The Tampa Bay Times ran an excellent story, Hurricane Michael Destroyed Their Homes Then The Insurance Heartache Began, which tells a sad but familiar theme about insurance company denials and delayed payments following hurricane losses. I was quoted in the piece:

Chip Merlin, a Tampa insurance lawyer, said the same conflict happened in the last 15 years after Hurricane Katrina and Hurricane Ike. He said companies try to avoid making payment even when a slab is all that’s left of a property, as is the case in much of Mexico Beach.

‘Typically you have the strongest wind speeds come first, and then the storm surge follows it,’ Merlin said. Both cause damage. But residents and their attorneys, he said, may need to pay meteorologists and engineers to prove that flood and wind are to blame, and how much.

Over a decade ago, I warned that exactly what has happened in Hurricane Michael was going to repeat in, Are We Doomed To Repeat This Again?

I truly think that by raising the National Flood Insurance limits to at least $600,000 for residential structures and $1,500,000 for commercial structures on a replacement cost basis, increase the Law and Ordinance coverage to $100,000 for each, and add co-insurance requirements to the limits available, many of these cases will go away and the National Flood Program will be more sound from a actuarial standpoint because it will be able to insure to value. I suggested something similar to this in a post, Is One Practical Answer to Many Coverage Disputes Involving Storm Surge Versus Wind to Raise National Flood Limits and Underwrite Insurance to Value Properly?

From an educational standpoint about the current limits of the National Flood Program, please remember that the current limits available for purchase are $250,000 for a residential structure at replacement cost and $500,000 for a commercial structure, but only on an actual cash value basis. Neither limit has been raised in years to keep pace with inflation.

There is a huge need to increase the limits for a number of reasons. There is also a strong public policy in a free market economy to encourage the development of a private flood insurance market.

Thought For The Day

The hurricane flooded me out of a lot of memorabilia, but it can’t flood out the memories.
—Tom Dempsey

  • drmikempa

    I can’t find where they increased the NFIP limit on residential properties to $300,000 from $250,000. Can you provide a reference?
    Thank you.

    • wmerlin

      They did not, but my brain forgot to remind my typing fingers of that fact.

  • David Thompson, CPCU

    I’ll make one correction and a few comments here.

    The maximum NFIP limits for a dwelling is $250,000 for a residential structure of 1-4 families, not $300,000. Personal property is available with a limit of $100,000. Replacement cost coverage on the building (personal property is always actual cash value…ACV) applies only for a single-family, owner occupied dwelling when the named insured and/or spouse resides in the house at least 80% of the year. (Still, all carpet and appliances are always ACV.) In my state of Florida, there are a significant number of homes that are seasonal, thus many NFIP policies for houses pay ACV for all losses.

    While I’m not 100% positive, I believe the NFIP maximum limits have not increased since 1994. Certainly, the limits are insufficient for many policyholders, but remember it literally takes “an act of Congress” to increase them. Counting on Congress for anything meaningful is a “pipe dream” in the view of many. Heck, the NFIP technically expired on 9/30/17 and since then there have been a dozen short-term extensions by Congress, some as short as three weeks. The U.S. House Financial Services Committee passed a sweeping reform bill that would reauthorize the NFIP for five years and make some positive program changes, but the maximum limits are not addressed there. The Senate has to act for it to pass Congress.

    The wind vs. flood debate has taken place every time there is a hurricane; this has been true for my 33+ year career in the industry…and it will occur the next time a hurricane strikes.

    Consumers are partly to blame for coverage shortfalls after a hurricane, or any loss for that matter. As much as the mainstream media, insurance industry associations, and insurance agents “spread the gospel,” every time there is flooding the news is chocked full of consumer standing in neck-high water saying, “I thought my policy covered flood.” Then you have those who continue to say, “I’m not in a flood zone.” Breaking news: everyone is in a flood zone, it just depends on whether you are in a high risk or low-to-moderate risk zone. I’ve actually seen numerous emails from lenders to consumers saying, “You are not in a flood zone, you don’t need flood insurance.” Required to have and “need” to have are totally different. Anyone with a structure located anywhere near Mexico Beach and the coastline is foolish not to buy flood insurance. Remember, FEMA data has consistently shown for decades that around 25% of all dollars actually paid during floods are paid to those in a low-to-moderate flood zone where lenders do not require flood policies. Right at 33% of all NFIP policies are written as a “Preferred Risk Policy.” That means those customers are not in a Special Flood Hazard Area (Zones starting with “V” or “A”) and have voluntarily purchased a NFIP policy. I have cousins in Mexico Beach who owned two homes there, both low-risk Zone X homes, and despite the fact that the lender did not require flood insurance, they had two policies. On one home (Insured for $454,000 on the home and $250,000 under NFIP) the NFIP carrier paid them $67,000 within three weeks. Then, a few weeks later, the homeowners insurer declared the home a total loss and paid them the $454,000 policy limit. My cousins advised that they were paid by the NFIP and the homeowners insurer said, “Good for you.” That’s a success story that never makes the news or blogs.

    Don’t overlook private flood insurance either. While there is no “magic answer” about when private flood insurance is appropriate (each situation is different) there are distinct advantages to private flood. Just a few days ago, I looked at underwriting guidelines for a homeowners insurer (A.M. Best rating of A-) and they provide flood insurance under their homeowners policy (Subject to underwriting) up to $3 million. Coverage is replacement cost on the building and personal property with distinct coverage advantages over NFIP. One significant advantage of this arrangement is that after a wind & flood loss, there is one insurer and one adjuster, thus no wind/flood debate. Consumers should seek the advice of a qualified independent insurance agent when purchasing insurance.

    Finally, anyone within 10 miles of the coast is foolish not to have flood insurance. Many others need it too, but over my decades of experience in the insurance industry I’ve seen it over and over again where storm surge and/or heavy rains associated with a hurricane or “wicked” storm have caused flooding. For those in a low-to-moderate zone the cost for NFIP coverage can be as low $1.32 per day for a policy with $250,000 building and $100,000 personal property coverage. I just left a local breakfast spot and paid $2.03 for an iced tea.

    David Thompson, CPCU

  • I’ve written and spoken about this issue for decades, most recently in this blog post:

    Years ago, damage caused by a boiler explosion was often covered by at least two policies that were written with different insurers. In order to prevent delays or denials of payment to those affected while the carriers pointed fingers at each other, a bridge endorsement was used. This allowed the affected parties to be compensated promptly while the insurers figured out how to split the claim payment.

    • wmerlin


      Your post is a lot better than mine on this topic. Maybe we can gang up on the powers that be!

  • L. A. McDonough

    Sounds like these insurance companies are crooks refusing to pay out in full so people can rebuild and move on. Lawyers are fighting lawyers I hear from some living near the gulf and mass devistation areas that report to me in Ala. as I knew them before we moved up here. (Dothan AL) The motels here are full of evacuees up here and it is now July 2019.