When The Earth Moves, Flood Insurance Is Denied

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Aug. 23--It is perhaps the two most dreaded words Sandy victims will ever hear from their flood insurance company: "earth movement."

Both are technical terms buried within insurance agreements that can cut tens of thousands of dollars from a homeowner's insurance offer -- and be the difference between salvaging a damaged home or forcing the owner to simply walk away.

There's an exclusion in flood insurance policies for a loss of property caused "directly by earth movement even if the earth movement is caused by flood," according to the standard policy. In layman's terms, that means if water moves the soil and that movement of soil cracks a house's foundation, that damage is not covered by insurance.

The National Flood Insurance Program does not keep records on the number of claims that have been denied because of damaged foundations.

But denials for flood insurance have become a cause with growing support in New York.

U.S. Sen. Kirsten Gillebrand, D-N.Y., has urged the National Flood Insurance Program, which is overseen by the Federal Emergency Management Agency, to back off on their denial of claims on the basis of the earth movement exclusion.

The exclusion is the focus of a Facebook group called Sandy Victims Fighting FEMA. The group plans to hold a rally on Aug. 29 in Mineola, N.Y., hit hard by Sandy.

Robert Trautmann, a Red Bank attorney representing Sandy victims battling insurance companies, said he has reviewed about 30 to 40 earth movement cases.

Trautman said that adjusters for insurance companies are following FEMA's directions on claims "to a fault," fearful of the repercussions if they get something wrong. Trautmann maintains that FEMA has told those adjusters that the agency will be looking to the adjusters to reimburse the federal government, not the homeowners, if a mistake is made.

"They're really looking for any reason to deny in case FEMA comes back to them," Trautmann said.

Dan Watson, spokesman for FEMA, countered Trautmann's remarks, saying adjusters have an incentive to make sure the correct amount of damage is properly reflected. The bigger the claim, the more they are paid.

The flood waters from Sandy wreaked havoc on the foundation of a client from Seaside Heights in a way that had nothing to do with earth movement, Trautmann said.

His experts are prepared to argue that it was "liquefaction erosion" that damaged that clients' foundation, which he says is covered by flood insurance. The ocean water eroded the soil -- mostly sand -- around the foundation, compromising it, he said.

The dispute boils down to definitions under the policy, the basis of many insurance arguments.

"There's a long history of litigation over definitions," said Mark Browne, a professor of insurance with St. John's University'sSchool of Risk Management, New York.

Watson, who also serves as spokesman for the National Flood Insurance Program, declined to address the dispute over definitions.

He said that policyholders who have concerns with their insurance companies can call FEMA at 1-800-427-4661. When a claim or any part of a claim is denied by the insurer, the policyholder may also appeal that denial directly to FEMA.

Ken Serrano: 732-643-4029; kserrano

@njpressmedia.com

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