Hurricane Florence Flood Victims Need to Understand the Nuances of Flood Insurance Claims
by Charles R. Tutwiler on 9/12/2018
The catastrophic flood event expected from Hurricane Florence with widespread flooding on the Virginia, North and South Carolina coasts is bringing back bad memories from the debacle we went thru with Superstorm Sandy. For those who have flood insurance, we encourage you to review and pay close attention to your flood policy’s terms and conditions. The policies issued by the National Flood Insurance Program (NFIP) are unique because they fall under a Federal Government program with its own rules and regulations. Keep in mind that many private insurance companies resell and administer the NFIP policies. So make sure you confirm if your flood policy falls under this program.
The steps property owners take to comply with their insurance policies in regards to their property and flood claims can have a significant impact on how much they will receive and under what policy the loss will be covered. So I thought it would be helpful and hopefully educational to explain the distinction between a flood event and a water loss since these terms are often misused by policyholders filing a claim. In addition, for those who do have flood insurance, we want to share some knowledge and information in the form of tips from my firm’s extensive experience in water/flood losses including our work handling Super Storm Sandy flood claims.
Water losses: In the insurance world water losses and the claims that follow are the most frequent claims that are reported to insurance companies. Generally speaking most property insurance policies cover these types of losses but the water damage has to occur from an event inside a building or home. If Hurricane Florence blows your roof off or breaks your windows and water enters your home, you have a water loss claim. Other examples are broken water lines, water that overflows from an appliance such as a dishwasher, a hot water heater break or a ruptured ice maker line to name a few. For these types of losses to be covered they have to be sudden and accidental. Long-term water leaking issues are generally excluded. But for those who are covered for a water loss, a common mistake insured policyholders often make is to report them as a flood loss. While seemingly a flood to the policyholder, reporting a water loss as a flood is a sure bet to get you off to a wrong start with your property insurer.
A flood loss: The NFIP has a definition for a flood event. In order for a flood to be covered in their policy, flooding conditions must meet the following conditions: “A flood is a general temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. In the insurance world, a flood loss occurs when water originates from outside a building or home. Generally a flood loss results from rising water. If this water enters into the building it will not be covered under most standard insurance property policy forms. Insurance coverage from a flood event will only occur if the property owner purchased a flood policy from the National Flood Insurance Program (NFIP). There are other flood policies such as excess flood insurance as well as some types of manuscript policies generally sold to commercial clients. Some state regulators have recently approved some private carriers to sell their own brand of flood policies. This is the result of an $18 billion deficit in the NFIP flood program which now requires the NFIP to be actuarially sound, or in others words the premiums must cover the expected claim payouts. As NFIP premiums have sky rocketed private carriers are looking at jumping in to capture market share.
So what is covered and what is not covered in the standard NFIP program?
- The insured building and its foundation
- Electrical and plumbing systems
- Central air conditioning equipment, furnaces and water heaters
- Refrigerators, cooking stoves and built-in appliances such as dishwashers
- Permanently installed carpeting over unfinished flooring
- Permanently installed paneling, wallboard, bookcases and cabinets
- Window blinds
- Detached garages (up to 10 percent of building property coverage); detached buildings (other than garages) require a separate building property policy
- Debris removal
Personal Contents Property
- Personal belongings, such as clothing, furniture and electronic equipment
- Portable and window air conditioners
- Portable microwave ovens and portable dishwashers
- Carpets that aren’t included in building coverage
- Clothing washers and dryers
- Food freezers and the food in them
- Certain valuable items such as original artwork and furs (up to $2,500)
What’s Not Covered
- Damage caused by moisture, mildew or mold that could have been avoided by the property owner
- Currency, precious metals and valuable papers such as stock certificates
- Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools
- Living expenses such as temporary housing
- Financial losses caused by business interruption or loss of use of insured property
- Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy)
Flood Insurance for Basements and Areas Below the Lowest Elevated Floor
Coverage is limited in basements regardless of zone or date of construction. It's also limited in areas below the lowest elevated floor, depending on the flood zone and date of construction. These areas include:
- Crawl spaces under an elevated building
- Enclosed areas beneath buildings elevated on full-story foundation walls that are sometimes referred to as "walkout basements"
- Enclosed areas under other types of elevated buildings
So there you have it. This is what the National Flood Insurance Policy covers. And remember; because it is a federal program this coverage will be applied uniformly across the U.S., regardless of where a flood loss happened and in spite of any state insurance regulations or state statutes.
The NFIP policy requires you to file a proof-of-loss within 60 days of the flood event but is generally extended by an authorized official of FEMA/NFIP to one year when there is a major catastrophe like Hurricane Florence. Don’t procrastinate however. You must value and document your loss and arrive at a sum certain amount to put on the “proof of loss” document and have it submitted to the appropriate person handling your claim. Just remember that the claim may be denied in total for failure to comply with the policy terms and conditions. Our adjusters really need to work with our clients closely to make sure this is documented properly and deadlines are met.
There are many other conditions and definitions found in these polices you need to be aware of which if violated may void your coverage. If your policy was destroyed or lost, these forms can be viewed on the FEMA/NFIP site. Also, be aware that detailed records are maintained by NFIP regarding any past losses. The details of any of your prior claim(s) will be given to the new flood adjuster and they will determine if prior damages have been repaired before paying for any new claim. A flood certified adjuster will also take serial numbers of any appliances you are claiming and the information will be stored in their records for future loss verification. Pay particular attention to your duties after a loss as outlined in your policy. Also be aware that “coinsurance” provisions (a penalty) may be an issue if you are not insured to value.
Since most policyholders will be using a water restoration dry-out company to start the recovery process, you need to understand the rules in which FEMA and the National Flood Insurance Programs pays. If not, you may get stuck with a huge bill to pay or a lien on your property by the contractor. Ever since Superstorm Sandy, these restrictions have become even more onerous. Here are the official FEMA Structural Drying Guidelines.
Another tip to remember is that FEMA will not distribute money (with the exception of emergency funds) until they are satisfied that all possible private insurance has been claimed and paid. In other words, policyholders must pursue all available insurance from private policies they have purchased before FEMA will step in. This is a big burden on the policyholder especially given the stress and recovery issues they are going through, not to mention the complex insurance policy terms and conditions. While it is human nature to want to get your property repaired and livable, please make sure you are taking the proper steps to comply with all private and Federal Flood claim guidelines. Failure to do so could put your claim in jeopardy. If you are stressed or confused about the process consider hiring a public insurance adjuster who is familiar with the claims handling process to handle your loss.
As always, the professional public insurance adjusters at Tutwiler and Associates are here to help with any property insurance related questions you may have. Please visit our Hurricane Florence web page to submit a question to one of our public adjuster insurance claim experts.