Hurricane Helene made landfall in Florida on September 26, 2024, eventually making its way up to western North Carolina where it caused unprecedented damage. The estimated costs associated with these damages grow daily, with AccuWeather currently estimating losses between $145 and $160 billion. Earlier this week, we issued an alert with general tips policyholders should consider when pursuing insurance claims for hurricane-related losses. As damage reports continue to come in from portions of western North Carolina that have been cut off from regular communications, we are updating our guidance for North Carolina policyholders.
As of yesterday, hundreds of thousands of individuals and businesses in North Carolina were still without power. Many remain without running water, and mobile service has still not been restored in several counties. On September 28, 2024, North Carolina Transportation Secretary Joey Hopkins issued a press release stating that “People should still consider roads in western North Carolina to be closed,” and more than 400 roads remain closed as of today, including portions of Interstate 40. The North Carolina Department of Transportation has urged against unnecessary travel, and several western North Carolina counties, including Haywood, Henderson, and Watauga, as well as the City of Asheville, have nightly curfews in effect. While the full extent of losses will not be known for months, there is an immediate need for remediation and repairs to help individuals and businesses regain some sense of normalcy. However, the path to recovery for many western North Carolina storm victims will depend on their ability to access funding from private insurers and government agencies like FEMA, which are mobilizing to process incoming claims.
Many of our clients and their friends, families, and employees are still in the immediate cleanup phase. Some are focused on locating relatives, restoring communications and utility service, or obtaining access to basic necessities, and have not yet had a chance to take stock of the full extent of their losses. Because of this reality, on September 30, 2024, North Carolina Commissioner of Insurance Mike Causey issued an order activating the provisions of North Carolina General Statute § 58-2-46, a North Carolina statute providing for stays of proof of loss requirements in areas where a state of disaster has been declared, for residents of Alexander, Alleghany, Ashe, Avery, Buncombe, Burke, Caldwell, Catawba, Clay, Cleveland, Gaston, Haywood, Henderson, Jackson, Lincoln, Macon, Madison, McDowell, Mitchell, Polk, Rutherford, Transylvania, Watauga, Wilkes, Yancey counties and to the Eastern Band of the Cherokee Indians of North Carolina. This order provides a 60-day stay of any provision in an insurance policy that requires an insured to file a proof of loss within a certain period of time after the occurrence of the loss.
Despite this extension, we encourage all policyholders to provide notice of insurance claims as soon as possible, even if they cannot locate copies of their insurance policies in the aftermath of the storm. Moreover, policyholders should ensure that they document all damage and attempt to take photos of storm damage, debris, and road outages before cleaning up, disposing of debris, or repairing structures. Policyholders should also keep a detailed record of the steps taken to remediate damage, itemize lost personal property, and begin collecting repair estimates from qualified experts when it is safe and possible to do so. We further recommend saving all receipts for any out-of-pocket expenses incurred in clean-up and repair efforts.
When communicating with insurers, policyholders should remember that, as with any disaster, unscrupulous insurance adjusters may claim that hurricane-related losses are not covered to discourage policyholders from making claims. For example, insurers may suggest that water-related losses are not covered because of flood exclusions in most commercial insurance policies. While it is undeniable that North Carolina has been affected by devastating floods, flood exclusions should not limit coverage for property damage and business interruption losses arising from wind-driven rain, fallen trees, or other storm-related causes. Moreover, not all flood exclusions are worded the same, and some policyholders actually may have purchased flood insurance. Therefore, it is critical to review the terms and conditions of insurance policies with experienced coverage counsel before drawing premature conclusions about whether a claim might be covered or excluded.
Another common misconception is that claims for lost business revenues following an extreme weather event are not covered if a policyholder’s property did not sustain structural damage. This is not always the case. In the wake of Helene, some North Carolina businesses may not have suffered significant property damage, but they cannot reach their properties because of road closures or other local government orders restricting access. Scenes of collapsed sections of I-40 and debris strewn throughout town centers suggest that this lack of access may continue for days—if not longer, which could have a devastating impact on a business’s bottom line if it cannot resume business operations until local infrastructure is restored.
Fortunately, some businesses may have purchased property policies that contain “ingress/egress” coverage, which covers lost revenues or profits a business may suffer if there is no way to enter or exit a property because of, for example, a washed-out section of highway. By way of comparison, in the wake of Hurricane Floyd on the east side of the state, a court held that a North Carolina business’s ingress/egress coverage allowed it to recover for business losses related to flooding caused by Hurricane Floyd that blocked access to the business, even though the business suffered no physical damage. See Fountain Powerboat Indus., Inc. v. Reliance Ins. Co., 119 F. Supp. 2d 552, 557 (E.D.N.C. 2000). Other businesses may be able to obtain “civil authority” coverage if a state, county, or local government restricts access because of property damage and other unsafe conditions elsewhere in an affected area. Similarly, some businesses might have “service interruption” coverage for business interruption losses caused by utility outages. While these types of enhanced business interruption coverage sometimes apply only after waiting periods and/or for a limited duration, all policies should be reviewed carefully to avoid leaving valuable insurance coverage on the table that is designed to provide balance sheet protection after natural disasters. The strain on North Carolina residents and businesses is and will remain immense, so to the extent insurance policies can help shoulder the financial burden, North Carolinians should avail themselves of those resources.
Beyond commercial insurance policies, some individuals and businesses may be able to pursue governmental assistance. On September 28, 2024, President Biden issued a major disaster declaration for North Carolina, unlocking federal assistance through FEMA’s Public Assistance Program for individuals and some state-owned organizations and nonprofits in western North Carolina counties affected by the disaster. According to the President’s disaster declaration: “[a]ssistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses and other programs to help individuals and business owners recover from the effects of the disaster.” This program should allow eligible state, tribal, territorial, and local governments, as well as some private nonprofits, to receive grants to fund expenses for debris removal, road and bridge repair, public utility repair, temporary generators, and public building repair that is required as a result of damage from a federally declared disaster like Hurricane Helene.
While many businesses in western North Carolina have little or no experience with the FEMA application process, some businesses, including nonprofit hospitals and quasi-government utilities, have successfully obtained FEMA funding following hurricanes that hit the Gulf Coast, the northeast (e.g. Superstorm Sandy), Puerto Rico, and elsewhere in the United States. The FEMA application can be onerous, and it is important to coordinate FEMA recovery efforts with insurance recovery efforts. Under the Stafford Act, FEMA funds are to be used as a last resort after insurance recoveries have been pursued, and failing to pursue insurance coverage can result in a clawback or reduction in FEMA funding that is otherwise available. Working with experienced legal counsel on the front end that is adept in helping businesses navigate the recovery process after a natural disaster can maximize and expedite the receipt of all available sources of funding.
