Wednesday, February 27, 2013

Unintended Consequences Hampering Recoveries From Disasters

When disasters strike, many people line up to volunteer to assist with the recovery.  When natural disasters like hurricanes strike and destroy or damage homes and businesses, members of the design community mobilize to assist local governments in inspecting homes and buildings to determine whether they are safe, need repair, or should be demolished.  Such was the case after Superstorm Sandy.  Hundreds of architects and engineers mobilized to assist local building department officials in their communities in assessing the structural viability of the tens of thousands of homes that were damaged in Staten Island, Brooklyn, Queens, and elsewhere.

But something happened shortly after they mobilized.  They assessed what occurred in the aftermath of the terrorist attacks on the World Trade Center on September 11, 2001, and took a step back.  After September 11th, contractors, architects, engineers, and others all mobilized to assist in the recovery efforts at the WTC site.  They did this with no thought to the potential consequences of their participation in making decisions about how the demolition and clean-up of the site would go.  And they found out that for their heroic participation in helping with the recovery and clean-up efforts, they were thanked by being named as defendants in the thousands of personal injury lawsuits that were brought by clean-up workers and others alleging injuries arising out of the clean-up at the WTC site and related lower Manhattan buildings.

With that memory fresh on their minds, the architects and engineers who could have assisted the local communities in assessing the damage to homes and businesses went back home because they did not want to become defendants again based on their efforts to help with a post-disaster recovery.  The pain and expense of being sued was not worth it to them to get involved.  Architects and engineers are not covered under New York's Good Samaritan laws and with no protection and no agreement by any municipal authority to hold them harmless and indemnify and defend them from tort suits, they stood on the sidelines. Crain's New York has a great story on this.

This unintended consequence of mobilizing professional volunteers to assist in disaster recovery affected the ability to inspect and classify homes and commercial buildings as quickly as would have happened had the fear of lawsuits been absent.  Efforts have been made to include design professionals under a Good Samaritan-type law, but in New York, so far those efforts have been blocked.  According to the Crain's article, 24 states, including states on the Gulf Coast, have laws that protect building and design professionals from lawsuits when they come to the aid of disaster victims.

Recovering from a disaster like Superstorm Sandy requires has many hands as possible in the stricken communities.  Even today, months later, homes are not rebuild, insurance funds have not been paid to everyone, and families are still unsure when or whether they will ever be able to rebuild.  When those who can help are afraid to help because they might find themselves on the receiving end of tort claims, there is something wrong.  There is a bill in the New York Assembly to address this issue.  A04380 is a Good Samaritan law for building and design professionals.  The purpose of the bill, if passed, is:

"To provide professional engineers, architects, landscape architects and land surveyors immunity from liability for providing volunteer services funding during times of crisis and catastrophe. Such immunity would not be applied in cases of wanton, willful, or intentional misconduct, nor to services provided after 90 days of the emergency. This legislation shall not affect the liability of any government which requests a volunteer to perform these services."

You decide if this makes sense.  Many other states believe it does.  If you are sitting in Rockaway with your house still a wreck because you couldn't get it inspected properly and can't afford an engineer or architect to help you figure out if you can rebuild, you probably think it makes sense also.

Let us know what you think.

Friday, February 15, 2013

Claims Changes in the Wind?

The aftermath of Superstorm Sandy is still being felt throughout the New York, New Jersey, Connecticut coasts.  Claims payments, especially for flood insurance, are not coming as quickly as some would like.  Banks, with mortgages on damaged properties, are holding up checks causing inquiries by government officials to be made.  And regulatory and legislative changes are being considered throughout the region that, if enacted, will affect how claims are handled in the future.

Shortly after Superstorm Sandy, New York enacted an emergency regulation requiring claims arising from the storm to be handled on an expedited basis.  Inspections by insurance companies on claims had to be made within six days of notice of claim instead of the normal fifteen days -- a time frame large insurers said was impossible given the number of claims and the number of insurance adjusters.  A report card was and continues to be posted on the website of the New York Department of Financial Services on claim responses.

New York also issued a circular letter that allowed claims to be made and documented without first having to wait for an adjuster's inspection.  Some of the text of the circular letter stated as follows:

Accordingly, insurers must accept homeowners' documentation of losses rather than requiring an inspection first where an immediate cleanup is reasonably necessary to protect health and safety, or protect further damage to property.

For claims under homeowners' insurance, if dwelling debris must be removed before the adjuster is able to examine it, insurers should accept as proof of loss documentation such as photographs, videos, material samples and inventories prepared by policyholders as alternatives to formal inspection.

Now New Jersey is considering amending its insurance law to allow for a private right of action for bad faith claims practices against insurance companies.  Coupled with governmental pronouncements about the applicability of hurricane deductibles and the consideration of changes to the anti-concurrent causation clause in many homeowners' policies, there may be big changes for insurers and consumers coming in the wake of Superstorm Sandy.

These developments are important to watch because they will have an impact on the availability and affordability of insurance for communities in areas now clearly exposed to disasters caused by hurricanes and other cyclonic events.