In­sur­ance and clean-up costs after a dis­as­ter

Jamaica Gleaner - - BUSINESS - Cedric Stephens

QUES­TION: I saw pho­to­graphs of the dam­age that Hur­ri­canes Har­vey and Irma caused in North Amer­ica and in some Caribbean coun­tries in that or­der. Many trees were blown down caus­ing dam­age to houses, cars and other prop­erty. Would dam­age to a build­ing or to a mo­tor ve­hi­cle in Ja­maica that was caused dur­ing a hur­ri­cane by a blown-down tree and the costs of cut­ting and re­mov­ing it be con­sid­ered hur­ri­cane dam­age by an in­sur­ance com­pany? What would hap­pen if the tree was blown but did not hit the build­ing? Would the in­surer pay for the cost of re­mov­ing the de­bris?

– D.L., Kingston 9 IN­SUR­ANCE HELPLINE: There is a big black mango tree in my front­yard. It is about 25 to 40 feet high. I have looked on it many times, es­pe­cially dur­ing the cur­rent hur­ri­cane sea­son, and won­dered if it would pose a threat to the house if it were to be blown down dur­ing a storm.

My thoughts have not ex­tended be­yond that. I am yet to do any­thing about re­duc­ing the risk of it caus­ing dam­age to my house. As for the in­sur­ance ef­fects, I haven’t thought about this be­fore. Many thanks for spurring me into ac­tion with your ques­tion.

I vividly re­call the al­most to­tal dis­ap­pear­ance of trees from the Ja­maican land­scape after Hur­ri­cane Gil­bert hit. The ab­sence of leaves from those trees that re­mained stand­ing was very de­press­ing.

The aerial and other pho­tos that I saw after Hur­ri­cane Irma hit sev­eral Caribbean is­lands and the south­ern parts of the United States – mi­nus the ex­ten­sive flood­ing – evoked those mem­o­ries. They also re­minded me of the loss of elec­tric­ity, Lovin­deer’s popular song and the nasty sur­prises of some in­sur­ance con­sumers. The ques­tions you asked were very timely. Even though Ja­maica was spared the rav­ages of Cat­e­gory 5 Irma, at least one in­surer that has its roots here trans­acts busi­ness in many of the coun­tries that were af­fected.

Sce­nario plan­ning is one of the ways that or­gan­i­sa­tions think about and plan for the fu­ture. Ac­cord­ing to The Econ­o­mist, Peter Schwartz in his book, The Art of the Long View, de­scribes sce­nar­ios as “sto­ries that can help us recog­nise and adapt to chang­ing as­pects of our present en­vi­ron­ment. They form a method for ar­tic­u­lat­ing the dif­fer­ent path­ways that might ex­ist for you to­mor­row, and find­ing your ap­pro­pri­ate move­ments down each of those pos­si­ble paths”.

COV­ER­AGE SCE­NAR­IOS

I pro­pose to re­la­bel your ques­tions as sep­a­rate sce­nar­ios and an­swer them in the or­der in which they were asked in an ef­fort to re­move un­cer­tainty, be­cause the hur­ri­cane sea­son is not yet over.

Sce­nario 1: In the case of a build­ing or other prop­erty that was dam­aged by a fall­ing tree dur­ing a hur­ri­cane, the in­sured prop­erty would be the build­ing. If hur­ri­cane was an in­sured peril, the in­surer would be re­spon­si­ble for re­pair­ing or re­plac­ing the build­ing. Pro­vided that the con­tract in­cluded de­bris-re­moval costs – as many house­hold poli­cies do – the costs as­so­ci­ated with the cut­ting up and re­mov­ing all of the de­bris, in­clud­ing parts of the tree, would also be re­cov­er­able. In other in­stances, dam­age to the prop­erty in­sured caused by fall­ing trees is ex­pressly cov­ered.

In a sit­u­a­tion where a ve­hi­cle was in­sured un­der a com­pre­hen­sive mo­tor pol­icy and, pro­vided that hur­ri­cane or storm was listed as an in­sured peril, the cost of re­pairs should be paid by the in­surer. How­ever, I am un­cer­tain whether the costs as­so­ci­ated with the cut­ting up and re­moval of the tree would be paid by the in­surer.

Sce­nario 2: If a tree or trees were blown down dur­ing a storm or hur­ri­cane and there was no dam­age to the in­sured prop­erty, the house, the costs of cut­ting up and re­mov­ing the tree, and de­bris re­moval would not be paid. Those costs would be for the ac­count of the house­holder.

Brawta: Ja­maicans who mi­grated to Florida and as­sumed that the in­sur­ance sit­u­a­tion there is sim­i­lar to what hap­pens in Ja­maica are in for a very rude awak­en­ing. There are dif­fer­ences be­tween the prac­tice of in­sur­ance there and what hap­pens here. Dam­age to build­ings caused by blown-down trees and the de­bris-re­moval costs are treated sim­i­larly, for the most part.

On the other hand, while poli­cies in Ja­maica au­to­mat­i­cally pro­vide pro­tec­tion for flood­ing caused by hur­ri­canes, the sit­u­a­tion in the US is very dif­fer­ent. Hur­ri­cane dam­age there is lim­ited to wind dam­age. Flood dam­age which is ex­cluded by poli­cies bought from pri­vate in­sur­ers, can only be pur­chased from the fed­eral gov­ern­ment.

End Note: In last week’s col­umn, ‘Memo to Min­istry of Eco­nomic Growth & Job Cre­ation’, I omit­ted to say that the standby agree­ment that our Gov­ern­ment signed with the In­ter­na­tional Mon­e­tary Fund was re­garded by both par­ties as “an in­sur­ance pol­icy against un­fore­seen ex­ter­nal eco­nomic shocks (for ex­am­ple, a nat­u­ral dis­as­ter) be­yond Ja­maica’s con­trol”, was in­di­cated in the Fund’s most re­cent staff re­port.

Cedric E. Stephens pro­vides in­de­pen­dent in­for­ma­tion and ad­vice about the man­age­ment of risks and in­sur­ance. For free in­for­ma­tion or coun­sel, write to: aegis@flowja.com.

AP

Ar­borist Paul Mys­li­wiec climbs a tree that fell dur­ing Hur­ri­cane Irma in St Peters­burg, Florida, Tues­day, Septem­ber 12. Clean-up after a big storm is costly, and for Ja­maica it may not be cov­ered by in­sur­ance if the de­bris does not dam­age in­sured prop­erty.

IN­SUR­ANCE HELPLINE

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