Partial Flood Proofs of Loss Requesting Only Items In Dispute Are Losers In Flood Claims

Chip Merlin | Property Insurance Coverage Law Blog | February 4, 2019

Flood insurance claims governed by the National Flood Insurance Program are different. The requirements to get paid are strict and must be complied with. Many inexperienced attorneys and public adjusters prepare these claims improperly and the result is that policyholders do not get paid or paid as much as they otherwise deserve. Federal proofs of loss have to be completed fully, properly, and on time.

A case issued last week, Clark v. Wright National Flood Insurance Company,1 involved a situation where the policyholder filed a proof of loss for the undisputed amounts of a flood claim and a proof of loss for disputed items. This is not the way to file a flood insurance proof of loss. A flood proof of loss for all the amounts claimed has to be filed on a federal form, completely filled out and signed. It should have backup and documentation as well. We have discussed and warned about these requirements in:

  • A Warning Regarding Federal Flood Proofs Of Loss
  • What is Enough to Satisfy the Standard Flood Insurance Policy’s “Proof of Loss” Requirement?
  • National Flood Proof of Loss Deadline on Monday – Are You Sure the Proof is Right?
  • Proof of Loss Tips for National Flood Claims Involving Superstorm Sandy

In the reported decision, the federal judge hammered the policyholders and stated the following:

A NFIP participant cannot file a lawsuit seeking further federal benefits under the SFIP unless the participant can show prior compliance with all policy requirements.”…In case of a flood loss to insured property, the insured must satisfy several requirements before bringing a lawsuit….Foremost, the insured must provide a complete, sworn Proof of Loss (POL) within 60 days after the loss, “or within any extension authorized by FEMA.”…

In addition, the proof of loss must include documents supporting the claimed amount, including “[s]pecifications of damaged buildings and detailed repair estimates,” as well as “inventory of damaged property showing the quantity, description, actual cash value, and the amount of loss.”… These are strict requirements….Thus, an insured’s failure to provide a complete, sworn proof of loss statement with supporting documentation “relieves the federal insurer’s obligation to pay what otherwise might have been a valid claim.”

….stating the amount of an invoice and attaching an adjuster’s list of contents losses does not amount to stating the amount claimed under the policy…Plaintiffs did not seek payment for any portion of the items on the contents list in the proof of loss, nor did they sign and swear to the amount in the attached adjuster’s estimate, which would be required under the SFIP to claim those losses…The proof of loss does not even claim the $32,310 from the invoice, it merely states that this is the flood-related part of the invoice. Because the December 2016 proof of loss did not meet the requirements of the SFIP, Wright is excused from paying plaintiffs’ claim. (Citations omitted)

Filing flood insurance claims differs from almost any other form of insurance. The law has been interpreted strictly against policyholders and exacting preciseness seems more important than the validity of the claim under current federal law.

10 Factors to Consider when Adjusting Flood Claims

Patricia L. Harman | Property Casualty 360° | January 6, 2016

As the Midwest begins to dry out from massive flooding, insurance adjusters and contractors from across the country will be working to get covered insureds back to some semblance of normalcy. For those who have flood insurance, the claims process is just beginning, and they will likely have more questions than answers.

Hurricane Sandy, Hurricane Katrina and other major flood events provided some important lessons for all involved in the adjusting and restoration process. Documentation will be critical for both policyholders and adjusters. What does the policy cover? What damage was sustained? What can be replaced and what can be restored?

For adjusters who do not have a lot of experience adjusting flood claims, Canopy Claims Management in New York City offers some recommendations to ensure that critical facets of the inspection aren’t missed and to help reduce the number of claims that may need to be reviewed or reopened at a later date. Canopy was involved in reviewing or mediating over 500 insurance claims after Hurricane Sandy and handled well over 1,000 of their own flood claims for insurers.

Jeff Major, Canopy’s chief operating officer and executive vice president, says it’s critical that estimates be as complete as possible and that pricing can be one of the areas where problems arise. “If Xactimate says that the price is different, then you have to change,” he explains. He says he’s done “five-page estimates just for a kitchen in Xactimate because you have to identify everything.”

Major recommends taking as many photographs as possible. “Years ago, adjusters were mindful of film developing costs, which are a non-factor now. Photographs should be taken of all sides of the risk and the surrounding area, as well as in every room. Each room should have general photos of the room, each showing at least two walls, and then from the other side of the room,” he says.

“Additional photographs of each room should show the types of finishes and construction materials as well as damage, and contents photographs should be taken with special attention to unique and high- or low-value items. As many catastophe adjusters only visit a risk once, having a vast quantity of photographs can answer questions during estimate entry, inventory review and in addressing concerns or questions with insureds or file reviewers. Since claim file submissions usually contain a limited quantity of photographs, it is a good practice for adjusters to have and keep a flash or jump drive for each catastrophe that they work which contains excess photographs in individual files.”

