Connecticut was hit less hard by Superstorm Sandy than New York and New Jersey, but there are still Connecticut-based legal issues arising out of the most destructive hurricane of the 2012 season, I reported for the Connecticut Law Tribune:
In the 18 months since Superstorm Sandy swept in from the Atlantic, Connecticut lawyers have been untangling knotty legal issues that have arisen concerning insurance coverage for home and business owners who suffered property damage.
Lawyers are litigating some cases in Connecticut. But because New Jersey and New York were hit harder by the storm, some Connecticut-based firms are litigating cases in those jurisdictions as well.
More than 1,000 Sandy-related cases are pending in the U.S. District Court of the Eastern District of New York, and 949 cases are pending in the District of New Jersey, according to reports made by two U.S. magistrate judges at a conference held earlier this month focusing on Superstorm Sandy insurance litigation.
As of May 2013, 47,002 residential-property claims were reported in Connecticut as a result of the storm. There were also 4,460 commercial-property claims, 2,772 flood claims and 1,212 business-interruption claims, according to the Connecticut departments of banking and insurance.
Stephen Goldman and Gregory Varga, both partners with Robinson & Cole in Hartford who are defending insurers in Sandy cases, said that the litigation will be influenced by decisions related to other major disasters in courts in other parts of the country. A lot of case law concerning insurance coverage for property damage and interruption to business operations comes out of catastrophes "because the losses are so numerous and losses are often so large," Goldman said.
Judges and insurance litigators look to past experience with other catastrophes around the country when dealing with the large number of cases that arise out of a natural disaster, Goldman said.
"What we're always looking at [is] … 'What was the most recent experience that was analogous to our situation?'" Varga said.
Hurricane Katrina-related decisions from the Mississippi Supreme Court, Louisiana Supreme Court and U.S. Court of Appeals for the Fifth Circuit could be influential in Sandy cases, Varga said.
Like Hurricane Katrina, Superstorm Sandy raises questions of how courts will interpret policy clauses that address situations when there are multiple weather-related reasons for property damage. Often, these policies block claims when one type of weather is covered by the insurance but another type isn't, Varga said.
Most insurance companies will not cover flood damages, and so-called anticoncurrent cause provisions prevent insurance payouts if both wind and flood could have caused damage, he said.
Leonard Isaac, an insurance litigator with offices in Waterbury and West Hartford, represents policyholders and said Connecticut had more wind damage than flood damage from Sandy, so there are fewer situations in which claims might be rejected. In contrast, there was more rain-driven damage from 2011's Hurricane Irene, which has led to more coverage disputes, he said.
Theresa Guertin, an associate with Saxe Doernberger & Vita, said the Hamden firm is handling as many as 20 Superstorm Sandy cases with policyholders suing insurance companies, including cases pending in the Eastern District of New York. Their claims range from a case Guertin is handling involving damages to a new condominium complex that was being developed on Long Island to businesses whose operations were interrupted because electric power was off for several days.
In past disasters, insurance companies did not do a good job of getting agents out to inspect sites in a timely manner, Guertin said. In Sandy's aftermath, insurance companies generally responded quickly, she said.
Goldman agreed that insurance companies are far better at addressing claims quickly than they were when Hurricane Andrew hit Connecticut 20 years ago. "They've been to this rodeo before," he said.
But there are exceptions. "Superstorm Sandy cases that are going to go to litigation here in Connecticut are going to involve bad-faith claims," Guertin said. She explained those are often cases where there has been a lot of back-and-forth communication between insurers and policyholders with no results. "That leaves policyholders feeling like they've been mistreated, or, in fact, [and] that legally amounts to bad faith," Guertin said.
Also, insurance companies are in a catastrophe mode because of the number of Sandy claims, Isaac said. "As a result, companies sometimes just don't have the ability to take the same positions [in terms of providing coverage] as they might take on an individual claim," Isaac said.
Business-interruption claims are presenting another legal complication, as policyholders must show that their lost profits or additional expenses are directly related to a covered event. Robert Glasser, director of East Coast claims preparation and valuations for Aon Risk Solutions, a risk management and insurance brokerage firm, said it's difficult to define what actual loss of business income is. "If we knew what 'actual' was, you wouldn't need forensic accountants," he said at the conference.
Another emerging issue is "civil authority" coverage, which provides insurance coverage for loss of income if a business had to shut down because of an order made by governmental authorities. Sometimes, government officials don't explicitly prohibit the public from leaving their homes, but they do advise the public that it's best to stay home. In the latter situation, there is litigation over whether businesses affected by the lack of customers can file claims, Guertin said.
Another issue is the liability of insurance brokers, Varga said. Policyholders often argue they thought they had flood coverage, and then when they find out they didn't, "it's my broker's or my agent's fault," he said. That cause of action didn't used to be viable in New York but has become more attractive, Varga said.
Sandy also may lead to changes in how insurance policies are written in the future. Policies are often changed when courts construe policy language in a way no one ever intended, attorneys said.
"You can't make insurance policies clear" because no one would buy them if the exclusions were written in plain language, Jay Levin, a partner at Reed Smith in Philadelphia who represents policyholders, said at the conference. When language is vague, he said, that leads to litigation.
"Insurance is a method of risk transfer of some risk that can be economically modeled and transferred—but not all risk," Levin said. "Insurance is not government handouts."
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