National Flood Insurance Program (NFIP): Conforming Changes To Reflect the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) and the Homeowners Flood Insurance Affordability Act of 2014 (HFIAA), and Additional Clarifications for Plain Language
Notice of proposed rulemaking.
CFR Part: "44 CFR Parts 59, 61, and 62"
RIN Number: "RIN 1660-AA95"
Citation: "83 FR 32956"
Document Number: "Docket ID FEMA-2018-0026"
Page Number: "32956"
"Proposed Rules"
SUMMARY: The National Flood Insurance Program (NFIP), established pursuant to the National Flood Insurance Act of 1968, as amended, is a voluntary program in which participating communities adopt and enforce a set of minimum floodplain management requirements to reduce future flood damages. This proposed rule would revise the NFIP's implementing regulations to codify certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014 that
DATES: Submit comments on or before
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SUPPLEMENTARY INFORMATION:
I. Public Participation
The Federal Emergency Management Agency encourages the public to participate in this rulemaking by submitting comments and related materials. The Agency will consider all comments and material received during the comment period.
When submitting a comment, identify the agency name and the docket ID for this rulemaking, indicate the specific section of this document to which each comment applies and give the reason for each comment. The public may submit comments and materials by electronic means, mail, or delivery to the address under the ADDRESSES section. Please submit comments and material by only one means.
Regardless of the method used for submitting comments or material, all submissions will be posted without change to the Federal e-Rulemaking Portal at http://www.regulations.gov and will include any personal information the commenter provides. Therefore, submitting this information makes it public. Those considering commenting may wish to read the Privacy and Security notice that is available via a link on the homepage of http://www.regulations.gov.
Viewing comments and documents: For access to the docket to read background documents or comments received, go to the Federal e-Rulemaking Portal at http://www.regulations.gov. Background documents and submitted comments may also be inspected at
Public Meeting: We do not plan to hold a public meeting, but you may submit a request for one at the address under the ADDRESSSES section explaining why one would be beneficial. If
II. Background and Authorities
A. National Flood Insurance Program
Congress created the National Flood Insurance Program (NFIP) through enactment of the National Flood Insurance Act of 1968 (NFIA) (Title XIII of Pub. L. 90-448, 82 Stat. 476), found at 42 U.S.C. 4001 et seq. The NFIP is a Federal program enabling property owners in participating communities to purchase insurance as a protection against flood losses in exchange for State and community floodplain management requirements that reduce the risk of future flood damages. Communities participate in the NFIP based on an agreement between the community and
1.
The NFIP makes flood insurance available to property owners or lessees in communities that participate in the NFIP through the adoption and enforcement of community-wide floodplain management requirements. If a community adopts and enforces a floodplain management ordinance that meets certain minimum floodplain management requirements to reduce future flood risks within an area known as the Special
Prior to enactment of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), the NFIA made federally subsidized flood insurance available to property owners or lessees of buildings in NFIP-participating communities. /1/ Subsidized flood insurance rates were available for policies covering existing buildings or buildings built prior to the community's adoption of its initial Flood Insurance Rate Maps (FIRMs), generally referred to as "pre-FIRM buildings." Subject to certain short-term statutory exceptions,
FOOTNOTE 1 Flood insurance is also available to cover the contents owned by tenants in a rental property. END FOOTNOTE
As discussed in more detail below, with the passage of BW-12,
The Homeowner Flood Insurance Affordability Act of 2014 (Pub. L. 113-89, 128 Stat. 1020) (HFIAA) requires a phase-out of subsidies on all pre-FIRM properties at a rate of no less than 5 percent and no more than 15 percent premium increases per year, subject to certain exceptions established by statute (such as the BW-12 provisions) requiring a quicker phase-out for certain types of pre-FIRM properties. Accordingly,
A prospective policyholder may purchase an NFIP flood insurance policy either: (1) Directly from the Federal Government through a direct servicing agent (referred to as "NFIP Direct"), or (2) from a participating private insurance company through the Write Your Own (WYO) Program. The Standard Flood Insurance Policy (SFIP) sets out the terms and conditions of insurance. See 44 CFR part 61, Appendix A.
The SFIP is a single-peril (flood) policy that pays for direct physical damage to insured property. There are three forms of the SFIP: The Dwelling Form, the General Property Form, and the Residential Condominium
In addition to coverage for building or contents losses, most NFIP policies also include Increased Cost of Compliance (ICC) coverage. ICC coverage applies when flood damages are so severe that the local government declares the building "substantially damaged," thus requiring the building owner to bring the building up to current community standards. If a community has a repetitive loss ordinance, ICC coverage will also cover compliance requirements for a repetitive loss structure. ICC coverage provides up to
FEMA publishes a Flood Insurance Manual with detailed explanations of the terms and conditions of the SFIP and relevant program policies and procedures. The Flood Insurance Manual is primarily used by insurers and agents selling and servicing Federal flood insurance.
Additionally,
2. Floodplain Management
A local community with land use authority may elect to participate in the NFIP. Communities participate under a voluntary agreement with
3. Flood Hazard Mapping
Through its Flood Hazard Mapping Program,
B. Recent Legislative Changes
1. Biggert-Waters Flood Insurance Reform Act of 2012
Congress enacted BW-12 (Title II, Subtitle A of Pub. L. 112-141, 126 Stat. 405) to extend the NFIP's authorities through
The provisions of BW-12 relevant to this rulemaking include the following. First, BW-12 requires
2. Homeowner Flood Insurance Affordability Act of 2014
Congress enacted HFIAA to address flood insurance affordability concerns related to BW-12. Accordingly, HFIAA repealed some provisions of BW-12, mostly related to establishing premium rates. HFIAA also made a number of new program changes. The provisions of HFIAA relevant to this rulemaking include a requirement in Section 8 of HFIAA that
III. Discussion of Proposed Rule
FEMA proposes to amend parts 59, 61, and 62 of 44 CFR. These parts contain regulations implementing the NFIP. In addition,
FEMA proposes this rulemaking for three purposes. First, it intends to make several non-substantive changes designed to improve the readability, uniformity, and clarity of the NFIP regulations. Second,
A. Part 59: General Provisions
1. Part 59 Authority Citation
FEMA proposes to update the authority citation for Part 59 to reflect changes to
2. Section 59.1 Definitions
44 CFR part 59 contains general provisions applicable to the NFIP's regulations. Section 59.1 contains a list of definitions generally applicable throughout the NFIP regulations.
First,
Second,
Third,
FEMA also proposes to add definitions for several terms. These terms are: "condominium building," "mixed use building," "multifamily building," "non-residential building," "non-residential property," "other residential building," "other residential property" "residential building," "residential property," "single family dwelling," and "two to four family building." The NFIP already uses these terms when describing the program to the public because they align with the terminology used in the private insurance industry and addresses important nuances not adequately addressed in statute and regulation.
1. Part 61 Authority Citation
The current authority citation for part 61 is 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of 1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of
2. Section 61.1 Purpose of Part
Section 61.1 describes the overall purpose of part 61. It states that part 61 describes the types of properties eligible for flood insurance coverage under the NFIP, the limits of such coverage, and the premium rates actually to be paid by insureds. It states that the specific communities eligible for coverage are designated by the Federal Insurance Administrator from time to time as applications are approved under the Emergency Program and as ratemaking studies of communities are completed prior to the regular program. Finally, it states that lists of such communities are periodically published under part 64 of this subchapter.
3. Section 61.3 Types of Coverage
Section 61.3 states that insurance coverage under the NFIP is available for structures and their contents, and that coverage for each may be purchased separately.
FEMA proposes to change the title of this section from "Types of coverage" to "Coverage and benefits provided under the Standard Flood Insurance Policy" because this new title provides a more accurate description of the proposed revisions to this section.
FEMA proposes to replace "structure" with "building" because in current practice the program uses the term "building" rather than "structure" throughout its guidance documents and other communications. The term "building" is a more precise and accurate term, because the SFIP insures buildings, not structures. While the term "structure" encompasses the term "building," it also includes things that are not buildings, such as carports and gas or liquid storage tanks, and thus not insurable under the terms and conditions of the SFIP. Consistent use of this terminology will improve the overall clarity and accuracy of the regulation when viewed within the larger context of
FEMA proposes to add two new provisions to this section to provide a more accurate depiction of the coverages and benefits available under the SFIP and to improve the Section's overall clarity. First,
4. Section 61.4 Limitations on Coverage
Section 61.4 provides that coverage obtained through the NFIP is subject to the NFIA, relevant regulations, the SFIP, and each individual policy's declaration page, and the maximum limits of coverage.
5. Section 61.5 Special Terms and Conditions
Paragraph (a) of section 61.5 states that no new flood insurance or renewal of flood insurance policies shall be written for properties declared by a duly constituted State or local zoning or other authority to be in violation of any flood plain, mudslide (i.e., mudflow), or flood-related erosion area management or control law, regulation, or ordinance.
Paragraph (b) of section 61.5 states that to reduce the administrative costs of the NFIP, of which the Federal Government pays a major share, payment of the full policyholder premium must be made at the time of application.
FEMA proposes to retain the substance of paragraphs (a) and (b), but proposes to move them to their own section (proposed 61.4) but retaining the current title of the section ("Special terms and conditions").
Paragraph (c) of section 61.5 states that because of the seasonal nature of flooding, refunds of premiums upon cancellation of coverage by the insured are permitted only if the insurer ceases to have an ownership interest in the covered property at the location described in the policy. It further states that refunds of premiums for any other reason are subject to the conditions set forth in 62.5 of this subchapter.
Similar to current section 61.4, paragraph (e) of section 61.5 states that the SFIP is authorized only under terms and conditions established by Federal statute, the program's regulations, the Administrator's interpretations and the express terms of the policy itself. Section 61.5 also states that representations regarding the extent and scope of coverage which are not consistent with the NFIA or with NFIP regulations are void, and the duly licensed property or casualty agent acts for the insured and does not act as agent for the Federal Government, the
6. Proposed Section 61.5 Deductibles (Formerly Paragraph (d) of Current Section 61.5)
Current paragraph (d) of section 61.5 states that optional deductibles are available in all zones for four categories of properties, and presents those categories as four tables. The Category One table lists some of the deductible options for one to four family building and contents coverage policies. The Category Two table lists some of the deductible options for one to four family building coverage only or contents coverage only policies. The Category Three table lists some of the deductible options for "other residential" (residential buildings with five or more units) and nonresidential policies. The Category Four table lists some of the deductible options for residential condominium building policies. A note to these tables indicates that policyholders may submit any other deductible combination for rating to the NFIP. This note allows
FEMA proposes several revisions to paragraph (d). First,
FEMA proposes to replace the current contents of paragraph (d) (proposed unnumbered paragraph) with a requirement that
The proposed text would require
FEMA also proposes to limit deductible options in accordance with section 1312(b) of the NFIA, as added by section 100210 of BW-12 (42 U.S.C. 4019(b)). Per this provision,
Overall, the proposed deductible section would provide readers with a clear understanding of available deductible options, including minimum deductibles required under Section 1312(b) of the NFIA, as added by Section 100210 of BW-12 (42 U.S.C. 4019(b)) and the
FEMA also proposes to rename the section heading of 61.5 to "Deductibles" because section 61.5 would only address deductible amounts.
7. Section 61.6 Maximum Amounts of Coverage Available
Current section 61.6 details the maximum amounts of coverage available under the NFIA. See 42 U.S.C. 4013(b). The current table shows varying coverage amounts available, depending on whether a policy is under the Emergency Program or the Regular Program, the use and occupancy of the building, and the building's location. As provided under the NFIA, for residential occupancies, the table lists coverage limits of
i. Title of Table
The current table does not have a title.
ii. Vertical Axis of Maximum Coverage Table
The current table has one vertical axis that lists the different categories of occupancy applicable to both building and contents coverages. These categories are, in order: "Single Family Residential," "Other Residential," "Nonresidential," and "Contents." Although the table provides a "contents" heading on this axis, there is no corresponding label for the building coverages.
As noted above, the current table lists the different categories of occupancy applicable to each coverage--"Single Family Residential," "Other Residential," and "Nonresidential." The current table further divides the "Single Family Residential" and "Other Residential" categories by whether or not a subject property is located within
FEMA proposes to substitute the current use of "Single Family Residential" with "Single Family Dwelling" to describe a property.
FOOTNOTE 2 http://www.fema.gov/txt/nfip/manual200505.txt. END FOOTNOTE
Because "single family dwelling" is not currently defined,
FEMA proposes to add a new occupancy category, "two to four family building." (The table would list the same maximum coverage amounts as those for a Single Family Dwelling,
Because "two to four family building" is not currently defined,
While FEMA proposes to maintain the "Other Residential" occupancy category that is in the current table,
Because neither "other residential building" nor "multifamily building" is defined,
FEMA proposes to add the "
While FEMA proposes to maintain the "Nonresidential" occupancy category,
In order to provide greater clarity,
FEMA proposes to adjust the occupancy categories under the "Contents Coverage" portion of the coverage limits table. Currently, the table at section 61.6(a) divides the contents coverage portion amongst three categories: "Residential," "Small business," and "Churches, other properties."
In addition to the adjustments to the categories of occupancy described above,
FEMA proposes to revise footnote 1 by appending it to the title of the table, "Maximum Amount of Coverage Available," to describe the table generally. It would read, "This Table provides the maximum coverage amounts available under the Emergency Program and the Regular Program, and the columns cannot be aggregated to exceed the limits in the Regular Program, which are established by statute. The aggregate limits for building coverage are the maximum coverage amounts allowed by statute for each building included in the relevant Occupancy Category."
FEMA proposes to leave footnote 2 in the same place (after "Contents Coverage"--the term replacing "Contents" in the current table), but expand it from "Per unit" to instead read, "The policy limits for contents coverage are not per building. Although a single insured may not have more than one policy covering contents in a building, several insureds may have separate policies of up to the policy limits."
For instance, the tenants of a building with two independent living units may obtain separate contents policies for each unit. Each policy could have limits up to
FEMA proposes to append a new footnote--footnote 3--to the "Residential Property" occupancy category under "Contents Coverage." Footnote 3 would explain that "[t]he Residential Property occupancy category includes the Single Family Dwelling, Two to
iii. Special Provisions for Property in
The current maximum coverage table in section 61.6(a) lists separate increased limits in the Emergency Program within the "Single Family Residential" and "Other Residential" occupancy categories for residential structures located in
iv. Horizontal Axis of Maximum Coverage Table
FEMA also proposes to make several clarifying, nonsubstantive changes to the horizontal axis of the table in section 61.6(a). The current table's horizontal axis is one label, "Regular program." Under that label are three sub-labels: "Emergency program first layer," "Second layer," and "Total amount available." As noted above, "Emergency program first layer" has a footnote (footnote 1) that reads, "Only first layer available under emergency program."
FEMA's proposed replacement table would dispense with the "layer" language and use only two columns, "Emergency Program" and "Regular Program." Each column would list the applicable coverage limit for each occupancy type under each type of program. (The values under "Emergency Program" and "Regular Program" would be independent of each other and not subject to aggregation).
FEMA proposes these simpler horizontal axis labels for two reasons. The first reason is to improve overall clarity, as the "layer" language is unclear and inaccessible to the reader. The second reason is to more accurately reflect the NFIP's intent. This is because the current table reflects a previous approach for describing the NFIP's coverage limits. The idea was that the NFIP divided the Regular Program's coverage limits into two layers. The first layer was available for all NFIP policies, whether under the Emergency Program or the Regular Program. The NFIP only made the second layer of coverage available through the Regular Program. The current table attempts to capture this by placing the "Emergency program first layer" and "Second layer" under the "Regular program" label. However, the table also combines the two layers under the "Total amount available" column, which is also under the "Regular program" label. A person could read this formulation as indicating that the three sub-headings combined provided the maximum amount of coverage under the "Regular program." This is not
Moreover, it is for this reason that
v. Paragraph (b): Application of Limits to Additional Coverages
As noted above, current paragraph (b) is being removed and its contents are being incorporated into the proposed table.
This revision would not make any substantive change to NFIP policy, but rather would provide a clarifying link to the coverage and benefits listed in proposed section 61.3 and how coverage limits relate to those coverages and benefits.
Overall,
8. Section 61.10 Requirements for Issuance or Renewal of Flood Insurance Coverage
FEMA proposes to add a new section, 61.10, entitled "Requirements for Issuance or Renewal of Flood Insurance Coverage." The proposed section would state that
9. Section 61.11 Effective Date and Time of Coverage Under the Standard Flood Insurance Policy--New Business Applications and Endorsements
Section 61.11 describes the methods for calculating the effective dates of new policies. In general, under current paragraph (c), the effective date and time of any new policy or added coverage is "
FEMA proposes to add a third exception to the 30-day waiting period relating to flooding linked to post-wildfire conditions in proposed paragraph (c), and proposes to redesignate current paragraph (c) as paragraph (d). The proposed provision would allow for a next-day effective date where (1) the FEMA Administrator determines that the property was affected by flooding on Federal land as a "result of, or is exacerbated by, post-wildfire conditions," and (2) that coverage was purchased no later than 60 calendar days after the fire containment date of the wildfire relating to the post-wildfire conditions described in clause (1).
As stated above,
Current paragraph (d) allows policyholders to add new coverage or increase the amount of coverage in force during the term of any policy.
Current paragraph (e) states that with respect to any submission of an application in connection with new business, the payment of the premium by an insured to an agent or the issuance of premium payment by the agent does not constitute payment to the NFIP. It further states that it is important that an application for flood insurance and its premium be mailed to the NFIP promptly to have the effective date of coverage based on the application date plus the waiting period.
It states that if the application and the appropriate premium payment are received at the office of the NFIP within ten (10) calendar days from the date of application, the waiting period will be calculated from the date of application.
FEMA proposes to redesignate current paragraph (e) as paragraph (f). Current paragraph (f) describes the method for determining the effective date when a WYO company receives a proper application, but decides to refer the application to the NFIP's Direct Servicing Agent rather than write the policy itself.
10. Section 61.13 Standard Flood Insurance Policy
Section 61.13 describes the applicable sources of terms and conditions associated with polices issued through the NFIP, including the SFIP forms, endorsements, and applications.
FEMA proposes to add new paragraphs (e) and (f), and redesignate current paragraphs (e) and (f) as (g) and (h).
FEMA's proposed new paragraph (f) would specify that the property or casualty agent acts on the behalf of the policyholder and never on behalf of the Federal Government,
Current paragraph (f) (proposed paragraph (h)), provides that private sector WYO property insurance companies may issue SFIPs.
Overall, the proposed changes to 61.13 would provide greater clarity to the public regarding the existing relationship between
C. Appendix A(1) to Part 61: Standard Flood Insurance Policy Dwelling Form
Appendix A(1) to part 61 contains the Dwelling Form of the SFIP. This form, as well as the other two SFIP policy forms (the General Property Form and the RCBAP), defines the relationship between
Throughout Appendix A(1),
1. Prefatory Paragraph and Article I "Agreement"
The prefatory paragraph states that the policy insures (1) a non-condominium residential building designed for principal use as a dwelling place of one to four families, or (2) a single-family dwelling unit in a condominium building.
In the current policy, Article I "Agreement" begins after the prefatory paragraph. It states in the first paragraph that
FEMA proposes to begin Article I before the prefatory paragraph, and to relabel the prefatory paragraph as Section A, current Article I's first paragraph as Section B, the second paragraph as Section C, and the third paragraph as Section D. This is to clarify that the prefatory paragraph, which is actually an initial coverage statement, is part of the policy and not just an introduction to the policy.
FEMA also proposes to modify proposed Section C (currently the second paragraph in Article I) and add three new sections to Article I (proposed sections E, F, and G) to clarify existing rules and limitations under the SFIP.
i. Proposed Section C
As previously described,
ii. Proposed Section E
Proposed Section E would state that the policy insures only one building. If the insured owns more than one building, coverage will apply to the single building specifically described in the Flood Insurance Application. While the SFIP's limitation on coverage to one dwelling is already implied by current Article III.A,
iii. Proposed Section F
Proposed Section F would state that multiple policies with building coverage cannot be issued to insure a single building to one insured or to different insureds, even if separate policies were issued through different NFIP insurers. It would also state that payment for damages may only be made under a single policy for building damages under Coverage A--Building Property. This proposed section would incorporate current Article VII.U's general language stating that there may not be more than one NFIP policy on a property. Proposed section F would be subject to the exception in proposed Section G involving condominiums, which provides that a condominium unit may be covered by an RCBAP policy and a dwelling policy.
FEMA proposes this clarification because there have been several instances where multiple persons have taken out multiple, overlapping building policies. This in turn may leave policyholders to believe they have more coverage than is allowed by the NFIA. This is most common in instances where both a building owner and a tenant obtain building policies. As described in WYO Bulletin W-15001 (
FOOTNOTE 3 Available at http://bsa.nfipstat.fema.gov/wyobull/2015/w-15001.pdf. END FOOTNOTE
iv. Proposed Section G
FEMA proposes to add Section G, which would define the relationship between a Dwelling Form policy and an RCBAP policy that insures the same condominium unit. Section G would state that a Dwelling Form policy with building coverage may be issued to a unit owner in a condominium building that is also insured under an RCBAP. However, no more than
FEMA proposes this section to clarify instances where a condominium unit is covered by both a Dwelling Form policy and an RCBAP policy, and to codify its current practice (pursuant to BW-12) of waiving the requirement found in current regulation to limit payments to affected policyholders. Current Article VII ("Coinsurance") of the RCBAP policy (Appendix A(3) to Part 61) restricts payments for damage to condominium associations that insure less than 80 percent of the full replacement cost of the RCBAP insured condominium building, or less than the maximum amount of insurance available. In turn, current Article III.C.3.b.4 of the Dwelling Form policy precludes payment for a loss assessment if the reason for the shortage is application of the RCBAP's coinsurance penalty provision. Current Article VII.C.2 of the Dwelling Form policy provides that where a condominium unit is covered by both the Dwelling Form policy and an RCBAP (or other flood insurance coverage purchased by the condominium association), the Dwelling Form policy will be in excess over the RCBAP (or other insurance).
Since 2007,
FOOTNOTE 4 Available at https://bsa.nfipstat.fema.gov/wyobull/2016/w-16024.pdf. END FOOTNOTE
Proposed Section G would also state that
2. Article II Definitions
i. General Changes
FEMA proposes to remove the last sentence of the second paragraph in Article II.A which states, "The precise definitions are intended to protect you."
FEMA also proposes to move the definition of "flood," which is currently in the third paragraph of Article II.A, to a separate Section B. Accordingly,
ii. Proposed Removal of Definition
FEMA proposes to remove one definition, "expense constant," from the Dwelling Form. The term describes a flat charge assessed on all policies to defray expenses to the Federal Government related to flood insurance.
iii. Proposed Addition of Definitions
FEMA proposes to add a definition of "condominium building" to mean a type of building for which the form of ownership is one in which each unit owner has an undivided interest in common elements of the building.
FEMA also proposes to define the term "deductible" as "the fixed amount of an insured loss that is your responsibility and that is incurred by you before any amounts are paid for the insured loss under this policy." This definition aligns with the definition of "deductible" currently proposed for 44 CFR 59.1.
iv. Proposed Changes to Existing Definitions
FEMA proposes to modify several definitions currently in the Dwelling Form. First,
FEMA proposes to revise the definition of the term "basement." Currently, "basement" is defined as "any area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides."
FEMA proposes to revise the term "condominium." Currently, "condominium" is defined as "that form of ownership of real property in which each unit owner has an undivided interest in common elements."
Similarly,
FEMA proposes to revise the definition of "dwelling." Currently, "dwelling" is defined as "a building designed for use as a residence for no more than four families or a single-family unit in a building under a condominium form of ownership."
FEMA proposes to revise the definition of "emergency program." Currently, "emergency program" is defined as the initial phase of a community's participation in the National Flood Insurance Program. The definition also states that during this phase, only limited amounts of insurance are available under the NFIA.
FEMA proposes minor revisions to the definition of "improvements." Currently, this term is defined as "fixtures, alterations, installations, or additions comprising a part of the insured dwelling or the apartment in which you reside."
FEMA proposes to move the definition of "principal residence" from Art. VII.V.1.a.1 ("Loss Settlement") of the Dwelling Form to the Definitions Section (Article II). Currently, under Article VII.V.1 a principal residence means the single-family dwelling where the policyholder or the policyholder's spouse has lived for at least 80 percent of (a) the 365 days immediately preceding the time of loss; or (b) the period of ownership, if either the policyholder or policyholder's spouse owned the dwelling for less than 365 days immediately preceding the time of loss.
FEMA proposes to revise the definition for "probation premium" by replacing the defined term "probation premium" with the term "probation surcharge." "Probation surcharge" would retain the same definition as the current definition for "probation premium," which is a flat charge the policyholder must pay on each new or renewal policy issued covering property in a community the NFIP has placed on probation under the provisions of 44 CFR 59.24.
FEMA proposes to amend the definition of "regular program." Currently, "regular program" is defined as the final phase of a community's participation in the National Flood Insurance Program. In this phase, a Flood Insurance Rate Map is in effect and full limits of coverage are available under the NFIA.
FEMA also proposes to modify the definition of "Special
FEMA proposes to revise the term "unit." Currently, "unit" is defined as "a single-family unit you own in a condominium building."
3. Article III Property Covered
Article III of the Dwelling Form ("Property Covered") is divided into four sections, each addressing different types of property: Section A, "Coverage A--Building Property," Section B, "Coverage B--Personal Property," Section C, "Coverage C--Other Coverages," and Section D, "Coverage D--Increased Cost of Compliance."
i. Coverage A--Building Property
Article III.A.5.b.2 describes the zones above which the lowest floor of a non-walled or roofed building under construction, alteration, or repair must be to be covered.
In Article III.A.6,
Article III.A.7 provides a list of items of property covered under Coverage A only.
Article III.A.8 limits coverage on items of property in a building enclosure below the lowest elevated floor of an elevated post-FIRM building in specified zones.
ii. Coverage B--Personal Property
Article III.B.1 describes the conditions under which the policy covers personal property inside a building. Current Article III.B.1.b contains two unnumbered paragraphs.
Article III.B.3 (renumbered B.5.in the proposed text) limits coverage for items of property in a building enclosure below the lowest elevated floor of an elevated post-FIRM building located in specified zones or a basement.
iii. Coverage C--Other Coverages
Article III.C describes other coverages under the SFIP, including for debris removal, property relocation, and condominium loss assessments. In III.C.2.b,
Article III.C.3.a describes the terms of coverage for condominium loss assessments.
Article III.C.3.b describes scenarios where
Article III.C.3.b.4 states that the NFIP would not insure any loss assessments on units in a condominium building that were underinsured as described in this paragraph.
Current Article III.C.3.b.5 provides that
The last sentence of current III.C.3.b.6 states that "[l]oss assessment coverage does not increase the Coverage A Limit of Liability."
iv. Coverage D--Increased Cost of Compliance
Article III.D ("Increased Cost of Compliance") describes the terms of coverage for costs associated with complying with State or local floodplain management laws or ordinances affecting repair or reconstruction of a structure suffering flood damage.
4. Article V Exclusions
Article V of the Dwelling Form ("Exclusions") provides the terms and conditions of the SFIP relating to what losses are excluded from coverage under the SFIP. Article V.B excludes coverage for losses resulting from a flood that began prior to the effective date of a policy; this is referred to as the "flood in progress" exclusion. If the SFIP covered losses for policies obtained after a flood became imminent, people could avoid paying for insurance during the times they did not need to make a claim.
Currently, the exclusion specifies that
While these clarifications provided workable guidance on the issue, BW-12 directed the FEMA Administrator to review "the processes and procedures for determining that a flood event has commenced or is in progress for purposes of flood insurance coverage made available under the National Flood Insurance Program." BW-12 section 10227(a)(1)(A) (42 U.S.C. 4011 note). Accordingly,
FEMA proposes to revise the language of Article V.B to allow for two separate exclusions for floods in progress, depending on how the policyholder applied for the policy. If the policy became effective at the time of a loan closing, as provided by 44 CFR 61.11(b), then
FEMA believes the proposed formulation provides a more thorough understanding of what constitutes a flood in progress, providing greater clarity to policyholders, without altering the actual effect of the provision because the proposed language captures the principles underlying the previous agency guidance.
In article V.C.6, regarding gradual erosion,
5. Article VII General Conditions
Article VII ("General Conditions") provides the general terms and conditions of the Dwelling Form SFIP, such as provisions related to other insurance; amendments, waivers, and assignments; policy reformation; policy renewal; requirements if there is a loss; and loss payments.
i. Section B--Concealment or Fraud and Policy Avoidance
Article VII.B ("Concealment or Fraud and Policy Avoidance") provides the general terms and conditions of the Dwelling Form SFIP related to concealment or fraud and policy avoidance.
ii. Section C--Other Insurance
Article VII.C ("Other Insurance") discusses terms related to instances where property is covered by more than one insurance policy with flood coverage.
FEMA proposes to add language to Article VII.C.2 (proposed VII.B.2) to provide that the section does not apply where a condominium loss assessment to the unit owner results from a loss sustained by the condominium association that was not reimbursed under an RCBAP because the building was not insured for an amount equal to the lesser of: (a) 80 percent or more of its full replacement cost; or (b) the maximum amount of insurance permitted under the NFIA.
FEMA also proposes to add language to proposed Article VII.B.2 clarifying that even when a condominium unit is insured by two policies, the maximum statutory coverage limit available under the NFIA of
iii. Section D--Amendments, Waivers, Assignment
Article VII.D (" Amendments, Waivers, Assignment") provides that any amendments or waivers to the policy require express written consent of the Federal Insurance Administrator. It allows a policyholder to assign this policy when transferring title of his or her property except when the policy (1) covers only personal property, or (2) covers a structure during the course of construction.
iv. Section E--Cancellation of the Policy by You
Article VII.E ("Cancellation of the Policy by You") authorizes a policyholder to cancel the policy in accordance with the applicable rules and regulations of the NFIP and provides that a policyholder who cancels may be entitled to a full or partial refund of premium.
v. Section F--Non-Renewal of the Policy by Us
Article VII.F ("Non-Renewal of the Policy by Us") states that a policy will not be renewed if the community where the covered property is located stops participating in the NFIP, or the building has been declared ineligible under section 1316 of the NFIA.
vi. Section G--Reduction and Reformation of Coverage
Article VII.G ("Reduction and Reformation of Coverage") describes the terms and conditions of the policy related to situations in which it is discovered that the premium paid on an annual policy, or the information used to rate the policy, is insufficient. Specifically, this section details how coverage under the policy would be reformed in such situations and the policyholder's options upon reformation.
