South Carolina Flooding - Causation will become a key issue for insurance claims
While some media outlets are reporting that water is starting to subside in some of the hard hit areas of Columbia and Charleston, others are reporting on the dam failures that could compound matters and make things much worse. If some of the media reports are correct, many of the good folks in South Carolina may be in for nasty surprises when they call their insurance agent or 800 numbers listed on their property insurance policies to file an insurance claim. As an example, Ben Berkowitz a reporter from CNBC posted South Carolina flood losses $1 billion and rising, about the damages and lack of homeowner flood insurance.
First, let me say I am not surprised about the low percentage of property owners in South Carolina who purchased flood policies. In addition, of the 200,000 property owners in South Carolina who have flood coverage, some may not have flood damage. As an example, we received an email yesterday from a resident we know who lives in Charleston and lives in the historical Charleston waterfront area in an old antebellum home who told us “Charleston is fine no water.” But undoubtedly many thousands of property owners, state and local governments will have major losses with little to no insurance coverage available. While $1 billion seems to be the starting point for the rising damages, my rule of thumb has always been to multiply any figure in the media by three and you may be getting close. This of course does not take into consideration business losses that will continue indefinitely but some commercial businesses may find themselves in better shape with private commercial policies that cover some flood related losses.
In situations like this property owners need to be proactive in the investigation of their property’s condition. As we wrote yesterday, there may be coverage if water entered from above due to heavy rain that may cause structural failure or property damage. Coverage may also be available due to fallen trees onto buildings. It’s not possible to predict or write about all the causation issues that can and do occur in a disaster like this but the property owners are on the frontlines and while salvaging items and mitigating further loss is important, please do not forget about the causation issues that may give you some relief from another property policy.
Finally, I want to mention an issue that is very controversial in first party property loss arena. As you may have guessed, it’s about insurance and the never ending fight between coverage for a loss and no coverage. May seem simple to figure it out but insurance policies have inserted terms like concurrent causation, anti-concurrent causation and efficient proximate cause that will come into play depending on the laws of a state. All these have to do with the factual issues related a loss. Based on the state where the loss occurred, these conditions may or may not benefit the policyholder looking for coverage when two or more causes contribute to a loss at more or less the same time.
Generally concurrent causation is favorable to the policyholder. In general, if an excluded loss and a covered loss occur at approximately the same time, then the whole loss may well be covered. The insurance industry does not like this so they have been successful in getting laws passed and courts to overturn concurrent clause schemes.
Here is a good article link on concurrent causation, efficient proximate cause and anti-concurrent causation that was published in 2007 by some lawyers. It offers a good explanation of these legal terms and the issues surrounding them. The article also lists by state, their standing on these issues. Just remember, things change, so you may need to get a legal opinion on your fact issues and the property policy you have. As an aside, I understand the Florida Supreme Court will soon be taking up this issue, so folks in Florida may want to pay attention.
In closing, my guess is that causation will be the hot issue in South Carolina given the reported low amounts of flood policies folks purchased. Finally, just because the adjuster says no, that does not mean it’s the end. Claims can be reopened and many times the policyholder is successful, but you need to know the rules! Information and knowledge is omnipotent!
As always, the professional public insurance adjusters at Tutwiler and Associates are here to help with any property insurance or flood related questions you may have. Please call 800.321.4488 or contact a public adjuster to submit a question to one of our insurance claim experts.