Insurance coverage issues in the wake of Hurricane Sandy

October 30, 2012

Legal Research: Insurance hurricane SandyHurricane Sandy, the Perfect Storm and a “Frankenstorm,” is striking the Northeastern United States.  Ocean water has turned into storm surge.  Pushed by Sandy’s winds, water has already breached the levees and overwhelmed parts of the Atlantic City, New Jersey Boardwalk.

Over the next several days, property owners, businesses, and individuals will all turn to their insurance companies for help.  They will present claims to coverage under a cascade of insurance policies, from Commercial Property Insurance Policies to Homeowner’s Policies to Commercial General Liability Insurance Policies.

Moreover, the range of likely insurance claims is not limited to the Northeast.  Hurricane Sandy directly affects Policyholders located in the Northeast today, but tomorrow or the day after Sandy’s effects on insurance coverage will be felt across country and even all over the world.

Here are some of the basic coverage issues to anticipate as a result of the damages wrought by Hurricane Sandy.  We will discuss these and other issues at length during the week to come, but for now it is important to state what the issues are, so that you and your clients may identify them as they happen.

  1. When making a claim under a Property (Commercial Property, Homeowner’s) Insurance Policy, is the coverage provided for “all risks” or for “specified perils” meaning only for perils specified in the policy?
  2. Was the loss which is claimed under a Property Insurance Policy, or the “Bodily Injury” or “Property Damage” which is claimed under a General Liability Insurance Policy, caused by a covered or an excluded peril (Property Insurance Policy) or by a covered “occurrence” (General Liability Policy)?
  3. If the insurance contract appears to potentially cover the loss at issue in the claim, regardless of whether the contract is for Property or Casualty, First-Party or Third-Party Insurance, which exclusions do or may apply?  Here are some representative exclusions to take a look at:
  • Flood exclusions in Property Insurance Policies.  
    • This exclusion is a trigger to look for any and all Flood Insurance Policies which may apply in the event that the Flood Exclusion applies.
  • Was the loss caused by more than one peril, or “did they cause the loss concurrently”? 
  • Mold damage.
  • Was the loss caused by compliance with government ordinances or laws?
  • What part of the loss is clearly covered if any, and what part is clearly not covered if any, and what is subject to reasonable dispute?  

The answers to these latter questions are the ones to which our Courts will look when they are ultimately called upon to decide whether the Insurance Company has handled the claims in Good Faith and dealt fairly with its Policyholders and its other Insureds who present these claims.

We will be addressing these and other essential coverage questions as Hurricane Sandy pursues her destructive path and leaves insurance claims behind.