The Louisiana Floods – Posing Some Unique and First-of-Their-Kind Adjusting and Estimating Challenges
Just in case you have just returned from the North Pole (or Polebridge, Montana for some of us), 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 neighborhoods, which historically did not or seldom flooded, as well into areas in which flood insurance was not “required” (try telling that to a homeowner with water up to the ceiling joists!).
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 do not read the FEMA 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 with flood insurance was about 1-8 or 1-5, depending upon who is expounding the numbers. It’s accurate to say; however, more people DID NOT have flood insurance than those who carried the 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. Removal of building (structure) and contents (personal property) items from flooded homes and businesses were done for “free”.
In many cases, the person(s) doing the volunteer work did not ask the flood victim whether he or she had flood insurance – they just went to the job of cleaning out the house(s). 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 CHARGE to the homeowner. The question arises, should the adjuster add for tear out and debris removal to his or her estimate when calculating “damages”? If the policyholder did not “pay” a contractor for such services, do we (as adjusters) owe for the 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 make up the spreadsheet, calculate the clean-up costs and pay an insured for the labor time incurred. We can only assume the insureds who collect this money will either 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 the volunteers would want to see.
The SFIP pays for “damages” which usually means COVERED AND INCURRED costs paid by the policyholder. In the case of the Baton Rouge event, we definitely have two-out-of-three in that we have “damages”, and, for the most part, they would be “covered”. We are missing the “incurred” part. 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, it sounds “do-able” but we must also consider the back-end. NFIP contents claim dollars are federal dollars. They are our tax dollars being used to the 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, to follow-up, “Where is the documentation to support this contents payment?”
Again, here are my two cents based on a lifetime of helping flood victims (with insurance). Although I don’t have any numbers, the amount of contents claims with less-than-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’ JUDGEMENT and allow him or her to “do the right thing”. These types of 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) 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 question 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 affected by the flood waters of this event. 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 to all the adjusters handling the claims of the Baton Rouge event. As I see your reports, estimates and photographs pour into our data warehouse; I feel for the human suffering that goes along with such a massive flooding event – I have witnessed too many. I am proud to say that I know many of the 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 offices and workspaces! Keep up the good work and continue to place the policyholder first!
Adjust ‘til ya’ bust,