For those who have never experienced one, it is easy to dismiss the need to prepare for the possibility of natural disasters and the threat that they pose to one’s property. Even for the insured, many policies’ coverage exclude common elements of disasters. What can private citizens do to ensure their lives and livelihoods are fully protected? We hear more below with David J. Furtado, attorney at law and founder of Furtado Law PC. Read the full article on Lawyer Monthly Here!
Unveiling the Foundation: The Significance of the Insurance Policy
Imagine waking up one day to discover that your home has been destroyed, your belongings have been washed away and your loved ones have been forcefully displaced. Natural disasters possess an unsettling ability to strike without warning, devastating human lives and leaving behind a trail of despair. What makes this even more alarming is the fact that countless individuals and communities find themselves completely unprepared for such unforeseen events, with insurance coverage that proves to be woefully insufficient.
The insurance policy serves as the fundamental basis for all property insurance claims. It is a form of a contract that consists of contract language, encompassing various terms and definitions. The attorney advising clients regarding insurance coverage matters bears the responsibility of possessing a comprehensive understanding of the insurance policy language, statutory law and case law to effectively challenge coverage decisions, claim denials and policy exclusions.
Insurance policies are often well defined in terms of specific coverages and exclusions. Many of these policies are designed to have a broad scope when it comes to the types of risks and losses that are covered, allowing for various interpretations and leaving room for subjective understanding.
Understanding a policy is vital, as it can include both explicit, clearly stated terms and implicit, legally understood expectations. Just because something is not explicitly mentioned in the policy does not mean it can be interpreted or added. Deciphering the policy language is important to grasp the rights, obligations and limits outlined. The policy’s effectiveness and coverage depend on its specific terms and conditions.
In insurance claims, if a policy explicitly excludes a specific type of loss, the insurance company has the right to deny the claim based on that exclusion. Interpreting the policy’s terms allows the insurance company to determine if a claim is covered or not. When multiple exclusions exist in a home insurance policy, it complicates property coverage interpretation when trying to make a claim.
Just because something is not explicitly mentioned in the policy does not mean it can be interpreted or added.
Coverage can vary, with some policies covering certain natural disasters while excluding others. For example, certain policies may not provide coverage for water damage, which is a common type of claim. If a policy specifically excludes coverage for certain natural disasters or water-related events, the insurer can deny the claim. These clauses help clarify the circumstances in which the insurance company must provide coverage for natural disaster claims or other types of claims.
In case of a natural disaster, it is important to consider that any previous insurance claim, whether unreported, improperly investigated, not adequately paid, or where the necessary restoration work was not carried out, may have a negative impact on the evaluation and payment of the claim resulting from the natural disaster. Other factors that could affect the evaluation and payment of the claim include a lack of property maintenance, destruction of evidence, poorly worded coverage provisions in the policy, and policy exclusions.
The consequences of the disaster can make the process of adjusting and settling the claim more complicated and time-consuming. Moreover, post-event crimes like theft or vandalism can further complicate the assessment of the claim, especially if the property is vacant due to a previous loss.
Reframing Insurance: Transforming Liability into Valuable Assets
Homeowners often underestimate the true purpose of insurance and neglect the opportunity to protect their valuable assets. Dismissing the likelihood of accidents, damage or natural disasters, they adopt a mindset of ‘It won’t happen to me’. However, it is vital to recognise that it is not a matter of if these incidents will occur but rather when they will happen. Your home holds paramount importance as your most valuable asset. Opting to save a few hundred dollars on an insurance policy exposes your most crucial investment to significant vulnerabilities.
Many homeowners lack sufficient insurance coverage. Studies indicate that approximately 60% of homes in the US, which equates to two out of every three homes, are underinsured by a minimum of 18%. Outdated policies and failure to consider property changes and rising costs in labour and materials can lead to underinsured homes. Inadequate coverage in home insurance areas like dwelling, structures, personal property, loss of use and liability can leave homeowners vulnerable before and after disasters.
Homeowners are advised to keep comprehensive records of all home improvements and renovations done during the year. These improvements have the potential to affect the coverage required for your home and also enable your insurer to identify any safety or security features that might make you eligible for discounted rates.
By prioritizing cost over coverage, individuals may unknowingly compromise their own protection. Homeowners depend on insurance brokers and agents as their trusted advisors when selecting policies and ensuring adequate coverage, especially as many homeowners never read their insurance policy. Agents might often prioritize sales and policy costs, focusing on offering lower premiums and emphasizing cost as the primary factor when selecting a policy, rather than ensuring the policy will effectively protect the homeowner from financial calamity. While opting for cheaper insurance may initially save money, it could ultimately result in denied claims and uncovered expenses, imposing a larger financial burden.
Studies indicate that approximately 60% of homes in the US, which equates to two out of every three homes, are underinsured by a minimum of 18%.
