Property Insurance After Storms and Other Disasters

On Thursday night and early into Friday morning, Western Washington was hit with one of the worst wind storms in the region’s history. Puget Sound Energy reported almost one million customers without power, and despite round-the-clock repairs by approximately 350 crews from nine different states and Canada, power has been restored to less than half of their customers. The damage, however, goes beyond power outages. Many homes and businesses have sustained varying degrees of damage from fallen and uprooted trees. Thus, property insurance will play a major role in repairing and rebuilding after the storm.

Like any other agreement, property insurance is a contract. Therefore, there are certain obligations that both the insurer and the property owner must fulfill in order to ensure that claims are processed quickly and efficiently and minimize coverage disputes. This post will discuss common terms in property insurance policies. Each policy may or may not contain similar language, and coverage in any particular situation may not match exactly the common policy terms described below.

Basic Coverage. Property insurance generally covers physical damage to the insured property. In the case of homeowner’s insurance, damage to the home and fixtures on the land – a fence, for example – are commonly covered. Where business property insurance is at issue, coverage for inventory as well as physical structures may be purchased. Subject to exceptions and exclusions, most property insurance will cover damage to buildings, whether caused by wind blowing off a roof, or fallen trees and debris.

Liability Coverage. In addition to covering the property itself, property insurance may cover damage to persons or other property arising out of the use of the insured property. This is common in homeowner’s insurance policies where, for example, the insurer may cover a slip-and-fall claim of a guest on the property. In the context of the recent storm, this means that property insurance may cover damage to neighboring homes or businesses where the fallen tree on one property damages other property not specifically covered by the same policy.

Common Exclusions. All insurance policies contain a number of exclusions, and these exclusions vary with each policy. Some property insurance may not cover damage that could have been avoided if the owner had taken proper care of the property. This may occur where a tree is visibly diseased or dead prior to the storm, yet the homeowner fails to maintain the property by removing the tree. The tree then falls during the storm, causing damage to the home. Depending on the language of the particular policy, the insurer may deny the claim because the damage could have been prevented by the insured (the homeowner).

Another storm expense commonly not covered is the clean-up of debris. Where debris simply dirties the property and does not cause any physical damage, clean-up costs will generally be at the expense of the homeowner. (Some policies may provide separate or additional coverage for this, particularly commercial and municipal policies.) Finally, property insurance may or may not cover vehicles stored on the property. For example, separate coverage may be (but is not always) required for cars, boats, trailers, or RVs damaged while on the property.

In addition to the above common provisions, most insurance policies will include a number of other coverage provisions and exclusions. Coverage determinations are made on a case-by-case basis, and will depend on the language of the particular policy at issue.

Notice to Insurer. Most insurance policies require that the insured provide the insurance company with timely notice of a claim. The owner generally contacts the agent, or the insurance company directly, to file a claim. A number of companies have been airing radio and television advertisements encouraging their policyholders to report claims.

There is no clear definition of “timely” notice, and “timely” is generally determined on a case-by-case basis. Notice may not be timely where the damage has already been cleaned up and repaired. Emergency situations may change this general rule. In general, an insured property owner who gives notice as soon as reasonably possible will not violate an insurance policy’s requirement that the insured give timely notice of a claim.

Cooperation. Another common clause in insurance policies is the cooperation clause. That clause requires that the property owner cooperate with the insurer as the insurer investigates and adjusts the claim. Among other things, this generally requires a homeowner to give an adjustor reasonable access to the damaged property so that the insurer is able to assess the damage, and provide additional information, such as repair estimates, requested by the insurer. Compliance with the cooperation clause generally imposes only a minimal burden on the property owner, and failure to cooperate could result in a denial of coverage.

There is no doubt that property insurance will play an important role in repairing the damage to the region during the coming weeks. All policies are different, and each will cover different damage from the storm. Consult legal counsel for questions about particular coverage or compliance issues and disputes.