As the Eastern Seaboard begins to recuperate from the havoc wreaked by “Frankenstorm” Sandy, plaintiffs’ firms are striving to paint insurance companies as the next monster the victims will have to face. Likewise, it is now public adjusters who are undoubtedly flooding the impacted states to try to get a cut of the billions of dollars in claims to be filed. Given these outside influences, carriers must be extremely cautious and expeditious in the handling of Hurricane Sandy losses in order to minimize the surge of bad faith claims that are sure to follow.

Tips from the Plaintiffs’ Bar

Not surprisingly, numerous publications, websites and blogs have been created to give “advice” on how to make hurricane claims. Accordingly, the potential distrust instilled by these resources, on top of the storm’s devastation, mandate that insurers be especially vigilant to avoid claims-handling pitfalls.

Many plaintiffs’ law firm websites essentially provide insureds with a road map for setting up a bad faith claim. They also depict insurance companies in a very unflattering light. One site advises that if an insurer denies a claim that the insured thinks should be covered, it could be bad faith. It also claims that insurance companies have a vested interest in paying an insured as little as possible and delaying payment for as long as possible. A second site warns that when an insurance company gets a large number of claims, it will often give low offers of settlement. The site goes on to explain that “smart” business people consult with an attorney prior to “signing their rights away to an insurance company.” Still another site accuses insurance companies of engaging in “tactics” illustrated as requesting paperwork that has already been sent, claiming paperwork has gone missing or been filled out improperly, or claiming that damage was caused by factors not covered in the policy.

To combat the predisposed suspicion such “advice” ignites, it will be important to understand each affected state’s specific claims-handling requirements.

Public Adjuster Issues

Much attention has also been placed on the shortage of adjusters available to assess claims. Given this real problem, there likely will be an influx of public adjusters. In the wake of Hurricane Sandy, some states, such as Delaware, have relaxed the rules for becoming a licensed catastrophe adjuster. Likewise, in New York it is relatively easy to become a temporary public adjuster, with the only requirement being a license from the applicant’s home state; temporary licenses are then granted the same day.

In the aftermath of other disasters such as hurricanes Katrina and Ike, public adjusters created a myriad of problems in the claims process. They overstated or inflated claims to ensure that their significant fees (20 percent or more) were paid. In addition, they delayed the production of necessary documents and other information or produced incorrect information.

As is true in the adjustment of any claim, the introduction of attorneys and public adjusters often frustrates the claims-handling process. Accordingly, the following guidelines may help curb bad faith claims, or at least make them easier to defend if filed.

Know Each State’s Sandy-Specific Regulations

A number of states have issued orders specific to claims resulting from Sandy. For example, Connecticut, Delaware, the District of Columbia, Maryland, New Jersey, New York, Pennsylvania and Rhode Island have prohibited insurance companies from imposing hurricane deductibles on Sandy claims. These mandates appear to apply only to homeowner policies as opposed to commercial policies. Nevertheless, commercial property owners have likely heard about the suspension of hurricane deductibles. That fact, coupled with justification for prohibiting the deductibles – e.g., the supposed lack of hurricane force winds – may encourage commercial insureds to look for bad faith. In the end, insurers may not ultimately save any money by imposing hurricane deductibles to commercial claims, even if they are arguably within their rights to do so.

Other states have imposed Sandy-specific regulations on insurance companies. The Department of Insurance in Connecticut, for example, issued a bulletin directing insurance companies to follow a specific list of tasks for the adjustment of Sandy claims. An insurer must (1) promptly establish contact with the insured, (2) quickly survey and assess damage, (3) provide prompt and accurate responses to questions, (4) provide prompt payment for additional living expenses and temporary repairs after assessment of the damage, and (5) quickly set appointments with the claimant for examination and resolution of all claim matters.

The Connecticut Department of Insurance also extended the grace period within which premiums must be paid to prevent any lapse in coverage for victims. Similarly, New York imposed a 30-day moratorium (beginning October 26, 2012) on the termination, cancellation and non-renewal of certain types of policies.

Carriers must be sensitive to each of these regulations. Indeed, given the high risk for bad faith claims in this climate, the additional regulations imposed in Connecticut are good ones to follow in any state.

Know Each State’s Deadlines

Most states have adopted the Uniform Deceptive Trade Practices Act and/or the Unfair Claims Settlement Practices Act (referred to herein as UDTPA), which define conduct that may amount to unfair claims handling. The UDTPA contains generalized standards as to when a claim must be acknowledged or resolved, only indicating it must be done “reasonably promptly.”

Many states, however, have adopted more specific time frames on top of the general UDTPA provisions. By way of example, in Delaware an insurer must acknowledge receipt of a notice of claim within 15 working days from receipt of notice of the claim and begin its investigation within 10 days of notice.

What is particularly troubling about these deadlines is that many states grant insureds a private cause of action for violation of the state’s version of the UDTPA. Therefore, it is critical to know each state’s deadlines and act within them to avoid a nearly “slam-dunk” bad faith claim.

While many of the states impacted by Hurricane Sandy do not allow insureds to bring direct claims under the UDTPA, it is important to remember that violations of a state’s version of the UDTPA or other insurance regulations may still be used as evidence of a carrier’s bad faith, though not presumptive proof of the claim. For example, the standards imposed by these regulations or statutes may be cited by an insured’s expert as the “industry standard” for reasonableness. Accordingly, violating a state’s claim-handling deadlines poses a risk for potential bad faith regardless of whether the particular state permits a private cause for such violations.

The claim-handling deadline chart sets forth some of the claim-handling deadlines for each state impacted by Sandy and whether the state allows for a private cause of action for violation of the state’s UDTPA. While the chart attempts to capture the majority of states and their claim-handling laws, it is not intended to be exhaustive.


In light of the physical devastation and emotional toll Hurricane Sandy has caused, along with the abundance of public adjusters and potentially misleading information from plaintiffs’ attorneys about insurance companies, adjusters must be hypersensitive to the claim-handling deadlines imposed by each of the states impacted by the storm.

Following a protocol of acknowledging and investigating claims within days, keeping a well-documented file, constantly communicating with insureds, paying any undisputed portion of the claim as quickly as possible and assigning senior people to questionable claims is especially important to the handling of hurricane claims. Insurers may also wish to consider assigning mold experts or invoking the appraisal process earlier than usual. In short, being conscious of deadlines and making prompt, well-reasoned decisions may help decrease the number of bad faith claims, or at least marginalize the bad faith fodder for plaintiffs’ attorneys and public adjusters.