National Flood Insurance Program
Summary: There are three standard forms used for writing flood insurance under the National Flood Insurance Program (NFIP): the dwelling, general property, and the residential condominium building association. This article reviews the dwelling form which is used for the average homeowner. Revisions to the form are noted where appropriate.
The dwelling form is used for insuring one to four family dwelling buildings and their contents. This form may also be used for a manufactured home, mobile home, a travel trailer meeting certain criteria, or a dwelling under construction. The National Flood Insurance Policy rules permit a condominium unit owner to insure his or her unit under the dwelling form as though it were a single family dwelling. Such policies may be written in the name of the individual unit owner and the condominium association, as their interests may appear, or may be purchased by the association in the name of the owner of the unit. If the condominium association owns the unit, the dwelling form may still be used to insure the unit. When flood insurance is to be written on the entire building in the name of the condominium association alone, the residential condominium building association form or the general property form is used.
Row or townhouses may be insured using the dwelling form, provided that the living unit is titled as a single family dwelling, has a separate legal description, and is regarded as a separate property for other real estate purposes (such as being capable of being deeded or conveyed).
The dwelling form is prefaced by the wording that the policy covers only a noncondominium residential building designed for principal use as a dwelling place for one to four families, or a single family dwelling unit in a condominium building.
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 (CFR).
We will pay you for direct physical loss by or from flood to your insured property if you:
- Have paid the correct premium;
2. Comply with all terms and conditions of this policy; and
3. Have furnished accurate information and statements.
We have the right to review the information you give us at any time and to revise your policy based on our review.
Analysis
The current flood form is similar in its design to a standard homeowners form. This makes it easier for the insured to understand how coverage in this form works.
A. In this policy, "you" and "your" refer to the insured(s) shown on the Declarations Page of this policy and your spouse, if a resident of the same household. "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 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. The precise definitions are intended to protect you.
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 (at least 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 A.1.a. above.
Analysis
The definition of flood includes the overflow of inland or tidal waters. If a dam were to burst, releasing a torrent of water that flooded homes, this could fall within the scope of the "overflow of inland waters," since the inland waters can be either natural or man-made.
As well as providing coverage for commonly understood flooding, the definition of flood encompasses unusual and rapid runoff of surface waters, mudslides that may be triggered by such runoff (but see exclusions B.2. and B.3.), and collapse of land along the shore resulting from flooding. The surface water can come from any source—melting snow, ice, or rain. Surface water is not defined in the form; many courts hold it to be water usually created by rain or snow which is of a casual or vagrant nature, following no definite course. (See, for example, Smith v. Union Automobile Indemnity Co., 752 N.E.2d 1261 [Ill. App. 2001], in which the court viewed various jurisdictions relying on this definition, and concluded that it was the most popular and applicable.)
A flood may be the result of land subsidence or erosion created by abnormal water levels as well as what one normally thinks of as causing flooding, such as abnormal rain or a hurricane.
B. The following are the other key definitions that we use in this policy:
- 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. For us to issue you a policy, the correct premium payment must accompany the application.
Analysis
The application itself becomes a part of the flood policy, and that the correct premium payment must accompany the application for a policy to be issued. If an application is sent without payment, it is returned and no coverage is in effect.
4. Base flood. A flood having a 1 percent chance of being equalled or exceeded in any given year.
5. Basement. Any area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.
Analysis
A base flood has often been called a one hundred-year flood, a term which led to a significant amount of confusion. Many people mistakenly thought that a one hundred year flood occurred once every one hundred years, and did not realize that it meant that there was a one percent chance of a flood in any given year. Therefore the term base flood is being used to replace the term one hundred-year flood.
Unlike other property forms, which do not define a basement, the flood form does, and includes a sunken room (or portion thereof, if the floor is below ground level on all sides) within the definition. This is important since much personal property is excluded from coverage if it is within a basement. So, for example, the insured with a basement family room would be well advised to move all personal property in event of an impending flood.
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 (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 or a recreation vehicle, park trailer, or other similar vehicle, except as described in B.6.c. above.
Analysis
As previously noted , the dwelling form may be used for certain mobile homes, so the definition of building encompasses this form of housing. Many manufactured and mobile homes are eligible for coverage under the flood program. However, certain requirements—tie-downs or being permanently attached to a foundation—must be met. Loss to manufactured or mobile homes less than 16 feet wide or of at least 600 square feet is settled on an actual cash value basis only. (See Loss Settlement Provisions section in this article.)
7. Cancellation. The ending of the insurance coverage provided by this policy before the expiration date.
8. Condominium. That form of ownership of real property 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 real property in which the unit owners have use rights;
where membership in the entity is a required condition of unit ownership.
Analysis
Because the dwelling flood form may be used to cover a single condominium unit, there are definitions relating to this type of property ownership.
10. Declarations Page. A computer generated summary of information you provided in the 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.
11. Described Location. The location where the insured building(s) or personal property are found. The described location is shown on the Declarations Page.
Analysis
It is interesting to note that the declarations page is defined as being computer generated. If the computers were inoperable for some reason, would that make a typed declarations page invalid?
Although similar to a homeowners definition of insured premises, the definition of the described location makes no reference to the grounds, since they are not insurable under the flood (or homeowners) form. Grounds as part of the premises definition are important in the homeowners forms because of the liability protection afforded, and this is not a subject of the flood policy.
12. 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.
Analysis
This definition is straightforward. The damage must be directly caused by a flood, and there must be evidence of physical changes to the property. The physical changes can be interpreted as the damages caused by the flood.
13. Dwelling. A building designed for use as a residence for no more than four families or a single-family unit in a building under a condominium form of ownership.
14. 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.
Analysis
Because a basement may include a room or any portion of a room having its floor below ground level on all sides, it is important to keep this in mind when determining whether a building can be considered elevated. For example, a building built on a slab is not elevated. A building with a floor elevated by foundation walls will still not be elevated if there is a sunken room within it.
A common method of building along the coast is on posts or piers, with hot water heater, central air unit, etc. contained in a central enclosed area. This is the type structure the definition refers to.
