Wind, Surge, and Two Deductibles in Kihei
A beachfront rental in Kihei, Maui. Hurricane-force winds from a named storm peel back roughly 40 percent of the roof; rain enters and damages ceilings and interior finishes ($22,000). Later that same night, storm surge pushes about 18 inches of seawater through the ground floor, ruining flooring, cabinetry, and the lanai ($60,000). The HO-3 shows Coverage A of $800,000, a $2,000 all-perils deductible, a 5 percent hurricane deductible, and no flood coverage. The insured carries a separate NFIP policy with a $250,000 building limit and a $5,000 deductible. The insured's handyman began tearing out saturated drywall before you arrived and has already discarded the ruined flooring. Wind damage to the roof itself is estimated at $28,000.
1. Allocate the loss between the two policies and state the deductible that applies to each component.
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Wind and rain-driven interior damage - HO-3. The $28,000 roof loss and the $22,000 interior loss both flow from wind. Rain entering through a roof opening created by wind is treated as part of the wind loss, not as a separate flood event. Both items are hurricane-caused, so the 5 percent hurricane deductible applies once to the aggregate hurricane loss as a single occurrence - not once per item and not alongside the $2,000 AOP deductible. The deductible is 5 percent of $800,000 Coverage A, or $40,000. Provisional HO-3 payment: $50,000 less $40,000 = $10,000, before any Coverage A limits or ordinance issues.
Storm surge - NFIP. Rising seawater is flood, which the HO-3 excludes outright, and no flood coverage exists under that policy. The $60,000 surge loss belongs to the NFIP policy, subject to its $250,000 building limit and $5,000 deductible, and requires a timely proof of loss.
Allocation risk. The insured will want both policies to pay the same items. Obtain certified meteorological data and, if the physical evidence is ambiguous about whether water entered from above or below, an engineering report. Document the water-line evidence (salinity, tide-line marks) before the handyman removes any more material.
2. What is the significance of the discarded flooring and the handyman's demolition, and how do you handle it?
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Problem. The policy imposes post-loss duties to protect the property from further damage and to exhibit the damaged property for inspection. The insured did the first and defeated the second. Without the flooring, cause and scope cannot be verified: you cannot tell whether that material was wet from rain entry or from surge, which drives whether the HO-3 or the NFIP pays for it, nor can you establish pre-loss condition and age for valuation.
Handling. Do not treat the spoliation as an automatic coverage bar. Establish cause through substitute evidence: photographs, the handyman's written statement and invoices, water-line marks, salinity testing, moisture readings in unaffected assemblies, neighbor accounts, and met data. Document in the file exactly what was removed, when, and by whom, and note the resulting evidentiary gap so a later dispute over the allocation is preserved.
Also. Issue a written instruction now that no further demolition occur without notice, and confirm the NFIP adjuster has an opportunity to inspect before anything else is removed. Advise the insured in writing of the mitigation duty going forward and of the NFIP proof-of-loss deadline.