Major also recommends that every risk be fully sketched. “Adjusters should sketch the entire risk, not just sketch the exterior and only take room measurements. Sketching all interior rooms including closets, offsets etc., noting doors and windows will not only allow adjusters the ability to bifurcate room and footprint scope items, it will also allow them to accurately estimate damages. A photograph of the sketch should be taken and included/saved with claim photographs. Later, when entering line items into the estimating system, the sketch will remind estimators which way doors swing, how rooms connect, and help in the orientation of photographs.”

The following recommendations courtesy of Canopy identify areas where adjusters might miss items as they prepare their estimates:

gas line fittings

Oxidizing steel gas line fittings. (Photo: Canopy Claims Management)

1. Gas lines and accessories

It’s easy to overlook gas service, piping, valves and lines to individual appliances. After Hurricane Sandy, rough lines and valves were exposed to salt water, which caused them to rust and deteriorate. Frequently, flexible gas lines were discarded with the appliance, so Major says it’s a good practice to identify the presence of gas service to a property and calculate the costs for payment to the insureds.

He recommends looking at the basement, mechanical room or kitchen scope items and identifying if any appliances are gas (i.e., boiler, water heater, range) and identifying the level of the floodwater. Compare this to the elevation of rough gas lines and service, and calculate either a square or linear foot allowance for payment. In addition, add a shut-off valve, escutcheon and flex connecting line to all gas-fed mechanicals and appliances being replaced on the property.

claims sales tax adjustments

(Image: Canopy Claims Management)

2. Sales tax

Frequently, adjusters’ estimates may not include sales tax for taxable items. Don’t forget to clarify the rate for each state and the items that should be taxed as part of the estimate.

overhead and profit in claims

(Image: Canopy Claims Management)

3. Overhead and profit

Another expense that may be overlooked in an estimate involves overhead and profit (O&P). Where work has already been performed by a contractor directly with a homeowner, the contractor’s materials, labor, tax, and overhead and profit would be included in the invoice. Any work and related line items to be performed by a general contractor should include overhead and profit.

Canopy recommends that if documentation does not exist indicating that the items were excluded from the general contractor’s overhead and profit, then it should be calculated on those items accordingly. Items should be separated to those that exclude O&P and those that should include it. When figuring the cost, calculate the O&P plus tax on all items that should not be excluded in any payments to the insureds. Work performed and costs incurred before a GC was engaged are not included in O&P calculations.

Major says that adjusters estimating losses using estimating software such as Xactimate or Simsol should review and be well versed in the descriptions of each line item they use. “Scope descriptions tell adjusters and estimators what is included and excluded from that specific line item. Using line items that remove dry building components instead of wet will result in underpayments, and adding casing trim to doors when the door line item already includes casing trim will result in overpayments. Making sure that the line items in an estimate accurately represent the estimator’s intent is a best practice.”

flood-damaged contents

(Photo: Patricia L. Harman/

4. Remediation and clean-up

There are a number of factors that can impact the costs associated with the restoration, remediation and clean-up process. Work performed by non-profits or charities at no expense to the insured is usually not payable to the insured under the National Flood Insurance Program (NFIP).

Work performed by the insured can be reimbursed at the federal minimum hourly wage for the replacement only of work covered by the NFIP. A third-party restoration contractor may also perform remediation and clean-up work that could be covered by the NFIP.

Some items may be excluded such as building components and contents in areas that are below the lowest elevated floor since FEMA only allows for the removal or clean-up of specific covered building items.

Any questions about coverage issues can be addressed with FEMA.

subflooring claims

Sandy homes where subflooring was removed in easily accessible areas and not under walls or stairs. Note the saw cuts along the wall edge. (Photo: Canopy Claims Management)

5. Subflooring issues

Following Hurricane Sandy, many estimates included the replacement of damaged subflooring, but the unit cost allowance does not include the added labor to remove and replace the subflooring under interior and exterior walls. Since insureds were not given allowances for the work, Major says it was usually not performed and the subflooring in these structures continued to degrade and compress. There were also many cases where floor sheathing estimates were incorrect, resulting in over and under payments.

If the subfloor is measured from inside the exterior walls, adjust the square foot calculations to the outside, allowing for the square feet under the exterior walls. When the subflooring is listed in the individual rooms, no allowance is included for the subflooring under the interior or exteriors walls. Adjusters will have to identify the appropriate footprint measurements and calculate the correct square footage and costs inclusive of other costs associated.

Frequently, undervalued allowances may result in replacement of subflooring in easily accessible areas, but overlook crucial areas under walls, mechanical and plumbing systems. If contractors cut the subflooring with a circular saw along the wall framing and abutting the new floor to the old floor without adding proper nailers and integrating the sheathing structurally, it will result in a less rigid framing system.

