Plagued By Erroneous Flood Zone Determinations?
Professional Land Surveyors To The Rescue!
By William E. McGrath, P.L.S.
THE BRIAN AUDLER STORY:
In the spring of 2001 Brian Audler refinanced his home at 3612 Juno Drive, Chalmette, Louisiana with Gulf Coast Bank and Trust Company. Gulf Coast is a regulated lender, and in compliance with the National Flood Insurance Act, Gulf Coast requested and obtained a Standard Flood Hazard Determination from CBC Innovis, Inc., a flood determination company. CBC Innovis, Inc. certified that Brian’s house was not in a flood zone and with that, it relieved the bank from mandating that the borrower obtain flood insurance as would be required by law.
In August of 2005 Hurricane Katrina destroyed thousands of homes along the Gulf Coast. Brian’s house was also destroyed. He later found out that his house actually was in a flood zone. Brian filed a class action lawsuit against CBC and nineteen other defendants in the flood determination business, as a representative of a class consisting of all home and business owners who sustained Katrina flood losses and had no flood insurance following allegedly incorrect determinations that their property was not in an SFHA flood zone. Brian’s Louisiana state court action was removed to federal court based on jurisdiction under the Class Action Fairness Act and diversity jurisdiction.
The District Court (E.D. La.) concluded that Brian’s complaint failed to state a claim for relief under Louisiana law. It granted CBC’s motion and dismissed all defendants from the lawsuit. Brian appealed.
The Fifth Circuit held that Brian lacked standing to assert claims against any flood zone determination company, and dismissed those claims. Brian then argued that CBC owed a duty to him to provide an accurate flood zone determination even without privity of contract. The Court, however, determined that under Louisiana law, CBC owed no duty to Brian, as it was hired by and responsible to his lender, not him, even though Brian paid for the determination.
THE D.K. STIEN STORY:
When Mr. Stien’s mortgage was sold to Bank of America, he was immediately told he would be required to carry flood insurance. He tried to communicate with customer service by phone and correspondence but was very much ignored. He was sold a flood insurance policy at over $600 per year. He tried to communicate with Bank of America asking why his property had been identified as being in a flood zone. He finally got a hold of someone in the second year of the flood insurance policy and was told by them that was up to him to prove that his house wasn't in a flood zone. He asked them where the proof was that he was and was ignored. Finally at the beginning of the third year he hired a Professional Land Surveyor who verified he was nowhere near a flood zone and he sent the report to Bank of America. Without so much as an apology they notified him that new information had surfaced about his property, that it was not in a flood zone. At that point he requested reimbursement for the two years of flood insurance and the cost of the survey, a total of about $1500. He never heard a word from them, not an apology, go jump in the lake, or any kind of a response. Rest assured if the shoe were on the other foot, he would have paid through the nose.
The error was no doubt caused by a flood determination company.
ADDITIONAL HORROR STORIES TOO NUMEROUS TO ELABERATE IN THIS ARTICLE:
Kelcan v. Countrywide Home Loans and Landsafe Flood Determination, Inc. http://www.state.il.us/court/OPINIONS/AppellateCourt/2011/3rdDistrict/June/3100084.pdf
Paul v. Landsafe Flood Determination, Inc.
http://caselaw.findlaw.com/us-5th-circuit/1333998.html
Stephanie Parker v. Citimortgage, Inc. and CoreLogic Flood Services, LLC
http://ar.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20101210_0003110.EAR.htm/qx
Dalas Duhon v. Trustmark Bank and Fidelity National Financial, Inc. d/b/a LSI Flood Services
http://www.brunini.com/assets/attachments/ECOPY12_EXCHANGE_09262007-134815.PDF
Susan L. Ford v. First American Flood Data Services, Inc.
http://manningfulton.com/newsstand/241-susan-l-ford-v-first-american-flood-data-services-inc
Joseph and Wendy Kessak v. Tower Hill Preferred Insurance Co. & LandAmerica Tax & Flood Services
http://docs.justia.com/cases/federal/district-courts/florida/flndce/3:2008cv00303/50813/44/0.pdf?1270163995
Dockets throughout the country are littered with dozens upon dozens of the cases involving erroneous flood zone determinations, not to mention thousands of consumer complaints against lending institutions for unjustifiable force placed flood insurance policies based on erroneous flood zone determinations. This is a disgrace to our National Flood Insurance Program!
