Hurricane Insurance Fraud: Understanding Wind Vs. Flood Damage & How FEMA Works
Hurricanes generally involve both wind and flood damage to a structure. However, coverage for flood, or water, damage is a separate form of insurance obtained from FEMA and wind damage is covered under most homeowners insurance policies. Understanding how the different coverages work can be extremely complicated for policyholders, and an provides an opportunity for insurers to engage in bad faith insurance practices or hurricane fraud.
Wind vs. water damage
R. Jason Richards, a Florida attorney whose firm represents victims of hurricane fraud, explained the differences between wind and water damage:
Flood coverage is a separate form of insurance. It is a single-risk insurance policy that insures against all 'direct physical loss by or from flood.' Your flood policy will not cover wind damage and your homeowners' policy will not cover flood damage.
How FEMA works
FEMA (the Federal Emergency Management Agency) is the federal agency responsible for coordinating response efforts to federal disasters, risk reduction, and recovery. Richards says that as part of these duties the agency oversees the National Flood Insurance Program, which issues flood policies. These flood insurance policies can be issued by FEMA directly or by private insurers called write your own (WYO) companies, such as independent insurance agents, who can issue policies in their own names, collect premiums, and pay claims.
Unfortunately, FEMA hasn't always done well by policyholders. Richards explained some of the agency's shortcomings:
Although many of FEMA's shortcomings were brought to light following the aftermath of Hurricane Katrina, one of the agencyýs more practical shortcomings is that it fails to coordinate with its fellow wind adjusters when adjusting claims where both the peril of wind and flood contributed to the loss. In such cases, it seems prudent to have both the flood and wind adjuster work together to assess the damage and try to come to agreement regarding damage and liability to avoid the inevitable finger pointing that follows when damages go unpaid. Unfortunately, this doesn't happen.
Hurricane fraud / bad faith claims
What can you do if that finger pointing results in your insurance company refusing to honor your valid claim? Richards answered:
First, make sure you have provided the insurance company with all the preliminary information necessary to enforce your claim, such as a sworn proof of loss, receipts, contractor's estimates, etc. If the insurance company still refuses to pay what you feel is owed, contact an attorney to discuss your case. Depending on the amount at issue, it may be advisable to file a small claims lawsuit, but at least the attorney can advise you of the best course of action to take.
If your insurance company has delayed or denied your valid benefits, click here for a free Insurance Bad Faith Case Review.