Monday, October 19, 2009

Insurance Commissioner warns companies not to use "governmental action" exclusion to deny claims related to the Howard Hanson Dam

In response to concerns raised by some insurance brokers, Washington state Insurance Commissioner Mike Kreidler is telling business insurers not to use a common policy exclusion for “governmental actions” to deny claims if water releases from the Howard Hanson Dam flood parts of the Green River Valley.

“I strongly urge all companies to refrain from taking such a position,” Kreidler said in a letter sent to about 200 business insurers.

In this case, he said, such language doesn’t apply.

Many insurers use standardized policy language from the Insurance Services Office. Such policies typically exclude “seizure or destruction of property by order of governmental authority.”

In the Green River Valley situation, the Army Corps of Engineers has said that it may have to release more water than usual from the Howard Hanson Dam, due to structural weaknesses discovered in the earthen dam. After heavy rains, the water released from the dam could cause flooding in the valley below the dam.

“I do not believe that a government order to release water to protect the dam constitutes the type of `destruction of property by order of governmental authority’” included in many insurers’ commercial flood policies, Kreidler said.

For one thing, he said, the key cause of such flooding would be the heavy rainfall. Also, the government would be ordering the release of more water, rather than ordering the “seizure or destruction” of particular property.

Some companies use different policy language. Kreidler is asking those companies to contact his office immediately to discuss the policy language and how it would be applied to this situation.

He’s also asking all companies to reassure customers about their coverage.

“People buy insurance to protect their families and businesses from exactly this kind of risk,” said Kreidler. “The people who live and work there need to know that their insurance companies stand behind them.”

IMPORTANT NOTE: There is no such exclusion in policies from the National Flood Insurance Program, which is the first stop for most homeowners and businesses seeking flood coverage. But since the NFIP covers a maximum of $500,000 for a building and $500,000 for contents, many businesses below the Howard Hanson Dam have been seeking additional coverage from private insurance companies.

Also, homeowners' policies typically do not include flood coverage. If you live in this area and do not have flood coverage, you should consider getting it immediately. Here's a link to the federal insurance program, with contact info.

Five things never to say to your insurer

Insure.com has put out an interesting list of "Five Things Never to Tell Your Insurer," saying that using certain red-flag phrases could hurt your chances of having a claim approved.

Among them: don't say your basement's "flooded" if the water's coming from, say, a leaking pipe. True floods -- e.g. water from a nearby river inundating your house -- are typically NOT covered by regular homeowner's coverage. A plumbing problem that fills your basement, however, typically is.

Interestingly, the article says that "whiplash" is another word to avoid, since "insurance companies often associate the term with exaggerated or fraudulent claims." Better to describe an injury in medical terms, Insure.com advises, or to wait until your doctor makes a diagnosis.

Consumer Reports poll on health insurance

In a phone survey of more than 1,000 randomly selected households, Consumer Reports found recently that more than one in four (28 percent) had lost or experienced cutbacks in their health coverage in the past year.

More than one half of those surveyed said they've faced difficult health care choices in the past year, such as not filling a costly prescription, putting off a doctor's visit due to cost, etc.

Here's a link to the results and methodology.