Stay Afloat with Flood Insurance

Like others, David Volion, owner of Voleo’s Seafood Restaurant, Lafitte, Louisiana, felt he couldn’t afford flood insurance. However, damage from Hurricane Rita in September 2005 taught him he couldn’t afford not to have insurance. After getting back on his feet, he contacted an insurance broker and purchased flood insurance through the government’s National Flood Insurance Program (NFIP).

Fortunately for the layman, coverage for policies written through the NFIP is summarized on the website, including the fact that there is a 30-day waiting period from the date of purchase until the policy, which covers the structure and contents, goes into effect.

Among other things, contents coverage includes furniture, electronic equipment, portable appliances, washers, dryers, food freezers, and the food inside them. Property coverage extends to the foundation, electrical, plumbing, air-conditioning, heater, water heater, refrigerators, stoves, dishwashers, and the like.

Three years after Volion purchased flood insurance, Hurricane Ike destroyed his restaurant again. “I was tickled to death with the amount of money we received. It wasn’t what I expected, but I was able to rebuild,” he says.

From his experiences dealing with flood insurance from that hurricane, and again following Hurricane Isaac in 2012, he learned pointed lessons.

First, his contents were not insured at replacement cost value (RCV), but rather actual cash value (ACV) because contents of buildings insured through the NFIP are insured on an ACV basis—the depreciated amount.

Volion found himself haggling with claims adjusters about his lost contents. They asked for receipts proving he actually owned the contents, when he bought them, and how much he paid for them. He didn’t have receipts for everything. They also asked for serial numbers for all of his equipment to match with receipts. He had to determine where he bought everything, request duplicate receipts from the equipment vendors, and write in the serial numbers.

Much wiser, he now keeps receipts and takes the time to write serial numbers on them. He also recommends taking photos of the contents and construction progress for any building projects to prove it was done and what materials were used.

Others have been surprised that flood insurance coverage for basements is limited. In fact, many NFIP-policy coverage complaints swirl around basement issues, says Mario Saccente, an insurance broker and executive vice president of the Long Island chapter of the New York State Restaurant Association. Basement coverage includes the air conditioner, heater, and other HVAC equipment, but not kitchen equipment.

He notes that flood insurance is not hard to get, and it doesn’t have to be written through the NFIP. Some, but not all, property insurers can add on flood coverage through a policy extension. In any case, he notes that loss-of-business coverage is not included in flood insurance.

Power outages from flooding became a serious issue for New York restaurants after Hurricane Sandy. Restaurants without flood insurance that weren’t flooded by the hurricane but that lost power were denied business-interruption and food-spoilage coverage from their commercial-policy insurers, because the loss of power was the result of a flood.

This leads James Versocki, legal counsel to the Greater New York City chapter of the New York State Restaurant Association, to advise restaurant owners to review their general commercial policies with their agent and ask what instances are not covered or for what reasons they can be denied coverage. “Then make an informed decision about changes to your policy and if you want to pay for it. All policies have endorsements. Make sure you understand what is not covered,” he says.

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