[Federal Register Volume 85, Number 139 (Monday, July 20, 2020)]
[Rules and Regulations]
[Pages 43946-43986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09260]
[[Page 43945]]
Vol. 85
Monday,
No. 139
July 20, 2020
Part II
Department of Homeland Security
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Federal Emergency Management Agency
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44 CFR Parts 59, 61, and 62
National Flood Insurance Program: 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; Final Rule
Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Rules
and Regulations
[[Page 43946]]
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DEPARTMENT OF HOMELAND SECURITY
Federal Emergency Management Agency
44 CFR Parts 59, 61, and 62
[Docket ID FEMA-2018-0026]
RIN 1660-AA95
National Flood Insurance Program: 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
AGENCY: Federal Emergency Management Agency, DHS.
ACTION: Final rule.
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SUMMARY: This final rule revises the National Flood Insurance Program
(NFIP) regulations to codify certain provisions of the Biggert-Waters
Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance
Affordability Act of 2014, and to clarify certain existing NFIP rules
relating to NFIP operations and the Standard Flood Insurance Policy.
DATES: This rule is effective on October 1, 2021.
ADDRESSES: The docket for this rulemaking is available for inspection
using the Federal eRulemaking Portal at http://www.regulations.gov and
can be viewed by following that website's instructions.
FOR FURTHER INFORMATION CONTACT: Kelly Bronowicz, Director,
Policyholder Services Division, Federal Insurance and Mitigation
Administration, Federal Emergency Management Agency, 400 C Street SW,
Washington, DC 20472, (202) 557-9488.
SUPPLEMENTARY INFORMATION:
I. Background and Discussion of the Rule
On July 16, 2018, FEMA published a Notice of Proposed Rulemaking
(NPRM) (83 FR 32956) proposing to make several non-substantive changes
to the NFIP regulations to improve their readability, uniformity, and
clarity. In addition, FEMA proposed to codify certain requirements of
the Biggert-Waters Flood Insurance Reform Act of 2012 (Pub. L. 112-141,
126 Stat. 916) (BW-12) and the Homeowner Flood Insurance Affordability
Act of 2014 (Pub. L. 113-89, 128 Stat. 1020) (HFIAA).
The NPRM proposed to codify the provisions of BW-12 that require
FEMA to (1) increase the maximum coverage amount for multi-family
properties to the same amount as that allowed for commercial
properties; (2) establish a minimum deductible amount for NFIP polices;
(3) stop denying payment to policyholders for damage or loss to a
condominium unit under the Dwelling Form based solely on the fact that
the condominium association has inadequate flood insurance coverage on
the entire condominium; and (4) review, among other things, the
processes and procedures for making flood in progress determinations.
The NPRM also proposed to codify HFIAA's requirement that FEMA offer a
high deductible option of $10,000.
The NPRM solicited public comment on these proposed changes. FEMA
received three comments related to the rulemaking and five unrelated
comments that were outside the scope of the rulemaking. FEMA does not
consider the five comments unrelated to this rulemaking in this
preamble. In this final rule, FEMA adopts the changes it proposed in
the NPRM, with some minor revisions in consideration of the related
comments and corrections of typographical errors. FEMA describes these
changes below.
II. Summary and Discussion of Public Comments
Of the three comments germane to this rulemaking, one anonymous
commenter [FEMA-2018-0026-0005] commented on the need for more dams,
the second, from the Association of State Floodplain Managers (ASFPM)
[FEMA-2018-0026-0004], commented on the inclusion of spouses on the
General Property Form of the Standard Flood Insurance Form (SFIP) and
identified a typographical error, and the third, a member of the public
[FEMA-2018-0026-0003], suggested that FEMA should modify the
Residential Condominium Building Association Policy (RCBAP) to better
take into account certain State laws concerning the maintenance and
repair of condominium buildings and the units therein.
A. Dams
The anonymous commenter [FEMA-2018-0026-0005] suggested that FEMA
``build more dams to hold back the waters from flooding.'' FEMA is
committed to building a culture of preparedness by, in part,
incentivizing investments that reduce risk--including pre-disaster
mitigation--and reduce disaster costs at all levels.\1\ This includes
encouraging the investment in infrastructure that reduces future
disaster costs, such as dams and levees. However, this comment suggests
actions beyond the scope of this rulemaking, which focuses on making
conforming and clarifying changes to the National Flood Insurance
Program's regulations and policy forms. For this reason, FEMA declines
to make changes to this rulemaking in response to this comment.
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\1\ Federal Emergency Management Agency, 2018-2022 Strategic
Plan, https://www.fema.gov/media-library-data/1533052524696-b5137201a4614ade5e0129ef01cbf661/strat_plan.pdf.
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B. Spouse as Named Insured in General Property Form
The Association of State Floodplain Managers (ASFPM) [FEMA-2018-
0026-0004] noted that it supports FEMA's effort to revise the NFIP's
regulations to clarify rules relating to the NFIP's operation and align
them with BW-12 and HFIAA. ASFPM disagreed, however, with FEMA's
proposal to add the insured's spouse as a named insured for both the
Dwelling Form and the General Property Form of the SFIP. While ASFPM
understands that a homeowners policy may typically include the
insured's spouse as a named insured, it is not included in a commercial
policy. ASFPM spoke with insurance specialists who confirmed that there
may be a good chance that the spouse is not part of the commercial
venture and has no interest in the business and therefore, should not
be automatically included in the General Property Form. ASFPM therefore
recommended removing the spouse as a named insured in the General
Property Form.
FEMA did not intend to modify this provision in the NPRM and agrees
with ASFPM's comments that the spouse of a named insured should not
automatically be included as an insured in the General Property Form of
the SFIP. The current General Property Form of the SFIP does not
automatically include the spouse of a named insured as an insured under
the policy. See 44 CFR part 61, App. A(2), II.A. Accordingly, this
final rule will not modify the provision from the status quo. FEMA
thanks ASFPM for identifying this inadvertent proposed change.
C. Replacement of ``Covered'' With ``Insured''
ASFPM [FEMA-2018-0026-0004] also noted that while it has no issues
with FEMA's proposal to replace the word ``covered'' with the word
``insured'' in the SFIP, the NPRM did not propose doing so throughout
the
[[Page 43947]]
SFIP, including the title of Section IV, ``Property Not Covered.''
ASFPM recommended that FEMA review the different SFIP forms and ensure
they are consistent with the use of ``insured.''
FEMA proposed to replace the word ``covered'' with the word
``insured'' in the SFIP because ``covered'' is a generic and undefined
term that does not conform to common industry or Agency usage. FEMA
agrees with ASFPM's comment and has replaced the word ``covered'' with
``insured'' in all instances where appropriate throughout the three
SFIP forms.
D. Residential Condominium Building Association Policy (RCBAP)
A member of the public [FEMA-2018-0026-0003] suggested several
modifications to the Residential Condominium Building Association
Policy (RCBAP). The RCBAP insures residential condominium association
buildings and offers building coverage up to $250,000 multiplied by the
number of units and contents coverage up to $100,000 per building.
Under existing NFIP regulations, the RCBAP acts as primary coverage for
an entire condominium building, including portions of a condominium
building which an individual unit owner is responsible for maintaining,
such as interior walls and cabinetry.\2\ Individual unit owners may
choose to purchase a Dwelling Form policy that provides excess building
coverage beyond that offered by an RCBAP, subject to statutory coverage
limits. The requirement that the RCBAP act as primary coverage for all
losses to condominium buildings and the units therein simplifies the
claims process by allowing the NFIP to pay claims without having to
divide payments between unit owners and condominium associations based
on a wide array of condominium building bylaws and relevant state laws.
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\2\ See SFIP Dwelling Form, Art. VII.C.2.
