SOUTH JERSEY LEGAL SERVICES, INC. DISASTER RELIEF PROJECT. A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

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1 A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy South Jersey Legal Services, Inc. has prepared the following Memorandum to assist you in filing an Increased Cost of Compliance (ICC) claim. Since the FEMA National Flood Insurance Program (NFIP) and its Federal rules and regulations are complex, and each case is subject to a different set of facts, this Memorandum cannot address all aspects of your flood claim. If you require individualized assistance, you may call our Centralized Intake Unit at , Monday Through Friday, from 9 am to 1 pm, to determine if you are eligible for free legal assistance. ICC Coverage: Who is Eligible? Increased Cost of Compliance (ICC) coverage is included standard with your flood policy (found under Section D of the Standard Dwelling Form) where you already have building coverage (under Section A of the Standard Dwelling Form). ICC is intended to assist homeowners with up to an additional $30,000 to help pay for the cost to comply 1 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

2 with state or community floodplain management laws or ordinances from a flood event in which a building has been declared substantially damaged or repetitively damaged. National Flood Insurance Program, Answers to Questions About the NFIP (March 2011), FEMA F-084. Depending upon your individual case, ICC may include money for demolition, elevation, relocation of the building and, in some cases applicable to non-residential buildings, flood-proofing. If you qualify for ICC money, you may use it towards any combination of these activities, even if they do not occur simultaneously (i.e. an initial demolition project, followed by elevation of the reconstructed building). You do not pay a separate deductible for ICC and the date of loss is the same as the date of the underlying flood loss covered under part A. In the case of Sandy, the date of loss is on or about October 29, In order to qualify for the ICC portion of your flood insurance claim, you must meet one of two criteria relating to the level of your flood damage: (1) You have substantial damage, which is defined as damage from any origin (flood, wind, rain, etc.) sustained by a building where the work needed to repair the home to its pre-damaged state is 50% or greater of the pre-damage home's market value. By definition, a complete demolition and rebuild has substantial damage. 1 1 Also, any repair or improvement (including a rebuild) of 50% or greater of the structure s market value is considered by FEMA to be a substantial improvement. However, for purposes of this document, substantial damage and substantial improvement will be used interchangeably. All rebuilds or new constructions must be 2 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

3 (2) Your home in an A or V Zone was repetitively damaged by flood two (2) times in the last 10 years, ending on the date for which a second claim is made, in which the cost of repairing the flood damage, on the average, equaled or exceeded 25 percent of the market value of the building at the time of each such flood event. For this provision to apply, the municipality must have a repetitive loss ordinance in effect. For either condition above, the flood component of damage must meet the threshold, even if the home was damaged by another peril (e.g., wind or wind-driven rain). This means that if your home has substantial damage, at least 50% of the damage must be from a flood event. If you meet either criterion, you may be eligible for up to $30,000 through ICC coverage in order to satisfy a community's or municipality's flood mitigation requirements. This amount would include elevation of the home as required by your municipality or community. ICC money is not a grant or separate insurance, nor is it affiliated with any state or federal program of repair. 2 Rather, ICC is included standard in your flood policy (Section D), and you do not pay a separate deductible for it. made to existing code as pertaining to elevation and flood mitigation measures. In addition, those policyholders without flood damage who make substantial improvements- such as additions to their homes- may also fall under the broader substantial improvement amount if that new addition is 50% or over of the home s market value. 2 However, ICC claims, under certain circumstances, may be assigned by the policyholder to certain grant programs, such as he Hazard Mitigation Grant Program (HMGP). Under the HMGP, the community is assigned the claim by the consent of the policyholder. The community official then files the ICC Proof of Loss directly and receives ICC money towards elevation and/or mitigation. New Jersey s HMGP Elevation Program stopped accepting applications in September P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

