Your clients may still have coverage for earthquake damage

Earthquake damage is rarely covered under property insurance policies, but some circumstances mean clients could still seek redress.

Insurance News


Just one in nine California residents has earthquake insurance, leaving most reeling financially from the 6.0 magnitude earthquake that shook Napa, Calif. last week. But while most homeowners and commercial property policies don’t cover the catastrophic damage inflicted by earthquakes, attorney Mike Levine of Richmond, Va.-based Hunton & Williams LLP notes that some affected by the quake may have coverage from other policies.

“You can’t put everyone into the same basket following an earthquake. It really comes down to what each policyholder’s situation looks like,” said Levine, who has been practicing insurance coverage litigation and counseling since 1996. “Some properties may have suffered no direct earthquake damage, but did receive some kind of secondary damage from flooding, fire or anything else triggered by the earthquake.”

As such, insurance agents fielding calls about the quake should be careful to inquire about the extent of damage as well what caused it and in what order.

Some properties could be damaged by both the earthquake and fire, for example, leading an insurer to write off an entire loss as not covered when in fact commercial property or homeowners insurance should kick in to pay a portion of the damages.

In other situations, an insurer may need to send in an engineer to determine the cause and relations of events.

“If it’s a combination of both earthquake damage and fire, for example, it often takes a legitimate investigation to determine what caused the damage first: Did the property burn and then collapse, or did it collapse and then burn?” Levine said.

Similarly, other policies—such as third-party policies—may provide coverage for adjoining landowners or building tenants listed as additional insured.

“If the third party failed to properly maintain the building or keep open flames under control through negligence, a liability claim could be made independent from earthquake insurance,” Levine said.

He noted that given the number and scale of claims insurance companies receive following an event like the Napa earthquake, it is sometimes difficult for insurance professionals to offer more than “cursory advice” on a claims situation.

As such, independent agents—who are often among the first in receiving calls about damage—can play a vital role in acting as an intermediary between client and carrier.

“It all comes back to proper analysis,” Levine said.

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