December 4, 2012 — Hurricane Sandy was an unusual, late-season storm that devastated the East Coast. Because hurricanes on the East Coast are rare, less than 15% of homeowners have flood insurance. Although standard homeowner’s insurance typically covers wind damage, it does not cover flood damage. This distinction often leads to litigation and disputes about whether property damage was caused by wind or flood.

Homeowners without flood insurance have reason to argue that damage was caused by wind or wind-driven rain. Insurance companies typically argue that damage was caused by storm-surge, flooding, or a hurricane. Because Hurricane Sandy was downgraded to a “Post-Tropical Cyclone” just before making landfall, hurricane insurance likely will not cover damage caused by the storm.

Many homeowners may soon discover that without flood insurance, their insurance company will argue that they are not liable for damage caused by the storm.

In any insurance claim dispute, determining what caused the damage is likely to be a contentious issue. After Hurricane Katrina, for example, hundreds of homeowners filed lawsuits alleging that much of the damage was caused by “wind-driven rain” instead of flooding. That argument may not be very successful after Hurricane Sandy, which had lower winds than Katrina.

Some homeowners are also concerned that insurance companies will not be willing to pay for wind damage. Hurricane Sandy was downgraded just before making landfall because it did not have “sustained hurricane-force winds.”

For homeowners with and without flood insurance, it is important to choose words very carefully when making a claim. For example, even without flood insurance, your insurance company could potentially owe you compensation if the water damage occurred because wind downed a tree that blocked a drain, or wind damage broke a pipe. Calling the water damage a “flood” could make it more difficult to argue that the damage should be covered under another insurance policy.