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WDEL Blog: Allan Loudell

After Sandy, people discover limitations of their insurance policies

Too bad hurricane coverage forced us to cancel Tuesday's Insurance Commissioner's debate we had scheduled.

...Because the occasion of a hurricane or storm crossing into Delaware would've provided the perfect backdrop for questions about homeowners' insurance, and what the state Insurance Commissioner can (or cannot) do on behalf of the average property-owner.

Many people know, of course, that traditional homeowners' insurance typically doesn't cover floods. And a "flood", in itself, is an elusive term, which might refer to ANY water damage, including that from ruptured pipes and other leakage.

Interestingly, FEMA (the Federal Emergency Management Agency) does provide insurance through NFIP (the National Flood Insurance Program).

While many people may be aware their homeowners' insurance doesn't cover flooding, they may be less aware that their policies may not cover simultaneous events, technically "anti-concurrent causation", an exceptional loophole for insurance providers (although illegal in some jurisdictions). Basically, under "anti-concurrent causation", if two or more catastrophic events occur at the same time, then the policy might not cover damage from EITHER or ANY event! So you the homeowner might get stuck with flooding and wind damage.

And even if you went to the time and trouble to purchase special flood insurance, you might not be covered. A central legal question emerges:

Does flood insurance carry the obligation to pay back victims so they can return to their circumstances BEFORE the flood, or is it just a form of financial assistance? Red tape at NBC News reviewed these legal questions...


http://redtape.nbcnews.com/_news/2006/04/25/6346100-flood-insurance-doesnt-have-you-covered?lite


Next, many insurance companies have surreptitiously introduced "insurance deductibles", or increased them. Just like mushrooming medical deductibles, these are bad news. Rather than shelling out five hundred or a thousand bucks, you might have to pay ten thousand dollars or more before you get that first dollar from your insurance provider. The closer you are to a coastline, the higher your percentage-based deductible.

Enter yet another loophole. Depending on the fine print, it might make a difference whether a named hurricane reverted to a non-tropical storm by the time it made landfall. Naturally, insurance companies would insist "Hurricane" Sandy stormed into Delaware. State Insurance Commissioner Karen Weldin Stewart called me to say NOAA ruled it a "tropical cyclone" -- plus we had a hurricane warning within 48 hours of landfall -- so most insurance companies would automatically impose the higher hurricane deductible in Delaware.

If I dare enter a political argument, here you have the classic battle as to whether people feel better protected from private insurers, forever looking for loopholes and raising deductibles -- vs. Uncle Sam. Not unexpectedly, FEMA has emerged as a hot political topic just days before the election.


Some further reading on "anti-concurrent causation"...


http://www.riskvue.com/articles/fs/fs0705b.htm

Posted at 7:45am on October 31, 2012 by Allan Loudell

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Comments on this post:

teatime
Wed, Oct 31, 2012 11:58am
I've run into similar problems with the car insurance companies. I faithfully pay my insurance premiums for many decades and, every 20 years or so, I'll get into that one accident. The insurance company decides not to pay me. Not much I can do but get angry, switch insurance companies (and have the "new" insurance company pull the scam of non-payment 15 years later.

For all the birdbrains screaming "socialism" know that some government is necessary to prevent other people in society (including insurance companies) from ripping you off.

Mike from Delaware
Wed, Oct 31, 2012 3:22pm
Teatime: It would seem that insurance is legalized stealing. I remember back in the 1985 where I hit a pothole that was covered with water, so you couldn't see it. Hitting that pothole cracked my mag wheel. I had only one claim with them back in 1971. The insurance company told me IF I filed a claim, they'd raise my rate, because that is considered a "self-inflicted accident". Of course, I didn't bother filing the claim and just replaced the mag wheel myself.

Later when I went through a divorce, the auto insurance company told me that my rates were doubling, because I was a single male again (her rates weren't affected). I said, hey, I'm 38; my days of crusin' Main Street are long over. Her reply was, you could be 65 years old, with our company ANY single male pays more. I told her, I won't be a customer for much longer, hung up, called around and found far cheaper insurance that didn't discriminate against single men who are not kids. Switched that day.

Insurance = legalized stealing. They are kind of like banks, who will only loan you money once you proved to them you don't really need the money. It is what it is.

mrpizza
Wed, Oct 31, 2012 6:33pm
Teatime: I have nothing against insurance laws designed to protect policyholders, etc. What I have a problem with is too much FEDERAL intervention. For the most part, state insurance departments are sufficient to deal with these issues, provided that you don't end up in a situation where one hand washes the other.


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