The answer is blowing in the wind for some Sandy sufferers
Insurance is complicated. It is especially so when it comes to filing claims after a natural disaster. For one thing, damage to your home from flooding, unless from a burst pipe, is not covered by a standard homeowner policy – you need separate flood insurance, which carries its own exclusions and limits. (See: "5 ways flood insurance can soak you.")
Then, there are hurricane deductibles, which can be costly – typically they are up to 5 percent of a property's insured value. In the case of Superstorm Sandy, homeowners were told by state officials that the deductible would not apply because the storm failed to meet criteria for a hurricane. (See: "Homeowners saved from costly hurricane deductibles for Sandy.")
However, on the heels of reassurances by state insurance regulators came a Reuters report saying that homeowners may be pinched by deductibles after all. These charges could come in the form of wind damage deductibles, which also are up to 5 percent of a property's insured value.
"Some policies carve out wind damage from coverage altogether or levy sizable deductibles for wind damage even if it is not caused by a hurricane," says the Reuters article. It proved to be prescient. Six days later, the Insurance Journal reported that a number of insurers have been applying windstorm deductibles in homeowners policies. "The broker said the insurer had used ISO’s HO 03 40 [insurance policy] endorsement.' It basically says for a windstorm, you have a deductible. However, it does not define what a windstorm is…I think some people will have a real problem,'" says the report.
If the confusion over windstorm and hurricane deductibles wasn't enough, there is also another issue to wrap your mind around: “anti-concurrent-causation clauses" (ACC).
In some cases, these provisions allow insurers to deny claims based on excluded causes, in many cases flooding, if they occur at the same time as other covered causes, such as wind damage.
Some policies held by Sandy victims may contain ACC clauses. The Consumer Federation of America is calling for regulators to ensure that ACC clauses are not used to deny legitimate claims.
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Des Toups is a writer, editor and expert on insurance, cars and personal finance. He has written extensively about all three for national publications such as MSN and major newspapers such as the Seattle Times. He has been quoted about insurance issues in The New York Times, USA Today and Kiplinger's.
Follow him on Twitter @destoups