As hazard insurance is closely associated with natural disasters, is it helpful to first discuss what natural disasters actually are. A natural disaster is an event that causes property damage because of natural causes that are beyond a person’s control. Such events generally involve extreme conditions, such as abnormal weather patterns or earthquakes.
Because natural disasters are unpredictable and difficult to measure, it can be difficult to recover losses for property damage, even with sufficient insurance. Natural disasters are also referred to as “Acts of God”.
Some examples of the events and occurrences that are generally considered to be natural disasters in most insurance policies include, but may not be limited to:
- Severe storms;
- Earthquakes;
- Lightning strikes;
- Tornados and hurricanes; and
- Floods.
Depending on the coverage provided by your specific insurance policy, you may be able to recover losses associated with the following aspects of property:
- Walls and Insulation: Specifically, damage to walls caused by winds or earthquakes may be covered;
- Power and Electricity: It may be possible to recover costs associated with electrical repairs;
- Carpets: This could include damage associated with floods and other water-related events;
- Asbestos: In terms of natural disasters, these may agitate existing asbestos in ceilings and walls. You may be able to recover costs that are associated with asbestos removal measures;
- Mold Damage: Because mold frequently results from many natural disasters, you may be able to recover expenses associated with mold removal treatments; and
- Additional Expenses: If the natural disaster required you to move out of your home, you may be able to recover temporary housing expenses, such as hotel lodging.
To reiterate, the extent of damages that you can recover will depend largely on the type of agreement you have with your insurance provider. Many policies do not cover all of the damages and costs that are listed above.
What Is Hazard Insurance? What Does Hazard Insurance Cover?
Hazard insurance can protect your home in the case of certain events, such as natural disasters. However, it is not always included in a regular homeowners insurance policy. While homeowners policies do generally cover events such as fire or theft, you may need to purchase a separate policy in order to protect your investment during hazards such as earthquakes, floods, hurricanes, and other severe events. Payment terms and rates will vary depending on the individual company you purchase from, as well as your individual insurance needs.
It is imperative to note that it is highly likely that your regular homeowners policy will not cover events that are common in your area. An example of this would be how if the area where you live is known for a high occurrence of earthquakes or hurricanes, earthquakes and hurricanes will likely be excluded from your homeowners policy. This is due to the cost of such coverage to the insurance company. As such, you should consider purchasing additional hazard insurance in order to protect yourself and your home.
Generally speaking, if you have a mortgage on your home and do live in a high-occurrence area, you will be required to purchase hazard insurance as a condition of your mortgage lender. Additionally, you should always ensure that you know what exactly is covered by your insurance policies.
Some examples of categories of hazards that will likely necessitate a separate hazard insurance policy include, but may not be limited to:
- Floods;
- Fires, especially wildfires;
- Earthquakes;
- Storms, such as tornadoes and hurricanes;
- Landslides and erosion; and/or
- Sinkholes.
Some hazard insurance policies may cover a variety of different hazard risks, depending on the region. Alternatively, some types of policies only cover very specific types of damage. An example of this would be how flood insurance could provide limited coverage for underground structures.
What Are Some Common Legal Disputes Associated With Hazard Insurance?
Many of the legal disputes that are associated with hazard insurance are similar to those associated with a breach of contract. Specifically in terms of an insurance contract, disputes can arise when the insured party attempts to make a claim, and the insurance company responds by disputing the validity of the claim for whatever reason.
Hazard insurance contracts are even more specific, due to the fact that they are tailored very specifically to the needs of the insured. This would be in opposition to the more standard clauses that can be found in a standard homeowners policy.
Some common examples of legal disputes that are frequently associated with hazard insurance include:
- Discrimination, specifically in terms of denying or withholding coverage based on the applicant’s age, race, sex, or nationality;
- Attempting to claim incidents that are outside of normal hazard insurance coverage;
- Attempting to claim damage that is caused by the homeowner’s own negligence;
- Fraud and/or misrepresentation by either party involved; and/or
- Breach of an insurance contract term, such as defaulting on a monthly payment.
Legal consequences for a violation or dispute generally involve some sort of economic damages award, similar to other breach of contract disputes. This award intends to compensate the non-violating party for any financial losses they experienced, which were directly caused by the breach. More severe remedies may include a loss of operating license, or a fine if an insurance agent violates industry standards.
What Is A Bad Faith Insurance Lawsuit?
Generally speaking, you cannot sue your insurance company simply because they do not cover losses that were caused by natural disasters. As with any contract, parties enter into insurance policies with full understanding of the coverage terms. Additionally, they must consent to these terms in the policy agreement, which indicates that they both understand and agree to uphold those terms.
However, it may be possible to sue your insurance company through a “bad faith” lawsuit. A policyholder pays premiums to the insurance policy, and when it is time to pay on claims, the insurance policy may deny these claims without a good reason to do so. When this occurs, the policyholder may have a legal claim against the insurance company.
Every insurance contract or policy has an implied covenant to act in good faith. What this means is that it will act in a reasonable and prudent manner toward your claims. When you file a legitimate insurance claim, they must make reasonable efforts to compensate you. This duty is known as the “Covenant of Good Faith and Fair Dealing.”
An insurance company can only deny an insurance claim if they have made a fair and reasonably thorough investigation which showed that your claim was not actually covered by the insurance policy.
If your insurance company has denied a claim without properly investigating it, or if they otherwise acted unreasonably, they have acted in bad faith.
Some examples of acting in bad faith include, but may not be limited to:
- Denying a claim without giving a reason as to why;
- Failing to conduct a reasonably thorough investigation of your claim; and
- Offering you less money than they know the claim to be worth.
If you can prove that your insurance company acted in bad faith when processing your natural disaster claim, you may be able to recover the amount that should have been paid to you in the claim. You may also be able to recover attorney’s fees and court costs.
Do I Need An Attorney For Help With Hazard Insurance Disputes?
If you believe your hazard insurance provider is acting in bad faith, or if you are experiencing some other dispute, you should consult with an experienced and local insurance lawyer. An attorney can help you understand your rights and legal options according to your state’s specific insurance laws, and will also be able to represent you in court, as needed.