4 How Is Substantial Damage Calculated? What Data is Acceptable to Prove Substantial Damage? It is useful to think of Substantial Damage as a percentage where: Equals or Is Greater than 50% The Cost to Repair is the numerator (top number) of the Substantial Damage formula discussed above, and reflects all costs necessary to fully repair the structure to its before damaged condition. This will include materials and labor towards repair site preparation (such as excavation and filling in a basement); demolition and construction debris removal; costs associated with the work to be in compliance with local and state codes, state and Federal law; structural elements (foundation, walls, windows and doors, roof; slabs; etc.); overhead-and-profit; fixtures; utility installation and hook-up; sales tax; HVAC; hardware; built-in cabinets; tiling; attached decks and porches; and elevation (if required) to meet the local Base Flood Elevations (and freeboard) requirements. See: A FEMA memorandum states that the cost to repair is estimated without applying the deductible and applicable depreciation. See FEMA Bulletin 4 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

5 W (October 23, 2014), available at: 3 However, not every type of improvement should be included in the substantial damage formula above. FEMA states that plans, specifications, survey and building permits, and other items which are separate from or incidental to the repair of the damaged building are not included in the cost to repair. Also, temporary building stabilization for safety purposes; trash clean-up (but not including demo work, which is covered); carpeting; and installation of appliances is not included in the formula. Note, however, that built-in kitchen appliances are included in the cost. See: In addition, FEMA states that any project for improvement of a building to correct existing violations of state or local health, sanitary, or safety code specifications identified by local code enforcement officials as the minimum specifications necessary to ensure safe living conditions is not factored in. In practice, this means that if a building was not to code prior to Sandy (for example, if it had a leaky roof that did not meet building codes), and the local official (whether construction, code, or fire) was already aware of the code violations, the minimum amount necessary to remedy this violation to assure 3 Many homes were repaired through the generous efforts of volunteers or by using donated supplies and materials. FEMA will consider the reasonable, market value of this labor and materials towards the full cost to repair the structure, even if no money was actually paid by the homeowner to volunteers or agencies assisting in the disaster response. In addition, even if the homeowner elects not to do all the repairs in the estimate of repair, the estimate is what is counted towards the substantial damage formula, not what the homeowner actually elects to repair. 5 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

6 safe living conditions would be deducted from the cost to repair. However, if these violations were either not in existence prior to Sandy, or the local official was not aware of, or informed about, the deficiency, it is unlikely that the cost to remedy the code violation can be deducted from the cost to repair. FEMA specifically states that an official who has the authority to enforce the community s health, safety, and sanitary codes must have prior knowledge of the condition and must have verified that it constitutes a violation in order for the code compliant activity to be deducted from the cost to repair. See: FEMA P- 758, Substantial Improvement/Substantial Damage Desk Reference (2010), available online at: (emphasis added). For example: Susan and Bob had a home with a non code-compliant roof. They were notified by the Code Enforcement official that the roof must be repaired. Before they could repair the roof, Sandy hit. A professional estimate indicates that the minimum amount of work (labor plus materials) to repair this non-compliant roof would be $5,000. The total cost to repair the home, which had Sandy damage, is $60,000. Because the roof repair work applies to a pre-sandy violation, where the local official was already aware of this condition, the $5,000 is deducted from $60,000. Susan and Bob s total 'cost to repair is $55, P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

7 Finally, alterations to historic buildings as defined by the National Flood Insurance Program (NFIP) are also not factored into the cost to repair. See: National Flood Insurance Program, Answers to Questions About the NFIP (March 2011), FEMA F-084. However, ICC coverage is available for historic buildings. FEMA recommends that where the cost to repair is in the range of 40-60% of the structure s pre-damage market value, more detailed estimates should be used because the home is potentially on the cusp between substantial and non-substantial damage. According to FEMA, the following are acceptable means of valuating damage: (1) Itemized estimates by licensed contractors, itemized for materials and labor; (2) monetary damage estimated by the claims adjuster; (3) Qualified Estimates by the building department professionals; (4) Building Code Valuation tables for items that are not structurally unique; (5) Damage assessment field surveys conducted by building inspection departments, emergency management or tax assessment agencies, or other professional State or local officials. All of this data should be provided to your local construction or floodplain official, normally during the permitting process. See: National Flood Insurance Program, Answers to Questions About Substantially Damaged Buildings (May 1991), FEMA 213, available online at: 7 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

