Insurance Law
From KatrinaLegalRelief
In the aftermath of a natural disaster, questions regarding insurance are likely to be the first to arise, including issues related to homeowners’, automobile, life, disability, and health insurance. Questions related to health insurance are discussed in the employment and benefits sections.
Homeowner's Insurance
Covered losses
What steps should a homeowner take to file a claim?
Acting quickly is important. A homeowner should contact the insurance agent or company immediately, act quickly to prevent additional damage, and document the damage. More detailed suggestions for filing a claim are provided at the end of this section.
What damage caused by a hurricane is likely to be covered?
Coverage depends on the language of a policy. Generally, standard homeowner’s insurance policies cover losses caused by wind and exclude coverage for losses caused by flood. Homeowners with standard policies will have to deal with the question of whether the damage was caused by wind, by water, or by both. Some homeowners may have separate flood policies.
How does a homeowner prove the cause of damage?
Mississippi Insurance Commissioner George Dale has ordered insurance companies to be able to prove to the Mississippi Insurance Department that damage was caused by flood rather than wind before denying a claim. This is consistent with Mississippi precedent requiring insurers to prove the loss was caused by an excluded peril. Commercial Union Ins. Co. v. Byrne, 248 So. 2d 777, 782 (Miss. 1971). In addition, George Dale has instructed insurers that they must fully inspect damaged property before a coverage decision is made. See Mississippi Insurance Department, Insurers Directed to Fully Inspect Damaged Property Before Coverage Determinations (Sept. 7, 2005 Press Release) at http://www.doi.state.ms.us/pressrel/pressrel9805.pdf. Generally, whether the damage was caused by wind or flooding is one for a jury. Liberty Ins. Co. v. Hall, 289 So. 2d 683, 684 (Miss. 1973). Often an expert, such as an engineer, can determine whether damage was probably caused by wind - such as rain that entered through a wind-blown roof -- or by flood. Engineers may also be able to determine whether wind or flood tore a building away from its foundation.
What if damage was caused by both wind and water?
If a loss is the result of a covered cause (wind) and an excluded cause (flood), an insured may be able to argue that the loss is covered if the covered cause is the most “efficient proximate cause” of the loss. Providence Washington Ins. Co. v. Weaver, 133 So. 2d 635, 637 (Miss. 1961); Litiz Mutual Ins. Co. v. Boatner, 254 So.2d 765, 767 (1971).
Many insurance companies try to avoid this argument by specifically providing in the contract that loss caused even in part by water damage is not covered. In some states, these exclusion provisions are valid, but it appears that in Mississippi, they may not be. The Mississippi Supreme Court refused to enforce a similar provision in an accidental injury policy which required the injury to be caused solely and independently by an an accident. Bankers Life and Cas. Co. v. Crenshaw, 483 So. 2d 254, 270 (Miss. 1985). But see Boteler v. State Farm Cas. Ins. Co.), 876 So.2d 1067 (Miss. Ct. App. 2004); Rhoden v. State Farm Fire & Cas. Co., 32 F. Supp. 2d 907, 912-913 (S.D. Miss. 1998).
Mississippi's Attorney General Jim Hood has filed a lawsuit seeking a court declaration that flood exclusions are unenforceable as against public policy. The outcome of the lawsuit may affect recovery under numerous policies.
If you feel your insurer has inapproriately denied coverage based on the exclusion for loss caused by flood, you should consult an attorney to review your claim.
This issue will be the focus of ongoing discussion. This section will be updated as additional information is available.
Will a homeowner’s policy cover damage caused by falling trees?
Coverage depends on the language of the policy, however, most policies cover the loss caused when a tree falls on a house. In addition, some, if not all, of the expense of removing the tree(s) is typically covered. Generally, insurance companies do not pay for the removal of trees that have fallen in a yard. Some insurers may pay for the cost of removal if a tree is blocking a drive. Most insurers do not cover damage to trees and shrubs caused by a storm.
Will a homeowner’s policy cover removal of a tree that falls on a neighbor’s home?
Generally, no. If a tree falls from an insured homeowner’s yard onto a neighbor’s house, the loss is covered by the policy of the homeowner whose house was damaged.
Will a homeowner’s policy cover mold and wet rot?
Many policies exclude coverage for loss caused by mold or wet rot. If, however, the mold or wet rot was caused by a covered loss, you may be able to recover the loss caused by the mold or wet rot. If your insurer denies a claim based on the mold or wet rot exclusion, you may want to consult an attorney to review your claim.
[This section will be supplemented as additional research is conducted.]
Will a homeowner’s policy cover loss of use of a home?
If a covered loss makes part of a house uninhabitable, the owner is probably also covered for reasonable additional living expenses necessarily incurred to maintain the family’s normal standard of living. These might include rental payments made to obtain temporary housing, eating out and telephone or utility installation costs at a temporary residence.