FEMA proposes to redesignate Article VII.G as Article VII.D to conform to the relocation and redesignation of preceding sections described above.
FEMA proposes to add a new Article VII.D.1, entitled "Applicability." The proposed Article would state that the provisions in proposed Article VII.D, Insufficient Premium or Rating Information, apply to all instances where the premium paid on a policy is insufficient or where the rating information is insufficient, such as where an Elevation Certificate is not provided. This change reflects
Current Article VII.G.1 provides that if the premium received was not enough to buy the kind and amount of coverage requested,
FEMA proposes to add three paragraphs to this section. Proposed paragraph D.2.a clarifies that, for determining whether the premium is sufficient to buy the kinds and amounts of coverage requested,
Current Article VII.G.2 discusses how a policy can be reformed to increase the amount of coverage where insufficient premium or incomplete rating information is discovered before a loss (current paragraph (a)), and where insufficient premium or incomplete rating information is discovered after a loss (current paragraph (b)).
Proposed Article VII.D.3.a would be entitled "Insufficient Premium" and would address situations where
The last sentence in current VII.G.2.a.1 provides that where the policyholder pays the additional premium within 30 days from the date the bill is sent, the Program will reform the policy to the originally requested amount of coverage.
As mentioned above,
FEMA proposes to add a third subsection (proposed VII.D.3.a.3) allowing the policyholder the option of paying all or part of the amount due out of a claim payment based on the originally requested amount of coverage. Though not explicitly anticipated in the SFIP,
Proposed Article VII.D.3.b would be entitled "Insufficient Rating Information" and would address situations where it is discovered that the rating information is insufficient. This section would retain the substance of the first sentence in VII.G.2.a. stating that if it is determined that the rating information for the policy is insufficient and prevents the insurer from calculating the additional premium, the policyholder would be required to provide this information within 60 days of a request by the insurer. The last sentence in current VII.G.2.a.2 provides that once the amount of additional premium for the current policy term is determined, the procedures outlined in G.2.a.1 will be followed.
Current VII.G.2.a.3 and G.2.b.3 address situations where the additional premium or information is not received by the date it is due.
FEMA proposes to add a new Article VII.D.4, entitled "Coverage Increases," which would incorporate the language in current Articles VII.G.2.a.3 and VII.G.2.b.3. The proposed language states that if the policyholder does not submit the amounts requested in Article VII.D.3.a or the additional information requested in Article VII.D.3.b by the date it is due, the amount of coverage could only be increased by endorsement subject to the appropriate waiting period. However, no coverage increases would be allowed until the information requested in Article VII.D.3.b is provided.
Finally,
In section J (proposed section G) ("Requirements in Case of Loss"), section L (proposed section I) ("No Benefit to Bailee"), and section T (propsed section Q) ("Continious Lake Flooding"),
As a consequence of the changes proposed above,
vii. Section U--Duplicate Policies Not Allowed
Article VII.U ("Duplicate Policies Not Allowed") currently describes restrictions on insuring property with more than one NFIP policy.
viii. Section V--Loss Settlement
Current Article VII.V ("Loss Settlement") (proposed VII.R) describes the three methods for settling losses under the SFIP: Replacement cost loss settlement, special loss settlement, and actual cash value loss settlement. Article VII.V.1.a.1 (proposed VII.R.1.a.1) provides that replacement cost loss settlement applies to a single-family dwelling provided that it is the policyholder's principal residence within the meaning described further in the paragraph. As discussed in III.C.2,
Throughout proposed section VII.R,
ix. Internal Citation Updates Within Article VII
FEMA proposes to redesignate the letter identifiers for the following sections due to the resdesignation of earlier sections of Article VII. The changes are as follows: Current Article VII.J (proposed VII.G), Requirements in Case of Loss; current Article VII.M (proposed VII.J), Loss Payment; current Article VII.T (proposed VII.Q), Continuous
6. Article VIII Policy Nullification, Cancellation, and Non-Renewal
As discussed above,
i. Section A--Policy Nullification for Fraud, Misrepresentation, or Making False Statements
Current Article VII.B.1-3 provides that a policy is void, has no legal force or effect, cannot be renewed, and cannot be replaced by a new NFIP policy if the policyholder (or another insured or agent) has intentionally concealed or misrepresented any material fact or circumstance, engaged in fraudulent conduct, or made false statements related to this or any other NFIP policy. It also provides that the policy would be void as of the date the wrongful acts were committed, and that fines, civil penalties, and imprisonment may also apply.
ii. Section B--Policy Nullification for Reasons Other Than Fraud
Current Article VII.B.4 provides that the policy is void and has no legal force where the property is located in a community not participating in the NFIP on the policy's inception date and did not join or reenter the program during the policy term and before the loss occurred, or if the property is not otherwise eligible for NFIP coverage.
FEMA proposes to add Article VIII.B to state that the applicant or policyholder would be entitled to a full refund of all premium, fees, and surcharges received, but if a claim was paid for a policy that is void, the claim payment must be returned to
iii. Section C--Cancellation of the Policy by You
Current Article VII.E ("Cancellation of the Policy by You") provides that a policyholder may cancel the policy in accordance with the NFIP's rules and regulations, in which event they may be entitled to a full or partial refund of premium under those same rules and regulations.
iv. Section D--Cancellation of the Policy by Us
FEMA proposes to establish a new Article VIII.D, entitled "Cancellation of the Policy by Us," which would state four reasons for which a policy may be cancelled by the insurer: 1. Cancellation for underpayment of amounts owed on the policy, 2. cancellation due to lack of an insurable interest, 3. cancellation of duplicate policies, and 4. cancellation due to physical alteration of property.
The first reason for which the insurer may cancel a policy is in proposed Article VIII.D.1, entitled "Cancellation for Underpayment of Amounts Owed on Policy." This provision would state that the insurer may cancel the policy if, pursuant to VII.D.2, it is determined that the amounts paid by the policyholder were not sufficient to buy any amount of coverage, and the policyholder did not pay the additional amount of premium owed to increase the coverage to the originally requested amount within the required time period.
FEMA proposes to add the second reason for which the insurer may cancel a policy in proposed Article VIII.D.2, entitled "Cancellation Due to Lack of an Insurable Interest." Proposed Article VIII.D.2.a would state that if the policyholder no longer has an insurable interest in the insured property, the insurer will cancel the policy, and that the policyholder would cease to have an insurable interest if (1) for building coverage, the building was sold, destroyed, or removed, and (2) for contents coverage, the contents were sold or transferred ownership, or the contents were completely removed from the described location. Proposed Article III.D.2.b would state that if a policy is cancelled for these reasons, the policyholder may be entitled to a partial refund of premium under the applicable rules and regulations of the NFIP. This reflects
FEMA proposes to add the third reason for which the insurer may cancel a policy in proposed Article VIII.D.3, entitled "Cancellation of Duplicate Policies." Article VIII.D.3 would have three subsections. Subsection (a) would state that except as allowed under Article I.G (i.e., for a Dwelling Form policy on a condominium unit that is also insured by an RCBAP policy), property may not be insured by more than one NFIP policy. This would incorporate the language in the current Article VII.U, stating that duplicate policies are not allowed under the NFIP, as well as the exception to that rule created in Article I.G.
Subsection (b) would state that except as allowed under Article I.G, if the property is insured by more than one NFIP policy, all but one of the policies will be cancelled, and that the policy, or policies, will be selected for cancellation in accordance with 44 CFR 62.5 and the applicable rules and guidance of the NFIP.
Subsection (c) would state that if a policy is cancelled pursuant to VIII.D.4.b, the policyholder may be entitled to a full or partial refund of premium, surcharges, or fees.
FEMA proposes to add the fourth reason for which the insurer may cancel a policy in proposed Article VIII.D.4, entitled "Cancellation Due to Physical Alteration of Property." The proposed provision states that the insurer may cancel the policy if the insured building has been physically altered in such a manner that it is no longer eligible for flood insurance coverage, and that if the policy is cancelled for this reason, the policyholder may be entitled to a partial refund of premium under the terms and conditions of the policy and the applicable regulations of the NFIP. This reflects current agency practice and interpretations, as shown in the Cancellation/Nullification section of the Flood Insurance Manual, pages 1-2.
v. Section E--Non-Renewal of the Policy by Us
Current Article VII.F ("Non-Renewal of the Policy by Us") provides that a policy will not be renewed if the community where the covered property is located stops participating in the NFIP, or if the building has been declared ineligible under the section 1316 of the NFIA.
FEMA also proposes to add a new provision stating that the policy will not be renewed if the policyholder has not provided the information necessary to rate the policy within the required deadline.
FEMA further proposes to renumber current Articles VIII and IX as IX and X, respectively, due to the renumbering of prior articles.
7. Article IX What Law Governs
Current Article IX ("What Law Governs") describes which law applies to the SFIP.
8. Signing Statement
The Dwelling Form of the Standard Flood Insurance Policy concludes with a signing statement that references the "
D. Appendix A(2) to Part 61: General Property Form
FEMA proposes to revise the General Property Form of the SFIP in a manner consistent with the revisions to the Dwelling Form of the SFIP described above. Except as indicated in the sections below, the changes
1. Article I Agreement
In the current General Property Form, the first paragraph is a prefatory statement regarding what the policy does not cover, and it is outside of Article I. As
In addition, the proposed General Property Form would not include the proposed Dwelling Form's Art. I.G, which provides that a building may be covered under both a Dwelling Form policy and a RCBAP. General Property Form policies may only insure non-residential buildings, while RCBAP may only insure residential condominium buildings. Accordingly, Art. I.G would not apply similarly in the General Property Form.
2. Article II Definitions
The definitions
3. Article III Property Covered
Article III.A. describes the conditions under which the policy covers building property. Article III.A.2 provides that the policy covers building property at a location other than the one described on the Declarations Page according to certain conditions.
Article III.B.1 describes the conditions under which the policy covers personal property inside a building. Current Article III.B.1.b contains an unnumbered paragraph after paragraph B.1.b.
E. Appendix A(3) to Part 61: Residential Condominium
FEMA proposes to amend the Residential Condominium
Part 62 sets forth the manner in which NFIP flood insurance is made available to the public in participating communities, prescribes the general method by which
1. Part 62 Authority Citation
The current authority citation for part 62 is 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of 1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of
2. Section 62.3 Servicing Agent
Section 62.3 currently describes the
In section 62.3(a),
FOOTNOTE 5 See 48 CFR part 37. END FOOTNOTE
FEMA proposes to remove section 62.3(b) because the current regulation lists NCSI as the NFIP Direct Servicing Agent even though this is not accurate and it is uncessary to name a government contractor in the Code of Federal Regulations. Contact information for the Direct Servicing Agent is provided to each policyholder sold NFIP flood insurance through the Direct Servicing Agent.
After removing current paragraph (b),
With respect to section 62.3(b),
3. Section 62.5 Premium Refund
Section 62.5 describes reasons for which
In addition to section 62.5, section 61.5(c) and certain sections of the SFIP also describe the reasons for which
i. Paragraph (a): Nullification
Paragraph (a) of this new section, entitled "Nullification," would describe all the reasons for which
Subparagraph (2), entitled "Property Later Becomes Ineligible," would state that a policy for a property that was eligible for coverage at the time of the initial application, but later became ineligible for coverage, may not be renewed and will be void from the first renewal date after the property became ineligible. This paragraph would also provide the rules and limitations governing the applicability of this nullification reason, as well as the associated premium refunds. This would further codify Reason Codes 1 and 6 from the Nullification/Cancellation section of the Flood Insurance Manual into regulation.
Paragraph (3), entitled "Nullification Prior to Policy Effective Date," would clarify that in cases where a policy is nullified before it becomes effective, the NFIP will void the policy from the beginning of the policy term. Such a situation may arise where a policyholder's premium payment check is returned for insufficient balance or where a policyholder cancels his or her policy before it becomes effective. The provision would also clarify that in the rare instance where the NFIP pays a claim for a policy that was actually nullified before the policy's effective date, the policyholder would have to either return the claim payment or pay the premium using the claim payment. This paragraph would also provide the rules and limitations governing the applicability of this nullification reason, as well as the associated premium refunds. Overall, this provision will codify existing Reason Codes 5, 7, and 13 from the Nullification/Cancellation section of the Flood Insurance Manual into regulation. These reason codes are based on basic principles of insurance that the program has applied with regulatory instruction.
ii. Section 62.5(b): Cancellation Due to Lack of an Insurable Interest
Section (b), entitled "Cancellation Due to Lack of an Insurable Interest," would be taken from the current 61.5(c) and would allow policy cancellations when a policyholder ceases to have an insurable interest in the insured property (i.e., because the property was sold, destroyed, or removed). This subsection would state that for building coverage, a policyholder ceases to have an insurable interest if the building has been sold, destroyed, or removed. This subsection would further state that for contents coverage, a policyholder ceases to have an insurable interest if the contents were sold, transferred ownership, or have been removed from the described location. This paragraph would also provide the rules and limitations governing the applicability of this cancellation reason, as well as the associated premium refunds. This will codify Reason Codes 1 and 2 from the Nullification/Cancellation section of the Flood Insurance Manual into regulation. Reason Codes 1 and 2 are necessitated by basic principles of insurance that prevent an insurer from insuring property in which the policyholder does not have an insurable interest.
iii. Section 62.5(c): No Insurance Coverage Requirement
Paragraph (c), entitled "No Insurance Coverage Requirement," would allow cancellation in cases where the policyholder is no longer required to maintain flood insurance on the property. The new paragraph would state that a policyholder may cancel a policy if there was a requirement by a lender, loss payee, or other Federal agency to obtain and maintain flood insurance pursuant to statute, regulation, or contract, but there no longer is such a requirement. Such situatons would include where (i) the policyholder has paid off his or her mortgage, (ii) the policy was required by the mortgagee in error, or (iii) the property has been removed from the SFHA, and accordingly from the mandatory purchase requirement, through a revision or amendment to the FIRM, including the issuance of a Letter of Map Amendment (LOMA) removing a property from an SFHA.
The paragraph will further state that in such instances,
iv. Subsection 62.5(d): Establishment of a Common Expiration Date
Subsection (d), entitled "Establishment of a Common Expiration Date," would codify parts of current Article VII.U of the SFIP. The provision would allow policyholders to create duplicate policies, and then cancel the policy with the earlier effective date, to establish common expiration dates with other coverage. This paragraph would also provide the rules and limitations governing the applicability of this nullification reason, as well as the associated premium refunds. This would codify into regulation the NFIP's existing cancellation reason found under Reason Code 3 in the Nullification/Cancellation section of the Flood Insurance Manual.
v. Subsection 62.5(e): Cancellation or Nullification of Duplicate NFIP Policies
Subsection (e) would be entitled "Cancellation or Nullification of Duplicate NFIP Policies." The subsection would incorporate provisions of current Article VII.U, which allow for cancellation of duplicate NFIP policies. The proposed subsection would include two paragraphs. Paragraph (1), entitled "Generally," would have two paragraphs. Paragraph (i) would state that if more than one policy covers the same building not in accordance with applicable regulation and SFIP terms and conditions,
Paragraph (ii) would state that if both policies have the same effective date, the policyholder may choose which policy will remain in effect, at which point the same refund rules laid out in paragraph (i) apply. This paragraph would also provide the rules and limitations governing the applicability of this nullification reason.
Paragraph (2), entitled "Exceptions," would establish the exceptions to Paragraph (1) and would state that in certain cases, the policy with the earlier effective date may be cancelled instead of the policy with the later effective date. The first exception, contained in paragraph (i) and entitled "Earlier Policy Expired" would allow the policy with the earlier effective date to be cancelled where that policy has expired for more than 30 days. The second exception, in paragraph (ii) entitled "Group Flood Insurance Policy (GFIP)" would provide that the policy with the earlier effective date may be cancelled if that policy is a GFIP. The third exception, in paragraph (iii) entitled "Cancellations to Establish a Common Expiration Date" would provide that the policy with the earlier effective date may be cancelled pursuant to paragraph (d) of this proposed section (i.e., to establish a common expiration date). The fourth exception, in paragraph (iv) entitled "Force-Placed Policy" would allow the policy with the earlier effective date to be cancelled if the the mortgagee buys a flood insurance policy through the Mortgage Portfolio Protection Program after the property owner fails to obtain a flood insurance policy on their own. This is often refered to as "force placing" a policy. The last exception, in paragraph (v) entitled "Condominium Unit Covered by a Dwelling Form Policy and an RCBAP" would provide that if the policy with the earlier effective date is a Dwelling Form policy with building coverage on a condominium unit that is also covered by an RCBAP with coverage that equals the statutory maximum building coverage limit, the Dwelling Form Policy may be cancelled.
Each paragraph establishing an exception would also provide the premium refunds associated with cancellations falling under the exception. This proposed section would clarify, in regulation, how
vi. Subsection 62.5(f): Other Cancellations and Nullifications
Subsection (f) would be entitled "Other Cancellations and Nullifications," and clarify the other current reasons for which a policy may be cancelled. This section would also state that the policyholder will not receive a refund of any premium, fees, or surcharges for policies cancelled pursuant to this section. Paragraph (1), entitled "Fraud," would state that
Paragraph (2), entitled "Administrative Cancellation," would allow a policy to be cancelled and rewritten to correct an administrative error, such as when the policy is written with the wrong effective date, and any excess premium, fees, or surcharges would be refunded. This cancellation reason may be found under Reason Code 20 in the Nullification/Cancellation section of the Flood Insurance Manual.
Paragraph (3), entitled "Nullification for Properties Ineligible Due to Physical Alteration of Property," would state that a policy insuring a building or its contents, or both, may be cancelled if the building has been physically altered so that the building and its contents are no longer eligible for flood insurance coverage. This paragraph would also provide the rules and limitations governing the applicability of this nullification reason, as well as the associated premium refunds. This nullification may be found under Reason Codes 1 and 2 in the Nullification/Cancellation section of the Flood Insurance Manual.
4. Section 62.6 Minimum Commissions
Current section 62.6 contains provisions applicable to insurance agents and brokers writing NFIP policies through the NFIP Direct Services Agent. It does not apply to agents or brokers associated with WYO companies.
i. Section Heading
Currently, section 62.6 is titled, "Minimum Commissions."
ii. Paragraph (a): Agent and Broker Licensing Requirements
Currently, section 62.6(a) defines the commissions paid to agents and brokers participating in the Direct Servicing Agent (DSA) portion of the NFIP. However, it also includes a requirement that such agents and brokers are "duly licensed by a state insurance regulatory authority."
5. Section 62.22 Judicial Review
Section 62.22 provides that actions for disallowed claims must be instituted in the
IV. Regulatory and Economic Analysis
A. Executive Order 12866, Regulatory Planning and Review & Executive Order 13563, Improving Regulation and Regulatory Review
Executive Orders 13563 ("Improving Regulation and Regulatory Review") and 12866 ("Regulatory Planning and Review") direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 13771 ("Reducing Regulation and Controlling Regulatory Costs") directs agencies to reduce regulation and control regulatory costs and provides that "for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process."
The Office of Management and Budget (OMB) has not designated this rule a "significant regulatory action" under section 3(f) of Executive Order 12866. Accordingly, OMB has not reviewed it. As this rule is not a significant regulatory action, this rule is exempt from the requirements of Executive Order 13771. See OMB's Memorandum "Guidance Implementing Executive Order 13771, titled `Reducing Regulation and Controlling Regulatory Costs' " (
In this rule,
Overall, there are 34 identified proposed regulatory changes in this rule (itemized in Table 1 below). The vast majority of these changes are limited to nonsubtantive clarifications. The remaining provisions are considered "Codifications," that codify in regulation either an existing practice or policy, or a process heretofore requiring special waiver by
Following guidance in OMB Circular A-4,
Under a no-action baseline, this proposed rule would carry no transfers or quantifiable costs. The proposed rulemaking would make material improvements to the language and organization of the NFIP's regulations, but such clarifications and codifications would not result in any quantifiable burden or benefit. The proposed rule also would codify certain changes pursuant to BW-12 and HFIAA that
The below analysis adopts a consistent pre-statutory baseline of 2012 in order to capture the effects of the proposed rule, including those of modifications already implemented through interim actions. The summary table below (Table 1) presents the proposed rule's components based on the two categorizations above, including the related statutory mandates (BW-12, HFIAA or both), a description of their effects and their likely impact.
Table 1--Summary of Proposed Changes Current section Proposed change Mandatory or Impact No./ discretionary subject matter action Nonsubstantive Clarifications & Consolidations 1. S. 59 FEMA proposes to add and Discretionary No change in Definitions revise definitions to compliance support clarifications and burden. codificatons described below. This is a nonsubstantive change that clarifies existing definitions and does not alter the administration of the program 2. S. 61.1 FEMA proposes to remove Discretionary No change in Purpose of part irrelevant second sentence compliance that does not relate to the burden. substantive content of part 61. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 3. S. 61.3 FEMA proposes to clarify Discretionary No change in Coverage and language to provide a more compliance benefits provided complete statement of burden. under the SFIP coverage and benefits provided by the SFIP. The coverage and benefits provided under the SFIP are already stated in regulations; this is just a consolidated, unified statement of coverage and benefits under the SFIP. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 4. S. 61.5 An application of BW-12 Mandatory No change in Deductibles section 100210 and HFIAA compliance section 12, that would burden. clarify existing policy/practice by moving content of 61.5 to new unified cancellation/nullification section in 44 CFR 62.5 (discussed below). FEMA also proposes to replace the current deductible tables with provisions describing the minimum deductibles required by BW- 12 section 100210 and the|% 10,000 deductible option
required by HFIAA section 12. This is a nonsubstantive change because FEMA has always had this authority and has always made these deductible options available to policyholders despite not being explicitly provided for in the CFR 5. S. 61.6 FEMA proposes to clarify Discretionary No change in Maximum amounts the maximum coverage limit compliance of coverage tables in section 61.6 with burden. available nonsubstantive changes to improve readability and conformance with standard program terminology and terminology introduced by BW-12. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 6. S. 61.10 FEMA proposes to Discretionary No change in Requirements for clarify/consolide existing compliance Issuance or regulation language. This burden. Renewal of Flood new provision would clarify Insurance that no flood insurance Coverage coverage will be issued unless there is (a) receipt of full amount due and (b) submission of a complete application with all the required rating information. Although this has always been the case, and these concepts are covered in sections 61.5 and 61.11, FEMA believes that increased clarity is needed by adding a consolidated statement in the regulations. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 7. S. 61.13 This provision would Discretionary No change in Standard Flood clarify that SFIP is compliance Insurance Policy authorized only under terms burden. and conditions established by Act, regulations, SFIP, and Administrator interpretations. FEMA also proposes to clarify that the agent acts only for policyholder and that the risk of loss is borne by the National Flood Insurance Fund, not the WYO company. This does not represent a substantive change in policy or terms and conditions of the SFIP, but instead would make terms clearer 8. S. 62.5 Policy FEMA proposes to make Discretionary No change in Nullification and changes that would clarify compliance Cancellation and consolidate the burden. existing reasons for which a policy may be cancelled or nullified. The current reasons for which a policy may be cancelled or nullified are spread throughout the regulations and FEMA's interpretations of those regulations in the Flood Insurance Manual. This would consolidate those reasons into one section for greater clarity and transparency to the public. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 9. S. 62.6 Broker This provision would Discretionary No change in and Agents for clarify FEMA's existing compliance Servicing Agent policy by adding it to burden. regulation that a broker or agent selling NFIP policies must be licensed in the state in which the property is located. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 10. SFIP Article FEMA proposes changes to Discretionary No change in I SFIP Article I that would compliance clarify the types of burden. property covered by the SFIP. Proposed clarifications are about coverage limits and multiple policies covering one building. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 11. SFIP Article FEMA proposes to revise and Discretionary No change in II-Definitions add some definitions for compliance clarity. In particular, the burden. proposed changes would clarify that the named insured must also include the building owner if building coverage is purchased. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 12. SFIP Article FEMA proposes to clarify Discretionary No change in III that references to insured compliance property do not extend burden. coverage to any type or item of property not otherwise insured in accordance with the terms and conditions of SFIP. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 13. SFIP Article FEMA proposes minor Discretionary No change in III.A nonsubstantive changes to compliance Article III.A.5.b.2 to burden. improve the grammar of the section; revise Article III.A.8 to remove the phrase "in a building enclosure." This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 14. SFIP Article FEMA proposes to revise the Discretionary No change in III.B numbering in this section compliance to improve readability and burden. organization; revise Article III.B.3 by removing the phrase "in a building enclosure." This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 15. SFIP Article FEMA proposes to revise the Discretionary No change in III.D language in this section so compliance that the word "structure" burden. is replaced by the word "building" throughout the section except at III.D.5.c. The reason for this change is the NFIP insures SFIP defined "buildings," not any structure that does not meet the definition of "building" as defined in the SFIP. FEMA also proposes to improve the language in III.D.3.d and III.D.3.e by replacing the phrase "this coverage" with the phrase "Coverage D" to clarify that the coverage referred to in these provisions is Coverage D. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 16. SFIP Article FEMA proposes a Discretionary No change in V.B nonsubstantive, clarifying compliance adjustment to the Flood in burden. Progress Exclusion at SFIP Art. V.B to align with reports required by BW-12 section 100227. This change does not impact the application of the exclusion, but will help support more consistent reading of the provison 17. SFIP Article FEMA proposes to move the Discretionary No change in VII.B provision on concealment of compliance fraud and policy voidance burden. for consolidation into unified section on policy cancellations and nullifications (discussed below). This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 18. SFIP Article FEMA proposes to remove Discretionary No change in VII.E Article VII.E, Cancellation compliance of the Policy by You, and burden. incorporate the language into a new consolidated section on policy nullifications, cancellations, and non- renewals. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 19. SFIP Article FEMA proposes to remove Discretionary No change in VII.F Article VII.F, Non-Renewal compliance of the Policy by Us, and burden. incorporate the language into a new Article VIII discussing policy nullifications, cancellations, and non- renewals. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 20. SFIP Article This provision would revise Discretionary No change in VII.G the reformation section for compliance clarity/readability. This burden. is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 21. SFIP Article FEMA proposes to move the Discretionary No change in VII.U provision on duplicate compliance policies for consolidation burden. into unified section on policy cancellations and nullifications (discussed below). This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 22. SFIP Article FEMA proposes to revise Discretionary No change in VII.V Article VII.V.1.a.1 of the compliance current policy to remove burden. all the language after "It is your principal residence." The reason for this proposed change is that this language, which is essentially a definition of the term "principal residence," has been incorporated into the new definition of "principal residence" being added to Definitions section in Article II. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 23. SFIP Article FEMA proposes to clarify Discretionary No change in VIII the existing reasons for compliance which a policy may be burden. cancelled, nullified, or not renewed. This would mirror similar section being established at 44 CFR 62.5 (discussed above). This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 24. SFIP Article FEMA proposes to clarify Discretionary No change in IX that the SFIP and all compliance disputes arising from the burden. insurer's policy issuance, policy administration, or the handling of any claim under the SFIP are governed by the National Flood Insurance Act and the regulations. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 25. Entire SFIP-- FEMA proposes to replace Discretionary No change in Global Language the word "covered" with the compliance Replacements word "insured" because the burden. word "covered" does not conform to common industry or Agency usage. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 26. 62.22 FEMA proposes to replace Discretionary No change in Judicial Review references to the "Federal compliance (preamble sec. Insurance Administration" burden. III.F.5) with the current organizational title, "Federal Insurance and Mitigation Administration." This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 27. SFIP Article FEMA proposes to Discretionary No change in VII.D redesignate Article VII.D compliance as Article VII.C. Replaces burden. the phrase "structure during the course of construction" in Article VII.D.2 of the current rule with "building under construction," which is the proper term of art, as used in Article III.A.5.a and Article VI.A. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 28. S. 61.4 FEMA proposes to delete Discretionary No change in Limitations on this provision because some compliance Coverage of the language is burden. duplicative with language in other sections, and the rest of the language is more appropriately moved to other sections of the regulation. Move 61.5(a) and (b) to become a new 44 CFR 61.4. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 29. S. 62.3 FEMA proposes to remove the Discretionary No change in Servicing agent name of specific direct compliance servicing agent. This is a burden. nonsubstantive change that codifies current practices that began more than a decade before the baseline regarding the public announcement of the direct servicing agent 30. Part 59 FEMA proposes to replace Discretionary No change in Authority the citations to compliance Citation Reorganization Plan No. 3 burden. and Executive Order 12127 with a citation to the codification of the Homeland Security Act of 2002, 6 U.S.C. 101 et seq. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 31. Part 61 FEMA proposes to update Discretionary No change in Authority authority citations to compliance Citation reflect changes to FEMA's burden. source of authority from Executive orders to statute. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader 32. Part 62 FEMA propose to update Discretionary No change in Authority authority citations to compliance Citation reflect changes to FEMA's burden. source of authority from Executive orders to statute. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader Codification of Existing Policy and Practice 33. S. 61.11 FEMA proposes to codify BW- Mandatory No change in Effective date 12's addition of the Post- compliance and time of Wildfire Exception to the burden. coverage under 30-day waiting period the Standard required by 42 U.S.C. Flood Insurance 4013(c). This change does Policy--New not alter the current Business administration of the Applications and program becauseFEMA Endorsements immediately complied with the law FEMA also proposes a clarification by removing the second clause of the first sentence of 61.11(e) and 61.11(f) because thse clauses accommodate a business model that the WYO companies no longer use. This change does not alter the current administration of the program but rather provides greater clarity for the reader 34. SFIP Article FEMA proposes to codify BW- Mandatory Cost savings of III.C 12 section 100214, which$2,048 over 10 prohibits the application years ($1,799 of SFIP Article III.C.3.b.4 at 3 percent (disallowing the payment of and$1,539 at a condominium loss 7 percent assessment on a unit policy discount if the condominium building rates). is underinsured). Prior to BW-12, FEMA issued individual waivers of this provision as the need arose. The proposed changes would delete Article III.C.3.b.4, thus no longer requiring FEMA to issue individual waivers
1. Costs of Rulemaking
While the proposed rulemaking would make material improvements to the language and organization of the NFIP's regulations, such changes would not result in any quantifiable burden or benefit. WYO companies would, however, incur opportunity costs as they spend time becoming familiar with the proposed changes.