8 What About Market Value? How is That Calculated? The bottom number (denominator) of the Substantial Damage percentage formula is the home s pre-damage market value. FEMA states that acceptable estimates of the pre-sandy market value of the home (remember to always subtract the value of the land) include: (1) Independent appraisals by a professional appraiser; (2) Detailed Estimates of the Actual Cash Value (replacement cost minus applicable depreciation); (3) Assessed Value for Property Tax Purposes; (4) Value of buildings taken from NFIP claims data (this is likewise usually Actual Cash Value); (5) "Qualified Estimates" made by local building department staff. See: National Flood Insurance Program, Answers to Questions About Substantially Damaged Buildings (May 1991), FEMA 213, available online at: FEMA has stated that the use of tax-assessed values "can produce erroneous estimates of market value," where the last tax assessment was done much prior to Sandy during an older appraisal cycle, or where the assessment value the municipality uses differs significantly from the actual market value. Many municipalities use the pre-damage tax assessment as the equivalent and substitute for market value, but doing so can have a significant impact upon the substantial damage percentage if this does not accurately reflect the true market value, or 8 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

9 if the assessed value has not been adjusted to reflect actual market conditions prior to Sandy. For example, if a home (not including land) was last assessed for tax purposes several years prior to Sandy at $200,000, and had damage of $100,000, all from flood, this property would be considered substantially damaged (it has 50% or greater damage). However, the home just prior to Sandy might have been worth substantially more on the real estate market. If, in this example, the home was actually market valued at $250,000, the home should not have been deemed substantially damaged, as $100,000 is less than 50% of $250,000. FEMA recommends that the most precise data be used, especially where the cost to repair is close to 50%. Where the assessed value seems to be significantly off, FEMA recommends that adjustments be made to the tax-assessed value. An independent appraisal by a qualified appraiser may help meet the applicant s burden of proof in this case. You should consider discussing any discrepancy between the market and tax valuation with the construction official, appealing the substantial damage letter if you believe that the letter is in error. Replacement cost ( like kind item replacement) estimates should not be used because these typically will significantly over-estimate the home s valuation. 9 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

10 Making an ICC Claim Typically, your insurer will initially identify a possible ICC claim when the adjuster is sent out to look at your flood-damaged home to do an inspection. The insurance company should inform you that you might be eligible for ICC based on the adjuster s damage assessment. However, whether you do qualify for ICC depends on the amount of your home s damage, whether the flood damage portion meets the threshold, and whether or not you receive a "substantial damage" (or in some cases, "repetitive loss") letter from the local floodplain or construction official. It is this letter that begins the ICC claims process. Steps for Filing an ICC Claim The following is a typical chronology of events during an ICC claim process: 1. When you request a permit to do repairs, your local floodplain management official (usually the construction official who is also a floodplain manager for the municipality) will send you a so-called "substantial damage" letter if your damage meets the required threshold (as discussed above). If you believe that this letter is in error, you have limited time to request that it be reviewed or to make an 10 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

11 appeal. You should contact the official to request clarification if you believe the letter is in error. 4 Even if you believe that the substantial damage letter is accurate, you should discuss with the local official what actions you are required to take, so that you do not fail to take the required measures and improperly elevate or mitigate. This is especially important because FEMA is in the process of updating the Flood Insurance Rate Map (FIRM) and has, or is, issuing advisory base flood elevations (ABFEs) and preliminary elevation reports. It is better to meet the higher, more stringent elevation requirement that both FEMA and the community are adopting so that you will be able to obtain the necessary Certificate of Occupancy and to also avoid surcharges to your insurance premiums later on. Also keep in mind that even though FEMA may have a current or advisory BFE, your municipality may require you to build or elevate even higher. It is the community s elevation that you must meet. In fact, most municipalities are requiring additional elevation above the Base Flood Elevation (BFE) known as freeboard. Typically, municipalities that have a freeboard requirement have added about 4 Some things to look for in the Substantial Letter are: (1) Does the letter specify what portion of the damage is from flood? Ideally, the letter should include this component. (2) Is the cost to repair accurate? Try to do your own estimate based upon how much it will cost to do repairs, without deducting for the depreciation or applicable deductible, but deducting for any code violations where a local official was notified or already knew about the violation. Do not include cost for permits, specs, surveys, plans, and the like. (3) Is the home s pre-sandy market value accurate? Ask what value was used (usually most recent tax assessment). Is this value significantly less, or maybe even more, than the market value? Remember, only look at the building value alone, not land. is useful as a point of reference for values, although it is not normally an acceptable estimate for ICC purposes. (4) Finally, be sure that the market value reflects the home s value prior to Sandy. Even if your home was re-assessed at a lower value post-sandy, the local official should use the pre-sandy market value. Using the post-sandy re-assessment will significantly over-inflate your substantial damage, because the bottom number of the substantial damage formula will be much lower. (With apologies for including too much math. ~AH). 11 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

