Avoid these 3 potential pitfalls when handling Hurricane Ian claims
Determining too soon if wind or flooding caused damages is just the first step into the potential legal minefield trailing in Hurricane Ian's wake.
As a Florida attorney who has represented insurers and insureds since 2004, I have experience in windstorm-related claims concerning Hurricanes Charley, Frances, Ivan, Jeanne, Katrina, Irma and Michael, it is recommended that property insurers bear in mind the following three points regarding the adjustment of Hurricane Ian losses:
1. Wind vs. flood, that is the question
Premature assumptions have already been made by so-called talking head experts that the majority of claims associated with losses in Lee, Charlotte, Osceola, Orange, Leon, Broward and multiple other affected counties are excluded from property and business-interruption coverage arising from a flood exclusion.
Assuming flooding is the cause of loss of any Ian claim is something no insurer should make, particularly at this early stage post-loss. It is an issue that popped up during Hurricanes Ivan and Michael. Certain insurers learned the hard way that a denied claim was ultimately determined to be partially or even totally associated with windstorm-related losses. It is projected that certain Hurricane Ian losses, as with Ivan and Michael, will ultimately end up in court with the focus on the “battle of the (engineering) experts.”
Bear in mind the courts have found that in the event of unclear language in insurance contractual language, that such ambiguities will be construed strictly in favor of the insured.
Moreover, with certain claims the scenario is less fuzzy as Ian brought with it many tornadoes which would be covered under homeowners, tenants, and/or business-interruption indemnity.
2. Risk of extra-contractual exposure
Ordinarily, the maximum exposure to an insurer is policy limits. After all, windstorm litigation is usually brought pursuant to a breach of contract action, and an insurance policy is a contract between the carrier and its insured(s)/additional insured(s).
However, Florida has codified bad faith and unfair and deceptive claims practices in Sections 626.155 and 626.9541. The potential for a class action as to a denied or unacceptable settlement could put the insurer at risk of extra-contractual losses for bad faith or a policy or procedure that rises to the level of an across-the-board practice possibly even as a class action cause of action.
As a prerequisite to filing a bad faith action, the insured is required to file a Civil Remedy Notice of Insurer Violation with the Florida Department of Financial Services. The insurer has 60 days to file a response and and/or cure. This deadline is strictly construed. Failure to meet it comes with an undesirable price tag of the presumption of bad faith under governing Florida law.
3. Inside claims adjuster obligations
Section 69B-220.201 of Florida’s administrative code imposes certain ethical obligations to inside claims adjusters.
Florida is home to a large retirement population. One such ethical obligation required by the administrative code states: “An adjuster shall exercise extraordinary care when dealing with elderly clients to assure that they are not disadvantaged in their claims transactions by failing memory or impaired cognitive processes.”
Claims adjusters should review 69B-220.201 to ensure that they are complying with these and other ethical obligations to avoid undesirable and unintended consequences later.
Thus, whether the Ian claim is brought pursuant to a Florida homeowners, tenants or business-interruption indemnity coverage, be sure to dot those i’s and cross those t’s regarding these three traps for the unwary before sending out those partial or total denial letters.
Kathleen M. Bonczyk, Esq. is licensed to practice law in the states of Florida and New Jersey including for approximately two years as in-house counsel for Homeowners Choice Property & Cas. Ins. Co. She has represented insurers and insureds in various breach of contract, declaratory judgment and bad faith actions since 2004. She was named 2022’s pro bono attorney of the year by Community Legal Services of mid-Florida, and devotes her time toward mitigating the risk of school and workplace violence through her organization the Workplace Violence Prevention Institute. She can be reached at bonczyklaw@gmail.com (preferred) or (561) 568-2512.
Opinions expressed here are the author’s own.
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