It could be an understatement to say Amber Lopez, principal at Pacific Island Insurance LLC in Hawaii, has been busy over the past month as the island state’s erupting Kilauea sends lava flows throughout neighborhoods.
Lava has burned down some 117 homes in a rural Big Island district, according to Hawaii County officials.
Lopez, whose Pacific Island Insurance has an office in Hilo and another in Pahoa close to the ongoing eruption, said a percentage of affected property owners are her clients, who her agency is assisting through the claims process.
“I’d say 30 we’re talking to with claims, and we’re probably talking to about 10 with total loss,” Lopez said.
And she has several clients who don’t yet know if their properties have been impacted, as thousands of area residents have been displaced.
Lava has covered a total of 8 square miles, according to scientists. The U.S. Geological Survey stated earlier this week that parts of the flow from a fissure were starting to break out and move north.
Most of Hawaii Volcanoes National Park has been closed since May 11 due to earthquakes, including a magnitude 5.5 quake on Sunday, as well as explosions from the volcano’s summit crater.
Coverages and exclusions for lava damage in these Hawaii neighborhoods vary from policy to policy.
Some of Lopez’ clients have property coverage that includes damage from lava, while others may not be covered. However, she said she’s filing claims for all of them and letting the carriers sort that out.
A few carriers Lopez’ firm is dealing with have started to release money to a few of her clients, and while most of her clients are waiting to hear from carriers, it’s been so far, so good for Lopez and her clients.
“I haven’t had a declination yet,” Lopez added.
Up until recently, most of the properties affected by lava were located in what is known as Zone 1, an area deemed to be at most risk from eruption and lava flow.
According to Lopez, surplus lines and the Hawaii Property Insurance Association, which was created in 1991 by the Hawaii legislature as a backstop, are the primary writers of insurance in Zone 1. In that area most policies have a lava exclusion.
Now a number of homes in Zone 2 are being affected by lava. That is also primarily covered by the surplus lines industry and HPIA, however insurance sans the lava exclusion is available to property owners in that zone.
Lopez is regularly fielding calls from clients to help them sort this out, as well as from property owners in the area trying to procure insurance without the lava exclusion.
“We’re doing a lot of quotes for people right now,” Lopez said.
Hawaii Gov. David Ige last month signed a bill to lift any moratorium on the issuance of residential property insurance within certain high-risk lava zones, so HPIA is accepting new business applications and coverage increase requests with a six-month hold for policies to take into effect.
Since then, the calls have been flowing into Lopez’s office from property owners asking for help with HPIA coverage requests.
“I have two people that we’ve already submitted for,” Lopez said.
One person had coverage that had a lava exclusion, and the other had no coverage. Her firm secured a policy for both, and they are now in the waiting period, she said.
The situation in the lava-affected areas remains confusing as property owners sort out whether their properties are still standing, or rendered unusable, or if they are or are not covered.
Yet there are still even more insurance nuisances to be considered, according to Dave Thomas, an attorney specializing in insurance recovery and complex commercial litigation with Blank Rome.
Some property losses may not be merely from fire due to lava flow, but losses might be due to multiple causes, or concurrent causation, Thomas noted.
“It’s something that I would be shocked if it did not play a role in,” Thomas said.
Although, in his experience, many policies have an anti-concurrent causation provision, or ACC, efficient proximate cause is also a factor that’s likely to come into play as insurers and policyholders sort out the mess from the lava damage.
Efficient proximate cause became a big issue in mudslides that followed last year’s massive California wildfires. Most insurers have agreed to cover damage in the Montecito mudslides, but it was enough of a concern that the state’s insurance commissioner and Legislature took steps to try and ensure recovery for future victims where efficient proximate cause came into play.
The ACC provisions, which apply even if the uncovered peril is not the efficient proximate cause of the loss, Thomas noted, are enforced in a majority of states.
“In Hawaii, it’s a bit unsettled,” he said. “The case law from what I’ve seen is sparse.”
However, he believes a judge can be influenced by the court of public opinion, knowing a decision on an ACC provision is ruling that could leave homeowners uncompensated for their losses.
“It would be interesting to see how that gets tested in court and how the court might rule,” Thomas said.
The court of public opinion could also persuade carriers to pay out losses, he added.
“There is a public relations issue that carriers have as well,” he said.
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