Connecticut Foundation Solutions Indemnity Company, Inc. (“CFSIC”) Underwriting and Claims Management Program (Modified with retroactive effect from November 26, 2019)

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, inclusive of allowable concrete costs.

Tax-Exempt Purpose

CFSIC has been incorporated as a tax-exempt corporation under the laws of the State of Connecticut. CFSIC is a tax-exempt organization 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 April 2020, 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 (unless they are defined as “Legacy Claimants”), 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 the owner of a single-family or multi-family residential dwelling, including but not limited to a residential unit in a condominium or a unit used for residential purposes in a common interest community such as a planned unit development.

A commercial holder of debt or a company that purchases distressed residential properties as a business cannot qualify as a claimant, except with respect to condominium units, but in no event if (i) the condominium unit in question is a single condo unit on a single foundation platform, or (ii) the majority of the existing units on any single foundation platform are so owned (in which event the entire foundation platform in question is ineligible), or (iii) such unit was purchased by a commercial holder of debt, or a company that purchases distressed residential properties as a business, on or after December 1, 2019.

Definition of “Residential Building”

The enabling legislation creating the existence of CFSIC, modified on July 9, 2019, defines a residential building as follows:

A single-family or multifamily residential dwelling, including, but not limited to, (A) a residential unit in a condominium, as such terms are defined or used in section 47-68a, or (B) a unit that is used for residential purposes and located in a common interest community, as such terms are defined in section 47- 202, and (2) a building containing one or more of the units described in subparagraph (A) or (B) of subdivision (1) of this section.

All claims, whether Type 1 or Type 2, will be subject to the enabling and any subsequent legislation’s guidance and will be adjusted and paid according to all definitions found in these guidelines.

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.

Foundation 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 or versions of 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, including 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 or as an attachment to the proposal for services. The claim adjuster must be able to readily 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 adjust and pay 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, or part of a foundation, 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, subject to these guidelines.

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 partial 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 subsequently either (i) 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, 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. Any claim, 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 have a Participation Agreement fully executed 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 (with the exception of condominiums, where a cap of $70,000 per eligible unit will apply, and where the cap on the total allowable concrete work is calculated based on the number of eligible units resting on a common foundation platform).

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. A claim number will be assigned to the matter, which will be that matter’s valid claim number throughout the life of the adjustment and payment process.

  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 which may be applicable.

As the claim progresses in its development, 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 for contractor services.

If a claim is deemed to be “inactive” because the application is incomplete and/or does not contain, by way of necessary attachments, required information, or is inactive for other reasons related to any response provided on the application, the claimant will be notified of the status of their inactive claim. Those claimants with inactive claims will be registered with applicable claim numbers by the TPA. Type 1 claims with specific characteristics, such as severity coding, will be reserved on the loss run according to claim reserving protocols adopted from time to time in conjunction with the TPA.

  1. With respect to defining a Type 1 “active claim” under this program, no application will be considered to be an active claim file 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:
  1. 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);
  2. proof of ownership (for example, a recent mortgage statement or tax bill);
  3. a separate written visual inspection report of the property in question conducted by a professional engineer licensed in the state of Connecticut or a CFSIC-certified home inspector, and where, using criteria found further in these guidelines, that engineer or CFSIC-certified home inspector has assigned a deleterious pyrrhotite severity Class of 1, 2, or 3 to the foundation in question;
  4. 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);
  5. evidence in writing that the claimant’s current homeowner’s insurer 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. The term “current homeowner’s insurer” means the homeowner’s policy in force as of the date the claimant signed his or her application; the term “prior homeowner’s insurer” means the homeowner’s policy that was in force at the time a claim was filed with a prior homeowner’s insurer. Type 1 claimants will not have their claims be made active unless they can produce a claim denial or acceptance, with respect to the foundation in question, from a current or prior insurer. (As an example, this point of evidence could be a letter from a current or prior homeowner’s insurer denying the claim or indicating that the claim is under active consideration.) OR
  6. 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);
  7. 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 for that claim to be considered an active claim. (PLEASE NOTE claimants will be choosing between data points C and D, and data points E and F below):

