NCSI

NCSI

Flood Insurance Claim Adjusting

Requirements and Procedures

The following are guidelines that describe, in a general sense, requirements and procedures that should act as a road map for experienced flood adjusters handling claims assigned to them by NCSI. All policy provisions and conditions are not included. Please always refer to the Standard Flood Insurance Policies (SFIP).

Please note that newly rewritten editions of all three SFIPs are currently in the approval process. These polices may be effective as soon as December 31, 2000. These requirements and procedures will comply with all coverage changes both reductions and expansions that apply to the new policies.

A. Qualifications

1. The adjuster’s NFIP certification letter must be in our file. The adjuster’s flood certification number must be printed on the Closing Report.

2. The Errors and Omissions (E&O) insurance certificate must be in our file. The renewal declarations page is required annually.

3. A résumé and/or sample of the adjuster’s work product may be required.

B. Loss Assignments

1. Policyholders must be contacted within 24 hours from the adjusting firm’s receipt of claim. If contact is not made within 24 hours it must be explained.

2. Loss must be inspected within five (5) days from receipt of the claim. An explanation is required if the property is not inspected within the five-day (5) requirement.

3. Determine if an advance payment is needed. Complete the Advance Payment Proof of Loss at the time of inspection and fax it immediately with the Preliminary Report.

4. Verify mortgagee information at the time of inspection. Supporting documentation should be sent for any suggested change.

C. File Maintenance & Reporting Requirements

1. Reporting/Diary System

1. A fully completed Preliminary Report should be received in our offices within fifteen days of assignment. When feasible, all reports may be faxed. If a report includes photographs, please do not fax it.

2. Status reports should be received in our offices every thirty days after the initial fifteen days.

3. Closing Reports should be received in our offices within forty-five days of the assignment. The adjuster bill should be the first document we see. If applicable, include a statement sheet just below the bill that the proof of loss was sent to the policyholder and is not included with the report.

4. The Proof of Loss, signed by the named policyholder(s), should be sent by US First Class Mail to our offices within sixty days of the date of loss. If the adjuster has the signed Proof of Loss and is going to overnight or send it with the Closing Report or by itself, use of the more expedient mailing method is approved.

2. During times of catastrophe, do not fax and mail preliminary and status reports. Please do one or the other.

3. A copy of the Preliminary Report should always be provided with the Closing Report.

4. Return policyholders’ phone calls within 24 hours.

5. Return NCSI’s phone calls within 24 hours.

6. Identify all documents with the policy number, date of loss, and the named policyholder(s).

7. Always establish and state whether or not there was a general and temporary condition of flooding on the date of loss that caused the claimed damage. In these cases, the adjuster may have to canvas the area, and interview neighbors and local authorities.

8. Closing Reports must be reviewed by the supervisor in your office before forwarding them to our offices.

9. If substantial damage or improvement is a possibility, the Property Damage Assessment (PDA) form must be faxed to the NFIP Bureau and Statistical Agency (BSA) at (800) 457-4232. A copy of the PDA must be included in your Closing Report to NCSI along with verification that it was sent to BSA, when it was sent, and to whom. The adjuster should also discuss with the insured, if ICC possibilities exist.

10. Before the information we provide you on the Coverage Verification Sheet is accepted, the adjuster should verify that it is the correct information. Any differences should be supported in the Narrative Report and with photos.

D. Building Losses

1. Scope of coverage in basements and below the lowest elevated floor of a Post-FIRM elevated building.

1. The following Building Elements are covered:

· Foundation elements, required utility connections, sump pumps, well water tanks, oil tanks and the oil in them, cisterns and the water in them, natural gas tanks and the gas in them, pumps and/or tanks used in conjunction with solar energy, furnaces, hot water heaters, air conditioners, heat pumps, electrical junction boxes and circuit breaker boxes, clean-up, and elevators, dumbwaiters, and their equipment if installed below the Base Flood Elevation (BFE) prior to 10/01/87

· Building Elements covered only in basements are: unfinished and unpainted drywalls and ceilings including fiberglass insulation.

2. The following Building Elements are not covered:

· Improvements such as finished walls, floors, and ceilings. Building equipment and fixtures not specifically covered.

4. Contents, with the exception of washers, dryers, freezers and the food in them (insured must carry contents coverage) are not covered (See - Personal Property).

Note: In the case of elevated buildings, coverage limitation applies only to Post-FIRM elevated buildings in special hazard areas designated as zones A1-30 (AE), AH, AR, AR/A, AR/AE, AR/AO, AR/A1-30, and V1-30 (VE).

2. All building damage estimates must be detailed - area by area, room by room, and line by line. Only itemized estimates on a Unit Cost Basis are acceptable. Include the Replacement Cost, Depreciation, the Actual Cash Value, and all measurements.

