On October 14, 2016, the Federal Emergency Management Agency (FEMA) released Write Your Own (WYO) Bulletin W-16078 entitled, Inclusion of Law Firms on Checks Arising Out of NFIP Claims. The bulletin addressed who can be included as a payee on checks for flood claim payments—and they will no longer include public adjusters or attorneys.

The Bulletin, signed by David I. Maurstad, Assistant Administrator for Federal Insurance and Mitigation Administration, is republished in its entirety below:

Periodically, FEMA, Write Your Own (WYO) companies, and vendors acting on behalf of NFIP insurers receive requests to assign interests in claim payments to third parties, including attorneys, law firms, public adjusters, and others asserting lien interests. This bulletin clarifies FEMA’s position concerning the inclusion of attorneys, law firms, or public adjusters as co-payees or lienholders on NFIP checks. As explained below, the Assignment of Claims Act of 1940, as amended, 31 U.S.C. § 3727, sets forth a procedure for individuals requesting an assignment of a federal payment, and federal law preempts any state law with regard to attorney liens, or liens of any sort, on NFIP insurance claim payments.

The manner in which a flood insurance claim payment is issued, including the payees on a check, is governed exclusively by applicable federal laws and regulation, and the terms of the Standard Flood Insurance Policy (SFIP). See 44 C.F.R. Pt. 61, App. A(1) and A(2), Art. IX; 44 C.F.R. Pt. 61, App. A(3), Art. X (What Law Governs). Section II of each SFIP defines “you” and “your” as the:

[i]nsured(s) shown on the Declarations Page of this policy and your spouse, if a resident of the same household. Insured(s) includes: any mortgagee and loss payee named in the Application and Declarations Page, as well as any other mortgagee or loss payee determined to exist at the time of the loss in the order of precedence.

44 C.F.R. Pt. 61, App. A(1), A(2) and A(3), Section II (emphasis added). Third parties, such as attorneys, law firms and public adjusters, whose interest did not exist at the time of the loss are not loss payees under the SFIP.

In addition, the Assignment of Claims Act, 31 U.S.C. § 3727, sets out the conditions necessary to assign a claim against the United States to a third-party. Specifically, 31 U.S.C. § 3727(b) provides that:

An assignment may be made only after a claim is allowed, the amount of the claim is decided, and a warrant for payment of the claim has been issued. The assignment shall specify the warrant, must be made freely, and must be attested to by 2 witnesses. The person making the assignment shall acknowledge it before an official who may acknowledge a deed, and the official shall certify the assignment. The certificate shall state that the official completely explained the assignment when it was acknowledged. An assignment under this subsection is valid for any purpose.

The Assignment of Claims Act applies to NFIP claim payments. See, e.g., Diamond v. FEMA, 689 F. Supp. 163 (E.D.N.Y. 1988).

WYO companies shall not include third-parties as payees on NFIP flood claim payments unless the third party has a valid claim to such payment under the SFIP or complies with the Assignment of Claims Act.

Litigation arising out of a WYO Company’s exclusion of attorneys or law firms as co-payees or nonmortgagee lienholders on checks issued arising out of NFIP Claims, will be considered within the scope of the Arrangement. 44 C.F.R. Pt. 62, App. A Art. III (D)(2). Any judgment and all costs arising out of any such litigation will be addressed pursuant to the Arrangement.

This will come as a major shock to all those working on behalf of policyholders. The sad fact is this may ultimately effect the willingness of some individuals to assist policyholders in their fight against FEMA and the WYO Carriers following a flood loss.

This bulletin and the language it includes seems to also prevent other third-party payees such as grant programs from being included on these checks. I anticipate that we will see some pushback in the days ahead. We will keep you posted.

As always, I’ll leave you with a (mildly) related tune, here’s Pink Floyd with Money:


  • sherri vardas

    I need some direction on the rules that allow a mortgage company, who is named as a payee on our flood payment check, to hold and dictate the monies and force us to sign over the check. Do we not have the right to the funds since we paid for the policy through the NFIP to have thenwork completed? This is getting very unnerving especially since we are having to live elsewhere while the repairs are being made and my 24 year old son is confined to a wheelchair. Thank you.

    • Chase Mathis

      Ms. Vardas:

      I know that dealing with these issues can be very complicated and frustrating. The following is a point by point explanation of some of these issues that myself and my support staff have put together, hopefully it will provide you with some additional insight. If you have additional questions, please do not hesitate to contact our offices.

      Thank you.

      Chase Mathis

      Yes it can be frustrating to deal with the bank/mortgage company when they are named as a payee on an insurance check regarding a claim. As there are many circumstances as to why this happens after a settlement has taken place the bank/mortgage company still has a vested interest of the property. Regardless that you as the homeowner have paid each month on your policy this is part of their policy and procedure process. Here are a few areas that may answer your question:
      • When a settlement has taken place regarding your claim the bank/mortgage company is represented by their attorney and as long as you have a mortgage they will always be listed as a payee.
      • The only time were the bank/mortgage company is not listed is when you have paid off your home or if the settlement is just for the contents in the home.
      • The bank/mortgage company wants to make sure the money is used for repairs. There are some claims were the clients have walked away from the property and “pocketed” the monies.
      • Contractors who do the repairs are not always forthcoming and have walked away with the monies leaving the client without the means to complete any repairs.
      • Also contractors have also been left without funds owed to them for the work and they then can go after the homeowner and place a lien on the home.
      • There have been instances whereas the bank/mortgage company have held onto a settlement check due to the homeowner not taking any steps to do any repairs.
      The process to getting the funds released to the client are as follows:
      • Reach out to the bank/mortgage contractor and request a contractor’s packet. This includes all the documents needed for you and your contractor to go over. (Waiver of Lien, Affidavit, Statement of Satisfaction, request of contractor’s W-9, copy of the contractor’s License)
      • The contractor should have a bid showing how much the total repair job will cost. You also need the estimate cost sheet from the insurance company as this will give you a line by line detail of why they came to the conclusion of the amount of your settlement.
      • Once the contractor’s packet is completed this should be faxed immediately to the bank/mortgage company.
      • It will be reviewed thereafter the bank/mortgage company will release “draw” checks in the homeowners name and contractors name. These checks are for repairs, equipment needed for the repairs and supplies.
      • At some point the contractor will inform you the homeowner to contact the bank/mortgage company to have them do an inspection.
      • The inspection needs to meet somewhere at the 75% – 85% mark for satisfaction (each bank/mortgage company is particular with their %’s).
      • If the contactor has completed the repairs at the $ amount of what has been presented on the bid or more work needs to be done for completion the bank/mortgage company will consult with the homeowner and contractor.
      There are also times when there is settlement money still available, the bank/mortgage company will speak with the homeowner on what to do. (To be used toward the mortgage or send to the homeowner).