Hurricane Hindsight

Hurricane Hindsight

The Insurance View

By Kathy Danforth / Published February 2018

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       Contributor: Wayne Howell is with Herbie Wiles Insurance. For more information, call (800) 997-1961 or visit

The 2017 series of hurricanes created challenging new scenarios for Houston, Florida, Puerto Rico, and multiple points in between and beyond. From the Florida perspective, Wayne Howell with Herbie Wiles Insurance observes what has turned out to be a real eye-opener for many of those affected: “If you’re going to have a hurricane, it’s probably better to be the first state to have one. All of us here in Florida ran into a situation where we had a hurricane and flooding event after a similar event had occurred in Texas. Many of the independent adjusters from Alabama, Atlanta, and other areas, who would typically flock down here to help us out, were already in Houston helping folks there. That slowed down the process in many cases because we didn’t have people in the field to do the adjustment. That in turn delayed getting checks and repairs.

       “It has also worked that way for construction,” Howell notes. “A lot of contractors who travel were in Texas as well, and it was back to back with Matthew going through Georgia and the Carolinas in October 2016. It is better now, but there was such a backlog as a result that it has been slower than in the past all across the state.” In addition, the in-state competition for services was also high. “Irma came up the entire state, and every county had damage to some degree,” shares Howell.

       With so much damage, the law of supply and demand is ruling the cost of both workers and supplies. “Condominiums should get a property appraisal every three years, but some values are reflecting a higher replacement cost now than they would have two or three years ago. This is not simply due to inflation but also to the scarcity of contractors,” Howell explains. “Unfortunately, that’s a situation that has developed because of how widespread the storms were. An appraisal is a snapshot of the cost to rebuild a building based on costs for lumber, framing, etc., on that day. Right now, costs are higher. It may get to the point that values come down, depending on how frequent and damaging storms are. We need to have a few years without storms to rebuild and get caught back up.”

       Another variation in this storm’s aftermath is due to the type of damage. “This turned out to be more of a flood event than a windstorm event,” according to Howell. “Rising water is not covered under a property policy—you need a separate flood insurance policy, typically through the National Flood Insurance Program, though there is some private flood insurance available. If there is a claim that includes damage to the roof from the wind, and at the same time there is damage from rising water, that would involve two separate policies and two separate deductibles. We have seen a little bit of that, but predominantly with Irma we saw the effects of rising water rather than the wind.

       “Misconceptions about flood insurance are very common; I’ve been in the insurance business for 34 years, and each week I’ve heard someone say, ‘I don’t need flood insurance because I’m not in a flood zone.’” Howell responds, “The entire state of Florida is a flood zone. What they mean is that their property is not in a special flood hazard area. In a flood hazard area, flood insurance is required for a federally-backed loan. In order to purchase flood insurance in this area, the owner needs a certificate showing the difference in elevation between the first floor and the base flood elevation (BFE).

       “Flood insurance is available in those areas that don’t need an elevation certificate. The problem is that people in these areas often haven’t purchased flood insurance because they’re not required to by the bank,” Howell has witnessed. “I’ve heard statistics from the folks at FEMA that on average in Florida, depending on the storm, around one-third of the flood claims occur to properties that are not in a special flood hazard area. For example, this time water damage occurred in Jacksonville to properties that were not in the special flood hazard area, so many of the affected folks don’t have flood insurance because it was not required by the bank.”

       Howell advises, “I would encourage homeowners and association boards to at least get an insurance quote on flood insurance, so the board and owners are aware of what is available. Then they are making an informed decision based on their tolerance for accepting the risk and the cost of the policy. I know stories of properties where the loans have been paid off, and they allowed flood coverage to lapse. The most heartbreaking comments are from those who say, ‘We’ve been here 35 years, and we didn’t think it would flood because it never has.’”

      Many individuals and associations have found docks to be a slippery insurance issue with the damage from rising water from Irma. Howell explains, “You can have property insurance on a dock, which provides coverage if it is hit by a boat or catches on fire, but property insurance typically excludes the effects of flooding or wave action. A flood policy can be purchased for buildings or contents, but under the National Flood Policy, there are no modifications to the form, and you cannot add docks. For a dock to be covered against flooding or wave action, a separate maritime policy is required. However, that can be rather expensive. This applies to both homeowners with individual docks and associations with docks as common property.”

       The deductible will be driving association finances after a storm, and Howell notes that there can be misunderstandings as to how that is applied. “For hurricanes, the association deductible will be a percent based on the replacement cost of the building, not a percent of the damage caused. In some cases, the percent deductible can be based on the total insured value (TIV) of the complex.” Depending on the number of buildings, this could make a considerable difference. Howell stresses, “It is important that the board examine the policy or talk to their agent to ensure that they understand the deductible, and preferably that the deductible is based on an individual building’s value. Many associations do set up reserves for the deductibles. This is something that I would encourage all boards to review as the amount can be rather large.

       “Typically, the deductible is two to five percent of the value of a building, but in the past couple of years, several companies have begun offering a one percent deductible,” Howell reports. “That can make a dramatic difference, especially to a large condominium. I really recommend looking into whether that is available and the price, which will depend on the age of the building, location, and other factors.”

       After damage has occurred, there are multiple reasons to move quickly. “The insurance companies do want associations and individuals to take protective measures to prevent additional losses,” Howell comments. “Typically, insurance agencies are closed down until the storm passes, but you want to file a claim as soon as possible. We had an emergency response team—really, our entire staff—back in the office afterwards, with everyone from the mail room clerk to the president turned into a claims person. I think most agencies did the same thing, trying to get everyone’s claim filed.

       “There may be situations where you want to make improvements (for example, to upgrade a roof or windows), so a future claim would have reduced severity. That would have to be discussed with the adjuster,” according to Howell, “since insurance coverage is to restore the property to its original condition.”

       Besides avoiding living in a chaotic situation, prompt repairs can potentially help save money. “Getting a claim settled as soon as possible can help in shopping for next year,” Howell advises. “The other company will want to make sure there is no existing damage to the property and that it is fully repaired.

       “The goal of insurance agents is to make sure nobody is surprised,” says Howell. “Have your insurance agent come to a board meeting to answer questions. Invite the unit owners to come and ask questions so they understand the goal, the deductible, how the process works, and so on.” And, before memories of the latest events fade, convert this year’s hindsight into foresight for future events.