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Wind Versus Water Versus Oil

From an insurance perspective, it is likely that any coastal damage that is exacerbated by the discharge of oil will further complicate the coverage issues that arise.

By Diana B. Reitz, CPCU | Updated on June 30, 2010
As the nation and world are mesmerized by the sight of oil gushing from a well on the Gulf of Mexico’s floor, a new fear is arising about the course the oil will take and which areas will be most affected long-term. With hurricane season just a month old, we have to wonder what impact hurricanes in the region will have on the expanse and damage from the gushing oil.

Five years after the fact, we continue to watch as courts wrestle with the question of whether water damage that occurred during Hurricanes Katrina and Rita should be covered through residential and commercial property policies. Other tricky questions arose when policyholders who carried flood insurance first made a claim on that line and then tried to recover additional damages by claiming the damage was caused by wind and thus should be covered on their property policies. How complicated will these issues become when a third element — pollution — is added to the equation?

Mixing Oil and Water

The National Oceanic and Atmospheric Administration (NOAA) has begun speculating as to the potential effect of the oil slick on hurricanes that are likely to run through it. NOAA, in a recent fact sheet, explains that the oil should have little impact on a storm. This is because most hurricanes span enormous areas, likely much broader than the current size of the oily residue. If the slick remains small in comparison to the size of a hurricane that moves through it, “the anticipated impact on the hurricane would be minimal.”

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