In the wake of Hurricane Sandy, thousands of home and business owners in the Mid-Atlantic region are relying on prompt and fair payment of insurance claims to begin rebuilding. Unfortunately, insurance companies may delay payment and offer substantially less than what the policy may cover. The home or business owner is then faced with a dilemma of accepting the quick but lower offer or holding out.
Whether the claim is made under a standard homeowners insurance policy, a business loss policy, or a flood insurance policy will affect your rights to dispute a low offer. Be sure to read your policies carefully to be aware of the time limits in which you must file your claim as well as appeals or lawsuits if the claim is not resolved satisfactorily. In this blog, I’ll discuss state laws in Pennsylvania and New Jersey affecting homes and businesses damaged by Hurricane Sandy.
Home Owners and Business Loss Insurance:
Homeowners insurance and business loss insurance policies are contracts governed by state law. Homeowners insurance typically covers rain, wind, falling trees and other storm damage, but not damage from rising flood waters. Business loss also covers storm damage, except for floods, and can provide business interruption coverage as well.
The home or business owner must comply with the terms of the policy by giving timely notice of the loss to the insurer. Generally, policies also require a “proof of loss” to be submitted within sixty (60) days. Read your policy to see what is required for the “proof of loss.” The proof of loss may be supplied by a contractor or public adjuster on behalf of the policy holder. The insurance company adjuster will provide an estimate also, which may deny payment for items allegedly not covered or assign reduced amounts for covered items.
The insurance company should not withhold payment of a lower undisputed sum in an attempt to coerce a settlement of the overall claim. Don’t listen to adjusters who tell you you have to sign a release or agreement for the entire amount before you get any money. The insurer should promptly pay the amount not in dispute while efforts to resolve the amounts in dispute are ongoing. Failure to do so may enable the policy holder to sue the insurance company for “bad faith.”
Pennsylvania has a specific law providing a right to sue insurance companies for “bad faith.” The courts have defined “bad faith” as “any frivolous or unfounded refusal to pay the proceeds of a policy.” A violation of the law may result in an award of punitive damages and attorney fees against the insurer in addition to the unpaid insurance proceeds.
New Jersey does not have a legislative law prohibiting “bad faith,” but its courts have allowed lawsuits against insurance companies in such circumstances. However, New Jersey will not find “bad faith” if the amount in dispute is “fairly debatable.” New Jersey does not permit an award of punitive damages, “absent egregious circumstances,” or attorney fees.
In my next blog, I’ll discuss home and business owners’ rights with regard to flood insurance and dealing with FEMA after Hurricane Sandy.
Our Yardley, PA office will be happy to answer your questions regarding your homeowners or flood insurance coverage. Call (215) 493-8287 or email [email protected].