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Flood Exposures and Large Property Risks

Post written by: Martin J. Morisky CPCU, ARM, ALCM, ARe

Normally a building’s exposure to flooding is determined by consulting a flood service provider, asking them to provide the FEMA flood symbol and determine if the risk is located in a Special Flood Hazard area. This is fine for a small property risk, especially if the property is located near the street, since the flood exposure is determined at the “mailbox” or at the curb.

But how does one determine the flood exposure when the risk is a college campus, an apartment complex, an industrial complex, or an office complex?

Considerations for Large Properties

A simple flood check will not suffice if the risk involves multiple buildings or even a single building that is  very large. I remember a particular circumstance involving a large chemical facility that was considered to be in a low hazard flood zone at the front of the building but a high hazard flood zone in the rear portion of the building.

This was determined by superimposing the footprint of the building on the FEMA Flood Hazard Boundary Map.  If a building is built into a hillside or is a multilevel building with the lowest level in close proximity to a flood zone, the underwriter may need to know the floor elevation of the building in question  to compare  with the Base Flood Elevation (BFE) of the closest body of water.  There should be at least a 3-foot difference.

Some organizations and institutions require a separate flood check on each of their buildings, which makes sense if the buildings are scattered over a large area, as in the case of a major college.   The University of Michigan is a good example of a widespread campus that has buildings both in and out of high hazard flood zones.

For risks involving buildings in close proximity to one another, such as apartment or office complexes, it makes sense to order a flood survey for at least one building and ask for the flood map that covers  the remaining buildings in the complex.    The footprint of the buildings will again be superimposed on the FEMA flood map.  Special care must also be taken if the building complex is built on a hillside that leads down to a body of water, because some of the buildings may actually be located in the high hazard flood zone.

A high rise office building or hotel is a large property risk that extends vertically rather than horizontally, leading one to believe there isn’t much of a flood exposure since buildings of this nature generally have a small footprint. Even if the building is located in a high hazard flood zone, there may be little actual damage to the building from flood waters.  However, it is critical to consider damage to the basement and sub-basements because electrical switchgear and HVAC equipment are generally located in these areas. The subsequent loss of those services will result in a total shutdown of the building, resulting in a large time element loss.  These areas of the building are also subject to backup of sewers and drains.  A backup of sewers loss may occur if the floor level of the building is above the BFE but the basements and subbasements are below.  Therefore, it makes sense to locate critical, high-value equipment either on floors above the BFE, or in a separate  structure built on raised ground.

During my 20 years of underwriting, I have witnessed the many challenges of the flood peril  and have found that due diligence is  an absolute necessity when underwriting  for that particular risk.

Guest author Martin J Morisky is a quality assurance analyst in the Commercial Underwriting Office for Westfield Insurance and also served as the company’s property advisor.  He spent eight years at Westfield Insurance and 40 years in the industry in various underwriting, technical and managerial positions with a number of national and international carriers.  He has taught IIA, CPCU, and ARM courses for many years and has served as CPCU Education Chairman for both the Cleveland and Columbus CPCU Chapters.

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