Underwriting and Claims Criteria

Background

Residents in the northeast section of Connecticut and elsewhere have reported significant structural problems with certain residential concrete foundations. Investigators concluded that the deterioration of the concrete foundations was caused by the presence of pyrrhotite in the concrete mixture used to pour the foundations. Pyrrhotite is a naturally existing mineral in stone aggregate, which is used to produce concrete. Pyrrhotite oxidizes in the presence of water and oxygen, leading to the formation of expansive mineral products, and causing concrete to deteriorate prematurely. Perhaps as many as 30,000 homes in the north, east, and central parts of Connecticut may be affected. The mineral, pyrrhotite, causes the slow deterioration of concrete foundations when exposed to oxygen and water. While the presence of pyrrhotite indicates the potential for concrete deterioration, its existence alone does not necessarily cause it.  Homes and structures in approximately 41 towns may be affected by what appears to be a slow moving natural disaster.  As a foundation continues to deteriorate, it often becomes unsound. A rust color or white powder may appear.

The damage is irreversible. The most effective remediation is to replace the existing foundation with a new one that does not contain pyrrhotite.  Foundation repairs differ in costs based on multiple factors, but current estimates range between $150,000 and $250,000 per affected residential building.

Tax-Exempt Purpose

CFSIC has been incorporated as a tax-exempt corporation under the laws of the State of Connecticut. CFSIC will be making application to the Internal Revenue Service to be considered tax-exempt under Section 501(c)(3) of the Internal Revenue Code. All of CFSIC’s operations will be established and maintained consistent with and in the furtherance of its stated tax-exempt purposes.

Indemnification or Reimbursement Provided

CFSIC will require claimants whose claims are validly in line for adjustment to sign a Participation Agreement in advance of the claim adjustment process commencing. Residential building owners will become “Participants” under the program. No premium in the classic sense of the meaning of that word will change hands between CFSIC and the residential building owner. The funds to pay active claims will be provided through an annual allotment to CFSIC from the Crumbling Foundations Assistance Fund (“the Fund”), which in turn is receiving $20 million per year in bonded funds from the State of Connecticut over the next five years. In addition, beginning in February 2019, CFSIC can expect to receive an additional estimated $8.5 million each year, funded through a $12 per year homeowners policy assessment on each policy delivered within the state of Connecticut. None of these funds will be categorized as premium, and CFSIC will not be issuing any insurance policy or agreement linked specifically to a premium, where that premium is consideration in a contract.

Qualifications and Duties of Claims Administrator

CFSIC has retained ESIS ProClaim, which is a recognized and qualified Third-Party Administrator (“TPA”). The TPA will be responsible for reviewing all applications for indemnification or reimbursement, and approving for submission for payment by CFSIC all applicable and appropriate reimbursement and replacement expenses. The TPA will use these guidelines in determining claimant eligibility as well as replacement/reimbursement payments.

Type of Qualifying Claimant

Under the program of indemnification or reimbursement to be undertaken by CFSIC, claims will be presented to CFSIC by claimants who qualify for consideration by virtue of their ownership of affected residential buildings, but at all times subject to whether claims are Type 1 or Type 2 claims (as defined further in these guidelines), and other criteria which may from time to time be established by CFSIC’s Board of Directors.

A “claimant” will be defined as follows:

(a)        the owner of a single-family dwelling;

(b)        the owner of a multiple-family dwelling capable of housing not more than four families;

(c)        the owner of a condominium;

(d)        the owner of a unit within a planned unit development.

A holder of debt cannot qualify as a claimant.

Definition of “Residential Building”

The enabling legislation creating the existence of CFSIC defines a residential building as follows:

Sec. 334. (NEW) (Effective from passage) For purposes of sections 7- 374b and 12-701 of the general statutes and sections 335 to 337, inclusive, 342 to 344, inclusive, 346 and 347 of this act, "residential building" means a one-family, two-family, three-family or four-family dwelling including, but not limited to, a condominium unit or dwelling in a planned unit development.

All claims, whether Type 1 or Type 2, will be subject to the enabling legislation’s guidance and will be adjusted and paid according to all definitions found in these guidelines. What follows are examples of scenarios illustrating how CFSIC will be guided in the adjustment and payment of claims:

Example 1: A single-family dwelling... an eligible residential building.

Example 2: A four-family dwelling... an eligible residential building.

Example 3: A condominium development comprised of one building containing 12 condominium units... this building is ineligible.

Example 4: A condominium development comprised of three buildings containing 4 condominium units each... each building is eligible, but where each building constitutes a single claim.

