It seems like every year a major storm hits the U.S., causing devastation, tragedy and an influx of insurance claims. Even worse: A staggering number of people are left uninsured and undercompensated afterward. With that in mind, it’s a good idea to be aware of insurance coverage tips in case the next wildfire, flood or earthquake hits near home.
Homeowners’ Doesn’t Cover Everything
While events like fire and windstorms are covered by most homeowners’ policies, flood and earthquakes are excluded and require separate policies. “If you’re in certain floodplain areas, you’ll be required to get insurance [through federal programs like NFIP and FEMA]. No bank will lend to you if you don’t have flood insurance,” says Mike Ricketts, an insurance attorney with Gordon Thomas Honeywell in Seattle.
Some people interpret the phrase “100-year flood” to mean a rare flood that happens only once every century. The moniker actually refers to the statistical chance of one in 100 in any year for that level of flood, in that location. This designation is also not fixed. Your home can be assessed as being within a 100-year floodplain that is later reassessed as being in a 50-year floodplain. You may even be considered not in a floodplain at all and come to be smack in the middle of one over time. Rapid development, coupled with lagging updates to floodplain mapping, can lead to devastatingly inadequate insurance coverage, as well as homeowners who have no idea they’re at risk.
“Earthquake insurance is kind of like flood insurance: you’re not going to be required to have it—lenders will take the risk that it won’t happen in our lifetimes—but a sophisticated entity will probably have that type of policy,” Ricketts says.
“Everyone is waiting for the big one and we have to be prepared, but I don’t know that people will buy insurance for that because it’ll be an unprecedented event, if and when that should happen. … If it’s a total disaster, people typically don’t buy insurance that covers the value of a building falling down. It’s not like you turn it over to the insurance company and they take care of it; they only take care of a portion of your loss.”
There are three deadlines detailed in insurance policies that insureds should know: when to provide notice of a claim, when to provide proof of a claim, and when to bring a lawsuit. In Washington, insurers must provide at least a year for the lawsuit deadline. For the others, it’s generally a good idea to make your claim right away, but don’t do it haphazardly just to get something on file.
“If it’s a wildfire in eastern Washington and it’s a cabin, it may be a while until you hear any information,” Ricketts says. “Luckily, in Washington the rules are pretty generous for policyholders. It’s not like you’ll be out of luck if the policy says ‘report it right away’ and you don’t know about it for some time. You have to do what’s reasonable, and they’d have to show that they were somehow damaged by a late reporting, and that’s not typically going to be the case.”
If Your Claim is Denied
“Having a claim denied would be a pretty clear signal where you have to get an attorney to take a look at it,” Ricketts says. Another good reason to lawyer up, he says, is if it’s taking a long time to resolve your claim or if you know your claim is particularly complicated.
Often disputes are a question of what happened and if it should be covered. “Did the storm surge take out the house and flood insurance has to pay for it, if there is any, or did the wind take it out?” Ricketts says. Such debates often become a battle of experts. “You may not have video footage or witness testimony, and you have to piece it together with meteorological consultants.”
Such testimony rarely makes it to court, as the vast majority of cases are settled prior to litigation. Lawsuits are filed on the basis of breach of contract or bad faith. “There is also a Washington statute called the Insurance Fair Conduct Act that says if you’re unreasonable in denying a claim, the policyholder can get triple the damages,” Ricketts notes. “Washington also has a provision for attorney’s fees that says if you end up in litigation with your insurance company and you win, even if they had a reasonable basis for their position, you still get your attorney’s fees.”
Insurance attorneys are typically paid by contingency, meaning a fraction of what is recovered from the suit. Having a knowledgeable lawyer represent you can make a significant difference to your outcome.
Be likewise mindful of potential fraud that accompanies disaster situations. Common schemes include fraudulent inspectors, contractors, representatives of disaster aid, or requests for donations. Always ask for proof of credentials, and do not provide personal information unless you have verified the legitimacy of the source. There is no fee to apply for disaster assistance.
“Another one of the problems can be valuation,” Ricketts says. “Everything in your house may be ruined but you can show the adjustor what you had. If you have a wildfire and everything burns, you don’t have anything to show.” The best tip to avoid this: go through your residence and document what you have via video or pictures.
“A very sophisticated policy will also have claim preparation expenses included,” Ricketts says. “This is a really time-consuming, burdensome process for people to pull everything together.”