The Extent of the Non-Residential Crisis…
As has been true with the extent of the residential crumbling foundations crisis, the need to quantify the extent of the potential crisis with commercial and public-use buildings is clear.
We now know for certain that the extent of the residential crisis is most probably less than 4,500 homes. This doesn’t mean that the crisis isn’t a real human crisis…it is, and any family with a crumbling foundation can tell you that. It’s just clearer than it ever has been that we are not dealing in CT with a crisis involving 35,000 homes and $2 billion in remediation potential.
For the better part of a year, CFSIC has been involved with attempting to assess the extent of the non-residential crisis in the Northeast Corner of CT.
To be clear, CFSIC can’t replace any foundation except a residential foundation. It’s not our job, and the original enabling legislation makes that very clear.
What we have been charged with doing, however, is using part of our state funding to get our arms around the issue of where this crisis might exist in the commercial and public-use building area.
We have made great progress. More than 100 public-use buildings have been inspected and severity class codes assigned where possible. We think that the conclusions of our report, which will be made public in October on this website, will surprise some folks…and be not at all a surprise to others.
CFSIC staff are busy with preparing for the re-opening of the Participation Agreement line, we believe as early as the end of June. We are also preparing for the close of our fiscal year and our fourth external audit.
More news on the non-residential report will be available at the end of September.
By way of reminder…CFSIC is currently in suspension for the issuance of new Participation Agreements.
The Superintendent’s office is not sending any new PAs to claimants; the Superintendent is not signing new PAs. CFSIC does not have the funds currently to execute new Participation Agreements.
The doesn’t mean that CFSIC is shut down or that CFSIC is out of business. It just means what it means…no new PAs are being provided to claimants.
This summer we expect to get as much as $36M in new funding from a combination of our share of the Healthy Homes surcharge and the first new installment of $25M from the CT Bond Commission.
The date we get our funds has not been established. If you have been informed by your claim adjuster that you are in line for a PA, the best way to find out the status of our funding is to check “Latest News” for updates.
Lastly, the remediation of your foundation can’t begin without a PA. We know many claimants are eager to get back into safe and secure homes…but we are committed to the idea that we will not provide a PA to a claimant if we do not have the funds to cover remediation costs.
This summer we hope for some very good news, which will allow us to rapidly re-engage with claimants in the PA line.
It’s 1983 and 1983 Only…
We at CFSIC want to put a rumor to rest now. This rumor has no basis in fact.
The rumor flying about is that there is a “top end” to the date range for “year built” (the year an affected home was constructed) in order to qualify for CFSIC claim consideration, either now or in the future. The rumor suggests that there is a date range for CFSIC claim eligibility for these homes, and that the range is between 1983 and 2015 (or 2016, depending on who is spreading the rumor).
It’s not true, and it never has been.
Here are the facts: it is true that the bottom end of the date range is 1983 (that year is set by statute); however, there is no top end date to the range. CFSIC’s claim eligibility process can literally apply to a house completed yesterday.
Here’s the evidence.
First, see what is in bold below:
“proof that the building or addition in question was originally constructed during calendar year 1983 or subsequent”
The above, in bold, is from CFSIC’s claim application as well as our Underwriting and Claims Management Guidelines, which are published on our website. It is one of the required points of evidence in order to file a claim to begin with. Notice the words “or subsequent.” It doesn’t say 1983 to 2016, for example. This means that there is no top end date to the range for claim eligibility.
There is no artificial top end to the date range established by CFSIC just because some people believe that 2015 or possibly 2016 are the years that Mottes stopped pouring…nothing in CFSIC’s published guidelines indicates a top end to the date range. Any home inspector, any engineer, and most recently any real estate agent…if any of you are using that top end date on a formal or informal basis because you feel the need to artificially connect the end of Mottes pours with CFSIC’s guidelines…and whether you are doing it in writing or just verbalizing it…you are wrong to do so.
Additionally, see what’s in bold below.
“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 CFSIC-certified home inspector, prior to the date of sale.”
This is excerpted from Appendix 1 to the CFSIC claim application itself. (And, yes, it is absolutely published in our guidelines on our website.)
