With Hurricane Harvey Looming, Insurance and Reinsurance Issues Lurk in the Wings

As Hurricane Harvey barrels towards the Gulf, residents of Louisiana and Texas are scrambling to avoid a storm that forecasters currently predict will bring winds of over 110 miles per hour and dangerous flooding.  However, Harvey is creating concern not only for residents of the region, but also for insurers and reinsurers.  Of particular interest is the fact that Harvey is currently predicted to move slowly and linger in the region, which could trigger disputes about so-called “hours clauses.”  Hours clauses are provisions contained in some reinsurance treaties which limit the time period during which claims emanating from a given occurrence may be considered part of a loss subject to reinsurance cover.  Such clauses are typically measured in consecutive hours.  If Harvey ultimately lingers in the region for a period of time that exceeds the period set forth in a reinsurance treaty’s hours clause, it will likely trigger disputes about the extent to which damage wreaked by Harvey is actually covered under a given reinsurance treaty. This could generate complex disputes which may take years to ultimately resolve.