"The only thing that stops God from sending another flood is that the first one was useless."
        –Nicholas Chamfort (1741 – 1794)

I think a person named "Noah" has been building an ark in Florida because it has been raining, raining some more and, just when you thought it would stop, it rains a lot more. Over the weekend, some attorneys in the panhandle were curious about referring clients with flood claims caused by this drenching. At first they thought "groundwater" was excluded under the all-risk and National Flood policies. However, I believe policyholders with damage caused by very bad rainstorms may be covered under the National Flood policies.

The Flood insurance policies sold under the National Flood Program cover damage caused by "flood." Flood is defined in the policy as:

1. A general and temporary condition of partial or
complete inundation of two or more acres of normally
dry land area or of two or more properties (at least
one of which is your property) from:
a. Overflow of inland or tidal waters;
b. Unusual and rapid accumulation or runoff of
surface waters from any source;

A friend of mine who went through the Windstorm Network‘s flood training told me that the National Flood instructor gave an example of water from an open fire hydrant accumulating so much water over a city block that coverage would be afforded. The current deluge fits that definition.

Where a substantial amount of water enters into a structure during and after bad rains, we should expect to have flood claims under this policy. Where there are claims against any insurer, including National Flood, there are going to be denials and legal fights. Such events seem to be the nature of property insurance claims, and National Flood is no different.

In Donahue v. Am. Family Mut. Ins. Co., 2006 U.S. Dist. LEXIS 9501, 11-13 (D. Minn. Mar. 6, 2006), the issues concerned the definition of "flood” and the proof needed to obtain coverage following heavy rains. The Court’s discussion is revealing:

"American Family asserts that Donahue’s claimed losses did not result from a "flood" as defined by federal law and the Policy. American Family asserts that Donahue cannot show that two or more properties were all or partly inundated with water. American Family contends that Donahue has not offered any opinion as to the depth of the standing water she observed, other than to indicate that the water was not deep enough for her to have considered it "ponded." Further, American Family asserts that there is no evidence that the area in which Donahue describes having seen standing water is "normally dry land area." American Family contends that Donahue acknowledges that the area where she observed the water was a "swale" between her house and her neighbor’s house. Additionally, American Family asserts that there is no evidence of any substantial rapid accumulation of surface waters or runoff from any source.

American Family also asserts that Donahue cannot rely on statements by casualty agents responding to her claim as evidence that her property had sustained a flood. American Family cites 44 C.F.R. § 61.5(e), which states, "accordingly, representations regarding the extent and scope of coverage which are not consistent with the National Flood Insurance Act of 1968, as amended, or the Program’s regulations, are void, and the duly licensed property or casualty agent acts for the insured and does not act as agent for the Federal Government, the Federal Emergency Management Agency, or the servicing agent." Pursuant to that regulation, American Family asserts that the statements made by casualty agents upon which Donahue relies are not binding on American Family as a matter of law and should be disregarded.

Donahue, on the other hand, asserts that the fact that Edina received rainstorms between June 23 and June 25, 2003, provides sufficient evidence to conclude that heavy rains had inundated the area. Donahue also contends that she observed standing water between her home and her neighbor’s home after the storm. Further, Donahue asserts that the area between the two homes is normally dry… Additionally, Donahue contends that the Court should assume that the Log entry "GFC" stands for "a general condition of flooding." …

The parties agree that Donahue must show that "two or more properties (at least one of which is [Donahue’s] property)" suffered "[a] general and temporary condition of partial or complete inundation … from … unusual and rapid accumulation or runoff of surface waters from any source[.]" … Neither the Policy nor the regulations define "inundation." See 44 C.F.R. § 59.1. "Inundation" commonly means "a rising and spreading of water over land not usu[ally] submerged." Mathews v. Farmers Ins. Co. of Oregon, 2005 U.S. Dist. LEXIS 39848, No. 04-6117-AA, 2005 WL 1565261, *8 (D. Or. June 27, 2005) (quoting Webster’s Third New Int’l Dictionary (unabridged ed. 1993))."

There were two things that worried me from the policyholder’s perspective when reading the case. First, never believe the flood adjuster. The federal law presumes everybody, government employee or not, has notice of and know the federal regulations as well as the adjusters. An adjuster cannot bind the government, which is the ultimate paying entity under the National Flood Program. I know the attorneys reading this are wincing, but everybody gets the message–you rely on the federal flood adjusters at your own peril.

