Named Storm, Two Deductibles, and a Flooded Garage
A coastal North Carolina home is insured on an HO-3 with $600,000 dwelling coverage, a 5% named-storm deductible, $300,000 liability, and additional living expense coverage for 24 months. The insured also has an NFIP flood policy with $250,000 building and $100,000 contents. A hurricane brings wind that tears off shingles and exposes the roof; rain enters and damages ceilings. Floodwater rises into the ground-floor garage, ruining a washer, dryer, freezer, and stored furniture. A neighbor's tree falls and destroys a fence; the insured pays $2,500 to remove the tree and $4,000 to replace the fence. The family evacuates for 45 days, spending $9,000 on hotels and $6,000 on meals. The insurer has issued a payment for the roof but applied the named-storm deductible and denied the garage contents.
1. Calculate and explain the named-storm deductible on the wind damage, and explain why the garage contents are treated differently.
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The named-storm deductible is 5% of the dwelling limit, or $30,000. It applies to the wind loss, not to the flood loss. If the covered wind damage to the roof and ceilings is, for example, $80,000, the HO-3 payment would be $80,000 minus the $30,000 deductible, or $50,000, subject to the policy's other terms. The insured should not apply the same deductible to the flood claim; the NFIP policy has its own deductible and its own building and contents limits.
The garage contents are a flood loss. The HO-3 excludes flood, so the homeowner carrier is correct to deny those items under the HO-3. The insured must look to the NFIP contents coverage. Whether the washer, dryer, freezer, and stored furniture are covered depends on the NFIP definitions and the contents limit. The garage itself may be a building item under the flood policy, and the contents must be documented with photographs, receipts, and a proof of loss. The agent should separate the wind claim from the flood claim and avoid letting one carrier's denial stand as a denial by the other.
2. Analyze the tree removal and fence replacement. What coverage applies, and what limits or conditions should be checked?
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The tree was felled by wind, a covered peril, and it damaged a fence that is likely a covered structure on the residence premises. The HO-3 should respond to the fence replacement, subject to the named-storm deductible and any special limits for fences or other structures. The insured should check whether the fence is covered as a structure on the residence premises and whether the policy has a separate limit for trees, shrubs, and other plants.
Tree removal is often subject to a specific debris removal limit. Many homeowner forms cover removal of trees that fall on covered property, but only up to a per-tree limit and an aggregate limit, such as $500 per tree and $1,000 total. If the $2,500 removal cost exceeds those limits, only the limited amount may be payable. The insured should also determine whether the tree came from the neighbor's property; if so, the neighbor's policy or the insured's policy may respond, depending on whose property the tree was on and whether negligence is alleged. The agent should submit the removal invoice, photographs, and a diagram showing where the tree stood and what it damaged.
3. Advise the insured on additional living expenses for the 45-day evacuation, including the treatment of hotel and meal costs.
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Additional living expense coverage applies when a covered peril makes the residence premises uninhabitable. The wind damage to the roof and ceilings is a covered peril, so the HO-3 may pay the necessary increase in living expenses while the home is being repaired. The flood damage is separate; if the home was uninhabitable because of flood, the HO-3 would not pay ALE for that cause. The adjuster should determine which peril made the home uninhabitable and allocate the evacuation period accordingly.
Hotel costs are generally payable if they are necessary and reasonable. Meal costs are usually covered only to the extent they exceed the family's normal food expenses; the insured should provide receipts and a normal-expense estimate. The 24-month ALE limit is a time limit, not a dollar guarantee, and the policy may have a percentage-of-dwelling cap. The insured should submit a written evacuation timeline, hotel receipts, meal receipts, and documentation of when the home became habitable. The agent should also check whether the flood policy provides any displacement or temporary housing benefit, and should coordinate the two claims so the insured does not recover twice for the same expense.