Lesson 1 - Introduction to NFIP Claims Review
Adjustment Standards and Requirements - Partial (Advance) Payment. (Continued)
The partial payment should not be more than 50 percent of the anticipated total claim payment and preferably should be made against the contents claim. If paid under the building coverage, the mortgagee must be included on the claim check.
The Flood Certification Number (FCN) Identification
The FCN card identifies you as an "active" flood certified adjuster and specifies the types of claims you are authorized to handle. Always carry your FCN card. This is your identification to the policyholder. If asked to present a picture ID to the policyholder, you should do so.
Adjustment Standards and Requirements - Claims Adjustment. It is the adjuster's responsibility to:
Work with the policyholder throughout the claim process. Inspect and scope the damaged property. Apply the policy coverage, limitations, restrictions, and exclusions as is appropriate to the claim. Make recommendations to the insurer regarding payment or denial of the claim and request the use of experts.
Adjustment Standards and Requirements - Proper Building Scope and Estimate. The NFIP estimate must:
* Be broken down by room. * Be unit cost based, for example, cost per sq.'/sq. yard, or linear foot. Make sure to document sales tax if applicable. * Use accurate room descriptions, including the names of the rooms, e.g., "Master Bedroom," "Living Room," or "Dining Room." * Include offsets in measurements. * Show line-by-line depreciation.
Customer Service
* Expected to create a favorable impression of the NFIP. * Demonstrate professionalism in work practices & products & in interpersonal communications. * Improve policyholder's understanding of the SFIP
The Adjuster's Role
* Handle the claim * Make recommendations * Share recommendations with policyholder Does not have authority to approve/deny claims
Adjustment Standards and Requirements - Proper Photographs
* The adjuster should take as many photographs as necessary to depict the damage, including pre-existing damage. It is just as important to photograph undamaged property. * The photos must be of sufficient quality to see damage or lack of damage. Blurry, out-of-focus photographs and photos taken at night are not acceptable. * Further, the photographs must be adequately labeled, including the date the photograph was taken, the room location, and description of the damages being depicted.
Adjustment Standards and Requirements - Identify and Report Possible Fraud, Waste, and Abuse.
Adjusters are expected to be alert to possible fraud, waste, and abuse. Adjusters should make sure that receipts are legitimate and not tampered with, serial numbers are not for items claimed in a prior loss, waterlines are in fact true water lines, etc.
Adjustment Standards and Requirements - Manufactured (Mobile) Home/Travel Trailer Worksheet
Adjusters must complete the mobile home worksheet for every manufactured (mobile) home or travel trailer loss, including closed without payment (CWOP) claims. This worksheet is necessary to establish Actual Cash Value of the mobile home or travel trailer.
Adjuster Tip (Adjustment Standards and Requirements - Partial (Advance) Payment)
Adjusters should confirm whether there is a Small Business Administration (SBA) loan against the contents belonging to the policyholder; if so, this information must be included on the advance check.
Adjustment Standards and Requirements - Nonjudgmental and Judgmental Error Examples
Examples of nonjudgmental errors include: • Failure to identify an ineligible building where payment is subsequently issued • Payment of a loss in a ineligible community • Exclusion of building and contents items • Items not properly verified
Adjustment Standards and Requirements - Partial (Advance) Payment.
FEMA encourages advance payments to the policyholder. Adjusters should advise the policyholder of the availability of a partial (advance) payment.
Adjustment Standards and Requirements - Prompt Contact. (Continued)
Find out your management's protocol for prompt contact. If you are unable to contact the policyholder, you should contact your management to seek guidance. It is imperative that you document your efforts to contact the policyholder in the Narrative Report.
Adjustment Standards and Requirements - Nonjudgmental and Judgmental Error Examples (Continued)
Judgmental Error Example: The policyholder submits to the adjuster that a couch is worth $3,000; but later it is discovered that the couch is worth $1,500. This is a judgmental error because although the sofa is covered under the policy, $3,000 does not reflect the proper value. Remember: Your file must reflect adequate documentation to support your judgment!
