Flood Claims Are Different: Overhead and Profit on an NFIP Claim

An NFIP overhead and profit flood claim question has a published answer, which is unusual in property insurance. FEMA's NFIP Claims Manual, June 2025 edition addresses it on the page footed Claims Journey 54. The adjuster may add overhead and profit to an estimate “when the complexity of the repairs requires coordination by a general contractor, which is usually 10 percent overhead and 10 percent profit,” the manual says. Those two figures are the manual's, not a Restoration Doctor rate.

The same pages carry a second rule that gets far less attention. FEMA lists a set of “Non-OHP trades” that “should not be considered when estimating OHP,” and building dry-out is on that list. So is cleanup, so is treatment against mold and mildew, and so is carpet and padding. On a flood claim that means most of a water mitigation scope sits outside the general contractor markup by default.

The manual also has a separate route for a drying invoice with a complete log, an express exception to the Non-OHP list, and a federal appeal process with its own clock.

A flood policy and a homeowners policy are two different contracts, settled under different instructions. A Standard Flood Insurance Policy, or SFIP, is a federal form. The company named on the declarations page may be a private insurer, but it writes that policy for the National Flood Insurance Program and adjusts the claim to FEMA's manual, not its own.

A homeowners policy is a state-regulated contract between the property owner and a private carrier. What it pays turns on its own loss-settlement wording, and no public manual governs how an adjuster prices a general contractor markup on it. Which of the two responded to the water decides which rules apply, and the split between them is covered separately in flood insurance versus water damage coverage.

The two rule sets do not transfer. A property owner who reads FEMA's Non-OHP list and assumes a private carrier may strike overhead and profit from a mitigation invoice has borrowed a federal flood rule and applied it to a contract it does not govern. The reverse borrowing is just as wrong.

The manual splits a contractor's overhead into two kinds. “Contractors' overhead is categorized as indirect (general) or direct (job-related),” it says. Indirect, or general, overhead is the cost that “cannot be attributed to a specific project.” Its examples are office rent, utilities, business insurance and licenses, the salaries of bookkeepers and administrative employees, and ongoing marketing and legal costs.

Direct, or job-related, overhead is different: expenses necessary to complete the project other than material and labor. The listed examples are short-term office structures such as trailers and leased office space, short-term water and sanitation facilities, and “project-specific salaries for foremen, schedulers, engineers, job superintendents, etc.” Supervision of a specific job is named in a federal manual as a job-related overhead cost.

The manual draws one line the other way. Job-specific specialty equipment is “not typical to most repairs and should not be included or considered as part of the OHP,” with jackhammers and scaffolding among the examples. It goes on its own line item, which “should explain why the specialty equipment is needed and must include an invoice or contractor's estimate.”

This is the part of the manual a mitigation contractor has the least commercial reason to publish. Under the heading “Items Typically Omitted from General Contractor Ohp”, the June 2025 edition says FEMA “considers some repairs/contractor services as ‘Non-OHP trades’” that “should not be considered when estimating OHP.”

Read plainly, that covers the majority of a water mitigation scope on a flood claim. Extraction and debris removal is cleanup. Antimicrobial application is treatment against mold and mildew. Pulling wet carpet and pad is carpet and padding. The dehumidifiers and air movers are building dry-out. A flood adjuster who declines to run a general contractor markup across those lines is following the manual, not inventing a reason.

Two sentences on the same pages change the picture, though. The first explains who FEMA expects to perform these trades: “‘Non-OHP trades’ are typically performed by the policyholder or professionals hired by the policyholder.” So the category is about who coordinates the work, not about whether the work is worth paying for.

The second is an express carve-out. Where a general contractor's estimate or invoice does include overhead and profit for a Non-OHP item, the manual tells the adjuster to “provide justification, note the file, and apply OHP accordingly,” which makes it a documented exception rather than a prohibition.

FEMA's list in full, from the pages footed Claims Journey 54 and 55:

It can, by a different route than the general contractor markup. The manual sets out three methods for accounting for the cost of structurally drying salvageable insured building materials. Which method applies turns on who did the drying and on what the claim file shows.

The third method matters here, and its heading names the condition: a drying invoice with a properly completed drying log. Where the drying service follows the industry standard and the log is kept, the manual says, “the claim can account for the cost to dry using the professional's invoiced drying charges,” and it names what those charges may include.

So the two rules are not in conflict, and neither should be quoted without the other. Building dry-out is a Non-OHP trade for the purpose of estimating a general contractor's markup across the job. A drying professional's own invoiced overhead and profit is a separate item that Method 3 names, on the condition that the log supports the invoice.

The manual's list of what a documented drying invoice may carry:

The manual answers the missing-log case without hedging. Under Method 2, where a drying log is “not provided or is not properly completed,” the adjuster “should not include the invoiced drying allowances in the insurance estimate,” the manual says. The reason it gives is that the drying “was performed outside of the industry standard (ANSI/IICRC S500-2021),” a standard it names by number. The adjuster then determines the type and quantity of equipment and how long it runs, and those allowances “should not include usage for more than 72 hours.”

The reasoning is about evidence rather than money. Without a log, the manual says, the invoiced charges do not document “how wet materials were before drying started,” the first of three gaps it names. The other two are whether “drying progressed because of the drying technician's efforts,” and whether “the materials targeted for drying were actually dried as charged.”

