On Monday, October 10, 2016, the Federal Emergency Management Agency (FEMA) released Bulletin W-10673, entitled Advanced Payments Under Standard Flood Insurance Policies (SFIP) for Hurricane Matthew, which outlines a number of options for SFIP holders to obtain advance payments after flood and storm surge damage resulting from Hurricane Matthew.
The Bulletin waives the National Flood Insurance Programs’ (NFIP) standard requirement that a proof of loss must be submitted prior to an advance being issued. The bulletin can be read in full below:
Storm surge and flooding caused by Hurricane Matthew’s track along the East Coast has the potential to impact areas where there are large concentrations of flood insured properties. The Federal Emergency Management Agency (FEMA) is making every effort to ensure the prompt settlement of claims to NFIP policyholders affected by the recent flooding event. Therefore, I conditionally waive the Standard Flood Insurance Policy (SFIP) requirement that the policyholder provide proof of loss prior to payment to allow advance payments as described below. WYO companies and the NFIP Direct Servicing Agent may offer one or both of these two advance payment options to policyholders.
Advance Payment Option One: Pre-Inspection
Once a policyholder provides a notice of loss, an insurer may offer an advance payment after confirming coverage and validating that the insured property has flooded. Such advance payment may not exceed $5,000. An insurer may offer a total advance payment of up to $10,000 if the policyholder also provides the following documentation:
1. Photographs depicting flood damage to covered property, and
a. Documentation verifying out-of-pocket expenses related to the repair or replacement of covered property, such as receipts, or
b. A contractor’s itemized damage estimate
Advance Payment Option Two: Payment for Significant Damage
An insurer may offer an advance payment prior to receiving a proof of loss if:
1. The insurer receives a general contractor’s estimate of necessary repairs to the insured property; and
2. A flood insurance adjuster retained by the insurer has inspected the insured property.
Such payments may not exceed 50 percent of the general contractor’s estimate of necessary repairs to the insured property.
Advance Payment Guidance
For both options, the insurer must notify the policyholder in writing of the following conditions:
1. The advance payment is not a payment for Additional Living Expenses (ALE). The SFIP specifically excludes ALE.
2. The insured must complete and sign an Advance Payment Request in order to qualify for an advance payment. In the Advance Payment Request, the insured must state the following:
a. The issuance and acceptance of an advance payment does not prejudice or waive any claim or defense available to either the insured or insurer.
b. The issuance and acceptance of an advance payment does not constitute an admission of coverage under the policy.
c. To the best of the insured’s knowledge, the insured property suffered a covered loss.
d. If the loss is determined not to be a covered loss, or if the advance payment exceeds the amount of the actual covered loss, the insured recognizes that they are not eligible for the payment and agrees to repay the advance payment (or portion thereof).
e. The Additional Payment Request is not a proof of loss, and the insured will complete a proof of loss that complies with the SFIP to finalize any claim.
3. Acceptance of an advance payment will not affect the insured’s right to seek additional payments under the terms and conditions of their SFIP.
4. After the claim is settled, the insurer will reduce the final payment by the amount of any advance(s) made to the insured.
5. The insurer must include any mortgagee shown on the Declaration Page of the policy or any known mortgagee at the time of payment on the building property advance payment check.
6. To finalize the claim, the insured must execute a proof of loss meeting the requirements of the SFIP for all amounts received, including the amount of the advanced payment.
We are attaching a suggested Advance Payment Request template for your use.
If a WYO company issues an advance payment in accordance with the terms and conditions set forth in this bulletin to an insured suffering flood damages, FEMA will use these standards in all reviews or audits of files, including any reviews under the Arrangement or the Improper Payments Information Act of 2002 (Public Law 107-300, 33 U.S.C. §3321 note), as amended by the Improper Payment Elimination and Recovery Act of 2010 (Public Law 111-204). If a WYO company makes an advance payment in accordance with the terms and conditions of this Bulletin, FEMA will not hold the company responsible for ineligible payments. The company will need to make best efforts to recoup the funds, but if unable to do so, the recoupment will be referred to FEMA for appropriate action. However, if a WYO company makes an advance payment that results in an unauthorized payment without complying with the terms and conditions set forth in this Bulletin, the company will be responsible for the erroneous payment. The insurer must obtain accurate information from the insured or their representative regarding their temporary address when the claim is reported. It will not benefit the insured to send their advance payment to the property address, which is not accessible due to flooding. Again, we ask for your full support. Any questions or comments should be directed to [email protected].
Advance payments can be critical to individuals whose property has suffered damage as a result of flood and storm surge. Getting the funds in to remediate the property immediately and start rebuilding is extremely important and can keep the property from being further damaged. For those in the Southeast just now determining the extent of the damage left in Hurricane Matthew’s wake, these advance payments will be much needed.
If you are having any issues concerning your property damage claim from Hurricane Matthew, please contact competent legal counsel to advise you on your rights and obligations.