Note again that it is “1983 or subsequent”… no mention of “2015” or “2016” is in that paragraph.
As is true with so many rumors about CFSIC’s underwriting guidelines and operations, we all need to get this straight. We encourage real estate agents in particular to refer people to the Superintendent’s office for clarification of CFSIC’s guidelines.
Transfer Claimants: Real Estate Agent Alert…
Real estate agents can play an important role in helping to move residential real estate in the Northeast Corner by understanding how a claim with CFSIC can be transferred from seller to buyer.
We want to help realtors understand the CFSIC claim transfer process. Realtors can play an important role in this process…and we don’t mean by interpreting the CFSIC claim transfer process (which is not their job)…we mean by being there for their clients to assure that the process works smoothly and the claim can be effectively transferred.
We’ve decided to use a Q&A format for this alert.
Question: Can any claim with CFSIC be transferred?
Answer: Yes…with ONE EXCEPTION. No claim where the foundation remediation process is already underway can be transferred.
Question: Define “underway.”
Answer: Where any part of the remediation process has begun…including the moving of even one piece of equipment onto the claimant’s property in preparation for construction to begin.
Question: What are the steps in the process?
Step 1: Simply ask the seller whether they have applied to CFSIC.
Question: What if the seller can’t remember if they applied to CFSIC?
Answer: Unfortunately, that happens a lot (surprising but true). Ask the seller if they have a CFSIC claim number, or if they kept a copy of their original application and any supporting documents. If the seller can’t find this information, they can call the Superintendent’s office at 860-487-0000.
Question: Can I as a realtor just call instead?
Answer: No. If the seller wants to transfer an existing claim, it must be the seller who calls.
Question: Okay…can we just get the buyer to call?
Answer: Same answer as above.
Question: Okay…what is “Step 2”?
Answer: As a realtor, either point the seller to the link below, which fully explains the claim transfer process, or print this information and hand it to the seller:
Question: But what if they start asking me questions…
Answer: You’d be providing information well outside your license…that’s what the Superintendent’s office is for (see phone number above).
Question: Is there a “Step 3”?
Answer: Yes. The claimant/seller should then contact ESIS ProClaim at (844) 763-1207. They provide their name (claim number not needed) and their address to any member of our adjustment staff. The staff member will then provide the claimant/seller with a Claim Transfer Data Form. The data form must be completed by the seller or the seller’s attorney.
Question: Can I as the agent complete it?…or how about the buyer?
Answer: No and no.
Question: What comes after that?
Answer: The seller or seller’s attorney must directly and personally return the completed Claim Transfer Data Form to their contact at ESIS ProClaim (preferably by email)…and to anticipate your next question, this cannot be done by you and or the buyer.
Question: This process sounds pretty simple at this point. When does it start to get complicated?
Answer: It never gets complicated, as long as the seller stays involved every step of the way. At this point, depending upon whether the seller is an Active, Inactive, or Pending claimant, CFSIC needs to send a Claim Transfer Agreement to that claimant/seller by email. That comes from the Superintendent’s office, NOT from the claims adjustment staff at ESIS ProClaim…and that email communication from the Superintendent’s office will be specific about what happens next. (The Superintendent’s office can help a seller/claimant understand how their claim status affects anything else that needs to be done before the claim transfer can be completed.)
Question: Are we getting to the last step?
Answer: Yes. You are on it right now. The claimant/seller completes the Claim Transfer Agreement (sent to them by the Superintendent’s office) by signing it and having it witnessed (no notary required), and then provides it directly or through counsel to the buyer for their signature (with a witness as well), and the buyer then returns it to the seller. LASTLY, the seller must then return the fully executed Claim Transfer Agreement to the Superintendent’s office (where it came from in the first place) ATTACHING A COPY THE WARRANTY DEED.
Question: What happens if we just can’t get the seller to follow through and do this work?
Answer: Then CFSIC will not transfer the claim.
Question: Okay…once you get back the Claim Transfer Agreement with the Warranty Deed attached, is the buyer of the home now a CFSIC claimant?
