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Superstorm Sandy - Insurance, Flood, Taxes and Property Damage Issues

Explanations, and things you need to know.

1. Insurance Coverage Issues

a.  Wind damage vs. flood damage --Concurrent Causation:  When a loss is caused by multiple perils, such as wind, flood, storm surge and negligence, a policy may cover some causes but exclude others. Some policies anticipate this situation and include “anti-concurrent causation” provisions or “concurrent causation exclusions” that explicitly exclude coverage where both covered and uncovered causes contribute to a loss. Other policies do not explicitly address this situation but may include widely divergent deductibles depending on the covered peril (e.g., flood deductibles may be several times larger than windstorm deductibles). How courts treat and enforce these provisions varies by jurisdiction – some states prohibit enforcement of concurrent causation exclusions if a covered peril is the efficient proximate cause of a loss, while others permit parties to freely contract around the effect of the efficient proximate cause doctrine. For insureds whose policies include concurrent causation exclusionary language, they will need to show that at least some damage was caused exclusively by a covered peril. While the final decision as to causation is a question of fact that will be left for judge or jury to decide, determining the sequence of events and the cause of specific damage is critical. Both individuals and businesses need to keep these issues in mind when submitting insurance claims for Sandy.

b. Extra Expenses:  Most policies cover additional reasonable and necessary expenses incurred in an effort to continue normal living that is interrupted due to direct physical loss or damage from covered perils. Extra expense covers things like the cost of replacement shelter, over and above the total cost that would normally have been incurred had no loss or damage occurred. i. living expenses - need to see what the policy says - some companies are just saying no or giving a very low amount

c. Debris Removal:  This covers the cost of removal of debris of both covered property and non-covered property on the premises of the insured, provided the debris resulted from a covered loss.

d. Service Interruption:  This covers loss resulting from damage or destruction by covered causes of loss to electrical, steam, gas, water, sewer, telephone or other utility services. Most of these provisions contain specific limitations, such as only providing coverage for losses incurred during hours which the insured would or could have used the services had they been available.

e. Deductible - regular v. hurricane - Sandy was not a hurricane.  Significant because regular deductible is fixed amount.  Hurricane deductible is based upon percentage of value - can be much higher..

f. damage to trees - usually not covered - if fall and damage buildings, then covered i. Neighbor’s tree falls into your yard - neighbor has no duty to you to clean it up.  May not have any liability if it lands on your house and causes damage.

g. Autos:  Usually doesn’t cover autos - but auto insurance should cover under comprehensive coverage of auto policy.

2. Flood Insurance  

Many homeowners and businesses cannot obtain private flood insurance and instead purchase coverage through the National Flood Insurance Program (“NFIP”), which is administered by the Federal Emergency Relief Agency (“FEMA”). As with any policy, the insureds need to carefully review their coverage under their NFIP policy before submitting their claim to FEMA, understanding that coverage is often capped at a certain amount for each building or property insured. a. Limits are set forth in the declarations page i. Maximum amount is $250,000 for most private polices.  NFIP policy limits may differ - policies must be reviewed carefully b. FEMA i. If you have other resources, generally, FEMA will not cover anything that you don’t have some specific contract with them to cover.


3. Business Insurance

Key coverage considerations:  Most businesses purchase property policies that insure against “all risk” of direct physical loss of or damage to property occurring during the policy term. These policies often cover real and personal property, including property owned, used, leased or intended for use by the insured; property of others in the insured’s care, custody or control; and property which the insured is responsible for or has agreed to insure. Property policies contain numerous exclusions, as well as sublimits and deductibles specific to the cause of the loss. As with all coverage claims, the policy language is key, and it varies by insurer and policyholder. Knowing the law in your jurisdiction is also critical since courts interpret coverage provisions differently. Below are several key provisions that policyholders should look at before submitting claims for damage caused by Sandy.

a. Concurrent Causation: When a loss is caused by multiple perils, such as wind, flood, storm surge and negligence, a policy may cover some causes but exclude others. Some policies anticipate this situation and include “anti-concurrent causation” provisions or “concurrent causation exclusions” that explicitly exclude coverage where both covered and uncovered causes contribute to a loss. Other policies do not explicitly address this situation but may include widely divergent deductibles depending on the covered peril (e.g., flood deductibles may be several times larger than windstorm deductibles). How courts treat and enforce these provisions varies by jurisdiction – some states prohibit enforcement of concurrent causation exclusions if a covered peril is the efficient proximate cause of a loss, while others permit parties to freely contract around the effect of the efficient proximate cause doctrine. For businesses whose policies include concurrent causation exclusionary language, they will need to show that at least some damage was caused exclusively by a covered peril. While the final decision as to causation is a question of fact that will be left for judge or jury to decide, determining the sequence of events and the cause of specific damage is critical. Businesses need to keep these issues in mind when submitting insurance claims for Sandy.