FEMA proposes to revise section 61.11 to codify an additional exception to the 30-day waiting period before coverage on a flood insurance policy takes effect. Prior to BW-12, there were only two exceptions to this 30-day waiting period. The first exception was for the initial purchase of flood insurance in connection with the making, increasing, extension, or renewal of a loan. The second exception was for the initial purchase of flood insurance pursuant to a revision or updating of floodplain areas or flood risk zones, if such purchase took place within one year of the notice of such revision.
The proposed rule would codify in regulation Section 100241 of BW-12, which amended Section 1306(c) of the NFIA (42 U.S.C. 4013(c)), by placing a third exception to the 30-day new policy waiting period in regulation. This new exception applies to situations where the flooding to an insured privately owned property is the result of flooding on Federal land that was caused or exacerbated by post-wildfire conditions, also on Federal land.
When looking at the NFIP claim data from
2. Benefits of Rulemaking
The vast majority of provisions represent clarifications to the regulation or program documents, or remove regulations that are no longer applicable. The few non-clarifying provisions reflect in regulations certain provisions that have already been implemented through policy that streamline operations, or meet greater potential needs of policyholders (codifications). It is only with codifications where any quantifiable impacts appear. This analysis considers the following as possible benefits of this rule:
i. Clarification of NFIP Terms and Conditions
This analysis looks at the many efficiencies of the proposed rule, however, the bulk of these benefits are unquantifiable. Although they have not been quantified, they are essential to the justification of the proposed rule and should be considered as they provide significant benefits that will be seen for all stakeholders involved.
Under current conditions, the NFIP-related sections of the CFR contain inconsistencies or vague language that may cause confusion to stakeholders. The following are selected examples of proposed changes presented in Table 1 that would be introduced by the rule:
a. Making Explicit the Implicit
The NFIP deductible charts currently in the regulations at 44 CFR 61.5(d) show several possible deductible options, but not all the deductible options available under the program. A note to these tables indicates that policyholders may submit any other other deductible amounts not currently listed in this chart (including the
FEMA also proposes to change the language in Appendix A(1) of Part 61 to clarify that personal property is also insured under this policy.
b. Modifying, Adding or Removing Definitions
FEMA proposes to revise definitions such as "deductible," "emergency program," "act," or "basement."
FEMA believes that this increased precision and consistent use of terms would increase clarity of
ii. Codification of Dwelling Policy Underinsurance Exception
Presently, Article III.C.3.b.4 of the SFIP, found in Appendix A(1) to Part 61, prevents payment of condominium loss assessments on a unit policy if the condominium building itself is underinsured. The SFIP also requires the coverage limits of the RCBAP policy (the primary policy) to be exhausted before the Dwelling Policy (the secondary policy). This poses a challenge in the event the primary policy was disallowed in the above circumstance. Since 2007, policyholders facing such a predicament were required to obtain a waiver from
As directed by Section 100214 of BW-12, the proposed changes would delete Article III.C.3.b.4 of the SFIP, which would otherwise prohibit such claim payments and necessitate the submission and processing of waivers. As a result, waivers for this prohibition would no longer be required.
To estimate the cost savings that would result from omitting this process,
The reported time required for
FOOTNOTE 7 GS Scale based on 2018 OPM tables, hourly basic wage rates by grade and step for the locality pay area of
FOOTNOTE 8
The per hour benefits multiplier is calculated by dividing total compensation for all workers (
FOOTNOTE 9
FOOTNOTE 10
FOOTNOTE 11
FOOTNOTE 12
We calculated the inflation adjustment by subtracting the
FOOTNOTE 13
FOOTNOTE 14
See Illustration in Original Document.
Applying this cost to the estimated frequency of occurrence of 0.67 waivers per year and extending the avoided costs over a ten-year period would project a total undiscounted cost savings of
3. Alternatives Considered
Given that this rule has no direct compliance costs, no less burdensome alternatives to the proposed rule are available. In the absence of this proposed rule, stakeholders would continue to experience the negative repercussions of inconsistences between the statutes, regulations, and agency policy documents.
FEMA invites all interested parties to submit data and information regarding the potential economic impact that would result from adoption of the proposals in this NPRM.
4. Summary
For the 10-year period analyzed,
B. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (5 U.S.C.
In accordance with the Regulatory Flexibility Act, an IFRA must contain: (1) A description of the reasons why the action by the agency is being considered; (2) A succinct statement of the objectives of, and legal basis for, the proposed rule; (3) A description--and, where feasible, an estimate of the number--of small entities to which the proposed rule will apply; (4) A description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirements and the types of professional skills necessary for preparation of the report or record; (5) An identification, to the extent practicable, of all relevant Federal rules that may duplicate, overlap, or conflict with the proposed rule; and (6) A description of significant alternatives to the rule.
1. A Description of the Reasons Why Action by the Agency Is Being Considered
The proposed rule would revise the NFIP implementing regulations at parts 59, 61, and 62, as well as the Appendices to part 61, to codify in regulation certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014 that
2. A Succinct Statement of the Objectives of, and Legal Basis for, the Proposed Rule
The proposed changes to the regulation would codify
FEMA anticipates that this rulemaking will result in a more streamlined operation of the NFIP and enhance customer service because of greater information and clarity for policyholders and all stakeholders.
The NFIA authorizes
3. A Description of and, Where Feasible, an Estimate of the Number of Small Entities to Which the Proposed Rule Will Apply
"Small entity" is defined in 5 U.S.C. 601. The term "small entity" can have the same meaning as the terms "small business," "small organization" and "small governmental jurisdiction." Section 601(3) defines a "small business" as having the same meaning as "small business concern" under Section 3 of the Small Business Act. This includes any small business concern that is independently owned and operated, and is not dominant in its field of operation. Section 601(4) defines a "small organization" as any not-for-profit enterprises that are independently owned and operated, and are not dominant in their field of operation. Section 601(5) defines "small governmental jurisdictions" as governments of cities, counties, towns, townships, villages, school districts, or special districts with a population of less than 50,000. No small organization or governmental jurisdiction is a party to the WYO program and therefore would be affected.
The SBA stipulates in its size standards the largest business may be and still be classified as a "small entity." /15/ The small business size standard for North American Industry Classification System (NAICS) code 524126 (direct property and casualty insurance carriers) is 1,500 employees. The size standard for 524210 (Insurance Agencies and Brokerages) is
FOOTNOTE 15 U.S. Small Business Administration Table of Small Business Size Standards Matched to North American Industry Classification System Codes effective
There are currently 67 companies /16/ participating in the WYO Program. These 67 companies are subject to the terms of the Arrangement and the standards and requirements in the Financial Control Plan.
FOOTNOTE 16 Number of firms participating in the WYO Program as of
4. A Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Proposed Rule, Including an Estimate of the Classes of Small Entities Which Will Be Subject to the Requirement and the Types of Professional Skills Necessary for Preparation of the Report or Record
FEMA believes that the rule would impose no burdens on any participating company because it does not consist of any substantive policy changes, but instead would make changes for clarity and to accurately reflect current
5. An Identification, to the Extent Practicable, of All Relevant Federal Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule
There are no relevant Federal rules that may duplicate, overlap, or conflict with the proposed rule.
6. A Description of Any Significant Alternatives to the Proposed Rule Which Accomplish the Stated Objectives of Applicable Statutes and Which Minimize Any Significant Economic Impact of the Proposed Rule on Small Entities
Given that this rule has no direct compliance costs, no less burdensome alternatives to the proposed rule are available. In the absence of this proposed rule, small entities would continue to experience the negative repercussions of inconsistences between the statutes, regulations and agency policy documents.
FEMA invites all interested parties to submit data and information regarding the potential economic impact that would result from adoption of the proposals in this NPRM.
C. Unfunded Mandates Reform Act
Pursuant to section 201 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1531), each Federal agency "shall, unless otherwise prohibited by law, assess the effects of Federal regulatory actions on State, local, and Tribal governments, and the private sector (other than to the extent that such regulations incorporate requirements specifically set forth in law)." Section 202 of the Act (2 U.S.C. 1532) further requires that "before promulgating any general notice of proposed rulemaking that is likely to result in the promulgation of any rule that includes any Federal mandate that may result in expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of
D. National Environmental Policy Act of 1969 (NEPA)
Section 102 of the National Environmental Policy Act of 1969 (NEPA), 83 Stat. 852 (
Rulemaking is a major Federal action subject to NEPA. The List of exclusion categories at DHS Instruction Manual 023-01-001-01, Appendix A excludes the promulgation of rules that are of a strictly administrative or procedural nature and rules that implement, without substantive change, statutory or regulatory requirements from the preparation of an EA or EIS. (Catex A3(a) and (b)). The purpose of this rule is to implement some statutory requirements of BW-12 and HFIAA, along with making non-substantive clarifications designed to improve overall clarity and readability. These changes are administrative-related changes that are categorically excluded under Catex A3(a) and (b) of DHS Instruction Manual 023-01-001-01, Appendix A. No extraordinary circumstances exist that will trigger the need to develop an EA or EIS. See DHS Instruction Manual 023-01-001-01 V(B)(2). An EA will not be prepared because a categorical exclusion applies to this rulemaking action and no extraordinary circumstances exist.
E. Privacy Act/E-Government Act
Under the Privacy Act of 1974, 5 U.S.C. 552a, an agency must determine whether implementation of a proposed regulation will result in a system of records. A "record" is any item, collection, or grouping of information about an individual that is maintained by an agency, including, but not limited to, his/her education, financial transactions, medical history, and criminal or employment history and that contains his/her name, or the identifying number, symbol, or other identifying particular assigned to the individual, such as a finger or voice print or a photograph. See 5 U.S.C. 552a(a)(4). A "system of records" is a group of records under the control of an agency from which information is retrieved by the name of the individual or by some identifying number, symbols, or other identifying particular assigned to the individual. An agency cannot disclose any record that is contained in a system of records except by following specific procedures. The E-Government Act of 2002, 44 U.S.C. 3501 note, also requires specific procedures when an agency takes action to develop or procure information technology that collects, maintains, or disseminates information that is in an identifiable form. This Act also applies when an agency initiates a new collection of information that will be collected, maintained, or disseminated using information technology if it includes any information in an identifiable form permitting the physical or online contacting of a specific individual.
In accordance with
F. Paperwork Reduction Act of 1995
Under the Paperwork Reduction Act of 1995 (PRA), as amended, 44 U.S.C. 3501-3520, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the agency obtains approval from the
G. Executive Order 13175 Consultation and Coordination With Indian Tribal Governments
Executive Order 13175, "Consultation and Coordination with Indian Tribal Governments," 65 FR 67249 (
H. Executive Order 13132 Federalism
Executive Order 13132, "Federalism," 64 FR 43255 (
FEMA has reviewed this proposed rule under Executive Order 13132 and has determined that does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, and therefore does not have federalism implications as defined by the Executive Order. This rulemaking makes limited changes to the comprehensive, longstanding National Flood Insurance Program regulations governing the communities' participation in the program. Because these program updates are limited, they will not have substantial direct effects on the States or participating communities, on the relationship between the national government and the States or participating communities, or the distribution of power among the various levels of government.
I. Executive Order 11988 Floodplain Management
Pursuant to Executive Order 11988, "Floodplain Management," 42 FR 26951 (
Before promulgating any regulation, an agency must determine whether the proposed regulations will affect a floodplain(s), and if so, the agency must consider alternatives to avoid adverse effects and incompatible development in the floodplain(s). If the head of the agency finds that the only practicable alternative consistent with the law and with the policy set forth in Executive Order 11988 is to promulgate a regulation that affects a floodplain(s), the agency must, prior to promulgating the regulation, design or modify the regulation in order to minimize potential harm to or within the floodplain, consistent with the agency's floodplain management regulations. It must also prepare and circulate a notice containing an explanation of why the action is proposed to be located in the floodplain.
The purpose of this proposed rule is to implement insurance-related administrative changes to clarify coverage, rates, and terms and conditions. The changes proposed in this rule would not have an effect on land use, floodplain management, or wetlands.
J. Executive Order 11990 Protection of Wetlands
Executive Order 11990, "Protection of Wetlands," 42 FR 26961 (
In carrying out the activities described in Executive Order 11990, each agency must consider factors relevant to a proposal's effect on the survival and quality of the wetlands. These include public health, safety, and welfare, including water supply, quality, recharge and discharge; pollution; flood and storm hazards; sediment and erosion; maintenance of natural systems, including conservation and long term productivity of existing flora and fauna, species and habitat diversity and stability, hydrologic utility, fish, wildlife, timber, and food and fiber resources. They also include other uses of wetlands in the public interest, including recreational, scientific, and cultural uses. The purpose of this proposed rule is to implement insurance-related administrative changes to clarify coverage, rates, and terms and conditions. The changes proposed in this rule would not have an effect on land use, floodplain management, or wetlands.
K. Executive Order 12898 Environmental Justice
Under Executive Order 12898, "Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations," 59 FR 7629 (
This rulemaking will not have a disproportionately high or adverse effect on human health or the environment, nor will it exclude persons from participation in
L. Congressional Review of Agency Rulemaking
Before a rule can take effect, the Congressional Review of Agency Rulemaking Act (CRA), 5 U.S.C. 801-808, requires the Federal agency promulgating the rule to submit to
FEMA will send this rule to the
List of Subjects
44 CFR Parts 59 and 61
Flood insurance, Reporting and recordkeeping requirements.
44 CFR Part 62
Claims, Flood insurance, Reporting and recordkeeping requirements.
For the reasons stated in the preamble,
PART 59--GENERAL PROVISIONS
1. Revise authority citation for part 59 to read as follows:
Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C.
2. In section 59.1, add definitions, in alphabetical order, for "
* * * * *
Act means the statutes authorizing the National Flood Insurance Program that are incorporated in 42 U.S.C. 4001-- et seq.
* * * * *
Condominium Building means a type of building in the form of ownership in which each unit owner has an undivided interest in common elements of the building.
* * * * *
Deductible means the amount of an insured loss that is the responsibility of the insured and that is incurred before any amounts are paid for the insured loss under the insurance policy.
* * * * *
Emergency Program means the initial phase of a community's participation in the National Flood Insurance Program, as prescribed by Section 1306 of the Act.
* * * * *
Mixed Use Building means a building that has both residential and non-residential uses.
* * * * *
Multifamily Building means an other residential building that is not a condominium building.
* * * * *
Non-Residential Building means a commercial or mixed-use building where the primary use is commercial or non-habitational.
Non-Residential Property means either a non-residential building, the contents within a non-residential building, or both.
* * * * *
Other Residential Building means a residential building that is designed for use as a residential space for 5 or more families or a mixed use building in which the total floor area devoted to non-residential uses is less than 25 percent of the total floor area within the building.
Other Residential Property means either an other residential building, the contents within an other residential building, or both.
* * * * *
Residential Building means a non-commercial building designed for habitation by one or more families or a mixed use building that qualifies as a single-family, two to four family, or other residential building.
Residential Property means either a residential building or the contents within a residential building, or both.
* * * * *
Single Family Dwelling means either (a) a residential single-family building in which the total floor area devoted to non-residential uses is less than 50 percent of the building's total floor area, or (b) a single-family residential unit within a two to four family building, other-residential building, business, or non-residential building, in which commercial uses within the unit are limited to less than 50 percent of the unit's total floor area.
* * * * *
Two to
* * * * *
PART 61--INSURANCE COVERAGE AND RATES
3. Revise the authority citation for part 61 to read as follows:
Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C.
4. Revise
This part describes the types of properties eligible for flood insurance coverage under the Program, the limits of such coverage, and the premium rates actually to be paid by insureds.
5. Revise
(a) Insurance coverage under the Program is available for buildings and their contents. Coverage for each may be purchased separately.
(b) In addition to building and contents coverage, the Dwelling Form of the Standard Flood Insurance Policy (SFIP) covers debris removal, loss avoidance measures, and condominium loss assessments. The General Property Form of the SFIP covers debris removal, loss avoidance measures, and pollution damage. The Residential Condominium Policy Form of the SFIP covers debris removal and loss avoidance measures.
(c) With the purchase of building coverage, the Standard Flood Insurance Policy covers the costs associated with bringing the building into compliance with local floodplain ordinances.
6. Revise
(a) No new flood insurance or renewal of flood insurance policies will be written for properties declared by a duly constituted State or local zoning or other authority to be in violation of any flood plain, mudslide (i.e., mudflow), or flood-related erosion area management or control law, regulation, or ordinance.
(b) In order to reduce the administrative costs of the Program, of which the Federal Government pays a major share, applicants must pay the full policy premium at the time of application.
7. Revise
FEMA must provide policyholders with deductible options in various amounts, up to and including
(a) The minimum deductible for policies covering pre-FIRM buildings charged less than full-risk rates with building coverage amounts less than or equal to
(b) The minimum deductible for policies covering pre-FIRM buildings charged less than full-risk rates with building coverage amounts greater than
(c) The minimum deductible for policies covering post-FIRM buildings and pre-FIRM buildings charged full risk rates, with building coverage amounts equal to or less than
(d) The minimum deductible for policies covering post-FIRM buildings and pre-FIRM buildings charged full risk rates, with building coverage amounts greater than
8. Revise
(a) Pursuant to section 1306 of the Act, the following are the limits of coverage available under the emergency program and under the regular program.
Maximum Amounts of Coverage Available 1 Emergency Regular program program Occupancy Amount Amount Building Coverage: Single Family Dwelling *$250,000 . Two to Four Family Building$35,000 $250,000 . * 35,000 Other Residential Building **$500,000 . (including Multifamily Building) 100,000$250,000 times the number Condominium Building N/A of units in the building. Non-Residential Building **$500,000 . 100,000 Contents Coverage: *2 Residential Property *3 10,000 100,000. Non-Residential Property$100,000 $500,000 . *1 This Table provides the maximum coverage amounts available under the Emergency Program and the Regular Program, and the columns cannot be aggregated to exceed the limits in the Regular Program, which are established by statute. The aggregate limits for building coverage are the maximum coverage amounts allowed by statute for each building included in the relevant Occupancy Category. *2 The policy limits for contents coverage are not per building. Although a single insured may not have more than one policy covering contents in a building, several insureds may have separate policies of up to the policy limits. *3 The Residential Property occupancy category includes the Single Family Dwelling, Two toFour Family Building ,Other Residential Building , andCondominium Building occupancies categories. * In Alaska,Guam ,Hawaii , andU.S. Virgin Islands , the amount available is$50,000 . ** In Alaska,Guam ,Hawaii , andU.S. Virgin Islands , the amount available is$150,000 .
(b) Coverage and benefits payable under the SFIP pursuant to
9. Add
FEMA will not issue or renew flood insurance unless
(a) The full amount due (including applicable premiums, surcharges, and fees); and
(b) A complete application, including the information necessary to establish a premium rate for the policy, or submission of corrected or additional information necessary to calculate the premium for the renewal of the policy.
10. Amend
* * * * *
(c) Where the following conditions are met, the effective date and time of any initial purchase of flood insurance coverage for any privately-owned property will be
(1) The Administrator has determined that the property is affected by flooding on Federal land that is a result of, or is exacerbated by, post-wildfire conditions, after consultation with an authorized employee of the Federal agency that has jurisdiction of the land on which the wildfire that caused the post-wildfire conditions occurred; and
(2) The flood insurance coverage was purchased not later than 60 calendar days after the fire containment date, as determined by the appropriate Federal employee, relating to the wildfire that caused the post-wildfire conditions described in clause (1).
(d) Except as provided by paragraphs (a), (b), and (c) of this section, the effective date and time of any new policy or added coverage or increase in the amount of coverage will be
(e) Adding new coverage or increasing the amount of coverage in force is permitted during the term of any policy, subject to any applicable waiting periods. The additional premium for any new coverage or increase in the amount of coverage will be calculated pro rata in accordance with the rates currently in force.
(f) With respect to any submission of an application in connection with new business, the payment by an insured to an agent or the issuance of premium payment by the agent does not constitute payment to the NFIP. Therefore, it is important that an application for flood insurance, as well as the full amount due, be mailed to the NFIP promptly in order to have the effective date of the coverage based on the application date plus the waiting period. If the application and the full amount due are received at the office of the NFIP within ten (10) calendar days from the date of application, the waiting period will be calculated from the date of application. Also, as an alternative, in those cases where the application and premium payment are mailed by certified mail within four (4) calendar days from the date of application, the waiting period will be calculated from the date of application even though the application and full amount due are received at the office of the NFIP after ten (10) calendar days following the date of application. Thus, if the application and premium payment are received after ten (10) calendar days from the date of the application or are not mailed by certified mail within four (4) calendar days from the date of application, the waiting period will be calculated from the date of receipt at the office of the NFIP. To determine the effective date of any coverage added by endorsement to a flood insurance policy already in effect, substitute the term endorsement for the term application in this paragraph (f).
(g) The rules set forth in paragraphs (a) through (f) of this section apply to Write Your Own (WYO) companies, except that agents must mail the premium payments and accompanying applications and endorsements to the WYO company and the WYO company must receive the applications and endorsements, rather than the NFIP.
11. Amend
* * * * *
(e) Authorized only under terms and conditions established by the Act and Regulation. The Standard Flood Insurance Policy is authorized only under terms and conditions established by Federal statute, the program's regulations, the
(f) Agent acts only for policyholder. The duly licensed property or casualty agent acts for the policyholder and does not act as agent for the Federal Government, the
(g) Oral and written binders. No oral binder or contract will be effective. No written binder will be effective unless issued with express authorization of the Federal Insurance Administrator.
(h) The Standard Flood Insurance Policy and endorsements may be issued by private sector Write Your Own (WYO) property insurance companies, based upon flood insurance applications and renewal forms, all of which instruments of flood insurance may bear the name, as Insurer, of the issuing WYO company. In the case of any Standard Flood Insurance Policy, and its related forms, issued by a WYO company, wherever the names "
12. Revise Appendix A(1) to part 61 to read as follows:
Appendix A(1) to Part 61
Standard Flood Insurance Policy
Dwelling Form
Please read the policy carefully. The flood insurance provided is subject to limitations, restrictions, and exclusions.
I. Agreement
A. This policy covers the following types of property only:
1. A one to four family residential building, not under a condominium form of ownership;
2. A single family dwelling unit in a condominium building; and
3. Personal property in a building.
B. The
C. We will pay you for direct physical loss by or from flood to your insured property if you:
1. Have paid the full amount due (including applicable premiums, surcharges, and fees);
2. Comply with all terms and conditions of this policy; and
3. Have furnished accurate information and statements.
D. We have the right to review the information you give us at any time and revise your policy based on our review.
E. This policy insures only one building. If you own more than one building, coverage will apply to the single building specifically described in the Flood Insurance Application.
F. Subject to the exception in I.G below, multiple policies with building coverage cannot be issued to insure a single building to one insured or to different insureds, even if separate policies were issued through different NFIP insurers. Payment for damages may only be made under a single policy for building damages under Coverage A--Building Property.
G. A Dwelling Form policy with building coverage may be issued to a unit owner in a condominium building that is also insured under a Residential Condominium
II. Definitions
A. In this policy, "you" and "your" refer to the named insured(s) shown on the Declarations Page of this policy and the spouse of the named insured, if a resident of the same household. Insured(s) also includes: Any mortgagee and loss payee named in the Application and Declarations Page, as well as any other mortgagee or loss payee determined to exist at the time of loss, in the order of precedence. "We," "us," and "our" refer to the insurer.
Some definitions are complex because they are provided as they appear in the law or regulations, or result from court cases.
B. Flood, as used in this flood insurance policy, means:
1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property) from:
a. Overflow of inland or tidal waters,
b. Unusual and rapid accumulation or runoff of surface waters from any source,
c. Mudflow.
2. Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in B.1.a above.
C. The following are the other key definitions we use in this policy:
1. Act. The National Flood Insurance Act of 1968 and any amendments to it.
2. Actual Cash Value. The cost to replace an insured item of property at the time of loss, less the value of its physical depreciation.
3. Application. The statement made and signed by you or your agent in applying for this policy. The application gives information we use to determine the eligibility of the risk, the kind of policy to be issued, and the correct premium payment. The application is part of this flood insurance policy.
4. Base Flood. A flood having a one percent chance of being equaled or exceeded in any given year.
5. Basement. Any area of a building, including any sunken room or sunken portion of a room, having its floor below ground level on all sides.
6. Building.
a. A structure with two or more outside rigid walls and a fully secured roof that is affixed to a permanent site;
b. A manufactured home, also known as a mobile home, is a structure: built on a permanent chassis, transported to its site in one or more sections, and affixed to a permanent foundation); or
c. A travel trailer without wheels, built on a chassis and affixed to a permanent foundation, that is regulated under the community's floodplain management and building ordinances or laws.
Building does not mean a gas or liquid storage tank, shipping container, or a recreational vehicle, park trailer, or other similar vehicle, except as described in C.6.c above.
7. Cancellation. The ending of the insurance coverage provided by this policy before the expiration date.
8. Condominium. That form of ownership of one or more buildings in which each unit owner has an undivided interest in common elements.
9.
a. Common elements owned in undivided shares by unit owners; and
b. Other buildings in which the unit owners have use rights; where membership in the entity is a required condition of ownership.
10.
11. Declarations Page. A computer-generated summary of information you provided in your application for insurance. The Declarations Page also describes the term of the policy, limits of coverage, and displays the premium and our name. The Declarations Page is a part of this flood insurance policy.
12. Deductible. The amount of an insured loss that is your responsibility and that is incurred by you before any amounts are paid for the insured loss under this policy.
13. Described Location. The location where the insured building(s) or personal property are found. The described location is shown on the Declarations Page.
14. Direct Physical Loss By or From Flood. Loss or damage to insured property, directly caused by a flood. There must be evidence of physical changes to the property.
15. Dwelling. A building designed for use as a residence for no more than four families or a single-family unit in a condominium building.
16.
17. Emergency Program. The initial phase of a community's participation in the National Flood Insurance Program. During this phase, only limited amounts of insurance are available under the Act and the regulations prescribed pursuant to the Act.
18. Federal Policy Fee. A flat rate charge you must pay on each new or renewal policy to defray certain administrative expenses incurred in carrying out the National Flood Insurance Program.
19. Improvements. Fixtures, alterations, installations, or additions comprising a part of the dwelling or apartment in which you reside.
20. Mudflow. A river of liquid and flowing mud on the surface of normally dry land areas, as when earth is carried by a current of water. Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.
21. National Flood Insurance Program (NFIP). The program of flood insurance coverage and floodplain management administered under the Act and applicable Federal regulations in Title 44 of the Code of Federal Regulations, Subchapter B.
22. Policy. The entire written contract between you and us. It includes:
a. This printed form;
b. The application and Declarations Page;
c. Any endorsement(s) that may be issued; and
d. Any renewal certificate indicating that coverage has been instituted for a new policy and new policy term. Only one dwelling, which you specifically described in the application, may be insured under this policy.
23. Pollutants. Substances that include, but are not limited to, any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. "Waste" includes, but is not limited to, materials to be recycled, reconditioned, or reclaimed.
24. Post-FIRM Building. A building for which construction or substantial improvement occurred after December 31, 1974, or on or after the effective date of an initial Flood Insurance Rate Map (FIRM), whichever is later.
25. Principal Residence. The dwelling in which you or your spouse have lived for at least 80 percent of (a) the 365 days immediately preceding the time of loss; or (b) the period of ownership of you or your spouse, if either you or your spouse owned the dwelling for less than 365 days immediately preceding the time of loss.
26. Probation Surcharge. A flat charge you must pay on each new or renewal policy issued covering property in a community the NFIP has placed on probation under the provisions of 44 CFR 59.24.
27. Regular Program. The final phase of a community's participation in the National Flood Insurance Program. In this phase, a Flood Insurance Rate Map is in effect and full limits of coverage are available under the Act and the regulations prescribed pursuant to the Act.
28. Special
29. Unit. A single-family residential space you own in a condominium building.
30. Valued Policy. A policy in which the insured and the insurer agree on the value of the property insured, that value being payable in the event of a total loss. The Standard Flood Insurance Policy is not a valued policy.
III. Property Covered
A. Coverage A--Building Property
We insure against direct physical loss by or from flood to:
1. The dwelling at the described location, or for a period of 45 days at another location as set forth in III.C.2.b, Property Removed to Safety.
2. Additions and extensions attached to and in contact with the dwelling by means of a rigid exterior wall, a solid load-bearing interior wall, a stairway, an elevated walkway, or a roof. At your option, additions and extensions connected by any of these methods may be separately insured. Additions and extensions attached to and in contact with the building by means of a common interior wall that is not a solid load-bearing wall are always considered part of the dwelling and cannot be separately insured.
3. A detached garage at the described location. Coverage is limited to no more than 10 percent of the limit of liability on the dwelling. Use of this insurance is at your option but reduces the building limit of liability. We do not cover any detached garage used or held for use for residential (i.e., dwelling), business, or farming purposes.
4. Materials and supplies to be used for construction, alteration, or repair of the dwelling or a detached garage while the materials and supplies are stored in a fully enclosed building at the described location or on an adjacent property.
5. A building under construction, alteration, or repair at the described location.
a. If the structure is not yet walled or roofed as described in the definition for building (See II.B.6.a) then coverage applies:
(1) Only while such work is in progress; or
(2) If such work is halted, only for a period of up to 90 continuous days thereafter.
b. However, coverage does not apply until the building is walled and roofed if the lowest floor, including the basement floor, of a non-elevated building or the lowest elevated floor of an elevated building is:
(1) Below the base flood elevation in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A, AR/AO; or
(2) Below the base flood elevation adjusted to include the effect of wave action in Zones VE or V1-V30.
The lowest floor level is based on the bottom of the lowest horizontal structural member of the floor in Zones VE or V1-V30 or the top of the floor in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A, and AR/AO.
6. A manufactured home or a travel trailer, as described in the II.C.6. If the manufactured home or travel trailer is in a special flood hazard area, it must be anchored in the following manner at the time of the loss:
a. By over-the-top or frame ties to ground anchors; or
b. In accordance with the manufacturer's specifications; or
c. In compliance with the community's floodplain management requirements unless it has been continuously insured by the NFIP at the same described location since September 30, 1982.
