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Did FEMA Encourage Engineers to Deny Foundation Damage after Hurricane Sandy?

By now, anyone with foundation damage as a result of Hurricane Sandy has heard the stories of engineering companies altering reports that resulted in homeowner’s being denied coverage. But did FEMA create an environment that fostered this type of conduct?

On June 27, 2013, I examined a similar question in my blog: Why Aren’t Flood Insurance Companies Covering Cracked Foundations Caused By Flood? For those of you that may have missed it, I examined FEMA’s guidance in National Flood Insurance Program Adjuster Claims Manual (NFIP Manual). Below is the section from the manual entitled Foundations:

Floods can cause significant foundation damage, but so can settlement, improper construction,
earth movement, tree roots, and sinkholes. Many times an insured will claim normal settlement
cracks in slabs and foundations as flood related. The insured will indicate that he or she never
noticed the foundation and slab damage until after the flood. This neither proves nor disproves
that the damage resulted from flood.

Most slab and foundation damage occurs because of a lack of moisture in the ground. The soil
shrinks away from the foundation, allowing the grade beams to settle downward under the
supported weight. This results in a bowing effect and cracks. Excess water in the ground exerts
upward pressure on the slab floor and inward pressure on the subgrade foundation walls. This
also results in cracks and displacement. Damage of this kind is considered the result of
hydrostatic pressure and is not covered under the SFIP, unless there is a general condition of
flooding in the area.

Flooding with sufficient water movement to carry the subsoil away (scouring) from the slab or
foundation walls generally leaves visible signs. Claims for foundation damage without any
visible indication of scouring or land subsidence bear close scrutiny. Most foundation and slab
damage that occurs without any visible signs of soil displacement may have resulted from
causes other than flooding and is not covered by the SFIP. The adjuster must carefully check
the perimeter and underneath the building for soil washout from velocity water flow. When
finding no indication, the adjuster must resist a claim for foundation damage. The insured then
has the responsibility to prove that the damage was caused by flood. Use of structural
engineers must be limited to losses with visible indications of flood damage or of floodwaters’
having exacerbated preexisting damage.

Almost every line of the above is troubling:

  • “Insured will (not may) indicate that he or she never noticed the foundation and slab damage until after the flood.” – FEMA knows what all insured will say.
  • “This neither proves nor disproves that the damage resulted from flood.” – So eyewitness testimony from the homeowner has no value – are all homeowners lying?
  • “Most slab and foundation damage occurs because of a lack of moisture in the ground.” – What is the basis of this statement? Does this include flood ravaged areas like NY and NJ post-Sandy?
  • “Most foundation and slab damage that occurs without any visible signs of soil displacement may have resulted from causes other than flooding and is not covered by the SFIP.” – What is basis of this statement when in the prior paragraph it states that hydrostatic pressure as the result of flooding is covered?
  • “The adjuster must carefully check the perimeter and underneath the building for soil washout from velocity water flow.” – Again, what is the basis when in the prior paragraph it states that hydrostatic pressure as the result of flooding is covered?
  • “The adjuster must resist a claim for foundation damage.” – Is FEMA directing the adjuster not to pay for foundation damage even if he or she believes there is damage?
  • “The insured then has the responsibility to prove that the damage was caused by flood.” – This is nearly impossible when the insurance company will only accept its own engineering report when deciding to pay for a foundation.

FEMA has announced that it will be reviewing all Hurricane Sandy flood insurance claims.

While FEMA has not announced the process to review claims, the doorway has been opened for homeowners that were previously denied or underpaid benefits to take action. As a result, Wolff & Samson is once again reviewing flood insurance claims, with a special focus on those claims that were denied foundation damage as a result of an insurance company engineer.

About the Author: Christopher W. Gerold is an attorney in Wolff & Samson’s Disaster Recovery Claims Group. For the past two years, Chris has been representing homeowners, condominium associations and businesses with their Sandy related insurance claims with a special focus on flood insurance. For more information on flood insurance and ways Wolff & Samson can help you with your flood insurance claim, please contact Chris at (973) 530-2061.