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September 7, 2017

This weekend Hurricane Irma, a Category 5 Hurricane, is expected to subject South Florida to potentially catastrophic wind, rain and storm surge and then move north along the Atlantic coast of the United States. Irma is the strongest storm ever recorded in the Atlantic, outside the Gulf of Mexico or the Caribbean. It has also set a record for the amount of wind energy recorded over a 24-hour period. If Irma strikes South Florida, it could deliver the first widespread damage to the region since Hurricane Wilma in 2005.

The severity of Hurricane Irma raises the possibility that a large number of insured properties may suffer a “total loss” as the result of the effects of wind and flooding. The laws in the various states treat such damage in very different ways.

  1. Florida’s Valued policy law, West’s F.S.A. § 627.702, requires payment of policy limits when any covered peril (such as windstorm in policies covering that peril) causes a total loss. Note, however, that the law applies also to a partial loss by fire (e.g., no depreciation when lightning triggers a fire). However, when both covered and non-covered perils cause a loss, the insurer’s liability is limited to each covered peril’s share of the loss. Fla. Farm Bureau Cas. Ins. Co. v. Cox, 967 So.2d 815 (Fla.2007). Regardless, policy limits are due if the covered peril(s) alone would have caused the total loss. Appraisal does not preclude the application of the valued policy law. Freeman v. American Integrity Ins. Co. of Florida, 180 So.3d 1203, (Fla. 1st DCA 2015). 
  2. Georgia’s valued policy law does not apply to a total loss caused by a windstorm. It does apply to a total loss caused by fire (e.g., lightning from windstorm causes fire). Note, however, in a non-fire related total loss paid at less than policy limits, Ga. Code Ann. 33-32-4, the insurer must refund the difference between the amount of premiums actually paid for the insurance policy and the amount of premiums that would have been charged for a property insurance policy having a maximum amount payable equal to the amount actually paid by the insurer to the insured.
  3. South Carolina’s valued policy law does not apply to a total loss by a windstorm. It does apply to a total loss caused by fire. For example, if Hurricane Hermine causes lightning that sparks a fire and a total loss, Coverage A limits would be due regardless of the actual market value of the residence. See South Carolina Ins. Co. v. Price, 432 S.E. 2d 508 (S.C. App. 1993); S.C. Code Ann. §38-75-20.
  4. North Carolina does not have a valued policy law. Therefore, the policy determines how a total loss is to be adjusted and paid. See Sharpe v. Nationwide Mutual Fire Insurance Company, 62 N.C. App. 564, 302 S.E. 2d 893 (N.C. App. 1983). In other words, a policy can still require compliance with a policy’s replacement cost provision in the event of a total loss. Gilbert v. North Carolina Farm Bureau Mut. Ins. Companies, 574 S.E. 2d 115 (N.C. App. 2002); Edmund v. Fireman’s Fund Ins. Co., 256 S.E. 2d 268 (N.C. App. 1979).

Widespread damage places considerable stress on the adjusting resources of carriers. As a result, it is important to consider the specific time requirements in the handling of claims imposed by each State.

  1. In Florida, the insurer’s claims handling deadlines are provided by Florida Statute. § 627.70131. The statute provides that upon an insurer’s receiving a communication with respect to a claim, the insurer shall, within 14 calendar days, review and acknowledge receipt of such communication unless payment is made within that period of time or unless the failure to acknowledge is caused by factors beyond the control of the insurer which reasonably prevent such acknowledgment. If the acknowledgment is not in writing, a notification indicating acknowledgment shall be made in the insurer’s claim file and dated. A communication made to or by an agent of an insurer with respect to a claim shall constitute communication to or by the insurer. Within 90 days after an insurer receives notice of an initial, reopened, or supplemental property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay is caused by factors beyond the control of the insurer which reasonably prevent such payment.
  2. In Georgia, the insurer must acknowledge receipt of notification of a first-party claim within 15 days from receipt of notification of the claim. If the acknowledgment is not in writing, the insurer shall note and date the acknowledgment in the claim file. Ga. Comp. R. & Regs. 120- 2-52-.03(1). If a completed proof of loss is required, the insurer shall affirm or deny liability on all first-party property damage claims within 15 days of receiving the completed proof of loss. Ga. Comp. R. & Regs. 120- 2-52-.03(3). If a completed proof of loss is not required, the insurer shall affirm or deny liability on all first-party property damage claims within 30 days from the day the claim was reported. Ga. Comp. R. & Regs. 120- 2-52-.03(3). The insurer shall tender payment on a first-party property damage claim within 10 days after coverage is confirmed and the full amount of claim is determined and not in dispute. Ga. Comp. R. & Regs. 120-2-52-.03. 
  3. In South Carolina, the insurer must promptly acknowledge receipt of a claim and its investigation of that claim. When the policy requires written proof of loss after the notice of the loss has been given by the insured or beneficiary, the insurer or its representative shall furnish a blank to be used for that purpose. If the forms are not furnished within 20 days after the receipt of the notice, the claimant is considered to have complied with the requirements of the policy as to proof of loss upon submitting within the time fixed in the policy for filing proofs of loss written proof covering the occurrence, character, and extent of the loss for which claim is made. South Carolina Code Annotated § 38-59-10. Whether a claim has been paid promptly will be measured under the State’s Improper Claims Practices statute that makes the insurer’s failure to attempt in good faith to effect prompt, fair, and equitable settlement of claims, including third-party liability claims, submitted to it once liability has become reasonably clear on improper claims practice. South Carolina Code Annotated § 38-59-20(4)
  4. In North Carolina, the insurer must acknowledge and act upon communications regarding claims and affirm or deny coverage of the claim reasonably promptly. N.C. Gen. Stat. § 58-63(11)(b) and (e). The insurer is required to settle the claim promptly after liability has become reasonably clear. N.C. Gen. Stat. § 58-63(f). Once a decision has been made to pay a claim, the payment must be mailed or delivered within ten days. 11 N.C. Admin. Code 4.0421(1). If a claim is denied, or a claim is partially paid as a result of a compromise settlement, the insurance carrier must also promptly provide a reasonable explanation for the denial or the offer of compromise. N.C. Gen. Stat. § 58-63(11)(n).

Given Hurricane Irma’s projected path, insurers will likely receive a host of claims in many jurisdictions. Throughout the next few months, Butler will send you information that may be useful to your handling of hurricane claims. Do not hesitate to contact our property partners if you have any questions concerning the law governing your claims.

For any further questions, please contact John Garaffa.