Back in June, Rick Grey was at work in Lakeville when he answered a panicked phone call from his brother Ken in Sturgeon Lake, south of Duluth.
After days of rain, the river was rising and both their cabins were in peril. When Grey got there, he had to paddle up the road in a canoe and saw the tip of his cabin roof jutting above the floodwaters.
When the water receded six days later, Grey and his wife found their shed toppled and their belongings saturated.
"I was sick. My wife, she was bawling because we knew it was shot and what are you going to do?" Grey said. "But we figured, OK, well, we've got flood insurance, so that will help."
In fact, they had paid the flood insurance premiums for $210,000 worth of coverage ever since they bought the cabin three years ago. When they put in a claim for flood damage, Auto-Owners Insurance paid them a $15,000 advance.
Then the Greys got a shock. In September, Auto-Owners Insurance denied their claim because of a problem that the couple had no reason to know about: Sturgeon Lake was not participating in the National Flood Insurance Program, which is overseen by FEMA.
Properties in communities that aren't part of the NFIP are ineligible for federal flood insurance. But Auto-Owners mistakenly issued the policy to the Greys anyway, according to FEMA and the state Department of Natural Resources.
John Lindauer, a spokesman for Denver-based Auto-Owners Insurance, declined to talk about the Greys' case, citing privacy concerns. But the company has said it would refund the premiums that the Greys paid over the years.
Both FEMA and the Minnesota Department of Commerce found that the Greys believed they had a valid policy, and called on the insurer to resolve the problem.
"In our agreement about selling and servicing flood insurance there are provisions for just this event. It happens," said David Schein, regional flood insurance liaison at FEMA's Chicago office.
"We understand that we have an innocent party here who got flooded and paid premiums in good faith," Schein said. "So we have to go back to the folks responsible for delivering a valid policy."
City was warned
The land that Greys' cabin sits on used to be eligible for flood insurance, as part of unincorporated Pine County, which participates in the federal program.
But in 1998, the city annexed the land. Sturgeon Lake, with its 439 residents, was urged to enroll in the program in 2000 and 2011, according to a Minnesota Department of Natural Resources letter to the city.
The Greys bought their newly built cabin in 2009. A year later, city officials and FEMA were notified that the Greys and one other homeowner had flood insurance policies despite being ineligible, according to Ceil Strauss, the DNR's state floodplain coordinator.
But the city didn't begin to act on recommendations to enroll until late 2011 and still hasn't completed the process. "It just took a long time to get going on it. There were so many other things that happened," Mayor Tom Helfman said in an interview.
FEMA updated its floodplain maps in April of this year, placing the Greys' land solidly in a floodplain, Strauss said.
But the Greys never had any reason to believe their policy was invalid. They paid about $310 each year since 2009.
In drawing up the insurance policy, however, Auto-Owners mistakenly used a code that indicated the property was still in unincorporated Pine County, Strauss said.
The responsibility to write a valid policy rests with the insurance company and its agents, according to Schein, the FEMA official.
It is up to insurers to verify eligibility "by being familiar with the property or checking with local government officials or consulting FEMA floodplain maps" or proprietary software, he said.
If a policy is issued in error, the flood program must be reimbursed for any claims paid and the insurance company must take action, which may entail refunding premiums or utilizing its professional liability insurance, called "errors and omissions" insurance, Schein said. "Insurance companies are insured for their mistakes."
"The bottom line is we paid our premiums," Grey said. "I wasn't trying to scam anybody. I had a perfectly good flood policy ... and then after it all happens they're saying no, I should have never sold you that policy? Come on."
"Here I am with no cabin, no retirement," he said. "This is the worst thing I've ever had to deal with. My beautiful place is trash."
Grey said Auto-Owners told him to get a lawyer, so the couple met with one on Friday. Grey said he and his wife are going to fight to have their policy honored.
Even if it does require a long, upriver paddle.