Answer: Yes. The buyer occupies the exact same place in our system that the seller once did in each and every respect. That residential home address has now transferred fully to the buyer for purposes of CFSIC.
Question: Is there a time limit to get this all done and what happens if we don’t make it?
Answer: There is a time limit: thirty days from the date of sale. If the entire transfer process (and, yes, the entire process…from beginning to end) isn’t completed by then, it can’t be completed. So, if a seller represents that they have a CFSIC claim and walks away from their absolute obligation to do what they have to do as an existing claimant, within the time limit, to see that the claim is fully transferred to the buyer…then potentially some serious misrepresentations have been made to a buyer, and we know you will understand what that means.
Question: Any final advice for real estate agents?
Answer: Yes. Take a moment and print out this section of our site. Put the printed copy in your briefcase and take it with you wherever you go in the Northeast Corner of Connecticut.
January 5, 2022 Is An Important Date…
We wanted to remind everyone that anyone who applied to CFSIC on or after January 13, 2020 is by definition a “Pending” claimant.
If you’ve made application to CFSIC on or after that date, our electronic claims system has recorded key facts about your application, and that’s important to know.
But for most Pending claimants, there is something much more important for you to know…and that is that none of CFSIC’s claims adjustment staff began to look inside Pending applications in any detail until January 5, 2022.
Said another way, it was only on January 5, 2022 that our great staff at ESIS ProClaim actually began to open Pending claimant files and review them, document by document and page by page. Prior to that time, the staff had not done anything with your Pending claim except register its existence in our system. As you can imagine, we have been very busy taking care of Severity Class 3 and 2 claimants who first applied when we opened our doors on January 10, 2019.
We’re rapidly going to move into the adjustment process with Pending claimants from February through June, reviewing claim files and contacting Pending claimants directly about the status of their claims. Some of the Pending claims filed will be in perfect condition (a complete application, all points of evidence, etc.). Some Pending applications will be incomplete, or may be missing points of evidence.
Either way, our great claims staff will be working though each individual Pending claim file to get to the answer.
We’re going to start with verified Severity Class 3 Pending claimants first. We have more than 300 of those, and it’s going to be a job of work managing that process.
But what’s the goal?
Simply put…it’s to be in touch individually and directly with as many Severity Class 3 Pending claimants as we can, as soon as we can, and in the order, after January 13, 2020, in which their applications were received, so that when our next round of funding arrives (we hope this summer), we can move dozens of Pending claimants into Active status and from there quickly into line for a Participation Agreement.
New PAs Now in Suspension…
Effective this past Friday, CFSIC has suspended the issuance of new Participation Agreements until it receives its next round of funding, which is anticipated to happen this summer.
To be clear…we are still very much moving Active claimants into line to receive PAs in future…we’re just not sending new PAs to claimants while we are in suspension.
We are expecting to receive approximately $10.6 million to $11.0 million from the Healthy Homes surcharge perhaps as early as the end of June and, in addition, another $25 million from the CT Bond Commission as early as July or August of 2022.
When these funds are received, starting with the Healthy Homes surcharge funds, we’ll immediately re-open the Participation Agreement line.
By way of reminder, CFSIC’s Superintendent has directed that the captive will always maintain a minimum operational cash balance, so that we can continue our work while we are between funding allotments. This is particularly important since we are now rapidly opening Pending claim files and moving Tier 1 Pending claimants into the Participation Agreement line as quickly as our process permits.
Our goal is simple: make Pending claimants Active; make Active claimants eligible to receive a PA. We are moving as quickly as we can to make this happen.
Clarifying Severity Class Code 1 Foundations…
The Superintendent has directed that CFSIC publish a guidance on the visual inspection of foundations as it relates specifically to the classification of a foundation as a Severity Class 1. (This guidance does not apply to Severity Class 2s or 3s.)
Beginning immediately, the Superintendent has directed that in order for a Severity Class 1 to be validly applied through a visual inspection undertaken by one of our certified inspection professionals or a CT-licensed professional engineer not otherwise certified by CFSIC, 50% or more of the measurable wall space of the foundation must be visible to the professional assigning the severity class code. Otherwise, no Severity Class 1 code can be applied, and the professional must designate the foundation as “unable to certify.”
