Hurricane Matthew Insurance Issues Legal Aid of North Carolina Disaster Legal Services CLE 5 December 2016 L. D. Simmons McGuireWoods LLP lsimmons@mcguirewoods.com 704.343.2062

Introduction What types of policies apply? Principles of causation in North Carolina Filing the proof of loss

Standard HO Policies HO-3 Most common form “All risk” coverage for the dwelling Defined as: “All risks of physical loss to property” “Named peril” coverage for personal property ALE (additional living expenses) covered Typically 20% of the insured value of the home

Key Exclusions Standard HO and renter’s policies exclude flood damage Most homeowners policies cover windstorm damage Many carriers do not offer windstorm coverage So – we have issues . . .

Windstorm Coverage If windstorm coverage is not available, the homeowner may have coverage under either: North Carolina Joint Underwriting Association – the “FAIR Plan” Offers both wind and standard HO coverages or The Coastal Property Insurance Pool – formerly the “Beach Plan CPIP policies insure only windstorm damage – the insured must purchase a standard HO policy for other losses, e.g., fire

Flood Coverage Because flood is excluded homeowners must purchase flood insurance Homes in high-risk areas with federally regulated mortgages must purchase flood insurance Options: private or federally funded insurance National Flood Insurance Program Policies insure against “direct physical loss from flood” Flood is defined as: Overflow of inland or tidal waters Unusual and rapid accumulation of surface water Mudflow Collapse of land along the shore of a lake or other body of water as a result of water exceeding anticipated cyclical levels

Flood Coverage Covers buildings, personal property and debris removal Home is covered at ACV or replacement costs, if purchased Limits are 80% of replacement cost up to $250,000 Contents covered only at ACV No ALE coverage Exclusions: Basements Decks, pools, walkways Trees and shrubs

Available Coverages Insurers could have more than one policy that applies to a Hurricane Matthew loss: Standard HO policy Flood insurance Private or through the NFIP Windstorm insurance Private, FAIR Plan or CPIP

READ THE POLICY!!!

Causation Issues The insurers may contend that all or part of the loss is excluded. E.g., the applicable policies cover windstorm but exclude flood North Carolina courts follow the concurrent causation rule If a covered and an excluded loss combine to cause the damage, the loss is covered State Capital Ins. Co. v. Nationwide Mut. Ins. Co. (N.C. 1986)

Anti-Concurrent Causation Exclusions Most property policies contain an anti-concurrent causation exclusions: The Policy excludes loss or damage caused directly or indirectly by any of the following [exclusions]. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss Builders Mutual v. Glasscar Props. (N.C. App 2010) Enforced anti-concurrent causation clause in mold case Southern Ins. Co. of Virginia v. Advanced Coatings, Inc. (W.D.N.C. 2009) Judge Mullen declined to enforce exclusion

Proof of Loss All homeowners policies require the insured to submit a proof of loss A proof of loss verifies the amount of the loss FEMA deadline – 60 days from loss Extended now to 120 days Understand the proof of loss requirements and the deadline

Hurricane Matthew Insurance Issues Legal Aid of North Carolina Disaster Legal Services CLE 5 December 2016 L. D. Simmons McGuireWoods LLP lsimmons@mcguirewoods.com 704.343.2062