Example 5: A planned unit development with 27 homes (none of which contain more than four families)... this would result in 27 individual claims.

CFSIC’s interpretation of the legislation is that a residential building unit for purposes of replacement or reimbursement must contain four or fewer units.

As shown further in these guidelines, a claimant with a residential building may first need to qualify as eligible for the program based on the original date of purchase of the residential building in question.

Replacement Cost Parameters

Type 1 and Type 2 claims will be adjusted and paid subject to the terms and conditions of these guidelines or any subsequent guidelines approved by CFSIC’s Board of Directors.

Included in these guidelines are “replacement cost parameters,” which are defined collectively as the following square foot or linear foot maximum cost limitations (which will be applicable to both foundation replacements and foundation reimbursements), as well as the description of the construction activity permissible under this definition, and which is further subject to all other terms and conditions of claim adjustment and payment under these guidelines. The TPA will review all contract proposals first for foundation replacement work, or claims asserted for reimbursement, to determine that the costs quoted related specifically to foundation replacement or reimbursement, and exclusive of any disallowed costs and expenses, do not exceed the following units of cost:

  • $12 per square foot of garage floor slab (as may be applicable to the claim)
  • $27 per square foot of basement floor slab (as may be applicable to the claim)
  • $657 per linear foot of garage foundation walls
  • $719 per linear foot of house foundation walls

These square foot or linear foot replacement cost parameters are intended to cover all reasonable expenses and materiel associated with all CFSIC-eligible claim costs supporting the lifting of the residential building and garage (if applicable) off the existing foundation and replacing it on the new foundation. These parameters are intended to cover the costs of the removal and replacement of existing concrete walls, footings, footing drains, and exterior waterproofing, including the disconnection and reconnection of plumbing, electrical, HVAC, oil tank, and other similar systems. Such parameters are also intended to cover the costs of the removal and replacement of existing concrete slabs, vapor barriers, and crushed stone.

The contractor performing the work must provide a discreet, separate, and easily identifiable segregation of the activities and costs associated with the work defined as “replacement cost parameters” within the body of the total proposal for services. The claim adjuster must be able to identify eligible claim costs efficiently and with sufficient information. If the contract of construction indicates progress payments due at fixed and identifiable periods, the contractor may submit to CFSIC, through the claim administrator, invoices for completed construction associated with each phase. Such invoices must include detail concerning the completion of the phase in question and photographs (where the contractor attests that such photographs are actual photographs of the site). Payments for progress work done will only be made according to the protocol for payments outlined further in these guidelines.

Underwriting and Claim Adjustment Process: Part I

CFSIC will be adjusting and paying two types of claims in fulfillment of its mission. These are outlined below:

Claim Type 1: Type 1 claims will be those claims where the claimant has a compromised foundation according to the standards set forth in these guidelines and who is seeking financial assistance for a foundation replacement.

Claim Type 2: Type 2 claims will be those claims where the claimant has, through his or her own resources, or a combination of those resources and other resources, already replaced an entire foundation, and where that foundation was compromised according to the standards set forth in these guidelines, and where the claimant is seeking reimbursement for the costs associated with replacement.

A claimant who has partially replaced a foundation with the object of temporarily stabilizing the residential building in question, and where the work performed was performed on or before the date of CFSIC’s launch, may file an application for a Type 2 claim for the total of the work already done on a one-time basis (with the understanding that further partial work will not be eligible for reimbursement). That claimant may then either (i) eventually re-apply as a Type 2 claimant seeking reimbursement for the completion of the entire foundation replacement for the same residential building, or (ii) apply as a Type 1 claimant seeking financial assistance in order to undertake a complete foundation replacement for the same residential building.

With respect to a claimant filing a Type 2 claim for partial reimbursement as noted in the paragraph above, CFSIC will not pay for more than one partial reimbursement. When filing a partial reimbursement claim, the claimant must file a complete application in order to be eligible for that partial reimbursement, in the same way and with the same points of evidence as would be required for a claim involving a reimbursement for a full foundation. When either a Type 1 or Type 2 claim is fully adjusted and paid, in satisfaction of a complete replacement or complete reimbursement of a foundation, any payment made for a partial reimbursement performed on the foundation of the eligible residential building will be deducted in an amount equivalent to the amount already paid for that partial work done. All claims, whether Type 1 or Type 2, for which a claimant may already have received partial reimbursement on the residential building in question, must be fully adjusted and fully paid on or before June 30, 2022, and will be subject at all times to a cap of $175,000 in total expenditure, inclusive of the amount of any partial reimbursement.