It is important to remember that a visual inspection cannot be successfully accomplished for a Severity Class 1 if 50% or more of the interior foundation area is simply not visible.
To be clear: the requirement that any home sold after February 1, 2019 must have, in order to qualify for a potential CFSIC claim, EITHER a visual inspection report or a core sample report prior to the date of sale, is not compromised by this guidance. Nowhere in CFSIC’s guidelines is it required that the visual inspection must be severity coded in order to satisfy this requirement…the only requirement CFSIC has with regard to the February 1, 2019 rule is that one or the other has to have taken place: a visual inspection or a core test. This is an important fact that is not widely understood, particularly by some professionals in the real estate community.
No claimant ever becomes an Active claimant in CFSIC without a severity class code (and it doesn’t make any difference whether you’re a Class 3, 2 or 1)…so we draw everyone’s attention to the difference between what the rule is for homes purchased on or after February 1, 2019 as opposed to CFSIC’s rule about how you qualify to be an Active claimant. The first rule gets you in the door at CFSIC; but unless you have a Severity Class code you will never actually become an Active claimant. We encourage real estate agents in particular to pay close attention to this very important distinction.
Professionals undertaking a visual examination where a Severity Class code of 1 might normally apply will never be required to provide that designation to a foundation if they cannot see 50% or more of what they are trying to classify.
The Cap Is Going Up…
The cap on allowable construction costs will rise to $190,000 from $175,000 for stand-alone homes, and to $76,000 from $70,000 for condo units, effective 9:00 AM on January 5, 2022.
The Superintendent has conducted research on the issue over the past three months, with particular regard to the costs of materials and labor, and the difficulties with supply chain management. With the full support of CFSIC’s board, the Superintendent has made the decision to increase the caps in place.
Because the calculation of the cap can only be done by first using the linear and square footage factors applying, those will change as well. The current $719 maximum allowable cost calculation per linear foot of house foundation will rise from $719 to $777. The square foot maximum allowable costs for basement slab currently at $27 will rise to $30. The maximum allowable cost per linear foot of garage foundation will go from $657 to $710. The maximum allowable costs per square foot of garage slab will rise from $12 to $13.
We remind everyone that CFSIC currently permits special calculations for slab on grade construction. These will change as well. For linear per foot foundation measurements, the maximum allowable cost factor will go from $1,012 to $1,093, with the square foot of slab on grade itself maximum allowable cost moving from $29 to $31. (For garage calculations, see above, as these will be the same.)
These changes will apply to any new construction proposals submitted to ESIS for the first time on or after January 5, 2022. What does this mean?…if you have at any point between January 10, 2019 and January 5, 2022 submitted construction proposals to ESIS, the old cap applies to you.
As an example, if you are currently an Active claimant (and you already know that you need to get into the Participation Agreement line by 5:00 PM on January 5 or be taken out of the system), please understand that you will be unable to wait until January 5 and submit two new proposals at the new cap and at the new factors. As will be clearly understood, it is not going to be possible for staff to review your new proposals and approve them, for you to then have one of them executed, for your contractor to then submit all needed documentation, and for you to then be moved into the Participation Agreement line…all within 24 hours.
But here’s what’s more important… you will already have submitted proposals to ESIS. Therefore, it will not be for the “first time” when you re-submit. We at CFSIC can’t pretend that we already didn’t have proposals on your remediation prior to January 5.
We’ve supplied a few questions and answers to help everyone understand these changes.
Question: Will contractors be able to download a new template to calculate linear/square footage costs?
Answer: The template will be up online on this site on January 5 on or before 9:00 AM. The new template (including the new factors) cannot be used before that date and time, and any such proposals staff receive before that time will be rejected.
Question: I’ve heard that the current cap of $175,000 is not nearly enough. What makes you think that going to $190,000 is that much better?
Answer: We think you’ve heard wrong. Under the current $175,000 cap, our average allowable costs are actually right at $160,236. Contrary to what has been suggested in social media, the cap has always worked. It will continue to work as a way to spread limited funds among as many victims as we can.
