The Louisiana Flood of 2016
Unique Challenges Facing Adjusters and the NFIP
Unless you have just returned from another planet (or Polebridge, Montana for some of us), I am sure you have heard, seen and read about the major flooding event which occurred in and around the Baton Rouge area of Louisiana. Record rainfall gave way to both river and street flooding sending flood waters into quiet neighborhoods and subdivisions. These are sections of Baton Rouge and its surrounding communities which historically never or seldom flooded. In many of these areas flood insurance was not “required” (try telling that to a homeowner with water up to the ceiling joists!) and residents did not have flood insurance policies.
It’s a little-known fact that up to 30% of all homes which flood (and have an NFIP policy) are not located in the NFIP’s “Special Hazard” flood zones. Apparently, flood waters neither read nor have a high opinion of the FEMA flood maps!
I just returned from Baton Rouge where I attended the FEMA Flood Adjuster briefing as well as the NFIP Emergency Adjuster Authorization/Certification presentation. Both events were very well attended and both ended with some robust questions from the adjusters and not-so-robust answers from the Federales. In the Feds’ defense, there were some very tough and unique questions asked by the audience that in my 35 years of flood adjusting I had not heard before (and one of them was asked by yours truly!).
First, there is the question of “volunteer” help. In the Baton Rouge event, the number of affected homeowners who had flood insurance was about 1-in-8 to 1-in-5, depending upon who was articulating the numbers. It’s accurate to say, however, that more people DID NOT have flood insurance than those who carried the much-needed federal coverage. Because of this fact and the fact that the people of Baton Rouge, Louisiana, and the “South” in general are more community-based than in some other parts of the country, volunteers, church groups and total strangers helped flood victims as soon as the water started to recede. Even some groups like the “Cajun Navy” rescued flood victims using flat-bottom boats to rubber rafts while the flood waters were still in living rooms and on front porches. The demanding and foul-smelling task of the removal of wet building (structure) and contents (personal property) items from affected homes and businesses was done for “free.”
In many cases, the person(s) doing the volunteer work did not ask the homeowner whether he or she had flood insurance – the workers just went to the job of cleaning out the house(s) of anything and everything that was “wet.” Putting the virtuous morality of community action aside for a moment, the fact of the matter is much of the “tear out” and “debris removal” was completed AT NO INCURRED COST TO THE HOMEOWNER. The question arises, should the adjuster add for tear out and debris removal to his or her estimates when calculating “damages”? If the policyholder did not “pay” a contractor for such services, do we (as adjusters and guardians of the federal coffer) owe for these items?
The answer to that question is far above my pay grade, so I will only give my two cents – of course we owe it to the policyholder! In past events, flood victims often use family members and friends to lend helping hands in the clean-up after a flood. The NFIP requires (as they should) adjusters to get the names, social security numbers and the amount of hours each person worked as well as what work they performed BEFORE any payment can be made in an NFIP flood claim. Adjusters can then create the spreadsheet, calculate the clean-up costs and pay an insured for the labor cost incurred. We can only assume the insureds who collect this money will pay the laborers (if they have not done so already) for their time and effort.
In the Baton Rouge event, tear-out and debris removal were taken to extremes with no way to record accurately or begin to reimburse the people who gave their time and energy to help the flood victims (with or without flood insurance). Adjusters should, IMHO, estimate their tear-out costs as if the volunteer-assisted tear-out never happened. This would mean more money in the hands of the people who were responsible enough TO BUY FLOOD INSURANCE in the first place, and I think it would be what we, as Americans, would want to see. I also believe the hundreds of volunteers would be horrified to learn their humanitarian actions would adversely affect the flood insurance claims of the people they were trying to help.
The SFIP pays for “…direct physical damages by or from flood”. These damages must be first “covered” by the SFIP and secondly costs must (or should?) be “incurred” by the policyholder. In the case of the Baton Rouge event, we definitely have two-out-of-the-three ingredients of the flood insurance claim recipe. We have “damages” from flood, and, for the most part, tear-out and debris removal are “covered” under the SFIP. What we seem to be missing is the “incurred” part of the formula. There’s the rub! It will be up to the highest level of FEMA and NFIP management to decide on this one.
