Seven years ago, Hurricane Katrina made landfall in New Orleans. In the days that followed Katrina, we and others who focus on questions of insurance coverage debated whether the devastation in Mississippi and Louisiana had been caused by water or by wind. We discussed slabs, anti-concurrent causation clauses, levees, efficient proximate cause, valued policy laws, and local and national political dynamics.
Now, eight days after Sandy made landfall on the Jersey Shore, we query whether we are about to watch history repeat itself. We think the answer is yes. Over the coming months and years, we will again be parsing several insurance issues, including:
- What caused the damage to the shore in New York and New Jersey – wind or water?
- Will businesses have coverage for the lost profits they claim due to civil authority, including the shutdown of public transportation and the closure of bridges and tunnels?
- Will businesses have coverage for the lost profits they claim due to customers and clients’ lack of gasoline, making them unable to travel? Does it matter if gasoline was available but customers and clients chose not to wait on line for three hours at the gas station?
- Will businesses outside of the Northeast have coverage under contingent business interruption policies for their lost profits due to the stoppage of transportation out of the Northeast (leading to limited supplies)?
- Will businesses with servers located in the devastated regions be able to claim losses in other offices due to their server issues?
- Did businesses fail to mitigate their damages, by failing to respond expeditiously after the storm?
- In light of rumored possible cyber-attacks by hackers trying to take advantage of IT personnel devoted to restoring services rather than focusing on security, will any lapses in network security preclude coverage under network security or other types of policies?
- Will there be causation issues because of the difficulty in determining whether damage was caused by Sandy or future storms, because repairs will take months, if not years, to complete?
Clearly, Superstorm Sandy will affect the insurance industry. The scope and extent remain to be seen. We will be certain to follow developments, and invite your input and questions.