Insurance Q & As: Natural Disasters

Canada has had its share of natural disasters in recent years. Between forest fires devastating Alberta, tornadoes wreaking havoc in Ontario, and Quebec’s infamous ice storm, Canadians never know what to expect next from their climate. This has made insurance issues a major concern. The following list of questions and answers provides basic information regarding natural disaster insurance coverage issues. Policyholders must review the specific language of their particular policy to determine their actual coverage.

What kinds of natural disaster coverage do standard insurance policies provide?

According to the Insurance Bureau of Canada, most homeowners’ insurance policies cover damage to the policyholder’s home and its contents resulting from forest fires. Generally, living expenses arising from forest fire evacuations are also covered.

Policies generally cover lightning, windstorm, hailstorm and tornado damage to homes, but don’t cover exterior damage to trees, bushes and antennas and satellite dishes. They often cover food spoilage resulting from power failures due to storms and tornadoes, up to $1,000.00.

If an ice storm causes a power failure resulting in burst water pipes, the damage will generally be covered but only if the policyholder was living at the home regularly. Policyholders who travel need to arrange for a competent person to check their home regularly in order to maintain coverage. If forced to evacuate due to power failure from an ice storm, the policyholder should check the home daily if possible, and drain all pipes and appliances.

Damage from earthquakes, not covered by standard homeowners’ insurance, requires special coverage. Homeowners must purchase it in addition to standard insurance. But while damage from the actual shaking of an earthquake requires special coverage, some standard policies do cover secondary damage resulting from earthquakes, such as that caused by fires stemming from the earthquake.

The cost of earthquake coverage will depend on the type of home being insured and its location. A home made of more solid material such as brick will reduce the coverage cost. Living on a fault line increases the cost of earthquake coverage, but also increases the need for it.

Standard homeowners’ policies don’t generally cover flood damage. Those who live on a flood plain can expect flooding at some point, and insurance only protects against the unexpected. However, policies generally cover other kinds of water damage, for example from a broken water main. Prevention through the use of dams and floodways remains the best insurance against flooding.

2. After making a claim, what if the policyholder disagrees with the settlement amount provided by the insurance company?

Policyholders who feel their claim was unfairly denied or their settlement amount was insufficient should begin by contacting their insurance agent or broker to discuss their concerns. From there, policyholders can take their complaints to their company’s complaint liaison officer. The officer will make a final decision regarding the complaint and should confirm it in a written statement to the policyholder.

If the policyholder remains dissatisfied, independent organizations such as the General Insurance OmbudService allow them to pursue their complaints further. All federally licensed general insurance companies must have membership in this type of organization, which provides dispute resolution mechanisms such as mediation to policyholders who have exhausted all other complaint routes.

Mediation involves the designation of a neutral third party who evaluates the problem and helps the parties work towards a solution, at no cost to the policyholder. Informal and confidential, mediation can bring a contentious issue to a successful resolution. The mediator’s decision is not binding on either party.

3. What if the policyholder remains dissatisfied even after mediation?

At this point, the policyholder should investigate legal options. Circumstances which could result in a successful lawsuit include, for example, the insurance company denying coverage to remove mold in a home resulting from water damage caused by a natural disaster. Or, policyholders should consider legal action if a tornado causes heavy water damage to carpeting and the company provides coverage only for cleaning costs and not new carpeting and an underpad. Another example necessitating legal action occurs when the contractor hired by the company to repair the damage caused by a disaster cuts corners or provides substandard work.

By contacting a lawyer specializing in insurance contract interpretation, policyholders can ensure the protection of their legal rights and full compensation as promised under their policy for damage caused by natural disasters.

Each policy is unique and may differ significantly from a standard policy. Policyholders should never assume coverage. They must read their policies thoroughly and review them with their agent or broker in order to determine what is included and to evaluate the need to purchase specific peril related coverage.