Will a homeowner’s policy cover loss of personal property?
Coverage depends on the terms of the actual policy. Standard policies generally cover damage to personal property caused by a covered loss such as wind, windstorm, fire, theft and vandalism. Coverage for loss caused by water damage/flooding is generally excluded. Most policies obligate insurers to pay the actual cash value of such contents but some obligate the insurer to pay the amount it would take to replace the goods. Coverage for valuable personal property such as jewelry, silver, art, etc. may be limited unless the insured purchased additional coverage for these particular items. The policy may contain a provision that gives the insurance company the right of "salvage" with respect to damaged property. So you should not discard any damaged property without first getting the insurance company's approval.
Must a claim be resolved before repairs begin?
Ideally, an agreement should be reached with the insurer concerning the cost of repairs before permanent repairs are made. Even if you have not reached a final settlement agreement with the insurer, it may agree to make an advance payment to cover your ongoing expenses. Do not sign any release until the entire claim is settled to your satisfaction. Make sure you hire a licensed and reputable contractor to make those repairs. Beware of scammers. There may be dishonest contractors attempting to take advantage of hurricane victims. Don't enter into a contract or advance a deposit without first getting written estimates and references concerning the contractor’s past work. If you have any questions concerning contractors, you can contact the Mississippi State Board of Contractors at 1-800-880-6161 or the Better Business Bureau.
What should a homeowner do if an agreement cannot be reached?
A homeowner who is not satisfied with the settlement offered by the insurer should not sign a release or cash a check indicating “payment in full.” Also, do not sign any document which states that you acknowledge that you have suffered a flood loss, as the insurer may be trying to get you to admit that your loss is not covered.
If you and your adjuster cannot agree on a settlement amount, contact your agent or your insurance company's claims department manager. Make sure you have figures to back up your claim for more money and submit your argument in writing. You may want to have an attorney review your submission before you submit it so that you do not say anything that can be used against you later in a lawsuit with the insurer, should that become necessary. If no agreement is reached, the insurance policy may provide for a method of independently appraising the loss. A homeowner who is unable to reach an agreement with an insurer may file a complaint with the Mississippi Department of Insurance and/or consult an attorney to review the claim. If appropriate, the attorney may negotiate with the insurance company or file suit. (For more information on filing a complaint with the Mississippi Department of Insurance, see Appendix).
Is recovery affected by a homeowner’s absence from the house?
Some policies exclude coverage while property is vacant or unoccupied more than a certain number of days, often sixty. A homeowner who is unable to occupy a home and is concerned about additional loss due to later storms, theft or vandalism, should discuss this issue with the insurance agent or representative.
What amount will an insurance company pay for a covered loss?
Again, coverage depends on the terms of the policy. Under many policies, a homeowner is entitled to recover the full replacement cost of the damaged property -- the total amount it costs to replace a home with a home of “like kind and quality.” A homeowner who has Guaranteed Replacement Coverage may be entitled to recover the total replacement cost even if it exceeds the policy limits. Under other policies, an owner may only be able to recover the actual cash value -- the cost to repair or replace minus a deduction for depreciation. Some policies contain co-insurance provisions which limit ability to recover the full replacement cost if the home is not fully insured. Homeowners should consult with the agent or company representative to discuss the settlement provisions of the individual policy.
How are insurance proceeds used when a destroyed home was subject to a mortage?
If the mortgagee (bank) is named in the insurance policy, most standard policies require that the settlement be used to pay off the loan to the bank, with the owner getting the remaining amount. Mississippi law requires a standard mortgage clause to be incorporated in all fire insurance policies. Miss Code. Ann. § 83-13-9. Mississippi law further provides that, pursuant to such a clause and upon satisfactory proof of loss, the insurer shall pay the mortgagee as its claim appears. Miss. Code Ann. § 83-13-7.
An individual mortgage agreement may contain terms which govern the right to rebuild. Depending on the amount of debt, the value of property and the original interest rate, a lender may require use of the funds to pay the mortgage instead of allowing the homeowner to rebuild. In some states, an owner must be allowed to rebuild rather than paying a mortgage if the mortgagee’s security is not jeopardized. This question is not clearly answered in Mississippi.
Basic advice: Read your insurance policy and loan agreement. File a claim with your insurance company. Contact your lending institution to see if you may use the insurance proceeds to rebuild. If the mortgagee will not agree to let you use the insurance proceeds to rebuild and you believe the mortgagee’s security will not be diminished by your rebuilding, you may consult with an attorney to further evaluate your rights.
May insurance funds be used to rebuild a home in another location?
