Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

The Ocala Star Banner ran a story last week, "Insurers Say Sinkholes Impact Marion Market." The introduction in the first paragraph of the following exerpt is an exaggeration of our practice:

William “Chip” Merlin, president of Tampa-based Merlin Law Group, which specializes in sinkhole claims, said population growth and development is more to blame for rising sinkhole claims.

“Number one is population growth,” Merlin said. “We're seeing more structures in rural areas that are prone to sinkhole activity. Number two, we're seeing more in farm areas because of irrigation. With more development we're not going to see a decrease, we will continue to see an increase.

Another factor, Merlin said, is how difficult it is to deal with insurance companies when it comes to sinkhole claims. “Yes, we are seeing more claims,” Merlin said. “It's much more difficult to collect payment so more people are going to attorneys.”

The Merlin Law Group does not specialize in sinkhole claims. We represent policyholders with insurance disputes. A small portion of those claims involve sinkhole claims. Since most of our practice involves disputes with property insurance at issue, we represent many policyholders with sinkhole claims. Indeed, as I wrote this, two attorneys in our firm are in the third day of trial regarding a sinkhole loss that the insurance company has denied.

Floridians have a much more difficult burden to prove and collect for their sinkhole damaged properties than in the past. Several changes to the statutory laws limiting how, what and when the insurance companies pay their customers for sinkhole losses have passed the Florida legislature. The insurance industry wants even more burdens and restrictions for policyholders, even limiting representation. To justify this, they have lobbied the Florida Office of Insurance Regulation to find "data" to limit policyholder choices and opportunities when faced with a sinkhole claim.

I am writing this while embroiled in a two day mediation for a large Texas school district involving a Hurricane Ike loss. Some may consider a school district with dedicated legal counsel, architects and building construction employees to be a sophisticated client. The truth is that if these policyholders are having trouble collecting and are having to retain professionals such as us, policyholders with sinkhole damage need professional help even more, given the current complex state of the law.

In the interim, Hurricane Earl has a windspeed map that must be concerning to those living on the Eastern seaboard.
 

If Earl wobbles just a little to the west, you don't have to be a NASA rocket scientist to figure out somebody is going to be welcomed as a new member of the slabbed storm surge association.

State Farm was the major personal lines insurance company along the Mississippi coast when Hurricane Katrina hit. At its moment of truth -- when it had to decide whether to give its customers the benefit of the doubt and pay for Slab claims, State Farm's highest claims officers decided to deny those claims. The story inaccurately says that State Farm won this battle. It lost, and its loss would have been a financial catastrophe, but for a dubious ruling by the Federal Fifth Circuit Court of Appeals, which allowed State Farm to escape punative damages.

Still, I found State Farm to be a very able opponent during the Hurricane Katrina litigation and said so in the article:

State Farm is known for taking a broader view of each disputed case than other insurers, said Chip Merlin, a Florida attorney who said he's handled hundreds of Katrina claim cases, including many State Farm customers.

"It's about what (the case) might mean not just today, but five years from now," said Merlin, who only has a half-dozen cases still pending. "They're very worthy adversaries."

The story is not quite complete because a qui tam case involving State Farm catastrophe claims adjusters is set for trial in December. In that case, State Farm allegedly overpaid flood claims to reduce payments it owed under all risk policies.

While all this nostalgia is going on, there are new dangers lurking in the Atlantic. As correctly predicted in Tropical Waves off Africa Indicate a Need for Concern, Hurricane Danielle has formed and another very strong wave seems destined to become a hurricane as well. Regarding the second wave, the National Hurricane Center has this to say:

A BROAD AREA OF LOW PRESSURE ASSOCIATED WITH A TROPICAL WAVE LOCATED ABOUT 350 MILES SOUTHEAST OF THE CAPE VERDE ISLANDS CONTINUES TO SHOW SIGNS OF ORGANIZATION. THIS SYSTEM COULD BECOME A TROPICAL DEPRESSION DURING THE NEXT DAY OR TWO AS IT MOVES WESTWARD OR WEST-NORTHWESTWARD AT ABOUT 15 MPH. THERE IS A HIGH CHANCE...60 PERCENT...OF THIS SYSTEM BECOMING A TROPICAL CYCLONE DURING THE NEXT 48 HOURS. (emphasis added)

