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Water Losses and Your Home Insurance…. Are You “Really” Covered?

Water Losses and Your Home Insurance…. Are You “Really” Covered?

While the national press is full of politicians pontificating about what Congress has done (as in “done in”) to tens-of-thousands of property owners in the very ill advised legislation called Biggert-Waters Flood Reform Act (B.W.-12) known as the National Flood Insurance Program Reform Act, not to be outdone, the regulators and political types in Tallahassee have been busy as well.

First, a little commentary on Washington DC, and no, not the budget or government shut down.  What I am talking about is the legislation for the National Flood Insurance Program reforms that was voted on by a majority of your elected congressional officials without any debate, given that the Biggert-Waters legislation was attached to a transportation bill and thus never saw the light of day.

This legislation became effective October 1, 2013 and based on media reports, has shut down real estate sales in coastal communities across Florida.  Take a look at some of the real estate sites that show listings for sale.  Notice the marketing effort, if a home is not in a flood zone or soon to be in one with new flood maps rolling out. Yes, here is the wording at the top of the ads, “NO FLOOD INSURANCE REQUIRED.”  This is now a major selling point! But what about all the other homes owned by families who for years have paid their flood premiums and basically supported the NFIP.  Sorry, to bad for you, your elected officials did not understand a basic requirement of passing legislation, which is to look at the unintended consequences and openly debate a bill before passing it. See: Cost of Flood Insurance Rises Along with Worries.

Not to be left out of the criticism are the lobbyists…all of them.  Where were the lobbyists for the real estate industry, and how about the League of Cities lobbyists or people who proclaim to be consumer advocates of one type or another?  One can only guess they were all to busy passing out the steer and cheer at some conference or seminar to placate and impress their clients.   They sure were not watching out for the groups they were sending their bills to, or hoping to get business from! I can just hear the wheels turning in their heads, “sure sounds good to me, we need to make flood insurance actuarially sound!”

If you think you’ve seen this movie before, think back when the brains in Tallahassee passed legislation to all but curtail public adjusters in the Citizens adjustment process. Yep, a few years ago your legislature passed a law that didn’t allow Citizens policyholders to have professional adjusting help until Citizens first made a settlement offer……………also known as squeezing their policyholder.

The unintended consequences of that were to invite more litigation, ratcheting up legal and policyholder costs. Then to make matters worse, the regulators put draconian language in property insurance policies to further prevent appraisal, which for honest folks was widely viewed as a cost effective process to avoid litigation and the years it takes to get a trial date due to budget and the mortgage foreclosure mess that is still clogging up the court system.  Another government effort at work for all of us, don’t you just love it?

But wait there is more!  How about the millions of dollars being paid to lawyers to handle property claims? Why is this happening?  Some will no doubt say the lawyers are looking for work anywhere they can find it, as the great recession has decimated their professional fees. Probably a lot of truth to that as with eight years of no hurricanes, an internet full of self-help legal forms, established law firms laying off staff, some merging and others hanging out their own shingle, there is a lot of competition for any work out there. See Citizens Reports South Florida Lawyers are Responsible for Rising Litigation Costs

Now we have a new twist in this ongoing saga. We are now finding out that some of the new state approved take-out insurance companies are literally “taking out” or severely limiting coverage for water losses in their homeowners’ policies.

As any professional in the loss adjusting business will tell you, water losses are the most frequent type of perils that occur to property owners. The damages can be staggering in both scope and price. A typical single-family home can easily rack up in excess of $25,000 in damages. Add to that, the emergency restoration services firms who more often than not will have a bill in the five-figure range.

So what have the folks lobbied the Office of Insurance Regulation for?  Just check your policy for the results. You may find you have no or limited coverage for water damage. If coverage does exist, they probably have imposed a 14-day coverage restriction. So if your water damage is over 14 days old and you have not reported it, you are out of luck. Pity the poor snowbirds that lock-up their Florida residence and head north for 6 months. We are also starting to see policy forms with a $10,000 cap on water damage. The friendly emergency service folks are aware of this, so you can bet their bill will be over the cap just so they are covered.

Please check your policy.  This is a very serious reduction in one of the most utilized hazard coverage and one that may cost you tens-of-thousands of dollars if the flood (water loss from inside your home) is from a broken pipe, etc.  If you have questions regarding any property insurance related issues, please call 800.321.4488 or contact us to submit a question to one of our public adjuster or loss assessor experts.

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