Feds take aim at flood insurance lawsuit

TALLAHASSEE — The Biden administration this week urged a federal judge to reject a challenge by Florida and other states to an overhaul of the National Flood Insurance Program that has led to higher premiums for many property owners.

U.S. Department of Justice attorneys filed motions to dismiss a lawsuit challenging the overhaul and to deny a request by the states for a preliminary injunction. The motions said the changes, which became fully effective April 1 after being phased in, were designed to make the flood-insurance program "actuarially sound" and reflect the risks of each property.

The motion to deny a preliminary injunction said the overhaul, known as Risk Rating 2.0, "updates the NFIP (National Flood Insurance Program) with up-to-date actuarial methods at a time when the program sorely needs reform. For the past several decades, the NFIP has been losing billions of dollars because premiums have not accurately reflected flood risk."

"These changes all reflect best practices in the insurance industry, which is precisely what Congress charged FEMA (the Federal Emergency Management Agency) to do under the NFIA (National Flood Insurance Act)," Justice Department attorneys wrote. "Furthermore, the geographical distribution of premium payments has been stark: Under the legacy (previous) rating approach, taxpayers and policyholders in landlocked states were covering the cost of flood risk in a few coastal states. Risk Rating 2.0 charges every policyholder their fair share based on their property's true flood risk and thus accomplishes the stated purpose of the NFIA."

Florida joined nine other states in the lawsuit, filed in June in the federal Eastern District of Louisiana. The lawsuit, led by Louisiana Attorney General Jeff Landry, names as defendants FEMA, the U.S. Department of Homeland Security and the Federal Insurance and Mitigation Administration. Plaintiffs also include numerous local government agencies in Louisiana.

The flood-insurance program plays a major role for Florida residents, many of whom are required to have flood insurance because of home mortgages. A document in the lawsuit said the program included about 1.391 million Florida policies, with total coverage of nearly $367 billion.

Federal officials began phasing in the Risk Rating 2.0 changes in October 2021. Among other things, the lawsuit alleges the system improperly considers "hypothetical" future risks and doesn't properly account for mitigation projects to protect properties from flood damage.

"While the agency (FEMA) paints a picture of nuanced calculations using massive data repositories that reveal a property's individualized risks, the reality is much simpler: Flood insurance is going to be much more expensive for pretty much everybody," the lawsuit said.

A section of the lawsuit that focused on Florida said "high insurance rates will cause people to leave the state of Florida because they can no longer afford to live in the state. In addition, it will depress property values, particularly in areas where flood insurance is required."

But in Monday's motion to dismiss the case and Wednesday's motion to deny a preliminary injunction, the Biden administration disputed the allegations and argued the plaintiffs lack legal standing to challenge the overhaul.

"Plaintiffs wrongly ask the court to upend the status quo — which is that Risk Rating 2.0 has applied to NFIP policies for multiple years and has been fully implemented across the country — and do so simply because some policyholders in their states and communities are now paying higher premiums based on a more accurate, congressionally-mandated assessment of their flood risks, and are no longer being subsidized by policyholders in less flood-prone areas," Wednesday's motion said. "That some policyholders are now paying higher premiums does not entitle plaintiffs to relief."

Also, the Justice Department attorneys said the plaintiffs had exaggerated "skyrocketing costs." Since the changes took effect, Wednesday's motion said 19 percent of premiums decreased and 70 percent increased by less than $10 a month.

But in a news release after the lawsuit was filed in June, Florida Attorney General Ashley Moody's office said the changes are "making flood insurance unattainable for many policyholders by raising rates."

The 146-page lawsuit makes a series of allegations, including that federal officials violated a law known as the Administrative Procedure Act by making changes that were "arbitrary and capricious."