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Group Warns of Possible Insurance Problem Post-Sandy

Sunday, November 25, 2012

Residents recovering a lost sign at Breezy Point, Queens after Hurricane Sandy. (Stephen Nessen)

A consumer group is warning that some people whose homes were damaged or destroyed as a result of Sandy may be denied coverage.

Many home insurance policies contain so-called anti-concurrent causation clauses. Bob Hunter of the Consumer Federation of America says this language makes it easier to deny coverage if two factors — like flooding plus fire or wind, destroyed a home at around the same time.

“If there are two events damaging the same structure and one is covered and one is not, the insurer can deny both,” he explained. It was an issue that affected some claims after Hurricane Katrina.

But New York's Department of Financial Services says there is no indication that this will be an issue. The department said in a statement that it is watching and will intervene should the issue arise and become a problem.

Fire destroyed more than 100 homes in Breezy Point, Queens as Sandy swept through.

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Mar. 13 2013 06:49 AM
Frank Riina from Coastal New York

Beyond the issue of "anti-concurrent causation clauses" is insurability of near shore properties with financially sound and willing insurers. There are three types of insurers for these properties: those few companies that have not withdrawn from the market that have kept existing policies that were previously written but are not writing new policies; those out of New York State ("not admitted")insurers that write policies in NYS but need not follow NYS regulations; and those insurers that must follow NYS regulations ("admitted") but are under-capitalized and would not be able to payoff loses if a wide spread disaster occurred like hurricane Sandy.

This issue is further complicated by the fact that mortgage companies require customers to have property insurance, with some mortgage companies requiring only admitted companies and as I stated above these companies that are willing to insure shore line properties are frequently not financially strong enough to pay widespread loses.

There are many types of regional disasters that can lead to property loses beyond hurricanes: earthquakes, tornadoes, floods, fire, and even terrorism. I believe we need to have an all peril type policies that are written across state lines to mitigate the downside jeopardy of a regional incident for insurers. The loses experienced by the likes of Sandy affect the financial well-being of individuals and the nation as a whole. If private insurers are not interested then the government should offer an all peril policy at a cost that is high enough to protect the government from experiencing a cost that is passed onto the general public.

Nov. 25 2012 12:46 PM
Ron from Brooklyn

Would appear to me that the concurrent action clause was put into policies to prevent people whose property was damaged by storms and not covered from benefiting from a fire. Had these homes had flood insurance the clause would not take effect. If the government steps in and negates this clause are we not rewarding people who did not want to pay there fair share? Are we not also encouraging arson.

Nov. 25 2012 11:54 AM

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