3. A diagram(s) of all insured structure(s) must be provided with the estimate.

4. A Narrative Report is required for all claims and should identify any special issues or changes in the property. The Narrative Report should include, but not be limited to notes involving prior losses and repairs, Salvage (See D., 18.below), and possible Subrogation.

5. For the purposes of flood claims “Basement” means any area of the building having its floor sub-grade (below ground level) on all sides. If you can walk out at the natural grade, the basement restrictions do not apply. All walkouts must be documented by photos showing the exterior and interior at the point of entry including the relationship with the natural grade.

1. Land subsidence, seepage and sewer backup are subject to an additional $250.00 deductible if there is no exterior water line or other evidence that the damaged building was physically touched by flood waters.

Coverage exists if the following criteria are met:

1. There is a general and temporary condition of flooding in the area.

2. The flooding is the proximate cause of the land subsidence, sewer backup, or seepage.

3. The damage occurs no later than 72 hours after the flood has receded.

4. The insured building must be insured at the time of loss , for at least 80% of its replacement cost or to the maximum amount of NFIP insurance available.

7. Do NOT include sales tax or permit fees as separate line items, taxes must be included in the unit cost. Permits are included in overhead.

8. Complete and send a residential building evaluation to support property values. A Marshall & Swift or comparable detailed property evaluation is required on large or total losses and when the Replacement Cost Coverage in Article 3 of the SFIP is applicable.

9. All building items that are to be replaced should be depreciated on a line item basis. Depreciation is recorded in the building estimate’s depreciation column.

10. An Overhead and Profit (O&P) affidavit or signed, accepted general contractor contract is required to allow the full 10% Overhead and 10 % Profit. O&P is not applicable to clean up, carpet replacement, appliances, additional outside service charges (unless there is a general contractor running the job for all these items), or the policyholder’s labor.

11. Prepare all estimates for the entire loss. Do not stop at the building policy limit.

12. Under the Dwelling Policy to qualify for Replacement Cost Coverage (building only) the building must be insured to at least 80% of its replacement cost, the policyholder must occupy risk at least 80% of the calendar year, and the risk must be a single-family dwelling. The Residential Condominium Building Association Policy (RCBAP) is a replacement cost policy with co-insurance provisions.

13. Include brand name, model number, and serial number for all appliances.

14. Only the Dwelling Policy allows coverage for appurtenant structures (limited to garages and carports used only as garages or for storage). Only 10% of the building policy limit may apply. This is not an additional amount of insurance.

15. Additions and extensions must be attached to the main insured building by a common wall.

16. If damage to foundations is not caused directly by washout, undermining, scouring, or otherwise directly by flooding, the policyholder may choose to hire a licensed engineer to support the claim of direct flood damage. The engineer’s report must include the date of the loss, the cause of the loss, and the engineers expert opinion regarding the connection between the damage and the described flood loss. If we, subsequent to our pronouncement that the damage is not caused directly by flooding, determine that the damage is covered by the SFIP, the policyholder will be reimbursed the reasonable incurred cost of the engineer’s report.

17. When applicable, a completed subrogation referral form must be sent with the Closing Report.

18. Salvage recovery must be considered and commented on in every instance. If applicable, the policyholder may be allowed to buy-back salvageable building items. All buy-back items should be clearly identified on the worksheet along with the buy-back credit amount for each item. A salvor may also be utilized. Please call us we will give you the name(s) and telephone number(s) of salvors working in the area. Comments concerning salvage disposition should be included in the Narrative Report. If salvage is not to be considered, indicate why in the Narrative Report.

19. All Other Insurance should be commented upon in the Closing Report. This item is particularly important in determining primary vs. excess insurance when adjusting sewer backup, commercial, and mobile home claims. A copy of the other insurance policy, including the declarations page, and insuring agreement should be part of your Closing Report.

20. Equipment or fixtures are considered building items if they are either installed or bolted down, and will not be removed if the building is sold.

21. Coverage for landings is limited to 16SF plus staircase for ingress/egress.

22. Ranges, refrigerators, and other built-in appliances can only be considered building items. Please refer to Article 4, Coverage A of the SFIP for a complete list of building only items.

23. $750 is available for payment of mitigation expenses specifically noted in the SFIP. The policyholder must supply receipts for supplies and the names, addresses, and Social Security Numbers for family members supplying labor. Commercial risks must have employees payroll documented or Federal minimum wage is implemented.

Building property not covered:

1. Fences, retaining walls, seawalls, bulkheads, wharves, piers, bridges and docks.

2. Indoor and outdoor swimming pools.

3. Open structures and property over water (see policy for exception).

4. Underground structures and equipment including septic systems.

5. Land, land values, lawns, trees, shrubs, plants and crops.

6. Walks, walkways, decks, driveways, patios and all other surfaces located outside the perimeter exterior walls of the building.