7. The following items of property which are insured under Coverage A only:
a. Awnings and canopies;
b. Blinds;
c. Built-in dishwashers;
d. Built-in microwave ovens;
e. Carpet permanently installed over unfinished flooring;
f. Central air conditioners;
g. Elevator equipment;
h. Fire sprinkler systems;
i. Walk-in freezers;
j. Furnaces and radiators;
k. Garbage disposal units;
l. Hot water heaters, including solar water heaters;
m. Light fixtures;
n. Outdoor antennas and aerials fastened to buildings;
o. Permanently installed cupboards, bookcases, cabinets, paneling, and wallpaper;
p. Plumbing fixtures;
q. Pumps and machinery for operating pumps;
r. Ranges, cooking stoves, and ovens;
s. Refrigerators; and
t. Wall mirrors, permanently installed.
8. Items of property below the lowest elevated floor of an elevated post-FIRM building located in Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement, regardless of the zone. Coverage is limited to the following:
a. Any of the following items, if installed in their functioning locations and, if necessary for operation, connected to a power source:
(1) Central air conditioners;
(2) Cisterns and the water in them;
(3) Drywall for walls and ceilings in a basement and the cost of labor to nail it, unfinished and unfloated and not taped, to the framing;
(4) Electrical junction and circuit breaker boxes;
(5) Electrical outlets and switches;
(6) Elevators, dumbwaiters and related equipment, except for related equipment installed below the base flood elevation after September 30, 1987;
(7) Fuel tanks and the fuel in them;
(8) Furnaces and hot water heaters;
(9) Heat pumps;
(10) Nonflammable insulation in a basement;
(11) Pumps and tanks used in solar energy systems;
(12) Stairways and staircases attached to the building, not separated from it by elevated walkways;
(13) Sump pumps;
(14) Water softeners and the chemicals in them, water filters, and faucets installed as an integral part of the plumbing system;
(15) Well water tanks and pumps;
(16) Required utility connections for any item in this list; and
(17) Footings, foundations, posts, pilings, piers, or other foundation walls and anchorage systems required to support a building.
b. Clean-up.
B. Coverage B--Personal Property
1. If you have purchased personal property coverage, we insure against direct physical loss by or from flood to personal property inside a building at the described location, if:
a. The property is owned by you or your household family members; and
b. At your option, the property is owned by guests or servants.
2. Personal property is also insured for a period of 45 days at another location as set forth in III.C.2.b, Property Removed to Safety.
3. Personal property in a building that is not fully enclosed must be secured to prevent flotation out of the building. If the personal property does float out during a flood, it will be conclusively presumed that it was not reasonably secured. In that case, there is no coverage for such property.
4. Coverage for personal property includes the following property, subject to B.1 above, which is insured under Coverage B only:
a. Air conditioning units, portable or window type;
b. Carpets, not permanently installed, over unfinished flooring;
c. Carpets over finished flooring;
d. Clothes washers and dryers;
e. "Cook-out" grills;
f. Food freezers, other than walk-in, and food in any freezer; and
g. Portable microwave ovens and portable dishwashers.
5. Coverage for items of property below the lowest elevated floor of an elevated post-FIRM building located in Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement, regardless of the zone, is limited to the following items, if installed in their functioning locations and, if necessary for operation, connected to a power source:
a. Air conditioning units, portable or window type;
b. Clothes washers and dryers; and
c. Food freezers, other than walk-in, and food in any freezer.
6. If you are a tenant and have insured personal property under Coverage B in this policy, we will cover such property, including your cooking stove or range and refrigerator. The policy will also cover improvements made or acquired solely at your expense in the dwelling or apartment in which you reside, but for not more than 10 percent of the limit of liability shown for personal property on the Declarations Page. Use of this insurance is at your option but reduces the personal property limit of liability.
7. If you are the owner of a unit and have insured personal property under Coverage B in this policy, we will also cover your interior walls, floor, and ceiling (not otherwise insured under a flood insurance policy purchased by your condominium association) for not more than 10 percent of the limit of liability shown for personal property on the Declarations Page. Use of this insurance is at your option but reduces the personal property limit of liability.
8. Special Limits. We will pay no more than $2,500 for any one loss to one or more of the following kinds of personal property:
a. Artwork, photographs, collectibles, or memorabilia, including but not limited to, porcelain or other figures, and sports cards;
b. Rare books or autographed items;
c. Jewelry, watches, precious and semi-precious stones, or articles of gold, silver, or platinum;
d. Furs or any article containing fur that represents its principal value; or
e. Personal property used in any business.
9. We will pay only for the functional value of antiques.
C. Coverage C--Other Coverages
1. Debris Removal.
a. We will pay the expense to remove non-owned debris that is on or in insured property and debris of insured property anywhere.
b. If you or a member of your household perform the removal work, the value of your work will be based on the Federal minimum wage.
c. This coverage does not increase the Coverage A or Coverage B limit of liability.
2. Loss Avoidance Measures.
a. Sandbags, Supplies, and Labor.
(1) We will pay up to $1,000 for costs you incur to protect the insured building from a flood or imminent danger of flood, for the following:
(a) Your reasonable expenses to buy:
(i) Sandbags, including sand to fill them;
(ii) Fill for temporary levees;
(iii) Pumps; and
(iv) Plastic sheeting and lumber used in connection with these items.
(b) The value of work, at the Federal minimum wage, that you or a member of your household perform.
(2) This coverage for Sandbags, Supplies and Labor only applies if damage to insured property by or from flood is imminent and the threat of flood damage is apparent enough to lead a person of common prudence to anticipate flood damage. One of the following must also occur:
(a) A general and temporary condition of flooding in the area near the described location must occur, even if the flood does not reach the building; or
(b) A legally authorized official must issue an evacuation order or other civil order for the community in which the building is located calling for measures to preserve life and property from the peril of flood.
This coverage does not increase the Coverage A or Coverage B limit of liability.
b. Property Removed to Safety.
(1) We will pay up to $1,000 for the reasonable expenses you incur to move insured property to a place other than the described location that contains the property in order to protect it from flood or the imminent danger of flood. Reasonable expenses include the value of work, at the Federal minimum wage, you or a member of your household perform.
(2) If you move insured property to a location other than the described location that contains the property, in order to protect it from flood or the imminent danger of flood, we will cover such property while at that location for a period of 45 consecutive days from the date you begin to move it there. The personal property that is moved must be placed in a fully enclosed building or otherwise reasonably protected from the elements.
(3) Any property removed, including a moveable home described in II.6.b and c, must be placed above ground level or outside of the special flood hazard area.
(4) This coverage does not increase the Coverage A or Coverage B limit of liability.
3. Condominium Loss Assessments.
a. Subject to III.C.3.b below, if this policy insures a condominium unit, we will pay, up to the Coverage A limit of liability, your share of loss assessments charged against you by the condominium association in accordance with the condominium association's articles of association, declarations and your deed.
The assessment must be made because of direct physical loss by or from flood during the policy term, to the unit or to the common elements of the NFIP insured condominium building in which this unit is located.
b. We will not pay any loss assessment:
(1) Charged against you and the condominium association by any governmental body;
(2) That results from a deductible under the insurance purchased by the condominium association insuring common elements;
(3) That results from a loss to personal property, including contents of a condominium building,
(4) In which the total payment combined under all policies exceeds the maximum amount of coverage available under the Act for a single unit in a condominium building where the unit is insured under both a Dwelling Policy and a RCBAP.
(5) On any item of damage that has already been paid under a RCBAP where a single unit in a condominium building is insured by both a Dwelling Policy and a RCBAP.
c. Condominium Loss Assessment coverage does not increase the Coverage A Limit of Liability and is subject to the maximum coverage limits available for a single family dwelling under the Act, payable between all policies issued and covering the unit, under the Act.
D. Coverage D--Increased Cost of Compliance
1. General.
This policy pays you to comply with a State or local floodplain management law or ordinance affecting repair or reconstruction of a building suffering flood damage. Compliance activities eligible for payment are: Elevation, floodproofing, relocation, or demolition (or any combination of these activities) of your building. Eligible floodproofing activities are limited to:
a. Non-residential buildings.
b. Residential buildings with basements that satisfy
2. Limit of Liability.
We will pay you up to $30,000 under this Coverage D--Increased Cost of Compliance, which only applies to policies with building coverage (Coverage A). Our payment of claims under Coverage D is in addition to the amount of coverage which you selected on the application and which appears on the Declarations Page. But the maximum you can collect under this policy for both Coverage A--Building Property and Coverage D--Increased Cost of Compliance cannot exceed the maximum permitted under the Act. We do not charge a separate deductible for a claim under Coverage D.
3. Eligibility.
a. A building covered under Coverage A--Building Property sustaining a loss caused by a flood as defined by this policy must:
(1) Be a "repetitive loss building." A repetitive loss building is one that meets the following conditions:
(a) The building is insured by a contract of flood insurance issued under the NFIP.
(b) The building has suffered flood damage on two occasions during a 10-year period which ends on the date of the second loss.
(c) The cost to repair the flood damage, on average, equaled or exceeded 25 percent of the market value of the building at the time of each flood loss.
(d) In addition to the current claim, the NFIP must have paid the previous qualifying claim, and the State or community must have a cumulative, substantial damage provision or repetitive loss provision in its floodplain management law or ordinance being enforced against the building; or
(2) Be a building that has had flood damage in which the cost to repair equals or exceeds 50 percent of the market value of the building at the time of the flood. The State or community must have a substantial damage provision in its floodplain management law or ordinance being enforced against the building.
b. This Coverage D pays you to comply with State or local floodplain management laws or ordinances that meet the minimum standards of the National Flood Insurance Program found in the Code of Federal Regulations at 44 CFR 60.3. We pay for compliance activities that exceed those standards under these conditions:
(1) 3.a.1 above.
(2) Elevation or floodproofing in any risk zone to preliminary or advisory base flood elevations provided by
(3) Elevation or floodproofing above the base flood elevation to meet State or local "free-board" requirements, i.e., that a building must be elevated above the base flood elevation.
c. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States and communities must require the elevation or floodproofing of buildings in unnumbered A zones to the base flood elevation where elevation data is obtained from a Federal, State, or other source. Such compliance activities are eligible for Coverage D.
d. Coverage D will pay for the incremental cost, after demolition or relocation, of elevating or floodproofing a building during its rebuilding at the same or another site to meet State or local floodplain management laws or ordinances, subject to Coverage D Exclusion 5.g below.
e. Coverage D will pay to bring a flood-damaged building into compliance with State or local floodplain management laws or ordinances even if the building had received a variance before the present loss from the applicable floodplain management requirements.
4. Conditions.
a. When a building insured under Coverage A--Building Property sustains a loss caused by a flood, our payment for the loss under this Coverage D will be for the increased cost to elevate, floodproof, relocate, or demolish (or any combination of these activities) caused by the enforcement of current State or local floodplain management ordinances or laws. Our payment for eligible demolition activities will be for the cost to demolish and clear the site of the building debris or a portion thereof caused by the enforcement of current State or local floodplain management ordinances or laws. Eligible activities for the cost of clearing the site will include those necessary to discontinue utility service to the site and ensure proper abandonment of on-site utilities.
b. When the building is repaired or rebuilt, it must be intended for the same occupancy as the present building unless otherwise required by current floodplain management ordinances or laws.
5. Exclusions.
Under this Coverage D (Increased Cost of Compliance), we will not pay for:
a. The cost to comply with any floodplain management law or ordinance in communities participating in the Emergency Program.
b. The cost associated with enforcement of any ordinance or law that requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.
c. The loss in value to any insured building due to the requirements of any ordinance or law.
d. The loss in residual value of the undamaged portion of a building demolished as a consequence of enforcement of any State or local floodplain management law or ordinance.
e. Any Increased Cost of Compliance under this Coverage D:
(1) Until the building is elevated, floodproofed, demolished, or relocated on the same or to another premises; and
(2) Unless the building is elevated, floodproofed, demolished, or relocated as soon as reasonably possible after the loss, not to exceed two years.
f. Any code upgrade requirements, e.g., plumbing or electrical wiring, not specifically related to the State or local floodplain management law or ordinance.
g. Any compliance activities needed to bring additions or improvements made after the loss occurred into compliance with State or local floodplain management laws or ordinances.
h. Loss due to any ordinance or law that you were required to comply with before the current loss.
i. Any rebuilding activity to standards that do not meet the NFIP's minimum requirements. This includes any situation where the insured has received from the State or community a variance in connection with the current flood loss to rebuild the property to an elevation below the base flood elevation.
j. Increased Cost of Compliance for a garage or carport.
k. Any building insured under an NFIP Group Flood Insurance Policy.
l. Assessments made by a condominium association on individual condominium unit owners to pay increased costs of repairing commonly owned buildings after a flood in compliance with State or local floodplain management ordinances or laws.
6. Other Provisions.
a. Increased Cost of Compliance coverage will not be included in the calculation to determine whether coverage meets the 80 percent insurance-to-value requirement for replacement cost coverage as set forth in Art. VII.R ("Loss Settlement") of this policy.
b. All other conditions and provisions of this policy apply.
IV. Property Not Covered
We do not insure any of the following:
1. Personal property not inside a building;
2. A building, and personal property in it, located entirely in, on, or over water or seaward of mean high tide if it was constructed or substantially improved after September 30, 1982;
3. Open structures, including a building used as a boathouse or any structure or building into which boats are floated, and personal property located in, on, or over water;
4. Recreational vehicles other than travel trailers described in the Definitions section (see II.B.6.c) whether affixed to a permanent foundation or on wheels;
5. Self-propelled vehicles or machines, including their parts and equipment. However, we do cover self-propelled vehicles or machines not licensed for use on public roads that are:
a. Used mainly to service the described location or
b. Designed and used to assist handicapped persons, while the vehicles or machines are inside a building at the described location;
6. Land, land values, lawns, trees, shrubs, plants, growing crops, or animals;
7. Accounts, bills, coins, currency, deeds, evidences of debt, medals, money, scrip, stored value cards, postage stamps, securities, bullion, manuscripts, or other valuable papers;
8. Underground structures and equipment, including wells, septic tanks, and septic systems;
9. Those portions of walks, walkways, decks, driveways, patios and other surfaces, all whether protected by a roof or not, located outside the perimeter, exterior walls of the insured building or the building in which the insured unit is located;
10. Containers, including related equipment, such as, but not limited to, tanks containing gases or liquids;
11. Buildings or units and all their contents if more than 49 percent of the actual cash value of the building is below ground, unless the lowest level is at or above the base flood elevation and is below ground by reason of earth having been used as insulation material in conjunction with energy efficient building techniques;
12. Fences, retaining walls, seawalls, bulkheads, wharves, piers, bridges, and docks;
13. Aircraft or watercraft, or their furnishings and equipment;
14. Hot tubs and spas that are not bathroom fixtures, and swimming pools, and their equipment, such as, but not limited to, heaters, filters, pumps, and pipes, wherever located;
15. Property not eligible for flood insurance pursuant to the provisions of the Coastal Barrier Resources Act and the Coastal Barrier Improvement Act and amendments to these Acts;
16. Personal property you own in common with other unit owners comprising the membership of a condominium association.
V. Exclusions
A. We only pay for direct physical loss by or from flood, which means that we do not pay you for:
1. Loss of revenue or profits;
2. Loss of access to the insured property or described location;
3. Loss of use of the insured property or described location;
4. Loss from interruption of business or production;
5. Any additional living expenses incurred while the insured building is being repaired or is unable to be occupied for any reason;
6. The cost of complying with any ordinance or law requiring or regulating the construction, demolition, remodeling, renovation, or repair of property, including removal of any resulting debris. This exclusion does not apply to any eligible activities we describe in Coverage D--Increased Cost of Compliance; or
7. Any other economic loss you suffer.
B. Flood in Progress. If this policy became effective as of the time of a loan closing, as provided by 44 CFR 61.11(b), we will not pay for a loss caused by a flood that is a continuation of a flood that existed prior to coverage becoming effective. In all other circumstances, we will not pay for a loss caused by a flood that is a continuation of a flood that existed on or before the day you submitted the application for coverage under this policy and the full amount due. We will determine the date of application using 44 CFR 61.11(f).
C. We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that we do not cover are:
1. Earthquake;
2. Landslide;
3. Land subsidence;
4. Sinkholes;
5. Destabilization or movement of land that results from accumulation of water in subsurface land area; or
6. Gradual erosion.
We do, however, pay for losses from mudflow and land subsidence as a result of erosion that are specifically insured under our definition of flood (See II.B.1.c and II.B.2).
D. We do not insure for direct physical loss caused directly or indirectly by any of the following:
1. The pressure or weight of ice;
2. Freezing or thawing;
3. Rain, snow, sleet, hail, or water spray;
4. Water, moisture, mildew, or mold damage that results primarily from any condition:
a. Substantially confined to the dwelling; or
b. That is within your control, including but not limited to:
(1) Design, structural, or mechanical defects;
(2) Failure, stoppage, or breakage of water or sewer lines, drains, pumps, fixtures, or equipment; or
(3) Failure to inspect and maintain the property after a flood recedes;
5. Water or water-borne material that:
a. Backs up through sewers or drains;
b. Discharges or overflows from a sump, sump pump or related equipment; or
c. Seeps or leaks on or through the insured property; unless there is a flood in the area and the flood is the proximate cause of the sewer or drain backup, sump pump discharge or overflow, or the seepage of water;
6. The pressure or weight of water unless there is a flood in the area and the flood is the proximate cause of the damage from the pressure or weight of water;
7. Power, heating, or cooling failure unless the failure results from direct physical loss by or from flood to power, heating, or cooling equipment on the described location;
8. Theft, fire, explosion, wind, or windstorm;
9. Anything you or any member of your household do or conspire to do to deliberately cause loss by flood; or
10. Alteration of the insured property that significantly increases the risk of flooding.
E. We do not insure for loss to any building or personal property located on land leased from the Federal Government, arising from or incident to the flooding of the land by the Federal Government, where the lease expressly holds the Federal Government harmless under flood insurance issued under any Federal Government program.
F. We do not pay for the testing for or monitoring of pollutants unless required by law or ordinance.
VI. Deductibles
A. When a loss is insured under this policy, we will pay only that part of the loss that exceeds your deductible amount, subject to the limit of liability that applies. The deductible amount is shown on the Declarations Page.
However, when a building under construction, alteration, or repair does not have at least two rigid exterior walls and a fully secured roof at the time of loss, your deductible amount will be two times the deductible that would otherwise apply to a completed building.
B. In each loss from flood, separate deductibles apply to the building and personal property insured by this policy.
C. The deductible does NOT apply to:
1. III.C.2. Loss Avoidance Measures;
2. III.C.3. Condominium Loss Assessments; or
3. III.D. Increased Cost of Compliance.
VII. General Conditions
A. Pair and Set Clause
In case of loss to an article that is part of a pair or set, we will have the option of paying you:
1. An amount equal to the cost of replacing the lost, damaged, or destroyed article, minus its depreciation, or
2. The amount that represents the fair proportion of the total value of the pair or set that the lost, damaged, or destroyed article bears to the pair or set.
B. Other Insurance
1. If a loss insured by this policy is also insured by other insurance that includes flood coverage not issued under the Act, we will not pay more than the amount of insurance you are entitled to for lost, damaged, or destroyed property insured under this policy subject to the following:
a. We will pay only the proportion of the loss that the amount of insurance that applies under this policy bears to the total amount of insurance covering the loss, unless VII.B.1.b or c immediately below applies.
b. If the other policy has a provision stating that it is excess insurance, this policy will be primary.
c. This policy will be primary (but subject to its own deductible) up to the deductible in the other flood policy (except another policy as described in VII.B.1.b above). When the other deductible amount is reached, this policy will participate in the same proportion that the amount of insurance under this policy bears to the total amount of both policies, for the remainder of the loss.
2. If there is other insurance issued under the Act in the name of your condominium association covering the same property insured by this policy, then this policy will be in excess over the other insurance, except where a condominium loss assessment to the unit owner results from a loss sustained by the condominium association that was not reimbursed under a flood insurance policy written in the name of the association under the Act because the building was not, at the time of loss, insured for an amount equal to the lesser of:
a. 80 percent or more of its full replacement cost; or
b. The maximum amount of insurance permitted under the Act;
The combined coverage payment under the other NFIP insurance and this policy cannot exceed the maximum coverage available under the Act, of $250,000 per single unit.
C. Amendments, Waivers, Assignment
This policy cannot be changed, nor can any of its provisions be waived, without the express written consent of the Federal Insurance Administrator. No action we take under the terms of this policy constitutes a waiver of any of our rights. You may assign this policy in writing when you transfer title of your property to someone else except under these conditions:
a. When this policy insures only personal property; or
b. When this policy insures a building under construction.
D. Insufficient Premium or Rating Information
1. Applicability. The following provisions apply to all instances where the premium paid on this policy is insufficient or where the rating information is insufficient, such as where an Elevation Certificate is not provided.
2. Reforming the Policy with Reduced Coverage. Except as otherwise provided in VII.D.1, if the premium we received from you was not sufficient to buy the kinds and amounts of coverage you requested, we will provide only the kinds and amounts of coverage that can be purchased for the premium payment we received.
a. For the purpose of determining whether your premium payment is sufficient to buy the kinds and amounts of coverage you requested, we will first deduct the costs of all applicable fees and surcharges.
b. If the amount paid, after deducting the costs of all applicable fees and surcharges, is not sufficient to buy any amount of coverage, your payment will be refunded. Unless the policy is reformed to increase the coverage amount to the amount originally requested pursuant to VII.D.3, this policy will be cancelled, and no claims will be paid under this policy.
c. Coverage limits on the reformed policy will be based upon the amount of premium submitted per type of coverage, but will not exceed the amount originally requested.
3. Discovery of Insufficient Premium or Rating Information. If we discover that your premium payment was not sufficient to buy the requested amount of coverage, the policy will be reformed as described in VII.D.2. You have the option of increasing the amount of coverage resulting from this reformation to the amount you requested as follows:
a. Insufficient Premium. If we discover that your premium payment was not sufficient to buy the requested amount of coverage, we will send you, and any mortgagee or trustee known to us, a bill for the required additional premium for the current policy term (or that portion of the current policy term following any endorsement changing the amount of coverage). If it is discovered that the initial amount charged to you for any fees or surcharges is incorrect, the difference will be added or deducted, as applicable, to the total amount in this bill.
(1) If you or the mortgagee or trustee pays the additional premium amount due within 30 days from the date of our bill, we will reform the policy to increase the amount of coverage to the originally requested amount, effective to the beginning of the current policy term (or subsequent date of any endorsement changing the amount of coverage).
(2) If you or the mortgagee or trustee do not pay the additional amount due within 30 days of the date of our bill, any flood insurance claim will be settled based on the reduced amount of coverage.
(3) As applicable, you have the option of paying all or part of the amount due out of a claim payment based on the originally requested amount of coverage.
b. Insufficient Rating Information. If we determine that the rating information we have is insufficient and prevents us from calculating the additional premium, we will ask you to send the required information. You must submit the information within 60 days of our request.
(1) If we receive the information within 60 days of our request, we will determine the amount of additional premium for the current policy term, and follow the procedure in VII.D.3.a above.
(2) If we do not receive the information within 60 days of our request, no claims will be paid until the requested information is provided. Coverage will be limited to the amount of coverage that can be purchased for the payments we received, as determined when the requested information is provided.
4. Coverage Increases. If we do not receive the amounts requested in VII.D.3.a or the additional information requested in VII.D.3.b by the date it is due, the amount of coverage under this policy can only be increased by endorsement subject to the appropriate waiting period. However, no coverage increases will be allowed until you have provided the information requested in VII.D.3.b.
5. Falsifying Information. However, if we find that you or your agent intentionally did not tell us, or falsified any important fact or circumstance or did anything fraudulent relating to this insurance, the provisions of VIII.A apply.
1. This policy will expire at 12:01 a.m. on the last day of the policy term.
2. We must receive the payment of the appropriate renewal premium within 30 days of the expiration date.
3. If we find, however, that we did not place your renewal notice into the
a. If you or your agent notified us, not later than one year after the date on which the payment of the renewal premium was due, of non-receipt of a renewal notice before the due date for the renewal premium, and we determine that the circumstances in the preceding paragraph apply, we will mail a second bill providing a revised due date, which will be 30 days after the date on which the bill is mailed.
b. If we do not receive the premium requested in the second bill by the revised due date, then we will not renew the policy. In that case, the policy will remain an expired policy as of the expiration date shown on the Declarations Page.
4. In connection with the renewal of this policy, we may ask you during the policy term to recertify, on a Recertification Questionnaire we will provide to you, the rating information used to rate your most recent application for or renewal of insurance.
F. Conditions Suspending or Restricting Insurance
We are not liable for loss that occurs while there is a hazard that is increased by any means within your control or knowledge.
G. Requirements in Case of Loss
In case of a flood loss to insured property, you must:
1. Give prompt written notice to us;
2. As soon as reasonably possible, separate the damaged and undamaged property, putting it in the best possible order so that we may examine it;
3. Prepare an inventory of damaged property showing the quantity, description, actual cash value, and amount of loss. Attach all bills, receipts, and related documents;
4. Within 60 days after the loss, send us a proof of loss, which is your statement of the amount you are claiming under the policy signed and sworn to by you, and which furnishes us with the following information:
a. The date and time of loss;
b. A brief explanation of how the loss happened;
c. Your interest (for example, "owner") and the interest, if any, of others in the damaged property;
d. Details of any other insurance that may cover the loss;
e. Changes in title or occupancy of the insured property during the term of the policy;
f. Specifications of damaged buildings and detailed repair estimates;
g. Names of mortgagees or anyone else having a lien, charge, or claim against the insured property;
h. Details about who occupied any insured building at the time of loss and for what purpose; and
i. The inventory of damaged personal property described in G.3 above.
5. In completing the proof of loss, you must use your own judgment concerning the amount of loss and justify that amount.
6. You must cooperate with the adjuster or representative in the investigation of the claim.
7. The insurance adjuster whom we hire to investigate your claim may furnish you with a proof of loss form, and she or he may help you complete it. However, this is a matter of courtesy only, and you must still send us a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it.
8. We have not authorized the adjuster to approve or disapprove claims or to tell you whether we will approve your claim.
9. At our option, we may accept the adjuster's report of the loss instead of your proof of loss. The adjuster's report will include information about your loss and the damages you sustained. You must sign the adjuster's report. At our option, we may require you to swear to the report.
H. Our Options After a Loss
Options we may, in our sole discretion, exercise after loss include the following:
1. At such reasonable times and places that we may designate, you must:
a. Show us or our representative the damaged property;
b. Submit to examination under oath, while not in the presence of another insured, and sign the same; and
c. Permit us to examine and make extracts and copies of:
(1) Any policies of property insurance insuring you against loss and the deed establishing your ownership of the insured real property;
(2) Condominium association documents including the Declarations of the condominium, its Articles of Association or Incorporation, Bylaws, rules and regulations, and other relevant documents if you are a unit owner in a condominium building; and
(3) All books of accounts, bills, invoices and other vouchers, or certified copies pertaining to the damaged property if the originals are lost.
2. We may request, in writing, that you furnish us with a complete inventory of the lost, damaged or destroyed property, including:
a. Quantities and costs;
b. Actual cash values or replacement cost (whichever is appropriate);
c. Amounts of loss claimed;
d. Any written plans and specifications for repair of the damaged property that you can reasonably make available to us; and
e. Evidence that prior flood damage has been repaired.
3. If we give you written notice within 30 days after we receive your signed, sworn proof of loss, we may:
a. Repair, rebuild, or replace any part of the lost, damaged, or destroyed property with material or property of like kind and quality or its functional equivalent; and
b. Take all or any part of the damaged property at the value that we agree upon or its appraised value.
I. No Benefit to Bailee
No person or organization, other than you, having custody of insured property will benefit from this insurance.
J. Loss Payment
1. We will adjust all losses with you. We will pay you unless some other person or entity is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss (or within 90 days after the insurance adjuster files the adjuster's report signed and sworn to by you in lieu of a proof of loss) and:
a. We reach an agreement with you;
b. There is an entry of a final judgment; or
c. There is a filing of an appraisal award with us, as provided in VII.M.
2. If we reject your proof of loss in whole or in part you may:
a. Accept our denial of your claim;
b. Exercise your rights under this policy; or
c. File an amended proof of loss as long as it is filed within 60 days of the date of the loss.
K. Abandonment
You may not abandon to us damaged or undamaged property insured under this policy.
We may permit you to keep damaged property insured under this policy after a loss, and we will reduce the amount of the loss proceeds payable to you under the policy by the value of the salvage.
M. Appraisal
If you and we fail to agree on the actual cash value or, if applicable, replacement cost of your damaged property to settle upon the amount of loss, then either may demand an appraisal of the loss. In this event, you and we will each choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the insured property is located. The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of actual cash value and loss, or if it applies, the replacement cost and loss.
Each party will:
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.
N. Mortgage Clause
1. The word "mortgagee" includes trustee.
2. Any loss payable under Coverage A--Building Property will be paid to any mortgagee of whom we have actual notice, as well as any other mortgagee or loss payee determined to exist at the time of loss, and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.
3. If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:
a. Notifies us of any change in the ownership or occupancy, or substantial change in risk of which the mortgagee is aware;
b. Pays any premium due under this policy on demand if you have neglected to pay the premium; and
c. Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so.
4. All of the terms of this policy apply to the mortgagee.
5. The mortgagee has the right to receive loss payment even if the mortgagee has started foreclosure or similar action on the building.
6. If we decide to cancel or not renew this policy, it will continue in effect for the benefit of the mortgagee only for 30 days after we notify the mortgagee of the cancellation or non-renewal.
7. If we pay the mortgagee for any loss and deny payment to you, we are subrogated to all the rights of the mortgagee granted under the mortgage on the property. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.
O. Suit Against Us
You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim, and you must file the suit in the United States District Court of the district in which the insured property was located at the time of loss. This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.
P. Subrogation
Whenever we make a payment for a loss under this policy, we are subrogated to your right to recover for that loss from any other person. That means that your right to recover for a loss that was partly or totally caused by someone else is automatically transferred to us, to the extent that we have paid you for the loss. We may require you to acknowledge this transfer in writing. After the loss, you may not give up our right to recover this money or do anything that would prevent us from recovering it. If you make any claim against any person who caused your loss and recover any money, you must pay us back first before you may keep any of that money.
