The Thing That Caused The Thing


Back in August of 2005, Hurricane Katrina hit the southern coast of the United States, making landfall on Florida and Louisiana. It was a Category 5, and it made a terrible mess of the city of New Orleans especially, causing billions of dollars in damage.

In the months that followed, I was inundated with questions from my clients about the aftermath. You see, on the news there were plenty of images of good folks holding up signs. Some signs had messages like, “Thank you (Insurance Company Name)!” And some signs were less friendly, because those individuals were denied coverage. These various images triggered questions about why some were covered and some were not.

To answer these questions, we need to consider the legal concept of Proximate Cause…

Each insurance policy has a list of insured perils, essentially those crappy things that can happen to your stuff that would be covered by the contract. Some of those perils include Fire, Theft, Lightning, and so on. But when determining coverage, the policy is only concerned with the proximate cause of the damage. Imagine if you will, a large bird making a large nest in the gutter of your home. Further, imagine that said nest causes the gutter to fall off your house and crash through your picture window. The gutter damage would NOT be covered, because damage from birds is explicitly excluded on most Homeowners insurance policies. However, the damage to the window would be covered, because the policy covers damage caused by falling objects. It’s all about the proximate cause of the loss, the thing that caused the thing.

Back to NOLA and Hurricane Katrina…

The hurricane-force winds ripped roofs from homes, and blew trees and cars all over the place. The insurance contracts included coverage for wind damage, so those homes were covered. The subsequent damage that ensued, like water damage from rain coming in through the hole where the roof used to be was also covered. Owners of those homes were the ones holding the grateful signs.

As the storm raged, the levees were eventually damaged, and broke – causing catastrophic flooding in all the low-lying areas of The Big Easy. The waters rose above some roof lines, destroying everything below the waterline. Home insurance policies do not cover flooding. In areas of the US that are prone to flooding, individuals can buy Flood insurance from the local government. It’s typically an optional coverage, one that is not obligatory to satisfy the terms of a mortgage, so many people don’t buy it. If your home was in the lower areas of New Orleans on August 29, 2005, and you didn’t own Flood Insurance, you were not covered for the damage caused by the rising water.

With climate change becoming more and more of a thing, we’re starting to see flooding all over North America, even in idyllic Canada. When your insurance broker calls you and offers you Flood Insurance, consider it carefully. Sewer Backup coverage covers damage to your home when a storm water drainage systems fails. Overland Water coverage protects your home from damage caused by water entering the dwelling through a window or door. Flood, as a legal term, refers to water that comes from a body of water (like Lake Erie) breaching its banks. When that happens, you’ll be glad you had the coverage. Heck, you might even hold up a sign thanking your insurance provider.

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