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The commenter suggested that FEMA modify the RCBAP to better take
into account certain state laws concerning the maintenance and repair
of condominium buildings and the units therein. The commenter explained
that many state laws divide responsibility for maintaining and
repairing condominium buildings between a condominium association and
individual unit owners. According to the commenter, the RCBAP's present
design causes FEMA to deem the excess building coverage of an
individual unit owner's Dwelling Form policy duplicative, excessive,
and unable to provide coverage that an individual policyholder could
use upon suffering a loss. The commenter stated that treating the
Dwelling Form's building coverage as excess to the RCBAP causes delays
in insurance payments reaching individual unit owners, which in turn
delays repairs, ultimately leading to litigation between condominium
owners and their associations. The commenter is concerned that as a
result, informed individual owners will cease purchasing building
coverage under a Dwelling Form policy if they are aware that they will
only receive payment of loss if the loss exceeds coverage under the
RCBAP.
In addition, the commenter also stated that FEMA's treatment of a
unit owner's Dwelling Form policy as excess to a condominium
association's RCBAP violates section 1312(c) of the National Flood
Insurance Act of 1968 (42 U.S.C. 4019(c)) (added by section 100214 of
BW-12), which generally prohibits FEMA from denying or limiting
coverage under an individual condominium unit owner's policy based
solely or in part on the flood insurance coverage of the condominium
association on the overall property.
The commenter also suggested defining the term ``common elements''
or making clear to policyholders that the applicable state definition
will be used in interpreting the policy, likely for the purposes of
interpreting Dwelling Form SFIP, Art. III.C.3.a. Moreover, the
commenter recommended expanding the condominium loss assessment
coverage provisions in III.C.3 of the Dwelling Form to clearly state
what flood damaged items, if any, are excluded from coverage under the
condominium loss assessment provision.
In sum, the commenter proposed that FEMA redesign the RCBAP so that
it conforms with the laws in most states regarding condominiums (e.g.,
individuals insure the inside of their units, and the associations
insure what they are responsible for under state law to repair). The
commenter believes that this would (1) encourage individual unit owners
to purchase building coverage, and (2) protect financial institutions,
as a unit owner's financial institution is usually only named on the
individual's Dwelling Form policy but not the RCBAP.
FEMA appreciates the commenter's suggestions on substantive changes
FEMA could make to the SFIP to increase its marketability. As part of
its 2018-2022 Strategic Plan, FEMA is committed to building a culture
of preparedness by, in part, taking steps to double the number of
properties covered by flood insurance through the private sector or the
government. FEMA believes that designing flood insurance products that
meet consumer needs will help achieve this goal. However, FEMA does not
intend to make such substantive changes to the SFIP in this rulemaking.
FEMA's intent in this rule is to clarify the SFIP to improve overall
readability as well as conform it to BW-12 and HFIAA. FEMA thanks the
commenter for this comment and will take it under advisement if FEMA
considers substantive changes to the SFIP in the future.
FEMA disagrees with the commenter's view that making coverage under
a unit owner's Dwelling Form policy excess to the condominium
association's RCBAP violates 42 U.S.C. 4019(c). Condominium
associations commonly charge individual unit owners loss assessments
when the association's insurance coverage is insufficient to cover
damage after a flood. When a Dwelling Form policy insures a condominium
unit, the policy provides coverage for loss assessments charged to the
policyholder by their condominium association for covered flood damage.
See Dwelling Form SFIP, Art. III.C.3.a. Prior to the enactment of BW-
12, the policy excluded coverage for loss assessments if the reason for
the assessment is due to application of the RCBAP's coinsurance penalty
provision. See Dwelling Form SFIP, Art. III.C.3.b.4. As a result, FEMA
would deny coverage for a portion of flood damage under both the RCBAP
and the Dwelling Form of the SFIP.
Section 100214 of BW-12 now prohibits FEMA from denying or limiting
coverage under an individual condominium unit owner's policy based
solely or in part on the flood insurance coverage of the condominium
association on the overall property, including situations where the
condominium association did not maintain a minimum amount of coverage
through an RCBAP. See 42 U.S.C. 4019(c). As a result, FEMA no longer
denies coverage for a loss assessment under the Dwelling Form SFIP that
results from the application of the RCBAP's coinsurance penalty, and
this rulemaking removes the contrary provision. See Dwelling Form SFIP,
Art. III.C.3.b.4.
Contrary to the commentor's assertion, the current structure of the
RCBAP acting as primary coverage for a condominium building and the
Dwelling Form acting as excess coverage does not violate 42 U.S.C.
4019(c). The Dwelling Form's excess coverage provision (VII.C.2) does
not result in the denial of otherwise covered damage. Rather, it merely
apportions the coverage between the Dwelling Form and the RCBAP.
Ultimately, the flood
[[Page 43948]]
damage is still covered, though the payment may go to the condominium
association rather than directly to the unit owner.
Additionally, interpreting 42 U.S.C. 4019(c) to prohibit treating
the Dwelling Form as excess coverage to the RCBAP coverage would be
contrary to FEMA's statutory authority, fundamental tenets of insurance
law, and Congressional intent. If FEMA were not able to treat Dwelling
Form coverage as excess to RCBAP coverage, Dwelling Form policyholders
could be entitled to receive payments for damage that FEMA would also
be required to pay for under an RCBAP. Congress has not given FEMA
authority to ``double pay'' for the same damage.\3\ Further, such
double payments would also be contrary to fundamental principles of
insurance law.\4\ Finally, Congress' intent in enacting 42 U.S.C.
4019(c) was to ensure Dwelling Form policyholders can still receive
payments where RCBAP coverage is inadequate; it was not intended to
require FEMA pay for the same damage under two separate policies.\5\
Treating the Dwelling Form coverage as excess to the RCBAP coverage
comports with this purpose.
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\3\ Congress has only authorized FEMA to sell ``insurance
against loss resulting from physical damage to or loss of real
property or personal property.'' 42 U.S.C. 4011(a).
\4\ For instance, one such principle is that of indemnity, which
requires that ``the value of the benefit paid the insured will not
exceed the amount of the loss.'' 1 New Appleman on Insurance Law
Library Edition Sec. 1.05 (2019). (This principle is essential for
mitigating the moral hazard that would result from policyholders
profiting from insured losses). And ``Congress did not intend to
abrogate standard insurance law principles'' when it created the
National Flood Insurance Program. Leland v. Fed. Ins. Adm'r, 934
F.2d 524, 530 (4th Cir. 1991) (quoting Drewett v. Aetna Cas. & Sur.
Co., 539 F.2d 496, 498 (5th Cir.1976)).
\5\ In December 2011, the Senate Banking Committee explained the
intent behind section 116 of the Flood Insurance Reform and
Modernization Act of 2011 (2011 S. 1940), which eventually became
law as Section 100214 of BW-12. The Committee explained that the
provision ``[c]larifies that condominium owners with flood insurance
policies should receive claims payments regardless of the adequacy
of flood insurance coverage of the condominium association and other
condominium owners.'' See Senate Report 112-98, p. 8.
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FEMA appreciates the commenter's suggestions to clarify parts of
the Dwelling Form's coverage for condominium loss assessments. However,
FEMA does not agree with the commenter's suggestion of defining
``common elements'' based on applicable state laws. The NFIP is a
national program that is best implemented through uniform guidance
irrespective of various state laws. Defining ``common elements'' based
on state law, rather than a uniform standard, would increase
policyholder confusion and complicate claims adjusting processes.
FEMA also does not agree that it is necessary to list in the SFIP
items excluded from coverage of condominium loss assessments. FEMA has
already provided guidance in this respect in the NFIP Claims Manual.\6\
On page 54, the Manual explains ``[The Dwelling Form's coverage of
condominium loss assessments] does not include an assessment from the
Condominium Association for property not covered by the SFIP, such as
the cleanup of debris, sand, landscape lighting, repairs to parking
lots, decks, sidewalks, pools, etc.'' It is FEMA's position that this
guidance states with sufficient clarity what flood damaged items are
excluded from coverage under the condominium loss assessment provision.
