The more than 100 homeowners who lost their homes to a fire after Superstorm Sandy struck Queens, N.Y. may be denied coverage because of anti-concurrent-causation clauses in homeowners policies, a consumer group warns, although an industry representative says claims in the area are currently being settled.
In a statement released today, the Consumer Federation of America is asking state officials to step in and make sure the 111 homeowners who lost their homes to the fire in Breezy Point, Queens are not denied coverage because of the clause.
"Anti-concurrent-causation clauses (ACC) apply when a loss is caused by a combination of covered events, such as fire or wind, and non-covered events, such as a flood," says J. Robert Hunter, director of insurance at the CFA in a statement. "When a policy contains an ACC, insurance companies can deny an otherwise covered claim—like fire or wind—regardless of the sequence of events. They can also deny an otherwise covered claim even if both events are shown to have contributed to the loss at the same time."
CFA says an insured with a typical homeowner's policy and flood insurance would find the carrier splitting the responsibility of loss according to what was the most likely occurrence. Without flood insurance, an ACC clause would deny fire and wind damage as well as flood.
The consumer group says that 70 percent of New Yorkers in flood zones do not have flood insurance, "putting their claims—even their wind and fire claims—at risk."
CFA adds that ACC was used to deny numerous claims after Hurricane Katrina, resulting in litigation that "has not sufficiently clarified the circumstances under which ACCs can be enforced."
He adds, "We believe that additional clarity is needed and can be provided by the New York Department of Financial Services. We call on state regulators to take action to help New Yorkers whose fire and wind-related insurance claims payments are at risk of denial due to an unfair and legally unclear clause buried in the fine print."
A request for comment from the NYDFS was not immediately returned
Robert Hartwig, president of the Insurance Information Institute, says, "To the best of my knowledge, homeowners claims are being settled in Breezy Point and everywhere else."
He criticized the CFA for making its allegation without evidence that there has been any incident of denial because of an ACC clause, adding, "It is telling that they don't have any specifics."
Hartwig says that while ACC clauses may exist in some policies, the purpose is to make clear that when the preponderance of the evidence is that loss was caused by flood water, insurers will not be held responsible for a loss they do not insure.
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