12 May, 2022
Hurricane Ivan – even after 18 years, it feels like it happened yesterday; and with whispers of the first tropical wave of 2022 being reported this week, we need little reminder that hurricane season is fast approaching. So, are you prepared?
If you find yourself in the cone of a rapidly approaching little red ball rotating counterclockwise on your TV screen it may well be too late to consider the following:
Do you have house insurance coverage? Have you reviewed your policy to ensure that it has adequate coverage? If not, why not?
Adequate coverage should be within 15% of the value of your home, therefore an up-to-date home appraisal is a matter to add to your ever growing “to-do list”. Be comfortable with your appraisal; remember that you are not appraising for mortgage purposes or resale, you are appraising to find out what it is going to cost to rebuild your building as new. You surely do not want any mishaps there!
To be comfortable with your appraisal, be sure that you have a qualified appraiser deal with construction costs at the time of the appraisal and add about 10% to the valuation to cover the increase in these costs as a result of a hurricane. Be sure to also check on your contents coverage and take photographs of your furnishings and any special items so that you have proof of what you had. Prudence would dictate that you have your home or business building appraised annually. Some policies may well insist on it!
The consequences of under insurance are not pleasant. Simply put, you will be responsible for the difference between what insurance you carried and the full rebuilding or replacement costs of contents at the time of the loss or damage, and this could mean you will only receive a portion of your damage claims. For example, if you have $250,000 in contents value, which you insure for $125,000, and you have a $100,000 loss, your insurance will only cover $50,000 of the loss, as you will be deemed to be self-insured for half the value of the contents. You could well have the same type of result with your building coverage. This is not what you want to hear after you have suffered through a major hurricane.
Type of Coverage and Policy
Considering your type of coverage is also important. Insurers fail, particularly in major disasters, so you want to have a reputable insurer you can count on to be there when you need it most. There are two basic policies available.
Maximum coverage covers full replacement of reconstructing the building to the same specification, including the cost of demolition, removal of debris, the fees to secure an architect, surveyor and engineer. The insurer usually reserves the option to replace, repair, or reinstate without deduction for wear, tear or depreciation. The wording of the policy should be clear and readable in simple terms so you can understand your benefits and exemptions.
The other policy will not be a full replacement policy, but rather leaves it the insurer to determine the age, depreciation, and cost of fixing or replacing the building. These policies are often in very small print and the average person does not understand what or where the exemptions to policy coverage are. In fact, in some cases the policy wording is so unclear that the insurance adjustors may interpret the loss in a manner most favorable to the insurer and you are left in the position of taking it or referring the matter to arbitration (a form of dispute resolution) which takes time and can be a risky and costly approach.
When taking out a policy, here are some things to consider:
The claim document itself must usually be filed within 30 days of the loss. It is not necessary to have a fully detailed claim - you can simply report the loss and the fact that there will be a claim. Your insurer will then quickly send loss adjustors to you. However, take your time with the actual claim and be sure you have all the areas of loss covered.
With all that added pressure, you’ll be happy to know that responsible insurance companies will usually make an immediate payment to assist in your short-term needs.
The Insurance company wishes to settle claims as quickly and as economical as it can. This is not necessarily in your best interest. You will undoubtedly be under severe pressure and duress from being displaced from your home or business and losing everything. The insurance company will use this to their advantage. An insurance adjustor could assess you as underinsured, so the settlement offered will not compensate for the actual loss suffered. To have a better idea of the full costs to rebuild, seek out professional contractors and/or surveyors who are able to provide you with a full analysis of loss and replacement costs so that you are at least armed with this knowledge and have a starting point to your negotiations.
If you are in doubt as to the appropriateness of the sum being offered by the adjustor seek professional assistance. Remember you are dealing with seasoned professionals, who are working on the insurer’s behalf and are often sent from one disaster area to the next. What they may be applying to your particular case may not be practical or realistic to your claim. Remember, it is very unlikely that they will be sympathetic to your claim.
Is it all worth it?
Being properly prepared for a hurricane is essential as has been demonstrated in the recent past. Those who are adequately insured and handle the entire claims process in an appropriate manner, without the fears of inadequate or lack of insurance coverage, will justify every cent they spend on being prepared. Those who do not will be dipping largely into their savings, which in modern times have taken a beating all of their own. If there are no savings to dip into then remember Murphy’s Law: if it can happen, it will!
Stay dry and be safe this hurricane season.
About Broadhurst LLC
Broadhurst LLC is a boutique law firm in the Cayman Islands with a range of expertise in dispute resolution and corporate law. With a presence in Grand Cayman for over 24 years, the firm is known most recently for its successes in bankruptcy and insolvency litigation as well as its completion of one of Cayman’s largest telecommunications and broadcasting acquisitions. Please send all inquiries to Broadhurst LLC partner, Ian Lambert by email to firstname.lastname@example.org or by calling +1 (345) 949-7237.