There are several factors for insurance professionals to keep in mind when handling disaster-related claims. (Photo: Shutterstock)
It's disaster season; already Hurricane Barry has caused between $500 to $900 million in damages, and the season is just beginning. California has had 6.4 and 7.1 magnitude earthquakes recently, with a number of smaller aftershocks. The National Interagency Fire Center predicts that chances of wildfires will be higher than normal in parts of California, Oregon and Washington from June through September. Whether this is your first year handling claims or your fifteenth, there are a number of things to keep in mind when handling claims.
Safety first
Any water on the ground is likely to be contaminated, especially flood water. Sewers, chemical and other waste may be released, and any water could cause significant health concerns. If you have any cuts or are cut, be sure to thoroughly clean the wound once you are out of the area. People have died from infections they received from standing in floodwaters when a new or existing wound became infected.
The ground itself has its own hazards. There may be bits of metal, broken glass and chemical contaminants. Pay attention to where you're walking.
Following the rules
You may be assigned to handle claims in a different state. Be aware of any state-specific claims handling requirements; these will vary. You could need a temporary license or be allowed to adjust claims for a limited number of days or be acting under a special order from the insurance department.
You need to be aware of actions by the local insurance department. After the severe wildfires last year in California, the commissioner imposed a number of new requirements on insurers. Policyholders suffering a total loss were to receive up to at least four months of additional living expense payments in advance upon request, and additional funds with proper documentation after the advance period.
Advance payments of 25% of contents limits were to be paid in advance as well, and debris removal was to be expedited. In addition, carriers were to accept home inventory software or paper documents available to the public through the insurance department, Insurance Information Network of California or other reasonable forms without requiring insureds to use company-specific forms. Likewise, reduced itemization of contents was to be accepted; for example, allowing an insured to list 100 books instead of listing each title separately.
A formal notice was issued requiring all companies to ensure adjusters were trained on the California Unfair Practices Act, Fair Claims Settlement Practices Regulations and all of the other California laws relating to relevant insurance claims handling. If you're going to be handling claims in a state you do not normally handle, it is a good idea to review this kind of information so that you can handle claims properly. The insurance department website can be a good place to start.
Preparing for catastrophe
The insurance commissioner of Washington is currently urging residents to prepare for wildfire season by reviewing their policies and making a home inventory. An inventory is a critical piece of information that insureds need to tell adjusters what property was lost. Few people can construct a list of all their personal property on a good day, let alone after having lost everything in a fire or other disaster. He also recommends reviewing the space around the home and removing debris, dried vegetation and other flammable materials in order to provide a better defensive space for the property.
Puerto Rico developed new flood laws because of issues that became apparent after Hurricane Maria in 2017. Added to the insurance code was a duty of impartiality of appraisers. Policies were to contain clauses providing for resolution of disputes by appraisal without limiting an insured's ability to go to court. Insureds must be allowed one year to bring legal action, and in a state of emergency, the Supreme Court may set up Specialized Chambers of Insurance to handle disputes when the carrier does not submit to the appraisal process. As with the wildfires in California, significant underinsurance issues became apparent following the storm.
After a catastrophe, the commissioner can order carriers to issue partial or advance payments and pay parts of claims where coverage is clear regardless of the rest of the claim. Insurers will be examined every five years for solvency and must have a catastrophe response plan and other provisions regarding company financial standing.
The recent California earthquakes have again highlighted the underinsurance issue. Like floods, few people buy proper earthquake coverage. They assume everything is covered under the homeowners policy when it is not.
Remember, however, that under the standard ISO HO 00 03, direct loss by fire, explosion or theft that results from any earth movement, including earthquake, landslide, mudslide, mudflow or other earth movement including sinking, rising or shifting is covered. Underground gas and water pipes frequently rupture when an earthquake occurs. If an earthquake ruptures the gas pipe and the house explodes, that explosion is covered.
Underinsurance is apparent following wildfire and earthquake catastrophes when the demand for contractors and supplies increases. Being able to explain how policies work and the impact from rising costs and their effect on the price to repair and replace contents will be important.
Christine G. Barlow, CPCU, (cbarlow@alm.com) is managing editor of FC&S Expert Coverage Interpretation, the authority on insurance coverage interpretation and analysis for the P&C industry.
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