Flood Insurance Question

April 14, 2006 12:35 PM

My house recently flooded. Fortunately, we have flood insurance. Our adjuster claimed that we needed to remove our floors (hardwood and tile) throughout the house and replace. Our contractor (who I trust) said that's not necessary, that only re-finishing is required. Because of the discrepancy, I stand to pocket a chunk of change on the deal.

The contractors are finishing up, and sure enough, I've received an insurance check that covers the work the adjuster described. The check has to be co-signed by my mortgage lender, who I've spoken to and says that they will simply endorse and send back to me. Then, it's mine to deposit.

I know of only one catch: If my home floods again and we haven't done the work the adjuster paid for, they won't pay for it again. Frankly, that's a risk I'm willing to take. The area hasn't flooded like this in the 50+ years since it was developed, and the cash I stand to make is 5 figures.

This must have happened to someone else out there - do I have any legal, tax or other worries that I haven't thought of?

posted by space2k to home & garden (9 comments total)

They probably want you to remove it because of mold issues. It'll be damp in the underflooring for months, if not years, if it's not pulled up and at least aired out.

If mold takes root in your house, the potential problems are legion.

I'd suggest just getting it done.

As far as whether or not it's legal to not do the work... as far as I know, you're fine. You suffered damage, the adjuster made you whole... how you use the money is up to you.
posted by Malor at 12:46 PM on April 14, 2006

The insurance is to compensate you for your loss, not (specifically) to fix things up the way they were before. The theory goes, your house is worth $XXX less than it was before the flood, so you get a check for $XXX. The adjuster didn't "pay for the work," he simply figured out what work he thought was needed to put your house back the way it was, and how much he thought it would cost to do that work. If he's wrong (and overestimates), it's the insurance company's problem.

I can't speak to the tax implications (and, although IAAL, IANYL). You'll want to be sure you disclose the flood and the repairs you made (as well as the repairs the adjuster said were necessary), at least to your realtor, when you sell the house. S/he can tell you whether you're required to disclose that information to a potential buyer in your state. You may also want to speak to an independent contractor, and/or have a professional home inspector look at the repair work before it's completely closed up.
posted by spacewrench at 12:51 PM on April 14, 2006

Malor has it right, vis-a-vis the potential mold problem. I know that fat check looks tempting, but, if mold takes hold, you will easily spend that check on reepairs. And, your insurance company is not going to cover you for any mold-related repairs since you did not replace the flooring to begin with.
posted by Thorzdad at 1:03 PM on April 14, 2006

Fine advice from everyone.

I was quite nervous about the mold issues, but I had some disaster recovery people with fans and dehumidifiers in the house and the crawl space for a week immediately after the water receeded. I may have an inspector out to re-confirm, but I think that the mold danger has passed.
posted by space2k at 1:09 PM on April 14, 2006

One thing to consider is that if the flooring is warped even a little bit (maybe not even enough for you to notice right now), you could run into many problems down the road. The warped flooring could allow moisture back into the crawlspaces causing health problems for you and your family, or the floor could just warp even further and start to buckle; just to name two consequences.
posted by oddman at 1:25 PM on April 14, 2006

If I were you, I'd sock the excess money into a well-paying secure investment for a few years. I would then make regular checks for mold. If it all goes cockeyed, you have the original money plus interest to pay the repairs; if all is good, you're laughing.
posted by five fresh fish at 1:54 PM on April 14, 2006

And don't be surprised if your insurance company declines to renew you next time - they do no like water damage.
posted by DandyRandy at 2:29 PM on April 14, 2006

Whatever you decide, vis-a-vis the mold issue, can you get a signed document from an inspector indicating what actions are/are not needed? That way if you do run into a problem in the future and anyone is claiming it relates to the current flood issue, you have some backup.
posted by chudmonkey at 3:18 PM on April 14, 2006

When I had a roof replaced, they would only give me a certain percentage of the money and wouldn't pay the rest until I sent a receipt in for the amount of work done, which needed to say specifically that the work had been completed (not a quote).
posted by j at 6:18 PM on April 14, 2006