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Claims Against Insurance Companies
and Utilities after Hurricane Sandy
Four weeks after Hurricane Sandy, most New Yorkers are resuming their routines at work, school and home.
For tens of thousands, however, getting back to a normal way of life may take months, if not years. Severe property damage and long delays in power restoration make this disaster even worse for those affected. Many businesses cannot reopen or have large profit losses. In this article, we discuss important steps that affected property owners, renters, and entrepreneurs may take to restore their homes and businesses.
First, we highlight insurance benefits and federal programs that are the traditional sources of compensation for rebuilding, replacement of property, and business interruption.
Second, many have asked our attorneys whether lawsuits may be brought in the event that insurance and federal programs do not provide enough compensation. What happens when an insurance company rejects your Sandy claim? May a policy holder take the insurance company to court? Are utilities responsible for your damages, and, if so, may they be sued? There are at least two kinds of lawsuits that may be brought for additional compensation, and these are described below.
1. Insurance and Federal Programs
The first step in securing compensation is to contact insurance carriers and the federal government. If they have not done so already, home owners and businesses should file claims immediately with their property insurance company and, if they purchased coverage, with the flood insurance program.
Federal law requires that an itemization of flood damages be presented to the flood insurance program within sixty days of loss. Renters, too, should contact their rental insurance carriers as soon as possible with claims for loss of personal property. The Federal Emergency Management Agency ("FEMA") issues grants of up to $31,900.00 to owners and renters without insurance or with too little insurance. For those with insurance, any assistance provided by FEMA is treated as an advance and must be repaid to FEMA by the policy holder when payment is made on an insurance claim.
Once enrolled with FEMA, owners, renters and business owners are eligible for Small Business Administration ("SBA") loans. SBA low interest loans are issued in amounts up to: $40,000 for personal property; $200,000 for primary residences; and up to $2 million for business losses not covered by insurance. These payments will be in addition to any benefit received from the up to $30 Billion in federal money that Governor Cuomo requested for Sandy-related reconstruction. The United States issued a similar grant to Louisiana in the aftermath of Hurricane Katrina, creating the "Road Home" program to provide additional funding for rebuilding.
2. Claims Against Your Insurance Carrier
Most homeowners carry property insurance. If you have a mortgage, your bank probably required you to purchase it.
Businesses, too, carry this important insurance, as well as a second type known as "business interruption" coverage, to protect against lost profits.
Not surprisingly, given the expense, insurance carriers are often unwilling to pay damage claims resulting from flooding, and may "disclaim" any obligation to cover the losses. Flood damage is excluded in many insurance policies, and is covered by separate flood insurance policies. Thus, not everyone carries flood insurance, and homeowners may find themselves without any coverage.
Fortunately, in what are known as insurance coverage lawsuits, there may be arguments against flood damage disclaimers. A skilled attorney, working with experts in the fields of weather, engineering and construction, may persuade your insurance carrier to cover your claim.
For example, if, at trial, damage is demonstrated to result from wind, water from a backing sewer system, or even water leaking through a roof destroyed by wind, the damage is not the result of a flood. For this reason, an insurance company would have to cover such damage even though the policy it issued to a homeowner does not cover floods. Lawsuits against insurance carriers resulting from hurricane-related disclaimers are complicated, and may take years to conclude. In 2012, affected policy holders continued to settle insurance disputes arising from Hurricane Katrina's 2005 landfall.
Time Limitations to Bring a Claim
Against Your Insurance Carrier
The time limits to sue an insurance carrier for its failure to pay a claim will depend on the language of your insurance policy. By purchasing insurance, you may have agreed to reduce the time limits to sue the carrier from six-years, under New York law, to as little as one year. There may be additional requirements you need to satisfy before filing your lawsuit, too, or risk having your case dismissed.
Consulting with an Attorney
In the unfortunate event that your home insurance company does not pay your Sandy claim, you should consult with an attorney, immediately. It is very important that you provide a copy of your insurance policy so that the attorney may determine the strengths of your potential case and the time limitations to file a lawsuit. You should also be prepared to describe your property damage in detail, and review the funding you received from the federal government. The federal government may be entitled to share in any insurance settlement you receive.
