Doyle Raizner LLP Offers Tips in Wake of Hurricane Sandy’s Destruction

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East coast natural disaster affects insurance industry

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The Property Insurance Attorneys at Doyle Raizner LLP have experienced the unfortunate tactics that the insurance industry has employed followed catastrophic natural disasters and warn business owners and homeowners alike to be wary and be prepared. Hurricane Sandy swept through the eastern part of the country with a fury that rivaled the historic storms that have struck Gulf States over the years. Yet the magnitude of this particular storm, and loss projections in the tens of billions of dollars, indicate that Sandy has ushered in a new category of “superstorm,” and one whose size and trajectory across densely populated urban areas will likely make this storm, in terms of property loss, the most catastrophic natural disaster to hit our country ever.

“We certainly hope that the insurance industry chooses to act responsibly. New Jersey needs them. New York needs them. Much of the North East, indeed our entire nation, needs them to act honorably at this challenging time,” said firm partner Jeff Raizner. Doyle Raizner LLP was one of the leading law firms representing insurance policyholders following Hurricane Ike, and Raizner acted as Plaintiffs’ co-liaison counsel in Houston and a member of the Plaintiffs Steering Committee in Galveston.

“The insurance industry is a critical part of the rebuilding process. They, and not FEMA or state and local government, bear the contractual duty to ensure that businesses and homeowners can recover and rebuild. When the industry shirks these responsibilities, the consequences are frequently equally if not more devastating than the storm itself,” said Raizner.

To better prepare for an insurance denial, Raizner recommends that businesses and homeowners affected by Superstorm Sandy take the following proactive steps:

1. Take pictures of the damage as soon as possible.
2. Report the loss to your insurance company immediately.
3. Keep notes of all conversations with all representatives of the insurance company. Notes include any and all electronic communication such as email.
4. Insist that the insurance company send an adjuster out right away. Ask the adjuster about his experience and credentials. Ask where he or she is from and get their name, address and phone number.
5. Ask for a copy of your policy and review it, particularly the declaration page, to determine if the insurance company is providing all insurance required.
6. Make sure any contractor you hire is licensed by your state.
7. Keep receipts of all purchases and repairs. If you are displaced and need to stay at a hotel during clean up or repairs, keep your bills and a record of how long you are out of your home.
8. Take pictures throughout the rebuilding process.
9. Keep track of your time spent on rebuilding and dealing with the insurance company.
10. Businesses should begin to compile a record of their losses due to business interruption, and of added costs due to the interruption and getting the business back up and running.
11. Consider a public adjuster to help with the process and ensure you receive what the insurance company owes you. Where necessary, get an attorney involved.
12. Make a complaint to the New Jersey Department of Banking and Insurance or the New York Department of Financial Services if the insurance company has acted improperly

Property owners may not be aware of the steps the insurance industry is taking to prepare itself to minimize claims payments. Some of these preparations include:

Setting reserves too low: A reserve is an amount of money the insurance company sets aside to pay claims. Insurance companies will typically set reserves for the entire storm, and will also set a reserve on each property for which a claim is asserted. Problems arise when when insurers arbitrarily set their reserves too low and insurance companies begin changing the rules of proper adjusting and claims handling in order to squeeze claims to fit their artificially set reserves.

Inexperienced “Catastrophe Adjusters”: Because most insurance companies don’t have on staff a sufficient number of adjusters to handle natural disaster claims, they retain “independent” adjusters to handle the claims. These catastrophe team adjusters are anything but “independent,” though. They arrive from across the country with varying levels of experience, and sometimes very little experience, and they inspect and write estimates on a volume basis. These adjusters are typically paid per estimate they write, which means they have an incentive to cram as many inspections into a day as they can. This incentive rarely results in a fair or reasoned estimate since, for the catastrophe adjusters, its all about the volume.

Shifting rules and guidelines: Your insurance company knows the rules, since they come from the insurance policy, from the law, from regulations and bulletins handed down by the department of insurance, and from ordinary practice. But when a large-scale natural disaster hits, following the rules can cost them more money. So, unfortunately, after a disaster like Sandy, we often see insurers attempt to change the rules. Items that were covered before the storm seem no longer to be covered. They will even change what constitutes “physical damage” under the insurance policy. Some violate state regulations and refuse to pay for a general contractor to be involved in the rebuilding process. In insurance boardrooms across the world right now, these companies are crafting “storm bulletins” and other storm-specific instructions for their adjusters with new and creative ways to cut their bills.

Crafting Causation Arguments such as Wind vs. Flood: Flood policies don’t cover wind loss, and standard homeowner or business policies don’t cover flood. None of the policies cover things like wear and tear and pre-existing conditions. So, another insurance industry plan likely going into action right now will be causation studies and surveys that the industry will do to find excuses, other than Sandy, to blame the damage on, or to selectively characterize the loss as wind or flood, whichever is most expedient to avoid coverage. All of these efforts are designed to assist the insurers to craft excuses to avoid payment and to hold onto money that doesn’t belong to them.

Shifting Deductibles: What many property owners don’t realize is that they may have two different deductibles: one for most losses (such as fire), but a different one for hurricanes, named storms or “tropical cyclones.” A deductible on a $200,000 home might ordinarily be $1,000, but when the damage results from a hurricane or other named storms, the deductible climbs to 5% or even 10%. To add injury to injury, the catastrophe adjusters know these deductibles, and not surprisingly, the damages that they see often fall just under the deductible which means the insurance company won’t pay anything. State government in New York and elsewhere is working hard to dial back the use of hurricane deductibles, but don’t expect the insurance industry to voluntarily pay billions more in damages just because a government suggests they should. And remember, the higher deductibles aren’t just for hurricanes, as Governor Cuomo recently suggested, but for any named storm. Stiff regulation will be necessary to end the practice of applying different and much larger deductibles for named storms such as Sandy.

Businesses and homeowners now need to be ready for this unfortunate battle against their insurance companies. Sandy brought winds, flooding and fire, and based on experience, the industry may have more disasters in store for East Coast property owners. We certainly hope not, but history is our torchlight and this storm will be very expensive. Expect the industry to do all it can to shirk its responsibilities and to hold on to money that should be contractually committed to the rebuilding process.

Doyle Raizner has extensive experience fighting insurance companies after natural disasters. The firm led litigation for Hurricane Ike and helped residents of the Bolivar Peninsula, which suffered from very similar conditions as the Jersey Shore after Hurricane Sandy. The firm stands committed to ensuring a fair insurance process and a speedy recovery from Sandy.

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Jeffrey L. Raizner
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