Insurance ExpertsOn September 29, Hurricane Matthew formed near the Windward Islands, hit Haiti and Cuba, and by October 8, had reached the Southeast U.S., where it hit the coasts of Florida, Georgia, and the Carolinas. See, e.g., The Weather Company, “Hurricane Matthew Recap: Destruction from the Caribbean to the United States,” weather.com, Oct. 10. 2016.  At least 17 people were killed in the United States, with the death toll in Haiti being over 300. See Amanda Wills et al., “Hurricane Matthew: Live Updates,” CNN, Oct. 19, 2016. In addition to fatalities, Hurricane Matthew damaged infrastructure and, according to President Obama, “left a lot of destruction in its wake.” Doug Criss et al., “Matthew no longer a hurricane, but still just as dangerous,” CNN, Oct. 9, 2016 (quoting President Obama). This article assesses the potential legal implications of the destruction caused by Hurricane Matthew and examines the role that various consultants including insurance experts will play in ensuing litigation.

Discussion:

The American Bar Association (ABA) has acknowledged that there are “various legal angles surrounding the Hurricane Matthew disaster in the United States.” ABA News, “ABA legal experts available to discuss issues related to Hurricane Matthews aftermath,” Oct. 7, 2016. The ABA has enumerated some of the “complex legal issues involved, such as flood insurance coverage and navigating Federal Emergency Management Agency (FEMA) assistance programs.” Id.

There are myriad legal issues that have arisen because of all the damage that Hurricane Matthew did to the basic infrastructure of the places it hit. The following list enumerates some of these issues.

(1). Private Insurance Claims: One of the most common types of legal claims that is made following a natural disaster involves insurance companies. Three types of insurance claims may arise: life insurance, health insurance, and property insurance concerns. All three of these claims may require attorneys and expert witnesses. Specifically, insurance experts will be required as consultants by both claimants and insurance companies. Actuaries are a type of expert that are often utilized in insurance-related disputes to assess and generate an appropriate figure for damages, particularly in cases where it would be otherwise difficult to do so. For example, while there can be no monetary value placed on a human life, actuaries and other insurance experts use rigorous calculations to attempt to compensate for the loss of life or for certain injuries. Another type of insurance expert that will be incredibly important is a property valuation and real estate expert. Such individuals can help to determine what a damaged property is (or should be) worth and what, if any of that damage an insurer may be liable for.

Insurance experts will be invaluable as both consulting and testifying experts: in their consultative capacity, they can advise attorneys how to best address particular insurance claims, and as testifying witnesses, they can help jurors to understand how responsibility should be assigned in a given case, whether there is adequate causation for a specific claim, and what damages, if any, should be awarded to a party.

(2). FEMA Claims: In many cases, an insurance policy will not cover so-called “acts of God,” such as flooding.  For example, a typical homeowner’s policy does not provide for coverage in the instance of flood damage. See, e.g., Thomas L. Young, “Hurricane Matthew Insurance Claims—Wind & Flood Damage—Business Interruption Losses,” 2016, (last visited Oct. 19, 2016). In such cases, individuals may be eligible to make claims with the Federal Emergency Management Agency (FEMA) and receive some monetary relief to help mitigate their property losses. See id, e.g..  In the event that a person wishes to file a claim with FEMA, thorough documentation is required for several matters. For example, for an individual to be eligible for FEMA assistance, “the specific cause of damage must relate to the incident for which the disaster was declared.” FEMA, “Public Assistance: FrequentlyAsked Questions,” Mar. 7, 2016 (last visited Oct. 19, 2016). In other words, FEMA requires proof of causation, just as a private insurer might, and it differentiates between damage caused by “a lack of maintenance” on a claimant’s part versus damage that was directly caused by flooding, for example. Id. In order to receive assistance, parties who apply for FEMA monies will frequently require the assistance of an attorney. More importantly, however, whether or not an attorney is consulted, experts will decidedly play a role in FEMA determinations.

Many of the same type of experts that are utilized in private insurance disputes will be of use in FEMA cases as well. An adjuster, who determines the value of lost items or property, will be needed to assess FEMA claims. Adjusters can be retained by both sides, and different adjusters may offer different opinions, as with any other type of expert. Experts on causation are critical in FEMA cases, as the determination of whether the damage claimed was due to a natural disaster or not is what FEMA uses in deciding whether to approve a claim. Actuaries and similar insurance experts may also be necessary in FEMA cases. Since FEMA limits its monetary relief to $33,000, both claimants and the government may avail themselves of such expert witnesses in order to determine what amount, if any, is due to a particular person. See Thomas L. Young, supra.

(2). Business Interruption: Natural disasters with a magnitude similar to Hurricane Matthew wreak havoc on nearly every component of an affected society, and businesses are no exception. Many companies, from small businesses to Fortune 500 corporations, experience financial losses because their day-to-day operations are interrupted or even stopped altogether due to the effects of a natural disaster. These economic losses can add up quickly and depending on the length and magnitude of the disaster, can run into extremely large amounts of money. Specifically, with respect to Hurricane Matthew, “In the coming days, we will begin to see assessments of the disasters impact on businesses from the Caribbean to the East Coast.” Eric Rosenthal, “Five Ways to Prepare for Business Interruption Insurance Claims in a Natural Disaster,” The National Law Review, Oct. 11, 2016.

