While the insurance industry likes to note that the vast majority of Hurricane Sandy claims are now closed, a Star-Ledger review of state data shows that nearly one out of every four of those claims resulted in no payment to a policyholder.
Six months out from the Oct. 29 storm, the industry's closure rate looks impressive: 95 percent of New Jersey's Sandy claims had been closed, according to data the state collected from insurers. It's all the more astonishing considering that 450,000 private insurance claims were filed in the Garden State alone. And that's not counting National Flood Insurance Program claims.
But of the 430,000 claims that were closed as of May 3, about 23 percent -- or just over 100,000 total claims -- did not result in a check to a policyholder, the analysis of data collected by the state Department of Banking and Insurance showed.
Insurance officials caution that claims closed without payment should not be interpreted as outright denials.
"We'll open a claim because we're looking for a way to give them coverage, not to deny it," said Eric Stenson, a spokesman for New Jersey Manufacturers Insurance.
While there are many reasons claims are closed without payments, in most cases they boil down to one of two outcomes: either the loss was not covered under the terms of the insurance policy or it did not exceed the deductible.
For example, standard homeowners and commercial policies generally do not pay for flood damage. Many home and business owners contacted their insurer after Sandy, only to have an adjuster find that storm surge was to blame for damage. Those claims would be closed. If the homeowner or business had separate flood coverage, the claim would be processed under that policy.
Insurers so far have paid $3.4 billion to policyholders in New Jersey for Sandy claims, and they anticipate shelling out another $700 million, according to the state data. These figures don't include flood insurance funds and were for Sandy-struck homes, businesses, autos and other coverages.
New Jersey's insurance regulator ordered carriers to supply it with claims data soon after the storm struck. "We knew we wanted to get our arms around it to track the progress of our carriers," said Marshall McKnight, a spokesman for the state Department of Banking and Insurance.
The data released to The Star-Ledger does not identify insurers or policyholders, but shows claim statistics in and around the state and by type of insurance. The National Association of Insurance Commissioners, an umbrella group for state insurance regulators, helped to crunch the data by county and by ZIP code, McKnight said.
The state also gathered data on National Flood Insurance Program claims, but it proved to be incomplete, McKnight said. But according to data separately supplied by the Federal Emergency Management Agency, about 72,525 flood claims filed in New Jersey are now closed, representing about 98 percent of all claims. Of these, just under 9 percent were closed without payment.
The vast majority of private insurance claims closed without pay were for residential properties. About 75,000, or 24 percent, of the roughly 315,000 residential claims closed so far were closed without a check to a policyholder. The insurance department and industry officials note that some homeowners opened claims just to get a denial letter from their insurer, which was required by FEMA before it gave emergency assistance.
Business owners, however, had their claims closed without pay at a higher rate. About 35 percent of the more than 34,000 commercial property claims closed since the storm did not result in a payment, as were 37 percent of the roughly 12,600 business interruption claims, the state data show.
The county-level information in the state data reinforces some of what was already known about the storm's aftermath. The most devastated areas -- Ocean, Monmouth and Hudson counties -- have netted the highest insurance payouts.
But diving into the ZIP code level statistics reveals some interesting results. Some of the hardest-hit areas ended up also having higher rates of claims closed without payment.
The city of Hoboken, which experienced vast flooding, saw 57 percent of its residential claims and 59 percent of its commercial claims closed without payment. Also, 60 percent of business interruption claims in the city were knocked out.
Paradoxically, though, Hoboken also has enjoyed the third-highest amount of insurance payouts of all ZIP codes in New Jersey, or $54 million so far. The reason why? Auto insurance. Unlike standard coverage for homes and businesses, auto policies typically protect against flooding.
As a result, just 5 percent of personal auto claims in Hoboken were closed without payment, according to state data. That alone has meant $38.5 million in insurance payments in the Mile Square City, or $17,232 per average claim.
Reasons for no Payout
Dave Passman, national director of property claims at Willis, a global commercial insurance broker, said there are a few reasons why the proportion of business claims closed without payment was higher than he would have expected.
For one, some business owners may have called their insurer before assessing their losses. "People, knowing that lines were going to be long, reported claims very quickly," Passman said.
But a more likely scenario is that businesses weren't covered for the specific cause of their loss, or their deductible was higher than the amount they lost, he said.
For example, take a business that was flooded and then shut down for two weeks because it had no power after saltwater submerged the local electric substation.
To be covered for these losses, the business would need some form of flood insurance and a rider for business interruption caused by downed utility service.
Assuming it had both, it then would have to contend with deductibles, Passman said. For some commercial and business interruption policies, those deductibles could be as high as 2 percent to 5 percent of the replacement value of the property, or of a year's worth of business interruption coverage. In other words, a lot of money.
"Most insurance companies look for every way possible to pay these losses," Passman said, "but if it was black and white (that a loss was not covered), they do not."
The data also show how valuable coverage is, if it is procured.
Lots of Denials
The ZIP code comprising the Atlantic City casino waterfront had one of the largest rates of denied business interruption claims in the state -- 71 percent were closed without payment. But of the 12 claims closed with payment so far, the payout was hefty -- nearly $205,000 per policyholder.
Commercial properties in Gloucester City, along the Delaware River near Philadelphia, scored the largest average insurance payment, about $735,000 per each of the four claims that were closed with payment. A single ZIP code for Edison netted the second-highest, or $487,000 per each of the four commercial properties.
A Toms River ZIP code representing the bulk of its mainland section had the second-highest overall insurance payout in the state: nearly $75 million and counting, split largely between residential properties and personal vehicles.
The largest insurance payout was made to the section of Newark that encompasses Newark Liberty International Airport and its neighboring port. Insurers have made $111.4 million in payments there, and expect to make $37 million more.
Of the payments made, $26.6 million went to 61 commercial property claims, and another $74.7 million went to 82 claims classified as "other," which, according to the insurance department, generally refers to oceangoing cargo and watercraft. Sixty-eight residential properties in this heavily industrial zone split about $457,000.
Insurance industry officials say high levels of claims closed without payment speaks to the need for people to know what they are insured for, and the risks they face.
"One of the messages we're trying to get out is: Read your policies," said Chuck Leitgeb, vice president of the Insurance Council of New Jersey. "To assume that you have certain coverages, I think we've learned from Sandy, is a very speculative game."