Friday, November 2, 2012

Flood exclusion to homeowners' policy litigation; Is it coming?

Many homeowners' insurance policies exclude coverage from the effects of flood and surface water or natural water below the surface of the ground without exception. 

As reported by Newsday, LIPA is estimating that 100,000 Long Island area homes and businesses have been devastated. Click here to read the article.  

Therefore, many community members will be seeking insurance to cover their loss. While the flood exclusion sounds pretty straight forward, it may not be. In fact, ambiguities in the exclusionary provisions of an insurance policy are resolved in favor of the insured. So, you should carefully read the exclusion and seek the advice of counsel prior to accepting your insurer's position that you do not have coverage. 

There are also unique situations for businesses with flood insurance. To illustrate, some policies require "safe storage" as a condition to obtaining coverage for valuable papers and records. In this situation, is this a strict requirement for coverage or does it instead have to be correlated (related) to the loss? These are questions that you should consider, research and than fight for your rights.  

However, the exclusion may be clear and you may receive a denial. So, can you sue your insurance broker for your experience of flood-related losses because they did not recommend that you obtained flood insurance or flood insurance with suitable policy limits (how much money will be insured)? The rule is that absent a special relationship with your insurance broker (which rarely exists pursuant to law and facts), your broker has no duty to recommend a special type of insurance. Therefore, you likely cannot sue your broker. 

Stay tuned, later we will discuss FEMA's designation of Flood Plain Areas and requirements for the purchase of flood insurance and how that may effect your loss.