While some people may be satisfied with a regular insurance plan, others might require a customised manuscript policy to cater to their unique needs. Manuscript policies are personalised for the insured’s specific requirements and are typically found in large commercial accounts or individuals with uncommon risks. However, using a manuscript policy comes with risks such as confusing terminology and potential disputes over coverage. Additionally, the regulations for manuscript policies differ from state to state, potentially resulting in less oversight and regulation compared to standard policies. Therefore, it is crucial to consider these risks before opting for a manuscript policy.
Insurance companies are increasingly refining their policies by modifying exclusions in response to legal and regulatory changes, making it harder for policyholders to have their claims accepted. By modifying the terms and conditions of policies, and specifically targeting certain claims that previously would have been covered, policyholders are facing denied claims right from the start.
Mother Nature v Homeowner: Unleashing the Power of Your Insurance Policy
Mother Nature is a homeowner’s worst enemy, causing damage through unavoidable collisions with nature. Weather events are the main cause of home damage, leading homeowners to seek insurance coverage. 70% of claims are weather-related, emphasising the need for insurance against these risks on residential properties.
Many people fail to recognise that a single large-scale catastrophe, like a storm, can be categorised as multiple events such as flooding, wind damage and rainfall.
What makes this significant is that insurance companies often mandate separate deductibles for each of these events. These deductibles can add up swiftly, underscoring the importance of considering the potential for multiple events when determining the deductible for your insurance policy. If one or more events are covered while others are not, this can result in a severely insufficient insurance payout that does not adequately cover the costs of restoring the property to its pre-loss condition. It is extremely important to remember this when allocating funds for emergencies and when reviewing insurance policies to ensure that they include coverage for catastrophic events.
One common issue during home restoration is the impact of building and safety code updates on costs. Many municipalities have stricter building and safety code requirements compared to the original construction of the home, adding thousands or even hundreds of thousands of dollars to the restoration expenses. Insurance policies often offer limited coverage for the increased costs resulting from ordinances and laws. In many cases, this coverage is limited to a percentage of the replacement cost coverage.
Many people fail to recognize that a single large-scale catastrophe, like a storm, can be categorised as multiple events such as flooding, wind damage and rainfall.
While earthquakes often grab the headlines when it comes to ground movement, it is important to recognise that the ground can move for various reasons. Homeowners should not solely rely on earthquake coverage, as it only provides limited protection against damage caused by seismic activity. Earthquake policies generally exclude coverage for risks such as landslides, mudslides, rockslides, mine subsidence and sinkholes. To obtain coverage for these risks, seek out an earth movement insurance policy that provides broader coverage and protection against a wider range of perils.
Earth movement coverage considers other causes of ground movement, such as landslides, sinkholes, or subsidence. These events can cause significant damage to properties and may not be covered under a standard earthquake policy.
The risk of earthquakes is high in California, the Pacific Northwest and the New Madrid fault regions, but lower in other areas. However, there are still localised risks such as landslides, mine subsidence, sinkholes and ground movements. Oklahoma is unique as it experiences numerous smaller earthquakes due to fracking-related wastewater injection wells. Insurance coverage for Oklahoma earthquakes is limited, making policy definitions crucial. Insurance carriers struggle with assessing man-made risks in Oklahoma.
Insureds in earthquake-prone areas should choose their earth movement coverage carefully to avoid coverage gaps or claim issues. They should review their policies to ensure coverage for both natural and man-made earth movements, such as the vibration of the earth due to construction occurring around their property, as some insurers may include or exclude this coverage explicitly. Thoroughly assessing the definitions and terms of their coverage is vital, especially for those with excess policies, to avoid discrepancies that could jeopardize their coverage.
Insurance Policy Cancellations: A Changing Reality for Homeowners
Homeowners are currently dealing with an unprecedented increase in policy cancellations and non-renewals. This is being driven by a succession of expensive claims within the community or state, leading insurers to make the tough choice of either discontinuing operations in certain geographic areas or terminating coverage for policyholders.
Insurance companies consider various factors before cancelling a policy, and not all claims will automatically lead to policy cancellation. By neglecting to report a prior claim, homeowners are potentially jeopardizing their coverage and leaving themselves vulnerable in times of need. Insurance is meant to provide protection and peace of mind, but failing to disclose necessary information can ultimately hinder the purpose of having insurance.
Homeowners are currently dealing with an unprecedented increase in policy cancellations and non-renewals.
In the event that an insurance claim becomes necessary, homeowners who have a history of undisclosed claims may encounter significant obstacles. Insurance companies have the right to deny claims made for prior undisclosed incidents, which can leave homeowners responsible for covering the costs themselves. Failing to disclose prior claims can jeopardise coverage and leave homeowners vulnerable when they need it most. Homeowners frequently omit or fail to provide important details when filing a claim, due to the perception that this information might adversely affect the settlement process. However, holding back necessary information can ultimately weaken the intended outcome.