The Board of CFSIC has made an informed decision about the prioritization of claim payments, including the approval, with respect to a Type 1 claim, of any standards related to the severity of a claimant’s compromised foundation.

CFSIC has established a website containing general information about its operations, its mission, and its goals. The TPA will permit that site to link to a dedicated CFSIC application and information page located on the TPA’s website and maintained by the TPA.

The preferred and encouraged means of making a claim to CFSIC, regardless of claim type, will be by the electronic means noted above. The electronic application process will include:

  1. an application for indemnification or reimbursement (depending upon type of claim) enabling the claimant to apply by filling in requisite fields and through the use of drop-downs with pre-loaded information; and
  2. the ability to attach pdf or image files to the application.

In addition, the TPA must be able to receive an application in the mail from those unable to complete an application electronically. It will be the TPA’s responsibility to handle telephone requests for applications (through the use of a dedicated telephone number) as well as written requests accepted during normal business hours.

Type 2 claims submitted to CFSIC, where such claims are validly presented inclusive of all points of claim evidence, will be subject to a date-stamped first-come, first-served claim adjustment and payment process, and further subject to a maximum number of Type 2 claims eligible for adjustment as determined by CFSIC’s Board of Directors.

Underwriting and Claim Adjustment Process: Part II

The following will be the requirements for all completed applications:

  1. The TPA will review applications for completeness according to these claims management guidelines. Incomplete applications will be either returned as incomplete to claimants, or claimants will be notified electronically or by post as to the incompleteness of their applications. All applications will be acknowledged by the TPA regardless of status.
  2. Applications will be logged into the TPA’s claims management system (“CMS”). The applications will be date-stamped. A claim file will be established by the TPA electronically, with key claimant information populating the TPA’s loss run, taken from the application using the application’s data mapping connection to the TPA’s CMS.

At a minimum, the populated loss run will include:

  • the name of the claimant;
  • the address, telephone number, and contact email of the claimant;
  • confirmation of the required data points, which must be included with every application (described below);
  • information about the status of the claim, whether it is active or inactive, and any notes related to the adjustment of the claim in question.

As the claim is managed and develops, the loss run will also include the name and pertinent information of the contractor chosen to provide replacement and a history of the payments and remaining reserve for each claim.

  1. When a claim file is established as an active Type 1 claim, the claimant will be notified and directed back CFSIC’s website, where the claimant can link to the website maintained by the Capitol Region Council of Governments (“CRCOG”), from which the claimant can obtain a list of CRCOG-vetted foundation replacement contractors from which they can obtain eligible bids.

If their claim is deemed to be “inactive” because the application is incomplete and/or does not contain, by way of necessary attachments, required information, the claimant will be notified of the status of their inactive claim. Those claimants with inactive claims will remain on the loss run maintained by the TPA, until their claims convert to active status; however, no reserve for a claim payment will be placed on the loss run with respect to an inactive claim until the point at which the claim achieves active status.

  1. With respect to defining a Type 1 “active claim” under this program, no application will be considered or actual active claim file established, beyond the entry on the loss run of basic claimant information, unless the claimant has provided, in addition to the application, the following required data points as part of the application process (PLEASE NOTE claimants will be choosing between data points E and F below). These are:

A.) proof that the building or addition in question was originally constructed during calendar year 1983 or subsequent (for example, a copy of the original construction contract from the home, or an email or letter from a town tax assessor attesting to the year of construction);

B.) proof of ownership (for example, a recent mortgage statement or tax bill);

C.) a separate written visual inspection report of the property in question conducted by a professional engineer licensed in the state of Connecticut, and where, using criteria found further in these guidelines, that engineer has assigned a deleterious pyrrhotite severity Class of 1, 2, or 3 to the foundation in question;

D.) a pyrrhotite-positive petrographic or other type of approved laboratory core analysis (but only with respect to the registering of a claim as a severity Class 1);

E.) evidence in writing that the claimant’s current or any prior homeowner’s insurer has denied a claim in whole or in part, or that a claim is pending, as a result of a crumbling foundation matter (for example, a letter from a homeowner’s insurer denying the claim or indicating that the claim is under active consideration); OR

F.) evidence in writing confirming any claim paid, regardless of the amount paid, by an insurer as a direct or indirect result of a compromised foundation for the residential building or addition in question, where such communication from the insurer indicates that the insurer paid or settled the claim, in whole or in part, and the amount of the settlement in question. This would be required even when the claimant litigated the claim with the insurer in question (for example, a letter from a homeowner’s insurer accepting the claim, whether in whole or in part, and indicating that the claim has been paid or will be paid);

G.) confirmation as indicated on the application that the residential building in question is located in Connecticut.