  1. 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);
  2. proof of ownership, such as a recent mortgage statement or tax bill (for example, a recent mortgage statement or tax bill);
  3. a separate visual inspection report of the foundation in question, which was originally conducted by a professional engineer licensed in the state of Connecticut or a CFSIC-certified home inspector, and where that report confirmed convincing and clear visual evidence of the presence of deleterious pyrrhotite, as defined in this guideline; OR
  4. 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;
  5. evidence in writing that the claimant’s current homeowner’s insurer or any prior homeowner’s insurer had denied a claim in whole or in part, or that a claim is still pending, as a result of a crumbling foundation matter. The term “current homeowner’s insurer” means the homeowner’s policy in force as of the date the claimant signed his or her application; the term “prior homeowner’s insurer” means the homeowner’s policy that was in force at the time a claim was filed with a prior homeowner’s insurer. Type 2 claimants will not have their claims be made active unless they can produce a claim denial or acceptance, with respect to the foundation in question, from a current or prior insurer. (As an example, this point of evidence could be a letter from a current or prior homeowner’s insurer denying the claim or indicating that the claim is under active consideration.) OR
  6. 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);
  7. 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;
  8. confirmation as indicated on the application that the residential building in question is located in Connecticut;
  9. a Certificate of Completion or Certificate of Occupancy 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, and/or all application criteria are met, have their claims registered, but shown as “inactive,” which will not enable these claimants to receive funds from CFSIC. A claim categorized as inactive will be maintained as registered from the date the application is date-stamped, until it becomes an “active” claim. Active Type 1 claims will always have first priority to available CFSIC funds before 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, and using a severity coding: Class 3, followed by Class 2, followed by Class 1. 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, or for all fiscal years, including claims paid to Legacy Claimants.

CFSIC’s website will direct homeowners to the website maintained by CRCOG, which can be utilized by the homeowner as the point of contact for CRCOG-vetted core testing modalities and visual examination resources, as well as qualified foundation replacement contractors (as described further in this document). Claimants will be able to use any core testing modality or any visual examination resource, whether CRCOG listed or not, provided that the examination is conducted by a professional engineer licensed in the state of Connecticut or a CFSIC-certified home inspector, and where, as a result of that examination, a severity class code 1, 2, or 3 has been assigned in writing.

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 CFSIC’s launch through June 30, 2022. This number of paid claims includes claimants known as “Legacy Claimants.” CFSIC may take applications for Type 2 claims in any number, 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 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 by CFSIC 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 will be an account in the name of ESIS ProClaim. The TPA will advance funds to contractors and Type 2 claimants from its escrow account at regular intervals subject to the details contained in individual claimant Participation Agreements. CFSIC will replenish the TPA’s escrow account upon submission to the Superintendent and the captive manager of sufficient evidence of a disbursement, which is justified by the information contained in the claimant’s individual claim file.

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 required to obtain at least two proposals for foundation construction services work to be performed by way of replacement. These proposals will be provided by the homeowner to the TPA. It will be the homeowner’s sole responsibility to obtain all contractor proposals. The choice of whether the foundation is to be replaced will solely rest with the claimant.
The exception to this protocol will be planned unit developments, or “PUDs.” Prior to applying, PUD claimants, to the extent they share a common foundation platform, will be required to obtain at least two proposals for the work to be performed by way of foundation replacement, where each contractor specifies that it is possible to perform the necessary work required to replace all PUD foundations sharing the same common foundation platform in such a way as not to adversely affect the foundation of any PUD unit owner declining to participate in the overall foundation replacement.
  1. The TPA will review each estimate to determine that each is in conformance with the foundation replacement cost parameters established in these guidelines, and that the eligible concrete work, as defined in these guidelines, has been clearly and discreetly identified in each contractor’s proposal.
  2. The claimant will choose which contractor to engage subject to all terms and conditions of this guideline. A contract for services will be entered into between the dwelling owner of record (or foundation owner with respect to a condominium) 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 engaged will then be responsible for contacting the TPA to (i) provide the TPA with a completed and signed Contractor Acknowledgment for a Type 1 claim attaching the fully executed construction contract, and (ii) provide the TPA with a copy of the deposit security bond required (unless that has already been provided). Once the claimant and the Superintendent have both signed a Participation Agreement, the contactor can provide the TPA with an invoice for the deposit amount due, in the correct amount, as indicated in the Contractor Acknowledgment.
  3. Prior to any payment made by CFSIC, the office of the Superintendent will provide each claimant with access to a Participation Agreement detailing the location of the eligible residential dwelling, the total cost of allowable concrete work, and the maximum that CFSIC will pay for the work in question. The claimant will sign the completed Participation Agreement and have his or her signature witnessed. The claimant will provide the signed Participation Agreement with a complete copy of the signed construction contract, inclusive of any contractor worksheet, to the Superintendent’s office. The Superintendent will countersign the agreement and also have his or her signature witnessed. Once the Superintendent signs the Participation Agreement, the payment process commences.
  4. The TPA will provide, upon confirmation of all points contained in #2, #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 deposit security 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, where such bond securitizes the contractor’s receipt of any funds disbursed by CFSIC for the anticipated work to be performed. CFSIC will be the Obligee of such bond, with the contractor in question named as the Principal. Each project, including the first, securitized by the deposit security bond, will be named in a separate schedule attaching to that bond as a condition of the receipt of funds from CFSIC.
  5. 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 for any progress payment or any other 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 any progress payment in advance of any payment being made by CFSIC. The exception will be CFSIC’s payment of the deposit on the project.
  6. 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 (with the exception of condominiums, where a cap of $70,000 per eligible unit will apply, and where the cap on the total allowable concrete work is calculated based on the number of eligible units resting on a common foundation platform). 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;
    • 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;
    • 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; any Type 2 claim payment 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 (with the exception of any payment made to a “Legacy Claimant” as is specified further in this guideline).
  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, or by means of a separate worksheet, 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 (or applicable cap related to condominium units) 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; or complete and sign a contractor worksheet outlining such eligible expenses and the total cost of those expenses;
  • 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 worksheet itemizing and calculating the amount of expense associated with the eligible concrete work.
  1. Upon agreement by CFSIC to reimburse the claim, and prior to any payment made by CFSIC, the office of the Superintendent will provide each claimant with access to a Participation Agreement detailing the location of the eligible residential dwelling, the total cost of allowable concrete work, and the maximum that CFSIC will pay for the work in question. The claimant will sign the completed Participation Agreement and have his or her signature witnessed. The claimant will provide the signed Participation Agreement with a complete copy of the signed construction contract, and any amendment or worksheet to that contract, to the Superintendent’s office. The Superintendent will countersign the agreement and also have his or her signature witnessed. Once the Superintendent signs the Participation Agreement, the payment process commences.
  2. Once the Participation Agreement has been fully entered into, the Superintendent’s office will provide the TPA with a complete copy of the signed agreement, and the TPA 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, and subsequent payments made 90 days thereafter sequentially.
  3. 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, but subject at all times to a maximum payment of $175,000 in total reimbursement (with the exception of condominiums, where a cap of $70,000 per eligible unit will apply, and where the cap on the total reimbursement for allowable concrete work is calculated based on the number of eligible units resting on a common foundation platform). 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;
  • 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.
  1. “Legacy Claimants” are defined as those Type 2 claimants who, effective April 18, 2019, otherwise fully qualify as Type 2 claimants in all respects, but are claimants who replaced, in whole or in part, an impaired foundation due to the presence of pyrrhotite, at their own expense, and subsequently sold the residential building in question, between January 1, 2000 and January 10, 2019. Such Legacy Claimants must in all other respects meet Type 2 eligibility claim criteria. Legacy Claimants will be subject to a maximum individual payment cap of $100,000 in total reimbursement. The Legacy Claimant program will end on October 18, 2019, with no further Legacy Claimant applications to be accepted. In addition, the number of legacy claims paid by CFSIC will not exceed a total of ten. Legacy Claimants are subject to all other terms and conditions of these guidelines.