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\6\ https://www.fema.gov/media-library-data/1559248107320-0943773d439f0ea73003ce1adcf48be7/NFIP_Claims_Manual.pdf.
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FEMA also wishes to point out that Coverage B (Personal Property)
in the Dwelling Form of the SFIP will continue to include coverage for
``interior walls, floor, and ceiling'' not otherwise covered by an
RCBAP policy. This coverage is limited to no more than 10 percent of
the contents coverage limit chosen by the insured. This allows an
individual unit owner to purchase his or her own policy that provides
coverage beyond that offered by the RCBAP.
III. Summary of Other Changes
The final rule also includes corrections of typographical errors
and other non-substantive stylistic changes from the NPRM. For
instance, FEMA corrects the capitalization of some section headings to
ensure consistency. FEMA also removed an inadvertent inclusion of
``initial installment payment'' in the revised 44 CFR 61.11(c) and
added an inadvertently-removed unnumbered paragraph in the revised
RCBAP section III.C.2.a (stating ``[t]his coverage does not increase
the Coverage A or Coverage B limit of liability.''). FEMA also
hyphenated the usage of ``single-family'' and ``two-to-four'' through
the rule to conform to current NFIP styles. FEMA also updated cross-
references to the Dwelling Form in 44 CFR 61.17(g).
Last, in the Maximum Amounts of Coverage Table at 44 CFR 61.6(a),
FEMA replaced the term ``Condominium Building'' with ``Residential
Condominium Building'' to make clear that the particular coverage limit
is limited to condominium buildings used for residential purposes,
rather than non-residential condominium buildings. This change reflects
current practice and is for clarification purposes only.
IV. Regulatory Analysis
A. Executive Orders 12866, ``Regulatory Planning and Review'', 13563,
``Improving Regulation and Regulatory Review'', and 13771, ``Reducing
Regulation and Controlling Regulatory Costs''
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' '' (April 5, 2017).
In this rule FEMA makes several nonsubstantive changes to the
National Flood Insurance Program (NFIP) regulations at 44 CFR parts 59,
61, and 62, as well as the Appendices to Part 61. FEMA is codifying
certain provisions of the Biggert Waters Flood Insurance Reform Act of
2012 (BW-12) and the Homeowner Flood Insurance Affordability Act of
2014 (HFIAA) that it has already implemented in its Flood Insurance
Manual and other related guidance documents. FEMA is also revising
certain provisions of the NFIP regulations relating to NFIP operations
and the Standard Flood Insurance Policy to consolidate and update the
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regulatory text and standardize key terminology.
There are 34 regulatory changes in this rule (itemized in Table 1).
The majority of these changes are nonsubstantive clarifications. The
remaining changes codify an existing practice, policy, or process.
Pursuant to OMB Circular A-4, FEMA assesses the impacts of this
rule against a no-action baseline and a pre-statutory baseline. With
the no-action baseline, FEMA assesses what the world would be like
absent the final rule. With the pre-statutory baseline, FEMA assesses
what the world would be like absent the relevant statute(s) (in this
case, BW-12 and HFIAA). With this approach, FEMA considers the full
impacts of the rule.
Under a no-action baseline, this rule has no quantifiable
transfers, costs, or benefits. The rule makes non-substantive
improvements to the language and organization of the NFIP regulations
through clarifications and codifications, which do not result in any
quantifiable transfers, costs, or benefits. The rule also codifies
certain provisions of BW-12 and HFIAA that FEMA has already implemented
via the Flood Insurance Manual and other related guidance documents,
which results in no quantifiable transfers or benefits. WYO (Write Your
Own) companies will, however, incur opportunity costs as they spend
time becoming familiar with the rule's changes. Pursuant to the final
rule, FEMA will no longer require individual waivers for condominium
loss assessment restrictions; this results in cost savings.
The analysis below utilizes a pre-statutory baseline of 2012. The
summary of changes table (Table 1) lists all changes the rule makes to
FEMA's current regulations, a description of each change, and their
impact.
(a) Table 1--Summary of Changes
[Pre-statutory baseline]
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Mandatory or discretionary
Current section No./ subject matter Rule change action Impact
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Non-substantive Clarifications & Consolidations
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1. Sec. 59 Definitions............ FEMA will add and revise definitions to support Discretionary................ No change in compliance
clarifications and codifications described below. This is burden.
a non-substantive change that clarifies existing
definitions and does not alter the administration of the
program.
2. Sec. 61.1 Purpose of part...... FEMA will remove irrelevant second sentence that does not Discretionary................ No change in compliance
relate to the substantive content of part 61. This is a burden.
non-substantive change that does not alter the
administration of the program but rather provides greater
clarity for the reader.
3. Sec. 61.3 Coverage and benefits FEMA will clarify language to provide a more complete Discretionary................ No change in compliance
provided under the SFIP. statement of coverage and benefits provided by the SFIP. burden.
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 non-substantive change that
does not alter the administration of the program but
rather provides greater clarity for the reader.
4. Sec. 61.5 Deductibles.......... An application of BW-12 section 100210 and HFIAA section Mandatory.................... No change in compliance
12, that will clarify existing policy/practice by moving burden.
content of 61.5 to new unified cancellation/nullification
section in 44 CFR 62.5 (discussed below). FEMA also will
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 non-substantive 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. Sec. 61.6 Maximum amounts of FEMA will clarify the maximum coverage limit tables in Discretionary................ No change in compliance
coverage available. section 61.6 with non-substantive changes to improve burden.
readability and conformance with standard program
terminology and terminology introduced by BW-12. This is
a non-substantive change that does not alter the
administration of the program but rather provides greater
clarity for the reader.
6. Sec. 61.10 Requirements for FEMA will clarify/consolidate existing regulation Discretionary................ No change in compliance
Issuance or Renewal of Flood language. This new provision will clarify that no flood burden.
Insurance Coverage. insurance 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
non-substantive change that does not alter the
administration of the program but rather provides greater
clarity for the reader.
7. Sec. 61.13 Standard Flood This provision will clarify that SFIP is authorized only Discretionary................ No change in compliance
Insurance Policy. under terms and conditions established by Act, burden.
regulations, SFIP, and Administrator interpretations.
FEMA also will 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 will make
terms clearer.
[[Page 43950]]
8. Sec. 62.5 Policy Nullification FEMA will make changes that will clarify and consolidate Discretionary................ No change in compliance
and Cancellation. the existing reasons for which a policy may be cancelled burden.
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 will
consolidate those reasons into one section for greater
clarity and transparency to the public. This is a non-
substantive change that does not alter the administration
of the program but rather provides greater clarity for
the reader.
9. Sec. 62.6 Broker and Agents for This provision will clarify FEMA's existing policy by Discretionary................ No change in compliance
Servicing Agent. adding it to regulation that a broker or agent selling burden.
NFIP policies must be licensed in the state in which the
property is located. This is a non-substantive change
that does not alter the administration of the program but
rather provides greater clarity for the reader.
10. SFIP Article I.................. FEMA will change SFIP Article I to clarify the types of Discretionary................ No change in compliance
property insured by the SFIP. Clarifications are about burden.
coverage limits and multiple policies covering one
building. This is a non-substantive change that does not
alter the administration of the program but rather
provides greater clarity for the reader.
11. SFIP Article II--Definitions.... FEMA will revise and add some definitions for clarity. In Discretionary................ No change in compliance
particular, the changes will clarify that the named burden.
insured must also include the building owner if building
coverage is purchased. This is a non-substantive change
that does not alter the administration of the program but
rather provides greater clarity for the reader.