Five years ago, I was in pretty good shape, getting ready to run a marathon in a Boston Marathon qualifying time. Today, I am again getting ready to run a marathon, but my ever aging body is heavier and losing its get up and go. Given all these sanguine memories, lost abilities, frightening anticipations, and hopes for surprising happy endings, this seems a very appropriate ending to the post:

http://www.youtube.com/watch?v=RxPZh4AnWyk

A couple of days ago, BobbiStorm of Hurricane Harbor cryptically noted that it "looks like we have a swimmer to me." For those that do not follow her wacko rhetoric as often as I do, the interpretation is that she thought a classic hurricane would be forming off the African coast. Her prediction appears to be right. Dr. Jeff Masters' WunderBlog confirmed that:

A tropical wave (Invest 95L) in the far eastern Atlantic about 350 miles southwest of the Cape Verdes Islands has become more organized this morning. Satellite loops show that the wave has some rotation, and heavy thunderstorm activity has increased in recent hours, after a period overnight with little change. Water vapor satellite loops show that there is some dry air to the north of 95L, but this dry air currently appears to be too far away to significantly interfere with development. The main impediment to development is the moderate 10 - 20 knots of wind shear over the system. The shear is forecast to remain in the moderate range through Monday, then decrease. This should allow 95L to develop into a tropical depression Monday or Tuesday. NHC is giving 95L a 30% chance of developing into a tropical depression by Monday morning. With 95L's recent increase in organization, these odds should probably be 50%.

If it forms into a hurricane, the name will be Danielle. It only seems fitting to play a video from Danielle Peck, whose song could add Hurricane Danielle to a list of things that are bad for us:
 

Out in the Atlantic are three possible centers from a long, spread out ...wide area of convection. Let's call them Larry, Moe and Curly and I'm figuring none of them are going to make it to prime time unless they have a sex change operation or are cross dressers in which case Danielle may come out of hiding though she is progged to be a fish storm. Amazing...not even here on the maps and already written out of the script.

So... these are my thoughts…

If you are burned out from Colin or simply wishing on the weekend... I'd like to bring up a few topics before storms start popping and we can't remember we were bored, lethargic or afraid the whole season is going to be a bust.

According to Long Term models supposedly Danielle and Earl are down the road about to pop.... either in the Atlantic or close in around the Gulf… if Earl does the Gulf again I may lose it ;)

Fishy or not... think there is a sense here that they are all gonna be weak storms or fish storms and there is almost a dread to get invested in an invest because it's not going to be much but some wishy washy fish storm and barely more than a Tropical Storm

I say not... I say we are losing it to the hype that was the Mother of All Seasons and because we have yet to see any storm hit a home run we think this is all too boring to deal with .... a bunch of players walked with the bases loaded and suddenly the inning is over....

Well, I'm a Red Sox fan and we tend to stick around for the whole season...

My sport is football but I think this is a better analogy.

September Remember is the saying and it's a saying for a reason... we will remember this September I believe...and October.

So question?

How does this heat wave get unstuck.... note to people here who whine and complain we all want storms and death and destruction....there are more deaths from Heat Waves than Hurricanes and Tornadoes statistically. I'd fear the heat more than a Category 1 or 2 storm ...or even a 3.

I do not know whether heat waves are truly more lethal than hurricanes, but I am happy not to be in Russia this summer. The evening weather broadcast would be a lot more colorful if Bonnie were explaining it.

And, here's to hot Friday nights:
 

Rocco Calaci has taken time to write as a guest meteorologist on this blog. He has a web page listing sites and even tips for policyholders. Here are the sites he suggests for hurricane meteorology:

• National Weather Service
• National Hurricane Center
• Weather Underground Tropical page
• Gulf of Mexico Buoy Data
• Hurricane Tracking

The buoy data can be very revealing when a major storm is accompanied with storm surge. I was on the phone with Doug Branham of Colonial Claims before Katrina hit. He alerted me to the huge wall of water that eventually washed away parts of Mississippi, Louisiana and Alabama based on this information.

Jeff Masters WeatherUnderground Blog and Hurricane Terrapin are the two quick sites I watch. I strongly suggest that the Discussion made by the National Hurricane Center be read to better understand how the professional meteorologists are viewing the accuracy of their predictions and expectations. The Discussions are on either of these two sites.

Finally, for some off the wall fun, I have long kept bookmarked BobbiStorm's Hurricane Harbor blog. For instance, this is how she concluded last night's post:

Either she intensifies or gets downgraded... that's my guess. And, expect to see that track pulled back to the north a bit more as Bonnie is being pulled more to the north around the flow of the Upper Level Low and it's an interesting storm... that's all I'll say. Each in it's own way is interesting.