b. Business Interruption:  This optional coverage typically covers loss resulting from necessary interruption of business, whether total or partial, caused by covered loss, damage or destruction to real and personal property. This coverage is policy-specific and will vary between policyholder and insurer. There has been extensive litigation over what is meant by “partial” and “total” loss, and knowing the law in your jurisdiction is critical to this analysis. With storms like Sandy, lost business income may far exceed real and personal property damage.

c. Civil or Military Authority:  This covers loss sustained during the period of time when access to real or personal property is impaired by order or action of civil or military authority issued in connection with or following a peril insured against, such as a windstorm or flood. In the event businesses are prevented from accessing their real or personal property in areas affected by Sandy by order of civil or military authority, this provision will be key to recovering for their resulting losses. Most policies provide this coverage for a specific amount of time, typically capped at four weeks or 30 days.

d. Contingent Time Element/Extra Expense:  This covers loss resulting from damage or destruction by covered causes of loss to property that wholly or partially prevent any direct or indirect supplier of goods or services to the insured from rendering their goods or services. This also provides coverage when any direct or indirect receiver of goods or services is prevented from accepting the insured’s goods or services. Given the extent of damage to the infrastructure in and surrounding the areas devastated by Sandy, this coverage may be critical to businesses that rely on supply chains.

e. Debris Removal:  This covers the cost of removal of debris of both covered property and non-covered property on the premises of the insured, provided the debris resulted from a covered loss.

f. Extra Expense:  Most policies cover additional reasonable and necessary expenses incurred in an effort to continue normal operation that is interrupted due to direct physical loss or damage from covered perils. Extra expense covers the excess of the total cost chargeable to the operation of the insured’s business over and above the total cost that would normally have been incurred had no loss or damage occurred.

g. Ingress/Egress:  Unlike other coverages discussed above that require physical damage to a business’s real or personal property, ingress/egress covers loss sustained during the period of time when, in connection with or following a peril insured against, access to or egress from real or personal property is impaired due to physical loss or damage within a defined geographic area (e.g., one mile) of the insured’s property. Given the extensive mass transit closures following Sandy in densely populated cities like New York and the large numbers of people who are unable to get to their places of work, businesses may be able to get coverage under this provision if there is damage to property (e.g., subway tunnels, bridges, roads) within the defined geographic area of their insured property.

h. Service Interruption:  This covers loss resulting from damage or destruction by covered causes of loss to electrical, steam, gas, water, sewer, telephone or other utility services. Most of these provisions contain specific limitations, such as only providing coverage for losses incurred during hours which the insured would or could have used the services had they been available.

i. National Flood Insurance Program:  Many businesses cannot obtain private flood insurance and instead purchase coverage through the National Flood Insurance Program (“NFIP”), which is administered by the Federal Emergency Relief Agency (“FEMA”). As with any policy, businesses need to carefully review their coverage under their NFIP policy before submitting their claim to FEMA, understanding that coverage is often capped at a certain amount for each building or property insured


4. Taxes

Real property - need to know about NJSA 54:4-35.1 - have until Jan. 10, 2013 to notify tax assessor of material damage to structures on property and request reduced assessment for 2013.  The statute says: 54:4-35.1.  MATERIAL DEPRECIATION OF STRUCTURE BETWEEN OCTOBER 1 AND JANUARY  1;  DETERMINATION OF VALUE When any parcel of real property contains any building or other structure which has been destroyed, consumed by fire, demolished, or altered in such a way that its value has materially depreciated, either intentionally or by the action of storm, fire, cyclone, tornado, or earthquake, or other casualty, which depreciation of value occurred after October first in any year and before  January first of the following year, the assessor shall, upon notice thereof  being given to him by the property owner prior to January tenth of said year,  and after examination and inquiry, determine the value of such parcel of real  property as of said January first, and assess the same according to such  value.     L.1945, c. 260, p. 789, s. 1.

a. IRS has extended filing date for quarterly until February, 2013


5. Businesses

New Jersey Economic Development business assistance services: a. To support the recovery of New Jersey 's businesses and protect the overall economic interests of our state in the aftermath of Hurricane Sandy, Governor Chris Christie and Lt. Governor Kim Guadagno have announced a series of business assistance services for those affected by the storm. Among these vital services are those related to financial support, information on temporary space, and technical assistance for impacted businesses. Information for all services may be easily accessed through New Jersey 's Business Action Center (BAC) by calling 1-866-534-7789 or through the state's business portal at www.newjerseybusiness.gov, the "one-stop" shop for business resources. Agents are also available to assist callers that speak Spanish

b. "In response to this natural disaster, New Jersey has coordinated a range of multi-agency resources to assist impacted businesses and ensure they are operational quickly," said Lt. Governor Guadagno. "Providing a thorough and inter-departmental business recovery assistance program is another demonstration of our support for our business community and their workers. The Business Action Center can help businesses tap into a variety of resources that will help them begin to recover from this catastrophic storm."

