Hard lessons about flood insurance policies (Wed, 03 Sep 2014 18:30:00 +0000)

Patricia Smith's frustration alone could flood a few more thousand homes in metro Detroit.
After her Oak Park basement was hit with several inches of water, Smith, 66, was angry when her insurance agent said he wasn't sure what coverage she had. Later, he said she was out of luck and did not have a rider for sewer backups on her Allstate policy.

"You wrote the policy. Why didn't you offer me what I needed in the first place?" the Detroit Edison retiree remembered she asked the agent.

Metro Detroit saw historic flooding and sewer backups after a quick, brutal rainstorm on Aug. 11. Gov. Rick Snyder declared a state of disaster for Macomb, Oakland and Wayne counties. In the aftermath, we're learning the hard way about storm coverage. The lessons can be valuable to others across the nation who could be hit in the future.

Flood insurance and sewer coverage are not the same thing.
Many sewer lines across the country are aging. Pipelines that handle both storm water and sewage can become overwhelmed and back up.

J. Robert Hunter, director of insurance for the Consumer Federation of America, said his son faced damage from a backed-up sewer in Baltimore and was covered. But he said many people don't realize they need to buy an endorsement or they don't ask whether their standard policy offers the coverage.

Sewer backup coverage might add $40 to $50 to an annual premium, according to the Insurance Information Institute.

Kristie Taber, manager of consumer assistance and insurance investigations for the Michigan Department of Insurance and Financial Services, said some people ask about flood coverage but not about the extra rider for a sewer backup.

Taber, who met with storm victims at an information event in Southfield, Mich., said some homeowners have coverage ranging from $2,500 to $5,000 or even $10,000 for sewer backups.
Kim Purcell, 53, said she was happy her USAA policy covers up to $10,000 in damage to her Berkley, Mich., basement. She lost carpeting, a sewing machine, a small refrigerator and other items. "Thank goodness, I had something," she said.

Too many don't have coverage. Warren, Mich., Mayor Jim Fouts suggested Wednesday that state legislation is needed for more disclosure and regulation regarding "Truth in Flood Insurance." One proposal: Mandate a minimum flood insurance requirement for homeowners' policies at reasonable and competitive prices.

Do not file a claim if you're not covered
Filing a claim typically makes you a riskier customer, said Laura Adams, a senior analyst for InsuranceQuotes.com.

Think twice when you talk to a claims hotline, too. I had an Allstate catastrophic team claims agent urge me to quickly file a claim when the sewer backup hit my basement. I didn't know if I had coverage; neither did the hotline representative. But the claims representative kept insisting I might qualify for a low-interest loan during a disaster, even if my claim was denied. My husband and I thought that didn't make sense. But later I reconsidered, especially after a restoration guy told me I had to have coverage. In a day or so, my claim was denied. I didn't have the rider. Now I'm worried my rates will go up or the insurer could refuse to renew. But an Allstate spokesperson said filing a claim that is not covered under a policy would not impact rates or renewals.

Consumer advocate Hunter said he felt the claims line acted in bad faith by encouraging an unnecessary claim, and he stressed that consumers should not file a claim if they're not covered.
Allstate said its claims reps encourage customers to file so the company can start the claims process and fully investigate the damage to begin rebuilding.

Would rates go up anyway in my area?
"It's too early to determine the impact the Aug. 11 storm will have on rates," said Meghan Cass, a spokeswoman for Allstate. "We look at an area's loss history over many years before making changes."

You might qualify for a tax break
Some might say a tax break is a silver lining in storm clouds. But federal tax rules have tough limits on personal losses.

First, you must reduce the casualty loss by $100 first. Then, you must further reduce the total of all of your losses by 10% of your adjusted gross income.

Meaning, if you faced $5,000 in uncovered property losses but had an AGI of $50,000 you would not see any tax break under the normal tax rules.

"It's very hard to get this deduction," said George W. Smith IV, a certified public accountant and partner at George W. Smith & Co. in Southfield.

See Internal Revenue Service Form 4684 for the long list of rules. The IRS expects you to file a claim if you're covered.