Sheathing claims

A partially gutted home shows tar paper between the exterior wall framing and the exterior sheathing, which would prevent drying efforts from reaching the exterior sheathing. (Photo: Canopy Claims Management)

6. Exterior sheathing

Exterior sheathing is usually made of materials that are less susceptible to flooding and may extend down the side of a house beyond the subflooring to overlap the foundation wall. Frequently when adjusters determine that the subfloor is damaged, they do not allow for replacement of the exterior sheathing. While subflooring is easier to salvage or repair, exterior sheathing is accessible from the interior when drywall and insulation are removed, but cannot be accessed from the exterior side unless the siding and vapor barrier are removed. If siding, insulation, any old layers of siding and the vapor barriers are not removed, it will be difficult to effectively dry the newly saturated sheathing, eventually resulting in rot.

Both sides of the sheathing need to be addressed. The interior sheathing may be cleaned and possibly an anti-microbial agent applied, but only pressure washing the exterior will not address the drying issues for the sheathing. Adjusters should be aware that the dehumidifier and fan allowances for FEMA’s maximum allowed equipment per room or square feet may not be sufficient to dry the exterior sheathing through the vapor barriers. Canopy recommends contacting FEMA about issues concerning a resolution for both the subflooring and exterior sheathing treatments.

Other issues that will have to be addressed as part of the sheathing are vapor barriers, insulation, abandoned siding behind other layers of finished siding, lighting fixtures, shutters, house numbers, mailboxes, doors and windows to name a few.

building components

(Photo: Shutterstock)

7. Removal of building components

Pricing for the removal of building components depends on whether they are wet or dry. Most estimating platforms have specific line items for removing wet components and may even differentiate the categories of water. Canopy advocates that estimating best practices dictate that flood damage should always be estimated on a two-line basis for the removal and replacement of building components. Frequently, the damaged components are removed long before they are replaced.

When two line items are used, who performed the removal and any incurred costs should be identified. Incurred costs should be calculated against the allowance and adjusted accordingly. If no costs were incurred and an allowance for removal is not warranted, then calculate the overpayment accordingly.

toilet fittings

Escutcheon, rough pip and angle stop valve. (Photo: Canopy Claims Management)

8. Scoping toilets and related items

When estimating damages for a toilet, there are a number of related items that need to be included as part of the scope. These include: the metal mounting flange, the stop (shut-off) valve, the supply line from the valve to the toilet, cleaning if the toilet is to be reinstalled, replacement or cleaning of the toilet seat, replacement or cleaning of the rough plumbing, and wrapping or protection of the toilet if it is to remain in a gutted house until its reinstallation.

Stop valves, flanges and mounting bolts are metal and can be susceptible to rust when exposed to salt water. Estimating programs like Xactimate and Simsol have line items to address all of these items as part of the scope. Adjusters should make sure the scope reflects their intent if coverage applies for toilets and related items.


(Photo: Canopy Claims Management)

9. Sealer and paint

There is a perception that the NFIP only allows two coats of paint or a combination of primer, sealer and paint. According to multiple sources, the NFIP has no such restriction in place, and the intention is to put an insured back to pre-loss condition subject to any deductibles and exclusions.

Best practices allow for a coat of primer for new drywall and joint compound, and two coats for green or purple board (water resistant) found in bathrooms, followed by two coats of paint. Any questions should be directed to FEMA for clarification.

adjuster safety

(Photo: Shutterstock)

10.   Adjuster safety

Adjusters are exposed to a lot of dangerous elements following a major flood. Some are easy to see, but many are not. When it comes to water, Major says adjusters should not walk through fast or moderate moving water, or water they can’t see through. “Washed away ground or holes under the surface are tripping hazards, and the suction or pressure of small drains can pull someone under shallow water,” he cautions. “Water moving under parked cars or structures can pull someone down and trap them under the water.”

In addition, flood waters can uproot wildlife from their natural habits, posing a risk from snakes and other venomous creatures.

Electricity is another possible hazard that poses grave risks. “Always confirm the absence or presence of electricity, and practice electrical safety,” adds Major. “Every adjuster should have a non-contact voltage tester with them at all inspections. Klein Tools Cat. No. NCVT-1 Non-Contact Voltage Tester costs less than $20 and can detect 50-1000 volts. An adjuster’s first photograph is usually of the file name with the front of the risk in the background, the second should be of the electric meter on the outside of the risk. While there, checking if the meter is turning, or if the main is live is a best practice.”

There are also risks from mold, bacteria and other contaminants in flood waters. Major says that the second most important tool an adjuster can carry is a 3-M model #6297PA1-A mold and lead particle respirator. Frequent hand washing, particularly before eating, drinking or touching the face, will also help to contain the spread of bacterial contamination to an individual.