12 one (1) foot above the BFE. As a result, you must meet the BFE plus the freeboard to elevate to code. In addition, it is important to note that the Base Flood Elevation depends upon the sea level baseline used. In many cases the baseline has now shifted higher, and so even if your BFE number remains unchanged, in some cases you will have to elevate anyway because the baseline has shifted upwards in real terms. ICC would cover any elevation you need to do to meet the BFE, freeboard, and change in mean sea level baseline. 2. Once you receive the substantial damage letter, and you believe it is accurate, and have assessed what mitigation measures you should take by consulting with the local floodplain and/or construction official, you can then file an ICC claim with your flood insurer. You will be assigned a claims representative or adjuster for your ICC claim. The assigned ICC claims adjuster or representative will ask you to begin gathering the required documentation, which typically includes: a signed contract for the ICC work, which should include an itemized scope of work (itemized cost breakdown for labor and materials) and a start and end date. It is important to note that a detailed and itemized cost breakdown and a start and end date are by law required under all New Jersey home improvement contracts, which includes house lifters and improvement contractors. Detail is paramount! 3. You should provide the flood insurer or adjuster one (1) signed contract (only one is required under FEMA s rules) for elevation or any other ICC-eligible mitigation work required by your municipality, including a start and end date, and the estimate with itemized costs for 12 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

13 labor and materials. It is advisable that you also provide the required permits to the claims adjuster or representative in order to expedite the payment process. The permits are required for issuing an initial ICC payment, so it is best to give copies to the adjuster or claims representative as soon as possible. 4. Once you provide copies of the requested documentation, the claims adjuster or representative will then assess whether the documentation you provided supports an ICC claim. The adjuster may contact the community construction/floodplain official to verify that the building is substantially (or repetitively) damaged and that this loss is from a flood. In addition, as discussed in greater detail below, the local floodplain manager or construction official is authorized to provide to the insurer information regarding the value of your home prior to Sandy. A recent FEMA Memorandum permits the insurer to determine if your home meets the damage threshold by comparing your flood loss estimate to your home's assessed value before Sandy (this is discussed further below). Your insurer should be aware of this Memorandum, W , dated October 23, 2014, available at: 5. If you qualify for ICC coverage and all the documents support the claim, the claims adjuster or representative provides you an ICC Proof of Loss form to sign. Make sure to review the Proof of Loss carefully and affirm its accuracy by signing and dating it. FEMA no longer requires that the ICC Proof of Loss be notarized. See FEMA 13 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

14 Memorandum W (October 14, 2011). A blank ICC Proof of Loss is available at: (one line) 6. A signed and sworn ICC Proof of Loss along with a copy of the work permit should then be mailed to the insurer. Once these documents are obtained and copies are filed with your insurer, the insurer is authorized to release up to 50% of the total for the activity. If you receive the $30,000 maximum under ICC, the insurer is authorized to release up to $15,000. The FEMA regulatory language does not appear to require that the insurer release any amounts up front- so not all insurers may release an advance ICC payment. 7. Once the required permits are obtained and the ICC claim is approved, the mitigation work (demolition, elevation, etc.) is completed. If you have RREM or another grant for repairs, make sure to coordinate any repair or elevation activity with the RREM manager, obtaining the necessary prior approvals. 8. The insurer will make the final ICC payment only after all ICC work is completed, and you have received an elevation certificate and certificate of occupancy (CO) after your home s final inspection. FEMA s rules and regulations also allow a letter from the building department, in lieu of the elevation certificate, indicating that the elevation was done in accordance with the local floodplain ordinance. 14 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

