The National Flood Insurance Program will pay claims for damage to homes and contents from oil driven ashore during hurricanes, its officials announced earlier this month.
Last week, however, hopes the insurance industry had of politicians putting disagreements aside to reauthorize the NFIP were dashed, as the Senate voted against legislation to restart the program.
The NFIP expired May 31, marking the third lapse of the program this year.
As for the oil damage, Rachel Racusen, press secretary to the Federal Emergency Management Agency, which runs the flood program, said in a statement that "the mixing of oil and other pollutants in flood water is not unusual during a storm."
She added, "Damage caused by these pollutants in flood waters is covered under the NFIP, subject to the provisions in the Standard Flood Insurance Policy."
Effectively, Ms. Racusen confirmed what Mississippi Insurance Commissioner Mike Chaney told state residents in a statement released Tuesday by his office.
In the statement, Mr. Chaney said that to recover damages stemming from the additional risks oil poses should a hurricane strike, claimants seeking payment under the NFIP must prove there is a flood as defined in the standard flood insurance policy.
If that can be proven, Mr. Chaney said, damage caused by pollutants to commercial policies is limited to $10,000.
Home and condo payments will be limited to policy limits, and oil or water with oil in the yard is not covered.
Mr. Chaney further said that the cost of complying with any local or state ordinance, including one that requires special removal methods for oil, is specifically excluded, with the exception of certain floodplain management mitigation requirements.
Moreover, Mr. Chaney said, there will be no coverage for testing for, or the monitoring of, pollutants unless there is a law or ordinance requiring it.
As for the reauthorization, industry trade organizations said politicians are scrabbling over certain provisions in the bill unrelated to the NFIP.
These provisions in the "tax extenders bill" would allegedly add to the federal deficit, those against the measure claim.
"We cannot afford to have political disagreements get in the way of protecting millions of Americans from flood losses," said Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies. "The lack of action by Congress is unacceptable."
Complicating matters is the fact hurricane season began June 1 and an active one is being forecast. The only way for homeowners to get flood insurance is through NFIP, but right now no NFIP policies can be written or renewed, which also prevents real estate closings from occurring if a property is in a floodplain.
The program protects about 5.5 million homeowners.
"If nothing else, we have to immediately address the coastal homeowners who are preparing for the hurricane season now," said Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America.
Even if today's bill was passed, NFIP policies would not be active until mid-July because of a current 30-day waiting period from when a policy is bought, insurance representatives said.
The Senate could approve an amended version of the bill it voted down last Wednesday. It would then go back to the House.
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