Super Storm Sandy: Current Issues and Lessons Learned

Transcription

1 Super Storm Sandy: Current Issues and Lessons Learned Presented by: NJ DOBI Director of Insurance Peter Hartt, Matthew Brasch & Timothy Stalker, Esq. AICP Mid-Atlantic Chapter E-day June 3, 2013

2 A Company s Perspective Pre-Storm Activities Weather tracking Activation of Disaster / CAT Response Plan Prepare employees / claims department Independent Adjusters Moratorium on binding certain coverages Identification of Experts (Engineers, Weather)

3 A Company s Perspective During Storm Activities Continue to monitor weather track Use of satellite locations Communication with employees Final preparations for heavy volume of claims

4 A Company s Perspective Post Storm Activities Immediate Sufficient resources in call center Assignment of claims to IAs Adjusters to losses ASAP

5 A Company s Perspective Post Storm Activities Compliance Permissibility of Hurricane Deductible, Wind Deductible Corresponding increase in Consumer Complaints Corresponding increase in Internal Appeals (NJ) Data Calls Regulator Required Mediation Programs (NY & NJ)

6 The Legal Perspective What are the issues? Scope of the loss Investigation of the losses Coverage issues Policy language Law in the states affected Regulatory concerns over coverage and adjustment of the loss

7 The Legal Perspective Some of the states hit by Sandy: Connecticut Delaware Maryland New Jersey New York Pennsylvania Rhode Island Virginia West Virginia Etc.

8 The Legal Perspective What are some of the damages? Water Damage Plumbing, electrical, heating Mold Debris removal How did the damage occur? Flood Wind driven rain? Something else?

9 The Legal Perspective Investigation of the loss Has the insurer undertaken a proper investigation? Has the insurer used qualified professionals to adjust the loss? Has the insurer complied with claim handling regulations?

10 The Legal Perspective HO 3 Policy SECTION I PROPERTY COVERAGE Coverage A - Dwelling Coverage B Other Structures Coverage C Personal Property Coverage D Loss of Use Coverage E Additional Coverages Debris Removal Mold

11 The Legal Perspective SECTION I PERILS INSURED AGAINST A. Coverage A Dwelling and Coverage B Other Structures 2. We do not insure, however, for loss: a. Excluded under Section I Exclusions; * * * c. Caused by: * * * (2) Freezing, thawing, pressure of water or ice, whether driven by wind or not, to a:

12 The Legal Perspective (b) footing, foundation, bulkhead, wall, or any other structure or device that supports all or part of a building, or structure; (c) Retaining wall or bulkhead that does not support all or part of a building or other structure * * * (5) Mold fungus or wet rot. * * *

13 The Legal Perspective SECTION I EXCLUSIONS 1. Ordinance Or Law Ordinance Or Law means any ordinance or law: a. Requiring or regulating the construction, demolition, remodeling or renovation or repair of property, including debris removal. b. The requirements of which result in a loss of value of the property; or c. Requiring any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollution.

14 The Legal Perspective SECTION I EXCLUSIONS (Cont d) 3. Water Damage a. Flood, surface water, tidal water, overflow of a body of water, or spray from any of these, whether or not wind driven; b. Water or water-borne material which backs ups through sewer or drains which overflows or is discharged from a sump or related equipment; or c. Water or water-borne material below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure; Caused by or resulting from human or animal forces or any act of nature.

15 The Legal Perspective SECTION I - EXCLUSIONS (cont d) 9. Governmental Action Governmental Action means the destruction, confiscation or seizure of property described in Coverages A, B or C by order of any governmental or public authority.

16 The Law Generally: Storm Sandy: The Legal Perspective Courts will enforce the clear and unambiguous language of a policy. Where there is ambiguity, courts will construe the policy against the insurer. At times, courts will look at the intent of the parties. Courts tend to construe exclusions very narrowly.

17 The Legal Perspective Concurrent Causation What is concurrent causation? Anti-Concurrent Policy Provisions ISO Causes of Loss- Special Form (CP ) We will not pay for loss or damage caused directly or indirectly by any of the following [list a number of factors]. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

18 The Legal Perspective What is law on concurrent causation? Appleman s Rule The loss is covered if a covered cause either starts or ends the sequence of events. Where the insured risk was the last step in the chain of causation set in motion by an uninsured peril, or where the insured risk set into operation a chain of causation in which the last step may have been an excepted risk, the insured recovers.

19 The Legal Perspective What is law on concurrent causation? (cont d) Efficient proximate cause [W]here other, non-covered events operate more closely in time or space in producing the loss, the question of whether the covered event was sufficiently proximate to the loss to require that the insurer compensate the insured will depend on whether it was the dominate and efficient cause. No case law Confusing case law

20 Regulatory Issues Storm Sandy: The Legal Perspective Hurricane Deductibles Claim Handling Arbitration/Mediation Anti-Concurrent Causation Provisions

21 In battle I have always found that plans are useless but planning is indispensable. Ike STORM SANDY: A REGULATOR S PERSPECTIVE

22 Lessons Confirmed The act of planning is as important as the plans themselves It is in comprehensive planning and testing of those plans, with multiple stakeholders, that we: Build relationships with the people we ll need to rely on in a crisis Get out of our silos, to see the challenges we didn t know about and learn about the needs of others Minimize surprises and gain the confidence needed to resist pressure to overreact

23 DOIs need a seat at the table with emergency management authorities Sell them on the importance of insurance to economic recovery Get them to think about long-term recovery challenges, not simply public safety Conduct exercises, with industry participation

24 Data is in high demand DOIs need claims data to monitor solvency and market conduct Policy makers and emergency management authorities need data to assess damage and apply for aid The press needs data to tell the story, without overreliance on anecdotes

25 Direct, community outreach is essential You need enough bodies to staff DRCs, town halls, community centers -- and the JFO Face-to-face interaction builds confidence and can save time NAIC backup call center freed resources

26 Daily monitoring and reporting Allows quicker response than waiting for written complaints to analyze Expedite resolution Phone calls and communications with companies (e.g., to get an adjuster out)

27 Be a reliable, predictable regulator An insurance policy is a contract Constant communication with companies and trades, to minimize surprises about Orders, Bulletins etc. Have extraordinary measures in the hopper (07 and 09 Orders) Press releases

28 If we re not calm, how can we expect anyone else to be? Legislature / political leadership The companies The press Our own staff

29 Lessons Learned Some COOPs are better than others Not all companies had sufficient backup facilities to withstand extensive power outages It s hard to drive without fuel Adjusters, company staff Another COOP issue

30 Learn everything you can about NFIP and be proactive and relentless with them Complaint handling Data collection and sharing WYO creates reputational risk for insurers

31 Finally, it s worth remembering that

32 Somebody lived here

33 Current Issues & Lessons Learned Questions and Thank You! AICP Mid-Atlantic Chapter E-day June 3, 2013