freezers and the food in them
• Certain valuable items such as original artwork and furs (up to $2,500)

 
The NFIP advises that flood insurance does not  coverage for the following:
 
WHAT’S NOT COVERED

• Damage caused by moisture, mildew or mold that could have been avoided by the property owner
• Currency, precious metals and valuable papers such as stock certificates
• Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools
• Living expenses such as temporary housing
• Financial losses caused by business interruption or loss of use of insured property

Most self-propelled vehicles such as cars, including their parts More details of what is provided are available by downloading the NFIP Summary of Coverage .
My furnace got water damage in it, so the electronics go wet, and the insulation got wet.  My service company says they can replace the ruined parts for $500 or I can get  a new unit for 2500.  Who decides what I should do?
It is important before undertaking any action to repair or replace your property and/or damaged items that you speak with your insurance agent, your insurance company and/or the NFIP.  Depending upon the type of policy you have, the insurance company may only pay to repair, not to replace the furnace. Working with your insurance agent and/or insurance company will assist you in obtaining the maximum coverage available under your policy.
However please note that the location of the furnace may determine whether or not there is coverage under a flood insurance policy. While furnaces are considered covered items under the building property coverage, coverage limitations may apply if the furnace is located in a basement or a crawl space. You must look at your policy to determine whether or not coverage will be provided.
My boiler was ruined by the saltwater.  It is old and I would like to get a new high efficiency boiler, will insurance pay for a better boiler than I have?
Neither your insurance company nor the NFIP has an obligation to provide you with a boiler that is better than the one you currently have.
My furnace got salt water in it, and the service technician said he could fix it, but because of the salt water, it will begin to corrode.  Can I get it replaced instead of fixed?
The flood insurance policy should pay for a new furnace depending upon the location of the furnace.  However, prior to replacing, rather than repairing the furnace, you should discuss with your insurance agent, your insurance company and/or the NFIP in order to ensure coverage especially if you cannot afford the new furnace if coverage is not provided.
I need new duct work, and a new furnace and it is going to take at least a month to get it all repaired.  Can I go to a hardware store and buy temporary heating devices, and will insurance pay for it?
It is important before undertaking any action to repair or replace property and/or damaged items that you speak with your insurance agent, your insurance company and/or the NFIP.  Most insurance companies will allow insureds to make temporary repairs.  When there has been a catastrophic event, some insurance companies may even offer advance payments on covered claims so that restoration activities can begin.  If such is the case, then you must keep detailed records on how any money is spent.  Even assuming that you do not receive a lump sum from the insurance company for certain repair costs, detailed records must be kept to support any claim.
My oil tank was moved by the flooding.  It is still in good shape, but the oil company now says I should get it strapped down.  Is that something insurance will pay for?
Insurance coverage for fuel tanks, including the fuel oil, damaged due to a flood is provided in the building property coverage of the NFIP flood insurance policy. Therefore, your flood insurance policy should provide coverage to repair and/or replace the fuel oil tank.
I need a new furnace, and the service company is ready to do the replacement.  What do I need to have my claim submitted?  Do I have to save the parts, or can the receipt from my service company be good enough?  Should they say anything special on receipt?
It is your duty to prove the loss.  Therefore, if the furnace must be removed or repaired prior to an insurance adjuster examining the damaged furnace, be sure to take clear photographs of the damaged property and save all receipts.  Most insurance policies mandate that all damage be inspected prior to any damaged items being removed and/or repaired or replaced.  However, due to the devastation caused by Sandy, some states such as New York have ordered insurance companies to waive on-site inspections prior to accepting the claim and to accept a homeowners’ evidence, such as photos and videos of the damage, and not to deny any claim based on the removal of an item.  If repair of a furnace is necessary in order for you to remain in your home, most policies will allow you to make temporary repairs of the damage.  However, it is best not to dispose of any property until an insurance adjuster has reviewed it for your claim.  In addition, it is always best to talk with your agent, your insurance company and/or the NFIP about critical repairs that need to be made before you start any such repairs.
The gas lines into my neighborhood will not be replaced for months, and I need heat for this winter.  If I convert to oil, will insurance pay for the new tank, and new equipment?
No. Most insurance policies only pay for your property which has been damaged.  If  you do not own the gas lines and/or the damage which has occurred to the gas lines is being repaired by the gas company, neither a homeowner insurance policy nor a flood insurance policy will pay to install equipment necessary to convert to an alternative fuel source.
There are so many people giving me different answers on insurance, my broker, the telephone answering system for my insurer, and my neighbors.  Who should I listen to?
You should feel confident in listening to the advice of your insurance company, the NFIP or one of its authorized representatives such as an agent or an adjuster.  If your insurance agent or insurance adjuster has provided advice which you believe is contrary to what your insurance company has told you, then you need to confirm with your insurance company prior to relying on the advice.  Alternatively, be sure to take detailed notes regarding information provided by any authorized representative of the insurance company in the event a conflict arises in the future.  Ultimately the insurance company has final decisions on insurance coverage.
If the insurance carrier says they won’t cover a loss, is that it, do I have anybody else I can ask?
If your insurance company advises that a loss is not covered, be sure to obtain the coverage denial in writing. The letter is particularly important if you have a flood insurance policy through the NFIP as the NFIP will not consider any coverage until it receives a letter of declination from your homeowners’ insurance carrier.  In addition, any assistance to which you might be entitled from FEMA cannot be reviewed until FEMA has confirmed that you have no available insurance coverage as it is a market of last resort.
If you believe your insurance company has wrongfully denied your claim, most insurance policies have procedures you can follow towards resolution of your claim.  In addition, you can  contact your state insurance department for assistance.  While typically insurance departments do not become involved in claim matters, states which have been most devastated by Sandy have set aside special resources through various state insurance departments to assist insureds in understanding coverage which will be provided to them and alternative where there is no coverage.
If the insurance carrier says they won’t cover a loss, should I consider hiring a lawyer.  How can I find a good lawyer to help, and one who knows what to do?
 
Prior to hiring a lawyer, we suggest you document any conversations with your insurance company and request reconsideration of the claim denial. If the issue is not denial of an entire claim, but rather the amount it will pay or whether a particular item is covered, then you should consider using a public adjuster.  A public adjuster is an adjuster who works for you and not the insurance company.  Public adjusters seek to act as your advocate. Since they are paid a fee based upon a percentage of the claim settlement; you must consider whether the adjuster’s services are worth the discounting of your total claim.  Many times your insurance agent is able to provide assistance in processing your claim and serve as your advocate as well without the increased cost associated with a public adjuster.
If the insurance company still maintains a denial which you believe is wrongful, consulting a lawyer who has experience in insurance can assist you in reviewing your insurance policy against your losses and provide an opinion on whether or not coverage may be provided.  Lawyers can also assist in negotiating on your behalf with the respective insurance company.  There are a number of local lawyer referral services, including local bar associations which can be of assistance.
If I hire a lawyer because I was denied coverage, and the insurance carrier changes their mind, will they pay for the lawyer fees?
Insurance companies are not obligated to pay for your lawyers’ fees or those of any expert you may have hired to assist with your claim.  However, a lawyer can attempt to negotiate such with your insurance company.  If your claim finds itself in court and you prevail on the coverage issue, then you will most likely recover your attorney’s fees from your insurance company as in many states the law requires that the insurance company pay its insured’s attorney’s fees if an insured hired an attorney to initiate coverage litigation and the insured was successful in obtaining a declaration by the courts of insurance coverage.