By Meg Waters
Some of our local politicians are working to convince FEMA to extend deadlines that essentially prohibit homeowners affected by last September’s flood from filing a lawsuit against the National Flood Insurance Program (NFIP).
Shortly after the flood, the NFIP sent a certified claims adjuster to assess the damage on each property that has flood insurance coverage. Many homeowners are unhappy with their initial settlement offer, which is not uncommon in disasters. According to New York’s Touro College Law School, many survivors of Hurricane Sandy received around half of what it will cost to repair, replace, or rebuild their homes. The fairness of a settlement usually depends on the quality of work provided by the adjuster who looked at the property.
“The National Flood adjusters have varying levels of expertise and understanding of what’s covered under a flood policy,” says David Charles, an insurance adjuster and claims consultant who serves as an expert witness in flood insurance cases across the country. “Certification means you have to go to a one-day seminar every year. And if you look at a large number of their estimates, there’s often a broad spectrum of things they missed. In case after case, I see that the National Flood adjuster has taken the low-hanging fruit, the things that are easy to write up, while the things that are difficult to write up are left on the table.”
Even for the problems the adjuster does catch, the estimate for cost of repairs is often low. “One of the biggest things we’re seeing in this case is that they’re using computer programs to get prices that are way too low for the Boulder area,” Charles says. “It’s much more expensive to build there.”
Boulder County has hired Charles to help some local homeowners file supplemental claims with the goal of increasing the amount they receive from the NFIP. He’s confident that most of these homeowners will get more money as a result of his efforts. “It all comes down to how you document it,” he says. One local homeowner took matters into his own hands and filed a supplemental claim himself, and as a result increased by 75 percent the amount of his initial NFIP settlement.
However, Charles says, another problem looms. Homeowners who aren’t satisfied with their NFIP settlement even after filing a supplemental claim have little recourse. When the National Flood adjusters came out right after the flood, each homeowner received an estimate of the damages and had to sign a “proof of loss” form with numbers that matched the estimate.
“The proof-of-loss form is the basic document in which you make a written demand to an insurance company and say, ‘This is how much I believe that you owe me,’” Charles says. “By signing the proof-of-loss form, these folks signed a legal document that said, ‘This is all I have coming to me.’ If the Flood Insurance Program offered them $75,000 right away, that might have sounded like a good deal. But when a contractor came out a few months later and said it would cost $140,000 to repair the damage, then they realized they’d been ripped off.”
Unfortunately, the proof-of-loss forms locked homeowners into the Flood Insurance adjusters’ numbers from a legal perspective. They can’t sue the NFIP for more than the amount on the proof-of-loss form they filed before the November 2013 deadline.
By default, anyone filing a Flood Insurance claim has to sign a proof-of-loss form within sixty days of the disaster. “In no other part of the insurance world do you have to sign a proof-of-loss within sixty days of the date of loss,” Charles says. “Two years is the standard in the industry on a homeowner’s claim.”
The deadline is set by the statutes that established the NFIP, but FEMA, which administers the program, has the power to extend it. Usually FEMA does. “Every place I’ve ever been on a storm, in all my thirty-six years doing this, if it’s a big enough storm they extend that deadline either to six months or a year,” Charles says. “On Superstorm Sandy, they instantly extended it to one year, without anyone even requesting it, because they knew it’s difficult to put all your documentation together in sixty days. And since then it’s been extended two more times, so homeowners there ended up having two years to file proof-of-loss forms. We had people in Colorado who didn’t even get back into their homes in sixty days. How could they possibly know after sixty days how much their damage is worth?”
It’s an issue former Lyons Mayor Julie Van Domelen and current Mayor John O’Brien are tackling. They’re jointly sending a letter to FEMA encouraging the agency to extend the proof-of-loss deadline for NFIP claims related to the Colorado flood. If homeowners could file a revised proof-of-loss form that reflects everything they’ve learned since November about the cost to repair their homes, they would at least have the option of suing the NFIP if they still weren’t happy with the settlement they received on their supplemental claim. Unless Van Domelen and O’Brien can spark some action by FEMA or Congress, though, the supplemental claim will be the end of the road for flood-affected homeowners.