15 In most instances, however, homeowners will receive the elevation certificate upon completion of the home s elevation. You have four (4) years from the date of the substantial damage letter to complete ICC work, although in some cases extensions may be granted. When you sign the ICC Proof of Loss you certify and swear under penalty of perjury that if the ICC mitigation activity is not completed in the required time, the ICC money will be refunded. Note that although the "date of loss" is still the same date as the underlying flood loss (for Sandy almost invariably October 29, 2012), you have four (4) years from when your substantial damage letter was mailed out to finish ICC work. FEMA, Through a Recent Memorandum, Authorizes the Flood Insurer to Use the Community Official s Estimate of Pre-Damage Home Value in Assessing Substantial Damage A recent FEMA Memorandum (W-14056, dated October 23, 2014) attempts to clarify a typical concern that arises when the substantial damage letter issued by the municipality does not identify the flood component of the loss. FEMA has stated in its ICC Adjuster s Manual that "ICC can only be paid if the flood component alone meets the substantial damage requirement," even where the cause of substantial damage may be flood plus another non-flood loss such as wind or wind- 15 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

16 driven rain. See: 8rev_20sep13.pdf. Under authority provided in this FEMA Memorandum, the insurance company or homeowner may contact the local floodplain official to obtain the building's pre-damage assessed value. The insurance company can then compare the flood damage to the assessed value and make a determination as to whether the 50% threshold is met. This is helpful where the Substantial Damage letter does not provide sufficient detail as to whether the home has had over 50% flood damage. (Again, it is technically possible to have substantial damage but not meet the 50% flood threshold if some part of that percentage is non-flood loss). The FEMA Memorandum is available online at: ICC Limitations: What ICC Does Not Cover ICC is limited to mitigation activities, (demolition, elevation, relocation, flood-proofing) as required in the local floodplain ordinance. Certain structures and/or activities are not covered by ICC, including the following: 16 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

17 -To reiterate from above, the 50% threshold applies to the flood component only. FEMA has stated that "In cases where substantial or repetitive damage is due to a combination of hazards, such as wind and flood, an ICC claim is only paid when the flood component of the damage equals or exceeds 50 percent of the market value of the building." See: NFIP- Increased Cost of Compliance Coverage- Guidance for State and Local Officials, FEMA 301 (September 2013), available online at: (discussing exclusions to ICC coverage). This discrepancy is explained by the way FEMA defines substantial damage. Under 44 CFR 59.1 of the NFIP Floodplain Management Regulations, a structure is considered to be substantially damaged when:... damage of any origin [is] sustained by a structure whereby the cost of restoring the structure to its before damaged condition would equal or exceed 50 percent of the market value of the structure before the damage occurred. (emphasis added). This means that while your home may have substantial damage, of whatever origin, the flood component may be below the level required to be eligible for ICC. 17 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

18 For example: Susan and Bob own a home that lies in an A Zone whose market value prior to Sandy was $200,000 (not including land). As required by their mortgage company, they have both homeowner s and flood insurance which is in effect at the time Sandy hits. Their homeowner s insurance company settles their claim for $40,000, and they receive $80,000 from their flood insurer. In total, Bob and Susan have $120,000 of repairs due to Sandy. When they apply for a permit to do repairs, Bob and Susan receive a substantial damage letter. They determine that their home must be elevated another 3 feet to meet the local ordinance. They then file a claim for ICC with their flood insurer. Are they eligible for ICC money? Unfortunately in this case no. Although the total damage of $120,000 takes Bob and Susan over the 50% threshold ($120,000/$200,000) the flood component is below 50%: $80,000/$200,000 < 50%. Because ICC coverage is available only when the flood component meets the 50% threshold, Bob and Susan will be denied ICC coverage. However, because their home has substantial damage, they will still be required to elevate the home 3 feet. -ICC covers only mitigation activity to meet local floodplain ordinances and codes (e.g., elevation to BFE plus freeboard). No upgrades going 18 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

