Intelligent policyholders are not sticking around when their house is being destroyed documenting how much damage was caused by wind and then the flood that accompanies most of these catastrophic events. Yet, their insurance companies want to act as if their policyholders can play god. They demand that policyholder determine what damage was exactly caused by wind before the flood storm surge washed a lot of the evidence away.

Some insurance companies even claim their policyholders are crooks and cheats if they ask each company – the flood and wind carrier – to pay. I am hearing this from some Superstorm Sandy insurance adjusters. Most policyholders are underinsured following a major tropical storm or hurricane and need both policies to pay, at least in part, to be fully indemnified.

This is not the first time this issue has arisen. A good legal discussion of this factual pattern is found in Robichaux v. Nationwide Mutual Insurance Company:1

“Nationwide is contending that…an insured who submits a claim under a SFIP that does not segregate wind damage from flood damage or who submits a claim under a SFIP that includes claims for property damage that are doubtful or uncertain in origin does so at the peril of losing the wind damage benefits that would otherwise be payable under his homeowners policy.

. . .In essence, Nationwide is arguing that the burden is on the insured to properly segregate his losses at the time he makes a claim for SFIP benefits, and that if the insured errs and claims any damages under the SFIP that actually prove to be wind damages, the insured is estopped to make a subsequent claim for these wind damages under his homeowners policy. If this rule were established and followed, the wind insurer, the insurer who sold the homeowners policy, would then have no obligation to pay benefits for wind damages that would otherwise be covered.

. . .I find no authority to support Nationwide’s argument that by making a claim for damages under one policy an insured forfeits his rights under another policy if his original claim proves to be erroneous or over inclusive. In my opinion this would lead to an unjust result.

Insureds are entitled to recover their storm losses under all available insurance policies in accordance with the terms of those policies and the evidence showing the cause of the losses. In the context of catastrophic hurricane losses, the cause of the insured’s property damage is more often than not uncertain and more often than not disputed. It would be unreasonable and unjust to require an insured to correctly segregate his damages between flood losses and wind losses at the time he makes his initial claims at the peril of losing the insurance benefits he has paid for if his attempt at segregating these damages later proves to be incorrect. See: Palmer v. State Farm Fire and Cas. Co., 2007 WL 1459391 (S.D.Miss.2007).

In Ferguson v. State Farm Ins. Co., 2007 WL 1378507 (E.D.La.2007) Judge Berrigan faced a similar factual situation to this. The plaintiffs were insured under both a SFIP and a homeowners policy. Plaintiffs apparently claimed their hurricane losses were payable under both policies. On the basis of a telephone conversation, the SFIP benefits were paid, and State Farm argued that the plaintiffs should be estopped from claiming additional benefits under their homeowners policy. The Court disagreed, holding that the plaintiffs had a right to recover the wind damages covered by the homeowners policy. The Court determined that estoppel did not apply on the facts then before it.

This issue is important in New Jersey and New York as Superstorm Sandy litigation is getting in full swing and those clever insurance defense attorneys are trying their best to keep their neighbors from collecting benefits.

Positive Thought for the Weekend is a video that I urge you watch:


1 Robichaux v. Nationwide Mut. Ins. Co., No. 06-1165, 2007 WL 2783325 (S.D. Miss. Sept. 21, 2007).