15. 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.
16. Expense Constant. A flat charge you must pay on each new or renewal policy to defray the expenses of the Federal Government related to flood insurance.
17. Federal Policy Fee. A flat charge you must pay on each new or renewal policy to defray certain administrative expenses incurred in carrying out the National Flood Insurance Program. This fee covers expenses not covered by the expense constant.
Analysis
An emergency program community may be viewed as an entry-level community. Limited coverage, at flat rates (no discounting) is all that is available.
While continuing to appear in the policy language, the expense constant was eliminated May 1, 2003. The Federal policy fee still exists and is used to defray certain administrative expenses.
18. Improvements. Fixtures, alterations, installations, or additions comprising a part of the insured dwelling or the apartment in which you reside.
Analysis
The flood form covers additions or alterations an insured might make to a rented residence as well as those in, for example, a condominium unit.
19. Mudflow. A river of liquid and flowing mud on the surfaces 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.
Analysis
This definition may well prove troublesome. After the fact, it may be difficult to tell whether a loss was caused by liquid and flowing mud or by a saturated soil mass. To a casual observer, there may not be much difference between the two.
See, for example, McHugh v. United Service Automobile Association, 164 F.3d 451 (U.S. App. 1999). Coverage under a flood policy turned on whether the insured dwelling was damaged by a landslide or a mudslide. A lower court had held for a landslide, but on appeal, the cause was held to be a mudslide. Two geo-technical engineers each held a different opinion as to which caused the damage. The court stated that "common sense and common meaning must prevail. Under the terms of the policy, 'liquid and flowing mud' surely means nothing more than a saturated soil mass moving by liquidity down a slope (italics added)." Now, however, the definition precludes the court's finding, but leaves unaddressed what a mudflow is.
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 dwelling, which you specifically described in the application, may be insured under this policy.
Analysis
The definition of policy reiterates that the entire policy must include the application, declarations page, any endorsements, and renewal certificates. Most insurance policies do not define what the policy contains.
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.
Analysis
This definition matches what is found in the standard ISO homeowner form. As will be discussed later in the article, an exclusion for testing or monitoring for pollutants exists.
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 Premium. A flat charge you must pay on each new or renewal policy issued covering property in a community that the NFIP has placed on probation under the provisions of 44 CFR 59.24.
Analysis
The form no longer includes a definition of pre-FIRM building. This meant a building for which the start of construction or substantial improvement occurred on or before December 31, 1974, or before the effective date of the initial FIRM for the community in which the building was located, whichever was later. For application and rating purposes, however, a building may still be considered pre-FIRM and the rates will reflect this.
The probation premium is a flat charge of $50. If a community is put on probation (often for failure to comply with building requirements or building restrictions in flood-prone areas), then FEMA can assess each policy.
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.
26. Special Flood Hazard Area. 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/A, AR/AE, AR/AH, AR/AO, AR/A1-A30, V1-V30, VE, or V.
Analysis
Under the regular program, an insured may purchase full limits of coverage. When a building is located in a special flood hazard area, flood insurance must be purchased as a condition of receipt of federal or federally-related financial assistance for acquisition and/or construction of buildings. Flood Hazard Boundary Map is the term used when a community first enters the flood program. At this level, only limited coverage is available at flat rates.
27. Unit. A single-family unit you own in a condominium building.
28. Valued Policy. A policy in which the insured and the insurer agree on the value of the property insured, that value being payable in event of total loss. The flood policy is not a valued policy.
Analysis
Definition twenty-seven is an example of a circular definition, in which the word being defined is used in the definition. Luckily, the common person understands what a unit in a condominium building is.
A valued policy is one in which the full amount of insurance is the amount paid in event of a covered total loss, usually from certain events such as fire or windstorm. The flood policy is not one of these.
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 forty-five days at another location as set forth in III.C.2.b., Property Removed to Safety.
2. Additions and extensions attached to and in contact with the dwelling by means of a rigid exterior wall, a solid load-bearing interior wall, a stairway, an elevated walkway, or a roof. At your option, additions and extensions connected by any of these methods may be separately insured. Additions and extensions attached to and in contact with the building by means of a common interior wall that is not a solid load-bearing wall are always considered part of the dwelling and cannot be separately insured.
3. A detached garage at the described location. Coverage is limited to no more than 10 percent of the limit of liability on the dwelling. Use of this insurance is at your option but reduces the building limit of liability. We do not cover any detached garage used or held for use for residential (i.e., dwelling), business, or farming purposes.
4. Materials and supplies to be used for construction, alteration, or repair of the dwelling or a detached garage while the materials and supplies are stored in a fully enclosed building at the described location or on an adjacent property.
Analysis
Although it might appear odd to cover a dwelling at another location as in 1. above, remember that the form may be used for manufactured housing, which can be moved out of harm's way.
The coverage for additions and alterations gives broad coverage in that the addition may be connected by an elevated walkway or roof, for example, and does not need to be attached to a wall.
Instead of a separate coverage B for other structures, the flood policy includes detached garages as part of coverage A. Only 10 percent of the limit of A is allowed for the detached garage. Note that it is only a detached garage that is covered, and not any other structure.
Materials and supplies for use in construction or repair of the dwelling or garage must be stored indoors in a fully enclosed building or on an adjacent property. The homeowners policy allows for materials to be located on the premises in no particular location. However since this policy is designed to cover flood, it does not intend to cover property that the insured has not tried to protect from the hazard of flood.
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 ninety 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, Al-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A, AR/AO; or
(2) is below the base flood elevation adjusted to include the effect of wave action in Zones VE or V1-V30.
The lowest floor levels are based on the bottom of the lowest horizontal structural member of the floor in Zones VE or V1-V30 and the top of the floor in Zones AH, AE, Al-A30, AR, AR/AE, AR/AH,AR/A1-A-30, AR/A, AR/AO.
6. A manufactured home or a travel trailer as described in the Definitions section (see II.B.6.b. and II.B.6.c.).
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.
