34824 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

FEDERAL EMERGENCY

MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067–AD01

National Flood Insurance Program

(NFIP); Insurance Coverage and Rates

AGENCY: Federal Emergency

Management Agency (FEMA).

ACTION: Proposed rule.

SUMMARY: We (the Federal Insurance

Administration of FEMA) are proposing

changes to the Standard Flood

Insurance Policy (SFIP). The proposed

changes include: rendering the SFIP in

‘‘plain language’’ and restructuring its

format to resemble the homeowners

policy. We are also using this

opportunity to propose changes in the

policy’s coverage.

DATES: Please send your comments on

the proposal on or before July 31, 2000.

ADDRESSES: Please send your comments

to the Rules Docket Clerk, Office of the

General Counsel, Federal Emergency

Management Agency, 500 C Street SW.,

room 840, Washington, DC 20472,

(facsimile) 202–646–4536, or (email)

rules@fema.gov.

FOR FURTHER INFORMATION CONTACT:

James S. P. Shortley, Federal Emergency

Management Agency, Federal Insurance

Administration, 500 C Street SW.,

Washington, DC 20472, 202–646–3418,

(facsimile) 202–646–4327, (email)

James.Shortley@fema.gov.

SUPPLEMENTARY INFORMATION:

Plain Language Initiative

On June 1, 1998, President Clinton

directed the heads of Federal

departments and agencies to ensure that

their communications with the public

be in ‘‘plain language.’’ That directive

established January 1, 1999, as the date

when Federal executive agencies and

departments must use plain language in

all proposed and final rules published

in the Federal Register. This proposal to

revise the three separate forms of the

Standard Flood Insurance Policy

(SFIP)—the Dwelling Form, the General

Property Form, and the Residential

Condominium Building Association

Policy—complies with that directive.

Implementing Guidance

In drafting the proposed revisions of

the SFIP, we followed the guidance on

plain language developed by the

National Partnership for Reinventing

Government and provided on July 28,

1998 by Vice President Gore to the

Federal executive agencies and

departments and independent agencies.

Customer Review

On September 15, 1999, in Lancaster,

Pennsylvania, we convened a focus

group of eight flood insurance

policyholders—four had suffered flood

losses and four had never had a flood

loss—to help us judge the readability of

our draft revised flood insurance policy.

The group compared the readability of

the current Dwelling Form of the SFIP

with a semi-final draft of our proposed

revision. These are comments that the

participants offered about our proposed

rewrite: ‘‘Everything I looked at was

easier.’’ It had ‘‘more specific language’’

and was ‘‘worded much better.’’ It was

in ‘‘layman’s terms you can

understand,’’ and it made it ‘‘easier to

look up everything.’’ Members of the

focus group found that our proposed

policy revision had shorter sentences

than the current policy, had better

organization, and used words that were

easier to understand. The version of the

SFIP we are proposing is essentially the

version that the focus group reviewed

with only minor editorial changes.

The focus group recommended

several specific additions that would

make the proposed rewrite even easier

for policyholders to use:

• Include a table of contents,

• Add an index of key words at the

end of the policy,

• Insert page headers of major section

sections at the top of each page,

• Use a variety of graphic devices to

highlight headings and subheadings,

and

• Add a section on frequently asked

questions.

We agree with most of these

suggestions, which we will incorporate

in the printed version of the SFIP that

the policyholder receives and uses.

They will not however appear in this

proposed rule or in the Code of Federal

Regulations.

The focus group also suggested that

we post the SFIP on the internet. We are

already doing that: the current Standard

Flood Insurance Policy is one of the

‘‘Quick Links’’ found at our web site:

www.fema.gov/nfip. We will continue

that practice and post the revised policy

too once we publish the final rule, as

well as this proposed rule, on our web

site.

We do not believe that adding a new

section to the policy on frequently asked

questions, however, is necessary. Our

web site contains the link, ‘‘Basic

Questions and Answers about Flood

Insurance,’’ which gives the public,

policyholders, and insurance agents

ready access to specific information

about coverage. We have also developed

printed public education and public

information materials that serve that

purpose as well.