FLOOD ZONE DETERMINATION COMPANIES:
Prior to the closing of a mortgage loan, regulated lenders are required to determine whether any improved real estate (or any portion of it) or a manufactured home securing the loan is or will be located in a Special Flood Hazard Area. In all instances, lenders, or the third-party vendors with whom they contract, are required to complete a “Standard Flood Hazard Determination Form” (SFHD) to record the results of a determination. Lenders are further obligated to retain a copy of the form. Prior to 1994 most lending institutions would handle the determinations in-house. Today, most banks outsource this task to outside venders called Flood Zone Determination Companies.
FEMA, on its website, http://www.fema.gov/business/nfip/fzone1.shtm lists 154 Flood Zone Determination Companies. Above the list FEMA offers this disclaimer: “FEMA does not attest to the quality or accuracy of the services offered. That must be determined by potential users of those services. FEMA does not approve, endorse, regulate, or otherwise sanction any company on this list.”
Most Flood Zone Determination Companies utilize a geo-coded database with its inherent error prone software to forward certifications to their clients in a matter of a few minutes. Others use the manual method of looking up a property and visually viewing its location on a paper or digital flood map.
According to the National Flood Determination Association, Flood Zone Determination companies perform over 20 million determinations annually and track over 184 million loans for changes to flood maps. It is interesting to note that there is no licensing or certification required to protect the consumer for any individual or company that offers a Flood Zone Determination service. Most Flood Zone Determination Companies bundle their services to include other services such as title searches, settlement services, appraisals, credit services, etc.
NATIONAL FLOOD DETERMINATION ASSOCIATION:
Although there is no consumer protections against erroneous flood zone determinations to prevent thousands of horror stories like Brian Audler and D.K. Stien, there is one organization to improve the flood determination industry. The National Flood Determination Association according to their mission statement : “The NFDA promotes the common interests of stakeholders involved with flood risk information through education, industry standards and a collaborative approach to legislative issues."
Their current membership list shows they have 24 members. The dues are as follows:
$11,000 for companies that do 10,000 or more determinations daily,
$9,075 for 5,000-9,999 daily determinations,
$7,150 for 2,500-4,999 determinations daily,
$4,400 for 1,000-2,499 determinations daily
$1,000 for 1-999 determinations daily.
Considering their annual dues, it’s no wonder why they only have 24 members. They do however posses considerable lobbying muscle within the beltway. Their members were recently given the authority to do e-LOMAs by FEMA, here to for, could only be done by licensed professionals (e.g. professional engineers and professional land surveyors). They have a representative on FEMA’s Technical Mapping Advisory Council. It is interesting to note that some of the defendants listed in the cases I have outlined above are members of NFDA. FEMA requires that anyone who certifies a “Standard Flood Hazard Determination Form” (SFHDF) “guarantee” the determination. Although, FEMA doesn’t specifically define what the “guarantee” would be if the determination was erroneous. One thing is for sure, for Brian Audler, D.K. Stien and the other similar horror stories throughout the country, that “guarantee” didn’t remedy any “cost to cure” for them.
PROFESSIONAL LAND SURVEYORS, AN UNDER UTILIZED PROFESSION:
For the past 30 years the number of FEMA Elevation Certificates I have done number in the thousands. Does that make me special?.….ABSOLUTELY NOT! But, I am just a typical example of my fellow Professional Land Surveyors all across the country, numbering in the tens of thousands that do exactly what I do and more. Every time we do an Elevation Certificate we have to determine what zone (flood or not) the property improvements are in. 95% of the time it’s a “no brainer”. About 5% of the time, when the improvements are on the borderline of a zone it can become very difficult. At times it takes every bit of my education and experience to make a correct determination. I can’t imagine how some flood zone determination company employee would ever get it right in such situations. It’s no wonder why there are so many law suits and consumer complaints involving these companies all across the country.
Most Professional Land Surveyors and/or their firms have errors and omissions insurance. They have the exact expertise needed to make the close calls on zone determinations. Every State has strict licensing laws for Professional Land Surveyors mandating education and experience standards along with a State exam to insure the public is protected against incompetent practitioners. This is a far cry from what these flood determination companies offer or provide.
Now, I have nothing against Chiropractors. I go to one all the time. But, I wouldn’t go to a Chiropractor for Neurosurgery. Professional Land Surveyors not only read maps……..they make them. They not only use geo-coding…..they initially determine them and calculate their datum conversions for GIS mapping software.
AN OPEN INVITATION TO THE BANKING INDUSTRY:
Instead of contracting with XYZ MegaCorp Flood Services that does 10,000 plus determinations daily, who’s main office is 1000 miles away, why not contact your local Professional Land Surveyor to prepare, sign and seal your “Standard Flood Hazard Determination Forms” (SFHDF)? If you form a working relationship with your “local” Professional Land Surveyor it will ease your exposure to consumer complaints and future costly litigation because of erroneous flood zone determinations.