Hawaii Commissioner Erred; Some Lava Claims May be Excluded

By | May 14, 2018

Some homeowners in a Hawaiian neighborhood where lava is flowing might not be so fortunate when they file their claims after all.

It was previously reported that Gordon Ito, Hawaii’s insurance commissioner, was making it known that homes destroyed or damaged in the recent lava flow from the Kilauea volcano into a Hawaii neighborhood on the Big Island are covered for damage from fire under homeowners insurance policies.

His office has now clarified that coverages and exclusions vary from policy to policy, and it’s urging affected homeowners to check with their agents.

That’s something Amber Lopez, principal at Pacific Island Insurance LLC in Hilo Hawaii, which has another office in Pahoa that’s close to the eruption, has been saying for a week.

Lopez, who has helped five of her clients file claims so far, one for total loss, said most of the coverage in the area is provided by surplus lines insurers and the Hawaii Property Insurance Association, which was brought in years back by the Hawaii legislature as a backstop.

“There are various surplus lines policies that were written out in that area,” Lopez said.

Many of those policies that were written have either high deductibles for lava or they exclude damage from lava, she added.

“It’s kind of going to be a mess,” she said.

According to the insurance commissioner’s office, roughly 25 single family homes as well as other structures have been destroyed by the lava flow.

However, it’s a dynamic situation. Another crack opened up on Monday, sending more lava to the surface and threatening more homes.

Catastrophe risk modeling firm CoreLogic estimates there are nearly 1,000 homes in the high-risk area, which is primarily in Leilani. The average value of homes in the high-risk area is more than $230,000 with an aggregate valuation of $239 million, according to the Irvine, Calif.-based modeler.

There are roughly 5,900 homes in the broader area that could be at some level of risk, CoreLogic has said.

Lopez said she writes for a number of carriers including Lloyd’s, which has a lava exclusion for direct or indirect loss, as well as HIPA, which has a policy that covers for fire if home were to burn from lava but it wouldn’t provide coverage if lava renders the home uninhabitable, by surrounding it for example.

“We haven’t had any claim declination yet,” she said, adding that it’s too soon to know if her client’s claims will be accepted. “We’ve submitted all of our claims and haven’t’ heard back yet.”

Lopez, who has been an agent in Hawaii for 10 years, was glad the record is being set straight on the coverages. She said she heard Hawaii Gov. David Ige also say that all homes affected by lava would be covered under fire damage, and that sort of misinformation doesn’t help her when communicating to her affected clients or potential new ones in the area.

“I know for certain that’s what they were saying,” she said, adding, but “if fire were to happen because of the lava, then in some cases there would be no coverage.”

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