Sandy coverage update: ACC and FEMA guidelines
The latest estimates of insured losses from Hurricane Sandy have reached nearly $15 billion, mostly triggered from flood and wind perils. As insurers face a growing number of claims filed by homeowners and businesses, policyholders should review their policies carefully to check for specific carve-outs and exclusions. Among the most important to note are anti-concurrent causation clauses, (ACC) provisions which allow insurers to deny claims based on excluded causes like flooding, if they occur at the same time as other covered causes, such as wind damage. These clauses, invoked in the aftermath of Hurricane Katrina, aim to protect insurers from facing greater liability than the coverage they provided, but can leave consumers with little to no coverage and exorbitant costs. There are a variety of formulations of these clauses, depending on the insurer but a typical ACC may read “[w]e will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”
Last week, the Consumer Federation America (CFA) asked officials to pay attention to how ACC’s are used in claims stemming from Sandy, and to ensure that customers are not subject to higher-out-of pocket costs. The group says that although the governors in several northeastern states pledged to protect consumers from facing high deductibles associated with claims from the storm, they are worried that some insurers won’t comply with those orders.
Adding to the gray area of coverage difficulties, the Federal Emergency Management Agency (FEMA) ) is now requiring anyone applying for aid from the storm to show proof that their damaged house is their primary residence, and not a second home. This leaves many homeowners relying on their insurance companies for help. The federal agency has approved over $455 million in financial assistance and while that number continues to grow, most of the aid comes in the form of vouchers for hotel rooms and low-interest disaster loans. In addition to restricting aid to primary residences only, the agency will not duplicate benefits paid by private insurance companies, which means homeowners will have to settle those claims first before FEMA steps in. Grants that are awarded to individuals are capped at $31,900 and distributed according to a hierarchy of need. Agency officials are advising homeowners to first file a claim with their insurer. For those without coverage, they may apply for a Small Business Association loan, which are not restricted to businesses and granted according to an applicant’s income and ability to repay the loan. Although businesses do not have access to FEMA funds, they can also apply to the SBA for a low-interest loan to help cover costs that insurance may not pay for. As of last week, the SBA had issued more than 42,381 business disaster loan applications and continues to operate Business Recovery Centers in New York and New Jersey.
FEMA says that over 356,000 people in New York, New Jersey and Connecticut have registered for assistance from the agency and 101,000 have been approved. Despite criticism from those whose applications have been denied, many Sandy survivors, including government officials like New Jersey Governor Chris Christie (R), have praised the organization for its swift response in delivering supplies and aid to the areas wrought with devastation. After the fallout from Hurricane Katrina, the organization has implemented many reforms and proactive measures to prepare for future disasters, such as pre-positioning personnel, equipment, food, supplies and water. The organization is also a partner in the State-led Disaster Housing Task Forces in New York and New Jersey, and has activated several other temporary housing assistance options for survivors. Click here to learn more.
About the Author
Mary Broderick is a Senior Vice President and Leader of WGA’s Property Practice. Ms. Broderick is responsible for the design and implementation of complex property insurance programs for WGA’s corporate clients’ and has many years of experience working with complicated Business Interruption (BI) and Contingent Business Interruption (CBI) issues.