Flood Coverage: What Is and Isn’t Covered?

Historic flooding in September 2013 caused massive damage to property and sparked a number of questions about the Pool’s Flood coverage. With another possible flood season looming, it is important to remember that the Pool provides $2,000,000 in Flood coverage for scheduled properties as part of our Property form, at no cost to our members. It is also important to note that certain situations present unique challenges.

Floods can cause a wide variety of damage to equipment, property, and land. Aside from water damage, landslides, and damage from debris, as well as other hazards can impact a district. This is why it is crucial that members bear in mind that the Pool’s coverage is limited to replacement or repairs of scheduled equipment and property. The Pool’s Coverage form does not provide coverage for land and land improvement unless specifically scheduled. As examples: golf courses, parking lots, sidewalks, and trails would not be covered since they are excluded as “land improvements.” Exceptions can be made so that items such as greens, tee boxes, and irrigation systems can be covered but only if scheduled. Looking at a typical trail system, the trail itself is not normally covered but all the bridges, gates, and fencing could be covered, if they are scheduled. Additionally, the “supplemental coverages” in our form would not apply to unscheduled property.

During the September 2013 flood, many of the roads and highways commonly used to reach member facilities were flooded or washed out, preventing employees from reaching their worksites (“Ingress or Egress”). As a result, many members were forced to keep revenue generating facilities closed, thus experiencing a significant loss of business. Losses incurred from these situations fall under the Business Interruption (BI) section within the Pool’s Coverage Document.

Some of our members’ employees were unable to reach their homes due to the flooding. They had to stay at hotels and incurred expenses associated with their stays. While coverage is available to cover those costs, it will only apply to:

 

  • work performed on scheduled property
  • a percentage of the hotel cost may be reimbursable based on how much time the employee spent working at the scheduled damaged property
  • how long it took, or reasonably should have taken, to restore the property to a functioning condition.

 

When a property is scheduled, a wide variety of expenses associated with the clean-up of the scheduled property can be covered. Debris Removal coverage within the Coverage form typically includes removal of the damaged portion of a building and contents as well as the debris directly associated with the damaged scheduled property. Costs to rent a backhoe or other machinery to remove debris, as well as dump costs and other expenses may also be covered.

During a flood, districts may experience consequential losses. These include change of temperature or humidity, interruption of power, heat, air conditioning, or refrigeration. These would be the result of a physical loss or damage by a peril insured against. They can often lead to expenses such as food spoilage or a loss in revenue. The Pool’s Property coverage form has a $100,000 sublimit for offsite power interruption that could be applied within the $250,000 Business Interruption sublimit. Continuation of payroll for management and key employees when the covered damaged property is not operational is also covered within the BI limit.

We understand the confusion and concerns this terrible event has caused. The floods last year led to tremendous widespread damage, and while the Pool is always ready to help where it can, properties must be scheduled in order to be covered.

Many properties damaged last year were not scheduled, and therefore not eligible for coverage by the Pool. FEMA may be a great resource and may provide assistance covering a large percentage of claims not covered by the Pool, but remember that proper documentation is necessary for submissions to FEMA.

It is very important that members understand that once FEMA has paid on a claim, your district must obtain reasonable Flood insurance due to the Robert T. Stafford Disaster Relief and Emergency Assistance Act, or you may not be reimbursed a second time for the damages. We hope this article was helpful. If you have any questions, please do not hesitate to reach out to the Pool or your broker for more information.

Both comments and trackbacks are currently closed.