If the home was not subject to a mortgage, most policies will permit an owner to rebuild in another location but coverage is generally limited to the cost that would have been incurred to rebuild on the original premises. Homeowners should discuss rebuilding plans with the insurance agent to learn how rebuilding on other premises might affect coverage.
Must insurance funds be used to rebuild?
A homeowner who chooses not to rebuild at all may only be able to recover the actual cash value of the home as opposed to the cost of rebuilding. The owner should discuss the ramifications of choosing not to rebuild with the agent or representative.
Flood Insurance
What steps should an owner take to file a flood insurance claim?
An owner who lives in a flood plain and has a federally-backed mortgage was probably required to purchase flood insurance as a condition of the mortgage. Flood insurance is sold separately through the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA). Generally, the owner should follow the same procedure as for homeowner’s insurance. Proof of Loss must be filed within 60 days after the loss occurs. If necessary, an extension in writing can be obtained directly from FEMA.
See NFIP Flood Insurance Claims Handbook published by FEMA at http://www.fema.gov/pdf/nfip/f687_claimshdbk.pdf. For more information about flood insurance, visit www.floodsmart.gov. The handbook outlines the internal appeals process required before filing a lawsuit.
Automobile Insurance
Will comprehensive automobile policies cover damage or destruction to a car by Hurricane Katrina?
This depends of the terms of the individual policy. If covered, the owner will generally be entitled to the fair market value of the car less the deductible. If the vehicle is damaged, the insurer will generally pay the cost to repir and, depending on the policy terms, may also pay for the cost of temporarily renting a replacement vehicle. Comprehensive coverage usually covers loss caused by fire, windstorm, flood, falling objects (trees), theft and vandalism, as well as other causes. Thus, most comprehensive policies would cover loss to an automobile.
Will collision policies cover damage or destruction to a car by Hurricane Katrina?
Loss may be covered if the cause of the loss to the vehicle can be characterized as a collision. Collision is often defined in policies to include the upset of your vehicle or its impact with another vehicle or object.
If a loss is covered, what amount will the policy pay?
If a car was damaged, the owner may be covered not only for the cost to repair it but also for the cost of renting a vehicle while the car is being repaired.
Commercial Property Insurance / Business Interruption Insurance
What hurricane-related losses are likely to be covered by commercial property insurance?
Commercial property insurance policy terms vary greatly, so each owner must refer to the terms of the individual policy. Many of the same issues discussed above, such as coverage for loss caused by wind versus flooding, will also arise under commercial property insurance. Many commercial property insurance policies also provide business interruption coverage, which covers lost income resulting from property loss caused by a covered peril. Some expenses incurred in restoring business operations may be also covered. Some policies may also cover operating expenses, such as utility expenses or salaries. Even if a business did not suffer property damage, the policy may pay for loss that was caused by property loss to a key supplier or key customer location. Some policies also provide coverage if income loss results because the government denies access to property because of a covered loss to property owned by another. In order to file a claim for lost business income, an insured should substantiate losses with business records demonstrating income and expenses. You may need to retain an accounting firm to assist you. You may be able to negotiate with your insurer in order to get an early partial payment for lost income. Do not enter into any final settlement agreement until your total losses are fully developed. [See American Bar Association, Business Interruption Checklist (March 11, 2002) at http://www.abanet.org/litigation/committee/insurance/businesschecklist.pdf].
Life Insurance
There are two basic kinds of life insurance policies - individual and employer-sponsored group policies. Individual policies typically are obtained by people on their own, often through an insurance agent. Group coverage typically is obtained as part of an employee's benefits package. Many employers provide coverage with death benefit protection equal to a worker's salary or twice his or her salary.
What steps should a beneficiary take to collect on a life insurance policy?
The beneficiary should call the agent or company on the policy or call the employer if the policy was part of an employee’s benefits package. The company or employer will provide forms that should be filled out and returned with a certified copy of the deceased's death certificate.
What if a beneficiary cannot locate the policy?
A beneficiary who cannot find the actual policy should try to find the agent or company that the deceased may have used. A company should be able to find a policy by the deceased’s name, address or social security number. Beneficiarys may be able to obtain information by contacting the Mississippi Department of Insurance at 1-800-562-2957 (in-state), 1-866-856-1982 (out-of-state), or by contacting the insurance department of any state where the deceased lived.
What type of payments are made through life insurance?
Under most policies, the beneficiary of a life insurance policy can choose how they wish to be paid. However, if the insured pre-arranged the payout, the beneficiary has no option. The following are types of payouts typically available:
- Lump sum: The beneficiary receives the entire benefit in a single payment.
- Specific income provision: The company pays principal and interest to the beneficiary on a set schedule. These payments are also referred to as installment payments.
- Life income option: This option guarantees a certain level of income for life. The amount of the guaranteed income will be calculated based on the death benefit, the beneficiary’s gender, and the beneficiary’s age.