Analysis
A dwelling under construction may be afforded flood coverage; however, there are limiting conditions. Before the dwelling is walled and roofed, coverage is provided only while in the course of construction. If construction is halted, then coverage applies only for ninety days following the halt. The deductible for any one occurrence before the dwelling is walled and roofed is twice that selected. There is no coverage before the dwelling is walled and roofed depending on flood elevation in certain zones.
Note the requirement for manufactured homes or travel trailers to be secured if they are located in a special flood hazard area.
7. The following items of property which are covered 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
Analysis
These items are, for the most, considered to be real property, although some could be personal property, such as refrigerators. However, by listing them here under coverage A, more insurance is available for coverage B, personal property. (But remember that, unlike a homeowners form, personal property coverage is not included unless separately purchased.)
8. 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. 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.
Analysis
It is common for buildings near the coast to be elevated on pilings or piers, but have the furnaces and water heaters located in a central core at ground level. The above list addresses this. The property might also be located in a basement.
The contents of certain items—notably, cisterns and fuel tanks—are covered and includes clean-up costs.
Unlike a homeowners policy, coverage for personal property is not automatically included. Coverage must be separately purchased, and indicated on the declarations page.
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.
Personal property is also covered for a period of forty-five days at another location as set forth in IIIC.2.b., Property Removed to Safety.
Personal property in a building that is not fully enclosed must be secured to prevent floatation 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.
2. Coverage for personal property includes the following property, subject to B.1. above, which is covered under Coverage B only:
a. Air conditioning units, portable or window type;
b. Carpets, not permanently installed, over unfinished flooring;
c. Carpets over finished flooring;
d. Clothes washers and dryers;
e. "Cook-out" grills;
f. Food freezers, other than walk-in, and food in any freezer; and
g. Portable microwave ovens and portable dishwashers
3. 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.
Analysis
Contents coverage applies to personal property, owned by the named insured or resident relatives, incidental to the occupancy of the building as a dwelling. At the named insured's option, coverage can be extended to similar property of servants or guests and personal property of others for which the named insured is liable. The coverage applies only while the property is within a building at the insured premises and, more importantly, while it is not within a basement or below the lowest elevated floor in some zones. Property within an unenclosed building on the premises having two or more rigid walls and a fully secured roof (for example, an attached carport) is covered only if the contents are secured to prevent flotation out of the building during flooding. Personal property is also covered for forty-five days when moved away from a special hazard area if endangered by flooding.
While carpet permanently installed over unfinished flooring is covered under Coverage A, carpets that are not permanently installed over unfinished flooring, or carpets over finished flooring, are considered personal property. This could be an important consideration when arranging flood coverage. It is interesting to note that some appliances—refrigerators and cook stoves, for example—are covered under Coverage A, while clothes washers and dryers are covered under Coverage B.
Food in any freezer is covered; presumably this includes a walk-in freezer, even though walk-in freezers are not covered.
4. 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.
Analysis
If the tenant owns the stove and refrigerator, they are considered personal property. Improvements the tenant has made are covered for up to 10 percent of the limit selected for coverage B; however, as noted, the 10 percent is not an additional amount of insurance.
5. 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 covered under a flood insurance policy purchased by your condominium association) for not more than 10 percent of the limit of liability shown on the Declarations Page. Use of this insurance is at your option but reduces the personal property limit of liability.
Analysis
Since this form is used for condominium units, many of the provisions of coverage refer to this type of property ownership. The form extends 10 percent of the coverage B limit for loss not covered by the condo association to interior walls, floors, and ceilings. However, as with 4. above, use of the coverage reduces the limit available for personal property.
6. 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 semiprecious stones, or articles of gold, silver, or platinum;
d. Furs or any article containing fur which represents its principal value; or
e. Personal property used in any business.
7. We will pay only for the functional value of antiques.
Analysis
Similar to the standard homeowners forms, the flood policy contains limits for certain property. The flood policy should not be relied on to cover valuable items. These should be scheduled under the insured's homeowners policy. (For example, ISO form HO 04 61 10 00 does not exclude loss or damage caused by flood.)
Similarly to a homeowners or commercial property form, the flood form contains other coverages. But in this instance, they are not additional coverages; they are included within the limit of liability.
C. COVERAGE C—OTHER COVERAGES
1. Debris Removal
a. We will pay the expense to remove non-owned debris on or in insured property and owned debris 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.
Analysis
The debris removal clause provides coverage, within the policy limits, for expenses incurred for removing debris of, on, or from the insured property, provided the debris results from a flood. The policy states that this coverage includes the value of the insured's own labor (and the labor of the insured's household members) for clearing debris, at prevailing Federal minimum wage rates.
2. Loss Avoidance Measures.
a. Sandbags, Supplies, and Labor
(1) We will pay up to $1,000 for costs you incur to protect the insured building from a flood or imminent danger of flood, for the following:
(a) Your reasonable expenses to buy:
(i) Sandbags, including sand to fill them;
(ii) Fill for temporary levees;
(iii) Pumps; and
(iv) Plastic sheeting and lumber used in connection with these items.
(b) The value of work, at the Federal minimum wage, that you or a member of your household perform.
(2) This coverage for Sandbags, Supplies, and Labor applies only 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 insured building; or
(b) A legally authorized official must issue an evacuation order or other civil order for the community in which the insured 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, that 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 forty-five 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.
Any property removed, including a movable home described in II.B.6.b. and c., must be placed above ground level or outside of the special flood hazard area.
This coverage does not increase the Coverage A or Coverage B limit of liability.
Analysis
The coverage for expense to protect a covered building is $1,000, and the expense to move covered property to safety is $1,000. No deductible applies to these coverages. Neither coverage increases the Coverage A or B limits of liability.
Property that has been moved out of harm's way is covered at a temporary location for forty-five consecutive days from the date the insured begins to move the property. The insured must see to it the property is placed above ground level at the new location, or moved outside the flood hazard area. The property must be protected from the elements.
