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Juries to decide if Uber, Lyft drivers are independent contractors

Two U.S. judges ruled that lawsuits brought against ride-hailing services Uber and Lyft, respectively, will go to jury trial. Both companies claim that their drivers are not employees but rather independent contractors, and the distinction excuses the companies from providing benefits, allowing Uber and Lyft to operate with extremely low overhead costs. U.S. district Judge Vince Chhabria wrote of the Lyft case, “The Jury in this case will be handed a square peg and asked to choose between two round holes.” Both cases currently are restricted to California drivers although the driver’s attorney has stated a preference to represent drivers nationally.

____________________________________________

Two landmark lawsuits that claim that drivers for ride-hailing services Uber and Lyft should be considered employees rather than contractors will both go to jury trial, two U.S. judges ruled Wednesday. The decisions could have a ripple effect on the business models of the burgeoning on-demand and sharing economies.

Uber and Lyft are facing two separate suits seeking class action status in U.S. district court in San Francisco from drivers who claim that although the services classify them as independent contractors, they are actually employees and are therefore owed certain benefits, reimbursements and protections.

The drivers claim that because they are told how much they can charge and risk being fired if they don’t obey certain rules, they should be considered employees. But Uber and Lyft argue that drivers have many freedoms that typical employees don’t, like the ability to set their own hours or work as often or as little as they like.

If the jury finds that the drivers are employees, Uber’s and Lyft’s business models will be severely shaken. Both companies rely heavily on the independent contractor model to provide a cheap workforce that drives around customers. And the ruling would also undercut many of the other startups in the on-demand economy who use independent contractors to do everything from laundry to food delivery but don’t want to pay labor costs like health insurance. On-demand housecleaning service Handybook faces a similar worker misclassification lawsuit.

So are the drivers employees or independent contractors? It seems like neither label applies, noted U.S. District Judge Vince Chhabria, the judge in the Lyft lawsuit.

“At first glance, Lyft drivers don’t seem much like employees,” he wrote. “But Lyft drivers don’t seem much like independent contractors either,” he added later.

“The jury in this case will be handed a square peg and asked to choose between two round holes,” he wrote. “The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem.”
In the Lyft case, the judge denied the drivers’ request that they be deemed employees and turned it over to a jury. In the Uber case, the judge denied Uber’s request that its drivers be deemed independent contractors and did the same. In both cases, the drivers are represented by Boston attorney Shannon Liss-Riordan, who has won cases in the past arguing that FedEx FDX -0.12% drivers are employees and not contractors.

Representatives from Uber and Lyft declined to comment on pending litigation.

Liss-Riordan’s next task will be trying to establish class-action status for both cases, she said. Both lawsuits have also been limited in scope to California drivers for now.

“I’m very excited — this has been a long time coming,” Liss-Riordan said. “We’re looking forward to pushing these cases further and showing that Uber and Lyft are not above the law.”

 

AmTrust to acquire ARI Mutual Insurance in Pennsylvania

NEW YORK, March 18, 2015 (GLOBE NEWSWIRE) — AmTrust Financial Services, Inc. (Nasdaq:AFSI) (the “Company” or “AmTrust”) today announced that the Company has entered into a definitive agreement, pending regulatory and policyholder approval, to acquire ARI Mutual Insurance Company (“ARI”)  following the completion of the conversion of ARI to a stock company from a mutual company. The Company has also entered into a quota-share reinsurance agreement with ARI as a first step in the process to complete the acquisition. The transaction is expected to close by the fall of 2015.

“We are pleased to welcome and support ARI’s well-established commercial insurance products and distribution into AmTrust and look forward to the completion of the pending transaction,” said AmTrust Financial Services, Inc. President and CEO, Barry Zyskind. “Profitably leveraging the industry knowledge and product expertise of ARI’s management supports our strategy of building shareholder value through accretive acquisitions. In addition, the agreement with ARI is another example of our continued interest in supporting mutual insurers and their capital needs.”

“We are excited about the opportunity to become a part of AmTrust,” commented Karen S. Fulton, President and CEO of ARI.  “AmTrust’s “A” (Excellent) A.M Best rating and extensive geographical footprint enables ARI to expand its commercial auto insurance franchise.”

ARI is headquartered in Newtown, Pennsylvania and its history can be traced back more than a century. ARI is one of the top ten writers of commercial automobile insurance in New Jersey and has recently entered Pennsylvania and Maryland. During 2014, ARI wrote approximately $58 million in premiums. The majority of the business was written in New Jersey.

Locke Lord LLP acted as AmTrust’s legal advisor

Griffin Financial Group, LLC acted as ARI’s financial advisor and Stevens & Lee acted as ARI’s legal advisor.

About AmTrust Financial Services, Inc.

AmTrust Financial Services, Inc., a multinational insurance holding company headquartered in New York City, offers specialty property and casualty insurance products, including workers’ compensation, commercial automobile, general liability and extended service and warranty coverage through its primary insurance subsidiaries rated “A” (Excellent) by A. M. Best.

Forward-Looking Statements

This news release contains “forward-looking statements” that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, the amounts, timing and prices of any share repurchases made by us under our share repurchase program, our estimates of the fair value of our life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with Maiden Holdings, Ltd., National General Holdings Corp., ACP Re, Ltd. or third party agencies and warranty administrators, difficulties with technology or breaches in data security, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statements except as may be required by law. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected, is contained in the Company’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K and its quarterly reports on Form 10-Q.

 

Gov. Cuomo signs technical amendments to certificates of insurance law.

