Considerations Relating to Named Storm Provisions

The National Weather Service assigns a name to any weather disturbance that intensifies into a tropical storm. In the wake of “Superstorm Sandy,” issues have arisen that relate to provisions in first-party property insurance policies relating to “named storms.”

Named Storm Definitions
Some commercial property insurance policies contain what is referred to as a “named storm” definition. While the specific language varies, these definitions frequently contain common elements that need to be evaluated when determining the application of the definition to a particular insurable event.

A “named storm” definition usually refers to the storm’s having been named or otherwise declared to be a certain type or category of storm by a meteorological authority. It is important to pay close attention to the exact wording of the definition. The mere fact that a storm has a name does not necessarily make it a “named storm” under a policy’s terms and conditions. Assuming the storm constitutes a “named storm” according to the policy’s definition, there will usually be a question as to whether the claimed damages fall within the parameters of the definition.

The purpose of named storm definitions has been the subject of much debate and a number of legal decisions. One expressed view is that these definitions group various perils for the purpose of defining an “occurrence.” Others posit that such definitions are intended to create a separate peril, which then defines the nature of the loss and the application of other policy provisions. Still others claim that these definitions are designed to support the application of special limits or deductibles.

Other Policy Provisions
The policy should be reviewed to determine whether it contains a deductible, sublimit, or both, tied specifically to the named storm definition. Is the deductible expressed as a percentage of some value? Does the sublimit apply per occurrence and in the annual aggregate? If flood damages are claimed, the policy should be reviewed to determine whether it contains a flood deductible and/or sublimit.

Issuance of Executive Orders or Other Bulletins and Their Impact on Named Storm Clauses
After Sandy came ashore, several states, including New York and New Jersey, issued pronouncements and executive orders that related to the application of hurricane deductibles. In most instances, the import of these proclamations was to prevent the application of hurricane deductibles, which typically are larger than the standard deductible.

In conclusion, there are many issues to consider when a named storm may be involved in a loss. The language of the policy is of critical importance. Another factor to be aware of is whether a given state has issued notices relating to application of policy provisions tied to the named storm definition. The effect of such notices is beyond the scope of this article, but their existence is important information in the face of a potential claim.