3. Condominium Loss Assessments
a. If this policy insures a 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 as a result of direct physical loss by or from flood during the policy term, to the building's common elements.
b. We will not pay any loss assessment charged against you:
(1) And the condominium association by any government 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) That 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;
(5) to the extent that payment under this policy for a condominium building loss, in combination with payments under any other NFIP policies for the same building loss, exceeds the maximum amount of insurance permitted under the ACT for that kind of building; or
(6) To the extent that payment under this policy for a condominium building loss, in combination with any recovery available to you as a tenant in common under any NFIP condominium association policies for the same building loss, exceeds the amount of insurance permitted under the Act for a single-family dwelling.
Loss assessment coverage does not increase the Coverage A limit of liability.
Analysis
The last of the Other Coverages is for loss assessment. The form covers assessments made against the unit owner for property owned in common. Certain limitations apply. There is no coverage for an assessment made to recoup the association deductible, to cover damage to personal property of the association, or if the assessment is the result of any governmental body. Also, if a unit owner is assessed for loss because of the association's failure to carry at least 80 percent of replacement cost or the maximum amount of insurance available under the flood program, there is no coverage.
If the payment under this policy plus payments under any other NFIP policies for the same loss exceeds the amount of insurance permitted under the rules for that kind of building, this coverage will not respond. Nor will the policy respond if payment under this policy plus any amount recoverable from the association policy exceeds the amount of insurance permitted for a single family dwelling.
Increased cost of compliance coverage is similar to ordinance and law in the standard homeowners, except that it is triggered only by covered flood damage. Even then, the coverage is not automatic.
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 structure suffering flood damage. Compliance activities eligible for payment are: elevation, floodproofing, relocation, or demolition (or any combination of these activities) of your structure. Eligible floodproofing activities are limited to:
a. Nonresidential structures.
b. Residential structures with basements that satisfy FEMA's standards published in the Code of Federal Regulations [44CFR 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 amount 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.
Analysis
Increased cost of compliance coverage is now mandatory for all standard flood policies except for those on individual condominium units, those in Emergency Program communities, contents-only policies, and group flood insurance. Although the amount of coverage provided is $30,000 (increased from $20,000 in the prior form), this is not an additional amount of insurance. For example, if an insured had a limit of $250,000 and had a loss involving both flood damage and increased cost of compliance, the total amount that could be claimed is $250,000. Rates are found in the flood manual; the premium is not eligible for a deductible discount. Rates for the coverage vary according to zone and pre- or post-FIRM construction.
3. Eligibility
a. A structure covered under coverage A—Building Property sustaining a loss caused by a flood as defined by this policy must:
(1) Be a "repetitive loss structure." A repetitive loss structure is one that meets the following conditions:
(a) The structure is covered by a contract of flood insurance issued under the NFIP.
(b) The structure has suffered flood damage on two occasions during a ten-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 structure 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 structure; or
(2) Be a structure that has had flood damage in which the cost to repair equals or exceeds 50 percent of the market value of the structure 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 structure.
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 structures 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 structure must comply with the higher advisory base flood elevation.) Increased Cost of Compliance coverage does not respond 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 structures 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 structure 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 structures 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 this coverage D.
d. This coverage will also pay for the incremental cost, after demolition or relocation, of elevating or floodproofing a structure 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.
e. This coverage will also pay to bring a flood-damaged structure into compliance with State or local floodplain management laws or ordinances even if the structure had received a variance before the present loss from the applicable management requirements.
Analysis
This is not an automatically-granted coverage. A damaged building must meet certain criteria before qualifying for the increased cost of compliance. One qualifying criterion is that there must have been a previous claim within the ten years preceding the current claim which was reimbursed by the NFIP. The cost of repairing the flood damage must have, on average, equaled or exceeded 25 percent of the market value of the structure. The state or community must have a cumulative, substantial damage provision or repetitive loss provision being enforced against the structure. A second criterion is that a structure has sustained damage in which the cost to repair equals or exceeds 50 percent of the market value at the time of the flood. If a floodplain management law contains a substantial damage provision, the coverage responds.
The coverage will pay for floodproofing to meet floodplain management laws or ordinances even if the structure is rebuilt at another site. Also, even if the structure had previously received a variance from floodplain management requirements before the current loss, the coverage will pay to bring the structure into compliance with existing state or local law.
4. Conditions
a. When a structure covered under Coverage A—Building Property sustains a loss caused by a flood, our payment for the loss under this Coverage D will be for the increased cost to elevate, floodproof, relocate, or demolish (or any combination of these activities) caused by the enforcement of current State or local floodplain management ordinances or laws. Our payment for eligible demolition activities will be for the cost to demolish and clear the site of the building debris or a portion thereof caused by the enforcement of current State or local floodplain management ordinances or laws. Eligible activities for the cost of clearing the site will include those necessary to discontinue utility service to the site and ensure proper abandonment of on-site utilities.
b. When the building is repaired or rebuilt, it must be intended for the same occupancy as the present building unless otherwise required by current floodplain management ordinances or laws.
Analysis
These provisions state the scope of the coverage. Note that the cost of clearing a site includes costs to disconnect and discontinue utilities to the site. The building that is rebuilt or repaired must be intended for the same occupancy—in other words, a dwelling cannot be rebuilt as a corner grocery.
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 or other structure 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 (see 3.b.).
Analysis
There is no coverage for consequential loss—that is, the loss in value because of the ordinance or law requirements or the loss in residual value to any undamaged portion of a structure that must be demolished because of ordinance or law is excluded.
The insurer will not pay for the increased cost of compliance until the elevation or other requirement is actually carried out, not to exceed a two-year period.
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 structure insured under a 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.
Analysis
Any code upgrades not directly related to floodplain management are not covered. So, for example, if a dwelling is damaged by flood, and rebuilding requires that knob-and-tube wiring be replaced with Romex and circuit breakers, then the coverage will not respond to this cost. Further, if any additions or improvements are made following a loss and it is learned they do not comply with ordinance or law, the coverage will not respond. And, if an insured receives a variance to rebuild at an elevation not meeting the NFIP's minimum standards, the rebuilding will not be covered by this endorsement.
tructures insured under the Group Flood program are not covered. This is insurance issued in response to a Presidential declaration of disaster. This is a program in which disaster assistance recipients, in exchange for a small premium, receive a minimal amount of building and/or contents coverage for a three-year period. Garages and carports are not eligible for coverage. Assessments made by a condominium association to cover increased costs of compliance are not covered.