Q. Continuous Lake Flooding
1. If an insured building has been flooded by rising lake waters continuously for 90 days or more and it appears reasonably certain that a continuation of this flooding will result in an insured loss to the insured building equal to or greater than the building policy limits plus the deductible or the maximum payable under the policy for any one building loss, we will pay you the lesser of these two amounts without waiting for the further damage to occur if you sign a release agreeing:
a. To make no further claim under this policy;
b. Not to seek renewal of this policy;
c. Not to apply for any flood insurance under the Act for property at the described location;
d. Not to seek a premium refund for current or prior terms.
If the policy term ends before the insured building has been flooded continuously for 90 days, the provisions of this paragraph Q.1 will apply when the insured building suffers a covered loss before the policy term ends.
2. If your insured building is subject to continuous lake flooding from a closed basin lake, you may elect to file a claim under either paragraph Q.1 above or Q.2 (A "closed basin lake" is a natural lake from which water leaves primarily through evaporation and whose surface area now exceeds or has exceeded one square mile at any time in the recorded past. Most of the nation's closed basin lakes are in the western half of
a. Lake floodwaters must damage or imminently threaten to damage your building.
b. Before approval of your claim, you must:
(1) Agree to a claim payment that reflects your buying back the salvage on a negotiated basis; and
(2) Grant the conservation easement described in
(3) Comply with paragraphs Q.1.a through Q.1.d above.
c. Within 90 days of approval of your claim, you must move your building to a new location outside the ASC.
d. Before the final payment of your claim, you must acquire an elevation certificate and a floodplain development permit from the local floodplain administrator for the new location of your building.
e. Before the approval of your claim, the community having jurisdiction over your building must:
(1) Adopt a permanent land use ordinance, or a temporary moratorium for a period not to exceed 6 months to be followed immediately by a permanent land use ordinance that is consistent with the provisions specified in the easement required in paragraph Q.2.b above.
(2) Agree to declare and report any violations of this ordinance to
(3) Agree to maintain as deed-restricted, for purposes compatible with open space or agricultural or recreational use only, any affected property the community acquires an interest in. These deed restrictions must be consistent with the provisions of paragraph Q.2.b above, except that, even if a certified project protects the property, the land use restrictions continue to apply if the property was acquired under the Hazard Mitigation Grant Program or the Flood Mitigation Assistance Program. If a non-profit land trust organization receives the property as a donation, that organization must maintain the property as deed-restricted, consistent with the provisions of paragraph Q2.b above.
f. Before the approval of your claim, the affected State must take all action set forth in
g. You must have NFIP flood insurance coverage continuously in effect from a date established by
h. This paragraph Q.2 will be in effect for a community when the FEMA Regional Administrator for the affected region provides to the community, in writing, the following:
(1) Confirmation that the community and the State are in compliance with the conditions in paragraphs Q.2.e and Q.2.f above, and
(2) The date by which you must have flood insurance in effect.
R. Loss Settlement
1. Introduction
This policy provides three methods of settling losses: Replacement Cost, Special Loss Settlement, and Actual Cash Value. Each method is used for a different type of property, as explained in paragraphs a-c below.
a. Replacement Cost Loss Settlement, described in R.2 below, applies to a single family dwelling provided:
(1) It is your principal residence and (2) At the time of loss, the amount of insurance in this policy that applies to the dwelling is 80 percent or more of its full replacement cost immediately before the loss, or is the maximum amount of insurance available under the NFIP.
b. Special Loss Settlement, described in R.3 below, applies to a single family dwelling that is a manufactured or mobile home or a travel trailer.
c. Actual Cash Value loss settlement applies to a single family dwelling not subject to replacement cost or special loss settlement, and to the property listed in R.4 below.
2. Replacement Cost Loss Settlement
The following loss settlement conditions apply to a single-family dwelling described in R.1.a above:
a. We will pay to repair or replace the damaged dwelling after application of the deductible and without deduction for depreciation, but not more than the least of the following amounts:
(1) The building limit of liability shown on your Declarations Page;
(2) The replacement cost of that part of the dwelling damaged, with materials of like kind and quality and for like use; or
(3) The necessary amount actually spent to repair or replace the damaged part of the dwelling for like use.
b. If the dwelling is rebuilt at a new location, the cost described above is limited to the cost that would have been incurred if the dwelling had been rebuilt at its former location.
c. When the full cost of repair or replacement is more than $1,000, or more than 5 percent of the whole amount of insurance that applies to the dwelling, we will not be liable for any loss under R.2.a above or R.4.a.2 below unless and until actual repair or replacement is completed.
d. You may disregard the replacement cost conditions above and make claim under this policy for loss to dwellings on an actual cash value basis. You may then make claim for any additional liability according to R.2.a, b, and c above, provided you notify us of your intent to do so within 180 days after the date of loss.
e. If the community in which your dwelling is located has been converted from the Emergency Program to the Regular Program during the current policy term, then we will consider the maximum amount of available NFIP insurance to be the amount that was available at the beginning of the current policy term.
3. Special Loss Settlement
a. The following loss settlement conditions apply to a single family dwelling that:
(1) is a manufactured or mobile home or a travel trailer, as defined in II.C.6.b and c,
(2) is at least 16 feet wide when fully assembled and has an area of at least 600 square feet within its perimeter walls when fully assembled, and
(3) is your principal residence as specified in R.1.a.1 above.
b. If such a dwelling is totally destroyed or damaged to such an extent that, in our judgment, it is not economically feasible to repair, at least to its pre-damage condition, we will, at our discretion pay the least of the following amounts:
(1) The lesser of the replacement cost of the dwelling or 1.5 times the actual cash value, or
(2) The building limit of liability shown on your Declarations Page.
c. If such a dwelling is partially damaged and, in our judgment, it is economically feasible to repair it to its pre-damage condition, we will settle the loss according to the Replacement Cost conditions in R.2 above.
4. Actual Cash Value Loss Settlement
The types of property noted below are subject to actual cash value (or in the case of R.4.a.2., below, proportional) loss settlement.
a. A dwelling, at the time of loss, when the amount of insurance on the dwelling is both less than 80 percent of its full replacement cost immediately before the loss and less than the maximum amount of insurance available under the NFIP. In that case, we will pay the greater of the following amounts, but not more than the amount of insurance that applies to that dwelling:
(1) The actual cash value, as defined in II.C.2, of the damaged part of the dwelling; or
(2) A proportion of the cost to repair or replace the damaged part of the dwelling, without deduction for physical depreciation and after application of the deductible.
This proportion is determined as follows: If 80 percent of the full replacement cost of the dwelling is less than the maximum amount of insurance available under the NFIP, then the proportion is determined by dividing the actual amount of insurance on the dwelling by the amount of insurance that represents 80 percent of its full replacement cost. But if 80 percent of the full replacement cost of the dwelling is greater than the maximum amount of insurance available under the NFIP, then the proportion is determined by dividing the actual amount of insurance on the dwelling by the maximum amount of insurance available under the NFIP.
b. A two-, three-, or four-family dwelling.
c. A unit that is not used exclusively for single-family dwelling purposes.
d. Detached garages.
e. Personal property.
f. Appliances, carpets, and carpet pads.
g. Outdoor awnings, outdoor antennas or aerials of any type, and other outdoor equipment.
h. Any property insured under this policy that is abandoned after a loss and remains as debris anywhere on the described location.
i. A dwelling that is not your principal residence.
5. Amount of Insurance Required
To determine the amount of insurance required for a dwelling immediately before the loss, we do not include the value of:
a. Footings, foundations, piers, or any other structures or devices that are below the undersurface of the lowest basement floor and support all or part of the dwelling;
b. Those supports listed in R.5.a above, that are below the surface of the ground inside the foundation walls if there is no basement; and
c. Excavations and underground flues, pipes, wiring, and drains.
Note: The Coverage D--Increased Cost of Compliance limit of liability is not included in the determination of the amount of insurance required.
VIII. Policy Nullification, Cancellation, and Non-Renewal
A. Policy Nullification for Fraud, Misrepresentation, or Making False Statements
1. With respect to all insureds under this policy, this policy is void and has no legal force and effect if at any time, before or after a loss, you or any other insured or your agent have, with respect to this policy or any other NFIP insurance:
a. Concealed or misrepresented any material fact or circumstance;
b. Engaged in fraudulent conduct; or
c. Made false statements.
2. Policies voided under A.1 cannot be renewed or replaced by a new NFIP policy.
3. Policies are void as of the date the acts described in A.1 above were committed.
4. Fines, civil penalties, and imprisonment under applicable Federal laws may also apply to the acts of fraud or concealment described above.
B. Policy Nullification for Reasons Other Than Fraud
1. This policy is void from its inception, and has no legal force or effect, if:
a. The property listed on the application is located in a community that was not participating in the NFIP on this policy's inception date and did not join or reenter the program during the policy term and before the loss occurred;
b. The property listed on the application is otherwise not eligible for coverage under the NFIP at the time of the initial application;
c. You never had an insurable interest in the property listed on the application;
d. You provided an agent with an application and payment, but the payment did not clear; or
e. We receive notice from you, prior to the policy effective date, that you have determined not to take the policy and you are not subject a requirement to obtain and maintain flood insurance pursuant to any statute, regulation, or contract.
2. In such cases, you will be entitled to a full refund of all premium, fees, and surcharges received. However, if a claim was paid for a policy that is void, the claim payment must be returned to
C. Cancellation of the Policy by You
1. You may cancel this policy in accordance with the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
2. If you cancel this policy, you may be entitled to a full or partial refund of premium, surcharges, or fees under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
D. Cancellation of the Policy by Us
1. Cancellation for Underpayment of Amounts Owed on Policy. This policy will be cancelled, pursuant to VII.D.2, if it is determined that the premium amount you paid is not sufficient to buy any amount of coverage, and you do not pay the additional amount of premium owed to increase the coverage to the originally requested amount within the required time period.
2. Cancellation Due to Lack of an Insurable Interest.
a. If you no longer have an insurable interest in the insured property, we will cancel this policy. You will cease to have an insurable interest if:
(1) For building coverage, the building was sold, destroyed, or removed.
(2) For contents coverage, the contents were sold or transferred ownership, or the contents were completely removed from the described location.
b. If your policy is cancelled for this reason, you may be entitled to a partial refund of premium under the applicable rules and regulations of the NFIP.
3. Cancellation of Duplicate Policies.
a. Except as allowed under Article I.G, your property may not be insured by more than one NFIP policy, and payment for damages to your property will only be made under one policy.
b. Except as allowed under Article I.G, if the property is insured by more than one NFIP policy, we will cancel all but one of the policies. The policy, or policies, will be selected for cancellation in accordance with 44 CFR 62.5 and the applicable rules and guidance of the NFIP.
c. If this policy is cancelled pursuant to VIII.D.4.b, you may be entitled to a full or partial refund of premium, surcharges, or fees under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
4. Cancellation Due to Physical Alteration of Property.
a. If the insured building has been physically altered in such a manner that it is no longer eligible for flood insurance coverage, we will cancel this policy.
b. If your policy is cancelled for this reason, you may be entitled to a partial refund of premium under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
Your policy will not be renewed if:
1. The community where your insured property is located is suspended or stops participating in the NFIP;
2. Your building is otherwise ineligible for flood insurance under the Act;
3. You have failed to provide the information we requested for the purpose of rating the policy within the required deadline.
IX. Liberalization Clause
If we make a change that broadens your coverage under this edition of our policy, but does not re-quire any additional premium, then that change will automatically apply to your insurance as of the date we implement the change, provided that this implementation date falls within 60 days before or during the policy term stated on the Declarations Page.
X. What Law Governs
This policy and all disputes arising from the insurer's policy issuance, policy administration, or the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by
In Witness Whereof, we have signed this policy below and hereby enter into this Insurance Agreement.
Administrator,
13. Revise Appendix A(2) to Part 61 to read as follows:
Appendix A(2) to Part 61
Standard Flood Insurance Policy
GENERAL PROPERTY FORM
Please read the policy carefully. The flood insurance provided is subject to limitations, restrictions, and exclusions.
I. Agreement
A. Coverage Under This Policy.
1. Except as provided in I.A.2, this policy provides coverage for multifamily buildings (residential buildings designed for use by 5 or more families that are not condominmum buildings), non-residential buildings, and their contents.
2. There is no coverage for a residential condominium building in a regular program community, except for personal property coverage for a unit in a condominium building.
B. The
C. We will pay you for direct physical loss by or from flood to your insured property if you:
1. Have paid the full amount due (including applicable premiums, surcharges, and fees);
2. Comply with all terms and conditions of this policy; and
3. Have furnished accurate information and statements.
D. We have the right to review the information you give us at any time and revise your policy based on our review.
E. This policy insures only one building. If you own more than one building, coverage will apply to the single building specifically described in the Flood Insurance Application.
F. Multiple policies with building coverage cannot be issued to insure a single building to one insured or to different insureds, even if issued through different NFIP insurers. Payment for damages may only be made under a single policy for building damages under Coverage A--Building Property.
II. Definitions
A. In this policy, "you" and "your" refer to the named insured(s) shown on the Declarations Page of this policy and the spouse of the named insured, if a resident of the same household. Insured(s) also includes: Any mortgagee and loss payee named in the Application and Declarations Page, as well as any other mortgagee or loss payee determined to exist at the time of loss, in the order of precedence. "We," "us," and "our" refer to the insurer.
Some definitions are complex because they are provided as they appear in the law or regulations, or result from court cases.
B. Flood, as used in this flood insurance policy, means:
1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property) from:
a. Overflow of inland or tidal waters,
b. Unusual and rapid accumulation or runoff of surface waters from any source,
c. Mudflow
2. Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in B.1.a above.
C. The following are the other key definitions we use in this policy:
1. Act. The National Flood Insurance Act of 1968 and any amendments to it.
2. Actual Cash Value. The cost to replace an insured item of property at the time of loss, less the value of its physical depreciation.
3. Application. The statement made and signed by you or your agent in applying for this policy. The application gives information we use to determine the eligibility of the risk, the kind of policy to be issued, and the correct premium payment. The application is part of this flood insurance policy.
4. Base Flood. A flood having a one percent chance of being equaled or exceeded in any given year.
5. Basement. Any area of a building, including any sunken room or sunken portion of a room, having its floor below ground level on all sides.
6. Building.
a. A structure with two or more outside rigid walls and a fully secured roof, that is affixed to a permanent site;
b. A manufactured home, also known as a mobile home, is a structure built on a permanent chassis, transported to its site in one or more sections, and affixed to a permanent foundation); or
c. A travel trailer without wheels, built on a chassis and affixed to a permanent foundation, that is regulated under the community's floodplain management and building ordinances or laws.
Building does not mean a gas or liquid storage tank, shipping container, or a recreational vehicle, park trailer, or other similar vehicle, except as described in C.6.c above.
7. Cancellation. The ending of the insurance coverage provided by this policy before the expiration date.
8. Condominium. That form of ownership of one or more buildings in which each unit owner has an undivided interest in common elements.
9. Condominium Association. The entity made up of the unit owners responsible for the maintenance and operation of:
a. Common elements owned in undivided shares by unit owners; and
b. Other buildings in which the unit owners have use rights where membership in the entity is a required condition of unit ownership.
10. Condominium Building. A type of building for which the form of ownership is one in which each unit owner has an undivided interest in common elements of the building.
11. Declarations Page. A computer-generated summary of information you provided in your application for insurance. The Declarations Page also describes the term of the policy, limits of coverage, and displays the premium and our name. The Declarations Page is a part of this flood insurance policy.
12. Deductible. The fixed amount of an insured loss that is your responsibility and that is incurred by you before any amounts are paid for the insured loss under this policy.
13. Described Location. The location where the insured building(s) or personal property are found. The described location is shown on the Declarations Page.
14. Direct Physical Loss By or From Flood. Loss or damage to insured property, directly caused by a flood. There must be evidence of physical changes to the property.
15. Elevated Building. A building that has no basement and that has its lowest elevated floor raised above ground level by foundation walls, shear walls, posts, piers, pilings, or columns.
16. Emergency Program. The initial phase of a community's participation in the National Flood Insurance Program. During this phase, only limited amounts of insurance are available under the Act and the regulations prescribed pursuant to the Act.
17. Federal Policy Fee. A flat rate charge you must pay on each new or renewal policy to defray certain administrative expenses incurred in carrying out the National Flood Insurance Program.
18. Improvements. Fixtures, alterations, installations, or additions comprising a part of the dwelling or apartment in which you reside.
19. Mudflow. A river of liquid and flowing mud on the surface of normally dry land areas, as when earth is carried by a current of water. Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.
20. National Flood Insurance Program (NFIP). The program of flood insurance coverage and floodplain management administered under the Act and applicable Federal regulations in Title 44 of the Code of Federal Regulations, Subchapter B.
21. Policy. The entire written contract between you and us. It includes:
a. This printed form;
b. The application and Declarations Page;
c. Any endorsement(s) that may be issued; and
d. Any renewal certificate indicating that coverage has been instituted for a new policy and new policy term. Only one building, which you specifically described in the application, may be insured under this policy.
22. Pollutants. Substances that include, but are not limited to, any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. "Waste" includes, but is not limited to, materials to be recycled, reconditioned, or reclaimed.
23. Post-FIRM Building. A building for which construction or substantial improvement occurred after December 31, 1974, or on or after the effective date of an initial Flood Insurance Rate Map (FIRM), whichever is later.
24. Probation Surcharge. A flat charge you must pay on each new or renewal policy issued covering property in a community the NFIP has placed on probation under the provisions of 44 CFR 59.24.
25. Regular Program. The final phase of a community's participation in the National Flood Insurance Program. In this phase, a Flood Insurance Rate Map is in effect and full limits of coverage are available under the Act and the regulations prescribed pursuant to the Act.
26. Residential Condominium Building. A condominium building, containing one or more family units and in which at least 75 percent of the floor area is residential.
27. Special Flood Hazard Area (SFHA). An area having special flood or mudflow, and/or flood-related erosion hazards, and shown on a Flood Hazard Boundary Map or Flood Insurance Rate Map as Zone A, AO, A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-A30, V1-V30, VE, or V.
28. Stock means merchandise held in storage or for sale, raw materials, and in-process or finished goods, including supplies used in their packing or shipping. Stock does not include any property not covered under Section IV. Property Not Covered, except the following:
a. Parts and equipment for self-propelled vehicles;
b. Furnishings and equipment for watercraft;
c. Spas and hot-tubs, including their equipment; and
d. Swimming pool equipment.
29. Unit. A single-family residential or non-residential space you own in a condominium building.
30. Valued Policy. A policy in which the insured and the insurer agree on the value of the property insured, that value being payable in the event of a total loss. The Standard Flood Insurance Policy is not a valued policy.
III. Property Covered
A. Coverage A--Building Property
We insure against direct physical loss by or from flood to:
1. The building described on the Declarations Page at the described location. If the building is a condominium building and the named insured is the condominium association, Coverage A includes all units within the building and the improvements within the units, provided the units are owned in common by all unit owners.
2. Building property located at another location for a period of 45 days at another location, as set forth in III.C.2.b, Property Removed to Safety.
3. Additions and extensions attached to and in contact with the building by means of a rigid exterior wall, a solid load-bearing interior wall, a stairway, an elevated walkway, or a roof. At your option, additions and extensions connected by any of these methods may be separately insured. Additions and extensions attached to and in contact with the building by means of a common interior wall that is not a solid load-bearing wall are always considered part of the building and cannot be separately insured.
4. The following fixtures, machinery, and equipment, which are insured under Coverage A only:
a. Awnings and canopies;
b. Blinds;
c. Carpet permanently installed over unfinished flooring;
d. Central air conditioners;
e. Elevator equipment;
f. Fire extinguishing apparatus;
g. Fire sprinkler systems;
h. Walk-in freezers;
i. Furnaces;
j. Light fixtures;
k. Outdoor antennas and aerials attached to buildings;
l. Permanently installed cupboards, bookcases, paneling, and wallpaper;
m. Pumps and machinery for operating pumps;
n. Ventilating equipment; and
o. Wall mirrors, permanently installed;
p. In the units within the building, installed:
(1) Built-in dishwashers;
(2) Built-in microwave ovens;
(3) Garbage disposal units;
(4) Hot water heaters, including solar water heaters;
(5) Kitchen cabinets;
(6) Plumbing fixtures;
(7) Radiators;
(8) Ranges;
(9) Refrigerators; and
(10) Stoves.
5. Materials and supplies to be used for construction, alteration, or repair of the insured building while the materials and supplies are stored in a fully enclosed building at the described location or on an adjacent property.
6. A building under construction, alteration, or repair at the described location.
a. If the structure is not yet walled or roofed as described in the definition for building (See II.B.6.a.) then coverage applies:
(1) Only while such work is in progress; or
(2) If such work is halted, only for a period of up to 90 continuous days thereafter.
b. However, coverage does not apply until the building is walled and roofed if the lowest floor, including the basement floor, of a non-elevated building or the lowest elevated floor of an elevated building is:
(1) Below the base flood elevation in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A, AR/AO; or
(2) Below the base flood elevation adjusted to include the effect of wave action in Zones VE or V1-V30.
The lowest floor level is based on the bottom of the lowest horizontal structural member of the floor in Zones VE or V1-V30 or the top of the floor in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A, and AR/AO.
7. A manufactured home or a travel trailer, as described in the II.C.6. If the manufactured home or travel trailer is in a special flood hazard area, it must be anchored in the following manner at the time of the loss:
a. By over-the-top or frame ties to ground anchors; or
b. In accordance with the manufacturer's specifications; or
c. In compliance with the community's floodplain management requirements unless it has been continuously insured by the NFIP at the same described location since September 30, 1982.
8. Items of property below the lowest elevated floor of an elevated post-FIRM building located in zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement, regardless of the zone. Coverage is limited to the following:
a. Any of the following items, if installed in their functioning locations and, if necessary for operation, connected to a power source:
(1) Central air conditioners;
(2) Cisterns and the water in them;
(3) Drywall for walls and ceilings in a basement and the cost of labor to nail it, unfinished and unfloated and not taped, to the framing;
(4) Electrical junction and circuit breaker boxes;
(5) Electrical outlets and switches;
(6) Elevators, dumbwaiters, and related equipment, except for related equipment installed below the base flood elevation after September 30, 1987;
(7) Fuel tanks and the fuel in them;
(8) Furnaces and hot water heaters;
(9) Heat pumps;
(10) Nonflammable insulation in a basement;
(11) Pumps and tanks used in solar energy systems;
(12) Stairways and staircases attached to the building, not separated from it by elevated walkways;
(13) Sump pumps;
(14) Water softeners and the chemicals in them, water filters, and faucets installed as an integral part of the plumbing system;
(15) Well water tanks and pumps;
(16) Required utility connections for any item in this list; and
(17) Footings, foundations, posts, pilings, piers, or other foundation walls and anchorage systems required to support a building.
b. Clean-up.
B. Coverage B--Personal Property
1. If you have purchased personal property coverage, we insure, subject to B.2-4 below, against direct physical loss by or from flood to personal property inside the fully enclosed insured building:
a. Owned solely by you, or in the case of a condominium, owned solely by the condominium association and used exclusively in the conduct of the business affairs of the condominium association; or
b. Owned in common by the unit owners of the condominium association.
2. We also insure such personal property for 45 days while stored at a temporary location, as set forth in III.C.2.b, Property Removed to Safety.
3. When this policy covers personal property, coverage will be either for household personal property or other than household personal property, while within the insured building, but not both.
a. If this policy covers household personal property, it will insure household personal property usual to a living quarters, that:
(1) Belongs to you, or a member of your household, or at your option:
(a) Your domestic worker;
(b) Your guest; or
(2) You may be legally liable for.
b. If this policy covers other than household personal property, it will insure your:
(1) Furniture and fixtures;
(2) Machinery and equipment;
(3) Stock; and
(4) Other personal property owned by you and used in your business, subject to IV, Property Not Covered.
4. Coverage for personal property includes the following property, subject to B.1.a and B.1.b above, which is insured under Coverage B, only:
a. Air conditioning units, portable or window type;
b. Carpets, not permanently installed, over unfinished flooring;
c. Carpets over finished flooring;
d. Clothes washers and dryers;
e. "Cook-out" grills;
f. Food freezers, other than walk-in, and food in any freezer;
g. Outdoor equipment and furniture stored inside the insured building;
h. Ovens and the like; and
i. Portable microwave ovens and portable dishwashers.
5. Coverage for items of property below the lowest elevated floor of an elevated post-FIRM building located in Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement, regardless of the zone, is limited to the following items, if installed in their functioning locations and, if necessary for operation, connected to a power source:
a. Air conditioning units, portable or window type;
b. Clothes washers and dryers; and
c. Food freezers, other than walk-in, and food in any freezer.
6. Special Limits. We will pay no more than $2,500 for any loss to one or more of the following kinds of personal property:
a. Artwork, photographs, collectibles, or memorabilia, including but not limited to, porcelain or other figures, and sports cards;
b. Rare books or autographed items;
c. Jewelry, watches, precious and semi-precious stones, or articles of gold, silver, or platinum;
d. Furs or any article containing fur that represents its principal value.
7. We will pay only for the functional value of antiques.
8. If you are a tenant, you may apply up to 10 percent of the Coverage B limit to improvements:
a. Made a part of the building you occupy; and
b. You acquired, or made at your expense, even though you cannot legally remove.
This coverage does not increase the amount of insurance that applies to insured personal property.
9. If you are a condominium unit owner, you may apply up to 10 percent of the Coverage B limit to cover loss to interior:
a. Walls,
b. floors, and
c. ceilings,
that are not covered under a policy issued to the condominium association insuring the condominium building.
This coverage does not increase the amount of insurance that applies to insured personal property.
10. If you are a tenant, personal property must be inside the fully enclosed building.
C. Coverage C--Other Coverages
1. Debris Removal
a. We will pay the expense to remove non-owned debris that is on or in insured property and debris of insured property anywhere.
b. If you or a member of your household perform the removal work, the value of your work will be based on the Federal minimum wage.
c. This coverage does not increase the Coverage A or Coverage B limit of liability.
2. Loss Avoidance Measures
a. Sandbags, Supplies, and Labor
(1) We will pay up to $1,000 for costs you incur to protect the insured building from a flood or imminent danger of flood, for the following:
(a) Your reasonable expenses to buy:
(i) Sandbags, including sand to fill them;
(ii) Fill for temporary levees;
(iii) Pumps; and
(iv) Plastic sheeting and lumber used in connection with these items.
(b) The value of work, at the Federal minimum wage, that you perform.
(2) This coverage for Sandbags, Supplies and Labor only applies if damage to insured property by or from flood is imminent and the threat of flood damage is apparent enough to lead a person of common prudence to anticipate flood damage. One of the following must also occur:
(a) A general and temporary condition of flooding in the area near the described location must occur, even if the flood does not reach the building; or
(b) A legally authorized official must issue an evacuation order or other civil order for the community in which the building is located calling for measures to preserve life and property from the peril of flood.
This coverage does not increase the Coverage A or Coverage B limit of liability.
b. Property Removed to Safety
(1) We will pay up to $1,000 for the reasonable expenses you incur to move insured property to a place other than the described location that contains the property in order to protect it from flood or the imminent danger of flood. Reasonable expenses include the value of work, at the Federal minimum wage, you or a member of your household perform.
(2) If you move insured property to a location other than the described location that contains the property, in order to protect it from flood or the imminent danger of flood, we will cover such property while at that location for a period of 45 consecutive days from the date you begin to move it there. The personal property that is moved must be placed in a fully enclosed building or otherwise reasonably protected from the elements.
(3) Any property removed, including a moveable home described in II.6, must be placed above ground level or outside of the special flood hazard area.
(4) This coverage does not increase the Coverage A or Coverage B limit of liability.
3. Pollution Damage
We will pay for damage caused by pollutants to covered property if the discharge, seepage, migration, release, or escape of the pollutants is caused by or results from flood. The most we will pay under this coverage is $10,000. This coverage does not increase the Coverage A or Coverage B limits of liability. Any payment under this provision when combined with all other payments for the same loss cannot exceed the replacement cost or actual cash value, as appropriate, of the covered property. This coverage does not include the testing for or monitoring of pollutants unless required by law or ordinance.
D. Coverage D--Increased Cost of Compliance
1. General.
This policy pays you to comply with a State or local floodplain management law or ordinance affecting repair or reconstruction of a building suffering flood damage. Compliance activities eligible for payment are: Elevation, floodproofing, relocation, or demolition (or any combination of these activities) of your building. Eligible floodproofing activities are limited to:
a. Non-residential buildings.
b. Residential buildings with basements that satisfy FEMA's standards published in the Code of Federal Regulations [44 CFR 60.6(b) or (c)].
2. Limits of Liability.
We will pay you up to $30,000 under this Coverage D (Increased Cost of Compliance), which only applies to policies with building coverage (Coverage A). Our payment of claims under Coverage D is in addition to the amount of coverage which you selected on the application and which appears on the Declarations Page. However, the maximum you can collect under this policy for both Coverage A (Building Property) and Coverage D (Increased Cost of Compliance) cannot exceed the maximum permitted under the Act. We do NOT charge a separate deductible for a claim under Coverage D.
3. Eligibility.
a. A building covered under Coverage A (Building Property) sustaining a loss caused by a flood as defined by this policy must:
(1) Be a "repetitive loss building." A repetitive loss building is one that meets the following conditions:
(a) The building is insured by a contract of flood insurance issued under the NFIP.
(b) The building has suffered flood damage on two occasions during a 10-year period which ends on the date of the second loss.
(c) The cost to repair the flood damage, on average, equaled or exceeded 25 percent of the market value of the building at the time of each flood loss.
(d) In addition to the current claim, the NFIP must have paid the previous qualifying claim, and the State or community must have a cumulative, substantial damage provision or repetitive loss provision in its floodplain management law or ordinance being enforced against the building; or
(2) Be a building that has had flood damage in which the cost to repair equals or exceeds 50 percent of the market value of the building at the time of the flood. The State or community must have a substantial damage provision in its floodplain management law or ordinance being enforced against the building.
b. This Coverage D pays you to comply with State or local floodplain management laws or ordinances that meet the minimum standards of the National Flood Insurance Program found in the Code of Federal Regulations at 44 CFR 60.3. We pay for compliance activities that exceed those standards under these conditions:
(1) 3.a.1 above.