Adjustment Standards and Requirements - Inspection (Continued)
If it is not possible to inspect the insured building within the required time frame, this should be explained in a Status Report advising when the loss will be inspected.
Also required in the Origin section is information about the times water entered and receded from the building, the source of the water (this might pertain to subrogation, which is reviewed later in this course), how long the water remained, and the exterior and interior water heights (in inches). It is also important to set reserves on the report.
If reserves change during the claim process, the insurer must be notified of reserve changes. Adjusters must sign the Preliminary Report and include their FCN.
ADJUSTER TIP: Adjustment Standards and Requirements - Proof of Loss.
If the policyholder qualifies for replacement cost benefits, be sure to have him or her sign the Statement as to Full Cost of Repair or Replacement and the Proof of Loss forms.
Adjustment Standards and Requirements - Partial (Advance) Payment. (Continued)
If the policyholder requests a partial payment, the adjuster must prepare documentation necessary to support the recommendation to the insurer of the amount of payment requested, including the Proof of Loss form or an advance payment request form, which may be supplied by the insurer.
Adjustment Standards and Requirements - Underwriting Issues
It is important for adjusters to recognize underwriting issues as this could have an effect on the claim. Should you discover underwriting issues such as those listed below, it is important that you notify the insurer right away via your chain of command. Issues include, but are not limited to: ★ Improper flood zones ★ Incorrect building description or address ★ Substantial improvements ★ Two or more buildings are the described location ★ Incorrect mortgages
Adjustment Standards and Requirements - Narrative Report
It is very important for the adjuster to point out any circumstances that are unusual, suspect, or especially complicated and where additional explanation is appropriate. Only facts should be included in reports. Opinions or accusations are not to be included.
Adjustment Standards and Requirements - Salvage
On residential and small mercantile losses, adequate salvage credit is taken when the policyholder retains possession of totally damaged items. The contents inventory must specifically denote those items that have been considered salvageable and left with the policyholder. A professional salvor must be used to handle items of significant value. Salvage on large commercial losses must be promptly identified and inventoried by an approve professional salvor. Salvage agreements are executed in all cases where the stock has been taken over by a salvage company.
Adjustment Standards and Requirements - Preliminary Report. (Continued)
Once the adjuster determines there was a general and temporary condition of flooding, he or she should specify in the Origin section of the report the cause of loss and flood characteristics.
Adjustment Standards and Requirements - Building Replacement Cost Value (RCV), Special Loss Settlement, and Actual Cash Value (ACV) -(CONTINUED)
Only manufactured (mobile) homes and travel trailers qualify for this type of special loss settlement. All other manufactured (mobile) homes and travel trailers require ACV loss settlement. If you determine that the building is repairable, the loss will be settled according to the replacement cost conditions as stated in the Dwelling Form and RCBAP.
Adjustment Standards and Requirements - Judgmental and Nonjudgmental Errors
The NFIP expects the adjuster to accurately estimate the cost of replacement as well as cost of replacement or repair of like kind and quality directly affected by flood. The insurer relies heavily on the judgment of the adjuster in preparing an accurate scope and estimate and interpreting the provisions, limitations, restrictions, and exclusions of the SFIP.
Adjustment Standards and Requirements - Final Report
The NFIP Final Report is required on all NFIP DSA and WYO losses. The adjuster should not close the file until all items on the Final Report are completed.
Adjustment Standards and Requirements - Preliminary Report Due Dates
The NFIP Preliminary Report is required on all flood losses. This report is due to the insurer 15 days after the claim has been assigned to the adjuster. Note: The company for which you are handling claims may request that they receive the preliminary report before the 15 days.
Adjustment Standards and Requirements - Preliminary Report.
The Preliminary Report is reviewed in detail on each and every claim. This critical report describes the risk, the usage of the risk, the flood zone, whether there is a basement, and whether the residence is principal or seasonal.
Adjustment Standards and Requirements - Inspection
The adjuster is required to inspect the property within 48 hours of the loss assignment. This is also the time to complete the Adjuster Preliminary Damage Assessment, if applicable, and the Preliminary Report and to verify reserves.