E. Personal Property Losses

1. Always adjust personal property losses based on the Actual Cash Value (ACV) of the property. Replacement Cost Coverage is not available for personal property claims. Stock, merchandise, and inventory claims are adjusted at Cost.

2. Sales taxes should be included in the unit cost.

3. There is a separate deductible for building and personal property coverage.

4. Artwork, rare books, jewelry, furs, pictures, frames, etc. in the aggregate are subject to $250.00 limit.

5. Include the age and quantity of all items.

6. Include brand name, model and serial numbers for all major appliances, sound equipment, and computers.

7. Personal property coverage applies if the property is owned by the insured and stored in another building at the property address. The building must have at least two rigid walls, a roof, and the property must be secured from flotation. There may be coverage off premises for 45 days after loss. See the policy for details

8. Prepare all estimates for the entire loss. Do not stop at the contents policy limit.

9. $500 is available for payment of mitigation expenses specifically noted in the SFIP. The policyholder must supply receipts for supplies (truck rental, gas, storage facility, etc.) along with the names, addresses, and Social Security Numbers for family members supplying labor. Commercial risks must have employees payroll documented or Federal minimum wage is implemented.

Personal property not covered:

1. Business property, currency, postage stamps, valuable paper, etc.

2. Personal property in the open;; animals; and; aircraft.

3. Motor vehicles unless used for service of building and not licensed for highway use.

4. Trailers on wheels and other recreational vehicles.

5. Water craft including their equipment.

6. Personal property below the lowest elevated floor of an elevated building or in a basement is not covered except for the following items: washers, dryers, freezers and the food in them. The policyholder must have purchased contents coverage to qualify.

7. Claims for commercial stock, and inventory must be documented with receipts, invoices, inventory, and any other available documentation. Documentation should pre-date the loss. Settlement will be based on the policyholder’s cost (the cost to replace the damaged items) at the time of loss and not the retail price. The documentation must be cross-referenced to the inventory worksheets.

8. Manufacturing businesses must supply invoices for cost of materials, payroll for labor, and an explanation of the manufacturing process to determine the final cost.

9. Salvage recovery must be considered and commented on in every instance. If applicable, the policyholder may be allowed to buy-back salvageable building items. All buy-back items should be clearly identified on the worksheet along with the buy-back credit amount for each item. A salvor may also be utilized. Please call us we will give you the names and telephone numbers of approved salvors working in the area. Comments concerning salvage disposition should be included in the Narrative Report. If salvage will not be a part of the claim, indicate why in the Narrative Report.

F. Manufactured (Mobile) Homes

1. Verify ownership by requesting a copy of the title, registration, or mortgagee or loss payee documentation.

2. Include a completed mobile home worksheet and NADA book value form with manufactured home claims.

3. Manufactured homes are eligible for replacement cost coverage if:

· the home is 16 feet wide and

· has an area of at least 600 SF and

· the policyholder’s principal residence and

· insured to 80% of its value.

4. The date of construction of a manufactured home is the date it was placed on the site or if in a park, the date the park opened.

5. There is no coverage for mobile or manufactured homes located in a SFHA that are not anchored to a permanent foundation. See the Dwelling form, Article 6, paragraph H for additional specifications.

G. Group Flood Insurance Policy (GFIP)

1. The coverage limit is an aggregate amount for both building and contents even though it may be listed as a building limit on the coverage verification sheet.

2. The coverage limit is the same for all GFIP policies, regardless whether the coverage is building only (building owner), for contents only (tenant), or for building and contents (owner occupant). The limits are reviewed annually and are subject to change - the coverage verification sheet will include the correct coverage limit..

3. A tenant is covered for contents only. Proof of ownership is required to cover washers, dryers, and freezers which are normally supplied by the building owner.

4. There is coverage for claims caused by land subsidence, sewer back-up and seepage. There must be a general and temporary condition of flooding and the damage must occur 72 hours or less after the flood waters recede. However, policyholders do not have to satisfy the 80% insurance to value requirement and they are not assessed an additional $250.00 deductible.

5. Building owner policies can be transferred to a new owner with proper documentation. The policyholder is required to notify the NFIP Servicing Agent, when such transfers are made.

6. Tenant policies are rendered void if the insured tenant moves.

7. A $200 deductible applies separately to building and contents claims.

8. The building owner is covered for building if the insured building is tenant occupied. Contents coverage will apply to a building owner, with proper documentation, i.e., receipts and/or the tenants signed affidavit that the contents are owned by the building owner.