c. The business recovery assistance services are designed to support businesses and workers who may be temporarily unable to perform their jobs due to the storm. These services include:

i. • Guarantees of up to $500,000 for commercial lines of credit to businesses that need access to cash to improve their damaged property while awaiting insurance proceeds, with all related New Jersey Economic Development Authority fees waived. More information on this can be found at www.njeda.com/disasterrelief.

ii. • Grant awards for businesses to assist with on-the-job training costs for new workers hired specifically to assist in disaster-related activities, such as landscaping and tree removal, construction, insurance claims, building supplies sales, materials transport, utility work, call and claims centers staffing, and infrastructure clearing and repair.

iii. • Availability of the Business Resource Centers at any of the currently operational local One-Stop Career Centers across the state as temporary hubs for businesses to access telephone and internet services as well as for job seekers and displaced workers seeking workforce development and unemployment assistance - Temporary Hubs for Affected Business to Access Telephones and Internet Services

iv. • The availability of Disaster Unemployment Benefits to provide income security for those displaced workers suffering temporary storm-related job loss.

v. • Dispatch of Rapid Response team members to identified Disaster Recovery Centers to assist displaced workers.

vi. • Availability of services through New Jersey Youth Corps to assist non-profit, public and governmental entities in a variety of ways for disaster relief and clean-up.

d. In addition, BAC's Business Call Center is also the one-stop resource for more information on how to get businesses back up and running. The Call Center staff can assist with the following services:

i. • Arranging business facility inspections for buildings suffering major flood damage, as such conditions require structural integrity inspections before utility service can be restored. These inspections are handled in local code enforcement offices and by local code enforcement officials. Anticipating an enormous increase in such work, the Department of Community Affairs has mobilized all qualified personnel to assist local governments in this effort.

ii. • Advocating for businesses seeking information from local utilities to restore electric, phone, gas and water services.

iii. • Advocating with insurance carriers to file and expedite claims.

iv. • Providing information on how to qualify for federal recovery assistance, and

v. • Connecting businesses to the other county and local business services and to the services offered by the Small Business Administration and Small Business Development Centers that include assistance with insurance claims, as well as loans and business plan revisions.


6New Jersey Office of Homeland Security and Preparedness (OHSP)

Since October 28, 2012, the New Jersey Office of Homeland Security and Preparedness (OHSP) has staffed a Private Sector Desk at the Regional Intelligence Operations Center (ROIC), which has served as the primary point of contact for critical private sector industries leading up to, during and after Hurricane Sandy. OHSP staff operating the Private Sector Desk at the ROIC can be reached at 609-963-6810. a. For further information about best practices in the aftermath of Hurricane Sandy, please visit www.ready.nj.gov for continual updates.

Michael Warshaw is an attorney practicing in Red Bank, NJ.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Elena Gilbert November 19, 2012 at 11:14 AM
When you’re faced by the prospect of working with an insurance policy claim, it’s important to keep in mind the difference between the Loss Adjuster and a Loss Assessor.A Loss Adjuster’s part is to protect the actual welfare of your insurance provider, not yours as a policyholder. The lower the ultimate pay out, the better the Loss Adjuster is seen to have done.However, a Loss Assessor functions as your representative as the insurance holder. They’re there to supply expert knowledge and also help at a time when you may need it most. http://www.allkare.co.uk/luton/loss-assessors-adjusters-london.html
Michael Warshaw November 19, 2012 at 02:06 PM
usually a zoning issue
Michael Warshaw November 19, 2012 at 02:07 PM
I don't understand your question. You must read all of your policies to determine coverage and what the exclusions include. If have insurance, generally, FEMA doesn't provide help.
Michael Warshaw November 19, 2012 at 02:08 PM
Need to review the policies yourself. The exclusions are where the carriers will get you, and they will read them broadly. Law seems to say otherwise, forthe most part.
Michael Warshaw November 19, 2012 at 02:10 PM
Respectfully, one cannot rely upn anything that is said verbally by any insurance representative. Adjusters have no authority to bind and most policies limit representation to those made in writing by "authorized representatives." Adjusters are not those people, and the concept of estoppel does not generally apply in these types of claims.

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