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 claim 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 or prior insureds and outlining the terms and conditions under which that insurer will contribute to an eligible residential building claim, once CFSIC’s adjustment and full payment process has been completed.

  1. 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.
  2. 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, was 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 conducted by a Connecticut-licensed professional engineer or a CFSIC-certified home inspector, 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, enter into a Twelve-Month Residency Agreement with CFSIC, 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 or Certificate of Occupancy 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 may assume the original owner’s place in line as a CFSIC claimant, but, as a condition of receiving assistance from CFSIC, must enter into a Twelve-Month Residency Agreement, 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 or Certificate of Occupancy 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, enter into a Twelve-Month Residency Agreement, 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 or Certificate of Occupancy is granted by the town in which the residential building is located.

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 all the cost associated with each eligible Type 1 and Type 2 claim that may arise;
  • pay eligible Type 1 and Type 2 claims without imposing a per-residential or per-unit 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 class code, which will be used to determine the extent of damage to the foundation in question. Three levels of Type 1 claim severity have been established with claim handling priority given to Class 3 and Class 2 claims respectively as they become active in that order, subject at all times to claim eligibility and to the availability by CFSIC of acknowledged sources of revenue. Detail concerning these severity class codes is provided below:

1)   Severity Class 1: Based on the visual examination report, a Connecticut-licensed engineer or a CFSIC-certified home inspector concludes that no visual indications associated with deleterious pyrrhotite-bearing aggregate are present. (The engineer or CFSIC-certified home inspector so noting this can conclude that the foundation in question can be legitimately classified as a severity Class 1 and may so indicate in his or her written examination report that this is the case, even in the absence of a core test. However, for a severity Class 1 foundation claim so identified by an engineer or CFSIC-certified home inspector to be eligible to be considered by CFSIC for claim purposes, the further step of obtaining a core sample of the foundation must be taken, and that laboratory report must conclude that pyrrhotite exists in the sample in order for a claimant to make a claim for a foundation severity coded Class 1.) 

2)   Severity Class 2: Based on the visual examination report, a Connecticut-licensed engineer or a CFSIC-certified home inspector 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)   Severity Class 3: Based on the visual examination report, a Connecticut-licensed engineer or a CFSIC-certified home inspector 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 visual examination evidence, as determined by a CT-licensed professional engineer or a CFSIC-certified home inspector.

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 the Superintendent, 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 or Participation Agreement activity will be announced on CFSIC’s website, and at that point CFSIC will not accept new applications or enter into new Participation Agreements until its condition changes, if at all. A resumption of CFSIC’s activities, with regard to the acceptance of new applications or Participation Agreements, 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 or the entering into of new Participation Agreements 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, to honor its contractual commitments, and to pay its active and/or prospective claims.