(2) Elevation or floodproofing in any risk zone to preliminary or advisory base flood elevations provided by FEMA which the State or local government has adopted and is enforcing for flood-damaged buildings in such areas. (This includes compliance activities in B, C, X, or D zones which are being changed to zones with base flood elevations. This also includes compliance activities in zones where base flood elevations are being increased, and a flood-damaged building must comply with the higher advisory base flood elevation.) Increased Cost of Compliance coverage does not apply to situations in B, C, X, or D zones where the community has derived its own elevations and is enforcing elevation or floodproofing requirements for flood-damaged buildings to elevations derived solely by the community.
(3) Elevation or floodproofing above the base flood elevation to meet State or local "free-board" requirements, i.e., that a building must be elevated above the base flood elevation.
c. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States and communities must require the elevation or floodproofing of buildings in unnumbered A zones to the base flood elevation where elevation data is obtained from a Federal, State, or other source. Such compliance activities are also eligible for Coverage D.
d. This coverage will pay for the incremental cost, after demolition or relocation, of elevating or floodproofing a building during its rebuilding at the same or another site to meet State or local floodplain management laws or ordinances, subject to the exclusion at III.D.5.g.
e. This coverage will pay to bring a flood-damaged building into compliance with State or local floodplain management laws or ordinances even if the building had received a variance before the present loss from the applicable floodplain management requirements.
4. Conditions.
a. When a building insured under Coverage A--Building Property sustains a loss caused by a flood, our payment for the loss under this Coverage D will be for the increased cost to elevate, floodproof, relocate, or demolish (or any combination of these activities) caused by the enforcement of current State or local floodplain management ordinances or laws. Our payment for eligible demolition activities will be for the cost to demolish and clear the site of the building debris or a portion thereof caused by the enforcement of current State or local floodplain management ordinances or laws. Eligible activities for the cost of clearing the site will include those necessary to discontinue utility service to the site and ensure proper abandonment of on-site utilities.
b. When the building is repaired or rebuilt, it must be intended for the same occupancy as the present building unless otherwise required by current floodplain management ordinances or laws.
5. Exclusions.
Under this Coverage D (Increased Cost of Compliance), we will not pay for:
a. The cost to comply with any floodplain management law or ordinance in communities participating in the Emergency Program.
b. The cost associated with enforcement of any ordinance or law that requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.
c. The loss in value to any insured building due to the requirements of any ordinance or law.
d. The loss in residual value of the undamaged portion of a building demolished as a consequence of enforcement of any State or local floodplain management law or ordinance.
e. Any Increased Cost of Compliance under this Coverage D:
(1) Until the building is elevated, floodproofed, demolished, or relocated on the same or to another premises; and
(2) Unless the building is elevated, floodproofed, demolished, or relocated as soon as reasonably possible after the loss, not to exceed two years.
f. Any code upgrade requirements, e.g., plumbing or electrical wiring, not specifically related to the State or local floodplain management law or ordinance.
g. Any compliance activities needed to bring additions or improvements made after the loss occurred into compliance with State or local floodplain management laws or ordinances.
h. Loss due to any ordinance or law that you were required to comply with before the current loss.
i. Any rebuilding activity to standards that do not meet the NFIP's minimum requirements. This includes any situation where the insured has received from the State or community a variance in connection with the current flood loss to rebuild the property to an elevation below the base flood elevation.
j. Increased Cost of Compliance for a garage or carport.
k. Any building insured under an NFIP Group Flood Insurance Policy.
l. Assessments made by a condominium association on individual condominium unit owners to pay increased costs of repairing commonly owned buildings after a flood in compliance with State or local floodplain management ordinances or laws.
6. Other Provisions.
All other conditions and provisions of the policy apply.
IV. Property not Covered
We do not insure any of the following property:
1. Personal property not inside the fully enclosed building;
2. A building, and personal property in it, located entirely in, on, or over water or seaward of mean high tide if it was constructed or substantially improved after September 30, 1982;
3. Open structures, including a building used as a boathouse or any structure or building into which boats are floated, and personal property located in, on, or over water;
4. Recreational vehicles other than travel trailers described in the II.C.6.c, whether affixed to a permanent foundation or on wheels;
5. Self-propelled vehicles or machines, including their parts and equipment. However, we do cover self-propelled vehicles or machines not licensed for use on public roads and are:
a. Used mainly to service the described location; or
b. Designed and used to assist handicapped persons, while the vehicles or machines are inside a building at the described location;
6. Land, land values, lawns, trees, shrubs, plants, growing crops, or animals;
7. Accounts, bills, coins, currency, deeds, evidences of debt, medals, money, scrip, stored value cards, postage stamps, securities, bullion, manuscripts, or other valuable papers;
8. Underground structures and equipment, including wells, septic tanks, and septic systems;
9. Those portions of walks, walkways, decks, driveways, patios, and other surfaces, all whether protected by a roof or not, located outside the perimeter, exterior walls of the insured building;
10. Containers, including related equipment, such as, but not limited to, tanks containing gases or liquids;
11. Buildings or units and all their contents if more than 49 percent of the actual cash value of the building is below ground, unless the lowest level is at or above the base flood elevation and is be-low ground by reason of earth having been used as insulation material in conjunction with energy efficient building techniques;
12. Fences, retaining walls, seawalls, bulkheads, wharves, piers, bridges, and docks;
13. Aircraft or watercraft, or their furnishings and equipment;
14. Hot tubs and spas that are not bathroom fixtures, and swimming pools, and their equipment, such as, but not limited to, heaters, filters, pumps, and pipes, wherever located;
15. Property not eligible for flood insurance pursuant to the provisions of the Coastal Barrier Resources Act and the Coastal Barrier Improvement Act and amendments to these Acts;
16. Personal property owned by or in the care, custody or control of a unit owner, except for property of the type and under the circumstances set forth under III. Coverage B--Personal Property of this policy;
17. A residential condominium building located in a Regular Program community.
V. Exclusions
A. We only pay for "direct physical loss by or from flood," which means that we do not pay you for:
1. Loss of revenue or profits;
2. Loss of access to the insured property or described location;
3. Loss of use of the insured property or described location;
4. Loss from interruption of business or production;
5. Any additional living expenses incurred while the insured building is being repaired or is unable to be occupied for any reason;
6. The cost of complying with any ordinance or law requiring or regulating the construction, demolition, remodeling, renovation, or repair of property, including removal of any resulting debris. This exclusion does not apply to any eligible activities we describe in Coverage D--Increased Cost of Compliance; or
7. Any other economic loss you suffer.
B. Flood in Progress. If this policy became effective as of the time of a loan closing, as provided by 44 CFR 61.11(b), we will not pay for a loss caused by a flood that is a continuation of a flood that existed prior to coverage becoming effective. In all other circumstances, we will not pay for a loss caused by a flood that is a continuation of a flood that existed on or before the day you submitted the application for coverage under this policy and the correct premium. We will determine the date of application using 44 CFR 611.11(f).
C. We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that we do not cover are:
1. Earthquake;
2. Landslide;
3. Land subsidence;
4. Sinkholes;
5. Destabilization or movement of land that results from accumulation of water in subsurface land areas; or
6. Gradual erosion.
We do, however, pay for losses from mudflow and land subsidence as a result of erosion that are specifically insured under our definition of flood (See II.B.1.c and II.B.2).
D. We do not insure for direct physical loss caused directly or indirectly by:
1. The pressure or weight of ice;
2. Freezing or thawing;
3. Rain, snow, sleet, hail, or water spray;
4. Water, moisture, mildew, or mold damage that results primarily from any condition:
a. Substantially confined to the insured building; or
b. That is within your control including, but not limited to:
(1) Design, structural, or mechanical defects;
(2) Failures, stoppages, or breakage of water or sewer lines, drains, pumps, fixtures, or equipment; or
(3) Failure to inspect and maintain the property after a flood recedes;
5. Water or water-borne material that:
a. Backs up through sewers or drains;
b. Discharges or overflows from a sump, sump pump or related equipment; or
c. Seeps or leaks on or through the insured property; unless there is a flood in the area and the flood is the proximate cause of the sewer or drain backup, sump pump discharge or overflow, or the seepage of water;
6. The pressure or weight of water unless there is a flood in the area and the flood is the proximate cause of the damage from the pressure or weight of water;
7. Power, heating, or cooling failure unless the failure results from direct physical loss by or from flood to power, heating, or cooling equipment on the described location;
8. Theft, fire, explosion, wind, or windstorm;
9. Anything you or any member of your household do or conspires to do to deliberately cause loss by flood; or
10. Alteration of the insured property that significantly increases the risk of flooding.
E. We do not insure for loss to any building or personal property located on land leased from the Federal Government, arising from or incident to the flooding of the land by the Federal Government, where the lease expressly holds the Federal Government harmless under flood insurance issued under any Federal Government program.
VI. Deductibles
A. When a loss is insured under this policy, we will pay only that part of the loss that exceeds your deductible amount, subject to the limit of liability that applies. The deductible amount is shown on the Declarations Page.
However, when a building under construction, alteration, or repair does not have at least two rigid exterior walls and a fully secured roof at the time of loss, your deductible amount will be two times the deductible that would otherwise apply to a completed building.
B. In each loss from flood, separate deductibles apply to the building and personal property insured by this policy.
C. The deductible does NOT apply to:
1. III.C.2. Loss Avoidance Measures; or
2. III.D. Increased Cost of Compliance.
VII. General Conditions
A. Pair and Set Clause
In case of loss to an article that is part of a pair or set, we will have the option of paying you:
1. An amount equal to the cost of replacing the lost, damaged, or destroyed article, minus its depreciation, or
2. The amount that represents the fair proportion of the total value of the pair or set that the lost, damaged, or destroyed article bears to the pair or set.
B. Other Insurance
1. If a loss insured by this policy is also insured by other insurance that includes flood coverage not issued under the Act, we will not pay more than the amount of insurance that you are entitled to for lost, damaged, or destroyed property insured under this policy subject to the following:
a. We will pay only the proportion of the loss that the amount of insurance that applies under this policy bears to the total amount of insurance covering the loss, unless VII.B.1.b or c below applies.
b. If the other policy has a provision stating that it is excess insurance, this policy will be primary.
c. This policy will be primary (but subject to its own deductible) up to the deductible in the other flood policy (except another policy as described in VII.B.1.b above). When the other deductible amount is reached, this policy will participate in the same proportion that the amount of insurance under this policy bears to the total amount of both policies, for the remainder of the loss.
2. Where this policy covers a condominium association and there is a National Flood Insurance Program flood insurance policy in the name of a unit owner that insures the same loss as this policy, then this policy will be primary.
C. Amendments, Waivers, Assignment
This policy cannot be changed, nor can any of its provisions be waived, without the express written consent of the Federal Insurance Administrator. No action that we take under the terms of this policy can constitute a waiver of any of our rights. You may assign this policy in writing when you transfer title of your property to someone else except under these conditions:
1. When this policy covers only personal property; or
2. When this policy covers a building under construction.
D. Insufficient Premium or Rating Information
1. Applicability. The following provisions apply to all instances where the premium paid on this policy is insufficient or where the rating information is insufficient, such as where an Elevation Certificate is not provided.
2. Reforming the Policy with Reduced Coverage. Except as otherwise provided in VII.D.1 and VII.D.4, if the premium we received from you was not sufficient to buy the kinds and amounts of coverage you requested, we will provide only the kinds and amounts of coverage that can be purchased for the premium payment we received.
a. For the purpose of determining whether your premium payment is sufficient to buy the kinds and amounts of coverage you requested, we will first deduct the costs of all applicable fees and surcharges.
b. If the amount paid, after deducting the costs of all applicable fees and surcharges, is not sufficient to buy any amount of coverage, your payment will be refunded. Unless the policy is reformed to increase the coverage amount to the amount originally requested pursuant to VII.D.3, this policy will be cancelled, and no claims will be paid under this policy.
c. Coverage limits on the reformed policy will be based upon the amount of premium submitted per type of coverage, but will not exceed the amount originally requested.
3. Discovery of Insufficient Premium or Rating Information. If we discover that your premium payment was not sufficient to buy the requested amount of coverage, the policy will be reformed as described in VII.D.2. You have the option of increasing the amount of coverage resulting from this reformation to the amount you requested as follows:
a. Insufficient Premium. If we discover that your premium payment was not sufficient to buy the requested amount of coverage, we will send you, and any mortgagee or trustee known to us, a bill for the required additional premium for the current policy term (or that portion of the current policy term following any endorsement changing the amount of coverage). If it is discovered that the initial amount charged to you for any fees or surcharges is incorrect, the difference will be added or deducted, as applicable, to the total amount in this bill.
(1) If you or the mortgagee or trustee pay the additional amount due within 30 days from the date of our bill, we will reform the policy to increase the amount of coverage to the originally requested amount, effective to the beginning of the current policy term (or subsequent date of any endorsement changing the amount of coverage).
(2) If you or the mortgagee or trustee do not pay the additional amount due within 30 days of the date of our bill, any flood insurance claim will be settled based on the reduced amount of coverage.
(3) As applicable, you have the option of paying all or part of the amount due out of a claim payment based on the originally requested amount of coverage.
b. Insufficient Rating Information. If we determine that the rating information we have is insufficient and prevents us from calculating the additional premium, we will ask you to send the required information. You must submit the information within 60 days of our request.
(1) If we receive the information within 60 days of our request, we will determine the amount of additional premium for the current policy term and follow the procedure in VII.D.3.a above.
(2) If we do not receive the information within 60 days of our request, no claims will be paid until the requested information is provided. Coverage will be limited to the amount of coverage that can be purchased for the payments we received, as determined when the requested information is provided.
4. Coverage Increases. If we do not receive the amounts requested in VII.D.3.a or the additional information requested in VII.D.3.b by the date it is due, the amount of coverage under this policy can only be increased by endorsement subject to the appropriate waiting period. However, no coverage increases will be allowed until you have provided the information requested in VII.D.3.b is provided.
5. Falsifying Information. However, if we find that you or your agent intentionally did not tell us, or falsified, any important fact or circumstance or did anything fraudulent relating to this insurance, the provisions of VIII.A apply.
E. Policy Renewal
1. This policy will expire at 12:01 a.m. on the last day of the policy term.
2. We must receive the payment of the appropriate renewal premium within 30 days of the expiration date.
3. If we find, however, that we did not place your renewal notice into the U.S. Postal Service, or if we did mail it, we made a mistake, e.g., we used an incorrect, incomplete, or illegible address, which delayed its delivery to you before the due date for the renewal premium, then we will follow these procedures:
a. If you or your agent notified us, not later than one year after the date on which the payment of the renewal premium was due, of non-receipt of a renewal notice before the due date for the renewal premium, and we determine that the circumstances in the preceding paragraph apply, we will mail a second bill providing a revised due date, which will be 30 days after the date on which the bill is mailed.
b. If we do not receive the premium requested in the second bill by the revised due date, then we will not renew the policy. In that case, the policy will remain as an expired policy as of the expiration date shown on the Declarations Page.
4. In connection with the renewal of this policy, we may ask you during the policy term to recertify, on a Recertification Questionnaire that we will provide to you, the rating information used to rate your most recent application for or renewal of insurance.
F. Conditions Suspending or Restricting Insurance
We are not liable for loss that occurs while there is a hazard that is increased by any means within your control or knowledge.
G. Requirements in Case of Loss
In case of a flood loss to insured property, you must:
1. Give prompt written notice to us;
2. As soon as reasonably possible, separate the damaged and undamaged property, putting it in the best possible order so that we may examine it;
3. Prepare an inventory of damaged property showing the quantity, description, actual cash value, and amount of loss. Attach all bills, receipts, and related documents;
4. Within 60 days after the loss, send us a proof of loss, which is your statement of the amount you are claiming under the policy signed and sworn to by you, and which furnishes us with the following information:
a. The date and time of loss;
b. A brief explanation of how the loss happened;
c. Your interest (for example, "owner") and the interest, if any, of others in the damaged property;
d. Details of any other insurance that may cover the loss;
e. Changes in title or occupancy of the insured property during the term of the policy;
f. Specifications of damaged buildings and detailed repair estimates;
g. Names of mortgagees or anyone else having a lien, charge, or claim against the insured property;
h. Details about who occupied any insured building at the time of loss and for what purpose; and
i. The inventory of damaged personal property described in G.3 above.
5. In completing the proof of loss, you must use your own judgment concerning the amount of loss and justify that amount.
6. You must cooperate with the adjuster or representative in the investigation of the claim.
7. The insurance adjuster whom we hire to investigate your claim may furnish you with a proof of loss form, and she or he may help you complete it. However, this is a matter of courtesy only, and you must still send us a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it.
8. We have not authorized the adjuster to approve or disapprove claims or to tell you whether we will approve your claim.
9. At our option, we may accept the adjuster's report of the loss instead of your proof of loss. The adjuster's report will include information about your loss and the damages you sustained. You must sign the adjuster's report. At our option, we may require you to swear to the report.
H. Our Options After a Loss
Options we may, in our sole discretion, exercise after loss include the following:
1. At such reasonable times and places that we may designate, you must:
a. Show us or our representative the damaged property;
b. Submit to examination under oath, while not in the presence of another insured, and sign the same; and
c. Permit us to examine and make extracts and copies of:
(1) Any policies of property insurance insuring you against loss and the deed establishing your ownership of the insured real property;
(2) Condominium association documents including the Declarations of the condominium, its Articles of Association or Incorporation, Bylaws, rules and regulations, and other relevant documents if you are a unit owner in a condominium building; and
(3) All books of accounts, bills, invoices and other vouchers, or certified copies pertaining to the damaged property if the originals are lost.
2. We may request, in writing, that you furnish us with a complete inventory of the lost, damaged or destroyed property, including:
a. Quantities and costs;
b. Actual cash values or replacement cost (whichever is appropriate);
c. Amounts of loss claimed;
d. Any written plans and specifications for repair of the damaged property that you can reasonably make available to us; and
e. Evidence that prior flood damage has been repaired.
3. If we give you written notice within 30 days after we receive your signed, sworn proof of loss, we may:
a. Repair, rebuild, or replace any part of the lost, damaged, or destroyed property with material or property of like kind and quality or its functional equivalent; and
b. Take all or any part of the damaged property at the value that we agree upon or its appraised value.
I. No Benefit to Bailee
No person or organization, other than you, having custody of insured property will benefit from this insurance.
J. Loss Payment
1. We will adjust all losses with you. We will pay you unless some other person or entity is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss (or within 90 days after the insurance adjuster files the adjuster's report signed and sworn to by you in lieu of a proof of loss) and:
a. We reach an agreement with you;
b. There is an entry of a final judgment; or
c. There is a filing of an appraisal award with us, as provided in VII.M.
2. If we reject your proof of loss in whole or in part you may:
a. Accept our denial of your claim;
b. Exercise your rights under this policy; or
c. File an amended proof of loss as long as it is filed within 60 days of the date of the loss.
K. Abandonment
You may not abandon damaged or undamaged insured property to us.
L. Salvage
We may permit you to keep damaged insured property after a loss, and we will reduce the amount of the loss proceeds payable to you under the policy by the value of the salvage.
M. Appraisal
If you and we fail to agree on the actual cash value of the damaged property so as to determine the amount of loss, either may demand an appraisal of the loss. In this event, you and we will each choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the insured property is located. The appraisers will separately state the actual cash value and the amount of loss to each item. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of actual cash value and loss.
Each party will:
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.
N. Mortgage Clause
1. The word "mortgagee" includes trustee.
2. Any loss payable under Coverage A--Building Property will be paid to any mortgagee of whom we have actual notice, as well as any other mortgagee or loss payee determined to exist at the time of loss, and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.
3. If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:
a. Notifies us of any change in the ownership or occupancy, or substantial change in risk of which the mortgagee is aware;
b. Pays any premium due under this policy on demand if you have neglected to pay the premium; and
c. Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so.
4. All terms of this policy apply to the mortgagee.
5. The mortgagee has the right to receive loss payment even if the mortgagee has started foreclosure or similar action on the building.
6. If we decide to cancel or not renew this policy, it will continue in effect for the benefit of the mortgagee only for 30 days after we notify the mortgagee of the cancellation or non-renewal.
7. If we pay the mortgagee for any loss and deny payment to you, we are subrogated to all the rights of the mortgagee granted under the mortgage on the property. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.
O. Suit Against Us
You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year of the date of the written denial of all or part of the claim, and you must file the suit in the United States District Court of the district in which the insured property was located at the time of loss. This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.
P. Subrogation
Whenever we make a payment for a loss under this policy, we are subrogated to your right to re-cover for that loss from any other person. That means that your right to recover for a loss that was partly or totally caused by someone else is automatically transferred to us, to the extent that we have paid you for the loss. We may require you to acknowledge this transfer in writing. After the loss, you may not give up our right to recover this money or do anything that would prevent us from recovering it. If you make any claim against any person who caused your loss and recover any money, you must pay us back first before you may keep any of that money.
Q. Continuous Lake Flood
1. If an insured building has been flooded by rising lake waters continuously for 90 days or more and it appears reasonably certain that a continuation of this flooding will result in an insured loss to the insured building equal to or greater than the building policy limits plus the deductible or the maximum payable under the policy for any one building loss, we will pay you the lesser of these two amounts without waiting for the further damage to occur if you sign a release agreeing:
a. To make no further claim under this policy;
b. Not to seek renewal of this policy;
c. Not to apply for any flood insurance under the Act for property at the described location;
d. Not to seek a premium refund for current or prior terms.
If the policy term ends before the insured building has been flooded continuously for 90 days, the provisions of this paragraph Q.1 will apply when the insured building suffers a covered loss before the policy term ends.
2. If your insured building is subject to continuous lake flooding from a closed basin lake, you may elect to file a claim under either paragraph Q.1 above or Q.2 (A "closed basin lake" is a natural lake from which water leaves primarily through evaporation and whose surface area now exceeds or has exceeded one square mile at any time in the recorded past. Most of the nation's closed basin lakes are in the western half of the United States where annual evaporation exceeds annual precipitation and where lake levels and surface areas are subject to considerable fluctuation due to wide variations in the climate. These lakes may overtop their basins on rare occasions.) Under this paragraph Q.2, we will pay your claim as if the building is a total loss even though it has not been continuously inundated for 90 days, subject to the following conditions:
a. Lake floodwaters must damage or imminently threaten to damage your building.
b. Before approval of your claim, you must:
(1) Agree to a claim payment that reflects your buying back the salvage on a negotiated basis; and
(2) Grant the conservation easement described in FEMA's "Policy Guidance for Closed Basin Lakes" to be recorded in the office of the local recorder of deeds. FEMA, in consultation with the community in which the property is located, will identify on a map an area or areas of special consideration (ASC) in which there is a potential for flood damage from continuous lake flooding. FEMA will give the community the agreed-upon map showing the ASC. This easement will only apply to that portion of the property in the ASC. It will allow certain agricultural and recreational uses of the land. The only structures it will allow on any portion of the property within the ASC are certain simple agricultural and recreational structures. If any of these allowable structures are insurable buildings under the NFIP and are insured under the NFIP, they will not be eligible for the benefits of this paragraph Q.2. If a U.S. Army Corps of Engineers certified flood control project or otherwise certified flood control project later protects the property, FEMA will, upon request, amend the ASC to remove areas protected by those projects. The restrictions of the easement will then no longer apply to any portion of the property removed from the ASC; and
(3) Comply with paragraphs Q.1.a through Q.1.d above.
c. Within 90 days of approval of your claim, you must move your building to a new location outside the ASC. FEMA will give you an additional 30 days to move if you show there is sufficient reason to extend the time.
d. Before the final payment of your claim, you must acquire an elevation certificate and a floodplain development permit from the local floodplain administrator for the new location of your building.
e. Before the approval of your claim, the community having jurisdiction over your building must:
(1) Adopt a permanent land use ordinance, or a temporary moratorium for a period not to exceed 6 months to be followed immediately by a permanent land use ordinance that is consistent with the provisions specified in the easement required in paragraph Q.2.b above.
(2) Agree to declare and report any violations of this ordinance to FEMA so that under Section 1316 of the National Flood Insurance Act of 1968, as amended, flood insurance to the building can be denied; and
(3) Agree to maintain as deed-restricted, for purposes compatible with open space or agricultural or recreational use only, any affected property the community acquires an interest in. These deed restrictions must be consistent with the provisions of paragraph Q.2.b above, except that, even if a certified project protects the property, the land use restrictions continue to apply if the property was acquired under the Hazard Mitigation Grant Program or the Flood Mitigation Assistance Program. If a non-profit land trust organization receives the property as a donation, that organization must maintain the property as deed-restricted, consistent with the provisions of paragraph Q2.b. above.
f. Before the approval of your claim, the affected State must take all action set forth in FEMA's "Policy Guidance for Closed Basin Lakes."
g. You must have NFIP flood insurance coverage continuously in effect from a date established by FEMA until you file a claim under paragraph Q.2. If a subsequent owner buys NFIP insurance that goes into effect within 60 days of the date of transfer of title, any gap in coverage during that 60-day period will not be a violation of this continuous coverage requirement. For the purpose of honoring a claim under this paragraph Q.2, we will not consider to be in effect any increased coverage that became effective after the date established by FEMA. The exception to this is any in-creased coverage in the amount suggested by your insurer as an inflation adjustment.
h. This paragraph Q.2 will be in effect for a community when the FEMA Regional Administrator for the affected region provides to the community, in writing, the following:
(1) Confirmation that the community and the State are in compliance with the conditions in paragraphs Q.2.e and Q.2.f above, and
(2) The date by which you must have flood insurance in effect.
R. Loss Settlement
We will pay the least of the following amounts after application of the deductible:
1. The applicable amount of insurance under this policy;
2. The actual cash value; or
3. The amount it would cost to repair or replace the property with material of like kind and quality within a reasonable time after the loss.
VIII. Policy Nullification, Cancellation, and Non-Renewal
A. Policy Nullification for Fraud, Misrepresentation, or Making False Statements
1. With respect to all insureds under this policy, this policy is void and has no legal force and effect if at any time, before or after a loss, you or any other insured or your agent have, with respect to this policy or any other NFIP insurance:
a. Concealed or misrepresented any material fact or circumstance;
b. Engaged in fraudulent conduct; or
c. Made false statements.
2. Policies voided under A.1 cannot be renewed or replaced by a new NFIP policy.
3. Policies are void as of the date the acts described in A.1 above were committed.
4. Fines, civil penalties, and imprisonment under applicable Federal laws may also apply to the acts of fraud or concealment described above.
B. Policy Nullification for Reasons Other Than Fraud
1. This policy is void from its inception, and has no legal force or effect, if:
a. The property listed on the application is located in a community that was not participating in the NFIP on this policy's inception date and did not join or reenter the program during the policy term and before the loss occurred;
b. The property listed on the application is otherwise not eligible for coverage under the NFIP at the time of the initial application;
c. You never had an insurable interest in the property listed on the application;
d. You provided an agent with an application and payment, but the payment did not clear; or
e. We receive notice from you, prior to the policy effective date, that you have determined not to take the policy and you are not subject a requirement to obtain and maintain flood insurance pursuant to any statute, regulation, or contract.
2. In such cases, you will be entitled to a full refund of all premium, fees, and surcharges received. However, if a claim was paid for a policy that is void, the claim payment must be returned to FEMA or offset from the premiums to be refunded before the refund will be processed.
C. Cancellation of the Policy by You
1. You may cancel this policy in accordance with the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
2. If you cancel this policy, you may be entitled to a full or partial refund of premium, surcharges, or fees under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
D. Cancellation of the Policy by Us
1. Cancellation for Underpayment of Amounts Owed on Policy. This policy will be cancelled, pursuant to VII.D.2, if it is determined that the premium amount you paid is not sufficient to buy any amount of coverage, and you do not pay the additional amount of premium owed to increase the coverage to the originally requested amount within the required time period.
2. Cancellation Due to Lack of an Insurable Interest.
a. If you no longer have an insurable interest in the insured property, we will cancel this policy. You will cease to have an insurable interest if:
(1) For building coverage, the building was sold, destroyed, or removed.
(2) For contents coverage, the contents were sold or transferred ownership, or the contents were completely removed from the described location.
b. If your policy is cancelled for this reason, you may be entitled to a partial refund of premium under the applicable rules and regulations of the NFIP.
3. Cancellation of Duplicate Policies.
a. Your property may not be insured by more than one NFIP policy, and payment for damages to your property will only be made under one policy.
b. If the property is insured by more than one NFIP policy, we will cancel all but one of the policies. The policy, or policies, will be selected for cancellation in accordance with 44 CFR 62.5 and the applicable rules and guidance of the NFIP.
c. If this policy is cancelled pursuant to VIII.D.4.b, you may be entitled to a full or partial refund of premium, surcharges, or fees under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
4. Cancellation Due to Physical Alteration of Property.
a. If the insured building has been physically altered in such a manner that it is no longer eligible for flood insurance coverage, we will cancel this policy.
b. If your policy is cancelled for this reason, you may be entitled to a partial refund of premium under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
E. Non-Renewal of the Policy by Us
Your policy will not be renewed if:
1. The community where your insured property is located is suspended or stops participating in the NFIP;
2. Your building is otherwise ineligible for flood insurance under the Act;
3. You have failed to provide the information we requested for the purpose of rating the policy within the required deadline.
IX. Liberalization Clause
If we make a change that broadens your coverage under this edition of our policy, but does not re-quire any additional premium, then that change will automatically apply to your insurance as of the date we implement the change, provided that this implementation date falls within 60 days before or during the policy term stated on the Declarations Page.
X. What Law Governs
This policy and all disputes arising from the insurer's policy issuance, policy administration, or the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4001, et seq.), and Federal common law.
In Witness Whereof, we have signed this policy below and hereby enter into this Insurance Agreement.
Administrator, Federal Insurance and Mitigation Administration
14. Revise Appendix A(3) to Part 61 to read as follows:
Appendix A(3) to Part 61
Federal Emergency Management Agency, Federal Insurance and Mitigation Administration
Standard Flood Insurance Policy
RESIDENTIAL CONDOMINIUM BUILDING ASSOCIATION POLICY
Please read the policy carefully. The flood insurance provided is subject to limitations, restrictions, and exclusions.
I. Agreement
A. This policy covers only a residential condominium building in a regular program community. If the community reverts to emergency program status during the policy term and remains as an emergency program community at time of renewal, this policy cannot be renewed.
B. The Federal Emergency Management Agency (FEMA) provides flood insurance under the terms of the National Flood Insurance Act of 1968 and its amendments, and Title 44 of the Code of Federal Regulations.