Adjusters should be aware of their surroundings when entering an area — looters and other factors could pose a risk to their personal safety. Individuals who have not worked a major catastrophe should know that a city’s infrastructure could be severely compromised by flooding, affecting everything from services like food, gasoline and hotels to washing away roads, signs and other identifying landmarks.


Court Holds Statute of Limitations on Flood Claims is One Year From Date Proof of Loss is Denied

Charles Mathis – Property Insurance Coverage Law Blog – September 25, 2014

On September 15, 2014, United States District Judge, Faith S. Hochberg issued an Order in Kroll v. Johnson, which held the statute of limitations on Superstorm Sandy flood claims is one year from the date the insurance company denies the policyholder’s proof of loss.1

As is the story with thousands of residents on the East Coast, the plaintiffs, Lawrence and Diana Kroll suffered a flood loss to their home during Superstorm Sandy on October 29, 2012. The Krolls, who had a Standard Flood Insurance Policy (“SFIP”) issued by the National Flood Insurance Program (“NFIP”), “allege that they promptly reported the damage, subsequently submitted a sworn ‘proof of loss’ statement, and that defendant denied full coverage.” After their claim was denied, they filed suit against the defendant. Shortly thereafter, the defendant moved to dismiss plaintiff’s lawsuit, “alleging that a one-year statute of limitations bars Plaintiffs’ claims.”

After the plaintiffs initially reported their claim to the defendant, an adjuster from the Federal Emergency Management Agency (“FEMA”) inspected the property:

[F]ollowing the adjuster’s inspection, Plaintiffs were told that their property was a seasonal residence because they did not live there at least 80% of the year. As a result, Plaintiffs were eligible for the actual cash value, rather than the higher replacement cost value of the repairs to their property. Plaintiffs disputed this conclusion via latter, and in response FEMA issued a denial letter on January 14, 2013.

In filing their motion to dismiss, the defendant relied on the January 14, 2013 denial letter as the date starting the one-year limitations period, stating that the plaintiffs’ lawsuit, filed fifteen months later, was time barred.

In opposition to Defendant’s motion, Plaintiffs also include an April 19, 2013 letter from FEMA to Plaintiffs, acknowledging receipt of Plaintiffs’ proof of loss and partially denying Plaintiffs’ asserted losses.

The statute which governs all plaintiffs’ claims under the NFIP is 42 U.S.C. § 4072; the pertinent section of the statute states:

[T]he Administrator shall be authorized to adjust and make payment of any claims for proved and approved losses covered by flood insurance, and upon the disallowance by the Administrator of any such claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance by the Administrator, may institute an action against the Administrator on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in the controversy.2

The defendant argued that the January 14, 2013 letter “constituted a ‘notice of disallowance or partial disallowance.’” Countering that argument, plaintiffs’ argued that the statute of limitations would not run until one year after April 19, 2013, when their proof of loss was denied.

Plaintiffs contend that the statute ties the limitations period to a mailing on ‘such claims’ and that ‘such claims’ refers back to the statute’s authorization of the FEMA Administrator to make payments on ‘claims for proved and approved losses.’ In order to receive payment on claims, policyholders under the NFIP are required to submit a proof of loss. Claims are not for ‘proved … losses’ until they are supported by the required proof of loss. Thus, only a notice of disallowance for a claim supported by proof of loss triggers the statute of limitations.3

Ultimately, the court sided with the plaintiffs while relying on a persuasive case out of the Eastern District of Louisiana, Qader v. FEMA.4 The Kroll court stated that normally a proof of loss must be submitted within 60 days of a loss, but noted the FEMA had extended the deadline of Superstorm Sandy claims for two years. The court referenced the plaintiffs’ arguments and stated, “the proof-of-loss extension creates a two-step appeals process available to policyholders whose initial claim is denied based solely on an adjustor’s report: first, by filing a proof of loss; second, by filing federal suit.” Citing Qader, the court also stated that defendant’s arguments and, “reading of § 4072 would render the proof-of-loss extension meaningless.”

This decision is fantastic news for policyholders still fighting with their Write Your Own (“WYO”) insurance carriers over Superstorm Sandy flood damage. At least at my office, this is cause for celebration.

As always, I’ll leave you with a (mildly) related tune, here’s Rare Earth with I Just Want to Celebrate:

1 Kroll v. Johnson, No. 14-2496, 2014 WL 4626009 (D.N.J. September 15, 2014).

2 Id. at 4. (emphasis added). See also 42 U.S.C. § 4072.

3 Id. at 4. (Internal citations omitted).

4 Qader v. FEMA, 543 F.Supp.2d 558 (E.D.La.2008).

via Court Holds Statute of Limitations on Flood Claims is One Year From Date Proof of Loss is Denied : Property Insurance Coverage Law Blog.