PLEASE NOTE: in the case of someone completing an application on behalf of a homeowner, CFSIC’s authorized Power of Attorney document certifying that the person signing the application is authorized to act on the homeowner’s behalf will also be required. A claimant requiring a Power of Attorney form will be directed by the TPA to the Superintendent, but only once the application has been received, reviewed, and approved by CFSIC.

With respect to Type 2 claims, the claimant will be required to provide evidence of the following data points in order to assert an active claim. (PLEASE NOTE claimants will be choosing between data points C and D, and data points E and F below):

A.) proof that the building or structure in question was originally constructed during calendar year 1983 or subsequent (for example, a copy of the original construction contract from the home, or an email or letter from a town tax assessor attesting to the year of construction);

B.) proof of ownership, such as a recent mortgage statement or tax bill (for example, a recent mortgage statement or tax bill);

C.) a separate visual inspection report of the foundation in question, which was originally conducted by a professional engineer licensed in the state of Connecticut, and where that report confirmed convincing and clear visual evidence of the presence of deleterious pyrrhotite, as defined in this guideline; OR

D.) a pyrrhotite-positive petrographic or other type of approved laboratory core analysis from the foundation that was replaced, which was originally performed prior to the foundation replacement;

E.) evidence in writing confirming that the claimant’s current or any prior homeowner’s insurer has denied a claim in whole or in part, or that a claim is pending, as a result of a crumbling foundation matter (for example, a letter from a homeowner’s insurer denying the claim or indicating that the claim is under active consideration); OR

F.) evidence in writing confirming that the claimant’s current or any prior homeowner’s insurer has paid or will pay a claim, in whole or in part, indicating the amount of any settlement made or settlement to be made, as a result of a crumbling foundation matter (for example, a letter from a homeowner’s insurer accepting the claim, whether in whole or in part, and indicating that the claim has been paid or will be paid);

G.) evidence in writing confirming the replacement work done to the foundation in question, itemizing all costs and expenses associated with the work done as that work relates to the replacement cost parameters specifically shown in these guidelines, and indicating how much of the work may have been covered by insurance and how much was covered by out-of-pocket private payment. This would be required even when the claimant litigated the claim with the insurer in question;

H.) confirmation as indicated on the application that the residential building in question is located in Connecticut;

I.) a Certificate of Completion signed by the building inspector of the town in which the residential building is located, which was provided at the time the foundation replacement was completed.

PLEASE NOTE: in the case of someone completing an application on behalf of a homeowner, CFSIC’s authorized Power of Attorney document certifying that the person signing the application is authorized to act on the homeowner’s behalf will also be required. A claimant requiring a Power of Attorney form will be directed by the TPA to the Superintendent, but only once the application has been received, reviewed, and approved by CFSIC.

Those Type 1 or Type 2 claimants completing applications in whole or in part, but where required evidence with respect to data points has not been included, will, until such time as all data points are provided, have their claims registered on the loss run, but shown as “inactive,” which will not enable these claimants to receive funds from CFSIC. A claim categorized as inactive will be maintained on the loss run from the date the application is date-stamped, until it becomes an “active” claim. No reserves will be established for Type 1 claims on CFSIC’s books for inactive claims, whether coded as a severity Class 1, 2, or 3.  Active Type 1 claims will always have first priority to available CFSIC funds ahead of inactive Type 1 claims, regardless of severity class. As claims become active, they move up in priority with respect to access to available claim adjustment funds, but always in the order of severity Class 3, followed by 2, followed by 1.  No reserves will be established for Type 2 claims on CFSIC’s books for inactive claims. Active Type 2 claims will be adjusted in the order in which they are determined to be active claims, but subject at all times to any limitations as to the number of Type 2 claims which can be paid in any specific fiscal year.

CFSIC’s website will direct homeowners to the website maintained by CRCOG, which will be utilized by the homeowner as the point of contact for vetted core testing modalities and some visual inspection resources, as well as qualified foundation replacement contractors (as described further in this document).