4616

                              2015-2016 Regular Sessions

                                 I N  A S S E M B L Y

                                   February 4, 2015
                                      ___________

       Introduced  by M. of A. MORELLE -- read once and referred to the Commit-
         tee on Insurance

       AN ACT to amend the insurance law, in relation to certificates of insur-
         ance; and to amend chapter 552 of the laws of 2014 amending the insur-
         ance law relating to certificates of insurance,  in  relation  to  the
         effectiveness thereof

         THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
       BLY, DO ENACT AS FOLLOWS:

    1    Section 1. Article 5 of the insurance law, as added by chapter 552  of
    2  the laws of 2014, is amended to read as follows:
    3                                  ARTICLE 5
    4                          CERTIFICATES OF INSURANCE
    5  Section 501. Definitions.
    6          502. Prohibitions.
    7          503. [Applicability.
    8          504.] Enforcement.
    9          [505.] 504. Rules and regulations.
   10    S 501. Definitions. For purposes of this [section] ARTICLE:
   11    (a)  "Certificate" or "certificate of insurance" means any document or
   12  instrument, OR ADDENDUM THERETO  no  matter  how  titled  or  described,
   13  [which  is]  prepared  or  issued by an insurer or insurance producer as
   14  evidence of [property or casualty] PROPERTY/CASUALTY insurance coverage.
   15  "Certificate" or "certificate of insurance" shall not include  a  policy
   16  of  insurance  or  AN  insurance  binder[, and does not amend, extend or
   17  alter the coverage provided by the policy  of  insurance  to  which  the
   18  certificate makes reference, and is subject to all the terms, exclusions
   19  and  conditions  of  such policy.   A certificate of insurance shall not
   20  confer to any person new or additional rights beyond what the referenced
   21  policy of insurance expressly provides].
   22    (b) "Certificate holder" means any person, other than a  policyholder,
   23  that is identified on the certificate as a certificate holder.

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD08808-02-5
       A. 4616                             2

    1    (c)  "Insurance producer" has the meaning ascribed to it by subsection
    2  (k) of section two thousand one hundred one of this chapter.
    3    (d)  "Insurer" means any person "doing an insurance business" [as such
    4  phrase is defined in section one thousand one hundred  one]  WITHIN  THE
    5  MEANING of this chapter.
    6    (e)  "Person"  means any individual, partnership, corporation, associ-
    7  ation, or other [legal] entity, but shall not include  any  governmental
    8  entity,  [as that term is defined in this section] OR ANY AGENCY, BOARD,
    9  BUREAU, COMMISSION, DEPARTMENT, DIVISION, INSTITUTION, OFFICE, OR PUBLIC
   10  AUTHORITY OF A STATE, FEDERAL OR FOREIGN GOVERNMENT.
   11    (f) "Governmental entity" means any public entity as defined in  para-
   12  graph  fifty-one  of subsection (a) of section one hundred seven of this
   13  chapter, any state authority as defined in subdivision  one  of  section
   14  two  of  the  public  authorities law, any local authority as defined in
   15  subdivision two of section two of the public authorities  law,  and  any
   16  interstate or international authority as defined in subdivision three of
   17  section  two  of the public authorities law AND ANY INDIVIDUAL ACTING IN
   18  HIS OR HER CAPACITY AS AN EMPLOYEE, OFFICER, OR ELECTED OFFICIAL OF  ANY
   19  SUCH GOVERNMENTAL ENTITY.
   20    (g)  "Policyholder" means a person who has contracted with [a property
   21  or casualty] AN insurer for PROPERTY/CASUALTY insurance coverage.
   22    (H) "PROPERTY/CASUALTY INSURANCE" MEANS A KIND OF  INSURANCE  THAT  IS
   23  EITHER  A  BASIC  KIND OF INSURANCE OR A NON-BASIC KIND OF INSURANCE, AS
   24  SUCH TERMS ARE DEFINED IN SECTION FOUR THOUSAND ONE HUNDRED ONE OF  THIS
   25  CHAPTER, BUT SHALL NOT INCLUDE A KIND OF INSURANCE SPECIFIED UNDER PARA-
   26  GRAPH  THREE OR THIRTY-ONE OF SUBSECTION (A) OF SECTION ONE THOUSAND ONE
   27  HUNDRED THIRTEEN OF THIS CHAPTER.
   28    S 502. Prohibitions. [(a)  No  person  or  governmental  entity  shall
   29  prepare,  issue,  request,  or  require the issuance of a certificate if
   30  such person or governmental entity knows that such certificate does  not
   31  comply with the following provisions:
   32    (1)  The  certificate  is  a  standard  certificate  of insurance form
   33  promulgated and authorized for use by the  Association  for  Cooperative
   34  Operations  Research  and  Development (ACORD) or the Insurance Services
   35  Office (ISO);
   36    (2) The certificate is a form promulgated  by  the  insurance  company
   37  that has underwritten the policy referenced in the certificate of insur-
   38  ance; or
   39    (3)  The  certificate  is  a  form  prepared,  issued, or requested as
   40  evidence of insurance in connection with  a  commercial  lending  trans-
   41  action in which the underlying property serves as the primary collateral
   42  securing the borrower's repayment of the loan, including, but not limit-
   43  ed to a form promulgated by the Mortgage Bankers Association (MBA).
   44    (4)  The  certificate  is  a form promulgated by a governmental entity
   45  that is considered a covered agency under section fifty-one of the exec-
   46  utive law, provided such form has been approved for use  by  the  super-
   47  intendent.
   48    (b)  No person or governmental entity shall alter, modify, request, or
   49  require the alteration of a certificate  of  insurance  form  when  such
   50  person  or governmental entity knows that such alteration, modification,
   51  request or requirement is in violation of this article.
   52    (c) No person or governmental entity shall request or require  that  a
   53  certificate  of  insurance form contain additional terms, conditions, or
   54  language of any kind not found in the  insurance  policy  to  which  the
   55  certificate  makes  reference  or  to an endorsement to such policy when
       A. 4616                             3

