The Impact of Natural Disasters on First Party Insurance Litigation: Swift Currie

The Impact of Natural Disasters on First Party Insurance Litigation

In 2024, there were 27 confirmed weather disaster events in the United States with losses exceeding $1 billion. These events included a drought, a flooding event, 17 severe storms, five tropical cyclones, a wildfire and two winter storms.¹ With Hurricane Idalia in August 2023 followed by Hurricane Helene in September 2024, counties in Middle and South Georgia in particular are all too familiar with the devastation these natural disasters can wreak, and the influx of insurance claims and coverage disputes that follow. In 2023, carriers in the United States covered about 70 percent of the approximate $114 billion in losses from natural disasters.² Insurers are faced with growing concerns and challenges posed by the increasing number and frequency of natural disasters. As the risks of homeowners and property insurance coverage increase, insurers must adapt to the risks of natural catastrophes, economic inflation, climate change, legal system abuse and regulatory coverage mandates.

While these weather events continue to take their toll, there are multiple areas in which the insurer can take control of claims handling and litigation planning to ease the strain on first party litigation issues.

Multiple Claims from the Same or Similar Losses

Insurers should take special care with ongoing, open claim investigations when natural disaster strikes. Complications arise when property claims compound, and the insurer’s key focus becomes determining which property damages are associated with the loss reported in conjunction with an already ongoing claim, and which occurred subsequently as a result of the natural disaster. Without detailed photographs, inspection reports and potentially expert reports, it can be difficult, if not impossible, to discern which damages are associated with which respective loss event. In turn, the insurer runs the risk of issuing payments that exceed the scope of the ongoing, pre-existing claim, or extending coverage for damages that would otherwise not have been covered. Luckily, there are several measures the insurer can take to mitigate these risks and successfully navigate its insured’s ongoing claim and any claims that follow.

It is the insured’s duty to timely report a loss to their insurer.³ Furthermore, standard property insurance policies require an insured submit a separate claim for each occurrence or loss event. It is critical that the insurer and its representatives are aware of and understand these duties. When a natural disaster occurs and it becomes apparent an insured may have suffered additional property damages, the insurer should advise the insured to timely file a separate claim solely with respect to the disaster-related damages. From there, the insurer will need to take steps to differentiate the old from the new in terms of damages. Conducting a second property inspection, retaining an engineer to provide an opinion as to the cause(s) of loss and being intimately familiar with the facts of both claims can help ensure that coverage is extended where appropriate and denied where additional damages are unrelated, excluded or otherwise not covered by the policy.

While engineers face challenges of their own when re-inspecting a property following a natural disaster, their observations can be key in differentiating pre-existing and subsequent damages – ultimately drafting an estimate for the ongoing claim that is as precise and accurate as possible. Essential factors, including whether there are fallen trees in the surrounding and immediate areas, whether collateral indicators of wind/hail are present at the property and whether reports indicate a severe weather event in the direct vicinity, can all guide an engineer’s opinion. If the insurer is able to provide the engineer with extensive details regarding the pre-existing claim, the engineer will be all the more likely to affirmatively determine which damages are related to the natural disaster and which are not. As mentioned above, it is in the absence of key information, including photographs, reports, and the like, that engineers may face difficulty – or impossibility – in determining which damages are associated with each claim.

Despite the many steps the insurer can take to better navigate and understand these catastrophic losses, there remains one additional risk that the insurer should be aware of: fraud. While natural disasters are devastating for many insureds, other insureds may see the severe weather event as an opportunity to file a claim for pre-existing, excluded and/or unrelated damages, and ultimately receiving and benefiting from a settlement payment. While total avoidance may be impossible, early action – including insisting the insured comply with the duties set forth in the policy by virtue of timely reporting their claim, identifying with specificity the date of loss and damages sustained and providing substantiating documentation, including photographs, receipts and a Sworn Statement in Proof of Loss, can reduce the insurer’s risk to these fraudulent claims.⁴ Conducting an examination under oath of insureds suspected of potential disaster-related fraud can also help reveal underlying financial motives, inconsistent statements and more.

Juries and the Difficulties Associated with Defending a Claim in an Affected Community

As it pertains to jurisdiction, venue and juries, insurers should be prepared for the dangers of litigating cases in the courts of adversely affected communities. When an insured files suit against an insurer, there are two venues in which they may choose to pursue legal action: the county where the insurer’s registered agent is located, or the county in which the loss occurred. If the insurer is sued in an area affected by natural disaster, they will need to be prepared to deal with a much less favorable venue, as the insurer is more likely to encounter a jury pool with a communal bias towards the insured plaintiff.

One commonly utilized way to avoid the pitfalls of litigating in disaster-stricken areas is to remove the case to federal court. There are two requirements to remove a case from state to federal court. First, there must be diversity of citizenship between the parties, meaning the plaintiff and defendant are residents of different states. Second, the amount in controversy – the amount of damages sought by the plaintiff – must be over $75,000.00. 28 U.S. Code § 1332. Removal to federal court provides the insurer with a venue where (1) the jury pool is less likely to consist of residents from the affected community, and (2) the judges have more experience with insurance law, policies and defenses.

Conclusion

While the above risks are inherent results of broadscale natural disasters, insurers can and should take necessary precautions and measures to protect their business from the trending issues in first party litigation surrounding natural disasters. Scrupulous recordkeeping during the claim handling process, early retention of experts, vigilance in assessing potentially fraudulent claims and removing the case out of unfavorable venues where possible are all ways that insurers can insulate themselves from issuing payment for uncovered damages and finding themselves the subject of frivolous litigation.

¹NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2025). https://www.ncei.noaa.gov/access/billions/, DOI: 10.25921/stkw-7w73.

² Congressional Budget Office, Climate Change, Disaster Risk, and Homeowner’s Insurance (August 2024), https://www.cbo.gov/publication/60674 ; See also Aon, Climate and Catastrophe Insight (2024), https://tinyurl.com/ yc7ckauf (PDF).

³Forshee v. Emplrs. Mut. Cas. Co., 309 Ga. App. 621 (2011); See Caldwell v. State Farm Fire & Cas. Ins. Co., 192 Ga. App. 419 (1989); See also Longleaf in Vinings Homeowners Ass'n v. QBE Ins. Corp., No. 1:13-CV-03132-AT, 2015 U.S. Dist. LEXIS 180258, at 11 (N.D. Ga. Mar. 12, 2015).

⁴ McIntosh, A. (2024, February 2). Areas of risk in catastrophic insurance claims. Clearspeed. https://www.clearspeed.com/areas-of-risk-in-catastrophic-insurance-claims/.