Question: We have a flood claim on a property that has suffered water damage to both the dwelling and contents. The policy has coverage for the dwelling, and also has coverage for the contents.
The contents are being restored to pre-loss condition and will be put in storage until repairs to the dwelling are complete. Is the cost of the storage covered under the policy?
— Texas Subscriber
Answer: The flood policy pays to relocate property to protect it from flood or the imminent danger of flood. The limit is $1,000 and the coverage applies for 45 days, but the property must be moved before the flood occurs. The exclusions section states that the policy only pays for direct physical loss from flood; additional living expenses, loss of access to the property, loss of use of the property are not included. Therefore the cost to store property until the dwelling is restored is not covered. The property is not relocated to prevent damage from flood, it is simply being stored until the property has been repaired.
Flood definition clarified
Question: A commercial endorsement defines "flood" as follows: A general and temporary condition of partial or complete inundation of two or more acres of normally dry land or of two or more properties (at least one of which is your property) from unusual or rapid accumulation or runoff of surface waters from any source.
The insured had building water intrusion from surface runoff of less than two acres of water inundation of normally dry land. Another property not adjacent or contiguous — not directly connecting or neighboring but several properties away from insured — also sustained dwelling loss by runoff of water from the same storm. To qualify as flood, do the two properties that sustain damage need to be connected properties or directly next to each other?
— Texas Subscriber
Answer: Unfortunately, the definition does not make it clear whether the properties must be connected. Our inclination is that they do not need to be adjacent because the definition does not say so. However, that leaves a lot up to interpretation, such as how far away can two properties be to qualify?
We contacted the Federal Emergency Management Agency (FEMA) for clarification, and they said, "The two or more properties and/or acres referenced in the definition of a 'flood' must be neighboring (contiguous) properties. The properties/acres may not be separated."
Handling flood damaged car parts
Question: Our insured recently sustained a flood loss to their home. Prior to the flood, the insured had removed the rear seats of their Lexus SUV and they were sitting on the floor of the garage and were damaged by the flood waters.
The flood adjuster has advised the insured that there was no coverage under the flood policy as they are parts of the insured vehicle and therefore excluded.
We are questioning the denial as the seats were no longer part of the vehicle but sitting on the floor so does that not make them contents?
— Arkansas Subscriber
Answer: The flood policy excludes motor vehicles and their equipment and parts; so even though the seats were removed and were in the premises, they are still parts to a motor vehicle, and as such are excluded. The denial is correct.
Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit www.nationalunderwriter.com/FCS.
Covered property normally must suffer insured damage to trigger a flood policy claim. (Photo: iStock)
The cost of preventing further damage
Question: Our client owns a strip mall, which was damaged by a flood. He was insured through the National Flood Insurance Program for building damage only. His tenants' property was not damaged by the flood. However, it will need to be moved around, probably within the building, and covered to protect it during the repairs to the building.
It is our position that the cost of protecting the tenants' property from damage during insurance repairs to the building should be covered under the building owner's flood policy. The insurance company is taking the position that these costs are not covered. It seems to us that the cost of necessary preparations to protect any property (the landlord's or the tenants') is as much a part of the repair costs as the actual repairs themselves.
If the cost of protecting the tenants' personal property is not covered under the building's flood policy, would it be covered under the tenants' flood policy, even though the tenants' personal property suffered no damage?
Please give us your opinion.
— Missouri Subscriber
Answer: If the contractor you hire to repair the building damaged your tenants' property in the course of his or her work, he or she would be responsible to the tenant for the damage. The contractor, therefore has a responsibility to protect the tenants' property from damage during the repair of the building. The contractor's cost of providing this protection is as much a cost of doing business as is buying the supplies to make the repairs.
Since the cost of protecting the tenants' property is a cost of your contractor's doing business, it should be figured into the total cost of repairing your building. As part of the cost of repairing your building, the cost of protecting your tenants' personal property is covered under your building's flood insurance policy, because your contractor could not proceed with repairing the building without taking steps to protect the tenants' property.
In answer to the second part of your question, covered property normally must suffer insured damaged to trigger the policy. The standard flood insurance policy issued under the National Flood Insurance Act does provide coverage for the expense of moving personal property out of a flood harm's way to protect it; but in your case, the flood has come and gone with the property suffering no damage. Since there was no flood damage to the tenants' personal property, their flood policy would not cover the cost of protecting the property while the building is being repaired.
Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit www.nationalunderwriter.com/FCS.
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