David Stearnett, who is the Flood Insurance Advocate for the National Flood Insurance Program, and Sha Ron James, Florida’s Insurance Consumer Advocate, should be congratulated for hosting a free webinar on July 25: Guiding and Educating Insurance Professionals and Consumers about Flood Insurance Needs During a Catastrophe.
Here is the invite and a link to the webinar.
Stearnett publishes a yearly report regarding the National Flood Program from his perspective. It raises a number of issues from the policyholder’s view. I thought this year’s report was quite well done and the Program actually has written responses to some of his requests.
Those involved with flood insurance should read his report. It has many interesting discussions including one regarding the ever-battled claims topic over basements:
BASEMENT DETERMINATION MADE AT THE TIME OF LOSS
The OFIA finds that policyholders are confused when their slab-on-grade structure is determined to have a basement at the time of loss. Basements have very limited coverage under the SFIP. Adjusters are required to apply the limitations of the SFIP upon discovery that a building has a basement, regardless of how a policy was originally underwritten. Policyholders who had previous claims settled without applying basement restrictions express the most confusion and frustration.
BACKGROUND
The OFIA finds that a concept of “positive/negative” drainage is being applied inconsistently by some adjusters to determine whether a building has a basement. The basement coverage limitations of the SFIP exist for both building coverage and personal property coverage. These limitations on coverage, when applied to an NFIP claim, will significantly reduce the amount paid at the time of the claim. The definition of a basement under the SFIP is “any area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.”
Many claims are determined based on the relation of the lowest interior floor to the exterior ground level in contact with the home’s foundation. Positive drainage is described as the ability of water to flow away from a building toward the boundary of the property without backing up into the building. When the ground slopes toward the building, or there is a flood mitigation barrier intended to block water on the other side, a negative drainage situation may arise forcing floodwater towards the home. Using this concept, negative drainage is the primary factor in determining if the lowest floor of the structure is below grade.
If the negative drainage situation resulted from the construction of a flood mitigation barrier designed as protection from a flood source on the other side of the barrier, coverage will be restricted. This practice may discourage policyholders from taking such actions to reduce their flood risk.
The NFIP’s Standard Flood Insurance Application and associated training and underwriting materials do not provide guidance to an agent or adjuster that can be used to identify when positive/negative drainage occurs. In addition, the Mitigation Directorate’s publications describing flood risk reduction methods fail to indicate that taking certain certain measures, could impact the NFIP insurance rating and/or coverage available for the mitigated structure. If the concept of positive/negative drainage is to be applied as it has been in the field, the concept should be applied consistently throughout the country at the time of issuing building permits, underwriting NFIP policies, and adjusting claims under the NFIP.
Here is a link to David Stearnett’s report for the calendar year 2017, published this Spring.