CFSIC’s board has established that it will permit a total of 100 active and valid Type 2 claims to be paid from the date of launch until June 30, 2022. CFSIC may take applications for Type 2 claims in any number and amount, subject at all times to the availability of funds, but it is agreed and understood that as of the date of CFSIC’s official launch, the board has authorized only 100 claims to be paid in total during CFSIC’s statutory life; and, secondly, has authorized that no more than 25 Type 2 claims can be paid in any of CFSIC’s fiscal years or partial fiscal years.

Underwriting and Claim Adjustment Process: Part III

When a claim is ready for adjustment, the TPA will be required to direct the claimant to the list of contractor vendors on CRCOG’s website able to provide quotations for foundation replacement and related services. CFSIC will recognize that CRCOG will be the sole source of such list of vendors.

The TPA will be responsible for all payments made on behalf of CFSIC to the contractor selected by the claimant. No funds will be disbursed by the TPA directly to a Type 1 claimant. An escrow fund will be established with the TPA and funded at regular intervals by CFSIC for the purpose of paying claims. The TPA will have signatory authority on the escrow account, which it is agreed and understood is an account in the name of ESIS ProClaim.

With respect to Type 1 claim payments made by CFSIC on behalf of a claimant, the following steps in the process will apply:

  1. Once the TPA contacts the claimant to notify the claimant that the claim is active, the claimant will be require to obtain at least two proposals for the service work to be performed by way of replacement will be provided by the homeowner to the TPA. It will be the homeowner’s sole responsibility to obtain all proposals. The choice of whether the foundation is to be replaced will solely rest with the claimant, subject to the claims management guidelines employed by CFSIC, the replacement cost parameters contained in these guidelines, and further subject to the per-claim maximum indemnification provided as the cap on an individual eligible residential building payment made by CFSIC, as described in point #7 below.
  2. The TPA will review each estimate to determine that each does not exceed the foundation replacement cost parameters established in these guidelines, and that the eligible concrete work as defined in these guidelines have been clearly and discreetly identified in each contractor’s proposal.
  3. The claimant will choose which contractor to use subject to all terms and conditions of this guideline. A contract for services will be entered into between the dwelling owner of record and the foundation replacement contractor chosen. CFSIC will not be a party to this contract. The homeowner will indicate by email to the TPA that a contract has been entered into. The contractor will then be responsible for contacting the TPA and (i) providing the TPA with a completed and signed Contractor Acknowledgment for a Type 1 claim attaching the fully executed construction contract, (ii) providing the TPA with a copy of the minimum surety bond required (unless that has already been provided), and (iii) providing the TPA with an invoice for the deposit amount due as indicated in the Contractor Acknowledgment.
  4. Prior to the commencement of the claim adjustment process, and prior to any payment made by CFSIC, the office of Superintendent will complete the details of a Participation Agreement and provide that agreement by email or post to the claimant for signature. Once the claimant signs the Participation Agreement, the adjustment process commences.
  5. The TPA will provide, upon confirmation of all points contained in #3 and #4 above, a deposit not to exceed 10% of the total contract value, but subject at all times to a maximum deposit of $17,500. The contractor will be required to maintain a surety bond of a continuous nature, in a minimum amount of $250,000, which must be evidenced to the TPA prior to any payments by CFSIC being made, securitizing the receipt of any funds disbursed by CFSIC and the work performed, and where CFSIC is the Obligee and the contractor in question is the Principal.
  6. Upon agreement by CFSIC to contribute to the claim, and after the deposit is paid, CFSIC will make progress payments to the contractor by way of regular disbursements paid from the TPA’s escrow account, based on the satisfactory completion by the contractor of each progress phase of the agreed upon schedule of work, as outlined in the construction contract, and subject to the provision of visual evidence by the contractor to the TPA of the completion of each phase. No payment will be made to a contractor subsequent to the deposit for any progress payment or any payment, until and unless the contractor provides, by way of a copy of the front and back of a cancelled check, evidence that the claimant has paid the claimant’s share of the progress payment in advance of any payment being made by CFSIC.
  7. CFSIC will indemnify the expense of a replaced foundation for a Type 1 claim, deemed to be an active valid claim, subject to the foundation replacement cost parameters in this guideline, and less all payments made by any insurer, whether as a result of litigation or not, and subject at all times to a maximum payment of $175,000 in total indemnification per applicable residential building. It is agreed and understood that CFSIC will not pay for or reimburse expense incurred by the claimant or contractor for any costs associated with or as a result of:
  • replacement of drywall and/or other finishing wall features, including re-framing;
  • removal/replacement of porches or decks;
  • removal/replacement of gutters;
  • any work done to outbuildings, sheds, or barns;
  • swimming pools, whether in-ground or above-ground, or any ponds or water features;
  • moving or relocation expense;
  • temporary housing expense;
  • meals, transportation, mileage, and incidentals;
  • loss of wages or income or revenue associated with any work or any business, whether such business is home-based or not;
  • any liability incurred by the homeowner or any other person on a direct, indirect, or consequential basis.