    1  such person or governmental entity knows such request or requirement  is
    2  in violation of this article.
    3    (d)  No  person or governmental entity shall request or require either
    4  in addition to or in lieu of a  certificate  of  insurance,  an  opinion
    5  letter, warranty, statement, supplemental certificate or any other docu-
    6  ment  or correspondence that such person or governmental entity knows to
    7  be inconsistent with the prohibitions of  this  section.    However,  an
    8  insurer  or  insurance  producer  may  prepare or issue an addendum to a
    9  certificate that clarifies and explains the coverage provided by a poli-
   10  cy of insurance and otherwise complies with  the  requirements  of  this
   11  section,  provided  such  authority  is  granted  to the producer by the
   12  insurer.
   13    (e) No person or  governmental  entity  shall  request  or  require  a
   14  certificate  of  insurance that such person or governmental entity knows
   15  contains references to a contract other than the  insurance  policy,  or
   16  warrants  that  the  insurance  policies  referenced  in the certificate
   17  comply with the requirements of a particular contract provided however a
   18  certificate may include a contract title or  description  for  the  sole
   19  purpose of identifying the project for which the certificate was issued,
   20  but  such  inclusion  shall  not  be  interpreted as warranting that the
   21  insurance  policies  referenced  in  the  certificate  comply  with  the
   22  requirements of such contract.
   23    (f) No person or governmental entity shall request or require, prepare
   24  or  issue  a  certificate  of insurance that such person or governmental
   25  entity knows:   (i) does not accurately  state  the  terms  of  coverage
   26  provided by the policy or policies of insurance to which the certificate
   27  makes  reference; (ii) purports to alter, amend, extend, or misrepresent
   28  the terms of coverage to which the certificate makes reference; or (iii)
   29  purports to confer to any person new or additional  rights  beyond  what
   30  the referenced policy of insurance expressly provides] IN THIS STATE:
   31    (A) WITH RESPECT TO A CERTIFICATE OF INSURANCE EVIDENCING THAT A POLI-
   32  CY  PROVIDES  PERSONAL  INJURY  LIABILITY  INSURANCE  OR PROPERTY DAMAGE
   33  LIABILITY INSURANCE, AS DEFINED IN PARAGRAPHS THIRTEEN AND  FOURTEEN  OF
   34  SUBSECTION  (A)  OF  SECTION  ONE  THOUSAND ONE HUNDRED THIRTEEN OF THIS
   35  CHAPTER, NO PERSON OR GOVERNMENTAL ENTITY SHALL WILFULLY REQUIRE,  AS  A
   36  CONDITION  OF AWARDING A CONTRACT FOR WORK, OR IF A CONTRACT HAS ALREADY
   37  BEEN AWARDED AS A CONDITION FOR WORK TO COMMENCE OR CONTINUE  UNDER  THE
   38  CONTRACT,  OR  IF THE CONTRACT HAS BEEN PERFORMED OR PARTIALLY PERFORMED
   39  AS A CONDITION FOR PAYMENT TO BE MADE UNDER THE CONTRACT,  THE  ISSUANCE
   40  OF A CERTIFICATE OF INSURANCE UNLESS THE CERTIFICATE IS:
   41    (1) A FORM PROMULGATED BY THE INSURER ISSUING THE POLICY REFERENCED IN
   42  THE CERTIFICATE OF INSURANCE; OR
   43    (2)  A  STANDARD  CERTIFICATE  OF INSURANCE FORM ISSUED BY AN INDUSTRY
   44  STANDARD-SETTING ORGANIZATION AND APPROVED FOR USE BY THE SUPERINTENDENT
   45  OR ANY OTHER FORM APPROVED FOR USE BY THE SUPERINTENDENT.
   46    (B) NO PERSON OR GOVERNMENTAL ENTITY SHALL WILFULLY REQUIRE THE INCLU-
   47  SION OF TERMS, CONDITIONS OR LANGUAGE OF ANY KIND, INCLUDING  WARRANTIES
   48  OR  GUARANTEES, THAT THE INSURANCE POLICY PROVIDES COVERAGE OR OTHERWISE
   49  SETS FORTH TERMS AND CONDITIONS IN A CERTIFICATE OF  INSURANCE,  IF  THE
   50  INSURANCE  POLICY  REFERENCED  BY SUCH CERTIFICATE OF INSURANCE DOES NOT
   51  EXPRESSLY INCLUDE SUCH TERMS, CONDITIONS, OR LANGUAGE.  THIS  SUBSECTION
   52  SHALL  NOT  PROHIBIT  ANY  PERSON  OR GOVERNMENTAL ENTITY FROM INCLUDING
   53  MINIMUM INSURANCE REQUIREMENTS, COVERAGE LIMITS, TERMS, OR OTHER  CONDI-
   54  TIONS  IN THE SOLICITATION OF BIDS AS PART OF A COMPETITIVE PROCESS, AND
   55  IT SHALL NOT PROHIBIT ANY PERSON OR GOVERNMENTAL ENTITY FROM REQUESTING,
   56  OR AN INSURER OR INSURANCE PRODUCER FROM RESPONDING TO  SUCH  A  REQUEST
       A. 4616                             4

