Does Flood Insurance Cover Oil Damage Caused by Flood?
The short answer is yes. According to FEMA’s June 7, 2010 Bulletin w-10065a, the Standard Flood Insurance Policy covers the damage to the structure and contents up to the policy limits on residences and condominiums. For commercial buildings, damage caused by pollutants is limited to $10,000. Of course, there must first be a defined flood in the area, which for those impacted by Hurricane Sandy is not typically disputed. There are, however, some limitations to the coverage. According to the FEMA Bulletin, they include:
• Damage to ground, soil or land caused by flood, oil or flood water mixed with oil is not covered.
• The cost of complying with any local or State ordinance, including one that requires special removal methods for oil, is specifically excluded (certain floodplain management mitigation requirements are exceptions). This exclusion would also apply to local or state condemnations; the NFIP only pays for direct physical loss by or from flood.
• For all three forms there is no coverage for testing or monitoring of pollutants unless there is a law or ordinance requiring it.
• If payment is made, FEMA or the Write Your Own (“WYO”) carrier (i.e. the private insurance company that administers the policy) is automatically subrogated to the policyholder’s right to recover the payment from a responsible party. The policyholder may not give up the right of FEMA or the WYO to recover or do anything to impede recovery. If the policyholder makes a claim against an entity who caused a loss and recovers any money, the policyholder must pay FEMA or the WYO back before they may keep any of the money.
While the above seems clear, there have been many homeowners and businesses impacted by Hurricane Sandy that have met resistance to payment for oil damage and other pollutants from flood insurance adjusters and WYO carriers.
About the Author: Christopher W. Gerold is an attorney in Wolff & Samson’s Disaster Recovery Claims Group. Chris represents 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.