Question: Are any other parts of the program changing on January 5?
Answer: No. For example, the relatively new requirement that if a homeowner has progress payments due, then the total of these progress payments must be evenly spaced in sync with contractor progress payments throughout the project, will remain in place.
Question: It doesn’t seem fair that just as you’re starting to open up Pending claimant files, Pending claimants get a bigger benefit than claimants who signed up on Day One. I think what I’ll do is withdraw myself from the Participation Agreement line and start all over again.
Answer: The system permits you to withdraw your claim from the PA line. But here’s what happens if you do: you would then reapply and automatically become a Tier 2 Pending claimant on a foundation for which you had originally provided proposals prior to January 5, 2022, and therefore you would have wasted your time…for while you think you would get the benefit of the increased cap, you would not, because we would apply the old cap to your claim…and on top of it your foundation, which would probably be replaced in 2022 or 2023 if you’d stayed in line, would most likely now get replaced in 2027 or 2028. That choice would be yours but would clearly make no sense.
Protecting the Claim Transfer Process
Effective November 16 at 5:00 PM CFSIC has instituted a tightening of the claim transfer process. Go here to see highlighted changes to CFSIC’s Underwriting and Claims Management Guideline.
Annual Report Infographics
At the recent Annual Meeting of the board of CFSIC, the Superintendent presented the board with some infographics on the status of the program. Click here see this PowerPoint in its entirety. This is a supplement to CFSIC’s Annual Report dated September 29, 2021.
CFSIC’s Audited Financial Is Available
The Board of CFSIC was presented at its recent Annual Meeting with CFSIC’s independently audited financial report. By way of reminder, the independent auditor retained by CFSIC performs two audits: a statutory audit on behalf of the Connecticut Insurance Department and the Board, and an independent state audit provided to state government. CFSIC’s 2021 audit is posted here.
The claims disbursement process was tested independently. The separate cash disbursement process was tested. The audit was independent, vigorous, and complete. No exceptions were noted in the audited financial concerning any aspect of CFSIC’s operations.
By way of reminder, CFSIC’s auditor is the only service provider that does not report directly to the Superintendent and only to the Board of Directors.
Read CFSIC’s Third Annual Report
CFSIC believes in transparency and in data. The only way victims have been helped and can be helped is through an understanding of what we’ve accomplished, and how far we have yet to go. You can read the Superintendent’s 2021 Annual Report to CFSIC’s Board of Directors here.
How We Pay a Claim
This week we are pleased to feature a new white paper written by Kevin Miller on the importance of the visual examination of impaired foundations. This link will take you to this latest installment in this series.
An insurance company has to have a process by which it pays (it adjusts) a claim.
A state insurance commissioner, whether the insurance company in question is a captive or it is not, will not approve an operational plan for that insurance company unless that regulator is satisfied that the factors used to determine how a claim is paid are correct, fair, and based on logic.
This is why CFSIC does not use the results of foundation testing (whether through the extraction of a core sample or by other means) in determining how we actually pay a claim…how we disperse taxpayer funds.
While we believe that the victims of this crisis need to have any information about their foundation that they can get…including the results of foundation testing…the results of foundation testing are not the basis on which CFSIC pays a claim.
There are very good reasons for this.
When CFSIC opened its doors on January 10, 2019, its Board of Directors was under significant public pressure, primarily from some concrete activists, to use the results of foundation testing as the basis on which claims should be paid.
After a lot of consideration, CFSIC’s board rightly rejected that idea. Given CFSIC’s limited financial resources (which are still limited) CFSIC’s Board of Directors chose to create an underwriting and claims payment platform based on the quantifiable severity of impairment…a visual examination by qualified professionals, documented by photographic and measurement evidence, as the basis of prioritizing who would get their claim paid first.
How could we have built a claims management platform off the results of pyrrhotite testing? Let’s ask ourselves a series of questions that will help us get to the answer.
– Does a positive core sample tell you how badly your foundation has deteriorated?
– Do the results of concrete sampling predict when a perfect foundation (with no hint of impairment) might begin to show signs of impairment?
– Does it predict the year or even the decade when that might occur?