Adjustment Standards and Requirements - Personal Property/Contents Claims Adjustment
The adjuster is responsible for assisting the policyholder with preparing the contents claim, verifying that contents being claimed are covered under the SFIP, verifying accurate local replacement costs, and applying appropriate depreciation. The adjuster must include photos of the damaged contents items. It is also a good practice to photograph undamaged items.
Adjustment Standards and Requirements - Building Replacement Cost Value (RCV), Special Loss Settlement, and Actual Cash Value (ACV)
The adjuster is to prepare accurate calculations of the policyholder's building Replacement Cost Value and Actual Cash Value and properly conclude the claim on an RCV or ACV basis as applicable.
Adjustment Standards and Requirements - Proof of Loss
The adjuster may assist the policyholder in completing the Proof of Loss (POL). It is ultimately the responsibility of the policyholder to submit a Proof of Loss within 60 days of the date of loss.
Adjustment Standards and Requirements - Prompt Contact.
The adjuster should contact the policyholder within 24 hours of receiving the assignment. If you are unable to contact the policyholder by telephone, attempt contact through the agent. If that fails, use alternate methods such as email, text, or regular mail to the policyholder and agent. Include your contact information.
Adjustment Standards and Requirements - Origin of Loss
The adjuster verifies that the reported claim was caused by direct physical loss by or from flood as defined in the SFIP.
Adjustment Standards and Requirements -Timely Reporting
The adjuster's NFIP Preliminary Report is due within 15 days after receipt of loss assignment. The NFIP Final Report is due 30 days later. If the claim is not concluded within 45 days, subsequent reports are due every 30 days after the Preliminary Report, unless otherwise specified by the claims examiner.
Adjustment Standards and Requirements - Progress Notes in File
The adjuster's file should contain adequate notes about the progress of the claim and scope of damages, calculations of Replacement Cost Value and Actual Cash Value, and a diagram of the insured building with measurements.
Adjustment Standards and Requirements - NFIP Re-inspection.
The file information needed for re-inspection includes: • Flood Certification Number (FCN) • Mentor (two signatures required) • Policy number • Prior loss history (Bulletin W-12086 discusses prior loss history) • Declarations page • Deductible and coverage amounts (found on the Declarations Page) • Adjuster Preliminary Damage Assessment (APDA), if applicable • Manufactured (Mobile) Home Worksheet, if applicable • Preliminary Report • Scope notes • Progress notes • Final Report • Photographs • Copies of estimates • Paperwork on additional damages • Elevation Certificate • Narrative
Adjustment Standards and Requirements - Inspection (Continued) (Part 2)
The initial inspection includes preparation of the Preliminary Report and scope of damages. The adjuster scopes the loss during the initial visit by taking measurements and photographs. The adjuster notes direct flood damage as well as non-flood-related damage.
Adjustment Standards and Requirements - Prior Losses Checked
The policyholder is required to submit documentation to substantiate that prior flood damage was repaired. Those items damaged in the preceding flood loss, for which payment has been issued and which were not repaired or replaced prior to the most recent flood event, must be omitted from the current flood loss adjustment
Adjustment Standards and Requirements - Subrogation
The responsibility for identification of subrogation lies initially with the adjuster assigned to the flood loss and, ultimately, with the claims representative responsible for the file. The adjuster must identify on the NFIP Preliminary Report, in the Origin section, the cause of loss - whether the loss was associated, for example... with the failure of a dam, pumps, a storm drain system, or other flood control measure, and whether a non-natural cause contributed to the loss. If potential subrogation is determined the adjuster should submit the Cause of Loss and Subrogation Report to the insurer.
