Insurance Implications of the Gulf Oil Spill

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This article examines the basic coverage issues under ISO standard property forms that could arise if a hurricane distributes waterborne or windborne oil particles onto coastal properties from the Gulf oil spill.

In the past couple of weeks, with Gulf coast hurricane season approacghing, we have seen a dramatic increase in the number of coverage questions involving the impact of a hurricane on the Gulf oil spill relative to potential coastal property damage. Here are some representative samples:
"Media coverage of the Gulf oil spill is creating panic with insureds. Is there pollution coverage that can be purchased and put on a homeowners policy? If waters rise with oil mixed in with it, will that be excluded from flood policies?"

"Due to the oil spill in the Gulf and the potential for a hurricane, how will wind driven oil affect our current dwelling and homeowner policyholders? Will the pollution exclusion apply?"
"If a hurricane comes ashore and brings oil with it causing oil and water damage to property, is there coverage for the damage caused by the oil/water mix? Where is the coverage? What are the exclusions? This affects both personal and commercial. If Katrina had had oil in it, would that have affected how claims were adjusted?"
"Let's say we have a Gulf coast property insured under an HO-3 homeowners form and a hurricane occurs and blows the oil from an oil slick inland, covering a home. We know the wind damage is covered; however, how is the oil addressed — as a pollutant and excluded?"
"We are starting to get calls from rental property owners wanting to know if they can file for loss of use due to getting cancellations because of the oil spill. Is this covered?"
"The news here in Orlando this morning reported that several convention hotels in the Ft. Myers/Naples area have had 90% of their bookings cancelled over fear of oil on the beach. I have received similar emails from people who own rental condos and are having people dump reservations over fear of oil. The loss of business income is a big issue for hotel owners."

As a result of these inquiries, the VU faculty has collaberated to produce the article linked below. The principle author is Mike Edwards, CPCU, AAI, who was assisted by Bill Wilson, CPCU, ARM, John Eubank, CPCU, ARM, and David Thompson, CPCU, AAI, along with several other faculty members who responded to individual questions as received by our "Ask an Expert" service.
Click here to download the article in Word format:
In addition, the Insurance Information Institute has a presentation on the market impact of the Gulf oil spill:
From FEMA:
Last Updated:  June 6, 2010
June 4, 2010



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Revised: February 2012