12. SFIP Article III................ FEMA will clarify that references to insured property do Discretionary................ No change in compliance
not extend coverage to any type or item of property not burden.
otherwise insured in accordance with the terms and
conditions of SFIP. This is a non-substantive change that
does not alter the administration of the program but
rather provides greater clarity for the reader.
13. SFIP Article III.A.............. FEMA is making minor non-substantive changes to Article Discretionary................ No change in compliance
III.A.5.b.2 to improve the grammar of the section; revise burden.
Article III.A.8 to remove the phrase ``in a building
enclosure.'' This is a non-substantive change that does
not alter the administration of the program but rather
provides greater clarity for the reader.
14. SFIP Article III.B.............. FEMA will revise the numbering in this section to improve Discretionary................ No change in compliance
readability and organization; revise Article III.B.3 by burden.
removing the phrase ``in a building enclosure.'' This is
a non-substantive change that does not alter the
administration of the program but rather provides greater
clarity for the reader.
15. SFIP Article III.D.............. FEMA will revise the language in this section so that the Discretionary................ No change in compliance
word ``structure'' is replaced by the word ``building'' burden.
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 will 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 non-
substantive change that does not alter the administration
of the program but rather provides greater clarity for
the reader.
16. SFIP Article V.B................ FEMA is making a non-substantive, clarifying adjustment to Discretionary................ No change in compliance
the Flood in Progress Exclusion at SFIP Art. V.B to align burden.
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 VII.B.............. FEMA will move the provision on concealment of fraud and Discretionary................ No change in compliance
policy voidance for consolidation into unified section on burden.
policy cancellations and nullifications (discussed
below). This is a non-substantive change that does not
alter the administration of the program but rather
provides greater clarity for the reader.
18. SFIP Article VII.E.............. FEMA will remove Article VII.E, Cancellation of the Policy Discretionary................ No change in compliance
by You, and incorporate the language into a new burden.
consolidated section on policy nullifications,
cancellations, and non-renewals. This is a non-
substantive change that does not alter the administration
of the program but rather provides greater clarity for
the reader.
[[Page 43951]]
19. SFIP Article VII.F.............. FEMA will remove Article VII.F, Non-Renewal of the Policy Discretionary................ No change in compliance
by Us, and incorporate the language into a new Article burden.
VIII discussing policy nullifications, cancellations, and
non-renewals. This is a non-substantive change that does
not alter the administration of the program but rather
provides greater clarity for the reader.
20. SFIP Article VII.G.............. This provision will revise the reformation section for Discretionary................ No change in compliance
clarity/readability. This is a non-substantive change burden.
that does not alter the administration of the program but
rather provides greater clarity for the reader.
21. SFIP Article VII.U.............. FEMA will move the provision on duplicate policies for Discretionary................ No change in compliance
consolidation into unified section on policy burden.
cancellations and nullifications (discussed below). This
is a non-substantive change that does not alter the
administration of the program but rather provides greater
clarity for the reader.
22. SFIP Article VII.V.............. FEMA will revise Article VII.V.1.a.1 of the current policy Discretionary................ No change in compliance
to remove all the language after ``It is your principal burden.
residence.'' The reason for this 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 non-
substantive change that does not alter the administration
of the program but rather provides greater clarity for
the reader.
23. SFIP Article VIII............... FEMA will clarify the existing reasons for which a policy Discretionary................ No change in compliance
may be cancelled, nullified, or not renewed. This will burden.
mirror similar section being established at 44 CFR 62.5
(discussed above). This is a non-substantive change that
does not alter the administration of the program but
rather provides greater clarity for the reader.
24. SFIP Article IX................. FEMA will clarify that the SFIP and all disputes arising Discretionary................ No change in compliance
from the insurer's policy issuance, policy burden.
administration, or the handling of any claim under the
SFIP are governed by the National Flood Insurance Act and
the regulations. This is a non-substantive change that
does not alter the administration of the program but
rather provides greater clarity for the reader.
25. Entire SFIP--Global Language FEMA will replace the word ``covered'' with the word Discretionary................ No change in compliance
Replacements. ``insured'' because the word ``covered'' does not conform burden.
to common industry or Agency usage. This is a non-
substantive change that does not alter the administration
of the program but rather provides greater clarity for
the reader.
26. 62.22 Judicial Review (preamble FEMA will replace references to the ``Federal Insurance Discretionary................ No change in compliance
sec. III.F.5). Administration'' with the current organizational title, burden.
``Federal Insurance and Mitigation Administration.'' This
is a non-substantive change that does not alter the
administration of the program but rather provides greater
clarity for the reader.
27. SFIP Article VII.D.............. FEMA will redesignate Article VII.D as Article VII.C. Discretionary................ No change in compliance
Replaces the phrase ``structure during the course of burden.
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 non-substantive change that does not
alter the administration of the program but rather
provides greater clarity for the reader.
28. Sec. 61.4 Limitations on FEMA will delete this provision because some of the Discretionary................ No change in compliance
Coverage. language is duplicative with language in other sections, burden.
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 non-substantive
change that does not alter the administration of the
program but rather provides greater clarity for the
reader.
29. Sec. 62.3 Servicing agent..... FEMA will remove the name of specific direct servicing Discretionary................ No change in compliance
agent. This is a non-substantive change that codifies burden.
current practices that began more than a decade before
the baseline regarding the public announcement of the
direct servicing agent.
30. Part 59 Authority Citation...... FEMA will replace the citations to Reorganization Plan No. Discretionary................ No change in compliance
3 and Executive Order 12127 with a citation to the burden.
codification of the Homeland Security Act of 2002, 6
U.S.C. 101 et seq. This is a non-substantive change that
does not alter the administration of the program but
rather provides greater clarity for the reader.
31. Part 61 Authority Citation...... FEMA will update authority citations to reflect changes to Discretionary................ No change in compliance
FEMA's source of authority from Executive orders to burden.
statute. This is a non-substantive change that does not
alter the administration of the program but rather
provides greater clarity for the reader.
[[Page 43952]]
32. Part 62 Authority Citation...... FEMA will update authority citations to reflect changes to Discretionary................ No change in compliance
FEMA's source of authority from Executive orders to burden.
statute. This is a non-substantive 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. Sec. 61.11 Effective date and FEMA will codify BW-12's addition of the Post-Wildfire Mandatory.................... No change in compliance
time of coverage under the Standard Exception to the 30-day waiting period required by 42 burden.
Flood Insurance Policy--New U.S.C. 4013(c). This change does not alter the current
Business Applications and administration of the program because FEMA immediately
Endorsements. complied with the law.
FEMA also is making a clarification by removing the second
clause of the first sentence of 61.11(e) and 61.11(f)
because these 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 III.C.............. FEMA will codify BW-12 section 100214, which prohibits the Mandatory.................... Cost savings of $2,048
application of SFIP Article III.C.3.b.4 (disallowing the over 10 years ($1,799
payment of a condominium loss assessment on a unit policy at 3 percent and
if the condominium building is underinsured). Prior to BW- $1,539 at 7 percent
12, FEMA issued individual waivers of this provision as discount rates.)
the need arose. The changes will delete Article
III.C.3.b.4, thus no longer requiring FEMA to issue
individual waivers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Costs
This rule makes non-substantive improvements to the language and
organization of the NFIP regulations. These changes do not result in
any quantifiable costs, other than opportunity costs, that WYO
companies will incur as they spend time becoming familiar with the
changes.
This rule revises 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 1 year of the notice of such revision.
The final rule codifies 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. 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. FEMA
implemented this new exception via bulletin. See WYO Bulletin W-12045
(July 10, 2012) (announcing the implementation of Section 100241), see
also, WYO Bulletin W-18001 (Jan. 16, 2018) (replacing WYO Bulletin W-
12045). To date, circumstances have not existed requiring FEMA to apply
this exception. The change updates the regulations to reflect the
revised statutory language and existing Agency practice.