Filing property damage claims can affect a homeowner’s eligibility for insurance. Insurance companies may reassess and potentially change the coverage and premiums, or even cancel the policy, based on the nature and frequency of claims. Homeowners can challenge these decisions by making adjustments, like modifying their property or insurance policy, to meet the company’s requirements and keep their coverage.
Home Insurance Dilemma: When Coverage is Elusive
The profitability of property insurance is compromised due to the rise in natural disasters, as the amount paid out in claims settlements exceeds the premiums collected from policyholders. Some insurance companies are forced to limit coverage or even stop offering new policies in certain regions. Citing wildfire risk and the state’s limit on insurance premiums, Allstate and State Farm have stopped writing new homeowner policies in California. Farmers Insurance placed a cap on the number of policies in California.
When homeowners cannot find affordable coverage through traditional insurance companies, they may turn to ‘insurers of last resort’, or FAIR plans, which can operate similarly to a clearing house for participating insurance companies. These state-mandated programs offer property insurance to individuals and businesses facing difficulties in obtaining insurance in the standard market. The goal of FAIR plans is to ensure equal access to insurance, regardless of property risk factors or location. FAIR plans currently operate in 26 states, the District of Columbia and Puerto Rico.
Other states offer other types of ‘last resort’ options, such as the California Earthquake Authority, the Texas Windstorm Insurance Association and Florida’s state-run Citizens Insurance, which offers coverage for hurricanes and sinkholes.
Mitigating Risk: Insurance Companies Investing in Private Firefighters
In 2010, Chubb Insurance hired a private team of firefighters to protect some homes threatened by a wildfire in the Colorado foothills west of Boulder. Although limited to fire-prevention work, they are credited with saving at least 10 homes, while three insured by the company were destroyed. This marked the first time a private crew responded to a Colorado fire, which caused $217 million in damage and destroyed 169 homes.
USAA is the first major insurance company to offer a discount to residents of Firewise USA sites. They provide a free Wildfire Response Program in 15 states, partnering with certified wildland firefighters. These experts monitor wildfires and take proactive measures to protect policyholders’ homes, such as closing windows and removing debris.
Private firefighting companies offer on-call wildfire protection services to homeowners and insurance companies like USAA, Chubb and Safeco. However, their lack of coordination with local agencies creates a burden for first responders who must prioritize resident safety and coordinate with private crews. Private firefighting companies may exacerbate income inequality during wildfires by giving affluent individuals and neighborhoods a competitive advantage in protecting their homes, while economically disadvantaged communities lack access to such resources, widening the gap between those who can safeguard their properties and those left vulnerable to wildfires.
Insurance Policies: Building Resilience in the Face of Nature’s Uncertainties
While it is impossible to fully capture the breadth of natural disasters and their effects on the lives of property owners with different levels of protection – whether properly insured, underinsured, or uninsured – this article emphasizes the fundamental importance of securing an insurance policy as a means of safeguarding one’s home.
Mother Nature may always have the upper hand, but homeowners who are prepared can minimise the impact of natural disasters. Policyholders should stay informed about policy changes and carefully review their insurance policies. Protecting your most valuable asset, your home, through the right insurance coverage is not just a wise decision, but a critical one. Do not wait until it is too late to secure the protection you and your home deserve. Remember, it is not just bricks and mortar; it is the place where memories are made and cherished. Fortune favors the prepared: safeguard your financial future today to ensure a secure tomorrow.
David Furtado, Founder
Furtado Law PC
3773 Cherry Creek Drive North, Suite 755, Denver, Colorado 80209, USA
Tel: +1 866-497-6106
David Furtado is a highly accomplished legal professional with an extensive educational background and exceptional expertise in civil litigation, with an emphasis on insurance law, construction defect and first-party and third-party insurance litigation. He holds a Bachelor of Science in Finance and Master of Science in Accounting from the University of Rhode Island, a Juris Doctor from the University of Denver and a Bachelor of Science in Electrical Engineering from the University of Colorado.
With his diverse background, David brings a unique perspective to his legal work, enabling him to approach legal issues with a multidisciplinary mindset. He is adept at effectively managing complex and technically challenging legal cases.
Demonstrating his dedication to his profession, David is licensed to practice law in multiple states, including Colorado, California, Alabama and Massachusetts. He is also registered as a patent attorney and admitted to the US Patent and Trademark Office, showcasing his specialised knowledge in patent and trademark law.
Having practiced law since 1996, David has amassed nearly three decades of trial experience in complex civil litigation on behalf of plaintiffs. This extensive experience has provided him with a deep understanding of legal principles and a wealth of knowledge in various areas of law. As a result, he is able to provide seasoned and effective legal advice to his clients, ensuring their best interests are represented with diligence, dedication, passion and professionalism.