3. Claims Against Power Utilities
A great deal of publicity surrounds the responses of the Long Island Power Authority ("LIPA") and other utilities to Hurricane Sandy. In June of this year, New York State issued a written report criticizing LIPA's preparation for 2011's Hurricane Irene. Among other deficiencies, including a lack of organization, the State found that LIPA communicated poorly with customers as to timetables for restoration of service, used outdated computer equipment, and failed to clear trees and brush from utility poles. It is widely believed that LIPA did not act on the State's findings and remained just as ill-prepared to deal with Hurricane Sandy. Was LIPA negligent, and do LIPA's shortcomings give rise to a successful lawsuit? Who exactly can sue LIPA?
A. Negligence and Gross Negligence
LIPA will, no doubt, argue that it cannot be held responsible for its acts of negligence. When New York utilities seek to increase rates for customers, they must obtain approval from New York's Public Service Commission ("PSC"). The PSC controls rate increases. In exchange for their charging a rate lower than desired, the utilities are issued limitations of liability by the PSC, and these limitations may protect the utilities from lawsuits arising from power outages.
An example of such a limitation of liability for power outages issued by the PSC reads as follows:
The Company will endeavor at all times to provide a regular and uninterrupted supply of service (except where the terms and conditions of a particular Service Classification provide otherwise) but should it interrupt the supply of service for the purpose of making repairs or improvements in any part of the system, or in case the supply of service shall be interrupted or irregular or defective or shall fail from causes beyond the Company's control or because of the ordinary negligence of the Company, its employees, servants or agents, the Company will not be liable for damages, direct or consequential, resulting from such interruption or failure of service.
With such a limitation of liability, a utility is not responsible for ordinary negligence. As a matter of public policy, a utility cannot escape all liability, and will be responsible in the event it was "grossly negligent" in bringing about a power outage. In New York State, "gross negligence" is defined as follows:
"Gross negligence means a failure to use even slight care or conduct that is so careless as to show completed disregard for the rights and safety of others" PJ 2:10A
Both the Attorney General and the Governor's office are investigating LIPA's conduct and preparations for Sandy. We expect, too, that a full exploration of LIPA's actions will take place in the court system, and that a judge or jury will have final say as to whether LIPA was grossly negligent in dealing with Hurricane Sandy.
B. Your Potential LIPA Claim
If you are interested in filing a claim against LIPA in connection with the power outage, please consider the following.
Direct customers, those holding accounts with the utility, may sue LIPA. Although family members, employees or even friends of LIPA account holders may have suffered during the outage, New York law restricts the liability of a utility to its customers. If you are not an account holder, you will not be able to file a LIPA lawsuit. Time Limitations to
Bring a Claim Against LIPA.
The time limitations to sue LIPA for gross negligence are very short. LIPA is subject to New York State's Public Authorities Law[1]. Any lawsuit against LIPA based upon its conduct in bringing about the power outage first requires serving a Notice of Claim within 90 days. The Notice of Claim is prepared by an attorney, and states the facts and circumstances of the account holder's claim, and includes a demand for money damages. Having filed the Notice of Claim, an account holder must start a lawsuit within one (1) year and ninety (90) days of the "accrual date". Under certain limited circumstances, New York Courts may grant permission to serve a late Notice of Claim provided the application is made within 1 year and 90 days of the "accrual date."
Consulting with an Attorney
If you suffered hardship, additional expenses, and other damages as a result of the power outage, and are interested in suing LIPA, you are urged to consult with an attorney at once.
You will need to demonstrate that you are an account holder, and be prepared to discuss how exactly the power outage caused losses separate and apart from the damages directly caused by the winds and rain of Hurricane Sandy. An attorney will also want to understand how much funding you will receive from insurance and the federal government.
Conclusion
Hurricane Sandy was a terrible event, and we hope that you, the reader, are not affected in any lasting way. For those still in need, to be sure that you are not overlooking any assistance for you and your family, you should contact an attorney familiar with insurance and utilities law.
[1] The Public Authorities Law, under which the defendant Long Island Power Authority (hereinafter LIPA) was formed, incorporates the provisions of General Municipal Law § 50-e with respect to actions brought against a public authority (see, Public Authorities Law § 1020-y[3] ). General Municipal Law § 50-e requires, as a condition precedent to a lawsuit against a municipal corporation, timely service of a notice of claim on the municipal corporation). It is undisputed that the plaintiffs failed to serve a notice of claim on LIPA. Benzinger v. Town of Brookhaven 735 N.Y.S.2d 39, 395 (2nd Dept., 2001)
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