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 VII. General Conditions, V. Loss Settlement.
b. All other conditions and provisions of this policy apply.
Analysis
When calculating insurance to value at the time of a loss, the $20,000 of insurance provided under this coverage is not included.
We do not cover any of the following:
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 on or 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 II.B.6.c., whether affixed to a permanent foundation or on wheels;
5. Self-propelled vehicle 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 or unit 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.
Analysis
The list of property not covered by the flood policy is extensive. Self-propelled vehicles used to service the described location or that are designed to assist the handicapped are covered, so long as they are inside a building at the insured location.
Hot tubs and spas that are not bathroom fixtures are not covered. Swimming pools, their equipment such as heaters and pumps are excluded.
Item 10. excludes coverage for "tanks containing gases or liquids." Remember that fuel tanks within a building enclosure or basement are covered.
Remember that the Coastal Barrier Resources Act and the Coastal Barrier Improvement Acts intend to protect coastal areas that serve as barriers against wind and tides caused by coastal storms, and serve as habitat for aquatic species.
A. We only provide coverage for direct physical loss by or from flood, which means 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 resulting 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 that we describe in Coverage D—Increased Cost of Compliance; or
7. Any other economic loss.
B. We do not insure a loss directly or indirectly caused by a flood that is already in progress at the time and date:
1. The policy term begins; or
2. Coverage is added at your request.
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 covered under our definition of flood (see II.A.1.c. and II.A.2.).
D. We do not insure for direct physical loss caused directly or indirectly by any of the following:
1. The pressure or weight of ice;
2. Freezing or thawing;
3. Rain, snow, sleet, hail or water spray.
4. Water, moisture, mildew, or mold damage that results primarily from any condition:
a. Substantially confined to the dwelling; or
b. That is within your control, including but not limited to:
(1) Design, structural or mechanical defects;
(2) Failure, stoppage, or breakage of water or sewer lines, drains, pumps, fixtures or equipment; or
(3) Failure to inspect and maintain the property after a flood recedes;
5. Water or waterborne 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 covered 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 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 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 property 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.
Analysis
The list of losses not covered reinforces the fact that the flood policy provides coverage only for direct physical loss from flood to covered property. Consequential economic loss resulting from flood is not covered. So, for example, it is important when arranging flood insurance to make clear to insureds that there is no loss of use or additional living expense coverage. (Nor can an insured seek such coverage under his or her standard homeowners policy, since flood is an excluded peril.) Flooding could make access to insured property impossible, while the property itself remains intact, but there is no coverage under the flood policy or the standard homeowners forms.
And, although there is now $2500 in coverage for property used in business, there is no coverage under this form for any business interruption loss.
Loss resulting from increased cost of repair or rebuilding arising from any law or ordinance regulating repair or reconstruction is excluded, except as provided for under Coverage D—Increased Cost of Compliance.
Loss from theft, fire, or explosion is excluded; however, the standard homeowners forms state that "direct loss by fire, explosion or theft resulting from water damage is covered." Although loss resulting from earth movement is excluded, loss resulting from mudflow (as defined) or land subsidence that results from erosion due to water action are covered if they fall under the policy's definition of flood.
Sewer backup or water seepage is covered, but only when general flooding causes the sewer backup or water seepage. It is important to note that losses in progress as of the time and date the policy term begins or coverage is added at the insured's request are not covered. Although the flood policy is not continuous, this provision applies to new policies.
The exclusion for moisture, mold, and mildew states that if the insured fails to "inspect and maintain the property after a flood recedes" there is no coverage. Of course, if the insured takes preventive measures as soon as possible there is coverage for mold clean-up.
Damage from pressure of water against an insured structure is covered so long as there is a flood in the area and the flood is the proximate cause of the damage. For example, the pressure of water from a flood might cause a foundation wall to collapse.
An exclusion for testing or monitoring for pollutants exists, but the policy responds if testing or monitoring is required by law or ordinance. This is in contrast to the exclusion under coverage D—increased cost of compliance.
A. When a loss is covered 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.
Analysis
The dwelling flood policy is subject to a standard deductible of $500 (or higher at the insured's choice) that applies separately to building and contents losses, including related debris removal expense. A deductible of $1000 applies to losses occurring to property in an Emergency Program community or to property located in pre-FIRM special flood hazard areas. Different deductibles may be written for building and contents.
The current flood policy has extensive conditions in this section. Therefore, to simplify, we will discuss the loss settlement provisions separately rather than in this section.
A. Pairs and Sets
In case of loss to an article that is part of a pair or set, we will have the option of paying you:
1. The amount equal to the cost of replacing the lost, damaged, or destroyed article, minus its depreciation; or
2. An 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.
Analysis
This provision is different from its homeowners counterpart. Here, the insurer does not have the option of repairing or replacing any part to restore the pair or set to its pre-loss condition, but rather makes a payment.
Also, in the standard homeowners form, the insurer may elect to pay the difference between actual cash value of the property before and after the loss, which can result in a better settlement for the insured.
B. Concealment or Fraud and Policy Voidance
1. With respect to all insureds under this policy, this policy:
a. Is void;
b. Has no legal force or effect;
c. Cannot be renewed; and
d. Cannot be replaced by a new NFIP policy;
If, before or after a loss, you or any other insured or your agent have at any time:
(1) Intentionally concealed or misrepresented any material fact or circumstance;
(2) Engaged in fraudulent conduct; or
(3) Made false statements;
relating to this policy or any other NFIP insurance.
2. This policy will be void as of the date the wrongful acts described in B.1. above were committed.
3. Fines, civil penalties, and imprisonment under applicable Federal laws may also apply to the acts of fraud or concealment described above.
