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In the aftermath of the devastating Baltic Sea flood in October 2023, which caused significant damage to homes, cellars, and coastal facilities in MV and Schleswig-Holstein, a potential class action lawsuit is being prepared to challenge insurance companies over policy denials due to "storm surge" exclusions in insurance contracts.
The VdS, the Federal Association of the Insured, and the Consumer Center Hamburg are collaborating to legally clarify whether the use of the term "storm surge" in insurance contracts is permissible and whether insurers can rely on this exclusion. The initiators of the class action hope for support from the economy, and approximately 60,000 euros in donations are needed to fund this legal battle, according to VdS chairman Stephen Rehmke.
The legal landscape for such class action lawsuits is not straightforward. There is currently no widely reported legal precedent specifically for class action lawsuits against insurance companies based on policy denials due to "storm surge" exclusions in insurance contracts related to damages from Baltic Sea floods. The success of such a case would depend on the specific language and terms of insurance contracts, local insurance regulations, and the established practice in the jurisdiction where the floods occurred.
Given that certain regions, such as parts of Europe including around the Baltic Sea, may have limited or no standard flood insurance coverage, especially for complex storm surge or sea-level rise risks, insurance denials on exclusions are common. Class actions would have to demonstrate that insurers acted unlawfully or in bad faith by broadly excluding these damages in contexts where coverage was expected or required by law.
The climate change and flood risk insurance landscape is evolving but challenging. For example, in the Netherlands, recognized as vulnerable to sea-level rise and floods, there is an insurance shortage for flood risks, and damage from floods may often not be covered by standard policies. The government steps in with limited disaster compensation schemes, but regular insurance coverage often excludes these types of risks or requires innovative mechanisms like catastrophe bonds to help transfer or cover climate risks.
If pursuing such a case, affected parties would likely consult experts in insurance law and climate risk to assess contract language, local law, and the viability of class actions. Those affected by the flood are encouraged to register with the VdS or consumer centers to support the class action.
Currently, about 50% of home and apartment owners have elemental damage insurance. The class action requires at least 50 cases of coastal residents who were affected by flooding from Baltic Sea water and did not receive compensation despite elemental damage insurance. Rehmke doubts that there can be a "storm surge" on the Baltic Sea that would relieve insurers of their obligations due to a lack of a clear definition in the contract clauses.
A successful class action could potentially invalidate the use of the "storm surge clause" in flood damage insurance, requiring insurers to settle damages from the 2023 Baltic Sea flood. Federal politics is discussing the possibility of mandatory insurance for elemental damages, as per the black-red federal government's coalition agreement. One proposed design for the mandatory insurance obligation is for insurers to compulsorily offer insurance to their customers, with those who do not accept it needing to actively opt out.
As the legal landscape continues to evolve, affected parties are urged to stay informed and consider their options. The fight for justice and fair insurance practices in the face of increasingly frequent and severe flood events is a crucial step towards ensuring the protection of homeowners and communities.
- The VdS, the Federal Association of the Insured, and the Consumer Center Hamburg are focusing on understanding whether the term "storm surge" in insurance contracts, as used in light of the Baltic Sea flood damages, is legally permissible.
- Affected parties from the Baltic Sea flood are encouraged to register with the VdS or consumer centers, as a potential class action lawsuit may challenge insurance companies over policy denials due to "storm surge" exclusions in insurance contracts.