19 beyond the local ordinances are covered by ICC, although a homeowner can elect to do upgrades that ICC would not cover to make the home safer from a future flood. -Detached, appurtenant or "accessory" buildings (a car port or detached garage) are not covered under ICC but may be insured separately and additionally (would need additional coverage). -Walkways, decks, driveways, patios (even if covered by a roof) are not covered. However, a slab is covered. -Gas or storage tanks are not covered; nor are trees, shrubs, and lawns. -Underground structures (wells, septic tanks, septic systems) are generally not covered. However, under a demolition project if clearing the site requires removal of the foundation, utility system, and grading and stabilization of the site, removal of the septic tank under this exception is covered. Note that removal of other trash, cans, tires, etc. is not covered. The building must have all the applicable demolition permits. -Fill dirt is covered if used to grade the lot. -Filling in a sub-grade basement is covered if required as a mitigation activity by the community. -ICC is not available to those who have a Group Insurance Policy (this is usually coverage to those receiving a FEMA grant who did not have their own flood insurance prior to the storm). 19 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

20 -According to FEMA, "ICC does not normally cover buildings in B, C, X, or D Zones. However, if the building is in a B, C, X, or D Zone and the community requires the policyholder to undertake a mitigation action (e.g., the community has adopted and is enforcing advisory or preliminary BFEs provided by FEMA), ICC will be available if the community can document that they are regulating the area under their floodplain management ordinance. If communities have flood data for B, C, X, or D Zones, they are advised to provide this information to FEMA for a possible map revision. " -If a community changes a B, C, X, or D Zone to an A or V Zone, and the community adopts the new A or V zones, ICC is available. -Although ICC coverage maxes out at $30,000, the amount you may be eligible for is limited by (1) the actual cost to mitigate and (2) a $250,000 cap on flood insurance. The combined flood and ICC amounts cannot together exceed $250,000. -Unlike coverage for the building under part A of the Dwelling Form, ICC payments are not made to a mortgagee (bank), and you do not have to name a mortgagee as a party to the ICC check. -Unfortunately, chairs or lifts or similar structures that facilitate entry into a newly elevated building are not covered by ICC. However, if you already had an elevator or lift in the home prior to Sandy, that should have been covered under the initial flood insurance building damage claim under Part A of your building coverage. For more information on this aspect, see: 20 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

21 8rev_20sep13.pdf (one line). -If a flood policy expires or is not renewed after Sandy, but there was coverage at the time of the loss (October 29, 2012), you are still eligible for ICC. This means that even if you let the policy lapse, and subsequently receive a substantial damage letter, you are eligible for ICC if you meet all other conditions because the date of loss for the ICC is the same as the date of loss for the building. -Other conditions and policy exclusions may apply, so you should discuss with your claims adjuster or insurer any issues you have. You may also wish to review FEMA s online resources: ICC Page: (general information about ICC). ICC Adjustment Manual: 8rev_20sep13.pdf Guidance to Local Officials: 21 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

22 I Think My Insurance Company Got it Wrong and It Unfairly Denied My ICC Claim, What Next? The FEMA rules and regulations that apply to your flood claim likewise apply to your ICC claim as well. FEMA generally recommends that disputes with the flood insurer be handled in the following order: 1. Speaking with the claims adjuster and attempting to negotiate and settle the claim with the adjuster first. 2. If you disagree with the adjuster, speak to the adjuster s supervisor (that is, move up the ladder). 3. If the supervisor of the adjuster does not resolve the dispute, contact the insurance company directly. 4. Finally, if all of the above do not resolve the dispute, you can make an Appeal to FEMA by writing to: FEMA Mitigation Directorate Federal Insurance Administration 1800 South Bell Street Arlington, VA In the Appeal letter, include all of the following (must have all 6): 1. Policy Number as shown on the NFIP policy Declarations page. 22 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

23 2. Policyholder s name as shown on the NFIP policy Declarations page. 3. Property address as shown on the NFIP policy Declarations page (not a mailing address). 4. Contact information where and how the policyholder can be reached. 5. Complete details of the concerns, including a statement of the basis of the appeal. 6. Dates of contact and contact details for the person(s) spoken with in steps one through three (above). You should also attach supporting documentation. This should include the following: 1. A detailed list of damaged property and the value of individual items, 2. Supporting photographs, and/or 3. A contractor s detailed estimate to repair damages with supporting photographs. Comparing contractor and adjuster estimates in detail will help resolve differences, and 4. A copy of the insurer s written denial. If you decide to do a formal appeal to FEMA, keep in mind the following: 23 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

