Frequent readers of our blog know there are many quirks and pitfalls in the National Flood Insurance Program of which policyholders must be aware. Here in the Garden State, many have seen their flood claims drastically reduced because of the basement exclusion. The Standard Flood Insurance Policy defines a basement as “[a]ny area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.” Pursuant to the recent 1st Circuit opinion in Matusevich v. Middlesex Mutual Assurance Company, alterations or improvements sitting on top of the ground can effectively alter the ground level and change a first floor into a basement.
The facts as reported by the court in Matusevich are as follows:
The floor of the lower level, which consists of several finished rooms, is subgrade on three sides. The fourth side of the lower level is located at the rear of the house and contains a doorway which directly opens out into a backyard. The backyard contains an in-ground swimming pool (built by the prior owners in 1977) surrounded by a concrete apron which slopes down from the edge of the pool to the rear of the house. Though there are neither steps nor a ramp, one must step up slightly to exit the house onto the concrete apron.
During a substantial rainstorm, the first floor of the home flooded. The policyholder made a claim which was denied as the carrier considered the first floor to be a basement. The policyholder filed suit and during the inspections during the litigation the parties stipulated that the fourth side of the home was 3.49 inches higher than the exterior grade of the earth. However, the concrete apron from the swimming pool was 4.25 inches thick, which meant the top of the concrete apron was .76 inches higher than the floor on the fourth side of the home. The sole question for the trial court determine was where to begin the measurements, on the ground or the concrete apron. The trial court found that the concrete apron was the appropriate place from which to measure, making the 1st floor below grade on all sides and, therefore, a basement as defined by the Standard Flood Insurance Policy.
On appeal, the 1st Circuit Court of Appeals affirmed the decision. The appellate court wrote:
Matusevich asks us to ignore the fact that one steps up and out directly onto the concrete apron, and to instead compare the elevation of the lower level to the inaccessible soil underneath. Such an approach would belie common sense…. It is the current elevation adjacent to the structure that is the relevant measuring point, not some arbitrary baseline which has no effect on current flood risks.
Here, the concrete apron is directly adjacent to the lower level of Matusevich's home, and thus it is the relevant "ground level" elevation for determining whether the lower level is a "basement." Because the floor of the fourth side of the lower level is 0.76" lower than the concrete apron, all four sides of Matusevich's lower level are below ground, and it therefore constitutes a "basement" under the SFIP.
As you can see, the Court was definitive that the starting level of the earth does not matter, but rather the facts that exist at the time of the flood. Policyholders must be careful when altering or improving their properties not to change the elevation, otherwise adding that new patio could very well negate their much needed flood coverage.