The second “unique” scenario developing in the Baton Rouge event is the area of adjusting the contents and personal property portions of the flood claim. In addition to the building tear-out performed by volunteers, many homes were “gutted” of contents. We’ve all seen pictures of the streets of Denham Springs lined with piles of contents items like snow drifts in northern neighborhoods in winter.
NFIP requires all flood adjusters to “fully document” all contents losses. Full documentation usually means photographs of every contents item valued over a certain dollar figure (dictated by the flood servicing vendor or WYO company), along with make, model, and serial number. For many Baton Rouge event claims, adjusters are being confronted with a “heap of contents” with no photographic evidence taken by the homeowner and no way to accurately complete an inventory. In some cases, the community picked up the piles and took them to the parish waste facility before the adjuster was able to get past the local roadblocks and inspect the “heap”!
Now, some insureds will have photos of the house pre-event (if the photos did not end up in the front yard), but many will not. The flood adjusters working these claims will have to take the word of the homeowner and make judgment calls for each item based on where the house was located, the number of people living in the house and the “lifestyle” of the policyholder.
On the front-end of these claims, relying on reasonable adjuster judgment sounds doable but we must also consider the back-end of the FEMA flood claims process. We have to keep in mind all NFIP contents claim dollars are federal dollars. They are our tax dollars being used to their highest degree of humanity (IMHO). Three years from now, when these same claims come up for audit by another branch of the federal government (the GAO, for example), the first words out of the mouths of the federal bean-counters will be “Where are the photos (of the big screen TV, the piano, the $200 Ninja Blender)?” And “Where is the documentation to support this contents payment?” Will we all remember the unique adjusting challenges and circumstances of the Baton Rouge Flood of 2016 then?
Again, here are my two cents based on a lifetime of helping flood victims (with insurance). Although I don’t have any verifiable numbers, the number of contents claims with less-than-the-usually-required photos and documentation will be a small percentage compared to the overall number of contents claims with proper documentation. FEMA (for this event only) should “turn the other cheek” and give the DSA vendor as well as the WYO companies as much leeway as possible to pay these contents claims without fear of reprisal during any future claim audits. FEMA and the NFIP should TRUST THE ADJUSTERS’ JUDGMENT and allow him or her to “do the right thing.” These types of undocumented contents claims may be small in number, but they are “huge” to the affected policyholder(s) who may have never flooded before, didn’t know the (NFIP) documentation drill and thought they were doing the right thing by removing the wet stuff from their homes. If FEMA and the NFIP want to be truly “customer-centric,” paying these contents claims without questioning reasonable adjuster judgment or full documentation would go a long way in restoring the country’s faith in flood insurance (IMHO).
No matter how many years I have in the business of adjusting NFIP and WYO flood claims, it never ceases to amaze me what new challenges seem to emerge after each event.
To wrap it up, my wife’s family and childhood friends all live in and around the Baton Rouge area. But for the Grace of He who presides over us all, only a few were directly affected by the flood waters. Some of them had flood insurance, and others are not so fortunate. My hat’s off to all the volunteers who gave their time and energy to help clean up the mess! I also want to send a salute out to all the adjusters handling the claims of the Baton Rouge flood of 2016. As I see your reports, estimates and photographs pour into our data warehouse, I empathize with the human suffering that goes along with such a massive flooding event – my eyes have witnessed too many uninsured (and insured) losses. I am proud to say that I know many of the professional adjusters working this event and want you to know your actions and efforts are not taken for granted by those of us who “work the storm” from our ergonomic desk chairs and air-conditioned offices. Keep up the good work, pay what we owe, explain what we don’t and always treat the policyholder with respect! That’s customer-centric!
President – FloodPCA