Insured losses from January’s widespread winter storm will reach $6.7 billion, according to a flash estimate published by Karen Clark & Company (KCC). The estimate includes privately insured damage to residential, commercial, and industrial properties from freeze, snow/ice, and wind, according to the company.
Meanwhile, AccuWeather predicts economic losses to be anywhere between $105 and $115 billion, making it “one of the most costly weather disasters in modern history.” The storm, which affected over 200 million people, caused widespread power outages and prolonged infrastructure disruptions.
Winter Storm Specifics
The storm began over the Great Plains on Jan. 23 and persisted into Jan. 27, impacting over 30 states with frigid temperatures, snow, and ice, according to KCC. “Daily minimum temperature records were set in many locations like Madison, Wisconsin (-20°F) and De Kalb, Illinois (-12°F), and records were tied in several more, from Rockport, Texas (0°F), to St. Paul, Minnesota (-20°F),” states the report.
The storm developed, KCC explains, when “an Arctic air mass dipped southward, bringing frigid temperatures to the Great Plains and Midwest. A low-pressure system—Winter Storm Fern—developed along the leading edge of this air mass where the cold air interacted with warm, moist air streaming in from the Gulf. The warm air mass overran the denser Arctic air, producing widespread sleet and freezing rain from Texas through the Carolinas.” These conditions led to significant ice accumulations across northwestern Alabama, northern Louisiana, northern Mississippi, and Oklahoma. The storm then progressed to the northeast on Jan. 24 and 25, delivering heavy snowfall and freezing rain.
Impact on Claims
Claims professionals and their counsel can expect to grapple with claims ranging from water damage to impact damage from fallen trees or power lines, according to Taylor Davis, Clyde & Co. “The majority of claims will likely be for water damage from burst pipes, but if snowfall is heavy enough, there may be roof collapses,” she explains. “For commercial buildings, the claims may include a time element component. For residential properties, there is a secondary risk of fire loss as homeowners rely on fireplaces as a source of heat when the power is out.”
Challenges in the Southeast
The Southeastern region of the U.S., which is unaccustomed to winter weather, will face unique challenges as it recovers from the storm. “Some parts of the region have limited capability to recover from a winter weather event, which can lead to challenges in remediating and mitigating damage,” says Davis. “For example, damage can be worse if power is lost and cannot be restored quickly, or if debris removal and temporary repairs cannot be implemented quickly.”
Furthermore, given the likelihood of several events, it is crucial for insurers inspect affected properties as soon as possible to document damage before another loss occurs—a feat which may be challenging immediately after a severe weather event. However, Davis suggests, technology may be leveraged to document the initial damage.
When it comes to coverage disputes, it all depends on the policy wording, explains Davis. Some issues that could arise include “pre-existing damage that is not covered and exclusions for weight of ice snow, snow, [and] sleet; water damage; mold/fungi; cracking; and wear and tear. Furthermore, freezing could be excluded or the insured could be obligated to protect pipes against freezing, as part of a vacancy provision or otherwise.” She notes that both insurers and insureds would be well advised to review the policy and the local guidance for their particular jurisdictions.
Regions like the Southeast can better prepare for atypical winter weather events by “maintaining heat in the building, allowing faucets to drip, and keeping cabinets or doors to plumbing open to allow central heating to circulate around them or shutting off water supply,” says Davis. “If possible, a generator can protect against the effects of loss of power. And as a preventative measure, checking and improving insulation can help protect property against low temperatures.”