Advise & Consult, Inc. | August 20, 2015<\/p>\n
When your property is damaged in a storm your first thought is everyone safe followed by how bad is the damage?\u00a0 After emotions and the chaos subside, you are able to start dealing with insurance companies and pray that everything is covered and will be able to be replaced, repaired and return to normalcy.<\/p>\n
Except when it doesn\u2019t.\u00a0 Insurance coverage obviously varies policy to policy and is always a factor when your insurance policy covers the damage that occurred.\u00a0 Water intrusion issues are one of the main culprits of when a policy is approved or denied \u2013 depending on the water source.\u00a0 But at least you have a clear cut answer from your insurance carrier.\u00a0 Not always.<\/p>\n
In a claim resulting from the Superstorm Sandy a judge has now ruled that a denial letter was written and delivered to the insured, but the communication was unclear and ambiguous.\u00a0 From a blog post by Dick Bennett of Cozen O\u2019Connor <\/strong>it is explained as such:<\/p>\n the carrier was \u201cpleased to inform you\u201d that wind damage was covered while flood was \u201cexpressly excluded\u201d and concluding with what he called an \u201copen-ended statement that the letter could be amended should new information become available\u201d simply did not pass muster as a formal denial.<\/p>\n The property was inspected by an engineer, who found that while wind played a role in the structure damage, the majority of the damage was caused by a storm surge and flooding.\u00a0 Continuing from Mr. Bennett\u2019s post:<\/p>\n On February 25, 2013, the insurer sent a letter to the policyholders reciting as follows:<\/p>\n We are pleased to inform you damages resulting from wind are covered under your Property Insurance Policy.\u00a0 Our inspection revealed damages to your property.\u00a0 We enclose our estimate of repair which totals $___.\u00a0 After the recoverable depreciation in the amount of $___ and your wind deductible of $___ has been applied, this renders a net claim of $___.\u00a0 Under separate cover a check of $___ will be forwarded to the policy address.<\/p>\n The letter also informed the insureds that any damage by flooding was \u201cexpressly excluded,\u201d however, and it concluded by noting that the carrier \u201creserves the right to amend, alter or supplement this letter should information become known in the future that would affect the content of this letter.\u201d<\/p>\n There was apparently little additional adjustment activity thereafter, and the policyholders eventually filed suit on August 21, 2014.\u00a0 The insurer responded by filing a motion for summary judgment because the contract of insurance required that suit be brought within one year of the loss.\u00a0 Under New Jersey case law, this one-year statute of limitations is tolled from the date of notice until the date when the carrier \u201cformally denies coverage,\u201d but the insureds\u2019 lawsuit was filed 19 months after the February 25th letter.<\/p>\n The issue before Judge Robert Kugler was whether the carrier\u2019s letter was an unambiguous formal denial that ended the tolling period.\u00a0 On July 17th, he announced that it was not and denied the motion.<\/p>\n First, the court noted that the letter began by informing the policyholders that the contract of insurance covered wind damage.<\/p>\n Dollar amounts of the estimates of the total damages Plaintiffs would receive were left blank but the letter did state that Defendant\u2019s inspection revealed wind damage to Plaintiffs\u2019 property.\u00a0 Based on a reasonable reading of the language, it would appear that Plaintiffs were to receive some money for the wind damage to their property.\u00a0 From Defendant\u2019s perspective, this paragraph is at best ambiguous and is at worst an agreement to pay Plaintiffs\u2019 wind damage claim.\u00a0 In other words, the Court cannot find that there was unequivocal \u201cdenial language\u201d in the February 25 letter with regard to any wind damage covered under Plaintiffs\u2019 policy.<\/p>\n In addition, the court looked at the fact that the carrier had reserved the right to amend or supplement its position if new information warranted such a step.\u00a0 As Judge Kugler explained, the insureds \u201cmight reasonably wonder why new information could become relevant in the future if the denial was final\u201d on December 25th.\u00a0 The court found that this was further evidence that the letter was ambiguous in nature.<\/p>\n Lessons to be learned are many, here are a few: one, avoid the use of the form letter without modifying it to meet the needs of that particular claim.\u00a0 Two, denying part of the claim while clearly stating that there is covered damage without specifically identifying what is covered, that activities are going to occur to determine that level of coverage and then to pay out for that damage.\u00a0 Lastly, the opened ended concluding paragraph needs to be changed and use of more conclusive language should be used.\u00a0 Examples could include a quote from the policy expressing any limitations, that the insurer reserves its rights pursuant to any terms and conditions of the policy, and an invitation to the insured to submit any further data or information believed to have an impact on the decision.<\/p>\n","protected":false},"excerpt":{"rendered":"