According to FEMA's NFIP claim data, since implementation of this
exception in July 2012, no parties have made claims that apply to this
provision. Additionally, due to both the brief window of applicability
(the 30-day waiting period after initial enrollment in the NFIP) and
the narrow circumstances to which this exception applies (flood damage
due to flood on Federal land caused, or exacerbated, by post-wildfire
conditions), invocation of this exception will be rare. This provision
serves as an added enticement to potential enrollees of the NFIP to
join the NFIP if they believe that a wildfire on Federal land may
cause, or exacerbate, flooding on their property. In accordance with
the data, there has not been and FEMA estimates that there will
continue to be no additional burden on any party.
2. Benefits
The majority of provisions represent clarifications of the
regulation, or remove regulations that are no longer applicable. The
few non-clarifying provisions reflect certain provisions that FEMA has
already implemented through policy. These provisions 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 & Conditions
This analysis looks at the many efficiencies of the final rule;
FEMA cannot quantify the bulk of these benefits. Although FEMA has not
quantified them, they are essential to the justification of the final
rule and provide significant benefits for stakeholders.
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 changes presented
in Table 1:
a. Making Explicit the Implicit
The current NFIP deductible charts 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 deductible amounts not currently
listed in this chart (including the $10,000 deductible option required
under HFIAA). Notwithstanding this note, the current regulation's
listing of deductible options may give readers the impression that the
list is exhaustive. In this rulemaking, FEMA removes the
[[Page 43953]]
deductible charts and replaces them with a requirement that FEMA must
provide policyholders with deductible options in various amounts, up to
and including $10,000, subject to certain minimum deductibles. This
change does not expand or contract the deductible options the NFIP
offers; rather, it clarifies that FEMA offers various options,
including the $10,000 deductible, subject to other restrictions.
This rulemaking also changes the language in Appendix A(1) of Part
61 to clarify that FEMA also insures personal property under this
policy. FEMA has always insured personal property under this policy,
but the change makes this more explicit in the initial coverage
statement. This rulemaking also changes Appendix A(2) to Part 61 to
state that the policy insures only one building and that the insured
building is the one specifically described in the Flood Insurance
Application. FEMA has always limited coverage under the SFIP to one
building; with this change, FEMA clearly states this at the very
beginning of the SFIP.
b. Modifying, Adding or Removing Definitions
In this rule, FEMA revises definitions such as ``deductible,''
``emergency program,'' ``act,'' and ``basement.'' These non-substantive
changes are clearer and more consistent with the language in the
Articles of the SFIP, as are the addition of acronyms for ease of
repetitive use (such as that for the Special Flood Hazard Area as
``SFHA'') or to remove a term or definition that FEMA no longer uses
(e.g., ``Expense Constant'' which no longer applies, or ``Probation
Premium'' which is better changed to ``Probation Surcharge'').
This increased precision and consistent use of terms increases
clarity of FEMA's NFIP regulations for the insurance companies, flood
insurance policyholders, academic researchers, and private citizens.
This improved accuracy will minimize confusion.
ii. Codification of Dwelling Policy Underinsurance Exception
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 is underinsured. The SFIP also requires
policyholders to exhaust the coverage limits of the RCBAP policy (the
primary policy) before the Dwelling Policy (the secondary policy) can
take effect. This poses a challenge in the event FEMA disallows the
primary policy in the above circumstance. Since 2007, FEMA required
policyholders facing such a predicament to obtain a waiver from FEMA to
process such claims.
Pursuant to Section 100214 of BW-12, this rule removes Article
III.C.3.b.4 of the SFIP, which prohibits such claim payments and
necessitates the submission and processing of waivers. As a result of
this statutory change, FEMA no longer requires waivers for this
prohibition.
To estimate the cost savings that result from FEMA's removal of
this requirement, FEMA considered the frequency of these specific
circumstances. Between 2007, when FEMA began issuing the waivers, and
2013, when FEMA terminated the waiver process (following the passage
and FEMA's provisional implementation of BW-12), there were four
occurrences: Twice in Illinois, once in Texas, and once in Tennessee.
Four occurrences over 6 years equate to an estimated frequency of 0.667
instances each year, assuming that the rate remains consistent in the
future.
FEMA requires 3 hours to process a waiver request. Two General
Schedule (GS) Federal employees in the National Capital Region, at the
GS-14 and GS-15 levels, process waiver requests in equal proportion.
Utilizing 2018 GS scale \7\ published hourly wage rates from the Office
of Personnel Management (OPM) for the midpoint (step 5) of these grade
levels FEMA calculated fully loaded \8\ wage rates of $90.85 and
$106.87 per hour, respectively. At approximately 90 minutes per officer
for each expected waiver, the subtotal is $136.28 \9\ and $160.30,\10\
respectively. An Assistant Administrator at the Senior Executive
Service (SES) level must clear each waiver. This review and approval
takes approximately 5 minutes.\11\ FEMA estimates that a fully loaded
SES hourly rate is $126.66 per hour.\12\ The subtotal of the SES time
is $10.56.\13\ The total opportunity cost to process each waiver is
$307.16.\14\
---------------------------------------------------------------------------
\7\ GS Scale based on 2018 OPM tables, hourly basic wage rates
by grade and step for the locality pay area of Washington-Baltimore-
Arlington, DC-MD-VA-WV-PA. Accessed March 1st, 2018. https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/18Tables/html/DCB_h.aspx.
\8\ Bureau of Labor Statistics, Employer Cost for Employee
Compensation News Release, Table 1. Employer costs per hour worked
for employee compensation and costs as a percent of total
compensation; civilian workers, by major occupational and industry
group, December 2017. https://www.bls.gov/news.release/archives/ecec_03202018.htm.
The per hour benefits multiplier is calculated by dividing total
compensation for all workers ($35.87) by wages and salaries for all
workers ($24.49), which yields a per hour benefits multiplier of
1.46. ($35.87 / $24.49 = 1.46468). Fully-loaded wage rates are
calculated by multiplying the per hour benefits multiplier by the
applicable wage rate. GS-14: $62.23 x 1.46 = $90.85 and GS-15:
$73.20 x 1.46 = $106.87.
\9\ $90.85 (hourly wage rate of $62.23 x 1.46) * 1.5 hours =
$136.28.
\10\ $106.87 (hourly wage rate of $73.20 x 1.46) * 1.5 hours =
$160.30.
\11\ FEMA bases SES salary estimates on OPM's Senior Executive
Service Report. The latest report available is for 2016. Across all
agencies the median SES pay is $173,882 (see table 13 at the
following link) https://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/reports-publications/ses-summary-2016.pdf. Accessed June 4, 2018.
\12\ $173,882 annual wage/2087 annual hours = $83.32 hourly wage
rate x 1.46 benefits multiplier = $121.65 fully loaded hourly wage x
1.04115 inflation adjustment = $126.66 fully loaded $2018 hourly
wage. We calculated the inflation adjustment by subtracting the July
2016 CPI-U (240.6) from the April 2018 CPI-U (250.5). We divided the
result (9.9) by the July 2016 CPI-U (240.0). Calculation: (250.5-
240.6)/240.6 = 0.04115. BLS CPI-U data is available at http://data.bls.gov/cgi-bin/surveymost?bls. Select CPI for All Urban
Consumers (CPI-U) 1982-84 = 100 (Unadjusted)--CUUR0000SA0 and click
the Retrieve data button. Accessed June 8, 2018.
\13\ $126.96 * 5 minutes = $10.56.
\14\ $136.28 + $160.30 + $10.56 = $307.14.
