Flood Claims
By Ray Bourhis

Q: With regard to your own (first party) insurance coverage, is it true that first party carriers in California are not responsible for flood damage?

A: Yes and no. Many insurers will not insure homes and businesses against flood damage requiring separate flood insurance. However, whether or not a particular loss was caused by the flood alone, versus by a combination of the flood and other factors (such as faulty design or construction elements), may be an issue with some policies.

More important in many cases, is the issue of what one was told by an insurance agent at the time the coverage was purchased. If a policyholder was told by the agent that there would be coverage for "all risks of physical loss" or that flood insurance was included, then even though the policy did not provide such coverage, the insurer would have to provide it.

Q: If there is any doubt as to whether or not a loss may be covered, what should you do?

A: If there is any doubt as to whether you should file a first party claim with your insurer, you should do so. The reason is two-fold. First, an insurance company really has very limited obligations until after you have filed a claim. Second, there are often statutory or contractual statutes of limitations which cut off your ability to file a claim after the passage of a given period of time. Filing deadlines can vary from a few months to a year or more from the date of loss. Don't assume that you have a year or more to file your claim. You may not.

Q: How does one assess the dollar value of losses suffered?

A: First note that whether losses are recoverable or not, and if so, from whom, is a separate question from evaluating the losses. Evaluating a loss would include the following costs:

(1) full restoration of damaged buildings, structures or land to the "like kind and quality" which existed prior to the flood;

(2) repair or replacement of damaged or destroyed personal property, such as automobiles, computers, electronics and furnishings;

(3) the value of time lost on flood related matters;

(4) clean up costs;

(5) the value of lost business;

(6) the cost of alternative living accommodations;

(7) recovery for physical or emotional injuries sustained;

(8) diminution in the value of damaged property.

Q: From whom are such damages recoverable?

A: There are two general sources of recovery. The first is from your own insurance, the second would be from a third party who was negligent and/or that person's or entity's insurance carrier.

As to your own insurance carrier, your recovery would generally be limited to the terms and benefits specifically provided by your insurance policy. A third party would be responsible for paying all damages actually caused. The third party's insurer would be responsible for indemnifying all such losses within the coverage of their liability policy.

Q: What would be an example of a "third party" who would be liable for flood losses?

A: Individuals and entities responsible for negligent design, construction, or maintenance of buildings, roads, creek beds, birms, or other improvements would be one example. Developers who built in a known flood plain without providing adequate disclosure to purchasers would be another.

Q: Should I give a recorded statement or sign "proof of loss" forms presented by an insurance company?

A: You have a duty to cooperate with your own insurance company, but you should not give a recorded statement or sign a "proof of loss" until you are confident that you fully understand the terms and conditions of your own coverage and of your loss. Occasionally, insurance company representatives will attempt to put words in your mouth as to what happened or how, so as to trigger an exclusion or limitation in the policy. The best rule is to obtain all the information necessary before answering questions. Know what you are talking about before you start talking.

Q: What general rules should one follow in proceeding with an insurance claim?

A: Obtain a notebook and begin taking detailed notes immediately. You should keep a diary, take photos of all damage and keep a written record of all conversations with insurance representatives (including his or her name, phone number, job title and supervisor's name.) If your adjuster is uncooperative or engages in delay, intimidation, or similar tactics, you should confirm this politely in writing. If your claim is not being handled fairly, contact an attorney specializing in policyholder representation and insurance law. Keep copies of all such correspondence. Never exaggerate or mislead an insurer about any aspect of a claim.

Q: Is it always necessary to accept an insurance company's experts as to causation or conclusions as to evaluation of loss?

A: No. You should be careful to obtain your own causation and loss evaluations. Remember that it is important for you to receive repair bids, not just estimates, for the rebuilding or repairing of damage. Insurance companies may occasionally present offers to settle based on inadequate or incomplete repair estimates. This is sometimes known as "low-balling." This practice is illegal and is a specific violation of the California Insurance Code. Obtain your own estimates from reliable and independent experts.

Q: Is it necessary to hire an attorney or adjuster to handle your claim for you?

A: No. In most cases, you should be able to properly evaluate and process your own claim without having to pay someone to do it for you. However, it is extremely important not to destroy your claim in the course of processing it. That is why it is so important for you to fully understand your legal rights and obligations before proceeding. Attorneys who specialize in this field will usually not charge you to help you protect and preserve your rights. Before speaking to anyone about your claim, be sure to ask specifically whether you are going to be charged for advice or evaluation.

In addition to the above, our office has available a free booklet prepared for attorneys who do not specialize in insurance law to assist them in advising clients. A copy of this booklet can be easily read and understood by most lay persons and is available without charge. Write to Bourhis & Wolfson, 1050 Battery Street, San Francisco, CA 94111 and ask for "Advising Individual and Commercial Policyholders Concerning Insurance Coverage and Bad Faith."

If you are a victim of bad faith or fraudulant insurance practices, or have a question regarding your insurance claim denial, please click here to submit a question through our online form.

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To contact us by telephone please call 800.264.2082.