Insurance Report on the May 2010 Flood - | Nashville News, Weather & Sports

Insurance Report on the May 2010 Flood


Insurance Report on the May 2010 Flood 

With the May 2010 flood, Tennessee experienced what has been described by some as a "once in a 500 year event".  The May 2010 flood affected approximately 130 state buildings, most suffering insignificant damage.  However, there are about five building complexes that were subject losses exceeding $1 million.  General Services, Correction, State Parks and University of Tennessee are the agencies that own the buildings most severely affected. 

The Risk Management Division is working with the state's insurance company, the insurance adjustor, state agencies, the emergency services vendor, and other vendors to mitigate losses and protect state assets.  After that, we will assist agencies with the insurance claim process. 

The state has flood insurance coverage with Lexington Insurance Company.  The insurance company is treating flooding losses as one state-wide event.  There is a single $5 million deductible that will be paid by the Risk Management Fund.  The insurance company will finance the amount of the loss exceeding $5 million.  This will be the first time that the state's insurance company will make payments due to losses from a flood. 

In addition, a new UT College of Pharmacy building in Memphis is under construction and is covered by a separate Builders' Risk insurance policy with ACE American Insurance Company.  There is a $2,500,000 annual aggregate deductible.  The estimated loss is $1,500,000 which the agency will be responsible for $50,000 and the Risk Management Fund will be responsible for $1,450,000. 

The Treasury Department and state agencies will be working with TEMA/FEMA to apply for federal financial assistance.  In the past FEMA has reimbursed the state for 75% of the out-of-pocket cost associated with tornados.  Accordingly, we hope to receive 75% of the state's deductible from FEMA relating to both policies. 

There are sufficient funds available in the Risk Management Fund to finance the $5 million deductible for the primary insurance and the $1.45 million for the builders' risk deductible.  As state agencies begin incurring expenses associated with the flood, the Risk Management Fund will make the funds available to state agencies. 

Attached is an initial report of the number of buildings the state is dealing with due to this disaster.  Ultimately, the insurance adjustor will review every building, issue a report on each building and establish a loss reserve estimate for each building.  Set out in the attached report is an initial reserve established for each building by the adjustor.  These reserves will be adjusted over time as more expenses become more definitive. 

Set out below are examples of losses covered and not covered by the Risk Management Fund and the insurance company: 

Building contents and equipment (both state and leased buildings)
Emergency clean up
Document restoration
Debris removal of buildings and/or contents 

Not Covered
Non-building debris (may be partially covered by FEMA)
Employee personal contents
Leased buildings (the owners must have their own insurance) 

The Risk Management Fund does not cover, and this memo does not address, losses sustained to state roads or any other liability that the state may have for cost sharing with local governments or other disaster relief efforts. 

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