(b) Table 2--Projected Cost Savings of Codification of Dwelling Policy Underinsurance Exception
----------------------------------------------------------------------------------------------------------------
Avg frequency Total cost per Annual cost
of waivers waiver savings NPV at 3% (m) NPV at 7% (m)
----------------------------------------------------------------------------------------------------------------
Year 1.......................... 0.67 $307 $205 205 205
Year 2.......................... 0.67 307 205 199 191
Year 3.......................... 0.67 307 205 193 179
Year 4.......................... 0.67 307 205 187 167
Year 5.......................... 0.67 307 205 182 156
Year 6.......................... 0.67 307 205 177 146
Year 7.......................... 0.67 307 205 171 136
[[Page 43954]]
Year 8.......................... 0.67 307 205 166 128
Year 9.......................... 0.67 307 205 162 119
Year 10......................... 0.67 307 205 157 111
-------------------------------------------------------------------------------
Total....................... 6.67 3,072 2,048 $1,799 $1,539
----------------------------------------------------------------------------------------------------------------
Applying this cost to the estimated frequency of occurrence of 0.67
waivers per year and extending the avoided costs over a 10-year period
will project a total undiscounted cost savings of $2,048. The 10-year
total equates to $1,799 and $1,539, when discounted at 3 percent and 7
percent respectively.
3. Alternatives Considered
Given that this rule has no direct compliance costs, no less
burdensome alternatives to the final rule are available. In the absence
of this final rule, stakeholders will continue to experience the
negative repercussions of inconsistences between the statutes,
regulations, and agency policy documents.
4. Summary
For the 10-year period analyzed, FEMA does not anticipate any costs
resulting from the selected provisions of BW-12 and HFIAA that the rule
is implementing. During that same period analyzed, the estimated
quantified benefits total $2,048. The present value, discounted at 7
percent, of the estimated quantified benefits is approximately $1,539
and $1,799 discounted at 3 percent. FEMA's ability to administer the
NFIP in a more streamlined manner and the public's enhanced
understanding of the terms and conditions of the program justify the
final rule.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as
amended, requires Federal agencies to consider the potential impact of
regulations on small entities. The term ``small entities'' comprises
small businesses, not-for-profit organizations that are independently
owned and operated and are not dominant in their fields, and
governmental jurisdictions with populations of less than 50,000. 29 of
the 67 WYO companies participating in the NFIP (43 percent) are small
entities.\15\ However, this rule will not have a significant economic
impact on any company because this rule does not impose burdens on any
participating WYO company. The rule makes non-substantive improvements
to the language and organization of the NFIP regulations through
clarifications and codifications. The rule also codifies certain
provisions of BW-12 and HFIAA that FEMA has already implemented via the
Flood Insurance Manual and other related guidance documents.
Accordingly, FEMA certifies under 5 U.S.C. 605(b) that this rule would
not have a significant economic impact on a substantial number of small
entities.
---------------------------------------------------------------------------
\15\ See Initial Regulatory Flexibility Analysis in the Notice
of Proposed Rulemaking at 84 FR 32983.
---------------------------------------------------------------------------
Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this rule. If the rule would affect your
small business, organization, or governmental jurisdiction and you have
questions concerning its provisions or options for compliance, please
contact the person listed in the FOR FURTHER INFORMATION CONTACT
section.
C. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 658, 1501-1504,
1531-1536, 1571, pertains to any rulemaking which is likely to result
in the promulgation of any rule that includes a Federal mandate that
may result in the expenditure by State, local, and Tribal governments,
in the aggregate, or by the private sector, of $100 million (adjusted
annually for inflation) or more in any one year. If the rulemaking
includes a Federal mandate, the Act requires an agency to prepare an
assessment of the anticipated costs and benefits of the Federal
mandate. The Act also pertains to any regulatory requirements that
might significantly or uniquely affect small governments. Before
establishing any such requirements, an agency must develop a plan
allowing for input from the affected governments regarding the
requirements.
FEMA has determined that this rulemaking will not result in the
expenditure by State, local, and Tribal governments, in the aggregate,
nor by the private sector, of $100,000,000 or more in any one year as a
result of a Federal mandate, and it will not significantly or uniquely
affect small governments. Therefore, no actions are deemed necessary
under the provisions of the Unfunded Mandates Reform Act of 1995.
D. 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 Office of Management and Budget (OMB)
for the collection and the collection displays a valid OMB control
number. See 44 U.S.C. 3506, 3507. This rulemaking does not call for a
new collection of information under the PRA. There is an existing
collection of information, 1660-0006, the National Flood Insurance
Program Policy Forms, Public Law 90-448 (1968) (expanded by Pub. L. 93-
234 (1973)) included in this rulemaking. BW-12 and HFIAA require
modifications to the NFIP. Program changes resulting from BW-12 and
HFIAA necessitated revision of the NFIP Policy Forms to assure proper
classification of properties for rating purposes and to rate and issue
the policies in accordance with the provisions of BW-12 and HFIAA.
However, this rule will not impact this collection because the forms
have already been updated as needed.
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
[[Page 43955]]
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, symbol, or other
identifying particular assigned to the individual. See id. section
552a(a)(5). An agency cannot disclose any record which 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 DHS policy, FEMA has completed a Privacy
Threshold Analysis (PTA) for this rule. DHS/FEMA has determined that
this rulemaking does not affect the 1660-0006 OMB Control Number's
current compliance with the E-Government Act of 2002 or the Privacy Act
of 1974, as amended. As a result, DHS/FEMA has concluded that the 1660-
0006 OMB Control Number is covered by the DHS/FEMA/PIA-011--National
Flood Insurance Program Information Technology Systems (NFIP ITS)
Privacy Impact Assessment (PIA). Additionally, DHS/FEMA has decided
that the 1660-0006 OMB Control Number is covered by the DHS/FEMA-003
National Flood Insurance Program Files, 79 FR 28747, May 19, 2014
System of Records Notice (SORN).
F. Executive Order 13175, ``Consultation and Coordination With Indian
Tribal Governments''
Executive Order 13175, ``Consultation and Coordination with Indian
Tribal Governments,'' 65 FR 67249, (Nov. 9, 2000), applies to agency
regulations that have Tribal implications, that is, regulations that
have substantial direct effects on one or more Indian Tribes, on the
relationship between the Federal government and Indian Tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian Tribes. Under this Executive Order, to the extent
practicable and permitted by law, no agency shall promulgate any
regulation that has Tribal implications, that imposes substantial
direct compliance costs on Indian Tribal governments, and that is not
required by statute, unless funds necessary to pay the direct costs
incurred by the Indian Tribal government or the Tribe in complying with
the regulation are provided by the Federal government, or the agency
consults with Tribal officials.
Nor, to the extent practicable by law, may an agency promulgate a
regulation that has Tribal implications and preempts Tribal law, unless
the agency consults with Tribal officials. This rule involves no
policies that have Tribal implications under Executive Order 13175.
This rule makes limited changes to the comprehensive, longstanding
National Flood Insurance Program regulations applicable to communities,
including participating Indian Tribal governments and Tribes, which
voluntarily choose to participate in the program. Because these program
updates are limited, they will not have substantial direct effects on
Indian Tribes, on the relationship between the national government and
Indian Tribes, or the distribution of power between the Federal
Government and Indian Tribes.
G. Executive Order 13132, ``Federalism''
Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999),
sets forth principles and criteria that agencies must adhere to in
formulating and implementing policies that have federalism
implications, that is, regulations that 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.'' For the
purposes of this Executive Order, the term States also includes local
governments or other subdivisions established by the States. Under this
Executive Order, Federal agencies must closely examine the statutory
authority supporting any action that would limit the policymaking
discretion of the States. Further, to the extent practicable and
permitted by law, no agency shall promulgate any regulation that has
federalism implications, that imposes substantial direct compliance
costs on State and local governments, and that is not required by
statute, unless the Federal Government provides funds necessary to pay
the direct costs incurred by the State and local governments in
complying with the regulation, or the agency consults with State and
local officials. Nor, to the extent practicable by law, may an agency
promulgate a regulation that has federalism implications and preempts
State law, unless the agency consults with State and local officials.