Adjustment Standards and Requirements - NFIP Re-inspection
There are three types of re-inspection: • Claims Appeals: The NFIP provides the policyholder with a process to appeal decisions regarding a flood insurance claim. The process helps resolve claim issues, but it does not give the policyholder additional coverage or claim limits beyond those in the NFIP policy. • Special Assist: There may be instances when the adjuster will reach an impasse in the adjustment of claims for various reasons. In these instances, the adjuster should contact his or her adjusting firm and the insurer immediately. The adjusting firm or insurer may recommend that an NFIP General Adjuster intervene and assist with bringing the claim to an amicable resolution. • Congressional: Claim inquiries received from congressional offices, White House, etc., are handled as priority
Adjustment Standards and Requirements - Proof of Loss (Continued)
There are, however, times when the Federal Insurance Administrator will extend the requirement for filing the POL within 60 days of the date of loss. Such notifications are provided in writing through Bulletins.
Adjustment Standards and Requirements - Judgmental and Nonjudgmental Errors (CONTINUED)
There will be instances when the adjuster's recommendation differs from the opinion of the NFIP reviewer as to whether a claim payment involved an excessive or inadequate loss payment. For example: reviews may differ on the amount of depreciation taken, whether a general condition of flooding existed, whether sufficient verification of damages was obtained, etc.,
Adjustment Standards and Requirements - Judgmental and Nonjudgmental Errors (Continued)
These are examples of judgmental errors: When the insurer determines that the adjuster has inadvertently made an error on a claim that resulted in claims or underwriting errors, such as payment on an ineligible risk, payment of loss for identical items, payment for non-existent items, or payment for unsubstantiated items, these are considered nonjudgmental errors, which are often serious.
Adjustment Standards and Requirements - Proper Building Depreciation
To accurately determine ACV of an item, the adjuster must consider replacement cost, depreciation, and the average useful life of the item. The condition of the item prior to the loss must also be considered. The NFIP will not accept lump-sum depreciation figures. Depreciation is shown separately, as applicable, for each line item in the adjustment, including overhead and profit.
Adjustment Standards and Requirements - Policyholder's Copy
When the claim is concluded, the adjuster furnishes the policyholder with a copy of all building and contents worksheets.
Adjustment Standards and Requirements - Identify and Report Possible Fraud, Waste, and Abuse. Potential areas of abuse include:
• Receipts • Serial numbers • Ownership • Policies • Waterlines • Misrating • Price quotes • Damaged property • Cause of Loss • Late claim reporting If you suspect waste & abuse you should report the matter immediately to the insurer via your chain of command.
Adjuster Tip: For manufactured (mobile) homes or travel trailers, replacement cost applies if the building:
★ Is at least 16' wide and, ★ Has an area of at least 600' within its walls ★ Is the principal residence
Adjustment Standards and Requirements - Identification. The adjuster must provide identifying information, such as make, model, and serial number, on items such as:
★ Major building equipment, for example : furnaces central air conditioning units ★ Major and minor appliances, for example: refrigerators water heaters washers, dryers televisions computers If identifying information is worn off, it is best practice to photograph the tag that held the information.
If a single-family building that is a manufactured (mobile) home or travel trailer and qualifies for replacement cost is a total loss or is not economically feasible to repair, then the adjustment of the property will be the lesser of:
★ The replacement cost of the building or 1.5 times the actual value. ★ The building limit of liability
Adjustment Standards and Requirements - Preliminary Report. (Continued). Examples of cause are:
★ Tidewater overflow ★ Stream, lake, or river overflow ★ Alluvial fan overflow (An alluvial fan is a fan- or cone-shaped deposit of sediment crossed and built up by streams.) ★ Accumulation of rain or snow melt.
Adjustment Standards and Requirements - Preliminary Report. (Continued). Examples of Flood Characteristics:
★ Velocity flow ★ Low velocity flow or ponding ★ Wave action ★ Mudflow ★ Erosion
Adjustment Standards and Requirements - Origin of Loss. (Continued). The adjuster should explain in his or her narrative report the origin of loss that created the general condition of flooding, answering questions such as these:
★ Was wave action a factor? ★ Is there evidence of mudflow? ★ Was there accumulation of rain or snowfall ★ Was the general condition of flooding associated with a hurricane or a spring rain? ★ What were the exterior and interior water heights? ★ What was the duration of the water in the risk before receding?
