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Flood Insurance

Common Problems

Adjuster refuses to process an advance payment request.


FEMA states that the adjuster must notify the insured of a partial (advance) payment. “If the insured requests a partial payment, the adjuster must prepare documentation necessary to support the amount of payment requested, including a Proof of Loss (shown on page A-29). The partial payment should not be for more than 50 percent of the anticipated total claim and preferably should be made against the contents claim”.

For more information go to:
http://www.fema.gov/nfip/authreq.shtm see paragraph C. 2. L.

In actuality, the regulations require a proof of loss to be submitted, not that it be completed by the adjuster. FEMAINFO.US has examples on file whereby the insured submitted their own proof of loss and requested an advance. After months of delays, the advance payment was processed.

Nevertheless, we have received many complaints about carriers, examiners and adjusters refusing to honor a partial (advance) payment request. These denials in large part led the current Cohen, Milstein Class Action lawsuit

The entire complaint can also be viewed.

Flood adjusters do not get paid until the proof of loss is signed. Many victims cannot afford to begin repairs without an advance payment. In these cases victims report they felt a significant reduction of stress after receiving such payments. Likewise, it is generally known in the claims industry such payments often cause victims to be less willing to sign a proof of loss prior to receiving contractor’s estimates and proposals.

FEMAINFO.US has first hand accounts of adjusters refusing to honor partial (advance) payment requests. In one case we have first hand knowledge the adjuster was told that an elderly couple remained homeless while the adjuster’s proof of loss remained nearly thirty percent short. The adjuster’s response, “Well, I really don’t think the insurance company has any interest in issuing an advance. They really want to get this wrapped up.” Ultimately, the insured received their entire settlement – nearly nine months after the loss. They were unable to make repairs as necessary because they could not make the contractor’s payments. They felt forced to use lesser quality materials than they originally had. Now they live with the constant reminder of their experience.

No action was taken against the adjuster.

The carrier was named in the Cohen, Milstein Class Action lawsuit by another victim. The entire complaint can also be viewed.


Adjuster equates direct physical loss with direct physical water contact.

This is perhaps the single largest misconception held by flood adjusters. For years the Adjuster Claims Manual contained a sentence, contrary to the CFR, that made this assertion.

On March 24 th 2004, FEMA’s NFIP Section Chief Charles Plaxico and NFIP Claims Director James Shortley made clear such a position was errant. After repeated requests, FEMA issued a claims guidance memo on May 7 speaking to the issue.

Additionally, on July 21, 2004, NFIP’s Bureau and Statistical Agent provided agent training at CSC offices in Lanham, MD. More than 50 agents heard the following exchange.


Q. Before we move on, now that we are talking

about RCV, can you please explain RCV? I am not

asking about a live loss, but rather, what should

agents explain to their clients as far as what the

policy pays for, in the case of RCV, in the event

that a covered peril is affected by the flood? Is

it the Program's intention concerning RCV to

restore the loss to its pre-loss condition?

A. "The policy pays upon the Proximate Cause ...

the Domino Theory of insurance ... The unbroken

chain of events. Because the original cause was

flooding, as defined, (his slide stated the policy

language - 2 or more acres or two adjacent

properties) the loss would be covered under the



Q. In other words, is the policy intended to

restore the RCV loss to its pre-loss condition?

A. Well, the policy can never do that because the

policy always contains a deductible.


Q. But not withstanding the deductible, in

regards to covered perils, will the line item

be restored to its pre-loss condition?

A. Yes.

Subsequently, on August 12, 2004 NFIP Claims Director Jim Shortley conducted an adjusters briefing in Dare County North Carolina. Mr. Shortley attempted to clarify this issue. Despite his best efforts, FEMAINFO.US has obtained proof of loss forms completed just days later. Once again, the adjuster failed to take NFIP’s instructions into account. The result was another pennies-on-the-dollar claim.

FEMAINFO.US has the videotape of the meeting, the third-party statements regarding the adjuster and third-party adjusting firm’s conduct, and copies of the proof of loss.

FEMA was made aware of this, in writing, immediately. To date, we have not received notice any corrective action has been taken.


Adjuster states the policy does not pay for mold cleanup.

This is one of the more common complaints we hear, yet FEMA documents do not support this. Instead, we have numerous cases where mold cleanup is paid for, and using the latest science – not just Clorox, soap and water as some adjusters offer.

The May 7, 2004 NFIP claims guidance memo speaks to this point.

Mold can pose a serious health risk especially to those people highly sensitive to it. For more information refer to Mold Information.


Adjuster states the policy does not pay for mold, mildew or moisture damage.

The policy states, indirectly, such damages are covered provided the loss resulted from a flood. Agents have been trained all covered items damaged as a result of an unbroken chain of events resulting from the flood are covered.

