Other Insurance Multiple Perils Decision Upheld

BUILDING COVERAGE: $250,000

PERS. PROPERTY COVERAGE: $0.00

DATE OF LOSS: September 2022

DATE OF DENIAL: March 2023

APPEAL SUBMISSION DATE: March 2023

APPEAL ELIGIBILITY DATE: April 2023

PROPERTY DESCRIPTION: A two-story, single-family, elevated post-FIRM (Flood Insurance Rate Map) building on pilings with a lower enclosure.

POLICYHOLDER’S APPEAL: The policyholder requests coverage up to the building’s valuation. [1]

Result: Uphold Denial

BASIS FOR DECISION UNDER THE STANDARD FLOOD INSURANCE POLICY (SFIP):[2]

• The insurer denied coverage because the wind insurer already paid the policyholder a total loss claim of $350,000. 
• The SFIP is a direct physical loss policy; it is not a valued policy. (See SFIP (III)(A), (II)(C)(30)). 
• In case of loss or request for payment, the policyholder must submit a signed proof of loss with the documentation that supports the loss and the dollar amount requested, including policy and claim payment details from other insurance covering the loss. (See SFIP (VII)(G)(3)-(5)). 
• When multiple perils are involved during a loss event, such as wind and flood, the wind and flood insurers should agree on the proportional percentage or distribution of damage from each peril and apply that percentage or value of damage against the building’s replacement cost value. (See SFIP (VII)(B)(1), (VII)(B)(3)). 
• In case of a total loss, the value of the wind and flood damage paid should not exceed the replacement cost value of the building or the policy limits, whichever is less. (See SFIP (VII)(R)(2)). Replacement cost value is based on the cost to replace a new building with like, kind, and quality, including planning, site preparation, excavation, overhead and profit, and sales tax. Replacement cost value may not include property items that are not insured under the SFIP. It may not include other costs such as those based on the market or other intangible factors such as those use to determine valuations for real estate, tax assessment, or financial lending. 
• The flood adjuster noted the building’s replacement cost value is $242,738. 
• Because the wind insurer paid the policyholder a total loss claim of $350,000, over the building’s replacement cost value, the insurer correctly denied payment. 
• The policyholder did not submit a proof of loss with the documentation that supports the loss, including all policy and claim details on other insurance covering the property. 
• Therefore, FEMA directs the insurer to coordinate benefits with the wind insurer to agree on the replacement cost value of the building and the distribution of damage attributable to each respective claim. 
• If the insurer obtains a forensic damage evaluation from a state-licensed engineer to help determine the proportion of flood and wind damage to the insured property, the insurer should share a full color copy of the report with the policyholder and the wind insurer.