Will You Be Covered for Your Hurricane Florence Flooding?
Insurance payments to North and South Carolina policyholders with flood damage will depend on the policies they purchased, the language in each policy and the law of each state. Nothing is simple in property insurance adjusting. Hurricane Florence may be a textbook example of some of the issues that may have to be sorted out before there is a discussion about the actual adjustment and payment of a hurricane claim.
Clearly the media is reporting widespread flooding, and there are reports that as few as 15% of property owners whose property was damaged by flood have purchased flood insurance. So, what should you do if you do not have coverage from either the government run flood program NFIP (National Flood Insurance Program) or flood coverage under some other type of special manuscript policy?
My suggestion is that you thoroughly inspect your property to determine if there is damage from some cause other than flood, or as we say in the business, a peril. As an example, was the property also damaged by wind in the form of either direct wind damage or perhaps a tree or some other item was blown into the building? Did another peril cause damage, such as surface water which, depending on the facts and the policy definition, may not be classified as a flood?
If you can find damage or an opening that allowed wind and/or wind-blown water into your home you may have a shot at getting your homeowner’s policy or business insurer into the mix. But first read your insurance policy to see if there is a clause that addresses ANTI- CONCURRENT CAUSATION, also known as the ACC provision.
A typical anti-concurrent causation clause may read as follows: “Where an excluded peril contributes directly or indirectly to cause a loss, then coverage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”
So, if you see this statement which is known as an “anti- concurrent causation clause” then you may be out of luck if you did not purchase a flood policy. But if an anti-concurrent causation clause is not in the policy and if there is another cause of loss besides the flood peril, consider the following.
If you live in North Carolina, familiarize yourself with an insurance concept called concurrent causation. Concurrent causation results from the issuing and adoption of “all risk” property insurance policies which are written to cover all risks (perils) and are intended to provide coverage from all types of losses unless they are specificity excluded.
The reason for this legal doctrine of concurrent causation is that in many losses two perils may occur at one time so that it is hard to distinguish which one caused the loss. Thus, under the concurrent causation doctrine, if one is covered and one is excluded, you can make a case (again depending on the facts of the loss) that the whole loss is covered because one of the causes of loss was a covered loss.
So, in North Carolina, if a wind and flood loss occur that caused damage to a property and the wind damage is covered, and if it is not possible to distinguish the timing of what happen at what time, then the whole loss under the concurrent causation doctrine may be covered. Of course, if wind and flood are covered, then the losses would have to separated out between the two carriers. But remember, concurrent causation only applies if there is no anti-concurrent causation clause in the policy.
South Carolina takes a somewhat different approach. They have adopted what is called the EFFICENT PROXIMATE CAUSE doctrine. This differs from North Carolina in that the efficient proximate cause of the loss must be a covered peril. This must be determined based on the facts and the policyholder will have the burden to prove what damages resulted from the peril that was the efficient cause (or most likely cause) of the loss.
In a real-world example, a multi- million-dollar home in Naples Florida was damaged in Hurricane Wilma. The home, although new, had serious construction defects that allowed water, mold, and general deterioration to the structure. Hurricane Wilma caused further damage to the structure. A claim was made for the total value of the loss in excess of $11 million dollars as it presented itself after the passing of Hurricane Wilma. The insurance company denied the claim due to pre-existing conditions, structural defects etc. The carrier did pay $50K for mold remediation, presumably under an ensuing loss provision in the policy.
Ultimately this case (also known as the Sebo case) went before the Florida Supreme Court, which ruled the whole loss was covered, as there was not an anti-concurrent causation clause in the policy, and concurrent causation applied. This case has sent a chill down the backs of Florida insurers.
In another case I handled during Hurricane Ivan, my client’s home was completely gone. The only evidence of a house being on the property was the foundation piers. The flood adjuster paid policy limits for building and contents. But these payments came nowhere close to making this family whole. After reviewing the file materials, doing an extensive site investigation, reading weather reports etc., it was my opinion that the wind had caused a great deal of damage before the building and contents were washed away. The challenge was to support a claim for damage to the building and personal property from the wind. Remember, there was nothing on the insured property months later. But what was there were other elevated structures in the neighborhood which, based on wind damage to them, helped me make a case that the lower 10 feet of my client’s house was flood damaged and all other items (contents and building) above that level would have been destroyed by the wind when the roof and windows were blown out. That damage had occurred before the flooding. This was a house on piers and although not elevated it was off the ground enough to make a convincing argument that there was sufficient wind damage to the building and contents.
Ultimately, we ended up in appraisal and the umpire was a former Florida Supreme Court Judge. Did we recover? Yes. With the substantial wind payments and the flood settlement, the client was very pleased with the result.
In closing, policy language often adds uncertainty in a coverage analysis based on concurrent causation and efficient proximate cause doctrines. They potentially can provide policyholders a path to recovery and payment of their losses. Not to be outdone, however, insurance companies often add anti-concurrent causation clauses.
But here’s the take away. There are many insurance companies writing policies on different forms. Each policy can and will be different. I hope this encourages the folks in North and South Carolina to read their policies to see what type of language it contains. If in doubt get help. You may have a chance at recovery, but you will need to do some work to determine the facts surrounding your loss.
As always, the public insurance adjusters at Tutwiler and Associates are here to help with any property insurance 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.