– Does it predict with any accuracy, once the impairment begins to show itself, how long it will take before you can no longer close your front door?
– In fact, does it actually predict anything at all with certainty?
The answer is “no.”
Not only that, but we at CFSIC believe that it may be a decade or more before enough data is collected to begin the process of what we call “predictive modeling.” Meanwhile, what do we do with claimants whose foundations are obviously impaired? By that, we mean visibly, quantifiably impaired. Do we tell them that, even though they have the scientifically proven visual outward signs of pyrrhotite, they still need to get a test? What happens months later and what do we tell them when they are facing bankruptcy or possibly even eviction because the structure is unsafe? Do we tell them “…sorry, we can’t help you, even though your basement obviously has a pyrrhotite infection, because our claims management guidelines don’t allow us to pay a claim without a core test”?
CFSIC felt it needed to move quickly, because the victims of this crisis were suffering emotional as well as financial loss.
We felt it was important to prioritize severe, scientifically quantifiable and measurable foundation impairment. We felt that, when a victim can no longer close their front door because of a crumbling foundation, that was far more important than whether or not that foundation had tested positive for pyrrhotite and at what level.
We still believe this to be the case.
We asked those then who wanted us to use a positive pyrrhotite test as the basis of disbursing taxpayer funds just how it would work. If your foundation tested positive for pyrrhotite (in whatever amount) and your foundation was still in perfect condition…did that mean that the taxpayers of CT should tear down that perfect foundation…a foundation that is not failing…and replace it just because that foundation might fail in the future? No one we spoke with inside or outside of state government thought that was a great idea, except for a handful of crumbling foundation activists.
If CFSIC had adopted a positive foundation test as the criterion for using taxpayer funds, how would we have identified who should be first in line? How would we have determined who was placed ahead of whom…especially when some people were unable to close their kitchen cabinet doors anymore?
There is no scientific and no statistical evidence supporting the idea that foundation testing results can predict, with any certainty, when a foundation will fail or even if it will at all. Make no mistake: CFSIC is not anti-testing. Far from it. CFSIC is about the use of hard facts in the disbursement of taxpayer funds.
Once testing data becomes available with statistical validity, CFSIC will not hesitate to use it, and it will not hesitate to build that data quickly and absolutely into our claims management program. Until that time comes, foundation testing is not the basis on which CFSIC pays claims.
CFSIC’s board had a choice: it could adopt a rational visual examination policy to rapidly put people in line who were the victims who were suffering the most…or it could have relied on who got a core test first. Had we done the latter, very few homes would now be remediated in Connecticut.
We believed then, and we believe now, that the visible manifestations of pyrrhotite infection, observed and documented by trained professionals, is the way that a professional insurance company’s claims program needs to operate. We are not going to change that position any time soon.
Ask any one of the 37 victims in Stafford Springs, CT whose foundations we have already replaced in 28 months whether they would have preferred us to use the results of foundation testing versus the results of visual examination in determining how their claims were paid. If you can walk into your basement and, because of your crumbling foundation, you don’t need to turn the lights on because sunlight is pouring in through the cracks…we think the answer is obvious.
CFSIC has never been approached at any time to collaborate with anyone validly collecting the results of testing information. We find that puzzling, as CFSIC is all about collaboration and all about the reasonable sharing of information for the public’s benefit. If we weren’t about sharing data, then our data would not be up on our website. We did experiment briefly with one possible collaboration in this regard…but we stopped when it became clear that it wasn’t going to be a collaboration of equals.
We stand ready to receive and accept valid foundation testing data and to incorporate it into our underwriting system when that data becomes available by way of using it to predictively model exactly when a foundation will fail.
Until then, we’re busy putting lives back together and restoring the tax base in the hard-hit towns of the Northeast Corner of Connecticut.
If you have any questions about the operation of the program, ESIS is your best source of information on your claim, and their phone number and email are shown below.
As you work through the information and application process (understanding that we are in suspension for the taking of new applications), here’s how you can get help:
– Call ESIS (the claim adjuster) at: 844-763-1207
– Email ESIS at: firstname.lastname@example.org
– Email CFSIC at: email@example.com