How to Maximize Your Insurance Coverage and Governmental Assistance Post-Sandy
By Adam Leitman Bailey and Colin Kaufman
NOTE that this is general information which may apply to you, but is not a substitute for discussing your individual situation with your lawyer and/or insurance broker. You should be aware that there are strict time limitations which may apply.
Q: How do I know if my home has flood or insurance coverage? And what type of insurance will cover damages from hurricane Sandy?
A: Because lenders mandate that homeowners in flood zones obtain flood insurance as a prerequisite to lending, most homeowners in flood zones will have flood insurance protection. There are three general types of flood insurance policies: the Dwelling Policy (includes condo unit owners), the General Property Policy and the Residential Condominium Building Association Policy. The specifics of flood insurance coverage can be reviewed at the FEMA website http://www.fema.gov/national-flood-insurance-program.
In addition to flood insurance, you may also have coverage under your general liability and umbrella polices for damage caused by wind and rain. All insurance policy coverage is contractual. That means that your specific policy may contain coverages, exclusions or deductibles that are not discussed here. You, your broker and your lawyer should review your coverages immediately so that a timely and correct report may be made to your carrier.
The most common homeowners policies issued in New York are the HO-1, HO-2, HO-3, HO-5 and HO-8. There are also HO-4 (Tenant Policies) and HO-6 (Unit Owner Policies). These policies do not cover flood damage.
The HO-1 and HO-2 policies are “named peril” policies in which coverage is afforded only to specific designated perils. A “peril” is a specific risk or cause of loss. The HO-1 policy is unusual in New York because of its narrow coverage; normally one of those named perils is windstorm coverage (but not flooding). The HO-8 policy is also unusual in New York – it provides for actual cash value coverage (explained below).
The HO-3, the most common homeowner policy in New York, is an “all risk” policy which insures against loss to the home or contents for all risks except those that are specifically excluded (flood is normally excluded). The HO-3 generally excludes coverage for, among other things, flooding, sewer backup, power failure and general weather conditions. The HO-5 includes the coverage of HO-3 with greater all-risk coverage for personal property, subject to specific exclusions.
All policies contain deductibles, amounts for which the insured will have to be responsible. Policies can be written such that the insurance payment will be based on “actual cash value” (ACV) of personal property or “replacement value.” ACV can be very roughly defined as the initial value of the property, less depreciation. ACV payment can never exceed the initial value of the property or replacement cost. Replacement cost is the cost to replace the item with one of similar value without deduction for depreciation.
Damage to your property may be subject to a “hurricane deductible” of 5%; news reports indicate that the Governors of New York and New Jersey have indicated that because Sandy did not make landfall as a hurricane, that deductible will not apply in their states.
The dwelling and other structures on the property are generally paid for at replacement cost, so long as at least 80% of the value of the property is insured; if not, the property owner will be required to directly bear a portion of the loss (the term for this is “coinsurance”). Property owners cannot insure in excess of 100% of their property (to reduce the risk of fraud).
Generally, damage to the property must be a direct result of the insured perils not merely a proximate one. Thus, wind damage to the structure will be compensable, if covered, but wind-driven water will not.
Q: When and how do I submit claims to insurance:
A: Time is of the essence. Every homeowners insurance policy, whether it be a general liability or umbrella policy for a building or community, or an individual unit owner policy, conditions the payment of claims on the receipt of timely notice of claim. What does this mean? If you do not provide your insurance company with notice of your claim as soon as reasonably practicable after the damage occurs, the insurance company may not pay out on your claim regardless of whether there would otherwise be coverage.
Therefore, boards and property owners should send claims to all of their current insurance carriers in writing mailed, return, receipt requested immediately. Boards should also urge residents within their communities to do the same. Claims should include a general description of the storm damage with a description of all of the particularized damages in an “including, but not limited to” statement. For example: “123 Main Street Condominium suffered extreme water and wind damage including, but not limited to (1) cracks in the façade, (2) falling windows, (3) water infiltration due to missing windows …”
Q: Is there any public assistance or funding available?