    1  WITH,  CLARIFICATION  REGARDING  THE TERMS OF THE POLICY, OR ENDORSEMENT
    2  THERETO.
    3    (C)  A  CERTIFICATE OF INSURANCE SHALL NOT AMEND, EXTEND, OR ALTER THE
    4  COVERAGE PROVIDED BY THE INSURANCE POLICY TO WHICH  THE  CERTIFICATE  OF
    5  INSURANCE  MAKES REFERENCE. A CERTIFICATE OF INSURANCE SHALL FURTHER NOT
    6  CONFER TO ANY PERSON ANY RIGHTS BEYOND THOSE EXPRESSLY PROVIDED  BY  THE
    7  POLICY OF INSURANCE REFERENCED THEREIN.
    8    S  503.  [Applicability. The provisions of this section shall apply to
    9  all certificate holders, policyholders, insurers,  insurance  producers,
   10  or  any  other  person  and  to certificate of insurance forms issued as
   11  evidence of  insurance  coverages  on  property,  operations,  or  risks
   12  located in this state, regardless of where the certificate holder, poli-
   13  cyholder, insurer, or insurance producer is located.
   14    S  504.]  Enforcement.  [(a)  The  superintendent shall have the power
   15  under section four hundred four of the financial services law to examine
   16  and investigate the activities of any  person  that  the  superintendent
   17  reasonably believes has been or is engaged in an act or practice prohib-
   18  ited by this article. The superintendent shall have the power to enforce
   19  the  provisions  of  this  section  and impose any authorized penalty or
   20  remedy as provided under section four hundred  eight  of  the  financial
   21  services law against any person who violates this article.
   22    (b)  The  office  of  the state inspector general shall have the power
   23  pursuant to section fifty-three of the executive law to investigate  any
   24  governmental  entity  that  is considered a covered agency under section
   25  fifty-one of the executive law that has been or is engaged in an act  or
   26  practice  prohibited  by  this  article.  If  a  governmental entity not
   27  considered a covered agency under section fifty-one of the executive law
   28  has been or is engaged in an act or practice prohibited by this article,
   29  that entity's inspector general, other compliance or  internal  investi-
   30  gative unit or other official or entity with proper authority shall have
   31  the power to investigate such entity] IF THE SUPERINTENDENT FINDS, AFTER
   32  NOTICE  AND  HEARING, THAT ANY PERSON, OTHER THAN A GOVERNMENTAL ENTITY,
   33  HAS WILFULLY VIOLATED THIS ARTICLE, THEN THE  SUPERINTENDENT  MAY  ORDER
   34  THE  PERSON TO PAY TO THE PEOPLE OF THIS STATE A PENALTY IN A SUM OF ONE
   35  THOUSAND DOLLARS FOR THE FIRST VIOLATION AND TWO  THOUSAND  DOLLARS  FOR
   36  EACH SUBSEQUENT VIOLATION.
   37    S  [505.]  504.  Rules and regulations.   The superintendent may adopt
   38  rules or regulations as [he or she] THE SUPERINTENDENT considers  appro-
   39  priate to carry out the provisions of this article.
   40    S  2. Section 2 of chapter 552 of the laws of 2014 amending the insur-
   41  ance law relating to certificates of insurance is  amended  to  read  as
   42  follows:
   43    S  2. This act shall take effect on the [ninetieth] ONE HUNDRED EIGHT-
   44  IETH day after it shall have become a law.
   45    S 3. This act shall take effect immediately; provided that section one
   46  of this act shall take effect on the same date as  chapter  552  of  the
   47  laws of 2014, takes effect.

 

Flood Insurance Policy. Commonly Asked Questions.

Many people don’t know about flood insurance. Midland Insurance Agency is talking points, answers to frequently asked questions about flood insurance, and barrier-busting contradictions to flood insurance myths and misconceptions.

Flooding is the most common natural disaster.

Anywhere it can rain, it can flood. You don’t need to live near a coastline or river to have a flood. Flash floods, inland flooding, and seasonal storms bring flooding to every region of the country. Just a few inches of water can cause tens of thousands of dollars in damage.

In Staten Island area most homeowners insurance policies do not cover floods.

Only flood insurance financially covers your home and your personal property from floods. A flood insurance policy compensates homeowners, renters, and business owners for all covered losses, and unlike a Federal disaster loan, it does not have to be repaid.

What is a Flood?

Flood insurance covers direct physical loss caused by “flood.” In simple terms, a flood is an excess of water on land that is normally dry. Here’s the official definition used by the National Flood Insurance Program.

A flood is “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:

  • Overflow of inland or tidal waters;
  • Unusual and rapid accumulation or runoff of surface waters from any source;
  • Mudflow*; or
  • Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.”

*Mudflow is defined as “A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water…”

Flood insurance is not expensive

The average flood insurance premium in Staten Island is about $640 a year (about $54 per month). Considering that even a few inches of water can cause tens of thousands of dollars in damage, the annual flood insurance premium is well worth the financial protection from floods.

If you live in a moderate- to low-risk area, you may qualify for a Preferred Risk Policy (PRP) with a premium starting at $129 per year.

Three Important Facts About Your Flood Policy

A Standard Flood Insurance Policy is a single-peril (flood) policy that pays for direct physical damage to your insured property up to the replacement cost or Actual Cash Value (ACV) (See “How Flood Damages Are Valued”) of the actual damages or the policy limit of liability, whichever is less.

  1. Contents coverage must be purchased separately.
  2. It is not a valued policy.A valued policy pays the limit of liability in the event of a total loss. For example: Your home is totally destroyed by a fire and it costs $150,000 to rebuild. If your homeowners insurance policy is a valued policy with a $200,000 limit of liability on the building, you would receive $200,000. Flood insurance pays just the replacement cost or ACV of actual damages, up to the policy limit.
  3. It is not a guaranteed replacement cost policy.

A guaranteed replacement cost policy pays the cost to rebuild your home regardless of the limit of liability. For example: Your home is totally destroyed by a fire and it costs $200,000 to rebuild. If your homeowners insurance policy is a guaranteed replacement cost policy with a $150,000 limit of liability on the building, you would receive $200,000. Flood insurance does not pay more than the policy limit.

General Guidance on Flood Insurance Coverage and What is insured under Building Property coverage:

  • The insured building and its foundation.
  • The electrical and plumbing systems.
  • Central air conditioning equipment, furnaces, and water heaters.
  • Refrigerators, cooking stoves, and built-in appliances such as dishwashers.
  • Permanently installed carpeting over an unfinished floor.
  • Permanently installed paneling, wallboard, bookcases, and cabinets.
  • Window blinds.
  • Detached garages (up to 10 percent of Building Property coverage). Detached buildings (other than garages) require a separate Building Property policy.
  • Debris removal.

What is insured under Personal Property coverage:

  • Personal belongings such as clothing, furniture, and electronic equipment.
  • Curtains.
  • Portable and window air conditioners.
  • Portable microwave ovens and portable dishwashers.
  • Carpets not included in building coverage (see above).
  • Clothes washers and dryers.
  • Food freezers and the food in them.
  • Certain valuable items such as original artwork and furs (up to $2,500).

What is not insured by either Building Property or Personal Property coverage:

  • Damage caused by moisture, mildew, or mold that could have been avoided by the property owner.
  • Currency, precious metals, and valuable papers such as stock certificates.
  • Property and belongings outside of a building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
  • Living expenses such as temporary housing.
  • Financial losses caused by business interruption or loss of use of insured property.
  • Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy).

You can’t get flood insurance at the last minute.

In most cases, it takes 30 days after purchase for a policy to take effect, so it’s important to buy insurance before the storm approaches and the floodwaters start to rise.

If you are in a high-risk area, flood insurance may be mandatory.