FEMA has reviewed this rule under Executive Order 13132 and has
determined that it 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 rule 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.
H. Executive Order 11988, ``Floodplain Management''
Pursuant to Executive Order 11988, each agency must provide
leadership and take action to reduce the risk of flood loss and to
minimize the impact of floods on human safety, health and welfare. In
addition, each agency must restore and preserve the natural and
beneficial values served by floodplains in carrying out its
responsibilities for (1) acquiring, managing, and disposing of Federal
lands and facilities; (2) providing Federally undertaken, financed, or
assisted construction and improvements; and (3) conducting Federal
activities and programs affecting land use, including but not limited
to water and related land resources planning, regulating, and licensing
activities. In carrying out these responsibilities, each agency must
evaluate the potential effects of any actions it may take in a
floodplain; ensure that its planning programs and budget requests
reflect consideration of flood hazards and floodplain management; and
prescribe procedures to implement the policies and requirements of the
Executive Order.
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
[[Page 43956]]
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 and prepare and
circulate a notice containing an explanation of why the action is
proposed to be located in the floodplain.
The purpose of this rule is to implement insurance-related
administrative changes to clarify coverage, rates, and terms and
conditions. FEMA included the Federal Insurance actions covered in the
purpose of this rule as part of the NFIP Nationwide Programmatic
Environmental Impact Statement, published on November 3, 2017, and
completed in accordance with the Council on Environmental Quality's
National Environmental Policy Act implementing regulations in 40 CFR
1500-1508 and in accordance with FEMA Directive 108-1 and Instruction
108-1-1. FEMA determined that these actions will not have a significant
effect on land use, floodplain management, or wetlands.
I. Executive Order 11990, ``Protection of Wetlands''
Executive Order 11990, ``Protection of Wetlands,'' 42 FR 26961 (May
24, 1977) sets forth that each agency must provide leadership and take
action to minimize the destruction, loss or degradation of wetlands,
and to preserve and enhance the natural and beneficial values of
wetlands in carrying out the agency's responsibilities. These
responsibilities include (1) acquiring, managing, and disposing of
Federal lands and facilities; and (2) providing Federally undertaken,
financed, or assisted construction and improvements; and (3) conducting
Federal activities and programs affecting land use, including but not
limited to water and related land resources planning, regulating, and
licensing activities. Each agency, to the extent permitted by law, must
avoid undertaking or providing assistance for new construction located
in wetlands unless the head of the agency finds (1) that there is no
practicable alternative to such construction, and (2) that the proposed
action includes all practicable measures to minimize harm to wetlands
which may result from such use. In making this finding, the head of the
agency may take into account economic, environmental and other
pertinent factors.
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 rule is to implement insurance-related administrative
changes to clarify coverage, rates, and terms and conditions. FEMA
included the Federal Insurance actions covered in the purpose of this
rule as part of the NFIP Nationwide Programmatic Environmental Impact
Statement, published on November 3, 2017, and completed in accordance
with the Council on Environmental Quality's National Environmental
Policy Act implementing regulations in 40 CFR 1500-1508 and in
accordance with FEMA Directive 108-1 and Instruction 108-1-1. FEMA has
determined that these actions will not have a significant effect on
land use, floodplain management, or wetlands.
J. National Environmental Policy Act of 1969 (NEPA)
Section 102 of the National Environmental Policy Act of 1969
(NEPA), 83 Stat. 852 (Jan. 1, 1970) (42 U.S.C. 4321 et seq.) requires
agencies to consider the impacts of their proposed actions on the
quality of the human environment. The Council on Environmental
Quality's procedures for implementing NEPA, 40 CFR 1500 et seq.,
require Federal agencies to prepare Environmental Impact Statements
(EIS) for major Federal actions significantly affecting the quality of
the human environment. Each agency can develop categorical exclusions
to cover actions that have been demonstrated to not typically trigger
significant impacts to the human environment individually or
cumulatively. Agencies develop environmental assessments (EA) to
evaluate those actions that do not fit an agency's categorical
exclusion and for which the need for an EIS is not readily apparent. At
the end of the EA process, the agency will determine whether to make a
Finding of No Significant Impact (FONSI) or whether to initiate the EIS
process.
Rulemaking is a major Federal action subject to NEPA. FEMA included
the Federal Insurance actions covered in the purpose of this rule as
part of the NFIP Nationwide Programmatic Environmental Impact
Statement, published on November 3, 2017, and completed in accordance
with the Council on Environmental Quality's National Environmental
Policy Act implementing regulations in 40 CFR 1500-1508 and in
accordance with FEMA Directive 108-1 and Instruction 108-1-1. FEMA has
determined that these actions will not have a significant effect on the
human environment.
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 (Feb. 16, 1994), as amended by Executive
Order 12948, 60 FR 6381, (Feb. 1, 1995), FEMA incorporates
environmental justice into its policies and programs. The Executive
Order requires each Federal agency to conduct its programs, policies,
and activities that substantially affect human health or the
environment in a manner that ensures that those programs, policies, and
activities do not have the effect of excluding persons from
participation in programs, denying persons the benefits of programs, or
subjecting persons to discrimination because of race, color, or
national origin.
FEMA included the Federal Insurance actions covered in the purpose
of this rule as part of the NFIP Nationwide Programmatic Environmental
Impact Statement, published on November 3, 2017, and completed in
accordance with the Council on Environmental Quality's National
Environmental Policy Act implementing regulations in 40 CFR 1500-1508
and in accordance with FEMA Directive 108-1 and Instruction 108-1-1.
FEMA has determined that these actions will not have a
disproportionately high or adverse effect on human health or the
environment, nor will it exclude persons from participation in FEMA
programs, deny persons the benefits of FEMA programs, or subject
persons to discrimination because of race, color, or national origin.
L. Congressional Review of Agency Rulemaking
Under the Congressional Review of Agency Rulemaking Act (CRA), 5
U.S.C. 801-808, before a rule can take effect, the Federal agency
promulgating the rule must submit to Congress and to the Government
Accountability Office (GAO) a copy of the rule; a concise general
statement relating to the rule, including whether it is a major rule;
the proposed effective date of the rule; a
[[Page 43957]]
copy of any cost-benefit analysis; descriptions of the agency's actions
under the Regulatory Flexibility Act and the Unfunded Mandates Reform
Act; and any other information or statements required by relevant
executive orders.
FEMA has sent this final rule to the Congress and to GAO pursuant
to the CRA. The rule is not a ``major rule'' within the meaning of the
CRA. It will not have an annual effect on the economy of $100,000,000
or more; it will not result in a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions; and it will not have significant
adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.
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, FEMA amends 44 CFR Chapter
I as follows:
PART 59--GENERAL PROVISIONS
0
1. Revise authority citation for part 59 to read as follows:
Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.
0
2. In Sec. 59.1, remove definition for ``Emergency Flood Insurance
Program or emergency program,'' and add definitions, in alphabetical
order, for ``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'' and revise the definitions for ``Act,'' ``Deductible,'' and
``Emergency Program'' to read as follows:
Sec. 59.1 Definitions.
* * * * *
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-Four Family Building means a residential building, including
an apartment building, containing two-to-four residential spaces and in
which commercial uses are limited to less than 25 percent of the
building's total floor area.
* * * * *
PART 61--INSURANCE COVERAGE AND RATES
0
3. Revise the authority citation for part 61 to read as follows:
Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.
0
4. Revise Sec. 61.1 to read as follows:
Sec. 61.1 Purpose of part.