With respect to Type 2 claim payments made by CFSIC to a claimant, the following steps in the process will apply:

  1. The decision to replace a foundation will be understood to have been made solely at the discretion of the claimant; however, any Type 2 claim will be subject to the claims management guidelines of CFSIC, the foundation replacement cost parameters established in this guideline, further subject to the per-claim maximum identified by CFSIC as the cap on an individual payment made by CFSIC, as described in point #6 below, and lastly subject to a maximum number of Type 2 claims to be reimbursed by CFSIC, each fiscal year or partial fiscal year, as may be determined by CFSIC’s Board of Directors, and indicated on CFSIC’s website. Reimbursement will only be made to the current owner of the residential building in question who, in addition, was also responsible for the payment of the replaced foundation, whether such payment was made in whole or in part, but subject at all times to the conditions noted below.
  2. The claimant will be required to provide CFSIC with a complete copy of the original contract entered into between the claimant and the contractor that provided the replacement service as an attachment to the Type 2 claim application.
  3. It will be the claimant’s responsibility to contact the contractor and obtain the contractor’s assistance with all the issues contained in this and subsequent sections prior to any Type 2 claim becoming active. CFSIC will only accept an after-the-fact itemized list of allowable concrete costs that is attached to the original contract for work by way of an amendment, or is provided in the form of a separate letter on the letterhead of the business owned by the contractor and where the contractor’s signature has been applied.

    In addition, the contractor should:

    • go to the “For Contractors” section of the CFSIC website to view a list of the allowable concrete work that CFSIC will pay for;
    • determine, after reviewing the original contract for work, and using CFSIC’s maximum reimbursement cost parameters in the section noted above and the linear/square footage measurements contained in the original contract, the total cost of work that can be reimbursed by CFSIC, subject at all times to the maximum cap on allowable costs of $175,000 and all linear/square footage reimbursement maximums;
    • include with the contract, either by way of an amendment to the original contract or as a separate document, a complete itemized list of the eligible concrete work that was performed, based on CFSIC’s replacement cost parameters, eligible expenses, and maximum claim cap.
    • send to the TPA (i) a copy of the original construction contract entered into between the claimant and the contractor, and (ii) an amendment to the contract or a separate document itemizing and calculating the amount of expense associated with the eligible concrete work.
  4. Upon agreement by CFSIC to reimburse the claim, and prior to any payment made by CFSIC, the office of Superintendent will complete the details of a Participation Agreement based on the information provided by the TPA and provide that agreement by email or post to the claimant for signature. Once the claimant signs the Participation Agreement, the adjustment process commences.
  5. Once the Participation Agreement has been received in the Superintendent’s office, CFSIC will make payment to the claimant, according to these claims management guidelines, by way of four equal quarterly installments made from the TPA’s escrow account, where the first payment will be due upon completion of the Participation Agreement.
  6. CFSIC will reimburse the expense of a replaced foundation for a Type 2 claim, deemed to be an active valid claim, subject to the foundation replacement cost parameters established in this guideline, and less all payments made by any insurer, whether as a result of litigation or not, and subject at all times to a maximum payment of $175,000 in total reimbursement. It is agreed and understood that CFSIC will not reimburse expense incurred by the claimant for any costs or expenses associated with or as a result of:
  • replacement of drywall and/or other finishing wall features, including re-framing;
  • removal/replacement of porches or decks;
  • removal/replacement of gutters;
  • removal/replacement of landscaping features such as driveways, walkways, paths, shrubs, lawns, trees, gardens, or other plantings or garden structures;
  • any work done to outbuildings, sheds, or barns; any work done to garages unless the garage is connected to the foundation of the main residential building and the work was performed to remediate or replace the garage’s foundation;
  • swimming pools, whether in-ground or above-ground, or any ponds or water features;
  • moving or relocation expense;
  • temporary housing expense;
  • meals, transportation, mileage, and incidentals;
  • loss of wages or income or revenue associated with any work or any business, whether such business is home-based or not;
  • any liability incurred by the homeowner or any other person on a direct, indirect, or consequential basis.