If you live in a high-risk area and you carry a mortgage from a federally regulated or insured lender, flood insurance is required.

If you own your property outright, you still should be covered by flood insurance.

Statistics show that if you live in a high-risk zone, you are more likely to have flood damage than a fire over the life of a 30-year mortgage.

You can purchase flood insurance no matter your flood risk.

It doesn’t matter whether your flood risk is high or low, you can buy flood insurance in Staten Island as long as your community participates in the NFIP. You can get flood insurance if your house has been flooded before, even if your mortgage doesn’t require it.

Outside of the high-risk Special Flood Hazard Area, most properties will qualify for the lower-cost Preferred Risk Policy.

Preferred Risk Policies provide flood protection at the best price.

For just $130 a year, qualifying Staten Island homeowners can purchase a minimum of $20,000 building and $8,000 contents coverage.

Renters can pay as little as $59 per year for $8,000 contents coverage.

Staten Island Business owners can buy $50,000 building coverage and $50,000 contents coverage (per building) for just $642 per year.

In Staten Island area to qualify for a PRP (Preferred Risk Policies), the property must be located in a moderate- to low-risk zone and meet loss history requirements. Two claims or disaster relief payments of $1,000 or more for flooding, or three flood losses of any amount, make the structure ineligible for the PRP.

What is an Elevation Certificate? And do I need one to obtain a quote?

An Elevation Certificate is a form showing the elevation of a building’s lowest floor relative to the height water would reach in a serious (1 percent annual chance or “100-year”) flood. The certificate is used to show compliance with community floodplain management ordinances and to determine the proper flood insurance premium rate.

You most likely will need an Elevation Certificate if the building is located in a high-risk flood zone (Special Flood Hazard Area) and you are shopping for a new policy.

General cost to obtain an Elevation Certificate in Staten Island is about $500.00.

What flood zone do I live in? What is my property’s flood risk?

If the property is located in a Special Flood Hazard Area (SFHA), which is shown on the FIRM as zones beginning with the letters A or V, that there is a high risk of flooding. If the property is located in Zone B, C, or X, it is considered to have a moderate-to-low risk.

Is flood insurance mandatory for my property? Will the lender require it?

If the property is located in an SFHA and has a mortgage from a federally regulated or insured lender, you will be required to purchase flood insurance for the property. If the property is located in a moderate- to low-risk area, flood insurance is not mandatory; however, it is strongly recommended, and some lenders still might require it.

Do I qualify for a Preferred Risk Policy (PRP)?

To qualify for a PRP, your building must be located in zone B, C, or X on the current FIRM and must meet other prior-loss history qualifications.

What flood damage will and won’t be covered?

Generally, the flood insurance policy covers physical damage caused to the building and/or its contents by a flood. Below are some more detailed examples of what is and isn’t covered by flood insurance.

How do I know that my claim will be paid?

An NFIP policy is fully backed by the Federal government, which means that even if there is a catastrophic flood, the NFIP will pay flood claims.

How much coverage can I buy for my building and its contents through the NFIP?

The amount will vary according to the building type. If you are insuring a single-family home in Staten Island area, you can purchase NFIP coverage of up to $250,000 for the building and $100,000 for contents. If the amount exceeds the NFIP limits, you can consider purchasing additional limits through an excess flood policy, sold through a private carrier and not the NFIP.

What options do I have to reduce my premium?

 One way to reduce flood insurance premiums is to take steps to mitigate damage to the building. Some mitigation actions include removing or modifying an enclosed area below the building’s elevated floor (i.e., installing flood vents or replacing enclosure walls with lattice) and filling in a sub-grade crawlspace. Another way is to raise the deductible.

How will my flood insurance policy be renewed?

 Unlike homeowners insurance, flood insurance does not renew automatically. Policyholders typically receive at least 1 renewal notice with payment instructions 45 to 60 days before the expiration date. You can choose to send out your own flood insurance renewal notice, use one of the direct mail templates, or call us directly via telephone or visit to ensure that your policy will not lapse.

Three Important Facts About Your Flood Policy

A Standard Flood Insurance Policy is a single-peril (flood) policy that pays for direct physical damage to your insured property up to the replacement cost or Actual Cash Value (ACV) of the actual damages or the policy limit of liability, whichever is less.

Contents coverage must be purchased separately.

It is not a valued policy.

A valued policy pays the limit of liability in the event of a total loss. For example: Your home in Staten Island area is totally destroyed by a fire and it costs $150,000 to rebuild. If your homeowners insurance policy is a valued policy with a $200,000 limit of liability on the building, you would receive $200,000. Flood insurance pays just the replacement cost or ACV of actual damages, up to the policy limit.

It is not a guaranteed replacement cost policy.

A guaranteed replacement cost policy pays the cost to rebuild your home regardless of the limit of liability. For example: Your home in Staten Island area is totally destroyed by a fire and it costs $200,000 to rebuild. If your homeowners insurance policy is a guaranteed replacement cost policy with a $150,000 limit of liability on the building, you would receive $200,000. Flood insurance does not pay more than the policy limit.

 

 

Fugate, Flanigan testify before Senate Subcommittee on post-Sandy flood insurance

“THE FLOOD INSURANCE CLAIMS PROCESS IN COMMUNITIES AFTER SANDY: LESSONS LEARNED AND POTENTIAL IMPROVEMENTS”
Submitted
By
Federal Emergency Management Agency
500 C Street, S.W.
Washington, D.C. 20472
July 30, 2014

Introduction
Good morning Chairman Johnson, Ranking Member Crapo and Members of the Subcommittee, I am Craig Fugate, Administrator for the Department of Homeland Security’s (DHS) Federal Emergency Management Agency (FEMA). I appreciate the opportunity to be here today to discuss the National Flood Insurance Program (NFIP) and claims paid as a result of Hurricane Sandy.

More than 144,000 NFIP policyholders submitted notices of flood loss stemming from Hurricane Sandy, and the NFIP has paid out more than $8.1 billion in flood claims to enable these policyholders to rebuild homes, businesses and communities. These policyholders made the proactive decision to protect themselves by investing in flood insurance. We have an obligation to these insured survivors, and to the taxpayers, to administer this program well and we take this responsibility very seriously.