IRS Publication 584 can help with rules on casualty, disaster and theft loss.

Another point: If the property is a rental or is used for business purposes, the $100 floor and the reduction for 10% of adjusted gross income don't apply, said Patricia Bojanic, certified public accountant for Gordon Advisors in Troy, Mich.

The stress factor remains high in the aftermath of a disaster, but understanding more about what might be covered could ease a little anxiety.

Contact Susan Tompor at stompor@freepress.com

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Today is First Day of National Preparedness Month (Tue, 02 Sep 2014 15:28:00 +0000)

Today is first day of National Preparedness Month! Make sure your family has a family emergency plan: ow.ly/AZkGX

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Lac-Megantic runaway train and derailment investigation summary (Mon, 25 Aug 2014 17:05:00 +0000)

This summary of the Transportation SafetyBoard of Canada's (TSB) Railway Investigation Report R13D0054 contains a description of the accident,along with an overview of the analysis and findings, the safety action taken to date, five key recommendations, and what more needs to be done to help ensure an accident like this does not happen again.

The accident

On the evening of July 5, 2013, atabout 10:50 p.m., a Montreal, Maine & Atlantic Railway (MMA)train arrived at Nantes, Quebec, carrying 7.7million litres of petroleum crude oil in 72 Class 111 tankcars. Originating in New Town, North Dakota, these were bound for Saint John, New Brunswick.

In keeping with the railway's practice,after arriving in Nantes, the locomotive engineer (engineer) parked the train on a descending grade on the main track. A replacement engineer was scheduled to continue the trip east in the morning.

The engineer applied hand brakes on all five locomotives and two other cars, and shut down all but the lead locomotive. Railway rulesrequire hand brakes alone be capable of holding a train, and this must be verified bya test. That night, however, the locomotive air brakes were left on during the test, meaning the train was being held by a combination of hand brakes and air brakes. This gave the false impression that the hand brakes alone would hold the train.

The engineer then contactedthe rail traffic controller in Farnham, Quebec,to advise the train was secure. Next, the engineer contacted the rail traffic controllerin Bangor, Maine, whocontrols movements forthe crews east of Lac-Megantic. During this conversation, the engineer indicated that the lead locomotive had experienced mechanical difficulties throughout the trip, and that excessive black and white smoke was coming from its smoke stack. Because theyexpected the smoke to settle, it was agreed to leave the train as it was and deal with the situation the next morning.

Shortly after the engineer left, the Nantes Fire Department responded to a 911call reporting a fire onthe train. After shutting off the locomotive's fuel supply, the firefighters moved the electricalbreakers inside the cab to the off position, in keeping with railway instructions. They then met with an MMA employee, a track foreman who had been dispatched to thescene but who did not have a locomotive operations background.

Once the fire was extinguished, the firefighters and the track foreman discussed the train's condition with the rail traffic controller in Farnham, and departed soon afterward.

With all the locomotives shut down, the air compressor no longer supplied air to the air brake system. As air leaked fromthe brake system, the main air reservoirs were slowly depleted, gradually reducing the effectiveness of the locomotive air brakes. Just before 1 a.m., the air pressure had dropped to a point where the combination of locomotive air brakes and hand brakes could no longer hold the train, and it began to roll downhill toward Lac-Megantic, just over seven miles away.

As it moved down the grade, the train picked up speed,reaching a top speed of 65 mph. It derailed near the centre of the town at about 1:15 a.m.

Aftermath and emergency response

Almost all of the 63 derailed tank cars were damaged, and many had large breaches. About six million litres of petroleumcrude oil was quickly released. The fire began almost immediately, and the ensuing blaze and explosions left 47 peopledead. Another 2000 people were forced from their homes, and much of the downtown core was destroyed.

The pile-up of tank cars, combined with the large volume of burning petroleum crude oil, made the firefighters' job extremelydifficult. Despite the challenges of a large  emergency, the response was wellcoordinated, and the fire departments effectively protected the site and ensured public safetyafter the derailment. 

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