November 4, 2012 — On October 29, the East Coast was devastated by Hurricane Sandy, one of the most expensive and devastating storms to ever hit the region.
Because it is very rare for strong hurricanes to hit this region, only a small percentage of homeowners have flood insurance. As thousands of claims are filed, it is highly likely that many homeowners and insurance companies will dispute whether damage was caused by flood or wind.
When water damage occurs in a home without flood insurance, insurance companies have a financial incentive to argue that property damage was caused by flooding, storm-surge, or a hurricane. Because standard homeowner’s insurance usually covers wind damage, homeowners have reason to argue that the damage was caused by wind or wind-driven rain. In some cases, the important distinction between wind and flood damage can lead to litigation.
After Hurricane Katrina, for example, hundreds of homeowners filed lawsuits alleging that at least some of the damage was caused by hurricane-force winds or wind-driven rain. This argument may be harder to make after Hurricane Sandy, which was actually downgraded to a “Post-Tropical Cyclone” just before making landfall because it did not have “sustained hurricane-force winds.”
Determining whether flood or wind actually caused the damage is an essential part of making an insurance claim. Homeowners should be very careful when choosing the words to describe property damage in an insurance claim. For example, describing damage as “water damage” is not the same as “flooding.” A standard homeowner’s insurance policy might still cover water damage that occurred because wind toppled a tree that blocked a drain, or broke a pipe.
Experts have estimated that Hurricane Sandy will cause $50 billion in property and economic damage, of which $22 billion is insured. Hundreds of thousands of people are expected to file claims for damage to their home or business. Many will see their claims denied because they lack flood insurance.