Hurricanes and Loss Assessments

In some cases, Florida homeowners associations are just now making loss assessments for damages incurred in 2005. The question is, which homeowners policy responds—the one in force at the time of damage or the one in force when the assessment is made?

According to several agents, some carriers are interpreting ISO-equivalent language to deny claims under policies in effect at the time of the loss assessment. That is incorrect. The policy language says: “We will pay up to $1,000 for your share of loss assessment charged during the policy period….”

It cannot be any more clear: the policy in force at the time of the assessment is the one that pays, not the policy in force at the time of damage. Loss assessment coverage is analogous to claims-made coverage without a retro date.

For a complete discussion of this issue, including an article from the Florida Association of Insurance Agents, click here.

Hurricanes and Business Income

Is there any business income coverage for flood losses? Would civil authority coverage apply to business income claims that resulted from evacuation orders? Based on past hurricanes, especially the ones last year, what are some of the lesser-known issues that come to the forefront in business income situations?

When it comes to business income claims, one of the most difficult aspects is determining what part of the claim, if any, can be attributed to covered windstorm and what part to excluded flooding. NFIP flood forms don’t cover business income losses (yet), so insureds must look to their property policies for coverage.

There are several key points to note about civil authority coverage: 1) a civil authority must prohibit access to the described premises; 2) the reason for restricting access must be because of damage to some other premises; 3) the damage to some other premises must be due to a covered cause of loss in the insured’s policy; 4) coverage lasts for up to three consecutive weeks; and 5) there is a 72-hour wait (i.e., deductible) for business income coverage (but not extra expense coverage).

Given the complexities of events surrounding hurricanes, even this seemingly simple coverage provision has become complicated and confusing. For example, some debate surrounds the exact content of the “evacuation orders.” It appears that in some areas, the evacuation was mandatory, while it was voluntary in others. In either case, these steps were taken in advance of the hurricane, as a precaution, and not necessarily “due to” direct damage at other premises.

For more information, click here.

Insuring Town Homes…HO or Master Policies?

A small lakefront town home development includes five buildings, each with two units. The agent feels that a master policy is the best way to insure the buildings. The developer’s attorney thinks individual HO policies are the best way to go. Who is right?

As usual, the short answer is, “It depends.” There are advantages and disadvantages to each approach, depending on what type of claims situation arises. The master policy is appealing in that it allows a consistent approach and control over rebuilding. One advantage of the individual homeowners policies approach is that it avoids turning over control of a major asset to others with regard for insurance.

For more information, click here.

Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.