Ask Regina: Central Texas Flooding

Q. For our insureds who have flooded autos, is there any loss-of-use coverage under reginacomprehensive coverage on their PAP?

A. The PAP provides Transportation Expenses, but the Texas TDI PAP only applies to a total theft of the covered auto. You would need endorsement 523 (Rental Coverage).

The ISO PAP provides temporary transportation expenses not exceeding $20 per day up to a maximum of $600 in the event of a loss to your covered auto for collision and other than collision losses if you have those coverages on your vehicle. There is a waiting period of  48 hours after a theft and for other than theft expenses beginning when the auto is withdrawn from use for more than 24 hours. Endorsement PP 03 02 (Optional Limits Transportation Expenses Coverage) is available for an additional premium to provide a higher limit per day and maximum.

Q. If homes flood due to release of water from the opening of floodgates on Central Texas dams, does that change anything in regard to coverage on the homeowners policy?

A. No, that doesn’t change anything in the homeowners policy. The water exclusion in the homeowners policy applies to all of the following water damage:

Flood, surface water, waves, including tidal wave and tsunami, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind, including storm surge;

The exclusion applies regardless of whether the damage is caused by an act of nature or is otherwise caused.

The exclusion applies but is not limited to, escape, overflow or discharge, for any reason, of water or waterborne material from a dam, levee, seawall or any other boundary or containment system.

Q. How does the vacancy clause apply on a homeowner policy when our insured’s move out of their severely damaged home while repairs are being made?

A. IIAT’s InfoCentral has a report which can be found here. In addition, the Texas Department of Insurance issued a Commissioner’s Bulletin during Hurricane Harvey encouraging insurers to provide relief to policyholders including the suspension of any vacancy provision in the policy, to allow continuing insurance coverage, providing the policyholder has not moved permanently from their home.

Q. Will carriers be able to re-rate, cancel, non-renew, or refuse to provide coverage because our insured has damage due to the Central Texas flooding?

A. A bulletin was issued during Hurricane Harvey flooding which, in our opinion, would still apply to the current Central Texas flooding. Commissioner’s Bulletin B-0015-17  states that it is the opinion of the Texas Department of Insurance that it is inappropriate for insurers to re-rate, cancel, non-renew, or refuse to provide coverage due solely to a policyholder’s status as a victim or evacuee of Hurricane Harvey. Further, it is not reasonable to change a policyholder’s rating classifications or increase their insurance rates solely because they are a victim or evacuee of Hurricane Harvey.

In addition, for admitted carriers (not surplus lines) there are already statutes regarding non-renewal because of losses caused by natural causes and weather-related claims.  View a complete list of the statutory policy cancellation and non-renewal provisions.

Other related technical reports:

Q. Some of our insureds in Central Texas have not sustained damage to their building, but due to impassable roads, the insured cannot access their business to operate. Is there any potential business interruption coverage applicable such as via Civil Authority on their commercial property or flood policy?

A. The loss has to be a covered cause of loss under the insured’s commercial property policy and flood is not a covered cause of loss and authorities have to prohibit access not just because there isn’t access.

If property within one mile of the described premises is damaged by a covered cause of loss and the authorities prohibit access to the area, the insured is covered for the business income loss after a 72-hour waiting period even though the insured’s property is undamaged. Coverage applies for up to four weeks. The waiting period can be reduced or eliminated by attaching endorsement CP 15 56 or eliminated altogether by attaching endorsement CP 15 56 (Business Income Changes – Beginning of the Period of Restoration). Extra expense coverage under the Extension is not subject to the 72-hour waiting period. The four week period of coverage can be extended, and/or the one mile radius can be increased, by attaching endorsement CP 15 32 (Civil Authority Changes).

The General Property Form for the National Flood Insurance Program exclusion V. 4.  Excludes loss from interruption of business or production.

For this type of coverage Difference in Conditions policies cover flood and earthquake and often business interruption losses resulting from floods.

Q. Many of our insured’s are unable to return home at this time from the Central Texas flooding due to damage to neighboring premises and the local authorities are prohibiting access to certain neighborhoods. Will their homeowner policy provide coverage under civil authority for additional living expense?

A. No, the civil authority only applies as a result of direct damage to neighboring premises by an insured peril and flood is not a covered peril in the homeowner policy.

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