A deregulated US flood market should help resolve damage disputes
Following a storm, how do you know if a property has been damaged by flooding or by wind? In the UK, the question isn’t so important, but for the US market the distinction can be critical, often leading to significant difficulties for homeowners trying to claim for damage to their property.
This issue is set to be if not resolved, then made substantially clearer, as the open market begins to compete for US flood business, which will, in turn, potentially help hundreds of thousands of homeowners.
Flood or wind
Litigation has often been a feature following a big storm in the US, as homeowners’ attempts to claim on their insurance have been frustrated by disputes over the question of is it flood or wind damage? What if flooding has been caused by wind driven water for example?
In theory, it shouldn’t prove too difficult to sort wind from flood claims. If the roof of a property has disappeared then the wind insurer should be happy to pick up the bill for replacement, while the flood insurer pays for the rest of the damage. During Hurricane Katrina, however, the situation was less clear cut with many properties completely disappearing.
Letters of denial
We’ve been contacted many times in the past by our US insureds, who we cover for wind damage, asking us for a ‘letter of denial’, which has been requested by the government’s National Flood Insurance Program (NFIP) to process a flood claim. This can potentially open us up to a lawsuit if we were to issue such a denial without first inspecting the property. Therefore we have to appoint a loss adjuster to see the property, which adds additional expense to the claim. Following Hurricane Sandy, in which hundreds of thousands of homes were damaged or destroyed, the difficulty in getting loss adjusters on site also added delay and confusion in establishing who had liability, which only added further to policyholders’ distress.
The removal of the barriers that have led to the development of separate wind and flood cover in the US should make claims adjustment and settlement faster and more amicable as the distinction between the two perils becomes less critical. In turn, this will help insureds feel more positive about their insurance cover and can only be a good news story for the London Market seeking to grow its share of this developing market.
Property Claims Manager
020 7448 6759