Miami is amazing. Breakfast at Bayside this morning and hunkered down for a Hurricane Party tonight... low key party, no liquor... lots of cherries and designer water ;)

Sweet Tropical Dreams... Bobbi

Speaking of a party, the weekend is almost here and this nostalgia should help get you in the mood:

While no one can predict the future, we all can at least prepare for it. In his blog post, Mr. Calaci correctly warned:

This year has already produced 2 tropical systems early in the season. We are receiving a warning loud and clear. Please take time to make hurricane plans. Inventory your belongings. Make necessary changes to your insurance policy. Many folks have their property under-insured, don't let this happen to you. If you need to increase your insurance limits, then do so...don't expect the insurance companies to know your needs. This is your responsibility.

From a Business Interruption perspective, these forecasts should not be taken lightly. For those who do not regularly keep up with this blog, I suggest you read Learning from Other’s Mistakes – Understanding Business Interruption Claims – Part 15 to learn how a catastrophic loss could run a business to the ground without the possibility of recovery despite having adequate insurance coverage. For those keeping score at home, I suggest you read it again.

The best business interruption claim is one that is planned for in advance of a loss. In other words, the success of a business interruption claim after a catastrophic loss will most likely depend on how well prepared the business is to handle an interruption event. Many companies have emergency response plans, which include team coordination and responsibilities. However, many small businesses barely have such response plans in place.

I recently came across an article in CAT Claims: Insurance Coverage for Natural and Man-made Disasters – Chapter 10- Proving Business Interruption Losses, where the authors suggested that many businesses should consider having an “insurance recovery team” as part of their response plans, where the team would work in tandem with risk managers and attorneys in order to address issues such as preservation of evidence to prove insurance coverage and causation, as well as the costs incurred in responding to a loss and the interruption event.

The article suggests a few pointers worth sharing:

• At the first team meeting the risk management personnel or the broker should brief the other team members on the scope of the coverage provided in the policy to insure that everyone has a clear understanding of what is covered and what type of documentation is needed to support a claim. Documentation will include accounting documents for all loss related expenses, budget/forecasts, accident reports made by the company, etc.

• The operations representative should review the loss event and the impact that it will have on the business. As this is early in the process it is unlikely that all the effects will be identified and the discussions should address the worst case and the likely case [scenarios].

• The accounting representative should inform the team on how the normal accounting process would respond to the event and what additional steps will need to be taken to capture the information needed to substantiate the claim to an adjuster.

• The planning representative will need to review the budget and model that is used for forecasting income and expenses. This [step] is critical as BI claims are based on theoretical calculations of what the business would have made as income had the event not occurred. The risk management personnel broker and claim consultant need to have a good grasp of this prior to communicating with the insurance adjuster. The adjuster’s first report to the underwriter sets the stage for the claim and correcting any misunderstanding in this first opinion is very difficult.

• The team, with the input of the claim consultant should develop the initial strategy for the handling of the claim along with setting up the schedule for the next meeting.

• The legal representative should advise the team on confidentiality issues and assist in the analysis of subrogation potential as the facts surrounding the event become known.

The reality is that many small businesses can only dream of having such an organized team in place to assist it before or after a loss. However, carefully following the highlighted pointers should, at minimum, give the business owners or managers an idea of the value of its claim and the period of time it will take to bring the claim to a successful conclusion and, hopefully, to a full resumption of operations.

In today's paper, NOAA issued a possible La Niña alert. NOAA announced that the conditions for La Niña were developing, and this scenario would be prevalent by August to September and extend into the beginning of 2011.

I'm here to tell you that La Niña isn't coming in August because it is already here. A quick check of water temperatures off the coast of Central and South America (Pacific Ocean side) shows that the temperatures for this region are almost 1.5 degrees Celsius colder than average. The chart below is current as of July 8, 2010. 

For a La Niña situation this is very cold, and, if this theory is correct, it should prove to be quite a hurricane season for the Atlantic and Gulf of Mexico areas.

The various forecasts from the National Hurricane Center show between 14 to 23 named storms this hurricane season. With a strong La Niña, I expect to see storms at the higher end of the predicted range.

The chart below shows how the numerical models are looking at La Nina conditions to persist into next year.

