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After 2014’s first hurricane, Hurricane Arthur, its important for Florida homeowners insurers, claims adjusters, and attorneys to remember how to handle a hurricane insurance claim. It has been years since we have dealt with the aftermath of a hurricane here in Florida; therefore, I wanted to take this opportunity to recap what everyone will need to know when the next hurricane hits Florida.
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In this article, I will address the issues of (1) trying to promptly handle a hurricane insurance claim; (2) the more common reasons why a Florida hurricane insurance claim may be denied; and (3) why homeowners and insurers may dispute what the proper claim payment should be.
As always, I would love feedback on your experience or if you have any questions. If you have any questions or comments about hurricane insurance claims, please do not hesitant to click on this page to find out how to contact me, or you send me a confidential message in the form below.
Issue #1: Quickly handling hurricane insurance claims will be tough for the homeowners and the homeowners insurers
First, lets remember how chaotic it will be for Florida homeowners and insurers to start and finish the hurricane claim process. If a hurricane makes landfall in Miami, Fort Lauderdale, West Palm Beach, or the Tampa-St. Petersburg area, each homeowners insurer could receive tens of thousands of claims. Even in less populated areas, a hurricane could really tax a homeowners insurer’s ability to promptly evaluate and pay claims.
Homeowners will face challenges as well. Homeowners may be without power and unable to use their mobile phones for days. In addition, homeowners may not have the money to stay in a hotel while their homeowners insurers process their claims. Homeowners will be demanding immediate conclusions; however, they will have to understand that most homeowners insurers will be doing their best to quickly close claims.
Ultimately, homeowners insurers will multiply their staff to respond to these claims, but homeowners will have no choice but to be persistent and patient. Technology has changed a great deal since Hurricane Wilma made landfall in Florida in 2005, so hopefully Florida homeowners insurers will be less reliant on humans doing routine processing tasks to investigate and close claims. Although Todd Legal’s software focuses on promptly and efficiently resolving litigated cases (after the claim process fails), Florida homeowners insurers can use less customized software for processing claims quickly and properly.
A hurricane will separate the strong and smart Florida homeowners insurers from the weak and ill-prepared. It will be interesting to see which homeowners insurers invested in smart processes over the past 8 years, and which insurers are still stuck in 2005 … or even worse.
The Rules: What are the rules on the timing of processing a hurricane insurance claim?
The Florida statutes require homeowners insurers to promptly respond to homeowners’ efforts to communicate. In addition, unless there is something outside of the insurers’ control stopping them from making payment, the Florida statutes require insurers to pay or deny each claim within 90 days of the date the claim is reported.
For more information on these rules, please check out my list of the Florida homeowners insurance laws here. If you want to learn about how Todd Legal, P.A. uses project management and automation software to streamline the implementation of these rules, then please contact me using the information on this page or you can submit a confidential message using the contact form at the end of this article.
Issue #2: Is the hurricane insurance claim covered or should it be denied?
Second, Florida homeowners insurers have to determine if the homeowners’ claim is covered.
Why wouldn’t a hurricane insurance claim be covered by a homeowners insurance policy? There are at least four reasons: (1) the damage is caused by flooding not covered by the homeowners insurance policy; (2) the homeowner failed to promptly report the damage to the insurer; (3) the damage pre-existed the hurricane; and (4) the damage was caused by the constant or repeated seepage of water and not a sudden burst of water into the property. In the subsections below, I provide you with a summary of how each of these issues can arise in a hurricane insurance claim.
1. Wind versus Flood Damage:
The most common issue with homeowners insurance coverage for hurricane claims is whether (1) flood OR (2) wind-driven rain caused the water damage to the house.
Most Florida homeowners insurers do not cover flood damage; therefore, if flooding caused the damage, then homeowners will need to submit that claim to their flood insurer. As you know, this issue could get tricky. If a hurricane destroys a roof, water seeps in through the roof, and that water damages the house, then that damage should be covered. If that roof and rain event happen AND flooding from the street also damages the house, then the homeowner may be faced with one of the most difficult insurance coverage issues there is: what caused the damage – wind versus flood.
Currently, it appears that some Florida areas would apply one standard to determine coverage – the concurrent cause doctrine. Meanwhile, other Florida areas would use another standard – the efficient proximate cause doctrine. This means that one Florida court may think your claim is covered if flood and wind-driven rain caused the damage, but another Florida court may not.
If both wind-driven rain and flooding caused the damage, then Florida courts using the concurrent cause doctrine may determine the damage is covered by your homeowners insurance policy. If the same thing happened in an area where courts apply the efficient proximate cause doctrine, then there would be homeowners insurance coverage if the wind-driven rain caused more damage (or was a stronger force) than the flooding.