4. This policy is also void for reason other than fraud, misrepresentation or wrongful act. This policy is void from its inception and has no legal force under the following conditions:
a. If the property is located in a community that was not participating in the NFIP on the policy's inception date and did not join or reenter the program during the policy term and before the loss occurred; or
b. If the property listed on the application is otherwise not eligible for coverage under the NFIP.
Analysis
It is vital that the provisions be explained clearly to all flood insureds, for they are much more stringent than those of the homeowners forms. For example, the homeowners provision states that under section I property coverages no coverage will be provided for loss if one or more insureds have engaged in fraud, concealment, material misrepresentation or making false statements. In the case of the flood policy, however, the entire policy becomes void. The insured will be unable to renew or to purchase new flood insurance. Note as well that fines, civil penalties, or even imprisonment may be the consequence of intentional misrepresentation or fraud.
The current edition states that misrepresentation by an agent renders the policy void. Presumably, this refers to someone acting on behalf of the insured, not to the insured's insurance agent (who is actually an agent of the insurer).
A policy also will be voided if it insures property that is ineligible for flood coverage.
C. Other Insurance
1. If a loss covered by this policy is also covered 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 C.1.b. or c. immediately below applies.
b. If the other policy has a provision stating that is it 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 C.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 in the name of your condominium association covering the same property covered by this policy, then this policy will be in excess over the other insurance.
Analysis
Generally the flood policy is primary but there are circumstances when it is not. An insured may have purchased scheduled coverage for certain personal property, say Oriental rugs. The flood policy covers carpets over finished flooring under coverage B. The flood policy could be called upon to contribute on a proportional basis, because scheduling the rugs provides coverage for flood damage.
Or, an insured may have purchased flood coverage in excess of the amounts available under the NFIP program. This provision details how a loss is to be settled that involves other insurance.
This policy is excess coverage over any available under the condominium association flood policy, when both policies cover the same property. For example, wall-to-wall carpeting over unfinished flooring in a condo unit often falls under property covered by the association policy. Therefore, this flood policy will respond only as excess coverage if a covered loss occurs.
D. 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 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 covers only personal property; or
2. When this policy covers a structure during the course of construction.
Analysis
Most standard homeowners policies cannot be assigned without the insurer's consent. Note that the flood policy may be transferred to a buyer when title to the property is transferred, except in the two situations described.
E. Cancellation of Policy By You:
1. You may cancel this policy in accordance with 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 also under the applicable rules and regulations of the NFIP.
Analysis
The flood policy may be canceled by the insured at any time for any valid reason, such as other coverage purchased, property sold, or satisfaction of a mortgage. However, if a refund of premium is made, the expense constant and Federal policy fee are never refunded.
The flood insurance rules manual allows for a current and one prior year's premium to be refunded; a refund for a greater period of time is allowable only under certain conditions, such as the property never having qualified for flood insurance.
F. Nonrenewal of the Policy by Us
Your policy will not be renewed:
1. If the community where your covered property is located stops participating in the NFIP; or
2. If your building has been declared ineligible under Section 1316 of the Act.
G. Reduction and Reformation of Coverage
1. If the premium we received from you was not enough to buy the kind and amount of coverage you requested, we will provide only the amount of coverage that can be purchased for the premium payment we received.
2. The policy can be reformed to increase the amount of coverage resulting from the reduction described in G.1. above to the amount you requested as follows:
a. Discovery of insufficient premium or incomplete rating information before a loss.
(1) If we discover before you have a flood loss that your premium payment was not enough 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 you or the mortgagee or trustee pay the additional premium within thirty 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 we determine before you have a flood loss that the rating information we have is incomplete and prevents us from calculating the additional premium, we will ask you to send the required information. You must submit the information within sixty days of our request. Once we determine the amount of additional premium for the current policy term, we will follow the procedure in G.2.a.(1) above.
(3) If we do not receive the additional premium (or additional information) by the date it is due, the amount of coverage can only be increased by endorsement subject to any appropriate waiting period.
Analysis
If the insurer discovers prior to a claim that there is insufficient rating information which precludes calculation of any additional premium due, the insured has sixty days to submit the missing information.
b. Discovery of insufficient premium or incomplete rating information after a loss.
(1) If we discover after you have a flood loss that your premium payment was not enough 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 and the prior policy terms. If you or the mortgagee or trustee pay the additional premium within thirty 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 prior policy term.
(2) If we discover after you have a flood loss that the rating information we have is incomplete and prevents us from calculating the additional premium, we will ask you to send the required information. You must submit the information before your claim can be paid. Once we determine the amount of additional premium for the current and prior policy terms, we will follow the procedure in G.2.b.(1) above.
(3) If we do not receive the additional premium by the date it is due, your flood insurance claim will be settled based on the reduced amount of coverage. The amount of coverage can only be increased by endorsement subject to any appropriate waiting period.
3. 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 Condition B. Concealment or Fraud and Policy Voidance apply.
H. Policy Renewal
- 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 thirty 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 nonreceipt 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 thirty 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 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.
I. 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.
L. No Benefit to Bailee
No person or organization, other than you, having custody of covered property will benefit from this insurance.
Analysis
If additional payment for an increase in coverage limits is not made by the due date, any existing claim will be settled based on the reduced amount of coverage.
Once a renewal notice is received, the insured has thirty days from the expiration date to pay the premium. The insurer may request the insurer to recertify rating information in connection with policy renewal.
As noted earlier, we have altered the sequence of the flood policy for clarity's sake. Conditions J., K., M., N., O., P., and V. are under the heading Loss Settlement Conditions.
Any loss resulting from increase of hazard within the insured's control or knowledge is not covered.
The no benefit to bailee provision (L.) is standard in property forms. The insurance is not intended to replace another's responsibility for maintaining insurance.
Q. Mortgage Clause
The word "mortgagee" includes trustee.
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.
If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:
1. Notifies us of any change in the ownership or occupancy, or substantial change in risk of which the mortgagee is aware;
2. Pays any premium due under this policy on demand if you have neglected to pay the premium; and
3. Submits a signed, sworn proof of loss within sixty days after receiving notice from us of your failure to do so.
All of the terms of this policy apply to the mortgagee.