A: Yes, there are several programs that can assist you which we have listed below.
FEMA Aid: http://www.fema.gov/apply-assistance
- Disaster assistance is financial or direct assistance to individuals and families whose property has been damaged or destroyed as a result of a federally-declared disaster, and whose losses are not covered by insurance. It is meant to help you with critical expenses that cannot be covered in other ways.
- How to apply: Apply Online at DisasterAssistance.gov Apply via a smartphone at m.fema.gov Or apply by Phone by calling (800) 621-3362 or TTY (800) 462-7585.
- U.S. Small Business Administration (SBA) Loans:
- http://www.sba.gov/content/home-and-personal-property-loans
- Assistance particularly for homeowners associations including coops and condos: http://www.sba.gov/content/fact-sheet-associations
- Homeowners can apply for a real property loan for up to $200,000 to repair or replace their primary residence to its pre-disaster condition.
- Homeowners or renters can apply for a personal property loan for up to $40,000 to help repair or replace personal property, such as clothing, furniture, automobiles, etc., lost in the disaster.
HUD Disaster Resources:
- http://www.hud.gov/info/disasterresources_dev.cfm
- Resources:
- Mortgage Assistance from HUD’s Federal Housing Administration (FHA): FHA activates a mortgagee letter making a variety of insured loan programs available for disaster victims and putting into play use of special loan servicing and underwriting requirements.
- § See also http://money.cnn.com/2012/11/02/real_estate/sandy-mortgage-relief/
- Forebearance from Ginnie Mae
- Reprogramming of Public Housing Funds
- Disaster Housing Assistance
- Mortgage Assistance from HUD’s Federal Housing Administration (FHA): FHA activates a mortgagee letter making a variety of insured loan programs available for disaster victims and putting into play use of special loan servicing and underwriting requirements.
NYS Division of Homeland Security and Emergency Services (DHSES):
- Helpful links are found here – http://www.dhses.ny.gov/oem/event/sandy/contact.cfm
New York City Business Assistance Programs: http://www.nyc.gov/html/sbs/nycbiz/html/home/home.shtml
- Loans for small to mid-sized business that have experienced business interruptions:
- Emergency loans capped at $25,000. Call 311 and ask for NYC Business Emergency Loan.
- Economic benefits for mid-to-large sized benefits:
- An emergency letter will be available, allowing businesses to avoid paying New York State and New York City sales tax on material purchases for rebuilding. Reconstruction programs exceeding $500,000 may qualify. Contact Shin Mitsugi at smitsugi@nycedc.com.
- For displaced businesses:
- NYC will make temporary space available at the Brooklyn Army Terminal free of charge. Contact Doug Roberts at droberts@nycedc.com for further information on this program.
FEMA only applies to losses not covered by any other existing insurance. If any insurance applies, to get FEMA you would have to be rejected by that insurance. Also, FEMA does not restore the damaged property to the condition before the disaster but rather only helps with “critical expenses”.
Q: Can I make a warranty claim?
A: In New York, under the General Business Law, purchasers of new homes from a housing merchant have protections against defects in workmanship, materials and design, unless excluded by a contract offering a limited warranty. In order to make a claim under this section of the law, the homeowner must give written notice to the seller of the breach and commence an action, if needed, within very strict time limits.
To the extent damage relates to a portion of your building or home that is under warranty, boards or property owners should send a warranty claim referencing the specific warranty to the warrantor as soon as possible by writing mailed, return receipt requested.
Q: How do I document the damages so insurance companies will cover my claim?
- Take video and still photography of all damage with a newspaper (the New York Post and the Daily News only) dated the day that the still and video photography is taken. Write down details of the pictured damage.
- Maintain a log of damages. This can be as simple as a handwritten list, or can be in the form of an excel chart (if you have access to power/computer).
- Keep receipts and documentation of all expenses incurred during the clean up process.
- For boards of multifamily developments, please invite residents to provide you with their damage logs or if possible post their damage logs on the community google or yahoo group page.