Typical La Niña conditions result in hotter temperatures in the South and fewer tornadoes east of the Mississippi. Remember, these so-called "typical" conditions are based solely on statistics from an era when there was little or no knowledge about El Niño/La Niña situations.

The two busiest hurricane seasons on record (1994 - 1995) occurred during La Niña conditions. At the same time, don't overlook the fact that 2008, (Hurricane Ike) occurred during La Niña conditions and the infamous 2005 (Hurricane Katrina) happened during La Niña.

This year has already produced 2 tropical systems early in the season. We are receiving a warning loud and clear. Please take time to make hurricane plans. Inventory your belongings. Make necessary changes to your insurance policy. Many folks have their property under-insured, don't let this happen to you. If you need to increase your insurance limits, then do so...don't expect the insurance companies to know your needs. This is your responsibility.

As I said, the La Niña predictions are based on statistics. Sometimes the numbers are totally wrong, but it doesn't hurt to prepare...just in case the numbers are correct.

--Rocco Calaci

There are two recent and very interesting posts regarding hurricanes worth reading. One is found on Dr. Jeff Masters' WunderBlog regarding storm surge misconceptions. Everybody should read this important discussion of storm surge. Dr. Master’s correctly noted:

The storm surge is usually the most dangerous threat of a hurricane. The ten deadliest U.S. hurricane disasters, including the Galveston Hurricane of 1900 (8000 killed), the Lake Okeechobee Hurricane of 1928 (2500 killed), and Hurricane Katrina of 2005 (1833 killed), were all primarily storm surge disasters.

He then listed and discussed a number of storm surge misconceptions:

Misconception: Call 911 and you can be rescued, while the water is pouring into your home.
How? No one will be able to get to you. Water rises quickly--sometimes six to ten feet within minutes; cars can't drive in it, and it is usually unnavigable by boats when it is coming ashore.

Misconception: Just stuff towels under the door jambs. Then rush around to start picking up things that are close to floor level, so you can save them.
Bad idea. In a minute or so the surge will burst open the door, and instead of standing in a room with four inches of water, you'll be knocked off your feet and into whatever piece of furniture is closest, and will suddenly be in three or four feet of moving water that you can't make any headway into...just before the refrigerator, quickly rushing through the water towards you, knocks you cold.

Misconception: You'll be able to maneuver around in the rushing water.
Probably not. Some people who drowned were not even able to get out of the room they were in, when the water started pouring into the home. The speed of water in surge can be equivalent to a Class III or IV rapids (Class V is hardly navigable by expert kayakers and canoers, and Class VI is not navigable at all).

Misconception: You'll know in time.
The surge is usually not a wall of water as is often assumed, but rather a rapid rise of water of several feet over a period of minutes. It can sneak in unexpectedly, on little cat feet. Most people that were not completely taken by surprise simply happened to look out the window at the right time.

Misconception: You can outrun the storm surge in your car.
Here's an email I got last year from a resident in the Florida Keys who ignored the evacuation order for Hurricane Ike in 2008: I hate to bother you again, but we live on Marathon in the Florida Keys on the Atlantic side, and my husband says that if we see water coming up from storm surge and have an inch of water in our house, that we can outrun the storm surge in our car. Can you please tell me if there is any way this can possibly be true? P.S., I don't know of anyone who lives down here who is planning on evacuating for Ike. Everyone says they are staying. If you wait until the water is an inch high before trying to outrun the surge, the odds are that the surge will rise to over a foot high before you get your car out of the driveway. If the water is a foot high, the typical 10 - 15 mph speed of the storm surge's current has enough force to sweep a car away. In many places along the coast, there is only one road out of a low-lying region prone to storm surges, and the surge will cut off one's only escape route. The Keys have only one road, and the storm surge will likely be moving perpendicular to the road, cutting off the only escape route. One of these days, there are going to be a lot of people who fail to evacuate caught and killed in the Keys by the storm surge from a major hurricane.

