The number of insurance claims filed in the wake of super-storm Sandy continues to grow. Federal Emergency Management Agency (FEMA) has reported a whopping 140,000 claims since the storm. However, a property owner’s efforts to get a recovery can potentially become a catastrophe all its own. There are a number of hurdles for policyholders already. For example, if Sandy had been classified as a hurricane, a “hurricane deductible” would kick in. A hurricane deductible is popular in many insurance policies and requires the first percentage amount of the damage to be paid by the policyholder (i.e. For a 15% deductible of $100,000 of damage, the policyholder must pay the first $15,000 worth of damage before receiving compensation). Luckily, state officials in several states slyly termed Sandy as a “tropical storm” instead of a hurricane to avoid the deductible.
With this hurdle overcome, the next obstacle that you as a policyholder face is exclusionary language known as an “anti-concurrent causation” clause. This means that two or more sources are responsible for the damage and some of them are not covered by the insurance policy. For example, if you argue that mold is the result of water damage from flooding from Sandy, but an insurance company says that faulty design of the building is a more to blame, you could possibly be unable to get compensation. In some cases, New Jersey Courts have decided against barring compensation for such a “concurrent” cause. Courts have also looked at whether the covered cause is the first or last in a “sequence” of causes.
Even with such issues, you should pat yourself on the back for choosing to live in New Jersey. Our case law requires that the insurance policy be interpreted in favor of the insured, even if the language could possibly benefit the insurance company. Additionally, insurance policies are to be read to meet the reasonable expectations of you as the policyholder. Moreover, “public policy” in New Jersey, which can often significantly impact an insurance claim dispute, favors the insured. It would seem that state lawmakers and judges are trying to take care of its citizens by finding in favor of compensation.
With Congress just recently passing a $9.7 billion storm relief measure to cover such insurance claims, policyholders should remain optimistic. With assistance from Angela Yu, Rutgers School of Law & Rutgers Business School.