Business interruptions occur in situations where a company’s own property is damaged, but they can also occur when hurricane damages affect the properties of that company’s suppliers and/or customers. See id. A business interruption policy is a type of insurance that generally covers the lost profits an entity experiences from a suspension of its operations. See id. Such insurance policies typically have specific requirements that a particular business must meet in order to make a valid claim. Moreover, “Business interruption losses often present tricky valuation and calculation issues.” Id. These issues can be further complicated by when they are analyzed, as it is easier to evaluate and assess the financial impact of a loss immediately after or even as the loss occurs. See id. Clearly, economic loss experts play a critical role in determining what amounts, if any, are owed to a corporate claimant under a business interruption policy. These experts are invaluable in two capacities: as consulting experts, they can advise both sides during and after a loss as to what valuations should be made and amounts paid out. However, due to the difficulty in assessing losses, a specific company’s view on the amount of losses it has versus the view of an insurer may greatly vary. In such instances, litigation may ensue, and business valuation experts, economic loss experts, and the like will be critical in offering testimony on the issues and helping a jury reach a verdict.

There are other complicating factors with respect to business interruption policies that may require expert witness evidence. For example, some policies may require a claimant to “expedite repairs, mitigate losses and/or track expenses in a way that is not consistent with [a company’s] normal business practice.” Id. In such cases, expert witnesses may hold the key to determining whether or not a particular business complied with its duties under a business interruption policy. Such experts will typically consist of business experts, who are knowledgeable about what customary business practices are as well as with how a company should best mitigate its losses. Accounting experts may also play a role in helping businesses track their expenses to ensure that such tracking meets with the policy requirements and the insurer’s satisfaction. Similarly, such experts may be the ones to assist insurers in determining what obligations a business has and what it must do before the insurer accepts a claim and makes payment.

In the event that a company’s suppliers or customers “suffer loss or damage as a result of the disaster,” there are additional factors to be taken into account by business interruption policies. Id. In the event that a policy provides such contingent coverage, its provisions will typically “extend the…coverage to include loss of gross earnings at the insured’s premises as a result of a supplier’s or customer’s inability to deliver or receive goods or supplies due to damage to its property.” Id. In such instances, several issues will arise that must be addressed by expert witnesses. To wit, “Determining whether [a] policy has been triggered,…and the anticipated revenue or income had the damage not occurred [are] all complicated issues necessitating the help of experienced…accounting professionals.” Id.

 

(3). Evacuation Orders: During Hurricane Matthew, civil evacuation orders were made, some of which may have prevented individuals from accessing their property. See id. A number of legal issues arise when evacuation orders are issued, because in many instances, such orders are not followed by every individual who is subject to them. While it seems apparent that governments have the right to issue such orders, other legal matters pertaining to such orders may not be as clear-cut. For example, if such an order causes an individual or business inconvenience, harm, or the like, such parties may be seeking someone to hold responsible for their inconvenience or losses. Some evacuation orders “could lead to insurance claims.” Id. In such cases, insurance experts will be crucial in determining what, if any grounds an individual or business has for making a claim and what, if any, actual losses were sustained and should be covered.

In addition to insurance claims, however, there are potential medical-legal issues at play when an evacuation order is issued. For example, during Hurricane Katrina, evacuation orders were issued in Louisiana. See, e.g., Anna M. Pou, “Ethical and Legal Challenges in Disaster Medicine: Are You Ready?”, Southern Medical Journal, Jan. 2013. The evacuation order was done in relays, and before it was complete, the “rescue was aborted as a result of gunfire. Civilians were shooting at the rescue helicopters.” Id. Some patients were left behind and ended up dying. See id. As one doctor explained, “Although the rescue effort was called off by those in command, it was the physicians who were left to address the emotional, legal, and ethical turmoil of that decision.” Id. First responders, such as firefighters and military members who follow such civil orders, are “protected from civil liability,” while “physicians are not.” Id. In the aftermath of Hurricane Katrina, doctors who rescued patients were faced with wrongful death lawsuits, which raises the question of whether medical providers “should stay with dying patients[,] not knowing whether they will be evacuated.” Id. Hurricane Matthew was of enormous magnitude. It is certainly conceivable that physicians who followed civil orders regarding rescue and evacuation could face similar lawsuits if such suits were permitted after Hurricane Katrina. If such litigation were to be brought against medical providers, expert witnesses would play an indispensable role in both prosecuting and defending against such lawsuits. Medical experts can testify to the appropriate standard of care a physician owes a particular patient, as well as whether a physician’s duty changes in the face of a governmental evacuation and/or rescue order. Natural disaster experts may be useful as well, to help fact finders determine what a medical provider’s duties are and how the urgent and life-threatening aspect of a major natural disaster may alter such duties.

Conclusion:

Natural disasters affect all aspects of life, from a person’s health and welfare to a company’s ability to conduct its business operations. Inevitably, lawsuits of all types ensue in the wake of a major disaster such as Hurricane Matthew, as people attempt to piece their lives and livelihoods back together, seek redress for their losses, and determine who should be held responsible for various damages. Regardless of the nature of a claim, cases arising from the effects of Hurricane Matthew will require expert witnesses of nearly every type, from business valuation experts to insurance adjusters. These witnesses will play a key role in helping both parties to put the pieces back together and move on.

 

 

By: Kat S. Hatziavramidis, Attorney-at-Law