C. We will pay you for direct physical loss by or from flood to your insured property if you:
1. Have paid the full amount due (including applicable premiums, surcharges, and fees);
2. Comply with all terms and conditions of this policy; and
3. Have furnished accurate information and statements.
D. We have the right to review the information you give us at any time and revise your policy based on our review.
E. This policy insures only one building. If you own more than one building, coverage will apply to the single building specifically described in the Flood Insurance Application.
F. Subject to the exception in Section I.G below, multiple policies with building coverage cannot be issued to insure a single building to one insured or to different insureds, even if issued through different NFIP insurers. Payment for damages may only be made under a single policy for building damages under Coverage A--Building Property.
G. A Dwelling Form policy with building coverage may be issued to a unit owner in a condominium building that is also insured under a Residential Condominium Building Association Policy (RCBAP). However, no more than $250,000 may be paid in combined benefits for a single unit under the Dwelling Form and the RCBAP. We will only pay for damage once. Items of damage paid for under a RCBAP cannot also be claimed under the Dwelling Form policy.
II. Definitions
A. In this policy, "you" and "your" refer to the named insured(s) shown on the Declarations Page of this policy. The named insured must also include the building owner if building coverage is purchased. Insured(s) includes: Any mortgagee and loss payee named in the Application and Declarations Page, as well as any other mortgagee or loss payee determined to have an existing interest at the time of loss, in the order of precedence. "We," "us," and "our" refer to the insurer.
Some definitions are complex because they are provided as they appear in the law or regulations, or result from court cases.
B. Flood, as used in this flood insurance policy, means:
1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property) from:
a. Overflow of inland or tidal waters,
b. Unusual and rapid accumulation or runoff of surface waters from any source,
c. Mudflow.
2. Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels which result in a flood as defined in B.1.a above.
C. The following are the other key definitions we use in this policy:
1. Act. The National Flood Insurance Act of 1968 and any amendments to it.
2. Actual Cash Value. The cost to replace an insured item of property at the time of loss, less the value of its physical depreciation.
3. Application. The statement made and signed by you or your agent in applying for this policy. The application gives information we use to determine the eligibility of the risk, the kind of policy to be issued, and the correct premium payment. The application is part of this flood insurance policy.
4. Base Flood. A flood having a one percent chance of being equaled or exceeded in any given year.
5. Basement. Any area of a building, including any sunken room or sunken portion of a room, having its floor below ground level on all sides.
6. Building.
a. A structure with two or more outside rigid walls and a fully secured roof that is affixed to a permanent site;
b. A manufactured home, also known as a mobile home, is a structure built on a permanent chassis, transported to its site in one or more sections, and affixed to a permanent foundation); or
c. A travel trailer without wheels, built on a chassis and affixed to a permanent foundation, that is regulated under the community's floodplain management and building ordinances or laws.
Building does not mean a gas or liquid storage tank, shipping container, or a recreational vehicle, park trailer, or other similar vehicle, except as described in C.6.c above.
7. Cancellation. The ending of the insurance coverage provided by this policy before the expiration date.
8. Condominium. That form of ownership of one or more buildings in which each unit owner has an undivided interest in common elements.
9. Condominium Association. The entity made up of the unit owners responsible for the maintenance and operation of:
a. Common elements owned in undivided shares by unit owners; and
b. Other buildings in which the unit owners have use rights; where membership in the entity is a required condition of ownership.
10. Condominium Building. A type of building for which the form of ownership is one in which each unit owner has an undivided interest in common elements of the building.
11. Declarations Page. A computer-generated summary of information you provided in your application for insurance. The Declarations Page also describes the term of the policy, limits of coverage, and displays the premium and our name. The Declarations Page is a part of this flood insurance policy.
12. Deductible. The fixed amount of an insured loss that is your responsibility and that is incurred by you before any amounts are paid for the insured loss under this policy.
13. Described Location. The location where the insured building or personal property are found. The described location is shown on the Declarations Page.
14. Direct Physical Loss By or From Flood. Loss or damage to insured property, directly caused by a flood. There must be evidence of physical changes to the property.
15. Elevated Building. A building that has no basement and that has its lowest elevated floor raised above ground level by foundation walls, shear walls, posts, piers, pilings, or columns.
16. Emergency Program. The initial phase of a community's participation in the National Flood Insurance Program. During this phase, only limited amounts of insurance are available under the Act and the regulations prescribed pursuant to the Act.
17. Federal Policy Fee. A flat rate charge you must pay on each new or renewal policy to defray certain administrative expenses incurred in carrying out the National Flood Insurance Program.
18. Improvements. Fixtures, alterations, installations, or additions comprising a part of the residential condominium building, including improvements in the units.
19. Mudflow. A river of liquid and flowing mud on the surface of normally dry land areas, as when earth is carried by a current of water. Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.
20. National Flood Insurance Program (NFIP). The program of flood insurance coverage and floodplain management administered under the Act and applicable Federal regulations in Title 44 of the Code of Federal Regulations, Subchapter B.
21. Policy. The entire written contract between you and us. It includes:
a. This printed form;
b. The application and Declarations Page;
c. Any endorsement(s) that may be issued; and
d. Any renewal certificate indicating that coverage has been instituted for a new policy and new policy term. Only one building, which you specifically described in the application, may be insured under this policy.
22. Pollutants. Substances that include, but are not limited to, any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. "Waste" includes, but is not limited to, materials to be recycled, reconditioned, or reclaimed.
23. Post-FIRM Building. A building for which construction or substantial improvement occurred after December 31, 1974, or on or after the effective date of an initial Flood Insurance Rate Map (FIRM), whichever is later.
24. Probation Surcharge. A flat charge you must pay on each new or renewal policy issued covering property in a community the NFIP has placed on probation under the provisions of 44 CFR 59.24.
25. Regular Program. The final phase of a community's participation in the National Flood Insurance Program. In this phase, a Flood Insurance Rate Map is in effect and full limits of coverage are available under the Act and the regulations prescribed pursuant to the Act.
26. Residential Condominium Building. A building, condominium, containing one or more family units and in which at least 75 percent of the floor area is residential.
27. Special Flood Hazard Area (SFHA). An area having special flood or mudflow, and/or flood-related erosion hazards, and shown on a Flood Hazard Boundary Map or Flood Insurance Rate Map as Zone A, AO, A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-A30, V1-V30, VE, or V.
28. Unit. A single-family residential space in a residential condominium building.
29. Valued Policy. A policy in which the insured and the insurer agree on the value of the property insured, that value being payable in the event of a total loss. The Standard Flood Insurance Policy is not a valued policy.
III. Property Covered
A. Coverage A--Building Property
We insure against direct physical loss by or from flood to:
1. The residential condominium building described on the Declarations Page at the described location, including all units within the building and the improvements within the units.
2. We also insure such building property for a period of 45 days at another location, as set forth in III.C.2.b, Property Removed to Safety.
3. Additions and extensions attached to and in contact with the building by means of a rigid exterior wall, a solid load-bearing interior wall, a stairway, an elevated walkway, or a roof. At your option, additions and extensions connected by any of these methods may be separately insured. Additions and extensions attached to and in contact with the building by means of a common interior wall that is not a solid load-bearing wall are always considered part of the building and cannot be separately insured.
4. The following fixtures, machinery and equipment, including its units, which are insured under Coverage A only:
a. Awnings and canopies;
b. Blinds;
c. Carpet permanently installed over unfinished flooring;
d. Central air conditioners;
e. Elevator equipment;
f. Fire extinguishing apparatus;
g. Fire sprinkler systems;
h. Walk-in freezers;
i. Furnaces;
j. Light fixtures;
k. Outdoor antennas and aerials fastened to buildings;
l. Permanently installed cupboards, bookcases, paneling, and wallpaper;
m. Pumps and machinery for operating pumps;
n. Ventilating equipment;
o. Wall mirrors, permanently installed; and
p. In the units within the building, installed:
(1) Built-in dishwashers;
(2) Built-in microwave ovens;
(3) Garbage disposal units;
(4) Hot water heaters, including solar water heaters;
(5) Kitchen cabinets;
(6) Plumbing fixtures;
(7) Radiators;
(8) Ranges;
(9) Refrigerators; and
(10) Stoves.
5. Materials and supplies to be used for construction, alteration or repair of the insured building while the materials and supplies are stored in a fully enclosed building at the described location or on an adjacent property.
6. A building under construction, alteration, or repair at the described location.
a. If the structure is not yet walled or roofed as described in the definition for building (See II.B.6.a.) then coverage applies:
(1) Only while such work is in progress; or
(2) If such work is halted, only for a period of up to 90 continuous days thereafter.
b. However, coverage does not apply until the building is walled and roofed if the lowest floor, including the basement floor, of a non-elevated building or the lowest elevated floor of an elevated building is:
(1) Below the base flood elevation in Zones AH, AE, A1-30, AR, AR/AE, AR/AH, AR/A1-30, AR/A, AR/AO; or
(2) Below the base flood elevation adjusted to include the effect of wave action in Zones VE or V1-30.
The lowest floor level is based on the bottom of the lowest horizontal structural member of the floor in Zones VE or V1-V30 or top of the floor in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A, and AR/AO.
7. A manufactured home or a travel trailer, as described in the II.C.6. If the manufactured home is in a special flood hazard area, it must be anchored in the following manner at the time of the loss:
a. By over-the-top or frame ties to ground anchors; or
b. In accordance with the manufacturer's specifications; or
c. In compliance with the community's floodplain management requirements unless it has been continuously insured by the NFIP at the same described location since September 30, 1982.
8. Items of property below the lowest elevated floor of an elevated post-FIRM building located in zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement, regardless of the zone. Coverage is limited to the following:
a. Any of the following items, if installed in their functioning locations and, if necessary for operation, connected to a power source:
(1) Central air conditioners;
(2) Cisterns and the water in them;
(3) Drywall for walls and ceilings in a basement and the cost of labor to nail it, unfinished and unfloated and not taped, to the framing;
(4) Electrical junction and circuit breaker boxes;
(5) Electrical outlets and switches;
(6) Elevators, dumbwaiters, and related equipment, except for related equipment installed below the base flood elevation after September 30, 1987;
(7) Fuel tanks and the fuel in them;
(8) Furnaces and hot water heaters;
(9) Heat pumps;
(10) Nonflammable insulation in a basement;
(11) Pumps and tanks used in solar energy systems;
(12) Stairways and staircases attached to the building, not separated from it by elevated walkways;
(13) Sump pumps;
(14) Water softeners and the chemicals in them, water filters, and faucets installed as an integral part of the plumbing system;
(15) Well water tanks and pumps;
(16) Required utility connections for any item in this list; and
(17) Footings, foundations, posts, pilings, piers, or other foundation walls and anchorage systems required to support a building.
b. Clean-up.
B. Coverage B--Personal Property
1. If you have purchased personal property coverage, we insure, subject to B.2 and B.3 below, against direct physical loss by or from flood to personal property that is inside the fully enclosed insured building and is:
a. Owned by the unit owners of the condominium association in common, meaning property in which each unit owner has an undivided ownership interest; or
b. Owned solely by the condominium association and used exclusively in the conduct of the business affairs of the condominium association.
2. We also insure such personal property for 45 days while stored at a temporary location, as set forth in III.C.2.b, Property Removed to Safety.
3. Coverage for personal property includes the following property, subject to B.1. above, which is covered under Coverage B only:
a. Air conditioning units, portable or window type;
b. Carpets, not permanently installed, over unfinished flooring;
c. Carpets over finished flooring;
d. Clothes washers and dryers;
e. "Cook-out" grills;
f. Food freezers, other than walk-in, and food in any freezer;
g. Outdoor equipment and furniture stored inside the insured building;
h. Ovens and the like; and
i. Portable microwave ovens and portable dishwashers.
4. Coverage for items of property in a building enclosure below the lowest elevated floor of an elevated post-FIRM building located in zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement, regardless of the zone, is limited to the following items, if installed in their functioning locations and, if necessary for operation, connected to a power source:
a. Air conditioning units, portable or window type;
b. Clothes washers and dryers; and
c. Food freezers, other than walk-in, and food in any freezer.
5. Special Limits. We will pay no more than $2,500 for any one loss to one or more of the following kinds of personal property:
a. Artwork, photographs, collectibles, or memorabilia, including but not limited to, porcelain or other figures, and sports cards;
b. Rare books or autographed items;
c. Jewelry, watches, precious and semi-precious stones, or articles of gold, silver, or platinum;
d. Furs or any article containing fur which represents its principal value.
6. We will pay only for the functional value of antiques.
C. Coverage C--Other Coverages
1. Debris Removal.
a. We will pay the expense to remove non-owned debris that is on or in insured property and debris of insured property anywhere.
b. If you or a member of your household perform the removal work, the value of your work will be based on the Federal minimum wage.
c. This coverage does not increase the Coverage A or Coverage B limit of liability.
2. Loss Avoidance Measures.
a. Sandbags, Supplies, and Labor.
(1) We will pay up to $1,000 for costs you incur to protect the insured building from a flood or imminent danger of flood, for the following:
(a) Your reasonable expenses to buy:
(i) Sandbags, including sand to fill them;
(ii) Fill for temporary levees;
(iii) Pumps; and
(iv) Plastic sheeting and lumber used in connection with these items.
(b) The value of work, at the Federal minimum wage, that you perform.
(2) This coverage for Sandbags, Supplies and Labor only applies if damage to insured property by or from flood is imminent and the threat of flood damage is apparent enough to lead a person of common prudence to anticipate flood damage. One of the following must also occur:
(a) A general and temporary condition of flooding in the area near the described location must occur, even if the flood does not reach the building; or
(b) A legally authorized official must issue an evacuation order or other civil order for the community in which the building is located calling for measures to preserve life and property from the peril of flood.
b. Property Removed to Safety.
(1) We will pay up to $1,000 for the reasonable expenses you incur to move insured property to a place other than the described location that contains the property in order to protect it from flood or the imminent danger of flood. Reasonable expenses include the value of work, at the Federal minimum wage, you or a member of your household perform.
(2) If you move insured property to a location other than the described location that contains the property, in order to protect it from flood or the imminent danger of flood, we will cover such property while at that location for a period of 45 consecutive days from the date you begin to move it there.
(3) The personal property that is moved must be placed in a fully enclosed building or otherwise reasonably protected from the elements. Any property removed, including a moveable home described in II.6.b and c, must be placed above ground level or outside of the special flood hazard area
(4) This coverage does not increase the Coverage A or Coverage B limit of liability.
D. Coverage D--Increased Cost of Compliance
1. General.
This policy pays you to comply with a State or local floodplain management law or ordinance affecting repair or reconstruction of a building suffering flood damage. Compliance activities eligible for payment are: elevation, floodproofing, relocation, or demolition (or any combination of these activities) of your building. Eligible floodproofing activities are limited to:
a. Non-residential buildings.
b. Residential buildings with basements that satisfy FEMA's standards published in the Code of Federal Regulations [44 CFR 60.6 (b) or (c)].
2. Limit of Liability.
We will pay you up to $30,000 under this Coverage D (Increased Cost of Compliance), which only applies to policies with building coverage (Coverage A). Our payment of claims under Coverage D is in addition to the amount of coverage which you selected on the application and which appears on the Declarations Page. But, the maximum you can collect under this policy for both Coverage A--Building Property and Coverage D--Increased Cost of Compliance cannot exceed the maximum permitted under the Act. We do not charge a separate deductible for a claim under Coverage D.
3. Eligibility.
a. A building covered under Coverage A (Building Property) sustaining a loss caused by a flood as defined by this policy must:
(1) Be a "repetitive loss building." A repetitive loss building is one that meets the following conditions:
(a) The building is insured by a contract of flood insurance issued under the NFIP.
(b) The building has suffered flood damage on two occasions during a 10-year period which ends on the date of the second loss.
(c) The cost to repair the flood damage, on average, equaled or exceeded 25 percent of the market value of the building at the time of each flood loss.
(d) In addition to the current claim, the NFIP must have paid the previous qualifying claim, and the State or community must have a cumulative, substantial damage provision or repetitive loss provision in its floodplain management law or ordinance being enforced against the building; or
(2) Be a building that has had flood damage in which the cost to repair equals or exceeds 50 percent of the market value of the building at the time of the flood. The State or community must have a substantial damage provision in its floodplain management law or ordinance being enforced against the building.
b. This Coverage D pays you to comply with State or local floodplain management laws or ordinances that meet the minimum standards of the National Flood Insurance Program found in the Code of Federal Regulations at 44 CFR 60.3. We pay for compliance activities that exceed those standards under these conditions:
(1) 3.a.1 above.
(2) Elevation or floodproofing in any risk zone to preliminary or advisory base flood elevations provided by FEMA which the State or local government has adopted and is enforcing for flood-damaged buildings in such areas. (This includes compliance activities in B, C, X, or D zones which are being changed to zones with base flood elevations. This also includes compliance activities in zones where base flood elevations are being increased, and a flood-damaged building must comply with the higher advisory base flood elevation.) Increased Cost of Compliance coverage does not apply to situations in B, C, X, or D zones where the community has derived its own elevations and is enforcing elevation or floodproofing requirements for flood-damaged buildings to elevations derived solely by the community.
(3) Elevation or floodproofing above the base flood elevation to meet State or local "freeboard" requirements, i.e., that a building must be elevated above the base flood elevation.
c. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States and communities must require the elevation or floodproofing of buildings in unnumbered A zones to the base flood elevation where elevation data is obtained from a Federal, State, or other source. Such compliance activities are also eligible for Coverage D.
d. Coverage D will pay for the incremental cost, after demolition or relocation, of elevating or floodproofing a building during its rebuilding at the same or another site to meet State or local floodplain management laws or ordinances, subject to Exclusion D.5.g below relating to improvements.
e. Coverage D will pay to bring a flood-damaged building into compliance with State or local floodplain management laws or ordinances even if the building had received a variance before the present loss from the applicable floodplain management requirements.
4. Conditions.
a. When a building covered under Coverage A--Building Property sustains a loss caused by a flood, our payment for the loss under this Coverage D will be for the increased cost to elevate, floodproof, relocate, or demolish (or any combination of these activities) caused by the enforcement of current State or local floodplain management ordinances or laws. Our payment for eligible demolition activities will be for the cost to demolish and clear the site of the building debris or a portion thereof caused by the enforcement of current State or local floodplain management ordinances or laws. Eligible activities for the cost of clearing the site will include those necessary to discontinue utility service to the site and ensure proper abandonment of on-site utilities.
b. When the building is repaired or rebuilt, it must be intended for the same occupancy as the present building unless otherwise required by current floodplain management ordinances or laws.
5. Exclusions.
Under this Coverage D (Increased Cost of Compliance) we will not pay for:
cost to comply with any floodplain management law or ordinance in communities participating in the Emergency Program.
b. The cost associated with enforcement of any ordinance or law that requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.
c. The loss in value to any insured building due to the requirements of any ordinance or law.
d. The loss in residual value of the undamaged portion of a building demolished as a consequence of enforcement of any State or local floodplain management law or ordinance.
e. Any Increased Cost of Compliance under this Coverage D:
(1) Until the building is elevated, floodproofed, demolished, or relocated on the same or to another premises; and
(2) Unless the building is elevated, floodproofed, demolished, or relocated as soon as reasonably possible after the loss, not to exceed two years.
f. Any code upgrade requirements, e.g., plumbing or electrical wiring, not specifically related to the State or local floodplain management law or ordinance.
g. Any compliance activities needed to bring additions or improvements made after the loss occurred into compliance with State or local floodplain management laws or ordinances.
h. Loss due to any ordinance or law that you were required to comply with before the current loss.
i. Any rebuilding activity to standards that do not meet the NFIP's minimum requirements. This includes any situation where the insured has received from the State or community a variance in connection with the current flood loss to rebuild the property to an elevation below the base flood elevation.
j. Increased Cost of Compliance for a garage or carport.
k. Any building insured under an NFIP Group Flood Insurance Policy.
l. Assessments made by a condominium association on individual condominium unit owners to pay increased costs of repairing commonly owned buildings after a flood in compliance with State or local floodplain management ordinances or laws.
6. Other Provisions.
a. Increased Cost of Compliance coverage will not be included in the calculation to determine whether coverage meets the coinsurance requirement for replacement cost coverage under Art. VIII.R. ("Loss Settlement").
b. All other conditions and provisions of this policy apply.
IV. Property Not Covered
We do not insure any of the following:
operty not inside a building;
2. A building, and personal property in it, located entirely in, on, or over water or seaward of mean high tide if it was constructed or substantially improved after September 30, 1982;
3. Open structures, including a building used as a boathouse or any structure or building into which boats are floated, and personal property located in, on, or over water;
4. Recreational vehicles other than travel trailers described in the Definitions section (see II.C.6.c) whether affixed to a permanent foundation or on wheels;
5. Self-propelled vehicles or machines, including their parts and equipment. However, we do cover self-propelled vehicles or machines not licensed for use on public roads that are:
a. Used mainly to service the described location or
b. Designed and used to assist handicapped persons, while the vehicles or machines are inside a building at the described location;
6. Land, land values, lawns, trees, shrubs, plants, growing crops, or animals;
7. Accounts, bills, coins, currency, deeds, evidences of debt, medals, money, scrip, stored value cards, postage stamps, securities, bullion, manuscripts, or other valuable papers;
8. Underground structures and equipment, including wells, septic tanks, and septic systems;
9. Those portions of walks, walkways, decks, driveways, patios, and other surfaces, all whether protected by a roof or not, located outside the perimeter, exterior walls of the insured building;
10. Containers, including related equipment, such as, but not limited to, tanks containing gases or liquids;
11. Buildings and all their contents if more than 49 percent of the actual cash value of the building is below ground, unless the lowest level is at or above the base flood elevation and is below ground by reason of earth having been used as insulation material in conjunction with energy efficient building techniques;
12. Fences, retaining walls, seawalls, bulkheads, wharves, piers, bridges, and docks;
13. Aircraft or watercraft, or their furnishings and equipment;
14. Hot tubs and spas that are not bathroom fixtures, and swimming pools, and their equipment such as, but not limited to, heaters, filters, pumps, and pipes, wherever located;
15. Property not eligible for flood insurance pursuant to the provisions of the Coastal Barrier Resources Act and the Coastal Barrier Improvements Act of 1990 and amendments to these Acts;
16. Personal property used in connection with any incidental commercial occupancy or use of the building.
V. Exclusions
A. We only pay for "direct physical loss by or from flood," which means that we do not pay you for:
1. Loss of revenue or profits;
2. Loss of access to the insured property or described location;
3. Loss of use of the insured property or described location;
4. Loss from interruption of business or production;
5. Any additional living expenses incurred while the insured building is being repaired or is unable to be occupied for any reason;
6. The cost of complying with any ordinance or law requiring or regulating the construction, demolition, remodeling, renovation, or repair of property, including removal of any resulting debris. This exclusion does not apply to any eligible activities we describe in Coverage D--Increased Cost of Compliance; or
7. Any other economic loss you suffer.
B. Flood in Progress. If this policy became effective as of the time of a loan closing, as provided by 44 CFR 61.11(b), we will not pay for a loss caused by a flood that is a continuation of a flood that existed prior to coverage becoming effective. In all other circumstances, we will not pay for a loss caused by a flood that is a continuation of a flood that existed on or before the day you submitted the application for coverage under this policy and the correct premium. We will determine the date of application using 44 CFR 611.11(f).
C. We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that we do not cover are:
1. Earthquake;
2. Landslide;
3. Land subsidence;
4. Sinkholes;
5. Destabilization or movement of land that results from accumulation of water in subsurface land areas; or
6. Gradual erosion.
We do, however, pay for losses from mudflow and land subsidence as a result of erosion that are specifically covered under our definition of flood (See II.B.1.c and II.B.2).
D. We do not insure for direct physical loss caused directly or indirectly by:
1. The pressure or weight of ice;
2. Freezing or thawing;
3. Rain, snow, sleet, hail, or water spray;
4. Water, moisture, mildew, or mold damage that results primarily from any condition:
a. Substantially confined to the insured building; or
b. That is within your control including, but not limited to:
(1) Design, structural, or mechanical defects;
(2) Failures, stoppages, or breakage of water or sewer lines, drains, pumps, fixtures, or equipment; or
(3) Failure to inspect and maintain the property after a flood recedes;
5. Water or water-borne material that:
a. Backs up through sewers or drains;
b. Discharges or overflows from a sump, sump pump or related equipment; or
c. Seeps or leaks on or through the insured property;
unless there is a flood in the area and the flood is the proximate cause of the sewer or drain backup, sump pump discharge or overflow, or the seepage of water;
6. The pressure or weight of water unless there is a flood in the area and the flood is the proximate cause of the damage from the pressure or weight of water;
7. Power, heating, or cooling failure unless the failure results from direct physical loss by or from flood to power, heating, or cooling equipment on the described location;
8. Theft, fire, explosion, wind, or windstorm;
9. Anything you or your agents do or conspire to do to cause loss by flood deliberately; or
10. Alteration of the insured property that significantly increases the risk of flooding.
E. We do not insure for loss to any building or personal property located on land leased from the Federal Government, arising from or incident to the flooding of the land by the Federal Government, where the lease expressly holds the Federal Government harmless under flood insurance issued under any Federal Government program.
F. We do not pay for the testing for or monitoring of pollutants unless required by law or ordinance.
VI. Deductibles
A. When a loss is insured under this policy, we will pay only that part of the loss that exceeds your deductible amount, subject to the limit of liability that applies. The deductible amount is shown on the Declarations Page.
However, when a building under construction, alteration, or repair does not have at least two rigid exterior walls and a fully secured roof at the time of loss, your deductible amount will be two times the deductible that would otherwise apply to a completed building.
B. In each loss from flood, separate deductibles apply to the building and personal property insured by this policy.
C. No deductible applies to:
1. III.C.2. Loss Avoidance Measures; or
2. III.D. Increased Cost of Compliance.
VII. Coinsurance
A. This Coinsurance Section applies only to coverage on the building.
B. We will impose a penalty on loss payment unless the amount of insurance applicable to the damaged building is:
1. At least 80 percent of its replacement cost; or
2. The maximum amount of insurance available for that building under the NFIP, whichever is less.
C. If the actual amount of insurance on the building is less than the required amount in accordance with the terms of VII.B above, then loss payment is determined as follows (subject to all other relevant conditions in this policy, including those pertaining to valuation, adjustment, settlement, and payment of loss):
1. Divide the actual amount of insurance carried on the building by the required amount of insurance.
2. Multiply the amount of loss, before application of the deductible, by the figure determined in C.1 above.
3. Subtract the deductible from the figure determined in C.2 above.
We will pay the amount determined in C.3 above, or the amount of insurance carried, whichever is less. The amount of insurance carried, if in excess of the applicable maximum amount of insurance available under the NFIP, is reduced accordingly.
Examples
Example #1 (Inadequate Insurance)
Replacement value of the building--$250,000
Required amount of insurance--$200,000
(80 percent of replacement value of $250,000)
Actual amount of insurance carried--$180,000
Amount of the loss--$150,000
Deductible--$500
Step 1: 180,000/200,000 = .90
(90 percent of what should be carried.)
Step 2: 150,000 x .90 = 135,000
Step 3: 135,000 500 = 134,500
We will pay no more than $134,500. The remaining $15,500 is not covered due to the coinsurance penalty ($15,000) and application of the deductible ($500).
Example #2 (Adequate Insurance)
Replacement value of the building--$500,000
Required amount of insurance--$400,000
(80 percent of replacement value of $500,000)
Actual amount of insurance carried--$400,000
Amount of the loss--$200,000
Deductible--$500
In this example there is no coinsurance penalty, because the actual amount of insurance carried meets the required amount. We will pay no more than $199,500 ($200,000 amount of loss minus the $500 deductible).
D. In calculating the full replacement cost of a building:
1. The replacement cost value of any covered building property will be included;
2. The replacement cost value of any building property not covered under this policy will not be included; and
3. Only the replacement cost value of improvements installed by the condominium association will be included.
VIII. General Conditions
A. Pair and Set Clause
In case of loss to an article that is part of a pair or set, we will have the option of paying you:
1. An amount equal to the cost of replacing the lost, damaged, or destroyed article, minus its depreciation, or
2. The amount that represents the fair proportion of the total value of the pair or set that the lost, damaged, or destroyed article bears to the pair or set.
B. Other Insurance
1. If a loss insured by this policy is also insured by other insurance that includes flood coverage not issued under the Act, we will not pay more than the amount of insurance that you are entitled to for lost, damaged, or destroyed property insured under this policy subject to the following:
a. We will pay only the proportion of the loss that the amount of insurance that applies under this policy bears to the total amount of insurance covering the loss, unless VIII.B.1.b or c immediately below applies.
b. If the other policy has a provision stating that it is excess insurance, this policy will be primary.
c. This policy will be primary (but subject to its own deductible) up to the deductible in the other flood policy (except another policy as described in VIII.B.1.b. above). When the other deductible amount is reached, this policy will participate in the same proportion that the amount of insurance under this policy bears to the total amount of both policies, for the remainder of the loss.
2. If there is a National Flood Insurance Program flood insurance policy in the name of a unit owner that covers the same loss as this policy, then this policy will be primary.
C. Amendments, Waivers, Assignment
This policy cannot be changed, nor can any of its provisions be waived, without the express written consent of the Federal Insurance Administrator. No action we take under the terms of this policy constitutes a waiver of any of our rights. You may assign this policy in writing when you transfer title of your property to someone else except under these conditions:
1. When this policy insures only personal property; or
2. When this policy insures a building under construction.
D. Insufficient Premium or Rating Information
1. Applicability. The following provisions apply to all instances where the premium paid on this policy is insufficient or where the rating information is insufficient, such as where an Elevation Certificate is not provided.
2. Reforming the Policy with Reduced Coverage. Except as otherwise provided in VIII.D.1 and VIII.D.4, if the premium we received from you was not sufficient to buy the kinds and amounts of coverage you requested, we will provide only the kinds and amounts of coverage that can be purchased for the premium payment we received.
a. For the purpose of determining whether your premium payment is sufficient to buy the kinds and amounts of coverage you requested, we will first deduct the costs of all applicable fees and surcharges.
b. If the amount paid, after deducting the costs of all applicable fees and surcharges, is not sufficient to buy any amount of coverage, your payment will be refunded. Unless the policy is reformed to increase the coverage amount to the amount originally requested pursuant to VIII.E.3, this policy will be cancelled, and no claims will be paid under this policy.
c. Coverage limits on the reformed policy will be based upon the amount of premium submitted per type of coverage, but will not exceed the amount originally requested.
