According to the New Jersey Department of Banking and Insurance, as of March 1, 2013, approximately 40% of flood-related Sandy claims are still unresolved. Many claims involve legal issues associated with the following circumstances, many of which we have seen in cases we are currently handling on behalf of insured policy – holders in the tri-state area:
- Reconstructing the cause of loss – whether the damages were caused by wind (typically covered under homeowners policies) or flood (covered under Federal flood policies);
- Whether there were concurrent causes of the loss (for example, caused partially by wind driven rain and partially by flood waters) requiring an analysis of insurance policies which may have clauses barring or supporting coverage under those circumstances;
- Whether the damages to a building occurred below the lowest elevated floor in designated flood zones, or in a basement. Under Federal flood policies, coverage for damage in these areas is significantly more limited than when damages occur above the lowest elevated floor;
- Whether adequate steps were taken by the insured to prevent mold from forming (impacted significantly by whether the insured had access to the structure – given widespread governmental restrictions on access for weeks following the storm);
- Reconstructing damages in those instances where homes were completely washed away and the cause of the loss is debatable or difficult to re-create, requiring the involvement of engineering professionals or other forensic analysis;
- Disputes over the rates of labor and materials utilized in adjuster appraisals, given the wide variation in experience levels of adjusters brought in from all parts of the country, and fluctuation in labor and material rates by location and in relation to when the loss was adjusted;
- Practical concerns regarding obtaining good faith estimates and contractors available to provide required services to rebuild structures to avoid further damage;
- The interplay of flood policies issued to individual condominium unit owners, vs. the coverage available to Condominium Associations for damages to the common elements of the condominium buildings;
- Issues concerning extensive debris removal costs where the debris comes from neighboring properties and ends up on the insured property, but not on or in an insured building; and
- Practical decisions concerning whether or when to rebuild, given uncertainty surrounding finalizing the Federal Flood maps and inconsistent municipal actions regarding property rights, dune reconstruction, access for contractors, permits, height restrictions and other considerations.
This represents a sampling of issues we are encountering, as we assist policyholders in these matters, although there are numerous additional issues faced by insureds as they seek to rebuild their lives and property. Policyholders are encouraged to seek legal advice, given that policy language can vary significantly from one policy to another and the rights defined in the policies can vary widely. While some of the areas in question have been the subject of opinions by reviewing courts, some of the issues arising out of Sandy are novel, and are likely to spawn both litigation against insurance carriers and, eventually, legal opinions defining the rights of policyholders under these unique circumstances.
Thomas J. Pryor works in Stark & Stark's Lawrenceville, New Jersey office concentrating his practice in Insurance Coverage & Liability issues. For questions, or additional information, please contact Mr. Pryor.