Walter Andrews, left, and Andrea DeField, right. (Courtesy photos)
It has been little over a week since Hurricane Harvey made landfall along the Texas coastline as a Category 4 storm. Since that time, parts of Texas and Louisiana have been inundated with flood waters as Harvey continues to wreak havoc. Hurricane Harvey was the first Category 3-plus storm, a “major hurricane,” to make landfall in the United States since Hurricane Wilma impacted our South Florida community in October 2005. For that storm, the National Hurricane Center estimated that property damage alone exceeded $20 billion, see Tropical Cyclone Report, Hurricane Wilma (12 Jan. 2006). Current estimates for Hurricane Harvey damage already greatly exceed that figure, and the estimates keep climbing.
With damage and lost income estimates running into the billions, Hurricane Harvey serves as a staunch reminder for South Florida individual and commercial policyholders. Insureds should review their insurance policies now to determine whether they have adequate insurance coverage in place in preparation for Hurricane Irma—a storm the National Hurricane Center calls a “potentially catastrophic Category 5 hurricane.”
Ensure Your Policy Covers Windstorm and Flood Damage
Florida law requires residential property insurers to provide coverage for windstorms resulting from hurricanes (named storms that the National Hurricane Center declares a hurricane) on all residential insurance policies. Where Florida residents are unable to get this insurance in the private market, Citizens Property Insurance, Florida’s state-run insurer, provides coverage. In contrast, commercial non-residential property insurers are not required to provide windstorm coverage. Thus, your business’s property insurance policy may exclude coverage for damage caused by windstorm, such that your business will need a standalone windstorm policy. Further, most windstorm coverage is subject to separate and often higher windstorm deductible. This point is important as our community prepares for Hurricane Irma—a storm with significantly higher winds than Hurricane Harvey. Accordingly, experts anticipate that the major source of Hurricane Irma damage will be wind damage in contrast to the devastation in Texas and Louisiana caused by high floods.
As to coverage for flooding, many property policies—whether homeowners or commercial—contain substantially reduced sublimits, or exclusions, for flood damage. South Florida insureds should review their policies now to ensure that they have windstorm coverage as part of their property policy or as a standalone policy, and a flood insurance policy to cover storm surge or flooding that may accompany a hurricane.
Should South Florida Experience a Storm, Keep These Coverages in Mind
Most commercial property policies, and even some homeowner’s policies, contain a number of specialized coverages. Depending on the specific loss experienced and extent of damage, one or more of these coverages may apply to your windstorm damage:
• Physical Damage to Insured Property: So long as windstorm damage is not excluded by the policy, there is generally coverage for the cost to repair, replace or rebuild property that suffers physical loss or damage due to a named storm. Under a dwelling or homeowner’s policy, coverage may be limited to the home (dwelling) itself and certain identified buildings like a guest house or garage, as well as personal property within the structure as defined in the policy. Commercial property policies usually contain a schedule of insured locations that may include not only buildings, but business person property such as furniture, machinery and stock, as well as equipment.
• Debris Removal: Many property policies provide coverage for costs incurred to remove debris from covered property damaged in a windstorm. This coverage is usually limited to a certain percentage of the total loss.
• Mitigation Costs: Most property policies cover expenses incurred in taking preventative measures to avoid loss or, where loss has already occurred, avoid further loss—such as boarding up a property should the windows be destroyed. In addition, most policies will expressly require that the policyholder take steps to mitigate existing damage and prevent further damage following the storm.
• Extra Expense: For businesses, commercial property policies may provide coverage for “extra” costs necessary to operate the business post-storm. These may include the cost of a generator or costs incurred to operate at a temporary location.
• Business Interruption Coverage: Business Interruption insurance is usually added to commercial property policies by endorsement and covers lost income and profits resulting from the cessation of business operations due to hurricane damage. This type of coverage should also cover operating expenses that are necessary even where the business is not operational. While property damage may be subject to a dollar deductible, this coverage is usually subject to a time deductible known as a “waiting period” designated in the policy.
• Orders of Civil Authority and Ingress/Egress Coverage: Commercial policies may also cover business income lost because of governmental directives restricting access to the insured property. Similarly, many commercial property policies provide coverage where ingress to or egress from the covered property is prevented because of the storm damage, such as in the situation of a major road closure like those seen in Houston post-Harvey.
• Service and Utility Interruptions Coverage: Should there be a loss of power, water and telecommunication due to the windstorm, resulting losses may be covered.
While the specific terms of each insurance policy and applicable law govern the extent of windstorm coverage afforded to you or your business, South Florida policyholders should take care now to review their existing policies with the help of knowledgeable coverage counsel to ensure that they have adequate coverage for any major hurricane. Policyholders should also save electronic copies of their policies to their e-mail or a cloud service to ensure that they can quickly access them even if forced to evacuate their business or home. By taking these steps now, South Florida insureds can better ensure that they will receive the full benefits of the coverage they have paid for after Hurricane Irma.