3. Discovery of Insufficient Premium or Rating Information. If we discover that your premium payment was not sufficient to buy the requested amount of coverage, the policy will be reformed as described in VIII.D.2. You have the option of increasing the amount of coverage resulting from this reformation to the amount you requested as follows:
a. Insufficient Premium. If we discover that your premium payment was not sufficient to buy the requested amount of coverage, we will send you, and any mortgagee or trustee known to us, a bill for the required additional premium for the current policy term (or that portion of the current policy term following any endorsement changing the amount of coverage). If it is discovered that the initial amount charged to you for any fees or surcharges is incorrect, the difference will be added or deducted, as applicable, to the total amount in this bill.
(1) If you or the mortgagee or trustee pay the additional amount due within 30 days from the date of our bill, we will reform the policy to increase the amount of coverage to the originally requested amount, effective to the beginning of the current policy term (or subsequent date of any endorsement changing the amount of coverage).
(2) If you or the mortgagee or trustee do not pay the additional amount due within 30 days of the date of our bill, any flood insurance claim will be settled based on the reduced amount of coverage.
(3) As applicable, you have the option of paying all or part of the amount due out of a claim payment based on the originally requested amount of coverage.
b. Insufficient Rating Information. If we determine that the rating information we have is insufficient and prevents us from calculating the additional premium, we will ask you to send the required information. You must submit the information within 60 days of our request.
(1) If we receive the information within 60 days of our request, we will determine the amount of additional premium for the current policy term and follow the procedure in VIII.D.3.a above.
(2) If we do not receive the information within 60 days of our request, no claims will be paid until the requested information is provided. Coverage will be limited to the amount of coverage that can be purchased for the payments we received, as determined when the requested information is provided.
4. Coverage Increases. If we do not receive the amount requested in VIII.D.3.a or VIII.D.4.a, or the additional information requested in VIII.D.3.b or VIII.D.4.b by the date it is due, the amount of coverage under this policy can only be increased by endorsement subject to the appropriate waiting period. However, no coverage increases will be allowed until you have provided the information requested in VIII.D.3.b or VIII.D.4.b.
5. Falsifying Information. However, if we find that you or your agent intentionally did not tell us, or falsified, any important fact or circumstance or did anything fraudulent relating to this insurance, the provisions of IX.A apply.
E. Policy Renewal
1. This policy will expire at 12:01 a.m. on the last day of the policy term.
2. We must receive the payment of the appropriate renewal premium within 30 days of the expiration date.
3. If we find, however, that we did not place your renewal notice into the U.S. Postal Service, or if we did mail it, we made a mistake, e.g., we used an incorrect, incomplete, or illegible address, which delayed its delivery to you before the due date for the renewal premium, then we will follow these procedures:
a. If you or your agent notified us, not later than one year after the date on which the payment of the renewal premium was due, of non-receipt of a renewal notice before the due date for the renewal premium, and we determine that the circumstances in the preceding paragraph apply, we will mail a second bill providing a revised due date, which will be 30 days after the date on which the bill is mailed.
b. If we do not receive the premium requested in the second bill by the revised due date, then we will not renew the policy. In that case, the policy will remain as an expired policy as of the expiration date shown on the Declarations Page.
c. In connection with the renewal of this policy, we may ask you during the policy term to recertify, on a Recertification Questionnaire that we will provide you, the rating information used to rate your most recent application for or renewal of insurance.
F. Conditions Suspending or Restricting Insurance
We are not liable for loss that occurs while there is a hazard that is increased by any means within your control or knowledge.
G. Requirements in Case of Loss
In case of a flood loss to insured property, you must:
1. Give prompt written notice to us;
2. As soon as reasonably possible, separate the damaged and undamaged property, putting it in the best possible order so that we may examine it;
3. Prepare an inventory of damaged property showing the quantity, description, actual cash value, and amount of loss. Attach all bills, receipts, and related documents;
4. Within 60 days after the loss, send us a proof of loss, which is your statement of the amount you are claiming under the policy signed and sworn to by you, and which furnishes us with the following information:
a. The date and time of loss;
b. A brief explanation of how the loss happened;
c. Your interest (for example, "owner") and the interest, if any, of others in the damaged property;
d. Details of any other insurance that may cover the loss;
e. Changes in title or occupancy of the insured property during the term of the policy;
f. Specifications of damaged buildings and detailed repair estimates;
g. Names of mortgagees or anyone else having a lien, charge, or claim against the insured property;
h. Details about who occupied any insured building at the time of loss and for what purpose; and
i. The inventory of damaged personal property described in G.3 above.
5. In completing the proof of loss, you must use your own judgment concerning the amount of loss and justify that amount.
6. You must cooperate with the adjuster or representative in the investigation of the claim.
7. The insurance adjuster whom we hire to investigate your claim may furnish you with a proof of loss form, and she or he may help you complete it. However, this is a matter of courtesy only, and you must still send us a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it.
8. We have not authorized the adjuster to approve or disapprove claims or to tell you whether we will approve your claim.
9. At our option, we may accept the adjuster's report of the loss instead of your proof of loss. The adjuster's report will include information about your loss and the damages you sustained. You must sign the adjuster's report. At our option, we may require you to swear to the report.
H. Our Options After a Loss
Options we may, in our sole discretion, exercise after loss include the following:
1. At such reasonable times and places that we may designate, you must:
a. Show us or our representative the damaged property;
b. Submit to examination under oath, while not in the presence of another insured, and sign the same; and
c. Permit us to examine and make extracts and copies of:
(1) Any policies of property insurance insuring you against loss and the deed establishing your ownership of the insured real property;
(2) Condominium association documents including the Declarations of the condominium, its Articles of Association or Incorporation, Bylaws, and rules and regulations; and
(3) All books of accounts, bills, invoices and other vouchers, or certified copies pertaining to the damaged property if the originals are lost.
2. We may request, in writing, that you furnish us with a complete inventory of the lost, damaged, or destroyed property, including:
a. Quantities and costs;
b. Actual cash values or replacement cost (whichever is appropriate);
c. Amounts of loss claimed;
d. Any written plans and specifications for repair of the damaged property that you can reasonably make available to us; and
e. Evidence that prior flood damage has been repaired.
3. If we give you written notice within 30 days after we receive your signed, sworn proof of loss, we may:
a. Repair, rebuild, or replace any part of the lost, damaged, or destroyed property with material or property of like kind and quality or its functional equivalent; and
b. Take all or any part of the damaged property at the value that we agree upon or its appraised value.
I. No Benefit to Bailee
No person or organization, other than you, having custody of insured property will benefit from this insurance.
J. Loss Payment
1. We will adjust all losses with you. We will pay you unless some other person or entity is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss (or within 90 days after the insurance adjuster files the adjuster's report signed and sworn to by you in lieu of a proof of loss) and:
a. We reach an agreement with you;
b. There is an entry of a final judgment; or
c. There is a filing of an appraisal award with us, as provided in VIII.M.
2. If we reject your proof of loss in whole or in part you may:
a. Accept our denial of your claim;
b. Exercise your rights under this policy; or
c. File an amended proof of loss as long as it is filed within 60 days of the date of the loss.
K. Abandonment
You may not abandon damaged or undamaged insured property to us.
L. Salvage
We may permit you to keep damaged insured property after a loss, and we will reduce the amount of the loss proceeds payable to you under the policy by the value of the salvage.
M. Appraisal
If you and we fail to agree on the actual cash value or, if applicable, replacement cost of the damaged property so as to determine the amount of loss, then either may demand an appraisal of the loss. In this event, you and we will each choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the insured property is located. The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of actual cash value and loss, or if it applies, the replacement cost and loss.
Each party will:
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.
N. Mortgage Clause
1. The word "mortgagee" includes trustee.
2. Any loss payable under Coverage A--Building Property will be paid to any mortgagee of whom we have actual notice, as well as any other mortgagee or loss payee determined to exist at the time of loss, and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.
3. If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:
a. Notifies us of any change in the ownership or occupancy, or substantial change in risk of which the mortgagee is aware;
b. Pays any premium due under this policy on demand if you have neglected to pay the premium; and
c. Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so.
4. All terms of this policy apply to the mortgagee.
5. The mortgagee has the right to receive loss payment even if the mortgagee has started foreclosure or similar action on the building.
6. If we decide to cancel or not renew this policy, it will continue in effect for the benefit of the mortgagee only for 30 days after we notify the mortgagee of the cancellation or non-renewal.
7. If we pay the mortgagee for any loss and deny payment to you, we are subrogated to all the rights of the mortgagee granted under the mortgage on the property. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.
O. Suit Against Us
You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year of the date of the written denial of all or part of the claim, and you must file the suit in the United States District Court of the district in which the insured property was located at the time of loss. This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.
P. Subrogation
Whenever we make a payment for a loss under this policy, we are subrogated to your right to recover for that loss from any other person. That means that your right to recover for a loss that was partly or totally caused by someone else is automatically transferred to us, to the extent that we have paid you for the loss. We may require you to acknowledge this transfer in writing. After the loss, you may not give up our right to recover this money or do anything that would prevent us from recovering it. If you make any claim against any person who caused your loss and recover any money, you must pay us back first before you may keep any of that money.
Q. Continuous Lake Flood
1. If an insured building has been flooded by rising lake waters continuously for 90 days or more and it appears reasonably certain that a continuation of this flooding will result in an insured loss to the insured building equal to or greater than the building policy limits plus the deductible or the maximum payable under the policy for any one building loss, we will pay you the lesser of these two amounts without waiting for the further damage to occur if you sign a release agreeing:
a. To make no further claim under this policy;
b. Not to seek renewal of this policy;
c. Not to apply for any flood insurance under the Act for property at the described location;
d. Not to seek a premium refund for current or prior terms.
If the policy term ends before the insured building has been flooded continuously for 90 days, the provisions of this paragraph Q.1 will apply when the insured building suffers a covered loss before the policy term ends.
2. If your insured building is subject to continuous lake flooding from a closed basin lake, you may elect to file a claim under either paragraph Q.1 above or this paragraph Q.2 (A "closed basin lake" is a natural lake from which water leaves primarily through evaporation and whose surface area now exceeds or has exceeded one square mile at any time in the recorded past. Most of the nation's closed basin lakes are in the western half of the United States where annual evaporation exceeds annual precipitation and where lake levels and surface areas are subject to considerable fluctuation due to wide variations in the climate. These lakes may overtop their basins on rare occasions.) Under this paragraph Q.2, we will pay your claim as if the building is a total loss even though it has not been continuously inundated for 90 days, subject to the following conditions:
a. Lake floodwaters must damage or imminently threaten to damage your building.
b. Before approval of your claim, you must:
(1) Agree to a claim payment that reflects your buying back the salvage on a negotiated basis; and
(2) Grant the conservation easement contained in FEMA's "Policy Guidance for Closed Basin Lakes," to be recorded in the office of the local recorder of deeds. FEMA, in consultation with the community in which the property is located, will identify on a map an area or areas of special consideration (ASC) in which there is a potential for flood damage from continuous lake flooding. FEMA will give the community the agreed-upon map showing the ASC. This easement will only apply to that portion of the property in the ASC. It will allow certain agricultural and recreational uses of the land. The only structures that it will allow on any portion of the property within the ASC are certain simple agricultural and recreational structures. If any of these allowable structures are insurable buildings under the NFIP and are insured under the NFIP, they will not be eligible for the benefits of this paragraph Q.2. If a U.S. Army Corps of Engineers certified flood control project or otherwise certified flood control project later protects the property, FEMA will, upon request, amend the ASC to remove areas protected by those projects. The restrictions of the easement will then no longer apply to any portion of the property removed from the ASC; and
(3) Comply with paragraphs Q.1.a through Q.1.d above.
c. Within 90 days of approval of your claim, you must move your building to a new location outside the ASC. FEMA will give you an additional 30 days to move if you show there is sufficient reason to extend the time.
d. Before the final payment of your claim, you must acquire an elevation certificate and a floodplain development permit from the local floodplain administrator for the new location of your building.
e. Before the approval of your claim, the community having jurisdiction over your building must:
(1) Adopt a permanent land use ordinance, or a temporary moratorium for a period not to exceed 6 months to be followed immediately by a permanent land use ordinance, that is consistent with the provisions specified in the easement required in paragraph Q.2.b above;
(2) Agree to declare and report any violations of this ordinance to FEMA so that under Section 1316 of the National Flood Insurance Act of 1968, as amended, flood insurance to the building can be denied; and
(3) Agree to maintain as deed-restricted, for purposes compatible with open space or agricultural or recreational use only, any affected property the community acquires an interest in. These deed restrictions must be consistent with the provisions of paragraph Q.2.b above, except that even if a certified project protects the property, the land use restrictions continue to apply if the property was acquired under the Hazard Mitigation Grant Program or the Flood Mitigation Assistance Program. If a non-profit land trust organization receives the property as a donation, that organization must maintain the property as deed-restricted, consistent with the provisions of paragraph Q.2.b above.
f. Before the approval of your claim, the affected State must take all action set forth in FEMA's "Policy Guidance for Closed Basin Lakes."
g. You must have NFIP flood insurance coverage continuously in effect from a date established by FEMA until you file a claim under this paragraph Q.2. If a subsequent owner buys NFIP insurance that goes into effect within 60 days of the date of transfer of title, any gap in coverage during that 60-day period will not be a violation of this continuous coverage requirement. For the purpose of honoring a claim under this paragraph Q.2, we will not consider to be in effect any increased coverage that became effective after the date established by FEMA. The exception to this is any increased coverage in the amount suggested by your insurer as an inflation adjustment.
h. This paragraph Q.2 will be in effect for a community when the FEMA Regional Administrator for the affected region provides to the community, in writing, the following:
(1) Confirmation that the community and the State are in compliance with the conditions in paragraphs Q2.e and Q.2.f above, and
(2) The date by which you must have flood insurance in effect.
R. Loss Settlement
1. Introduction
This policy provides three methods of settling losses: Replacement Cost, Special Loss Settlement, and Actual Cash Value. Each method is used for a different type of property, as explained in a-c below.
a. Replacement Cost Loss, Settlement described in R.2 below applies to buildings other than manufactured homes or travel trailers.
b. Special Loss Settlement, described in R.3 below applies to a residential condominium building that is a travel trailer or a manufactured home.
c. Actual Cash Value loss settlement applies to all other property covered under this policy, as outlined in R.4. below.
2. Replacement Cost Loss Settlement
a. We will pay to repair or replace a damaged or destroyed building, after application of the deductible and without deduction for depreciation, but not more than the least of the following amounts:
(1) The amount of insurance in this policy that applies to the building;
(2) The replacement cost of that part of the building damaged, with materials of like kind and quality, and for like occupancy and use; or
(3) The necessary amount actually spent to repair or replace the damaged part of the building for like occupancy and use.
b. We will not be liable for any loss on a Replacement Cost Coverage basis unless and until actual repair or replacement of the damaged building or parts thereof, is completed.
c. If a building is rebuilt at a location other than the described location, we will pay no more than it would have cost to repair or rebuild at the described location, subject to all other terms of Replacement Cost Loss Settlement.
3. Special Loss Settlement
a. The following loss settlement conditions apply to a residential condominium building that is:
(1) A manufactured home or travel trailer, as defined in II.C.6.b and c, and
(2) at least 16 feet wide when fully assembled and has at least 600 square feet within its perimeter walls when fully assembled.
b. If such a building is totally destroyed or damaged to such an extent that, in our judgment, it is not economically feasible to repair, at least to its pre-damaged condition, we will, at our discretion, pay the least of the following amounts:
(1) The lesser of the replacement cost of the manufactured home or travel trailer or 1.5 times the actual cash value; or
(2) The Building Limit of liability shown on your Declarations Page.
c. If such a manufactured home or travel trailer is partially damaged and, in our judgment, it is economically feasible to repair it to its pre-damaged condition, we will settle the loss according to the Replacement Cost Loss Settlement conditions in R.2 above.
4. Actual Cash Value Loss Settlement
a. The types of property noted below are subject to actual cash value loss settlement:
(1) Personal property;
(2) Insured property abandoned after a loss and that remains as debris at the described location;
(3) Outside antennas and aerials, awning, and other outdoor equipment;
(4) Carpeting and pads;
(5) Appliances; and
(6) A manufactured home or mobile home or a travel trailer as defined in II.C.6.b or c that does not meet the conditions for special loss settlement in R.3 above.
b. We will pay the least of the following amounts:
(1) The applicable amount of insurance under this policy;
(2) The actual cash value, as defined in II.C.2; or
(3) The amount it would cost to repair or replace the property with material of like kind and quality within a reasonable time after the loss.
IX. Policy Nullification, Cancellation, and Non-Renewal
A. Policy Nullification for Fraud, Misrepresentation, or Making False Statements
1. With respect to all insureds under this policy, this policy is void and has no legal force and effect if at any time, before or after a loss, you or any other insured or your agent have, with respect to this policy or any other NFIP insurance:
a. Concealed or misrepresented any material fact or circumstance;
b. Engaged in fraudulent conduct; or
c. Made false statements.
2. Policies voided under A.1 cannot be renewed or replaced by a new NFIP policy.
3. Policies are void as of the date the acts described in A.1.above were committed.
4. Fines, civil penalties, and imprisonment under applicable Federal laws may also apply to the acts of fraud or concealment described above.
B. Policy Nullification for Reasons Other Than Fraud
1. This policy is void from its inception, and has no legal force or effect, if:
a. The property listed on the application is located in a community that was not participating in the NFIP on this policy's inception date and did not join or reenter the program during the policy term and before the loss occurred;
b. The property listed on the application is otherwise not eligible for coverage under the NFIP at the time of the initial application;
c. You never had an insurable interest in the property listed on the application;
d. You provided an agent with an application and payment, but the payment did not clear; or
e. We receive notice from you, prior to the policy effective date, that you have determined not to take the policy and you are not subject a requirement to obtain and maintain flood insurance pursuant to any statute, regulation, or contract.
2. In such cases, you will be entitled to a full refund of all premium, fees, and surcharges received. However, if a claim was paid for a policy that is void, the claim payment must be returned to FEMA or offset from the premiums to be refunded before the refund will be processed.
C. Cancellation of the Policy by You
1. You may cancel this policy in accordance with the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
2. If you cancel this policy, you may be entitled to a full or partial refund of premium, surcharges, or fees under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
D. Cancellation of the Policy by Us
1. Cancellation for Underpayment of Amounts Owed on This Policy. This policy will be cancelled, pursuant to VIII.D.2, if it is determined that the premium amount you paid is not sufficient to buy any amount of coverage, and you do not pay the additional amount of premium owed to increase the coverage to the originally requested amount within the required time period.
2. Cancellation Due to Lack of an Insurable Interest.
a. If you no longer have an insurable interest in the insured property, we will cancel this policy. You will cease to have an insurable interest if:
(1) For building coverage, the building was sold, destroyed, or removed.
(2) For contents coverage, the contents were sold or transferred ownership, or the contents were completely removed from the described location.
b. If your policy is cancelled for this reason, you may be entitled to a partial refund of premium under the applicable rules and regulations of the NFIP.
3. Cancellation of Duplicate Policies.
a. Except as allowed under Article I.F, your property may not be insured by more than one NFIP policy, and payment for damages to your property will only be made under one policy.
b. Except as allowed under Article I.G, if the property is insured by more than one NFIP policy, we will cancel all but one of the policies. The policy, or policies, will be selected for cancellation in accordance with 44 CFR 62.5 and the applicable rules and guidance of the NFIP.
c. If this policy is cancelled pursuant to VIII.D.3.a, you may be entitled to a full or partial refund of premium, surcharges, or fees under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
4. Cancellation Due to Physical Alteration of Property.
a. If the insured building has been physically altered in such a manner that it is no longer eligible for flood insurance coverage, we will cancel this policy.
b. If your policy is cancelled for this reason, you may be entitled to a partial refund of premium under the terms and conditions of this policy and the applicable rules and regulations of the NFIP.
E. Non-Renewal of the Policy by Us
Your policy will not be renewed if:
1. The community where your insured property is located is suspended or stops participating in the NFIP;
2. Your building is otherwise ineligible for flood insurance under the Act;
3. You have failed to provide the information we requested for the purpose of rating the policy within the required deadline.
X. Liberalization Clause
If we make a change that broadens your coverage under this edition of our policy, but does not require any additional premium, then that change will automatically apply to your insurance as of the date we implement the change, provided that this implementation date falls within 60 days before or during the policy term stated on the Declarations Page.
XI. What Law Governs
This policy and all disputes arising from the insurer's policy issuance, policy administration, or the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4001, et seq.), and Federal common law.
In Witness Whereof, we have signed this policy below and hereby enter into this Insurance Agreement.
Administrator, Federal Insurance and Mitigation Administration
PART 62--SALE OF INSURANCE AND ADJUSTMENT OF CLAIMS
15. Revise the authority citation for Part 62 to read as follows:
Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.
16. Revise SEC 62.3 to read as follows:
SEC 62.3 Servicing Agent.
(a) Pursuant to sections 1345 and 1346 of the Act, the Federal Insurance Administrator may enter into an agreement with a servicing agent to authorize it to assist in issuing flood insurance policies under the Program in communities designated by the Federal Insurance Administrator and to accept responsibility for delivery of policies and payment of claims for losses as prescribed by and at the discretion of the Federal Insurance Administrator.
(b) The servicing agent will arrange for the issuance of flood insurance to any person qualifying for such coverage under parts 61 and 64 of this subchapter who submits an application to the servicing agent in accordance with the terms and conditions of the contract between the Agency and the servicing agent.
17. Revise SEC 62.5 to read as follows:
SEC 62.5 Nullifications, Cancellations, and Premium Refunds.
(a) Nullification.
(1) Property Ineligible at Time of Application. FEMA will void a policy for a property that was not eligible for coverage at the time of the initial application from the commencement of the policy. FEMA must pay the policyholder a refund of all premium, fees, and surcharges paid from the date of commencement of the policy, but no more than 5 years prior to the date of date of receipt of verifiable evidence that the property was ineligible for coverage at the time of the initial application. If FEMA paid a claim for an ineligible property, the policyholder must return the claim payment to FEMA, or offset the payment from the premiums to be refunded, before FEMA will process the refund.
(2) Property Later Becomes Ineligible. FEMA may not renew a policy for a property that was eligible for coverage at the time of the initial application, but later became ineligible for coverage. In such instances, the FEMA must nullify the policy from the first renewal date after the property became ineligible. FEMA must refund all premium, fees, and surcharges paid from the first renewal date after the property became ineligible, but no more than 5 years prior to the date of receipt of verifiable evidence that the property was eligible for coverage at the time of the initial application, but later became ineligible for coverage. If FEMA paid a claim for a property after it became ineligible for coverage, the policyholder must return the claim payment to FEMA or FEMA must offset the amount of claim payment from the premiums to be refunded before FEMA may process the refund.
(3) Nullification Prior to Policy Effective Date. If FEMA nullifies a policy prior to the policy effective date, that policy will be void from the commencement of the nullified policy term. In such case, FEMA will refund all premium, fees, and surcharges paid for the current policy term only. If FEMA paid a claim for a policy that was improperly issued, the policyholder must return the claim payment to FEMA or FEMA must offset the amount of claim payment from the premiums to be refunded before the NFIP may process the refund.
(b) Cancellation Due to Lack of an Insurable Interest. If the policyholder had an insurable interest, but no longer has an insurable interest, in the insured property, FEMA must cancel the policy on the insured property. If FEMA cancels a policy for this reason, FEMA must refund the policyholder a pro rata share of the premium from the date the policyholder lost an insurable interest in the property, but no more than 5 years prior to the date of the cancellation request. FEMA must pay the policyholder a refund of all fees or surcharges for any full policy term during which the policyholder had no insurable interest in the insured property, but no more than 5 years prior to the date of the cancellation request. A policyholder ceases to have an insurable interest if:
(1) For building coverage, the building was sold, destroyed, or removed.
(2) For contents coverage, the contents were sold or transferred ownership, or the contents were completely removed from the described location.
(c) No Insurance Coverage Requirement. A policyholder may cancel a policy if the policyholder was subject to a requirement by a lender, loss payee, or other Federal agency to obtain and maintain flood insurance pursuant to statute, regulation, or contract, but there is no longer such a requirement. The policyholder will receive a refund of a pro rata share of the premium for the current policy term only, calculated from the date of the cancellation request, but will not receive a refund of any fees or surcharges.
(d) Establishment of a Common Expiration Date. A policyholder may purchase a new policy and cancel an existing policy in order to establish a common expiration date between flood insurance coverage and other coverage. The policyholder will receive a refund of a pro rata share of the premium calculated from the effective date of the new policy to the end date of the previous policy. The policyholder will not receive a refund of any fees or surcharges. In order to rewrite and cancel the policy, the following conditions must apply:
(1) The new policy must be written with the same company for the same or higher amount of coverage. If the policy is written for a higher amount or different type of coverage, the waiting period in SEC 61.11 will apply.
(2) The other insurance coverage for which the common expiration date is being established must be for coverage on the same building that is insured by the flood policy being cancelled and rewritten.
(3) The coverage for the new policy must be effective prior to the cancelling the existing policy.
(e) Cancelation or Nullification of Duplicate NFIP Policies.
(1) Generally.
(i) Except as described in 44 CFR 62.5(e)(2), if an insured property is covered by more than one NFIP policy not in accordance with applicable regulations and the Standard Flood Insurance Policy, FEMA must nullify the policy with the later effective date. The policy with the earlier effective date will continue. The policyholder will receive a pro rata refund of all premium for the nullified policy from the effective date of the nullified policy, but no more than 5 years prior to the date of receipt of verifiable evidence that the insured property is covered by more than one NFIP policy. The policyholder will receive a refund of all fees or surcharges for any full policy term during which the policyholder was covered by more than one policy, but no more than 5 years prior to the date of receipt of verifiable evidence that the insured property is covered by more than one NFIP policy.
(ii) If both polices have the same policy effective date, the policyholder may choose which policy will remain in effect, and the policyholder will receive a refund of all premium, fees, and surcharges for the cancelled policy from the effective date of the cancelled policy, but no more than 5 years prior to the date of receipt of verifiable evidence that the insured property is covered by more than one NFIP policy.
(2) Exceptions. In the following cases, the policyholder may maintain the policy with the later policy effective date while cancelling the policy with the earlier policy effective date:
(i) Earlier Policy Expired--The policy with the earlier effective date has expired for more than 30 days. In such cases, the policyholder will receive a refund of a pro rata share of the premium, calculated from the effective date of the policy with the later effective date to the end date of the policy with the earlier effective date, but no more than 5 years prior to the date of cancellation. The policyholder will also receive a refund of all fees and surcharges for any full policy terms during which the insured property is covered by both policies, but no more than 5 years prior to the date of the cancellation request.
(ii) Group Flood Insurance Policy (GFIP)--The policy with the earlier policy effective date is a Group Flood Insurance Policy. In such cases, there will be no refund of any premium, fees, or surcharges.
(iii) Cancellations to Establish a Common Expiration Date--The policy with the earlier effective date is cancelled to establish a common policy expiration date pursuant to paragraph (d) of this section. In such cases, refunds will be provided in accordance with paragraph (d) of this section.
(iv) Force-Placed Policy--The policy with the earlier effective date was force placed pursuant to 42 U.S.C. 4012a using the NFIP's Mortgage Portfolio Protection Program. In such cases, the policyholder will receive a refund of the pro rata share of the premium calculated from the policy effective date of the new policy to the expiration date of the cancelled policy. There will be no refund of any fees or surcharges.
(v) Condominium Unit Covered by a Dwelling Form Policy and an RCBAP--The policy with the earlier effective date is a Dwelling Form Policy with building coverage on a condominium unit that is also covered by a Residential Condominium Building Association Policy (RCBAP) that is issued at the statutory maximum coverage limit for buildings. In such cases, the policyholder will receive a refund of a pro rata share of the premium for the building coverage issued under the Dwelling Form policy, as calculated from the effective date of the RCBAP policy to the end date of the Dwelling Form policy. The policyholder will also receive a refund of all fees and surcharges for any full policy terms during which the condominium unit is covered by both a Dwelling Form policy and an RCBAP in which the coverage equals the statutory maximum coverage limits for buildings, but no more than 5 years prior to the date of the cancellation request.
(f) Other Cancellations and Nullifications. Except as indicated below, FEMA will not refund premiums, assessments, fees, or surcharges if FEMA cancels a policy for any of the following reasons:
(1) Fraud. FEMA will cancel a policy for fraud committed by the policyholder or the agent. FEMA may cancel a policy for misrepresentation of a material fact by the policyholder or agent. Such cancellations will take effect as of the date of the fraudulent act or material misrepresentation of fact.
(2) Administrative Cancellation. FEMA may cancel and rewrite a policy to correct an administrative error, such as when the policy is written with the wrong policy effective date. In such cases, FEMA will apply any premium, assessments, fees, or surcharges to the new policy. FEMA will refund any excess premium, fees, surcharges, or assessments paid.
(3) Nullification for Properties Ineligible Due to Physical Alteration of Property. A policy insuring a building or its contents, or both, may be cancelled if the building has been physically altered in such a manner that the building and its contents are no longer eligible for flood insurance coverage. The policyholder will receive a refund of a pro rata share of the premium for the current policy term only, but the policyholder will not receive a refund of any fees or surcharges.
18. Revise SEC 62.6 to read as follows:
SEC 62.6 Brokers and Agents Writing NFIP Policies through the NFIP Direct Servicing Agent.
(a) A broker or agent selling policies of flood insurance placed with the NFIP at the offices of its servicing agent must be duly licensed by the state insurance regulatory authority in the state in which the property is located.
(b) The earned commission which will be paid to any property or casualty insurance agent or broker, with respect to each policy or renewal the agent duly procures on behalf of the insured, in connection with policies of flood insurance placed with the NFIP at the offices of its servicing agent, but not with respect to policies of flood insurance issued pursuant to Subpart C of this Part, will not be less than $10 and is computed as follows:
* * * * *
SEC 62.22 [Amended]
19. In SEC 62.22, amend paragraph (a) by removing the two instances of the words "Federal Insurance Administration" and replacing them with "Federal Insurance and Mitigation Administration."
Brock Long,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2018-13292 Filed 7-13-18; 8:45 am]
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