By STEVE YAHN
For insurers, a storm the size of the Moore, Okla., tornado "presents an all-hands-on-deck challenge," said William Kendall, a Dallas-based attorney with nearly 15 years' experience with large-sized tornadoes and thunderstorms.
Kendall, who is opening an office in Oklahoma City to help handle the devastation of the tornado, said the city is swarming with claims adjusters, including so-called "public adjusters" from all over the country.
"These public adjustors are going to be the first people on the ground trying to represent homeowners and businesses," said Kendall. "Public adjusters typically can readily get a provisional or temporary license to operate in a state outside their jurisdiction."
Public adjusters, who are not affiliated with insurance companies, solicit homeowners and commercial property owners to represent them as claimants.
Kendall said he and other attorneys generally get involved further down the road when a public adjuster comes to him to say they've hit a brick wall and feel there's more to be paid.
In the case of the Oklahoma wreckage, Kendall said: "I would expect most cases would just be handled on the spot, because the only thing to talk about is the amount of loss and most of these cases are total losses.
"But, of course with this number of claims, there's going to be plenty of things that are going to pop up, whether it's because the number of adjusters are spread thin and they're not getting out there or they're just missing stuff," he said.
According to Morgan Stanley analysts and the Oklahoma Insurance Department, overall damages are estimated at $2 billion, based on damages from other major tornados in recent years as well as assessments of the 17-mile-long disaster zone in Moore and nearby areas.
The National Weather Service tentatively classified the tornado as an EF-5, which means it reached wind speeds of more than 200 mph. That is the highest rating given to twisters.
"It will rank up there with one of the more severe tornadoes that has occurred, especially with the fatality numbers that we'll probably end up seeing," Jim Keeney, the NWS central region weather program manager told SNL Financial.
Ten children are reported dead, with another 58 individuals injured. The tornado destroyed two elementary schools and also damaged the town's hospital as it tossed cars and reduced houses to rubble.
Insurance adjusters of all sorts are already on the scene to begin the initial stages of the claims process, according to the New York-based Insurance Information Institute (III).
Standard homeowners and business insurance policies cover wind damage to the structure of insured buildings and their contents when caused by tornadoes and thunderstorms, according to the Institute.
Homeowners insurance policies also provide for additional living expenses, such as the added costs of living away from home if a residence is inhabitable due to damage from an insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while a home is being rebuilt.
"While replacing and repairing damaged properties may not be a high priority at the moment, the insurance industry will play a significant role in rebuilding Moore and other parts of Oklahoma just as it did following the storm in 1999," said Robert Hartwig, an economist and III president.
Hartwig added that the United States is in the midst of the most expensive period in recorded history for thunderstorm events, which includes damage from tornadoes.
A 2011 study on climate change by Munich Re confirms that observation. In the report, Munich Re, the largest insurance company in the world, said: "It has been possible for the first time to scientifically prove that climatic changes have already influenced U.S. thunderstorm losses.
The study found that severe U.S. thunderstorm losses increased significantly from the end of the 1980s, and that the fluctuations between the years were more extreme.
Eberhard Faust from Munich Re's Geo Risks Research and a co-author of the study, noted: "It is therefore clear that the changes in losses during the period in question is largely driven by changes in climatological boundary conditions. In particular, the potential energy required in the atmosphere for the formation of severe thunderstorms has increased in the course of time."
According to a 2013 Lloyd's of London report, the United States experiences more tornadoes per year than any other country on earth. Every year, said Lloyd's, the country has an average of 1,200 tornadoes.
Over the past five years, insurers have paid some $75 billion to victims of U.S. tornadoes, according to the III.
"As the events in Moore tragically demonstrate, this trend toward more violent and destructive weather patterns shows no sign of abating," said Hartwig.
Damage to businesses from a tornado is covered under business income (also known as business interruption) insurance, provided the property housing the business was directly hit.
Typical homeowner insurance policies include coverage for tornadoes; thus, tornado policies don't have to be bought separately, as they do for earthquakes, floods and, in some states, hurricanes. Studies show that 96 percent of U.S. homeowners have insurance.
According to Kendall, insurance coverage for tornado damage usually falls under the category of "windstorm damage" and typically includes:
* Loss of home. The insurance policy will provide coverage for the loss of the home. Depending on a person's policy, the value is based on either the market value or the replacement value of the home.
* Other structures. Covers structures such as tool sheds or garages that are separate from the house.
* Personal property. Coverage for certain items in the home that were personal property. Not all personal property is covered.
* Loss of use. This coverage provides for temporary living expenses while a person is deprived of a permanent home.
The amount of coverage a person will receive varies from policy to policy, but if an insurance company denies or underpays a valid claim, a policyholder may be entitled to pursue the appropriate compensation from them by taking legal action.
Damage to vehicles from a tornado is covered under the optional comprehensive portion of a standard auto insurance policy. Three out of four U.S. drivers choose to purchase comprehensive coverage, according to III.
State Farm Mutual Automobile Insurance Co., which has the most market share of U.S. catastrophe risk insurers in the state, said it had received 1,100 automobile claims and 2,100 homeowner claims by May 16, according to SNL Financial.
The second largest insurer in the state is Farmers Insurance Group of Cos.
YAHN is a former editor with Advertising Age.
May 23, 2013
Copyright 2013© LRP Publications