Trying To Reason with Hurricane Season: Mediating First Party Property Insurance Claims

Fri, Feb 28th, 2025 | by Miles Mediation and Arbitration | Article | Social Share

Lured by the dream of living in a sun-drenched paradise, with a lower cost of living, and in the case of Florida, no state income tax, hundreds of thousands of Americans have migrated to Florida and the Gulf South over the past two decades. In fact, since 2000, the Gulf South region has been the fastest growing U.S. coastal population. Being able to bask in the warm weather, go to the beach, and be active year-round has been a dream come true for many — except during hurricane season.

There has been an increasingly riskier downside to living in Florida or along the Gulf Coast, in the form of hurricanes, floods, tornadoes, or other severe weather events. In the past decade, increasingly frequent, stronger, and larger hurricanes have devastated property from Florida (Irma, Michael, Ian, Idalia, and Milton) to Texas and Louisiana (Harvey and Laura).

Most recently, Hurricanes Helene and Milton slammed through Florida, and tore up through Georgia, Tennessee, and North Carolina, causing wind and flood damages to hundreds of thousands of properties and causing estimated insurance losses in excess of a combined $100 billion dollars. Whether due to a storm, high winds, water, or a combination of several factors, hundreds of thousands of homeowners or business owners will experience property damage from a single storm.

The resulting first-party property damage claims that follow will frequently be resolved without resorting to litigation or dispute resolution. However, when insured property owners and property insurance carriers cannot agree on a resolution, the parties may, depending on the terms of the insurance contract and applicable state or federal law, turn to litigation, arbitration, appraisal, or mediation. Mediation, which can be court-ordered or voluntary, often provides the parties the most efficient and satisfactory method to resolve their hurricane-related property damage claims. Here is a closer look at some of the issues that are frequently encountered when mediating first-party property insurance claims.

Strong Emotions

The old adage is that a person’s home is their castle. Likewise, business property owners are emotionally invested in a property that provides the livelihood for themselves and their employees. It is not surprising that emotions run high when peoples’ properties have been damaged or destroyed by a severe storm event, and a claim can’t be settled without resorting to litigation. These emotions often present themselves at mediation, when all parties are present, facing one another in open dialog. To optimize the potential to reach a negotiated settlement at mediation, it is critical for all involved in the mediation process — the parties, their counsel, and the mediator — to recognize, prepare for, and be able to navigate, the role that emotion can play in the process of mediating a resolution of this type of claim. When these emotions are recognized and handled appropriately, mediation can provide the parties with the ability to look forward and get closure, rather than being mired in the anxiety-inducing and time-consuming uncertainty of litigation.

First-Party Property Claims – A Combination of Contract Law and Construction

What does the insurance contract cover?

The initial question frequently at issue when mediating first-party claims is determining what coverage was in place. First-party property claims are subject to the particular terms, conditions, and exclusions of the property insurance contract in place between the parties at the time of the loss. Most property owners have homeowners’ or dwelling policies in place that provide coverage for wind damage. However, most property owners do not have flood insurance.

Property insurance policies that provide coverage for “wind” events such as hurricanes, tornadoes, and rainstorms that cause resultant property damage nearly always exclude “flood”- related property damage. Flood policies are a separate, very limited type of policy issued, or underwritten, by the National Flood Insurance Program and some private carriers that are building a small but growing private market for flood coverage.

A wind policy won’t cover flood damage and a flood policy won’t cover wind damage. However, as you may expect, one of the issues at mediation with multiple causes for the loss is determining what actually caused the loss — i.e., wind and flood, or a covered loss and a non-covered loss.

What was the cause of the loss?

Was the loss caused by a single cause or a combination of causes? If there is only one covered cause for the loss, then the main focus of the mediation will likely be the scope and cost of repairs. The case gets trickier if there are potentially more than one cause for the loss, one that may be covered under the applicable policy and another cause that is not. This is known as concurrent causation.

First-party property insurance policies typically include anti-concurrent causation clauses, where if two or more causes of loss happen simultaneously to produce the same injury or damage, if any cause of loss falls within the terms of a policy that contains an anti-concurrent cause exclusion the loss will be excluded, regardless of whether another unexcluded cause of loss qualifies as the “proximate cause” of the loss.

Examples of concurrent-cause scenarios are hurricane-incurred damage from both wind and flood, or a claim where in addition to the wind- and rain-created damage, the property may have had either construction defect or maintenance issues that allegedly contributed to the loss. As one might expect, these concurrent cause disputes may rise or fall based on the documentation of the loss or testimony from adjusters, contractors, or engineers. Parties must be continually evaluating and reevaluating these risk issues at mediation to maximize their opportunity to successfully resolve the dispute.

Critical Questions of Damages – Scope and Cost of Repair

Scope and price of repairs necessary to return the property to pre-loss condition are often the main focus of a first-party mediation. Scope issues can include whether certain elevations or parts of the property were damaged, whether they need to be replaced, or whether they should be replaced as a continuation of other replaced/repaired materials (such as roofing, flooring, or ceilings). Pricing disputes usually revolve around what is the appropriate market rate for the labor, materials, and services in the market where the property is located at the time the repairs are to be made.

However, disputes can also arise as to whether the repairs sought are not of the same kind and quality or whether they are “betterment”. Similar to assessing the issue of causation, parties to the mediation must be prepared to evaluate each side’s scope and price calculations and evidence to determine what the settlement range of the case may be.

Attorneys’ Fees

Until December 2022, Florida law allowed for a one-way recovery of reasonable attorneys’ fees in favor of an insured policyholder if it secured a judgment against an insurer under a property insurance policy via Florida Statutes 627.428. However, legislation passed in 2022 and 2023 eliminated this statutory right of recovery of one-way attorneys’ fees in favor of policyholders and significantly impacted the way risk is analyzed during mediation. Whether it is one-way attorneys’ fees exposure under the prior law, or parties bearing their own respective attorneys’ fees under the new law, the risk and expense of attorneys’ fees is an exposure that significantly influences both parties at mediation.

A Continuing Issue

As the most recent hurricane season has demonstrated, hurricanes and other severe weather events will continue to cause widespread and devastating property damage and give rise to first-party property damage claims and disputes. Mediation offers both the insured and the insurance carrier an opportunity to expeditiously control and settle their claims without the protracted time and expense of litigation. Understanding the pivotal issues outlined above can help the parties and their counsel resolve their first-party claims and provide the optimal way to reason with hurricane season.

About Jim Shea

Jim Shea mediates and arbitrates disputes in the Tampa Bay, Pensacola/Panhandle, and Atlanta areas. He also conducts virtual mediations throughout Florida and Georgia. Jim’s mediation practice focuses on construction, employment, insurance, business, and tort disputes.