The mortgagee has the right to receive loss payment even if the mortgagee has started foreclosure or similar action on the building.
If we decide to cancel or not renew this policy, it will continue in effect for the benefit only of the mortgagee only for thirty days after we notify the mortgagee of the cancellation or nonrenewal.
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.
Analysis
This is a fairly typical mortgagee clause. The mortgagee is under the obligation to notify the insurer of any known change in ownership, occupancy, or increase in hazard. Further, if the policy is canceled or nonrenewed, it will remain in force solely for the benefit of the mortgagee (or a trustee) for thirty days following written notice to the mortgagee or trustee.
The mortgagee has the responsibility of filing a proof of loss if the insured does not do so. Notice will be sent to the mortgagee advising if this action is necessary.
R. 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.
Analysis
Suit against the insurer must be filed in the U.S. District Court for the district in which the insured property is located. In common with all such property provisions, the insured cannot bring suit unless all policy requirements have been complied with.
S. 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.
Analysis
In a standard homeowners subrogation clause, the insured may waive in writing all rights of recovery against another person prior to a loss. That is not the case with the dwelling form. The insured is required to preserve the company's rights, and if the insured collects from a person who caused a loss, the insured is to return any claim settlement to the carrier before keeping any money received from the individual.
T. Continuous Lake Flooding
1. If your insured building has been flooded by rising lake waters continuously for ninety days or more and it appears reasonably certain that a continuation of this flooding will result in a covered 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; and
c. Not to apply for any flood insurance under the Act for property at the described location; and
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 ninety days, the provisions of paragraph T.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 T.1. above or paragraph T.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 1 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 T.2. we will pay your claim as if the building is a total loss even though it has not been continuously inundated for ninety days, subject to the following conditions:
a. Lake flood waters must damage or imminently threaten to damage your building.
b. Before approval of you 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 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, they will not be eligible for the benefits of this paragraph T.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 T.1.a. through T.1.d. above.
c. Within ninety days of approval of your claim, you must move your building to a new location outside the ASC. FEMA will give you an additional thirty days to move if you show that 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 six months to be followed immediately by a permanent land use ordinance, that is consistent with the provisions specified in the easement required in paragraph T.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 T.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 nonprofit land trust organization receives the property as a donation, that organization must maintain the property as deed-restricted, consistent with the provisions of paragraph T.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 paragraph T.2. If a subsequent owner buys NFIP insurance that goes into effect within sixty days of the date of transfer of title, any gap in coverage during that sixty-day period will not be a violation of this continuous coverage requirement. For the purpose of honoring a claim under this paragraph T.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 T.2. will be in effect for a community when the FEMA Regional Director 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 T.2.e. and T.2.f. above; and
(2) The date by which you must have flood insurance in effect.
Analysis
An insured subjected to continuous lake flooding has two options. The insured may seek compensation under T.1. or T.2. If T.2. is selected, there is no requirement that the insured dwelling be flooded for ninety days, although other requirements apply as outlined.
U. Duplicate Policies Not Allowed
- We will not insure your property under more than one NFIP policy.
If we find that the duplication was not knowingly created, we will give you written notice. The notice will advise you that you may of choose one of several options under the following procedures:
a. If you choose to keep in effect the policy with the earlier effective date, you may also choose to add the coverage limits of the later policy to the limits of the earlier policy. The change becomes effective as of the effective date of the later policy.
b. If you choose to keep in effect the policy with the later effective date, you may also choose to add the coverage limits of the earlier policy to the limits of the later policy. The change will be effective as of the effective date of the later policy.
In either case, you must pay the pro rata premium for the increased coverage limits within thirty days of the written notice. In no event will the resulting coverage limits exceed the permissible limits of coverage under the Act or your insurable interest, whichever is less.
We will make a refund to you, according to applicable NFIP rules, of the premium for the policy not being kept in effect.
2. Your option under Condition U. Duplicate Policies Not Allowed to elect which NFIP policy to keep in effect does not apply when duplicates have been knowingly created. Losses occurring under such circumstances will be adjusted according to the terms and conditions of the earlier policy. The policy with the later effective date will be canceled.
Analysis
An insured with a dwelling having a replacement value of $450,000 cannot purchase one policy for $250,000 (the maximum currently available under the regular residential program) and another for $200,000 and hope to thus have full coverage. The provision clearly states that an insured may have only one flood policy in force. If an insured knowingly purchases two policies hoping to collect on both in event of a flood, the policy with the earlier effective date governs loss settlement, and the policy with the later date will be canceled.
If an insured unknowingly has a duplicate the insured has the option of choosing which policy is to remain in force.
As noted earlier, the loss settlement provisions and conditions are located in two different places in the flood policy. For convenience, they are discussed together in the section.
J. 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 sixty 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 the loss;
b. A brief explanation of how the loss happened;
c. Your interest in the property damaged (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 covered 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 covered 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 J.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 to complete it. However, this is a matter of courtesy only, and you must still send us a proof of loss within sixty 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.
Analysis
The duties of the insured following a loss are extensive, and, while in many cases similar to those of the standard homeowners forms, there are many differences. For example, the insured must give details as to who was in the dwelling at the time of the loss and for what purpose. The insured has to give details of other contracts of insurance on the property; the intent is to give details of any insurance that might respond to the flood loss.
Although an adjuster may assist the insured in preparing a proof of loss, it is still the insured's responsibility to prepare and forward the proof of loss within sixty days to the NFIP. Note also that the adjuster is not authorized to approve a claim or to tell the insured that the NFIP will approve the claim. However, the insurer has the option of accepting the adjuster's report. In circumstances where flooding is extensive, this might be the expedient approach.
K. 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;
(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 make reasonably available to us; and
e. Evidence that prior flood damage has been repaired.
3. If we give you written notice within thirty 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 we agree upon or its appraised value.