Since Hurricane Sandy made landfall in 2012, FEMA’s Federal Insurance & Mitigation Administration (FIMA) has been hard at work to help in the recovery, processing Hurricane Sandy-related insurance claims, and implementing the Biggert-Waters Flood Insurance Reform Act and the Homeowners Flood Insurance Affordability Act (HFIAA).

At this point, more than 99 percent of the flood insurance claims related to Hurricane Sandy that were filed by homeowners have been closed. There are only approximately 640 claims still outstanding.

In this testimony, I will discuss the NFIP and, in particular, our claims and appeals processes, policies, and successes.

Claims Related to Hurricane Sandy

FEMA moved quickly to process Hurricane Sandy-related claims. The average claim payment related to Hurricane Sandy is $61,000, with the NFIP paying claims totaling more than $8.1 billion.

When Hurricane Sandy made landfall, 236,000 NFIP policies were in place in New Jersey. As a result of the storm, 74,000 Hurricane Sandy claims were made in New Jersey. Of those, only 1,300 were appealed. Differences have been resolved among the adjusters, the policyholders, and the policyholders’ contractors and local building materials suppliers. Based on preliminary data, we expect there may be only 453 Sandy lawsuits filed in New Jersey. This means that 98.2 percent of the claims were resolved.

In New York, 169,000 policies were in place when Hurricane Sandy hit. As a result of the storm, 57,000 claims were made in New York. Of those, only 885 were appealed. Based on the
preliminary data, we expect there may be only 400 Sandy lawsuits filed in New York. This means that 98.5 percent of these claims were resolved. The remaining open claims are due to mitigating factors such as ongoing litigation, requests for additional payment, or outstanding requests for Increased Cost of Compliance (ICC) benefits.

NFIP policyholders may also be eligible for up to $30,000 in ICC coverage to bring their building into compliance with their community’s floodplain ordinance. Elevation, relocation, demolition, and flood proofing are all covered options under ICC coverage.

In New Jersey, 7,000 policyholders submitted claims for ICC coverage and the NFIP has paid out $69 million thus far. In New York, 1,500 policyholders submitted claims for ICC coverage and the NFIP has paid out $12 million thus far.

Efforts to Process Claims Rapidly Post-Sandy

The NFIP effectively responded to the post-disaster needs of its policyholders by creating a rapid claims process and by instituting programmatic changes that significantly reduced the procedural burden on policyholders. For example, we deployed our Director of Claims and other key NFIP leaders to the impacted area where they worked directly with the States to find ways to accelerate assistance and payments to policyholders. These changes included:

• Authorizing advance payments of up to $5,000 for claims prior to meeting with adjusters for inspections;
• Authorizing another advance payment of up to $25,000 for certain mechanical elements of the building to get heating and electricity restored; and
• Authorizing an additional $5,000 for necessary permanent repairs to doors and windows to secure a given building once heating and electricity were restored.

These claim advances, known as the 5/25/5 initiative, enabled policyholders to get back into their homes as soon as possible with necessary heat and electricity. Additionally, we extended the grace period for payment of NFIP renewal premiums. We also gave policyholders extensions to file their proof of loss statements. For Hurricane Sandy, NFIP policyholders have up to two years after the date of loss to file their proofs of loss.

In addition, the NFIP established community Flood Response Offices in New York and New Jersey to provide services to NFIP flood-certified adjusters, as well as Adjuster Certification Workshops in New Jersey. On-site Adjuster Briefings also educated an expanded corps of flood-certified adjusters on program changes made specifically to meet the needs of communities impacted by the storm. To bolster the numbers of adjusters who were able to respond to Hurricane Sandy claims, the NFIP implemented emergency adjuster certification for adjusters who were actively flood certified during the past two years, granting them a 12 month certification extension. This emergency adjuster certification made an additional 5,000 adjusters available to handle the large influx of claims related to the storm.

Early on, the Associate Administrator of FIMA went to the impacted states with senior leadership and met with state emergency management officials and state insurance commissioners to identify ways to get claims resolved expeditiously and to identify any concerns. The NFIP also deployed expert staff to work in the Governor’s Office in New Jersey, worked closely with the Governor’s office in New York, and sent experts to work with the FEMA Joint Field Offices in New Jersey and New York.

Increased Borrowing Authority

When Hurricane Sandy made landfall, the NFIP owed the U.S. Treasury $17 billion to cover losses stemming from Hurricanes Katrina and Rita. Existing authorities only allowed the NFIP to borrow an additional $3 billion before reaching the $20.7 billion cap. The NFIP used modeling from previous hurricane flood events and geospatial technology to estimate potential claims as a result of Hurricane Sandy, and estimated the borrowing cap could be hit as soon as early January 2013.

On December 31, 2012, Congress amended the National Flood Insurance Act of 1968 (NFIA) to increase FEMA’s borrowing authority from $20.7 billion to $30.4 billion. This enabled FEMA to cover losses stemming from Hurricane Sandy. The President signed this bill into law (Pub. L. No. 113-1) on January 6, 2013, increasing FEMA’s borrowing authority and allowing the Agency to continue paying flood insurance claims from Hurricane Sandy. We are grateful to Congress for this legislation, which was part of the supplemental the administration requested.

National Flood Insurance Program Background and Coverage Basics

National Flood Insurance Program Background

Established by Congress in 1968, the NFIP helps communities better understand their flood risk, and provides affordable flood insurance to help lessen the devastating consequences of flooding in communities that agree to adopt and enforce floodplain ordinances consistent with the criteria developed by FEMA for sound land use in the floodplain. In 1973, Congress amended the NFIP to prohibit Federally-backed lenders from making loans secured by property located in a special flood hazard area unless the property was covered by flood insurance for the life of the loan.

The NFIP serves as the foundation for national efforts to reduce the loss of life and property from flood. The program identifies areas of special flood hazards and flood risk zone data, and through its floodplain management criteria and grants, mitigates the long-term risks to people and property from the effects of flooding, and offers flood insurance in participating communities.