Several documented examples of NFIP’s payments for these types of losses are as follows:

1) An air conditioning compressor was torn loose from the refrigerant lines. The lines are contaminated and the air conditioning contractor certifies that no guarantees can be made as to the reliability of the equipment. Although the air handler was thirty feet above the floodwaters, it is covered.

2) Floodwaters entered the crawlspace and came within inches of the wooden floor joists, yet water never contacted the joists. Nevertheless, the moisture content of the joists rose to 25% and within days the hardwood and tile floors above were damaged. The hardwood curled and the tile came loose. Wall to wall carpets became loose as well. Doors became inoperable and drywall cracks developed.

This loss was inspected by FEMA Deputy Director Trey Reid and NFIP Claims Director James Shortley. The 85K originally offered by the adjuster jumped to 250k.

We have numerous other cases where NFIP has paid such claims.

Another issue raised by adjusters is the insured failed to mitigate. In other words, the policyholder failed to take reasonable steps to prevent additional damage such that the carrier and/or adjuster refuse to pay for mold, mildew or moisture damage.

First, a distinction needs to be made between mold contamination and mold damage. Mold damage generally occurs after a period of time. In regards to construction materials this is generally a prolonged time. Mold contamination on the other hand can occur within hours.

Moisture damage to construction materials also generally occurs over several days or more. One exception to this could be extremely porous or delicate materials.

In all of these cases, FEMAINFO.US has documents whereby the NFIP approved payment for these types of losses, contrary to positions held by some adjusters.


Adjuster states the flood policy only pays for the first four feet of sheetrock.

FEMAINFO.US has numerous cases contrary to this. FEMAINFO.US also has videotape of NFIP trainers instructing adjusters the policy is intended to restore the victim to its pre-flood condition. More importantly, FEMA has gone on the record numerous times stating the policy is intended to restore the policyholder to its pre-flood condition. See Direct Physical Loss Problem above.

It is unlikely your home, prior to the loss, had corner bead with breaks four feet above your floor. Your home should not have them after the loss either. FEMAINFO.US has documented cases where NFIP adjusters properly allowed for such repairs.


Adjuster states the flood policy was never intended to restore the policyholder to its pre-flood condition.

Documents show that Congress intended for the NFIP to restore flood victims to their pre-flood condition. FEMA has publicly stated the same on numerous occasions.

In fact, the NFIP Reauthorization signed into law on June 30, 2004 by President Bush includes a GAO investigation into NFIP related claims practices. The law reads in part,


(a) STUDY- The Comptroller General of the United States shall conduct a study of--

(1) the adequacy of the scope of coverage provided under flood insurance policies in meeting the intended goal of Congress that flood victims be restored to their pre-flood conditions, and any recommendations to ensure that goal is being met;

(2) the adequacy of payments to flood victims under flood insurance policies; and

(3) the practices of the Federal Emergency Management Agency and insurance adjusters in estimating losses incurred during a flood, and how such practices affect the adequacy of payments to flood victims.

(b) REPORT- Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit to Congress a report regarding the results of the study under subsection (a).”


Adjuster states you must sign his or her proof of loss.

FEMAINFO.US has numerous cases where the adjuster told the insured Federal Law required them to sign the proof of loss form.

In fact, this practice is one of the bases for the current class action suit.

Section VII J. 7 states:

"The insurance adjuster whom we hire to investigate your claim may furnish you with a proof of loss form, and she or he may help you complete it. However, this is a matter of courtesy only, and you must still send us proof of loss within 60 days after the loss even if the adjuster does not furnish the form to help you complete it."

The adjuster does not get paid until he or she has a signed proof of loss.


Adjuster states you must sign a proof of loss form before you receive estimates.

In many cases it is unlikely a policyholder will be able to obtain proposals, let alone complete repairs prior to the sixty day deadline for filing a proof of loss.

It is not unusual after a large event such as a hurricane for contractors to be overwhelmed with business and unable to provide estimates in time to make the sixty day deadline. In some cases FEMA extends the deadline. In the case of hurricane Isabel, FEMA extended the deadline by another sixty days approximately three weeks prior to the original deadline.


Adjuster states you must sign a proof of loss form that contains a claim for damages less than you believe you are entitled to.

This issue has plagued recent storm victims and is one of the bases for the current Cohen, Milstein Class Action lawsuit

Many recent victims have encountered this tactic. In some cases they filed their own proof of loss, enlisted the help of FEMA officials, enlisted the help of their federal legislators and/or changed the amount of damages on the adjuster prepared proof of loss.


Adjuster grants permission for repairs to proceed.

Section VII Paragraph J. 8 of the Flood Policy states:

“We have not authorized the adjuster to approve or disapprove claims or to tell you whether we will approve your claim”.

Numerous examples exist whereby adjusters grant permission to victims to proceed with work, hire specific contractors, or otherwise incur costs. Next, the insurance company or third party administrator disallows the claim citing the above language.

Last Modified: 090404 1253

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