Two of this blog’s four rotating headers depict a hurricane and a fire as examples of potentially-destructive types of property damage, and the hurricane season (June through November) and the wildfire season (late spring through mid-fall) are both well under way. This year has brought good news to the east coast with respect to the former and catastrophically bad news to the west coast with respect to the latter.
There are obviously many reasons for this. The west is undergoing a historically severe drought; the snowpack in California is currently 5% of what it should be. The region is also suffering from extreme heat; 2015 is the second warmest year ever recorded in Alaska, and temperatures in the west as a whole are now averaging two degrees hotter than they did in the 1980’s. This year’s “Godzilla” el Niño is also a factor, because that tends to heat the west coast but inhibit hurricane formation in the Atlantic basin.
Hurricanes
Atlantic Ocean hurricanes were a major threat as recently as 10 years ago. 2005 saw 27 named storms, 15 of which became hurricanes. Since 2010, however, the average has fallen to only 12 named storms and 6 hurricanes a year, with only 3 of the latter reaching Category 3 (110 mph) status. Early August saw 2 of the most respected predictive models downgrade their estimates for 2015. On August 4th, Phil Klotzbach and William Gray of the Department of Atmospheric Sciences at Colorado University announced that this would be “a well-below normal Atlantic hurricane season” with some 8 named storms and only 2 hurricanes. Two days later, on August 6th, the National Oceanic and Atmospheric Administration downgraded its forecast as well. NOAA now says there is a 90% chance that 2015 will be a below-normal season with some 6-10 named storms and only 1-4 hurricanes, with no more than one becoming a major storm. To date, there have been 4 named storms (Ana, Bill, Claudette, and Danny) and no hurricanes in the Atlantic basin. Read more ›
The insureds owned a home in Seaside Heights that was demolished by the storm on October 29, 2012, and they filed a claim for “storm damages.” Their homeowners carrier had the property inspected by an engineer, and he concluded that while wind had caused some damage to the structure, its loss was primarily attributable to storm surge and flooding.
“Read the policy, read the policy, read the policy” is a famous piece of advice for coverage counsel everywhere. Last Friday in 
A storm damaged the insured’s roof in December 2013, and she made claim under her homeowners policy. The contract of insurance called for payment on an ACV basis unless the damage had been completely repaired or replaced, and it defined ACV as “[t]he amount which it would cost to repair or replace damaged property with property of like kind and quality, less allowance for physical deterioration and depreciation, including obsolescence.” The insurer paid this amount after determining the replacement cost and depreciating both materials and labor, and it subsequently tendered the holdback after the roof had been fixed. The insured then brought suit, seeking class action status and arguing that the carrier’s practice of depreciating the cost of labor when determining ACV was unlawful.
In December, 2008 Allstate and four affiliated companies brought suit against 63 defendants, alleging the violations of IFPA. Those sued included physicians, chiropractors, and medical and equipment providers. The 604 paragraph complaint asserted that the defendants that engaged in a wide-ranging scheme to defraud the carriers of over $8 million by providing unnecessary care, engaging in fraudulent testing, creating bogus medical bills and records, and even staging accidents and recruiting accident victims. The plaintiffs sought compensatory and treble damages, as well as equitable relief in the form of disgorgement of benefits already paid and liens on the defendants’ assets. 
The policyholder owned an apartment building in Oakland that was damaged by fire in November of 2010. The blaze was confined to one unit, and the insurer valued the loss at approximately $180,000. The insured contended that there was extensive fire and smoke damage to five other apartments, however, requiring that all six units be completely gutted and rebuilt and that the building’s exterior be renovated and repainted. Her claim exceeded $800,000.
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The insured owned a home in Lake City that was heavily damaged by fire on February 27, 2013. It was undisputed that the dwelling was vacant at the time of the blaze and that the fire was caused by arson. The insurer denied liability and filed a declaratory judgment action, seeking an adjudication that the loss was excluded. After cross-motions for summary judgment were filed, the trial court held that the contract of insurance was ambiguous and construed it in favor of coverage.
Advance Cable had a building in Middleton, Wisconsin that sustained hail damage on April 3, 2011. The insurer’s claim representative inspected the roof and observed no damage. Six months later, the policyholder was contemplating a sale, and the buyer had the structure looked at. Its inspector stated that there was “definitely hail damage,” and the insured asked the carrier to reopen its claim. The resulting report by the insurer’s representative found hail dents up to 1” in diameter but concluded that these neither “affect[ed] the performance of the [roof] panels” nor “detract[ed] from the panels’ life expectancy.” There was no evidence of record to the contrary. 
The policyholder was a developer that was converting an office building in Tribeca in lower Manhattan into luxury condominiums when Superstorm Sandy flooded the premises in October of 2012. The storm caused more than $20 million in property damage and delay in completion loss. The insured had a builder’s risk policy with a $115 million overall limit of liability, but there was a $7 million sub-limit for delay in completion and a $5 million sub-limit for “all losses or damages arising during a continuous condition as defined in the definition of FLOOD.”