November 29, 2012 — It’s been one month since Hurricane Sandy destroyed thousands of homes and caused billions of dollars in property damage on the East Coast. Now, many residents in the hardest-hit communities in New York and New Jersey are discovering that their insurance company is unwilling to pay for their property damage. Unfortunately, much of the damage was due to storm surge and flooding, which is not covered under standard homeowner’s insurance policies.
According to the Insurance Information Institute, only 14% of homeowners in the Northeast have flood insurance policies. Because most of the property damage was caused by flooding, this could lead to thousands of claim disputes.
In the past, large natural disasters have prompted thousands of homeowners to seek compensation by filing a lawsuit. In Louisiana, after Hurricane Katrina, thousands of plaintiffs won a class action lawsuit against an insurer who delayed adjustment of their claims for more than 30 days. Many states have laws requiring insurers to act quickly after a natural disaster.
Even if an insurance company responds quickly, disputes about property damage may arise when homeowners disagree about the value of the property or the cause of the damage. For example, if a homeowner lacks flood insurance, it is very important to determine whether property damage was caused by flood or wind.
In most cases, hurricane insurance policies will not apply for damage caused by Hurricane Sandy. The storm was downgraded to a “Post-Tropical Cyclone” just before making landfall, and New York Governor Cuomo prohibited insurance companies from imposing hurricane deductibles on homeowners — typically 2-5% of a home’s value. Unfortunately, the lack of hurricane coverage means that many people will only be able to recover damages if they had flood insurance.