Second, the policyholder, after listening to the adjuster, appeared to have little evidence regarding the extent of the flood. Why should she? She was listening to the flood adjuster–BIG MISTAKE.
I had a feeling that this federal judge was about to clobber the poor lady with the flood claim. He did:

"The Court finds that, as a matter of law, Donahue cannot show that two or more properties were all or partly inundated with water. The Court rejects Donahue’s assertion that because Edina received rainstorms between June 23 and June 25, 2003, the trier of fact may conclude that heavy rains had inundated the area. Here, Glanzer stated that although parts of Edina sustained storm damage, there was no reported storm damage on Park Terrace, which sits at a higher elevation than other areas…Thus, the evidence here shows that Park Terrace, where Donahue resides, did not sustain storm damage even though Park Terrace is part of Edina.

The Court rejects Donahue’s assertion that the Court should assume that "GFC" stands for "a general condition of flooding" without any supporting evidence. Moreover, the Court finds that the plain language of 44 C.F.R. § 61.5(e) renders "void" any "representations regarding the extent and scope of coverage which are not consistent with the National Flood Insurance Act of 1968, as amended, or the Program’s regulations." Thus, the Court finds that statements such as "GFC" in the Log do not show that Donahue demonstrated that Donahue’s losses resulted from a flood as defined by the Policy.

Further, without knowing the depth of the standing water, it is unclear whether the water "inundated" the properties. Moreover, Donahue acknowledges that the area in question was a "swale" between her house and her neighbor’s house. A "swale" is "a low-lying or depressed and often wet stretch of land." Merriam- Webster’s Collegiate Dictionary 1189 (10th ed. 1998). Because water is expected to collect in a swale, Donahue cannot establish that the existence of standing water in a swale revealed a partial inundation even if Donahue contends that the area is normally dry. Additionally, there is no evidence of any substantial rapid accumulation of surface waters or runoff from any source. Viewing the evidence in the light most favorable to Donahue, the Court finds that Donahue cannot establish that her losses resulted from a "flood" as defined by the Policy.

B. Exclusions

American Family next asserts that the conditions which caused Donahue’s damages were substantially confined to her dwelling and thus excluded by the Policy. Donahue does not rebut American Family’s assertion. Additionally, American Family asserts that the cause of Donahue’s damage was the overflow of a sump pump as the result of seepage caused by heavy rainfall, another exclusion under the Policy. Donahue admits that water overwhelmed her sump pump and that ground water seeped through her foundation. However, Donahue asserts that both situations are covered by the Policy if there is first a determination of "a flood in the area." …

First, the Court finds that the conditions that caused Donahue’s damage were substantially confined to her dwelling, and thus excluded by the Policy. Here, there is no evidence that the conditions that caused Donahue’s damages extended beyond her own home or property. See Bull’s Corner Restaurant, Inc. v. Director of FEMA, 759 F.2d 500, 503–04 (5th Cir. 1985) (affirming the district court’s conclusion that the damage resulted primarily from a condition solely related to appellant’s premises where only one adjacent property experienced water entry). Further, there is no evidence that her street was submerged in water or that water entered any other home on her block. Although some other areas of the Twin Cities may have been subjected to flooding as defined by the Policy, there is no evidence that Donahue’s immediate neighborhood experienced flooding. See Mussoline v. Morris, 692 F. Supp. 1306, 1316 (S.D. Fla. 1987) ("the correct focus must be upon the plaintiff’s immediate neighborhood, rather than the Miami area, and upon the amount of damage sustained by neighborhood premises, to determine whether a general condition of flooding was present.") On this record, the Court concludes that the conditions that caused Donahue’s damages were substantially confined to her dwelling as a matter of law and are excluded from coverage under the Policy.

Second, the Court finds that the cause of Donahue’s damage resulted from water that discharged or overflowed from a sump pump or that seeped or leaked on or through the covered property–additional exclusions under the Policy. Donahue correctly asserts that both situations are covered by the Policy if there is first a determination of a flood in the area. However, the Court has determined that Donahue cannot show that there was a flood in the area. Therefore, the exclusions apply to bar Donahue’s claim."

Policyholders can learn from cases where coverage is denied. Getting the facts that fit the specific definitions under the policy are extremely important with National Flood Insurance claims because those claims are determined by federal codes and regulations. In those instances, forget about state insurance law and follow the flood law interpreted by federal courts.

Most important,as I indicated in a prior post, Important Reminder on Deadline for Filing Federal Flood Proofs of Loss, file your federal proof of loss on time and completely. Do not trust your flood adjuster to get the amounts right.