Brokers working with clients affected by Hurricane Lala may need to navigate several potentially responsive policies as wind, flood, water intrusion and ground movement combine within the same loss.
The warning comes as Hawaii moves deeper into damage assessment and recovery. Lala strengthened into a Category 1 hurricane on Saturday before passing just south of the Big Island without making landfall and weakening to a tropical storm on Sunday.
By Monday, more than 100 homes had been reported damaged or swept away, while severe flooding damaged roads and bridges and isolated some communities on the southern Big Island. More than 111,000 utility customers remained without power on Monday, according to Reuters, with Hawaiian Electric reporting major infrastructure damage in remote parts of Hawaii Island and Maui. Helicopters and drones were being used to assess areas that crews could not easily reach.
All tropical storm warnings and flood watches have now been cancelled, although statewide brown-water advisories remained in effect because of storm runoff. Hawaiʻi County also kept non-emergency county operations and public schools closed on Tuesday as recovery work continued.
The overlapping causes of damage could make early policy identification, insurer notification and claims documentation particularly important, according to Richard Folkman (pictured), vice president of CAT operations and flood and carrier practice leader at Crawford & Company.
In some cases, the same property could sustain damage that falls across separate policies, endorsements or exclusions. Commercial insureds may face an additional layer of complexity where property damage also triggers business interruption, equipment breakdown or utility interruption claims.
“The biggest challenge is separating the different causes of damage,” Folkman told Insurance Business. “In a multi-peril event, you may have wind, rain, flood, debris movement and ground movement affecting the same property within hours of each other.
“So, the adjuster's first responsibility is to document what happened and understand what damage occurred, when it occurred and how it occurred, rather than immediately assigning a particular cause.”
Adjusters need to examine water lines, debris patterns, roof and exterior damage, structural movement and the surrounding terrain, as well as accounts from property owners. Access may also slow claims handling where flooded roads, damaged bridges, landslides, fallen trees or power outages prevent adjusters and contractors from reaching affected locations.
A central challenge will be identifying every part of a client's insurance program that could potentially respond rather than treating the loss as one straightforward hurricane claim.
A single property could potentially have wind damage handled by one policy, flood damage under another, and ground movement that requires a completely different coverage analysis, said Folkman.
“Commercial properties can become even more complicated because you may have business interruption, equipment breakdown, utility interruption or other coverages involved,” he pointed out.
“That's why it's important not to look at the property as simply a hurricane claim. The hurricane is the event, but there are several different causes of loss within that event, and the applicable coverage depends on the actual property damage.”
Folkman expects some of the most significant questions following Lala to center on flood versus wind-driven rain and water intrusion, as well as the distinction between mudflow and landslide or earth movement. Those differences can be difficult to determine from the damage alone.
“Water entering through an opening created by wind is a very different factual scenario from rising surface water entering the same building,” Folkman said. “The resulting interior damage may look similar, but how the water entered the building can be very important.”
Similarly, the presence of mud does not necessarily establish what caused the loss. “Something looking like mud doesn't automatically tell you what caused the loss or how the policy is going to treat it,” he said. “Adjusters need to document whether the material was being carried by the flow of water or whether earth or a hillside actually fell and moved.”
The order in which different types of damage occurred may also become a major factor in determining how claims are evaluated.
Did the wind damage the roof first and allow the rain into the building? Did the floodwater enter independently? Did erosion undermine the foundation before the structure moved? Did saturated soil fail and cause a landslide? Folkman says the sequence can “help establish the cause of damage and determine which portions of the loss may be evaluated under different policies or coverage provisions.”
This also makes evidence gathered immediately after the catastrophe especially valuable.
Photographs, videos, visible water lines, weather information, eyewitness accounts and even pre-storm images can all help adjusters reconstruct the sequence of events.
Folkman also noted that Hawaii presents an additional complication because areas affected by the 2023 wildfires may now be more exposed to runoff, erosion and debris movement during heavy rainfall.
Where multiple causes of loss are possible, brokers can help ensure that the correct policies and endorsements are considered from the outset.
“After a multi-peril catastrophe, the client may be dealing with several potential causes of loss and may not know which policies could potentially respond. A broker can help the client identify the policies and endorsements that should be reviewed, understand the notice requirements, and make sure potentially applicable insurers are notified promptly,” said Folkman.
He also cautioned against insureds attempting to determine coverage themselves before notifying the relevant parties: “If there's uncertainty about which policy might respond, getting the appropriate parties involved early allows the facts and the policy language to drive that determination.”
His final advice is straightforward: preserve evidence before cleanup begins.
“Documentation is probably the most important thing I'd emphasize,” Folkman said. “Take photographs and video before damaged materials are removed, whenever it's safe to do so. Document the water lines. How high are they? Hold a tape measure up so you can see the whole tape measure. Document debris, damage to the exterior and surrounding properties.”
