DETERMINING THE ORIGIN AND EXTEND OF FOUNDATION DAMAGE DURING A FLOOD EVENT

DETERMINING THE ORIGIN AND EXTEND OF FOUNDATION DAMAGE DURING A FLOOD EVENT

One of the highly contentious issues following a flood event is whether the insurance will pay or not for cracked foundations caused by the settlement of land. Based on the current federal common law, congressional statutes/intent and Federal Emergency Management Agency (FEMA) rules that control the outcome of these cases, under certain circumstances, the National Flood Insurance Program (NFIP) pays for losses from subsidence of land along a lakeshore (or similar body of water) that resulted from the erosion or undermining of the shoreline caused by waves or currents of water exceeding cyclical levels that led to a flood.

All other land subsidence is expressly excluded, including gradual erosion, sinkholes, differential settlement, settlement due to improper construction, pre-flood settlement, prior flood damage, etc. Furthermore, even if the flood contributes to the differential settlement of supporting soils, FEMA consistently has ruled that the damages are not covered and the Standard Flood Insurance Policy (SFIP) specifically does not cover damages caused by “destabilization or movement of land that results from the accumulation of water in subsurface land area” (see SFIP Dwelling Form, June 1, 2014). Thus, the earth movement damage coverage is very limited due to the earth-movement exclusion of the SFIP.

Furthermore, unless there is a general condition of flooding in the area (and this flood is the proximate cause of sewer or drain backup, sump pump discharge or overflow or water seepage), the NFIP does not insure for direct physical loss caused directly or indirectly by any of the following:

· Backups through sewers or drains

· Discharges or overflows from a sump, sump pump or related equipment

· Seepage or leaks on or through the covered property

To reduce confusion, new federal law requires that starting June 1, 2014 the flood policies must state the conditions, exclusions and coverage limitations in plain English, in boldface type, and in a font size that is twice the size of the text of the body of the policy.

Last year, New York State announced that it will use its share of billions of dollars in federal SS Sandy aid to “fully compensate” storm victims who had flood insurance claims denied because of the earth-exclusion rule that bars payments for damage caused by earth movement during a flood.

Examples from Irene and Super Storm Sandy Damage Assessments

During Irene in 2011 and Super Storm Sandy in 2012, we saw damage caused by the scouring of the subsoil away from the slab or foundation walls. In those instances (such as the one depicted in Figures 1, 2 and 3) the insurance company did pay for the repairs because the properties were located near the shoreline and the damages were caused by the scouring away of the soil, undermining the foundations. Thus, the key to remember is that the damage to be covered must be caused by the flood waters and not by the earth movement.

Figure 1. Discrete pier footings damaged by flood during SS Sandy. The insurer determined that this was a covered loss. The home will be rebuilt as per the new elevation requirements.

Figure 2. View of soil scouring beneath the left side of the building. The insurer determined that this was a covered loss because the flood waters scoured the foundation. In order to repair the damage to the property caused by the floodwaters, we recommended that soil scoured from beneath the porch slab, approximately 3 cubic yards, be replaced with appropriately selected and properly compacted fill material.

Figure 3. View of offset concrete masonry block (CMU) blocks in the wall within the central portion of the crawlspace. There was ample evidence of scouring around the subject property. The insurer paid for the realigning of the CMU blocks to restore the foundation to its pre-flooding condition.

In another loss in New Jersey where the dirt washed out from under the slab, NFIP paid to replace the dirt under the slab. The above inspected properties evidenced soil scouring damage caused by the velocity of the flood water and the properties were located at the shoreline of streams, rivers and the ocean. The insurance companies did pay for these restoration damages when there was evidence of soil scouring caused by the flood waters and there was no evidence of damage caused by earth movement.

The SFIP excludes damages resulting from hydrostatic pressure unless there is surface flooding in the area and the flood is the proximate cause of the damage from the pressure of water against the insured structure

On the other hand, the NFIP does not cover damage to slabs and foundations when there is no evidence of erosion of earth under the foundation or if hydrostatic pressure from water is pushing upward or downward (settlement) on a slab or foundation. The NFIP Adjusters’ Manual specifically addresses these issues by stating: “Excess water in the ground exerts upward pressure on the slab floor and inward pressure on the subgrade foundation walls. This also results in cracks and displacement. Damage of this kind is considered the result of hydrostatic pressure and is not covered under the SFIP, unless there is a general condition of flooding in the area”.

The NFIP Adjusters’ Manual also addresses the lack of coverage for damages to the foundation caused by the lack of moisture in the ground when the flood waters recede: “The soil shrinks away from the foundation, allowing the grade beams to settle downward under the supported weight. This results in a bowing effect and cracks”. When the soil is saturated with the flood waters, very rarely do we see damage to the foundations caused by the weight of water alone. The reason is that the settlement foundation damage occurs when there is a lack of moisture in the ground and not when the home is flooded, unless there is soil scouring by the velocity of the flood waters. These are all site-specific analyses and two structures that are located next to each other may not evidence the same impact from the flood waters.

Examples of Excluded Foundation Damage

The overwhelming majority of the cases we inspected belong to the “differential settlement” damage, as the ones depicted in Figure 4 below.

Figure 4. View of a previously repaired crack in the north side of the building. Flooding with water movement sufficient to carry the subsoil away (scouring) from the slab or foundation walls generally leaves visible signs. Here, there was no evidence of soil scouring in the vicinity of the crack.

At the subject property (Fig. 4), the cracks observed were aged, weathered, evidenced prior repairs, and were not of recent origin. We observed cracks in the non-structural walls around the building but the cracks were weathered and not of recent origin. We carefully checked the perimeter and underneath the building for soil washout from velocity water flow and we found no indication. A common cause of cracks in walls and paving is differential movement. Cracks associated with differential movement are generally vertical or diagonal (in a stair-step pattern through the mortar joints and blocks) and occur at or near corners and at locations of abrupt support changes. The cracks observed in the CMU walls and concrete paving around the building were consistent with differential movement of the building and foundation.

Differential movement of a building and foundation is a common occurrence that may be caused by movement of the supporting soils at the property, deterioration and distortion of the framing and support components of the building, re-leveling, and other repair efforts. Movement of the supporting soil beneath the foundation system is typically caused by long-term reduction of the soil volume in response to loads imparted to the ground (consolidation), changes in soil moisture content, subsidence, and frost heave from subfreezing temperatures. Causes of variations in the soil moisture include intermittent periods of rainfall, frequency of flooding, poor drainage around a structure, variation in watering of vegetation, the presence of trees and shrubbery that consume soil moisture, and the presence of leaks in plumbing lines at or near the property.

Even if the cracks are new, differential settlement cannot occur without some movement, consolidation, compaction, or some other mechanical movement of the supporting soils. If the insured’s engineer is calling it differential settlement, then this does not provide coverage. If the foundation construction was substandard or not properly maintained, then this would result in denial of coverage. See SFIP Dwelling Form, June 1, 2014:

We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that we do not cover are:

…..

5. Destabilization or movement of land that results from accumulation of water in subsurface land area;

In summary, the SFIP only covers direct physical loss to buildings by flooding (such as scouring of soil due to the velocity of the flood waters)), not by earth movement or erosion or destabilization of the subsurface. Scouring generally is defined as having occurred when there was flooding with enough water movement to carry subsoil away from the slab or foundation walls.

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