Hurricane Sandy: What To Do If Insurance Claim Is Rejected

Hurricane Sandy insurance claims
Hurricane Sandy insurance claims

By Mandi Woodruff

Hurricane Sandy is expected to cost a staggering $50 billion, with as many as 200,000 claims for wind damage and 20,000 claims for flood damage filed by consumers.

The sooner those claims are filed the better, but that doesn't necessarily mean everyone will get what they ask for.

One of the concerns, as pointed out by the Consumer Federation of America, is that there may not be enough money in the pot to cover everyone:

Payments by private insurers for wind damage to homes and business properties from Hurricane Sandy will likely exceed $10 billion dollars. Flood claims paid by the National Flood Insurance Program (NFIP) will be at least $8 billion dollars and will likely exceed $10 billion, exhausting the NFIP's existing $4 billion in payment authority. To make up this shortage, FEMA is authorized to borrow up to $500,000 with an additional $1 billion available with Presidential approval.

"Even combined, these borrowings will be insufficient to pay all flood claims related to Hurricane Sandy," said J. Robert Hunter, director of Insurance for the CFA.

Whether it's due to fund shortages or not, the reality is that a lot of people will either see their claims flat out denied, or get checks for far less than they'd hoped for.

If that's the case, then your next step will be simple: Ask why. Either your insurer will be able to point out exactly which language in your policy backs up their conclusion, or you might wind up finding something they missed. This is crucial for one reason alone, says the CFA:

"Once the insurance company tells you the reasons for its action, it cannot produce new reasons for denying payment or making a low offer at a later time. You have locked them in -- a major advantage for the consumer."

All sorts of things can go wrong with claims. You might not realize that you've agreed to pay a deductible, which could account for a missing chunk out of your claim (remember that in some states, insurers have been ordered to drop deductibles for hurricane coverage since Sandy was downgraded to a tropical storm).

Your insurer also might have slipped in new or ambiguous policy limitations that you weren't aware of, which could be cause to call in help from an attorney.

Whatever the case, if you find reason to fight your reward, here are some simple steps from the CFA on what to do next:

Complain to senior staff in the insurance company. Use the records you have kept since the claim process began. The more serious the insurance company sees that you are in documenting how you were treated, the more likely they will make a more reasonable offer.

Complain to your state insurance department. All states will at least seek a response to your complaint from your company. A few states may actually intervene on your behalf with the insurance company in clear cases of bad claims handling. It is important to dispassionately present your side of the story, using the notes you have been taking.

See a lawyer. Remember, the notes you took are vital. In addition to an award covering your claim, if your treatment was particularly bad, the courts in many states will allow additional compensation when the insurance company acted in "bad faith."

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