It’s Time to do a Flood Insurance Policy Check Up
July 14, 2011
Katharine M. Nohr, Esq.
Nohr Sports Risk Management, LLC
Does your organization have flood insurance? If so, are the policy limits high enough to repair your damaged facility and replace damaged equipment? It seems that every time I turn on the news there is a story about flooding somewhere in the world. Those stories combined with the fact that I live on a koi pond, blocks from the ocean and on an island where hurricanes and tsunamis are a constant threat, led me to e-mail my insurance agent inquiring about the possibility of my purchasing flood insurance (I already had hurricane insurance). The agent replied with a quote and I responded accepting his offer. We met at my residence and I showed him the koi pond and wrote a check for the amount of the premium on October 11, 2008. I followed up in an e-mail less than one week later, asking that the agent confirm that my flood insurance coverage was bound. He responded by e-mail, assuring me that he submitted the application and explained that the policy through FEMA would take 30 days to be in effect. This was cause for celebration. While my neighbors worried about the constant threat of the pond flooding (as it had done in 2003), I felt confident that even if it flooded, any losses would be paid under my shiny, new flood insurance policy.
In the wee hours of the morning on October 5, 2009, I lay in bed listening to the torrential rains, thunder and lightning, I delayed getting up to check the pond level, reasoning that the rains had only been pouring for about 30 minutes. Last time, it took hours for the pond to slowly rise. I was also under the false impression that the homeowners association was taking measures too regularly clean and maintain the pond drain. As I lay in bed relishing in the fact that I had flood insurance, I heard the urgent sounds of a fire truck pull up outside my bedroom window. I instantly knew what that meant. Someone had called the fire department about the pond. I stepped out of bed into water up to my shin, horrified as I had electrical cords, my cell phone charging, my purse with I-Pod, camera, and passport, furniture, photographs, computer and many other valuable personal items under water.
It is hard to describe the enormity of the situation. After the firefighters left and the waters had receded, I sat in my living room overwhelmed at the work that would need to be done. I called my insurance carrier, who informed me the next day that they had no record of my purchasing a flood insurance policy. My agent had forgotten to submit my application and check. Fortunately, the carrier understood that the elements of a contract had been entered into (offer, acceptance, consideration), and so they decided to afford coverage. What surprised me was that the coverage was far short of the cost to remediate the damage (mold is a serious risk) and to rebuild. Also, no coverage for re-location was included in the FEMA policy. It will be 6 months before I can return home and I’m having to continue to pay my mortgage as well as the cost of alternative housing, which in Hawaii is extraordinarily expensive. Because there were only 4 homes destroyed, there was no declaration of a disaster and so I do not qualify for any federal programs.
How does this story relate to your sport or recreation program? If your facility is flooded, there will be potentially lengthy and expensive remediation work as well as construction. It is important to evaluate the following:
- Does your facility have an insurance policy that covers damages caused by flood, even if you are not in a flood zone?
- Have you recently evaluated the amount of coverage that the policy provides?
- Does the policy have sufficient coverage for building, contents and business disruption or relocation?
- If you do not have insurance coverage for flood, have you set up a self insurance program that will address unexpected flood related expenses?
- Have you identified where your program will operate in the event that your facility is uninhabitable for a period of time?
- Have you made an inventory of the contents of your facility in the event that disaster should strike?
Hopefully, my story will inspire you to consider the consequences of flooding and that you will take action in making sure that you are properly insured for this hazard.