Recent Snowstorms Melt into Controversy: Who Should Pay for Damage?

Article excerpt

It's like a game of hot potato. No one wants it, so they quickly pass it along.

During last month's snowstorms, many area homeowners suffered costly damage to their property. Numerous news reports told the public to call a contractor and have repairs done immediately, noting that insurance would cover the costs. Contractors' phones were ringing off the hook.

Those who took swift action spared themselves more damage and contained repair costs, which insurance companies do require for coverage to be valid. They don't want to fix damage that could have been prevented. There's not much question about damage being covered that was caused by ice dams. Essentially, anything that leaks from the roof on down is covered, but leakage from the saturated, flooded ground is not, unless you have flood insurance. Ground seepage is considered by insurance companies as flood damage.

"The industry position has always been that your homeowners policy does not cover flood damage. A flood means a body of water that rises from the ground and floods your home," says Michael Erwin, spokesman for the Insurance Information Institute in Washington.

What's covered, he says, is water seeping into your home resulting from an ice dam in the eaves, which causes melting snow on the roof to drain into the attic, walls and ceiling. Mr. Erwin says water damage caused by ground seepage is covered by flood insurance. Pass that hot potato.

The National Flood Insurance Program (NFIP) is backed by the federal government and administered by the Federal Insurance Administration (FIA), a component of the Federal Emergency Management Agency (FEMA).

And if you have a policy, you might be wet but you're in luck because you're covered, that is if there's a "general and temporary condition of partial or complete inundation of normally dry land areas." (That means your neighbors have to be flooded, too.) But most people don't have a policy.

There is some confusion about who is eligible for flood insurance coverage. It is a commonly held belief in the real estate industry that a home must be in a flood zone to be eligible, and then it is mandatory. But more than 10 million homes in flood plains aren't protected by flood insurance, and nearly 30 percent of the NFIP's flood insurance claims come from areas considered not to be high risk, according to Lena Hines, management analyst at the FIA.

She says if your community is a participant in the NFIP, you're eligible. A community can become eligible if it meets certain building and mitigation requirements, which is done at the county level though FEMA's mitigation office. The FIA administers the self-supporting insurance program. Flood insurance claims and program operating expenses are completely covered by premiums, not by taxpayer dollars. Private insurance companies issue the flood policies.

The question is, are you in a community that is eligible? You can call 800/427-4661 to find out.

Flood insurance can only be issued by the federal government because a flood is only a flood when the government defines it as such, says Michael Garcia, State Farm agent in Alexandria. The biggest concern he has as an agent is the term "flood." Basement flooding is not a natural disaster flood, and water seeping through the ground is not technically a flood, he says.

Policies address two kinds of water: captured water and natural water. Natural water is generally not covered because it is assumed the house is designed to protect against its entrance. Water seepage through concrete generally is not covered because it's an expected or natural event, he says. A policy will cover natural water damage when the exterior of the dwelling is compromised suddenly, accidentally and directly. (Incidently, when there is a backup of sewer lines or a sump pump, coverage is available for owner-occupied residences.)

The controversy stems from the question of who defines "flood. …