Sandy Flood Claims Denied – Public Adjuster Wins Reversal 2 Years Later
Two years ago, on October 29, 2012 Super Storm Sandy came ashore just south of New York City causing significant flood damage to many buildings in the Financial District and in Battery Park City, New York. Our firm was on the ground within 3 days post-storm, helping people prepare to file their Sandy insurance claims. We ended up opening an office in the area and stayed a good 6 months. Many of these high-end residential condominium buildings overlook the New York Harbor, Statue of Liberty, and skylines. Tutwiler & Associates Public Adjusters were retained to represent one of these tower communities.
Some of the newer buildings are considered “green type buildings,” and are also LEED Gold Certified as each unit receives fresh-ducted air that has been filtered to remove 85 percent of all outside particulates, soot and airborne toxins. In addition, these buildings use approximately 33 percent less water than comparable non-green buildings. They have their own waste water treatment system designed to recycle water necessary to supply water for flushing toilets and cooling water for the buildings cooling systems to name a few. As with all other heavy building equipment items, the waste water treatment equipment is typically located in the basement of the building next to the boiler equipment and is an integral part of the building’s overall system and plumbing. Given their eco-friendly lifestyle, these tower residences are highly desirable since they set a unique standard for those seeking green type living. Moreover, their sophisticated waste water treatment system is specifically designed to save on energy costs as well as reduce building expenses. These buildings rely on their waste water treatment systems to be working at all times. Following the damage caused by Super Storm Sandy they were not.
Immediately following their flood loss and resulting damages, the claims were reported to their respective insurance companies. The carriers quickly processed the claims in their system and advised that they would need to hire independent/contracted adjusters to handle the claims due to the enormous amount of claims being reported. This is typical in every hurricane/CAT situation we’ve been involved with.
When the adjusters finally arrived on-scene and provided their “repair estimates,” all the buildings mechanical equipment located in the basement, which included boiler equipment, fans and motor equipment, electrical switches and wires, equipment hoses, heat exchangers, elevator equipment, gas booster pumps, air conditioning equipment and heat pumps were included.
However, many of the estimates failed to include the mechanical equipment relating to the electrical system, waste water treatment system, and other green type equipment which was directly adjacent to the covered mechanical equipment items noted above.
When asking the carriers why the waste water equipment was not included in their repair estimate, the flood adjusters simply stated: “the equipment was left out of the initial estimate because it was located in the basement area and needs to be reviewed by the carrier to determine coverage.” After lots of back and forth communications, we finally got NFIP to agree that the equipment was permanently installed, hard-wired into the building’s electrical system, and was undoubtedly an integral part of the plumbing system. The adjuster then stated: “I will be happy to write a second supplemental estimate for these items,” however that never got accomplished.
Months later, the carrier flip-flopped with letters stating: “the adjuster’s final report indicates there were no visible signs of covered flood damage to the insured contents, located in the basement. We are denying any damages to the insured contents and all non-covered items located in the basement, pursuant to the Standard Flood Insurance Policy.” Not only were the cover letters extremely vague, they were very confusing as these buildings never made a claim for contents or personal property in the basement, it was large mechanical equipment. The letters go on to outline the following coverage items for property covered in a basement. For clarification purposes, we have highlighted in red the following coverage’s in which we finally won the argument that the waste water treatment equipment, electrical and green equipment should be covered:
III. Property Covered
A. Coverage A – Building Property
8. Items of property in a building enclosure below the lowest elevated floor of an elevated post- Firm building located in Zones A-1-A-30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V-30, or VE, or in a basement, regardless of the zone Coverage is limited to the following:
(1) Central air conditioners;
(2) Cisterns and the water in them;
(3) Drywall for walls and ceilings in a basement and the cost of labor to nail it, unfinished and unfloated and not taped, to the framing;
(4) Electrical junction and circuit breaker boxes;
(5) Electrical outlets and switches;
(6) Elevators, dumbwaiters, and related equipment, except for related equipment installed below the base flood elevation after September 30, 1987;
(7) Fuel tanks and the fuel in them;
(8) Furnaces and hot water heaters;
(9) Heat pumps;
(10) Nonflammable insulation in a basement;
(11) Pumps and tanks used in solar energy systems;
(12) Stairways and staircases attached to the building, not separated from it by elevated walkways;
(13) Sump pumps;
(14) Water softeners and the chemicals in them, water filters, and faucets installed as an integral part of the plumbing system
(15) Well water tanks and pumps;
(16) Required utility connections for any item in this list; and
(17) Footings, foundations, posts, pilings, piers, or other foundation walls and anchorage systems required to support a building
The more involved we became in the process, the more we realized the Flood Processing Center was incorrect in their multiple denials on many levels. Believe it or not, there were actually times when adjusters on the other end of the telephone agreed they were wrong but in fear of being “audited” and losing their jobs they said they had no choice. And so the denials kept rolling in.
While these denials dragged on, much of the electrical systems started corroding and caused great concern given the life safety issues that were at stake. Then the massive fire that occurred at the boardwalk in New Jersey woke everybody up…briefly.
In the end, after two (2) years of dealing with FEMA, NFIP and the Write Your Own Carriers to prove these damages were in fact covered, our clients finally received the claim settlement they were entitled to. We understand there are so many policyholders out there who are still recovering from this devastating storm. For me, the memories are still vivid and the experiences too real. I met adjusters who had never handled a flood claim in their lives and experienced adjusters who simply got tired and left 300+ files in their hotel rooms and went back home. It was those dedicated adjusters that stuck in for the long haul that should be commended for their determination and perseverance in helping the policyholders who finally prevailed.
As for the National Flood Program, pray you never have a Flood!
If you have questions regarding any property insurance claim related issues please call 800.321.4488 or contact us to submit a question to one of our public adjuster or insurance claim experts.