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.
0
5. Revise Sec. 61.3 to read as follows:
Sec. 61.3 Coverage and benefits provided under the Standard Flood
Insurance Policy.
(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 Building
Association 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.
0
6. Revise Sec. 61.4 to read as follows:
Sec. 61.4 Special terms and conditions.
(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 floodplain,
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
[[Page 43958]]
full policy premium at the time of application.
0
7. Revise Sec. 61.5 to read as follows:
Sec. 61.5 Deductibles.
FEMA must provide policyholders with deductible options in various
amounts, up to and including $10,000, subject to the following minimum
deductible amounts:
(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 $100,000 is $1,500.
(b) The minimum deductible for policies covering pre-FIRM buildings
charged less than full-risk rates with building coverage amounts
greater than $100,000 is $2,000.
(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 $100,000 is $1,000.
(d) The minimum deductible for policies covering post-FIRM
buildings and pre-FIRM buildings charged full risk rates, with building
coverage amounts greater than $100,000 is $1,250.
0
8. Revise Sec. 61.6 to read as follows:
Sec. 61.6 Maximum amounts of coverage available.
(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.
Table 1 to Paragraph (a)--Maximum Amounts of Coverage Available \1\
------------------------------------------------------------------------
Emergency Regular Program
Program ------------------------
Occupancy ----------------
Amount Amount
------------------------------------------------------------------------
Bulding Coverage
------------------------------------------------------------------------
Single-Family Dwelling......... * $35,000 $250,000.
Two-to-Four Family Building.... * 35,000 $250,000.
Other Residential Building ** 100,000 $500,000.
(including Multifamily
Building).
Residential Condominium N/A $250,000 times the
Building. number of units in the
building.
Non-Residential Building....... ** 100,000 $500,000.
------------------------------------------------------------------------
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-to-Four Family Building, Other Residential
Building, and Condominium Building occupancies categories.
* In Alaska, Guam, Hawaii, and U.S. Virgin Islands, the amount available
is $50,000.
** In Alaska, Guam, Hawaii, and U.S. Virgin Islands, the amount
available is $150,000.
(b) Coverage and benefits payable under the SFIP pursuant to Sec.
61.3(b) and (c) are included in, not in addition to, the coverage
limits provided by the Act or stated in paragraph (a) of this section.
0
9. Add Sec. 61.10 to read as follows:
Sec. 61.10 Requirements for issuance or renewal of flood insurance
coverage.
FEMA will not issue or renew flood insurance unless FEMA receives:
(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.
0
10. Amend Sec. 61.11 by revising paragraphs (c) through (g) to read as
follows:
Sec. 61.11 Effective date and time of coverage under the Standard
Flood Insurance Policy--New business applications and endorsements.
* * * * *
(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 12:01 a.m. (local time) on the first
calendar day after the application date and the presentment of payment
of premium:
(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, added coverage,
or increase in the amount of coverage will be 12:01 a.m. (local time)
on the 30th calendar day after the application date and the presentment
of payment of premium; for example, a flood insurance policy applied
for with the payment of the premium on May 1 will become effective at
12:01 a.m. on May 31.
(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
[[Page 43959]]
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.
0
11. Amend Sec. 61.13 by revising paragraphs (e) and (f) and adding
paragraphs (g) and (h) to read as follows:
Sec. 61.13 Standard Flood Insurance Policy.
* * * * *
(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 Federal Insurance Administrator's
interpretations, and the express terms of the policy itself.
Accordingly, representations regarding the extent and scope of coverage
that are not consistent with Federal statute, the program's
regulations, the Federal Insurance Administrator's interpretations, and
the express terms of the policy itself, are void.
(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 Federal Emergency Management Agency, the
Write Your Own (WYO) program participating insurance company authorized
by part 62 of this chapter, or the NFIP servicing agent.
(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 ``Federal Emergency Management Agency'' and
``Federal Insurance and Mitigation Administration'' appear, a WYO
company must substitute its own name therefore. Standard Flood
Insurance Policies issued by WYO companies may be executed by the
issuing WYO company as Insurer, in the place and stead of the Federal
Insurance Administrator, but the risk of loss is borne by the National
Flood Insurance Fund, not the WYO company.
0
12. Amend Sec. 61.17 by revising paragraph (g) introductory text and
(g)(2) and (3) to read as follows:
Sec. 61.17 Group Flood Insurance Policy.
* * * * *
(g) The GFIP is the Standard Flood Insurance Policy Dwelling Form
(a copy of which is included in Appendix A(1) of this part), except
that:
* * * * *
(2) VIII. POLICY NULLIFICATION, CANCELLATION, AND NON-RENEWAL, C.
Cancellation of the Policy by You, does not apply to the GFIP.
(3) VII. GENERAL CONDITIONS, E. Policy Renewal, does not apply to
the GFIP.
* * * * *
0
13. Revise Appendix A(1) to part 61 to read as follows:
Appendix A(1) to Part 61
Federal Emergency Management Agency, Federal Insurance and Mitigation
Administration
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 insures 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 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 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 Building Association Policy (RCBAP).
However, no more than $250,000 may be paid in combined benefits for
a single unit under the Dwelling Form policy and the RCBAP. We will
only pay for damage once. Items of damage paid for under an 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 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
[[Page 43960]]
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 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 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. 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.
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 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.
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 Insured
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
[[Page 43961]]
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:
[[Page 43962]]
(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; or
(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 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 insured 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 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
[[Page 43963]]
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 Insured
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;
[[Page 43964]]
(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
[[Page 43965]]
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.
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 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.
L. Salvage
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
[[Page 43966]]
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 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,
[[Page 43967]]
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
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;
[[Page 43968]]
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 to 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. 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.
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 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.
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
0
14. Revise Appendix A(2) to Part 61 to read as follows:
Appendix A(2) to Part 61
Federal Emergency Management Agency, Federal Insurance and
Mitigation Administration
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 condominium 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 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. 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. 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
[[Page 43969]]
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 insured under Section IV. Property Not Insured, 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 Insured
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;
o. Wall mirrors, permanently installed; and
p. In the units within the building, installed:
[[Page 43970]]
(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 insures 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 insures 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 insures 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 Insured.
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 insured 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:
[[Page 43971]]
(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 insured 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 insured 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 insured 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.
[[Page 43972]]
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 Insured
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 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 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.
[[Page 43973]]
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 insures 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 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 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
[[Page 43974]]
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.
[[Page 43975]]
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 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 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 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.
[[Page 43976]]
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 to 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 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.
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
0
15. 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 insures 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
[[Page 43977]]
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 Insured
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;
[[Page 43978]]
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 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.
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.
[[Page 43979]]
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.
(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 insured 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 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.
[[Page 43980]]
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 Insured
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.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.
[[Page 43981]]
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 insured building property
will be included;
2. The replacement cost value of any building property not
insured 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
[[Page 43982]]
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.
[[Page 43983]]
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
[[Page 43984]]
(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 insured 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, awnings, 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 to 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:
[[Page 43985]]
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
0
16. 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.
0
17. 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.
0
18. 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 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, 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,
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
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 insured 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
[[Page 43986]]
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 insured 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 insured 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 insured 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 insured 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) 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 insured by both policies, but no more than 5 years
prior to the date of the cancellation request.
(ii) 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) 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) 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) The policy with the earlier effective date is a Dwelling Form
policy with building coverage on a condominium unit that is also
insured 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 insured 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.
0
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]
0
19. In Sec. 62.22, amend paragraph (a) by removing ``Federal Insurance
Administration'' wherever it appears and adding in their place
``Federal Insurance and Mitigation Administration.''
Peter T. Gaynor,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2020-09260 Filed 7-17-20; 8:45 am]
BILLING CODE 9111-52-P