With respect to both Type 1 and Type 2 claims, the following will apply:

  1. Claimants will be required to attest on the application for indemnity or reimbursement that they either have received or have not received any payments from an insurer with respect to the claim in question, or either have or do not have evidence of the possibility of payment by an insurer of the claim in question, whether in whole or in part.CFSIC will accept an application for coverage for either a Type 1 or Type 2 claim, but such claim will remain inactive, while any outstanding commercial insurance claim or litigation is pending, involving the claimant’s foundation.

    Claims paid by CFSIC will be offset, in all cases, by the value of any commercial insurer claim settlement made, regardless of whether the settlement was as a result of the claim adjustment process or any litigation. The exception to this rule will be any payments made by an insurer collaborating with the CFSIC claims adjustment process, where CFSIC has entered into an agreement with that specific insurer with respect to that insurer’s current insureds and outlining the terms and conditions under which that insurer will contribute to an eligible residential building claim.will be required to attest on the application for indemnity or reimbursement that they either have received or have not received any payments from an insurer with respect to the claim in question, or either have or do not have evidence of the possibility of payment by an insurer of the claim in question, whether in whole or in part.

  2. If the owner of an eligible residential building is a contractor who participates or plans to participate in the CFSIC program as a contractor providing foundation replacement services to the public, that contractor will be ineligible to apply for either a Type 1 or Type 2 claim with respect to any eligible residential building unless such contractor seeks acceptable bids for Type 1 foundation replacement claims from contractors not owned or controlled directly or indirectly, in whole or in part, by the contractor-owner of the eligible residential building. With respect to a Type 2 claim involving a contractor-owner, the contractor-owner will have to represent and warrant that the work performed to replace a foundation was not performed by that contractor-owner or by a contractor owned or controlled directly or indirectly, in whole or in part, by the contractor-owner of the eligible residential building.
  3. The Board of Directors of CFSIC has determined that the eligibility of claimants with respect to both Type 1 and Type 2 claims is affected by the date on which the affected residential building was purchased. With respect to such eligibility:
    • for any residential building purchased on or after February 1, 2019, if the buyer of such residential building is aware that the building or any addition(s) to the building, inclusive of any garage, were constructed in 1983 or subsequent, such buyer will only be eligible to apply to CFSIC as a Type 1 or Type 2 claimant if the buyer or seller of the building has tested for pyrrhotite, or has conducted a visual exam for evidence of pyrrhotite, prior to the date of sale;
    • for any residential building purchased on or after October 31, 2017, Type 1 claimants applying to CFSIC must, as a condition of receiving assistance, execute a Twelve-Month Residency Agreement to be supplied by the Superintendent, representing and warranting that the claimant will reside in the residential building, once the claim is fully paid, for a period of twelve full months from the date on which a Certificate of Completion is granted by the town in which the residential building is located;
    • for any Type 1 claim involving a residential building sold on or after October 31, 2017, where the owner selling the residential building had, prior to the sale, established an active claim with CFSIC, and where the foundation has not been replaced, the buyer of the residential building assumes the original owner’s place in line, but, as a condition of receiving assistance from CFSIC, must execute a Twelve-Month Residency Agreement to be supplied by the Superintendent, representing and warranting that the claimant will reside in the residential building, once the claim is fully paid, for a period of twelve full months from the date on which a Certificate of Completion is granted by the town in which the residential building is located;
    • upon the death of a person with an active Type 1 claim with CFSIC involving any residential building, and upon the decision of the person inheriting the residential building identified in the claim to sell that residential building, the purchaser of the building, must, as a condition of receiving assistance, execute a Twelve-Month Residency Agreement to be supplied by the Superintendent, representing and warranting that the claimant will reside in the residential building, once the claim is fully paid, for a period of twelve full months from the date on which a Certificate of Completion is granted by the town in which the residential building is located.
  4. Claimants will not be able to simultaneously apply for a Type 1 and Type 2 claim, and will not, in addition, be able to change the type of claim applied for once CFSIC approves the original claim filed as active.