H. Residential Condominium Building Association Policy (RCBAP)

1. This is a replacement cost policy with co-insurance penalties. Provide a residential building evaluation to support property values. A Marshall & Swift or comparable, detailed property evaluation is required. The property valuation is required by us to verify that the coverage carried is to 80% or more of the insured building’s full replacement cost. If the insurance carried does not meet this test, a co-insurance penalty may apply (See, RCBAP form, Article 9 - Coinsurance).

2. The coverages extend to all building items for that particular building, including interior building items.

3. A copy of the by-laws is NOT needed. However, by-laws are needed for claims made by condominium unit-owners under the Dwelling form.

I. Prior Losses

1. Always address and document completion of prior repairs and the replacement of personal property paid for in prior losses. Obtain a copy of the file for review and comparison.

2. Any repairs not documented, either by photo comparison or repair invoices, must be deducted from settlement prior to submission to NCSI. If photos can clearly show that repairs were completed, receipts may not be necessary. A list of the deducted items should be included with your report.

J. Photograph Requirements

1. Include photographs of the Front and rear of structure. If possible the house number should be visible.

2. Clear photos of the water line, both interior and exterior are required.

3. Photograph enclosures and machinery, i.e., heat pump, below the lowest elevated floor of a Post FIRM elevated building.

4. Photos of both the interior and the exterior views of walkout areas should be taken to determine if basement restrictions apply. Photos should include the relationship of the walkout to the natural grade

5. Each room included in estimate. Take wide shots of rooms and closeup of damage.

6. Major contents items showing damage.

7. Properly label and identify photos.

8. No digital photos.

K. Increased Cost of Compliance

1. Inform the insured that a copy of the substantial damage letter from the community is required before an ICC claim may be reported.

2. Send insured a letter advising of the ICC process including all the required documents (permits, elevation certificates [before and after elevation], contractor bids, letter of satisfaction of work from the community, and a certificate of occupancy).

3. All documents with the adjuster’s recommendation should be forwarded to us before issuing Proof of Loss form to insured. NCSI will approve the sending of the Proof of Loss.

4. ICC pays for only the actual elevation of the building (to FEMA’s flood plane management requirements), demolition, or relocation of the insured building. Cost to elevate or otherwise mitigate to standards greater than FEMA’s are not covered.

L. Repetitive Loss Program

Background

The Repetitive Loss Property Strategy arises out of a relatively small number of NFIP insured properties that are producing a disproportionate number of losses and causing repeated disruption to the lives of NFIP policyholders. The objective of the Strategy is to reduce both the losses and the disruptions.

To do this it must be determined if there is a cause and effect relationship between physical characteristics of the insured structure and its surrounding terrain and repeated flooding. Decisions will be made regarding possible solutions based on several criteria.

During the course of your visit to the insured property, you may see or become aware of other relevant elements that may be important to the Strategy. You should ask the insured what property is generally damaged in a flooding event (i.e., floor furnace, heat pump, carpeting, drywall, personal property, stock). Another question for the policyholder is if the community has or is to fix any drainage problem associated with repeated flooding. The policyholder may have a letter or other documentation regarding any public works project, which is completed, in progress, or planned. A copy of any such documentation the policyholder will give you should be sent with the Preliminary Report.

We expect that you will make the Program aware of such pertinent things. Therefore, a narrative will be required for each claim discussing your observations, the policyholder’s responses, and any changes. This Narrative Report should be sent with the Preliminary Report along with any photographs supporting your observations.

All Repetitive Loss Properties policy numbers will begin with the “RL” prefix followed by eight (8) numerical digits. Based on the above, the following issues should be considered during the adjustment of the claim file:

1. All adjuster requirements and procedures that apply to other claims assigned by NCSI apply to RLP losses.

2. Review the Repetitive Loss Inspection Form that has been prepared and sent to your firm along with the Coverage Verification Sheet. Any discrepancies you become aware of during your inspection should be noted and highlighted on the inspection report form and returned with your Preliminary Report.

3. It is even more important in RLP claims to carefully complete a Marshall & Swift (or comparable) Property Evaluation prepared for each Repetitive Loss Property claim. The Replacement Cost Value should be one of the items highlighted if it is different from the value included on the Repetitive Loss Inspection Form or the Coverage Verification Sheet. The completed property evaluation may be submitted with your Closing Report.

4. Prior losses should be reviewed for each RLP claim. The SDF will have requested the prior loss claim file from the prior loss carrier’s or the NFIP Direct’s file archives, at the time we receive the loss notice. The adjuster needs to thoroughly review the prior loss file when preparing the claim report.

5. Substantial improvement or damage should be noted and discussed in full. There may be an opportunity for the policyholder to apply for assistance to mitigate the property. The policyholder’s and the community’s position of the substantial damage issue for the insured property should be reported.

6. Special consideration should be given to ICC claim possibilities. An ICC brochure should be left with the insured and the process explained to them.