The manual also sets a short expectation about duration. Applied properly, it says, the industry standard supports prompt completion of drying, “normally less than 72 hours,” with longer runs the exception. Where charges run past three days, “the drying log must specify the reason and include supporting evidence,” the manual says. Four shapes of invoice go back to Method 2 “no matter how thorough the drying log appears,” and the manual names each. They are insufficient dehumidification capacity, carpet dryers alone where the flood rose above floor level, no declining use of air movers, and no heaters during the last part of drying.

Restoration Doctor builds its own drying documentation around the same readings, which is the subject of what a carrier-ready drying file contains. Here is the manual's own list of what the log should carry.

One document circulates whenever flood claims and overhead and profit come up together: FEMA Flood Insurance Appeal Decision #C11, published on FloodSmart under the headline Overhead and Profit Decision Overturned. It is routinely described as a ruling that flood insurers must pay overhead and profit. Read end to end, it decides something narrower.

Five multi-family apartment buildings, each carrying its own flood policy, were inspected after a 2018 flood. The policyholder appealed two denied items: additional commercial supervision allowances, and additional charges for painting preparation.

On the first, FEMA agreed with the policyholder. The insurer's own estimates already carried standard overhead and profit, and the contractor had added commercial supervision and project allowances that the decision records as “below two percent of the estimate totals,” a small fraction of the whole. The decision found those allowances reasonable and directed the insurer to revise and document them.

On the second, FEMA sided with the insurer. The database pricing for the painting line items already included allowances for masking adjacent surfaces, so the decision found no need for additional painting preparation. That half is almost never quoted.

What survives is the decision's own statement of the rule, taken from the manual: “overhead and profit is added to an estimate when the complexity of the repairs requires coordination by a general contractor. The adjuster should evaluate each claim and document support of their decision in the file.” Evaluate, then document. It is not automatic in either direction.

Four cautions are worth carrying before reaching for this decision.

The manual has a rule for that too. Where the policyholder performs the duties of a general contractor, the manual says the policyholder “is entitled to a fair overhead allowance (not profit) for the time spent hiring, scheduling, and overseeing repair performance,” in its own words. The allowance runs “up to 10 percent depending on the complexity of repairs and the number of trades involved.”

Two features are worth noticing. Overhead is allowed and profit is not, which says what FEMA thinks the markup is for: the work of coordinating rather than a return on it. And the amount is tied to complexity and the number of trades, the same two facts the general contractor rule turns on.

None of this says what a particular policy pays. A flood claim is settled on a federal form by the company that issued it, and the decisions on a given claim belong to that company, to FEMA on appeal, and to any licensed professional the policyholder brings in.

A flood claim has a federal appeal route that a private homeowners claim does not. The manual requires a written denial letter whenever a claim is denied in whole or in part. The date on it “begins the 60-day period to file an appeal with FEMA under 44 C.F.R. § 62.20 and the one-year period from which the policyholder may file suit,” which makes that date the one to note. The letter must also list the items denied “with the corresponding dollar amount denied, whenever applicable,” give a plain-language explanation, cite the relevant sections of the policy with a web link, and attach FEMA's Policyholder Rights document.

44 C.F.R. § 62.20 requires a written appeal to FEMA “within 60 days from the date of the decision,” a copy of the insurer's written denial, the relevant policy and claim information with the basis for the appeal, and supporting documentation. Its examples include “room by room itemized estimates from the adjuster (includes contractors' estimates), detailing unit cost and quantities for the items needing repair or replacement,” which describes a priced scope.

The same regulation sets three limits. Filing an appeal “does not waive any of the requirements for perfecting a claim under the SFIP or extend any of the time limitations set forth in the SFIP,” so it does not extend a deadline. A dispute subject to appraisal cannot be appealed, and an issue once appealed is “no longer subject to resolution by appraisal or other pre-litigation remedies.” Filing suit on the claim takes the appeal off the table.

There is also a route short of an appeal. The manual describes a request for additional payment, or RAP, which “is not a new or additional claim as the policyholder has only one claim per flood loss,” in its own words. It adds that the program “may not deny a RAP based solely on the fact the policyholder has not completed repairs,” a narrower rule than it first reads. The manual states that under the SFIP the policyholder must prove their loss, which is why the documents below are the ones a contractor can hand over.

Restoration Doctor is a restoration contractor, not a public adjuster and not a law firm, and this page is general information rather than legal or insurance advice. Nothing here interprets a policy or states what one pays. Nobody at Restoration Doctor can negotiate or settle a claim for a property owner. What a contractor can do is hand over the record: a priced room-by-room scope, dated photographs, and a drying log carrying the readings the federal manual lists. Restoration Doctor invoices the property owner rather than the carrier, so what an adjuster leaves out of an estimate does not change what the contract says is owed, and seeking reimbursement under the policy is between the policyholder and the insurer.

Everything quoted above sits in two public documents and one regulation. The Claims Manual is a long file: the overhead and profit rules are at Claims Journey 54 and 55 in the June 2025 edition, the structural drying methods start at 50, and the denial letter requirements are at 72. The appeal decision is three pages. The page numbers used here are the printed footers, which do not match the page counter in a PDF viewer.

A private homeowners claim is not adjusted to this manual, and nothing here describes how a private carrier must price a mitigation invoice. Overhead and profit on a Virginia homeowners claim is a separate question, taken up in can your insurer deny overhead and profit in Virginia. Restoration Doctor does not add overhead and profit to the emergency service call line on any job, flood or otherwise.