The NFIP works closely in partnership with more than 80 participating private insurance companies – commonly known as Write Your Own (WYO) companies – to market, sell, administer and adjust claims for policyholders. By encouraging sound floodplain management efforts, the NFIP is estimated to save the nation $1.7 billion annually in avoided flood losses.

The NFIP supports 5.2 million policies, representing $1.2 trillion of coverage in force. The average claim paid is approximately $61,000.

Coverage Basics

The NFIP pays claims for direct physical loss by flood to the policyholder’s insured property. For family dwellings that house one to four families, the NFIP offers up to $250,000 in direct physical loss due to flood, and up to $100,000 for contents coverage with a deductible. When a loss is covered under the policy, the NFIP will only pay that part of the loss that exceeds the deductible. The same is true for contents coverage, which has a separate deductible.

NFIP Replacement Cost Value and Actual Cash Value

Property insurance contents claims are settled using two different methods.

The Actual Cash Value settlement (ACV) is at the replacement cost at the time of loss, less the value of its physical depreciation. This means if the policyholder has a ten-year-old couch that can be replaced on the date of loss for $2,000 but the physical depreciation on the date of loss due to wear and tear and the age of the piece is $1,000, the ACV settlement will be $1,000. Put simply, the couch was worth $1,000 on the date of loss. To pay more than the item is worth, especially in a residual market, has been long considered to be the policyholder’s windfall.

The Replacement Cost Value (RCV) settlement is based on the replacement cost of the item at the time of loss without any deduction for physical depreciation. In the above “couch” example, if an RCV endorsement is purchased by the owner, that claim would be settled at $2,000 rather than the ACV of $1,000. Some RCV contents endorsements limit the payment to a multiple of the ACV. In the above, even if there was a limit of twice the ACV, the full $2,000 would be paid. However, if the couch was older and in worse condition than in this example, the full RCV might not be paid.

The cost of an RCV contents policy would significantly increase the premium required for contents coverage and would also be very expensive for the NFIP. All of this would translate into higher premiums for contents coverage.

In all cases, the value of the NFIP insured building does not include the value of land or any other improvement (building or non-building structure) on the same parcel of land.

The NFIP policy is an actual cash value (ACV) policy for all building and contents, with very limited exception applicable to primary residential buildings insured up to 80 percent of the dwelling’s full replacement value. ACV means settlement amounts are based on the actual cash value of the property less depreciation at the time of loss for all building and content claims. Paying only the actual value of property on the date of loss is typical for many residual market insurance programs, especially those, like the NFIP, that are premium sensitive.

Building claims under the terms of the Residential Condominium Building Association Policy (RCBAP) are settled at RCV, subject to a coinsurance clause, that allows the policyholder to be a coinsurer in return for purchasing building limits that are less than 80 percent of the full replacement cost of the building or the maximum NFIP limits available, $250,000, times the number of units in the building.

All other buildings are insured at ACV. Building depreciation is also physical depreciation because of age, wear and tear. In a building, for example, elements like paint and wall covering will depreciate considerably more quickly than framing wood. However, deteriorated framing lumber with damage that is not associated with the current flood will not be worth as much as the same age wood that had not deteriorated.

HVAC systems and water heaters also have shorter life spans than framing. In all buildings, the condition of materials is considered in determining the depreciation and ultimately the dwelling’s ACV. This could mean several hundred dollars, and in some cases of a building in poor condition it could mean a difference of thousands of dollars in claim payments, but would be commensurate with the actual value of the building.

For eligible principal residences, the NFIP will settle building claims based on replacement cost values. This means the NFIP will pay to repair or replace the damage to the dwelling after application of the deductible and without deduction for depreciation. FEMA does not offer replacement coverage for contents. Were FEMA to offer replacement coverage for buildings and contents, it would result in significantly higher premiums.

All NFIP claims are individually adjusted to give personal attention to each policyholder’s losses and an NFIP flood certified adjuster is assigned to each claim. Building and contents claims both require a site visit. The determination of physical depreciation requires the adjuster to not only make a depreciation determination based on the age of either a contents item or a building element, but also to take into consideration the condition of the item or element on the date of loss. Often the adjuster will find items or elements that have been purchased or installed for an extended time, but are in pristine condition. In these cases, only a small amount of depreciation will be charged. Also, relatively recent purchases or installations may be in poor condition requiring a heavier depreciation charge. The adjusters are experienced in these determinations, which add an additional degree of fairness to the ultimate ACV of a contents item or building element.
Other Coverage Factors

Among other exclusions, the NFIP excludes coverage for decks and provides limited coverage in basements.

Much like traditional homeowner’s policies, the standard flood insurance policy includes a clause that requires the insurer – in this case the NFIP – to name the policyholder and any known mortgagee on all Building, Coverage A claim payments. The NFIP must include the lender’s name on these payments to protect their collateral allowing continued lending in flood-prone areas.

In addition, for eligible risks, some private insurance markets provide citizens flood insurance for coverage in excess of the maximum NFIP limits.

Claims Process and Improper Payments

Claims Process

FEMA is committed to efficiently and quickly resolving claims with the help of its WYO partners, with the ultimate goal of getting all funds that can be paid legally into the hands of eligible policyholders as soon as possible. All insurers of real property and their contents are similarly concerned about getting claim funds in the hands of their policyholders as quickly as possible.

The claims process was adjusted for Hurricane Sandy survivors to modify the proof of loss filing requirement. (Steps 10-14 represent minor modifications to the regular claims process to represent proof of loss – normally the proof of loss is due 60 days after the date of loss.)