Analysis
While this section is about options of the carrier, there are several requirements of the insured. The condition for examination under oath states that this is to be done while not in the presence of another insured—a condition that has already been added to standard homeowners forms. The insured must provide evidence, if requested, that any prior flood damage has been repaired. The insurer has the option to repair or replace damaged property with functionally equivalent material. So, for example, an insured may find following a loss that his or her turn-of-the-century cedar-shake beach-front home will be repaired with standard siding, and plasterboard instead of plaster walls. Of course, an insured may well prefer this as opposed to insurance limits being reached before the dwelling can be more than partially rebuilt.
M. 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 sixty days after we receive your proof of loss (or within ninety days after the insurance adjuster files an 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.P.
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 sixty days of the date of the loss.
N. Abandonment
You may not abandon to us damaged or undamaged property insured under this policy.
O. 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.
Analysis
The insurer has sixty days to make payment to the insured, provided two things occur: first, the insurer must receive the proof of loss; and second, the insurer must reach agreement with the insured as to the value of the loss; a final judgment must have been entered; or an appraisal award must have been filed with the insurer. This time frame is extended to ninety days if the insurance adjuster files a report signed and sworn to by the insured.
If the proof of loss is rejected either in part or in its entirety, the insured can accept the denial, file an amended proof of loss, or exercise his or her rights, such as bring suit against the insurer.
P. Appraisal
If you and we are unable to agree with you 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 twenty days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within fifteen days, you or we may request that the choice be made by a judge of a court of record in the State where the covered 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.
Analysis
This appraisal clause is similar to those found in other property forms. An appraisal determines only the actual cash value or replacement value of the damaged property; it does not determine whether or not there is coverage for a loss.
V. 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 V.2. below, applies to a single family dwelling provided:
(1) It is your principal residence, which means that, at the time of the loss, you or your spouse lived there for at least 80 percent of:
(a) The 365 days immediately preceding the loss; or
(b) The period of your ownership, if you owned the dwelling for less than 365 days; 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 V.3. below, applies to a single-family dwelling that is a manufactured or mobile home or 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 V.4. below.
Analysis
The loss settlement provisions apply certain settlement procedures for certain types of property. Special loss settlement applies to manufactured or mobile homes or travel trailers. Actual cash value applies to single family homes that are not subject to replacement cost or special loss settlement, and replacement cost applies to homes that are the insured's principal residence.
2. Replacement Cost Loss Settlement
The following loss settlement conditions apply to a single-family dwelling described in V.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 V.2.a. above or V.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 V.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.
Analysis
The replacement cost loss settlement conditions apply provided the amount of insurance on the insured dwelling is 80 percent or more of full replacement cost immediately before the loss, or is the maximum available under the NFIP. Further, they only apply if the insured dwelling is the insured's principal place of residence. The conditions are similar to those found in standard homeowners forms, except for 2.e. Under this provision, an insured gets the benefit of maximum insurance available under the program if the insured dwelling is in a location changed from emergency to regular program status.
If the insured elects to rebuild at a different location he may do so, but the amount of insurance will not be greater than the cost to rebuild at the insured location. Many questions arise concerning building at a new location, and this helps clarify that situation.
3. Special Loss Settlement
a. The following loss settlement conditions apply to a single-family dwelling that:
(1)I s a manufactured or mobile home or a travel trailer, as defined in II.B.6.b. and II.B.6.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.
(3) Is your principal residence, as specified in V.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 predamage 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 predamage condition, we will settle the loss according to the Replacement Cost conditions in paragraph V.2. above.
Analysis
The form specifies the required dimensions of the home and that it be the insured's primary residence. A total (including constructive total) loss settlement is limited to the lesser of 1.5 times actual cash value or the limit of liability.
However, in the event of partial loss or damage, and the insurer determines repair is feasible, then the loss will be settled according to replacement cost.
4. Actual Cash Value Loss Settlement
The types of property noted below are subject to actual cash value [or in the case of V.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.B.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 covered 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.
Analysis
The only instance in which a flood loss will be settled on a replacement cost basis is with respect to a single family dwelling that is the insured's principal residence. In all other cases, coverage is on an actual cash value basis. This point is made twice—see V.1.a.(1) as well as V.4.i.
Likewise, certain property is only eligible for an actual cash value settlement, such as personal property, outdoor antennas and aerials, carpeting (whether over finished or unfinished flooring), awnings, appliances, and outdoor equipment, even if part of the dwelling. Losses to two-, three-, or four-family dwellings are settled on actual cash value, as are losses to garages. (Free-standing carports, remember, are no longer covered property.)
If the amount of insurance at the time of loss is less than 80 percent of full replacement cost and less than the maximum amount available from the NFIP, then the proportion is achieved by "did over should"; that is, what the insured carried on the dwelling divided by an amount equal to 80 percent of what the insured should have carried. The resulting figure is then applied to the cost to repair or replacing. If the 80 percent of replacement is greater than the amount available under the NFIP, then what the insured did have is divided by what he could have had; the result is then applied to the cost of repair or replacing. For example, the replacement cost of the dwelling is $200,000; the insured has $150,000 of coverage, less than the required 80 percent which is $160,000. The calculation is as follows: $150,000/160,000 = .93 which is applied to the amount to repair/replace the dwelling. If the amount to repair the dwelling is $75,000 that is multiplied by the .93 and $69,750 is the amount paid by NFIP for the loss.
5. Amount of Insurance Required
To determine the amount of insurance required for a dwelling immediately before a loss, 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 V.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.
The Coverage D—Increased Cost of Compliance limit of liability is not included in the determination of the amount of insurance required.
Analysis
The determination of full insurance to value for a dwelling parallels those found in standard homeowners forms in that the cost of excavations, foundations, piers and supports below the lowest basement floor, etc., may be disregarded, in theory because they will be relatively undamaged.
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 sixty days before, or during, the policy term stated on the Declarations Page.
Analysis
Under most standard homeowners forms, a broadening of coverage can result from a change implemented within sixty days prior to the policy period.
This policy and all disputes arising from 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.
Analysis
The Act of 1968, with subsequent additions, governs both the policy and the handling of any claim. For example, the Flood Insurance Reform Act of 1994 requires lenders to notify borrowers or lessees that property is located in a special flood hazard area and flood insurance is required.
original 12/2013