24 You should mail your appeal letter, with supporting documentation, within 60 days of the denial by the flood insurer. FEMA strictly follows this deadline and if you appeal beyond 60 days from the letter denying your ICC claim you will have lost the opportunity to file an appeal (however, you still have one (1) year from the date of the flood insurer s denial to file suit against the insurer). An Appeal will prevent you from seeking an Appraisal over the monetary value of your claim. The filing of an appeal to FEMA does not stop ( toll ) the one-year clock to sue. That is, even if you Appeal to FEMA a denial by your flood insurer, you still only have a year to file suit from the first written denial or disallowance, as was discussed above. If you have filed suit against your insurer, FEMA would no longer review your Appeal. The same goes if you file suit during the pendency of an Appeal. After you file your Appeal, FEMA may request additional supporting documentation and require that you send it in by a certain deadline, usually not under 14 days. Once all requested documentation is sent in, FEMA should review your Appeal and issue a resolution for the dispute within ninety (90) days. There is no formal administrative appeal process beyond this Appeal. If you intend to file suit, the date beginning the one-year time period to sue would commence when all, or any part, of your claim was 24 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

25 denied by the flood insurance company. An appeal does not extend the one (1) year deadline to sue, nor any additional discussions or negotiations with your insurer, including invocation of the Appraisal procedure (Appraisal applies if you dispute the amount, not scope of, loss). You should review the portion of your flood policy under Suits Against Us. All suits must be filed in Federal District Court. Note that any legal claim you make against your insurer must be based on Federal law, as state law does not apply to any flood claims. What if I disagree with the Base Flood Elevation (BFE) or proposed FEMA Elevation for My Property? There are many additional issues that are potentially involved in your flood and ICC claim that are beyond the scope of this guide, including the adjustments in the proposed Base Flood Elevation and Flood Insurance Rate Map (FIRM), which are being updated as of the date of this writing in many Sandy-affected areas. However, by law, you have a right to seek an administrative appeal if you believe that the elevation requirements proposed by FEMA are scientifically or technically incorrect. If you believe that this applies, you have a right to appeal directly to your municipality and include supporting data that you believe indicates that the elevation proposal is scientifically or technically incorrect. The applicable law states that The community shall review and consolidate all such [elevation] appeals and issue a 25 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

26 written opinion stating whether the evidence presented is sufficient to justify an appeal on behalf of such persons by the community in its own name. 42 U.S. Code 4104 (c). Even if the community does not then appeal in its own right to the FEMA Administrator, FEMA must respond to these individual appeals, which the community should send to the FEMA Administrator. All proposed elevation changes have a public comment period, first in the Federal Register, and then in a prominent local newspaper. By law, the community must send individual copies of appeals to the FEMA Administrator as they are received, as well as a copy of the municipality s own decision to appeal or not to appeal within 90 days of the newspaper publication for public comment. The Administrator is charged with consulting with local officials, reviewing scientific and technical data, and issuing a determination in a reasonable time. See: 42 U.S. Code Flood Elevation Determinations, for further information about elevation appeals to FEMA. If I Have Additional Questions, Where Can I Turn for Assistance? If you qualify for our free legal assistance, South Jersey Legal Services may discuss with you the options you have and take a closer look at the facts and circumstances of your matter. If we believe that your matter is appropriate for a referral, we may refer your matter to a pro bono attorney for further advice and counseling. The above information is only intended as a guideline to assist you with your ICC 26 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy

27 Proof of Loss and flood claim, and the information therein should not be construed to be individualized or client advice. SJLS, Inc. cannot guarantee client representation or the outcome of your matter. If you would like further assistance, please call during the hours stated above in order to do an initial intake and screening. Prepared by: Alexander Hersonski, Esquire, South Jersey Legal Services, Inc. 27 P a g e A Guide to Making an Increased Cost of Compliance (ICC) Claim Under Your Flood Policy