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Requirements for Filing a Property Damage Claim for Flood Policy, Compliance with Obscure Requirements for Full Payment, 60 Day Proof of Loss

March 16, 2016

BULLETIN - REQUIREMENTS FOR FILING A PROPERTY DAMAGE CLAIM FOR FLOOD POLICY - COMPLIANCE WITH OBSCURE REQUIREMENTS FOR FULL PAYMENT - 60 DAY - PROOF OF LOSS

 

The following is necessary information for collecting payment of presently flood damages from a flood policy. These requirements are largely unknown to the general public and non-compliance will preclude supplemental payments to flood victims. These provisions were not enforced for Hurricane Katrina but will be enforced by FEMA in this flood event.

The flood insurance policies are regulated by FEMA and federal law. All flood policies are standard and uniform except for the selected policy limits for building and contents. The flood policies require compliance with an important 60 day deadline in order to preserve the right to receive payment or supplemental payment. Specifically, the 60 day deadline for a flood policy requires the policyholder to file a "Proof of Loss", a sworn statement which substantiates the amount claimed under the flood policy. The Proof of Loss is required under all flood policies. A policyholder is precluded from claiming more than the amount referenced in the Proof of Loss. Therefore, the Proof of Loss must contain the maximum amount of damages to be claimed in any anticipated supplemental claims.

Without a Proof of Loss, your flood insurer will most likely NOT process a flood claim. In some cases, the insurer will begin to process your claim even before the Proof of Loss is filed, but any amount over $7,500.00 must be supported by a completed, signed Proof of Loss. Courts have uniformly ruled that if an insured intends to obtain a supplemental payment, the insured must have first filed a signed Proof of Loss. It is the Proof of Loss that substantiates the amount claimed and fives a federal court jurisdiction over a dispute with flood insurer. Also, the Proof of Loss preserves the right to have a dispute resolved by appraisal. If a policyholder fails to first file a Proof of Loss containing the full amount of damages and then files suit or request an appraisal, the flood insurer will seek to have the case immediately dismissed. FEMA regulations permit FEMA to extend the deadline to file a Proof of Loss at FEMA's sole own discretion.

 

 

The Proof of Loss form must contain supporting documentation, specifically: (1) the formal Proof of Loss form, which must be signed and (2) all supporting documentation substantiating the amounts on that form. The Proof of Loss must include any documentation supporting the damages or supplemental damages. This may include the following documents:

  • An Engineering or Expert Report, if available;
  • A detailed contractor's Scope of Loss or Estimate (the more detail the better, especially as related to specific Sandy damage);
  • Other Reports and Estimates documenting damage (Itemized room-by-room, with unit materials and labor costs);
  • Photographs of damage; and
  • Paid Receipts or Invoices for Completed Repairs.
  • At a minimum, information must be provided to indicate what items or components of the building or contents damaged with an estimate of repair. A flood insurer is under no obligation to process your request for additional insurance money if you do not provide supporting documentation. Claiming that a policyholder "substantially complied" with the Proof of Loss by sending the flood insurer a number of documents is not enough. Simply mailing a completed Proof of Loss with nothing more is unlikely to preserve the underlying claim or supplemental claim. The most current Proof of Loss Form can be found at http://www.fema.gov.

    Flood insurers are considered the "fiscal agent" of the U.S. Treasury. This means that if they process and pay a Proof of Loss that is not substantiated by documentary proof on the flood insurer must pay that money back to the U.S. Treasury. Accordingly, the flood insurers are very stringent about the requirement for documentation that substantiates any part of a claim.

    An alternate method of resolution of a disputed flood claim is "appraisal" which is a formal process under the flood policy, whereby the policyholder and the insurer agree to choose a "competent and impartial appraiser within 20 days after receiving a written request from the other". If the two appraisers, the policyholder's appraisal and the flood appraiser, agree to the amount of loss, then that amount will be the amount awarded. If the two appraisers fail to agree, they will submit their differences to an umpire to be chosen within 15 days. Any decision by 2 of the 3 will be the final amount of the loss.

    If the Appraisal process is invoked, several conditions here apply:

  • A Proof of Loss with Supporting Documentation and the flood insurer failed to agree to the dollar amount sought in the Proof of Loss; and
  • Both the insured and the insurer agree to the Scope of Loss but disagree only as to the monetary value in the Proof of Loss, whether that is based on actual cash value (ACV) or replacement cost. Personal contents typically are replaced as Actual Cash Value (depreciated value) while some of the home's structural repairs can be reimbursed as replacement cost value.
  • I believe this information would be very helpful to the residents and policyholders affected by the recent flood.

    J. Douglas Sunseri

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