Ultimately, this is a very complex issue and one that even Florida’s best courts disagree on. In addition, the insurance policy may have certain terms that change the way these doctrines could apply to your claim. So, if you are brave enough to want to know more about these doctrines, I have a very detailed but easy-to-understand article on it here.
2. Late Notice:
Another reason a homeowners insurer might deny a homeowner’s claim for hurricane damage is that the homeowner failed to quickly report the damage to the insurer. This type of claim is known as a late notice claim, and is probably the second most likely reason for a hurricane insurance claim denial.
How could this happen?
Believe it or not, as I wrote about here, tens of thousands of homeowners reported Hurricane Wilma damage years after it occurred. How could you not notice a claim or not report it? Some homeowners might say that they did not notice a roof leak until it the water made its way to a visible area. In addition, some homeowners may simply not understand homeowners insurance coverage but, years later, someone may explain to them that their old roof leak may have been covered by insurance. In some circumstances, some homeowners may be lying about newer damage to try to get insurance proceeds for long term damage that may not be covered by insurance.
How late is too late? There is no 100% clear answer, but there are some things you must know.
According to the prompt notice provision found in all homeowners insurance policies, homeowners must promptly report damage to their homeowners insurer. “Prompt” does not have a specific definition, so each case will be considered separately. There are dozens of Florida cases on the prompt notice provision, and I have analyzed several of them here. In addition, I have written a very detailed article here that discusses how Hurricane Wilma became famous for claims reported years after the damage occurred.
Why is there a prompt notice provision? Homeowners insurers need to investigate any claim (whether it be a hurricane claim, sinkhole claim, hail claim, or a plumbing leak claim) claim as early as possible so that they can:
(1) make sure it is covered;
(2) properly determine the cost to repair; and
(3) have the chance to minimize the damage.
If a homeowner fails to promptly report a claim and the insurer is prevented from doing any of these three things, the insurer may deny the claim for the homeowner’s failure to comply with the prompt notice provision.
In addition to the prompt notice provision’s unclear deadline, Florida homeowners insurers also have a law that provides a strict deadline for reporting hurricane insurance claims. Years after 2005’s Hurricane Wilma, in 2011, Florida passed this law that requires homeowners to report hurricane claims to their insurers within three years of the hurricane making landfall or the damage occuring. This means that, if a hurricane made landfall in August of 2014, homeowners would not be able to report a claim for that hurricane in September of 2017.
Importantly, this 3 year deadline does not mean that homeowners no longer need to abide by the prompt notice provision. After a hurricane, smart Florida homeowners should promptly hire a professional contractor or other professional to inspect their house. If they find damage, then they should immediately report that claim to their homeowners insurer. If years pass before a homeowner discovers the damage, then the homeowner should not be surprised if the homeowners insurer denies the claim.
3. Pre-Existing Damage:
This is a simple issue. A homeowner may report damage that occurred prior to the hurricane. They may do so because they did not notice the damage, or they may intentionally try to defraud the homeowners insurer.
How can a Florida homeowners insurer know if damage pre-existed the hurricane? The insurer may have photographs of the house from before the hurricane. The insurer may also review records from the purchase and sale of the house. In addition, the insurer could send a records request to local building agencies with information regarding the home’s damage history. If a homeowner reports pre-existing damage to an insurer, then the insurer may deny the claim using the pre-existing damage exclusion, the policy period provisions, and, potentially, the concealment or fraud provisions.
4. Constant or Repeated Seepage:
If the hurricane causes a long term water leak that occurs for weeks or months (instead of a sudden burst of water that immediately damages the house), then a homeowners insurer may deny the claim using the constant or repeated seepage exclusion found in almost all homeowners insurance policies. The constant or repeated seepage exclusion is a very complex issue – there are few cases on it, and there are dozens of different variations of the exclusion depending on the policy’s year and the homeowners insurer that wrote the policy.
If you want to know more about how a homeowners insurer may deny a claim for long term water damage, then please check out my article on the constant or repeated seepage exclusion here. I also have many articles on water damage claims in general, and you can check these articles out here.
5. Conclusion on Coverage Issues:
Claims adjusters and management should not wait until the hurricane hits to make sure that they are ready to handle the onslaught of claims and cases that will follow a hurricane in Florida. Todd Legal, P.A. offers project management and automation software that will make claims and case decisions smarter, cheaper, and quicker. Todd Legal, P.A. embeds the recent legal changes into your case handling software so that you do not need to repeatedly educate your staff about top-down best practices. In addition, Todd Legal, P.A. substitutes software for people when routine processes can be done faster, better, and cheaper.
If you want to know more about how Todd Legal, P.A.’s claims and litigation software can make the difference between your insurance company failing or prevailing after the next hurricane, please contact me using the information on this page or send me a confidential message in the form at the end of this article.
Issue #3: How much should the homeowners insurer pay the homeowner for the damage?
Third, if the Florida homeowners insurer determines the claim is covered, then what does the insurer have to pay the homeowner? If a Florida homeowner disagrees with the homeowners insurer’s payment amount, how do you know who will end up being right?
As you know, after a homeowner reports a claim, the insurer will have an adjuster or contractor inspect the home, determine what is damaged, and prepare a repair estimate. For example, if the hurricane damaged the roof and rain seeped through to the living room ceiling only, then the homeowners insurer may only provide coverage for the cost to repair the ceiling. Usually, the adjuster or contractor will submit his or her estimate to someone at the homeowners insurance company, and the homeowners insurance company will use that estimate to determine how much it will pay the homeowner.
Here is where a dispute may arise: the homeowner may hire a public adjuster or contractor who determines that a roof leak also reached the walls in the living room, even if the damage is not visible. The public adjuster or contractor may claim that, to repair the walls, the baseboards will need to be removed. The public adjuster may claim that, if the baseboards are removed, then the flooring needs to be replaced, too.
Meanwhile, the homeowners’ insurer may not know why its adjuster or contractor did not include the walls in its estimate. Was it because there is no damage? Was it because the adjuster missed it?
Even if the homeowners insurer’s adjuster or contractor identified the wall damage, they may disagree that the baseboards and floors need to be replaced.
Some other examples of common hurricane insurance claim payment disputes include:
(1) if a tile is damaged by the hurricane, does all of the tile in the entire house need to be replaced? (see my articles on tile damage here);
(2) if the kitchen cabinets are damaged, can the homeowner repair the cabinets by refacing them or does the homeowner need to completely replace them?; and
(3) even if the hurricane leads to covered damage inside the house, was the roof already damaged from a prior event and not by the hurricane … and, therefore, is the cost to repair the roof not covered?
As you can see, reasonable minds might differ regarding how hurricane insurance damages should be repaired. Using the homeowners insurance policy’s Loss Settlement provision (click here to read a helpful article on this provision), the homeowners insurer may ask the homeowner to try to repair the property with the funds paid and then notify them if those amounts are not sufficient.
Although there is no definitive Florida law on what is the proper cost of repair under all of the different circumstances above, it will be important for both the homeowner and the homeowners insurer to work together to try to make the repairs. Otherwise, one party may use the other’s lack of cooperation as a basis for a lawsuit or a defense.
As a side note on hurricane insurance claim payments, homeowners should also be aware of their deductible. For hurricane claims, the deductible could be much higher than they expect.
That’s a lot of information to learn or remember about hurricane insurance claims.
Some of you may remember all of these issues from when you were an adjuster, claims manager, or homeowner handling hurricane damage claims and cases. For those people, I hope this refreshed your memory on some of the common issues and led you to ask yourself how you can be more prepared when the next hurricane makes landfall in Florida. As you might recall, there were many twists and turns, and everyone should be more prepared to handle the next hurricane. For those of you experienced with hurricane homeowners insurance claims, you will probably know that the issues I talk about in this article are merely the tip of the iceberg.
Adjusters and claims management, I welcome you to reach out to me to discuss how we can use software, project management, and automation to make sure that the next hurricane goes as smoothly as possible. There have been several changes in the law and several changes in your policy. You are reading First Party Property Insurance Blog, so you probably know about the laws and provisions that apply to a hurricane insurance claim; however, not everyone at your company may be ready.
Todd Legal, P.A. is here – not to simply assist you, but to lead the way in making sure you and your homeowners insurance staff are not stuck in 2005.
Some of you, however, may be new to the Florida homeowners insurance world and have no experience handling a homeowners insurance claim. After all, if my math is correct, it has been nine years and eight hurricane seasons since the last hurricane – Hurricane Wilma – made landfall in Florida. For those people, you better educate yourself on the Florida hurricane cases, laws, and insurance policy provisions.
If you are an adjuster, attorney, or homeowner and you have not taken a few hours (homeowners) or days (adjusters and attorneys) to make sure you understand how the new laws and policy provisions should be used for the next hurricane, then you will be in for a big and costly surprise.
As I have mentioned throughout this article, if you have any questions about hurricane insurance claims, litigation, or anything else related to homeowners insurance, I would love to hear from you. You can contact me by clicking on this page and using the information there, or you can send me a confidential form submission using the box at the end of this article.
Like any claim, a hurricane claim can be broken down into a scope of work. You can supervise/adjust these claims the old fashioned way, or you can supervise claims and cases using software that automates the checklist nature of a cases like these. Don’t just hand claims and cases off without a structured system for evaluating and communicating the key information. If you are interested in learning more about checklists and software for supervising hurricane claims, please message me.
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