Puerto Rico’s dire insurance situation more than a year after Hurricane Maria remains a constant reminder of why policyholders must diligently pursue their property and business interruption claims in the immediate aftermath of a storm. The numbers are staggering. On an island the approximate size of Connecticut, Hurricane Maria caused an estimated $100 billion in damage. According to the Office of the Insurance Commissioner of Puerto Rico, the hurricane resulted in more than 287,000 insurance claims. Roughly 11,000 of those claims, representing an estimated $2 billion in losses, remain unresolved.

To the government’s credit, Puerto Rico Governor Ricardo Rossello on November 25, 2018, signed into law six bills intended to expand insurance coverage options for the island’s policyholders and expedite payments following disasters. These measures include:

  • PS 1056, which is intended to expedite payments to policyholders following catastrophes.
  • PS 1054, which establishes a mandatory mediation process for the resolution of disputes between insurers and policyholders over the valuation of losses, along with special tribunals to hear such cases. A policyholder who elects to engage in mediation does not give up his or her right to later pursue litigation over a claim.
  • PC 1645, which authorizes a new legal cause of action against insurers that fail to act reasonably or in good faith when handling claims.
  • PC 1729, which makes low-cost “micro insurance” available to the island’s impoverished populations.
  • PC 1727, which allows companies to obtain insurance through surplus lines insurers if at least three carriers authorized to do business in Puerto Rico fully or partially decline to cover a risk.
  • PS 1058, which requires insurers to obtain regulatory approval each year for a “written response plan” to “guarantee the continuation of [their] services and operations” in the event of a disaster.

While these laws may prove effective in reaction to future storms, they will not get Hurricane Maria claims paid.

The empirical information suggests that policyholders can do more to maximize their insurance payouts from the storm. The number of lawsuits on the island is disproportionately low for the scale of damage, indicating that insureds are frequently accepting inadequate settlements rather than seeking legal help. Similarly, many businesses have focused on fixing property damage without pressing or even submitting substantial business interruption claims. Insurers, in turn, continue to reap the benefits of delay. Others, such as Real Legacy, have gone into receivership – virtually assuring that policyholders with valid claims will only be paid a fraction of what they’re owed.

For policyholders in Puerto Rico and any insured after a natural catastrophe, the time to take action against a recalcitrant insurer is “as soon as possible.” No special law is required to force a carrier to honor its contractual obligations and pay what it owes. The longer policyholders wait, the more likely they are to walk away short-changed or empty-handed.