Prioritization of Claims Adjustment and Payment

CFSIC’s identified and confirmed financial resources are limited. All available evidence with respect to the crumbling foundations natural disaster in Connecticut strongly supports a conclusion that CFSIC will not have enough funds to:

  • pay all eligible Type 1 and Type 2 claims that may arise;
  • pay 100% of each eligible Type 1 and Type 2 claim that may arise;
  • pay eligible Type 1 and Type 2 claims without imposing a per-residential building cap on the payment;
  • pay for the repair and/or replacement of amenities and other features as indicated and defined in these guidelines;
  • pay Type 1 claims solely on a “first-come, first-served” basis, without regard to severity;
  • pay Type 2 claims except on the basis of a stated maximum number of reimbursements during the period of CFSIC’s statutory life;

Type 1 claims will be subject to a prioritization of claim acceptance, claim handling, and claim payment based on a severity index, which will be used to determine the extent of damage to the foundation in question. Three levels of Type 1 claim severity will be established with claim handling priority given to Class 3 and Class 2 claims respectively as they appear in that order, subject at all times to claim eligibility and to the availability of acknowledged sources of revenue:

1)   Class 1: Based on the visual examination report, a Connecticut-licensed engineer concludes that no indications of deleterious pyrrhotite-bearing aggregate are present. (For a claim to be considered a Class 1, it is a requirement of the CFSIC program that a core sample of the foundation be taken and that a laboratory report find that pyrrhotite exists in the sample.)

2)   Class 2: Based on the visual examination report, a Connecticut-licensed engineer concludes that visible cracking patterns commonly associated with pyrrhotite-bearing aggregate are present, inclusive of typical crack widths of 1.0mm or less, and with the entire crack pattern extending over less than 20% of any contiguous wall plane. (For a claim to be considered a Class 2, there is no requirement by the CFSIC program that a core sample of the foundation be taken and that a laboratory report find that pyrrhotite exists in the sample.)

3)   Class 3: Based on the visual examination report, a Connecticut-licensed engineer concludes that visible cracking patterns commonly associated with pyrrhotite-bearing aggregate are present, inclusive of typical crack widths of greater than 1.0mm, and with the entire crack pattern extending over more than 20% of any contiguous wall plane. (For a claim to be considered a Class 3, there is no requirement by the CFSIC program that a core sample of the foundation be taken and that a laboratory report find that pyrrhotite exists in the sample.)

For purposes of this severity index, the term "deleterious pyrrhotite" is defined to mean the destructive expansion of a residential building concrete foundation caused by internal expansion and associated concrete degradation that is the result of the oxidation of iron sulfide minerals associated with the presence of pyrrhotite in the coarse aggregate, as determined by a visual inspection of the residential building, and where such evidence includes but is not limited to so-called "map cracking," which is defined as multiple cracks in concrete within inches of each other that intersect and are present in random directions, including but not limited to horizontal presentations.

Claimants may, at any time subsequent to the filing of a complete application for a Type 1 claim, re-file a subsequent visual examination, at their own expense, in support of a request to CFSIC by the claimant that the severity class code for their claim be reconsidered in light of new evidence.

A single claimant will not be able make multiple claims to CFSIC involving multiple residential buildings. CFSIC will only pay for one claim (inclusive of any partial reimbursement) on one residential building per owner of record.

Cessation of Claim Adjustment and Payment Activities

CFSIC will be unable to accept applications for eligible residential buildings when, as determined through the TPA’s loss run, as confirmed by CFSIC’s consulting actuary, and as approved by CFSIC’s Board of Directors, the total of all projected ultimate amounts due to identified eligible existing claimants exceeds known and confirmed sources of funds available to CFSIC from known sources, as those sources apply uniformly to all eligible claimants. Any temporary or permanent cessation of new application activity will be announced on CFSIC’s website, and at that point CFSIC will not be accepting new applications until its condition changes, if at all. A resumption of CFSIC’s activities, with regard to the acceptance of new applications, will be announced on CFSIC’s website, to the extent additional known and confirmed sources of funding to pay claims become available. Cessation of CFSIC’s acceptance of new applications may be caused by one or any combination of the following:

  • the point at which the total amount of incurred claim liability, defined as the total of the value of all active claims already paid, claims in line for payment, and reserves for known claims to be paid in future, as shown on CFSIC’s balance sheet, exceeds all known, pledged, and confirmed resources of revenue applicable to all eligible claimants;
  • the point at which CFSIC is unable to operate as a business or honor its financial obligations due to delays in CFSIC actually receiving funds allocated, because those funds are not in turn being made available to CFSIC in a timely and efficient way;
  • the point at which any legislative change or executive mandate results in a reduction to or the elimination of CFSIC’s revenues;
  • the point at which any estimates of revenue (such as estimates of revenue derived through individual homeowner policy assessments or other reasonably confirmed and expected sources of revenue) prove insufficient to honor the universe of potential claims as that becomes identified;
  • the point at which any function or activity of state government delays or compromises CFSIC’s ability to operate, honor its contractual commitments, and pay its claims.