Reed Smith Client Alerts

Individuals and policyholders who experienced property loss due to the devastating tornado outbreak across several states in the central United States, including Kentucky, Missouri, Mississippi, Tennessee, Arkansas, Illinois, Iowa, Kansas and Minnesota, earlier this month, will have insurance claims under their automobile, homeowners and property insurance policies. We cover some of the basic types of insurance coverage and disaster relief that may be available to policyholders below.

Auto insurance

Automobile damage from a tornado or straight-line wind is generally covered under the comprehensive coverage portion of an automobile insurance policy. Policyholders should obtain a complete copy of their automobile insurance policy and submit a claim to their automobile insurance company. If your copy of your automobile insurance policy is lost or was destroyed in the storms, you can request an additional copy from your broker or from the company directly.

Homeowners insurance

Homeowners insurance generally covers wind damage to dwellings and personal property up to certain limits, but additional windstorm coverage may be necessary for coverage for damage from tornadoes. Determining the full scope of coverage available to homeowners will require careful review of applicable policy language, and will depend on the individual circumstances surrounding each loss.

Claims should be made immediately so an adjuster can inspect the property to determine if any damage is covered by the homeowners policy.

Property insurance

Property insurance generally covers damage and associated loss of business income – profits and ordinary expenses of running the business – and extraordinary expenses incurred as a result of a windstorm. There may be exclusions for windstorms, or special deductibles or specific limits which apply. The insurance company will seek to cap the period in which business income can be claimed by the hypothetical time it should have taken the business to rebuild or repair its property. This may be impossible without payment for the damage. It is important to make a timely claim and to request sufficient advances on the damaged property to make rebuilding possible.

SBA disaster loans

Even with insurance, individuals may have a significant gap between their actual costs from the disaster and the insurance proceeds.

The Small Business Administration (SBA) provides low interest (generally less than 3.5 percent) long-term loans to individuals and businesses impacted by disasters, including up to $2 million for business loans and up to $200,000 for home loans to repair/replace real property, and $40,000 to repair/replace personal property on their primary residence. Most people can demonstrate the economic ability to repay an SBA loan and qualify for the loan. More information regarding the program is available on the SBA website.

All impacted individuals should go through the process of applying for an SBA loan, because it impacts the ability to obtain certain Federal Emergency Management Agency (FEMA) assistance (which does not need to be repaid).