NEW YORK, Aug 31 (Reuters) - As the water recedes from
Hurricane Irene, lawyers are expecting disputes over coverage
to pour in.
The biggest fights will stem from arguments over property
damage and whether it resulted from wind or water -- like
Hurricane Katrina six years ago -- legal experts said. Disputes over the extent of coverage and the reimbursement amounts also
are expected as property owners deal with soggy basements,
shattered windows and tree-beaten roofs.
Battles over who pays for what will start funneling into
state courts, federal courts and arbitration forums in the
coming months, said attorneys and scholars. But the first step
in the process will be for policyholders to make a claim.
"A flood of claims may lead to a river of litigation," said Tom
Baker, a professor at University of Pennsylvania Law School who
teaches courses on insurance law.
Homeowners insurance policies usually cover wind damage,
but they do not cover flood damage. And while homeowners in
flood-prone areas usually are required by mortgage providers to
buy separate policies issued through the National Flood
Insurance Program, property owners in other areas -- including
those in upstate New York, Connecticut and Vermont -- often
don't have flood insurance. Insurance companies historically
have not provided flood insurance because of widespread and
costly destruction created by floods.
Insurance policies can be hyper-detailed and insurance laws
vary state-to-state, so it's difficult to predict exactly when
any litigation will begin. But most cases are bound to be very
fact-specific, with coverage hinging on experts and
eyewitnesses, said Wayne Lee. He is a partner New Orleans-based
Stone Pigman Walther Wittmann and represented insurers
defending class actions after Hurricane Katrina. One issue
"extensively litigated," he said, was whether wind-driven
flooding-including storm surges -- was covered by flood
insurance. Generally speaking, it wasn't. "Courts, at least in
Louisiana, said a flood is a flood," Lee said. More difficult
questions, he said, arise when a home has been completely swept
away. Determining the cause of the destruction is tough when
nothing is left.
Another factor that will affect the volume of litigation is
whether individual jurisdictions allow policyholders to recover
attorney's fees, said Amy Bach, executive director of United
Policyholders, an insurance consumer advocacy group. Parameters
vary widely, however, based on factors such as the dollar
amount of claims. New York, Vermont and North Carolina, for
example, usually allow attorneys to recover costs and fees, but
the standards for recovery are different in each state.
"If I can't recover my attorney's fees, I'm probably not
going to bring the case," Bach said.
Individuals with separate policies for homeowners insurance
and flood insurance could find themselves in both state and
federal court, Lee said. Federal courts have exclusive
jurisdiction over disputes arising from coverage under the
national flood insurance program. A fight over a claim made
against an insurer based in the same state as the policyholder
could end up in state court.
It's also conceivable that states could consolidate
lawsuits with a particular judge or establish arbitration
forums, Baker said, although it is too soon to know.
What differentiates Irene from other hurricanes is that she
struck densely-populated regions of the upper East Coast, said
Michael Troisi, a partner at Rivkin Radler in Uniondale, N.Y.
His practice focuses on insurance defense. With more claims
being made, more disputes will arise, he said. He also said
that residents had a lot of preparation time, which may have
Disputes over claims are by far the exception, said Baker.
"Insurance companies have their reputations to consider," he
said. Even so, the lawsuits are coming. And when they'll be
resolved? "It could be years," he said.
(Reporting by Leigh Jones)
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