- Interest income option: The company periodically pays the beneficiary interest that is earned on the death benefit. The death benefit is retained by the insurer and is paid to a second beneficiary upon the original beneficiary’s death.
A beneficiary may want to consult a financial advisor to determine which option is best. [See Insurance Information Institute, How Do I File a Life Insurance Claim? at http://www2.iii.org/individuals/life/help/locatelost/].
How can a beneficiary file a claim if there is no death certificate?
Filing a claim without a death certificate can create problems. Under Mississippi law, a missing person is not presumed dead until he or she has been missing for seven years. Miss. Code. Ann. § 13-1-23. To file a claim without a death certificate, the beneficiary should contact the life insurance company to inquire how it will handle this type of situation. During the 9-11 disaster, many insurance companies accepted a sworn affidavit in lieu of a death certificate. It is likely that many insurance carriers will institute emergency measures for processing claims for those affected by Hurricane Katrina.
What if a deceased’s records were destroyed and the family does not know whether there was life insurance?
The family should go through the deceased’s records (bank records, credit card records, etc.) to look for payments to a life insurance company and check the mail for any forthcoming renewal notices. The family may also check the deceased’s past tax returns to determine whether the deceased reported interest income from a life insurance policy or interest paid on a loan from an insurance company. Families may call an insurance company to see if the company has a policy naming them as beneficiary. Typically, the beneficiary or deceased’s social security number is on the policy for identification. [See Insurance Information Institute, Are There Ways to Locate A Lost Life Insurance Policy? at http://www2.iii.org/individuals/life/help/locatelost/].
How long does it take to receive benefits?
Life insurance companies generally try to pay claims in a timely manner, often within 30 days of receiving a death certificate.
What should a beneficiary do if a claim is denied?
Upon denial, the beneficiary should object to the denial in writing, and ask the insurer to reconsider. Any new information pertinent to the claim should be provided. If a lawsuit is filed, it should be filed in a timely manner. Certain policies require an internal review or appeal process, so you should carefully examine the policy and contact an attorney.
Filing and preserving a claim: General suggestions
First, contact your insurance agent immediately. If you are unable to contact the agent, contact the insurer directly. For contact information, see Appendix. Make sure your agent knows how to contact you if you have a temporary telephone number or mailing address, as it might be necessary for the agent to call you or mail you necessary claim forms. Remember, your agent likely works for the insurance company or has some allegiance to the insurance company. So, if in doubt, contact an independnet expert to assist you instead of relying on advice from your agent or from the insurance company. In addition, document all communications with your agent or the insurance company in writing. If your agent or the insurer represents something to you verbally, confirm it in writing with a follow-up letter.
Second, read your policy carefully and take note of any deadlines for submitting a proof of loss, as well as deadlines for filing suit against your insurer. Make sure that you comply with all deadlines or obtain an extension of these deadlines from your insurance company in writing.
Third, take reasonable steps to prevent additional damage to your property if you can do so safely. Many insurance policies exclude coverage for additional damage caused after the original loss if you fail to take reasonable steps to prevent damage. Keep any receipts for this emergency repair work. If you vacated your home during the storm, do not return to the damaged home until you are sure re-entry is safe. If your house suffered structural damage, make certain it will not collapse. Have a utility technician inspect your home to make sure there are no live electrical wires or gas leaks.
Fourth, make a list of all your damage (structural damage to real property and other damage to personal property - the contents of your home). When creating this inventory, include a description, brand name, estimated date on which you purchased the item, model and serial number if available, and your estimated loss. Document the state of your home and its contents if possible. For example, photograph or video any structural loss or any damaged property. Your insurance company will probably send an adjuster to your home to inspect the damage (or maybe two adjusters - one to inspect structural damage and another to inspect damage to the contents of your home). If possible, keep all damaged property until the adjuster has had an opportunity to inspect it. If you are required to dispose of damaged property before the adjuster is able to inspect, make sure to photograph or otherwise document the property before disposal.
[See National Association of Insurance Commissioners, Emergency Information for Hurricane Katrina Victims (Sept. 2, 2005 Press Release) at http://www.naic.org/Releases/2005_docs/Gulf_help.pdf; Hurricane Insurance Information Center, Insurance Advice Offered for Hurricane Katrina Damage Recovery (Sept.. 2, 2005) at http://www.disasterinformation.org/disaster2/latest/insurance_advice/; Insurance Information Institute, Settling Insurance Claims After a Disaster at http://www.iii.org/media/hottopics/additional/settlingclaims/; Mississippi Insurance Department, Dale Asks for Assistance and Patience in Handling Insurance Claims (Aug. 30, 2005 Press Release) at http://www.doi.state.ms.us/pressrel/Katrina.pdf.]
