Maybe Now You Will Review Your Insurance Coverage?

Hurricane Harvey has devastated Houston and the Gulf Coast. Hurricane Irma was not as bad as initially feared, but still did substantial damage in Florida and Georgia. Tens of thousands have had their homes and businesses damaged or destroyed and their lives turned upside down. Many are uninsured. Others will learn that their losses are partially covered or not covered at all. We pray for the victims.

We hope that insurers and insurance adjusters will be fair and even generous in their response. It seems certain, however, that there will be an enormous amount of insurance litigation following the storms, just as there was after Hurricane Katrina in 2005.

Perhaps a little good will come out of it, and perhaps these natural disasters will spur individuals and businesses not currently affected to take a hard look at their insurance coverage to try to avoid nasty surprises in the future. In doing this, you should consider help from an experienced independent insurance agent or broker. Remember that each situation can be different and that insurance law can vary significantly among states. If your situation is particularly complex, you may want to consult with an insurance coverage attorney licensed in your jurisdiction.

Here are a few thoughts--not comprehensive by any means--to get you started.

Homeowners insurance typically does not cover flooding. If you want flood insurance, you need to purchase it through the national flood insurance program. Note, however, that whether a loss was caused by wind damage (typically covered by homeowners insurance) or flooding is often factually disputed. Courts have taken differing approaches in such situations, with policyholders sometimes prevailing.

In a flood, auto insurance may repair or replace your vehicle. But not if you are only carrying the state mandated liability coverage. If you are carrying comprehensive coverage, the insurance should respond, subject to a deductible. Check your policy and check with your agent. Consider arguing for the vehicle to be declared a total loss so that it can be replaced.

While we're on the subject of personal lines, do you have a personal umbrella liability policy? If you are ever have an automobile or other significant claim filed against you, your policy limits may not be adequate to protect your assets. Consider carrying a personal umbrella liability policy. They are usually cheap and offer substantial increases in policy limits.

Are you covered for earthquakes? Under most homeowners policies, probably not. But you may be able to purchase an endorsement adding coverage. Ask your agent or broker.

Are your business liability limits adequate? I often see businesses carrying liability coverage with policy limits of $1 million per occurrence (which means, essentially, per event) and $2 million annual aggregate (the total the insurer will pay for all occurrences during the policy period). In this day and age, that is not a lot of protection. Ask your agent or broker about higher limits, perhaps through business umbrella or excess liability coverage.

Do you have business interruption coverage? What if your business facilities are damaged and you are out of business for a significant period? Business interruption insurance (sometimes called lost business income insurance) may cover that loss and also provide coverage for extra expenses to help resume business operations.

Is your business liability insurance subject to unnecessary exclusions? An example is the "pollution exclusion," which insurers have successfully used in some states to avoid coverage for injuries having nothing to do with environmental pollution, such as injuries caused by the unintended release of carbon monoxide from heating equipment. However, insurers also offer policies with an exception to this exclusion for heating and air conditioning equipment. Again, a good agent or broker should be able to help.

Are you protected from cyber risks? This is a very large topic, but, generally, insurers try to avoid coverage for cyber risks under traditional business insurance. Cyber coverage is available, but it varies substantially in terms of what is covered and not covered. Earlier posts in this blog have more information. For help in this area, make sure your agent or broker has sufficient experience, or can refer you to an expert.

Although these are areas you should think about, they are not intended to be comprehensive. A good agent or broker should spend some time getting to know you and your business and can help identify other potential risks and offer potential insurance solutions.

My final thought is one I always offer when giving an insurance presentation: If you have a claim and it is denied, never accept an insurer's determination at face value. Insurer determinations are sometimes right, but they may also be wrong or debatable. Consult with your agent or broker or an insurance coverage attorney licensed in your jurisdiction.