This document summarizes challenges facing homeowners affected by wildfires in Colorado, including issues with underinsurance and burdensome claims processes. It discusses legislative efforts to address these issues and recommendations for homeowners to carefully review policies and document home contents. The document also discusses storm surge risks on the Eastern US coast and estimates potential damages of over $700 billion according to one report.

1. A Fine Line September 2012
This summer's catastrophic wildfires have victims are struggling with insurance settlements. As
you should know by now I have always been a critic of the insurance companies who make it the
homeowner’s responsibility to determine the homes rebuilding cost. Many of the homes destroyed
were underinsured resulting in settlements that are inadequate to replace the home. Other
policies have burdensome requirements to itemize lost possessions and with living-expense
reimbursements that run out long before they can rebuild.
That has legislators, regulators and
insurers in Colorado working on ways to
fix those concerns before the state faces
another catastrophe.
A Denver Post article State
Representative Claire Levy, House
District 13, was quoted as saying “most
insurance companies use a computer
model to determine how much insurance
to provide. The model determines the
maximum amount of insurance the
homeowner can purchase based upon
basic information about the size and features of a home. A homeowner may obtain an estimate
of the cost to rebuild the home from a home builder. But the agent generally cannot use that
estimate if it deviates significantly from the value the model computes.”
After hearing about these problems, Rep. Levy introduced legislation to require insurance
company to use models and methodologies that more closely reflect the cost of rebuilding homes.
That legislation died in the House Local Government Committee.
Until the legislature votes to reform the law, Rep Levy has three recommendations for Colorado
homeowners but they also apply to all homeowners:
 Review the insurance policy carefully.
 Don’t confuse market value or assessed value with rebuilding cost.
 Document all the contents of your home and outbuildings.
Since 2010 it is estimated that over 500 homes were destroyed by the High Park, Waldo Canyon,
Lower North Fork and Four Mile Canyon fires. While we may be able to take some solace in the
fact that we do not live in a wildfire area, with the changing weather patterns we are all in danger
of wind, hail, and flooding losses which could result in catastrophic losses to our homes.
While these legislative measures will help homeowners estimate the rebuilding cost of their
homes, it will still be their responsibility to tell the insurance companies how much coverage they
want on their homes. Insurance agents and brokers need to be more diligent and accept
responsibility for advising their clients on policy terms, conditions and limitations.
Are you risking more than you can afford to lose?

2. Storm Surge
For those of us living on the Eastern Seaboard of the U.S we remember last summer when
Hurricane Irene paid us a visit. I can vividly recall losing power at 2:00 a.m., telling my wife I would
wait until 6:00 a.m. and if power had not been restored I would fire up the backup generator. What
was I thinking! BY 6:00 a.m. I had 7 inches of water in the basement. I very quickly got the
generator working and by 10:00 a.m., with the help of a very hard working sump pump, had all but
a few puddles of water successfully removed from my “grotto”. Lesson learned. Water is a
powerful adversary.
Since that event I have read many articles on
water damage and one recently grabbed my
attention. It was the 2012 CoreLogic® Storm
Surge Report. This article highlighted the fact
that news headlines tend to focus on intense
hurricane wind and rainfall but the damage
caused by storm surge is typically not well
publicized.
This report examines the single family homes
exposed to potential hurricane-driven storm
surge damage along the Gulf and Atlantic
coasts. The worst-case scenario includes:
Maximum wind speed for each category at time of landfall;
Right-front quadrant and on-shore facing winds of the storm at landfall;
The storm striking perpendicular to the coast; and
Peak high tide of hurricane landfall.
Storm surge is a phenomenon that occurs when water is pushed toward the shore by hurricane
winds that act like a plow, causing the water to pile up along the front of the storm. In deep water
this effect is minimized because the surge can be dissipated off to the sides of the storm. In
shallow water, however, there is no place other than forward for the surge to go.
Storm surge flooding can be affected by off-shore characteristics such as wind speed, atmospheric
pressure, forward speed, tide and the angle of the coastline. On-shore characteristics include
levees, bays, barriers, rivers and canals.
The report estimates that the total structural value of damages could exceed $700 billion.
A full copy of this report can be obtained at www.corelogic.com or email me I will send you a copy.
n. WS Risk Management Consulting, LLC
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tb Pittstown, NJ 08867
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