The other post, Tornado Threat Increases as Gulf Hurricanes Get Larger, verifies a number of observations that a Guest Columnist, Rocco Calacci, has made in six previous posts to this Blog. Those posts are:

1. Is The Saffir-Simpson Scale Still Relevant
2. Hidden Causes of Hurricane Damage: Meteorologist Rocco Calaci Explains That Hurricanes Are More Than Just High Winds And Water
3. Part 2: Hidden Causes of Hurricane Damage: Meteorologist Rocco Calaci Explains That Hurricanes Are More Than Just High Winds And Water
4. A Call To Reassess How We Gauge Damage From Hurricane Winds
5. Rocco Calaci Questions Current Models Used to Determine Wind Damage
6. Tropical Storm Erika? - Rocco Calaci Gives His Plain-Talk Interpretation of the National Hurricane Center Bulletin

Rocco will be giving an update on the wind speed data this Friday at our seminar, Hurricane Ike--What a Difference a Year Makes, on September 11, 2009. The Insurance Journal article noted:

Currently, it's well known that when hurricanes hit land, there's a risk that tornadoes may form in the area. Until now, no one has quantified that risk because observations of tornadoes were too sporadic prior to the installation of the NEXRAD Doppler Radar Network in 1995. Belanger along with co-authors Judith Curry, professor and chair of the School of Earth and Atmospheric Sciences at Tech and research scientist Carlos Hoyos, decided to see if they could create a model using the more reliable tornado record that's existed since 1995.

The model that they developed for hurricane-induced tornadoes uses four factors that serve as good predictors of tornado activity: size, intensity, track direction and whether there's a strong gradient of moisture at midlevels in the storm's environment.

"The size of a tropical cyclone basically sets the domain over which tornadoes can form. So a larger storm that has more exposure over land has a higher propensity for producing tornadoes than a smaller one, on average," said Belanger.

While some may suggest that tornado activity is well accepted, I have sat across from Dr. Max Mayfield and debated this topic at a Windstorm Conference. The better the measuring devices are becoming, the better we understand how some very unique strong winds and gusts are more prevalent than previously thought in hurricanes.

Accuweather.com released its revised forecast (”guess”) even before the Hurricane Season has started. This possibly could mean they are unreliable and have lost before the game has started. They now expect that there will be fewer named storms. Why should we pay attention to this forecast if they already admit they were wrong?

Nevertheless, here is the basis for their brand new forecast:

“AccuWeather predicts three tropical storms will hit the U.S. coastline, including two hurricanes, one of which could be at least category 3 strength.

Anywhere along the U.S. coast is susceptible to an impact, but the Texas coast early in the season and East Coast from Carolinas northward during the heart of the season are areas that have us worried," said Bastardi in a statement.

A weak El Nino pattern of warm water in the Pacific Ocean is expected to create wind shear to blow apart storms while cool water in the tropical Atlantic ocean will rob the storms of their primary energy source as dust and dry air blowing from Africa will inhibit storm development, AccuWeather said.”

I will try to contact the psychic I referenced above to see what she thinks. I imagine that her basis for a change may be no better than the meteorologists, but it may be much more interesting.

Stay tuned.

And seriously, now is the time to check that policy.

The archrivals of my beloved Florida Gators have a new hurricane study that is surprisingly academic. Normally, the Seminoles of Florida State University have a level of thought more akin to my post, Psychic Predicts No Hurricanes On Florida's Treasure Coast. Instead, Ryan Maue has an excellent discussion of this study on Steve McIntyre's Climate Blog regarding the reasons why we have seen a decrease in worldwide tropical cyclone activity over the past several years and why hurricane prediction is more Wizardry than science:

"Under global warming scenarios, hurricane intensity is expected to increase...., but MANY questions remain as to how much, where, and when. This science is very far from settled....Many papers have suggested that these changes are already occurring especially in the strongest of hurricanes, e.g. this and that and here, due to warming sea-surface temperatures (the methodology and data issues with each of these papers has been discussed here at CA, and will be even more in the coming months). The notion that the overall global hurricane energy or ACE has collapsed does not contradict the above papers but provides an additional, perhaps less publicized piece of the puzzle. Indeed, the very strong interannual variability of global hurricane ACE (energy) highly correlated to ENSO, suggests that the role of tropical cyclones in climate is modulated very strongly by the big movers and shakers in large-scale, global climate. The perceptible (and perhaps measurable) impact of global warming on hurricanes in today's climate is arguably a pittance compared to the reorganization and modulation of hurricane formation locations and preferred tracks/intensification corridors dominated by ENSO (and other natural climate factors). Moreover, our understanding of the complicated role of hurricanes with and role in climate is nebulous to be charitable. We must increase our understanding of the current climate's hurricane activity."

(emphasis added)

A chart in Maue's paper looks similar to my stock portfolio's recent performance: