Which Came First: the Chicken, the Egg or the Hurricane?
While debates wax and wane in newspaper headlines, the harsh reality for thousands of policyholders in the wake of Hurricane Katrina centers around an age-old issue: which came first, the chicken or the egg? Or in this case, is it the wind damage or the tidal surge?
Policyholders are discovering that this issue has a sharp impact on their financial recovery as insurance carriers initially deny claims by anyone without flood insurance. Because there is little, if any, evidence left to verify the exact amount of wind damage, it is common for some carriers to call everything tidal surge. This leaves impacted policyholders in the unenviable position of having to figure out how to prove that the winds did, in fact, do at least partial damage before their property was flattened, flooded, or swept away by the 25- to 30-foot tidal surge. That is, if they hope to obtain any financial recovery at all based on their wind insurance policy.
Proving the impossible
While eyewitnesses are reporting that the winds hit at least an hour before the surge, it is still difficult to prove the extent of damages before the tidal surge since few residents were there to document the state of their property just prior to the flooding. In general, policyholders have little idea of where to begin.
As Gulf Shores, Alabama, attorney Harold Callaway III says, “With entire communities wiped away–for example, most of the city of Bayou La Batre, Ala., along with its shrimping industry–policyholders are left with little idea of where to start rebuilding, and their attorneys’ staffs are stretched thin or impacted themselves by the devastation.”
Too many cooks in the kitchen
In addition, policyholders are facing not only the complexities of proving their case, but even if they have flood insurance, they’re juggling negotiations with multiple parties.
In one commercial claim being handled by Adjusters International, a single building involves two named insureds, four different insurance companies, five claim files, three engineers, and four insurance company adjusters. Imagine the overwhelmed policyholder who might be facing this on their own. Even a relatively simple homeowner claim with flood coverage will typically involve two companies and at least two adjusters.
Brokers can learn several lessons from the recent hurricanes, none more pressing than the importance of taking the time to truly understand the full extent–and the limitations–of each policy sold.
As the insurance company “representative” with the most established relationship with policyholders, brokers are naturally looked at as having some influence over–and, as people look around for answers–some responsibility for the situation they find themselves facing.
A Gulf Coast marina, for example, assured by their agent at the last renewal that their all-risk policy included “storm coverage,” was shocked to find that they weren’t covered for flood. Perhaps not surprisingly, the marina has insinuated that if their extensive damages aren’t satisfactorily covered by what they’d believed was appropriate coverage, they may have to look to the agent for errors and omissions. How, after all, could a property right on the water not be covered for flood?
This could have been avoided had the agent simply clarified what the policyholder meant by “storm” coverage and gone the extra mile to ensure that the water-based marina indeed had flood coverage.
Before Katrina, no other event in recent memory has so highlighted the need for brokers to take the time to dig into each policyholders’ exposures and to read and understand each policy’s coverages and exclusions.
In the aftermath of this, Rita, and Wilma, policyholders need guidance on what steps to take to fully recover and how to prove at least a partial claim despite, in many cases, a lack of normally sufficient evidence being left standing. Right now, when it comes to chicken-and-egg decisions, entire livelihoods hang in the balance and the mood in these areas is grim. Insurance company adjusters are working in two-person teams to help ease their anxieties about hostility.
This is a time when it is easy for policyholders across the country to look with cynical eyes at the insurance industry. In their role as trusted advisors, brokers may be expected to pressure carriers to provide at least some coverage for policyholders who are currently facing blanket denials. Now is an important time for agents and brokers to make every effort to help clients make the best of a bad situation.
Cameron Ricci of Adjusters International has 16 years of adjusting experience and is a lead adjuster on the team serving the Gulf Coast region. Adjusters International is the nation’s largest claims consulting/public adjusting organization with offices throughout North America. www.adjustersinternational.com.