Home Page The Publication The Editor Contact Information Insurance Key issues Book Subscribe

Vol. 6, Iss. 7
September 13, 2017

Hurricane Harvey: Some Early Thoughts On Coverage

The destruction caused by Hurricane Harvey is unimaginable. Like you, I stared at the television heartbroken for those affected and in awe of the neighbor-helping-neighbor response. We all have those impacted in our thoughts and prayers.

The road to recovery in Texas is going to be long and steep. The incredible grit and resolve of Texans will go a long way toward getting there. But, unfortunately, grit and resolve are not legal tender. Money, of course, will drive the recovery process. The government will provide substantial amounts through various channels. And the public will contribute generously through charitable giving.

But when it comes to money to respond to a natural disaster, insurance dollars are far and away the most desirable. They can be large amounts, paid quickly and directly to those in need, and with no repayment obligation. This can’t always be said about other sources of funds.

But the victims of Hurricane Harvey face serious challenges to securing insurance for damaged property. The problem is at least four-fold: (1) homeowner’s policies exclude damage caused by flood; (2) the media has reported that only a small percentage of the affected homes have stand-alone flood policies; (3) even those with flood policies may be underinsured (flood policies can have low limits); and (4) in 2015, the Texas Supreme Court issued a decision that will make it very difficult for policyholders to secure coverage for damage caused by a combination of wind and water (an issue more likely to arise in coastal areas). I wrote about this SCOTX decision in the May 20, 2015 issue of Coverage Opinions.

But despite the challenge, I believe that efforts will still be made to secure coverage, under homeowner’s policies, for damages caused by Harvey’s floodwaters. The reason is simple – there is just too much at stake not to. As we learned after Hurricane Katrina in 2005, those affected have no choice but to leave no stone unturned in their pursuit of coverage. Initial efforts to challenge the flood exclusion post-Katrina seemed foolhardy. Yet policyholders did, and they achieved an early victory. While later reversed on appeal, this success proved beneficial in shaping subsequent claims. Katrina insureds litigated the definition of the word “flood” and it took the Louisiana Supreme Court to resolve the question. Everything was on the table. It had to be.

As I said in a recent Wall Street Journal story: “The language of homeowners’ policies is going to get more twisted than Cirque du Soleil performers in an effort to find coverage.”

The flood exclusion in homeowner’s policies seems unassailable. But there is no shortage of plaintiff’s lawyers in Texas with the talent, means and experience to take a run at it.

Website by Balderrama Design Copyright Randy Maniloff All Rights Reserved