The claims process is as follows:
1. The policyholder calls their insurance agent to report the loss.
2. The policyholder’s insurance agent reports the claim to either the WYO Company or the Direct Servicing Agent (DSA).
3. The WYO Company/DSA (“insurer”) verifies that coverage was in force on the date of loss.
4. If coverage was in force before the flood was in progress, the insurer assigns the claim to an independent claims adjusting firm hired by the insurer.
5. The adjusting firm assigns the claim to an independent NFIP flood-certified adjuster hired by the adjusting firm.
6. The adjuster contacts the policyholder within 24 to 48 hours to schedule an appointment to visit the policyholder’s property, with the visit itself usually occurring within 72 hours of the assignment.
7. The adjuster meets with the policyholder at the property. During this scoping visit, which can last hours or several days for larger projects, the adjuster will:

a. Inspect the property to verify that direct physical loss by or from flood has occurred (as defined in the Standard Flood Insurance Policy (SFIP));
b. Offer to recommend an advance payment (if appropriate). The adjuster must take care to consider the size of the recommended advance against the probable loss and the deductible;
c. Scope the loss, to include measuring, taking pictures, diagramming, and noting specific damage, and documenting serial and model numbers of damaged major appliances and electronics;
d. Meet with the policyholder to discuss the policy, explain the claim process, answer any question, and establish reasonable expectations;
e. If the policyholder also has contents coverage, the adjuster explains the contents process and provides inventory sheets to list the damaged contents, the current replacement cost value, age, and other details; and
f. If applicable, identify the need for expert opinions from engineers regarding foundation damage and accountants or salvors for commercial stock or inventory claims.
8. After completing all assigned scoping visits, the adjuster writes the NFIP flood claim repair estimates and closing papers, which are detailed and contain room-by-room, line-by-line estimates of flood damage.
9. The adjuster sends a copy of the completed estimate to the policyholder and informs the policyholder that the estimate is only a recommendation. Only the insurer has the authority to determine what will actually be paid.
10. The adjuster sends a copy of the completed estimate, contents claim and closing papers to the insurer.
11. The insurer examines the adjuster’s closing documents to verify that the adjuster’s recommended payment is correct and is the maximum amount that can be paid legally.
12. The WYO Company/DSA then makes the payment to the policyholder. Payment is typically made in two checks – one for building and one for contents. The building claim check must name any mortgagee know at the time of payment
13. If the policyholder considers the payment inadequate, he/she must submit to his/her insurer a complete, proof of loss signed and sworn to by the policyholder attaching all documentation supporting the additional requested amount should be sent to the insurer.
14. The insurer must consider the valid proof of loss and determine whether additional reimbursement is appropriate.

Improper Payments

FEMA is the steward of federal funds under the NFIP and is committed to reducing and eliminating waste, fraud, and abuse. FEMA and WYO companies take this responsibility very seriously. Particular focus was placed on this priority after Hurricane Katrina, when overpayments occurred and FEMA subsequently built a greater number of safeguards into
programs across the agency. These changes have decreased improper payments over time, and increased confidence in the programs that are designed to assist survivors. FEMA tracks all improper payments through an audit of payments consistent with the Improper Payment Information Act. As demonstrated in the chart below representing NFIP payments, improper payments have decreased over time due to strengthened oversight and a commitment to educating WYO companies on potential penalties for non-compliance. The data collected does not differentiate overpayment, underpayment or fraud.
Fiscal Year
see http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=7c26e8c7-a3a8-4cab-96e5-2f1ebcaa2392
*These are FEMA’s results for the years of its participation. This tracking does not differentiate underpayments, overpayments or fraud.

The NFIP claims mechanism incentivizes adjusters to recommend accurate claims payments, and pay accurate claims quickly. Adjuster compensation amounts are on a schedule of payments based on the amount the policyholder is paid. NFIP insurers receive 1.5 percent of paid claims for their Unallocated Loss Adjustment Expenses, those expenses that cannot be allocated to an individual claim, for instance, the opening and operation of a catastrophe office. Neither the adjusters nor the insurers get paid until the policyholder gets paid.

While underpayments are rare, they are treated as a critical error in dealing with the WYO company at fault and closely monitored through an auditing process. If an audit finds that a WYO company has made improper payments in 20 percent or more of their claims, FEMA requires a follow up audit within 12 months. This process helps ensure proper oversight.

Additionally, complaints and concerns are tracked and assessed during operational reviews of WYO companies.

Proof of Loss Extension
The NFIP policy requires policyholders to submit a valid proof of loss with supporting documentation to the NFIP insurer within 60 days from the loss. For Hurricane Sandy, FEMA extended the deadline for submitting a proof of loss from 60 days to 24 months after the loss.

Appeals process
Once the NFIP insurer has issued a final written denial, in whole or part, of a claim, the policyholder may appeal the denial to FEMA. This process is detailed in the NFIP Flood Insurance Claims Handbook, which is provided to the policyholder.

Prior to filing an appeal, policyholders should:
1. Try to resolve coverage issues with the adjuster or the adjuster’s supervisor.
2. If the adjuster’s supervisor can’t resolve your issues, the policyholder should contact the NFIP insurer’s claims representative and ask for assistance.
3. If policyholder still has questions or concerns, the policyholder should send the formal appeal along with the supporting documentation directly to the Associate Administrator for the Federal Insurance and Mitigation Administration.
4. Prior to issuing an appeal decision, the Associate Administrator may request additional documents from the policyholder or the insurer and may conduct a re-inspection. After gathering the documentation, the Associate Administrator will issue written appeal decision.
5. A policyholder who does not agree with the appeal decision has the option of filing suit against the NFIP insurer within one year of the date the insurer denied the claim.

Of the more than 144,000 insurance claims received in the aftermath of Hurricane Sandy, 2,800 or 1.9 percent have been appealed. This large influx of appeals caused a backlog that FEMA worked quickly to resolve. A monthly plan was established to resolve the issue, which involved leveraging existing claims resources as well as bringing in additional claims, correspondence, and quality control resources. Because of these efforts, this backlog was cleared in January 2014.

As of July 11, 2014, there were 122 total outstanding NFIP claims appeals and there were none that are over 90 days old.

Conclusion

Through the NFIP, tens of thousands of survivors better understand how to mitigate their risk and when a flood does occur, have received payments that are helping them to rebuild their homes, businesses and communities. FEMA has an obligation to these survivors and to be good stewards of taxpayer dollars. We take this responsibility very seriously and have put a process in place that effectively settles legitimate claims and has a low improper payment rate.
We are grateful to Congress for the supplemental borrowing authority provided in the aftermath of Hurricane Sandy, and we look forward to working with Congress as we close out the few remaining claims.

 
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