National Flood Insurance Program (NFIP) policies provide only limited coverage for basements. The policies cover a few key mechanical systems, such as furnaces and water heaters, but not finish materials or contents.

But what's a basement? For purposes of an NFIP policy, the answer is not always straightforward. Even experienced adjusters can misunderstand the rules — that's why FEMA requires adjusters to take annual training classes, which include this question, as a condition for keeping their certifications in force (see "A Catastrophe Adjuster's Perspective," December 2012).

But even the pros may see the same room two different ways. That's what happened in the case of Staten Island homeowner Kathleen Palazzolla, reports the Staten Island Advance ("FEMA to Staten Island Sandy victim: We want our money back," by Judy L. Randall). Her insurance adjuster, working for The Travelers, had awarded her $10,000 for damage to the home's lower level. After the money was spent on repairs, an auditor decided the original adjuster had goofed and the space was technically a basement. That's when she got a phone call from FEMA, telling her to refund more than $7,000.

Palazolla's insurance broker, Tom Aloia of Aloia McKinnon Insurance in Brooklyn, is on her side. But he's not getting any traction with the agency, he told the Advance. "The flood program is a federally funded program, dictated by FEMA, which sets the rates," said Aloia. "Travelers is a vendor for the government. I have been trying to be an advocate for her. But FEMA has been totally unresponsive. They don't even answer the e-mails I've sent. It makes no sense. It is illogical. In my 30 years in this business, I have never seen anything like it." In an email to FEMA, Aiola wrote: "I'm at a total loss to explain what is being accomplished by asking a victim to return money to Travelers."