November 2018

Every year, at least a few large hurricanes cause evacuations, flooding, and other physical damage. The following are unique to hurricane losses.

Homeowner Coverage for Water Damage

Most homeowner’s policies cover only wind damage, not flooding. However, if a covered peril (such as wind or lightning) causes damage to a roof which then allows water to enter the home, the resulting water damage from rain coming through that opening will likely be covered under the standard homeowners policy.

Flood insurance is most often provided by the federal government through the National Flood Insurance Program (NFIP), even if purchased through an insurance company or broker. The Federal Emergency Management Agency (FEMA) manages the NFIP. Some insurance companies may also offer flood coverage other than the NFIP policy, so you will need to check with your broker or agent. The NFIP’s coverage generally includes (i) buildings up to $250,000, and (ii) personal property (contents) up to $100,000. However the building and contents coverages are separate, so it is possible to purchase one without the other.

NFIP claims are handled by NFIP adjusters and by insurance company adjusters that are certified by the NFIP to handle flood claims. The NFIP will address questions and complaints by phone (1-888-225-5356).

Business Interruption Claims

Most “all risk” policies cover damage caused by wind and wind-driven rain, but do not cover floods. With hurricane losses on a coastal area, Insurers can claim that the damages were caused by non-covered flooding. This is a fact-specific inquiry, just as occurs for homeowners (see above).

Contingent business income coverage covers losses caused by interruption to key suppliers, even if your business was not directly damaged. However, the type and cause of physical damage must be the same as insured under your policy. This can be a challenge with key suppliers in the other part of the country who carry insurance different than what you cover for your business. For example, a coastal of river-adjacent business may carry flood insurance, which a Southern California business would typically not have. However, the southern California business probably has coverage for rain and wind damage. For the Southern California business to make a claim using contingent business income coverage, the loss to the supplier would need to be classified as having been caused by covered claims for wind and rain.