Winter Storm Uri: Presenting, Adjusting, and Litigating Claims BY MARY-ELLEN KING
Mary-Ellen King is a partner in the Austin, office of Thompson, Coe, Cousins, and Irons L.L.P., where she is in the insurance coverage group and also practices business and commercial litigation. She is licensed and practices in the state courts of Texas, Louisiana, and Alabama and federal courts nationwide.
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n 2021, Winter Storm Uri resulted in state and federal disaster declarations for all 254 Texas counties. More than 4.5 million homes and business were left without power—some for days. There were more than 456,500 insurance claims, which resulted in more than $8.2 million in payouts. The bulk of the claims were from damage to residential properties. Many locations experienced their longest-ever continuous recorded freeze, according to catastrophe risk modeler AIR Worldwide, “with Waco as an example of one Texas city staying below freezing for 203 consecutive hours—53 more than the previous record. At the peak of the low temperatures, on February 15, the average temperature across Texas was just 12° Fahrenheit, or 6° lower than the average temperature in Alaska on the same day.”1 IS A FREEZE A COVERED LOSS? Generally speaking, a freeze is typically going to be a covered loss. However, this truism is not an absolute, and the insured should also refer to the policy 10
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declarations page and policy language of their insurance policy to determine if a loss is covered. Several coverage issues seen in the Winter Storm Uri claims include the following: (1) Failure to Mitigate: There were some delays outside the control of the insured, but once they could return and mitigate, they should have taken action to do so (e.g., shut off water at the loss location). (2) Pre-Existing Damage: The policy will not cover water damage that clearly existed prior to the freeze event. (3) Limitations on Coverage: Many policies have a monetary limit on mold damage and some policies do not provide Additional Living Expense (ALE) or business interruption coverage, or they have limitations. (4) Exclusion of Temperature Extremes: Some policy exclusions excluded coverage for extremes in temperature. Also, the policies typically only cover damage resulting from a covered loss, which means renovations and upgrades during the repair process will not be covered under the policy. The policy may also have occupancy requirements. In those policies, where the property was permanently vacated prior to the storm, vacancy provisions apply. The Texas Insurance Commissioner issued Commissioner Bulletin #B-0005-21 urging insurers to work with policyholders temporarily displaced by the storm. In commercial claims, business interruption without property damage is not going to be covered. A typical ISO (Insurance Services Office, Inc.) commercial policy form requires that the loss or damage be caused by or result from a covered loss (i.e., pipe burst and resulting water damage). The business interruption coverage is for the period of restoration. Additionally, some businesses may have partially shut down. In Texas, there is an argument that this may
Sunrise over Round Rock during Winter Storm Uri. Photo by Roschetzky Photography.
not be a compensable business interruption claim, because the law generally requires the business to cease all operations. PRESENTING CLAIMS AFTER THE STORM Every property insurance policy, whether commercial or residential, sets forth the insured’s duties in the event of a loss. The duties are typically found in the Conditions section of the policy and includes things like: 1. Give prompt notice of the loss; 2. Mitigate the damage; 3. Cooperate in the investigation of the claim; 4. Prepare an inventory of damaged personal property showing quantity, description, actual cash value and amount of loss. Attach all bills, receipts and related documents that justify the figures in the inventory; 5. Allow for inspections as often as the insurer reasonably requires, provide records and documents requested, and submit to an examination under oath; 6. Provide a proof of loss (details of what is required can be found in the policy); 7. Provide specifications of damaged buildings and estimates of repair; 8. Inventory of personal property; 9. Receipts for additional living expenses (in a commercial claim, this may include access to financial records in the
event of a business interruption loss resulting from a covered loss); 10. Evidence or affidavit that supports a claim. Gathering this information is often time consuming and emotionally difficult for insureds after a catastrophic loss, but it is required of them under the policy. Working early in the claim process to provide a comprehensive list of damages and replacement costs of damaged items will only expedite the insurer’s adjustment of the claim. It is also helpful to present as many photos before and after the loss as possible to aid in the adjustment of the claim. Under Texas Administrative Code Chapter 28, Section 5.9970(d) and (e), homeowners are entitled to have their home repaired by a person of their choice. Finding a contractor after Winter Storm Uri was complicated based on supply and demand, as well as supply chain delays as a result of COVID-19. These factors also result in increased costs of repair for the insured. ADJUSTING CLAIMS AFTER A MASS CATASTROPHE The insurer’s duties are set forth in the Texas Insurance Code. Insurers are required to evaluate the claim fairly and not deny or delay payment when liability is reasonably clear. Section 542.055 of the Texas Insurance Code provides that an insurer must do the following within