External Customers

Our two largest external customer

groups that use the SFIP are: (1)

Roughly four million property owners

who buy flood insurance and need to

understand the terms of their contract

for flood insurance, and (2) hundreds of

thousands of private insurance agents

across the country who sell and service

the SFIP. Any revision to the SFIP must

serve the needs of both groups: our

policyholders for an easy-to-read flood

insurance policy, and licensed private

insurance agents for a flood insurance

policy that is organized like the more

familiar homeowners policy. There are

also smaller, specialized customer

groups that use the SFIP such as claims

adjusters, insurance underwriters,

auditors, etc., who will benefit from a

policy that is clearer and easier to use.

Compatibility With the Homeowners

Policy

Making the SFIP conform more

closely with the homeowners has been

a long-standing recommendation of our

partners in the insurance industry. We

have received comments in the past that

the flood insurance policy and

coverages available under it should as

nearly as possible ‘‘look’’ like other

insurance policies which are commonly

bought by the public or sold and

handled by insurance agents in order to

promote the greatest utilization of the

NFIP.

To help us make the SFIP conform

with the homeowners policy, we

contracted with Insurance Services

Organization (ISO), Inc. ISO

restructured the proposed rewrite of the

SFIP so that it ‘‘looks’’ more like ISO’s

version of the homeowners policy,

specifically HO–3. ISO also provided us

an initial draft of that restructuring in

plain language, which we used as a

starting point to meet the

Administration’s standards for plain

language communications with the

public. By making the SFIP ‘‘look’’ and

‘‘feel’’ like homeowners policies, we

believe the desk level staff in insurance

agencies will be more comfortable with

the SFIP since it will follow the same

sequence and use the same format as its

industry model. This we believe will

help serve the goal of having more of the

nation’s property owners in flood-prone

areas protected from uninsured flood

losses.

Summary of Proposed Coverage

Changes

We are also proposing some changes

in coverage for the three policy forms.

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34825

The following tables compare the current coverage under the SFIP with

the proposed changes:

TABLE 1.—LAND SUBSIDENCE, SEWER BACK-UP, AND SEEPAGE

Proposed change in SFIP coverage Current SFIP coverage

The proposed changes would not affect the coverage for losses from

‘‘subsidence of land’’ along the shore of a lake or other body of

water as a result of flood-related erosion.

Pay for losses from subsidence of land along the shore of a lake or

other body of water as a result of flood-related erosion.

Not pay for any losses from other land subsidence ................................ Pay for losses from other land subsidence under certain circumstances.

Pay for losses from sewer back-up and seepage if there is a general

condition of flooding and the flood waters touch the structure.

Remove the current requirements for replacement cost coverage on

the building and for the loss occurring within 72 hours after the flood

has receded for sewer back-up and seepage losses.

Do not apply a separate deductible to claims for sewer back-up and

seepage.

Pay for losses from sewer back-up and seepage:

If there is a general condition of flooding in the general area;

If the building has replacement cost coverage; and

If the loss occurs within 72 hours after the flood has receded.

Apply a separate deductible to claims for these losses.

As noted in the preceding table, we

pay, in the current policy, for losses

from sewer backup if flooding is ‘‘in the

area.’’ We are proposing a more

verifiable standard to adjust sewer

backup losses, namely, that flood waters

must touch the insured building. This

proposed change would give us a more

objective standard for adjusting claims

for sewer backup losses.

Also, as the preceding table shows,

there are two references to the

subsidence of land in the current policy.

The first is in our definition of ‘‘flood.’’

Section 1370 of the National Flood

Insurance Act of 1968 mandates that the

term ‘‘flood’’ shall also include ‘‘the

collapse or subsidence of land along the

shore of a lake or other body of water

as a result of erosion or undermining

caused by waves or currents of water

exceeding anticipated cyclical levels.’’

The second reference to land subsidence

is in the Dwelling Form: currently we

pay for losses from land subsidence

when certain criteria are met such as

amount of insurance coverage in force

on the dwelling, the duration of

flooding (‘‘no later than 72 hours after

the flood has receded’’), and the

proximity of the flood (‘‘in the area’’).

The proposed changes do not include

any revision to the statutory reference to

‘‘subsidence of land’’ in the policy’s

definition of ‘‘flood.’’ The proposed

revisions would however eliminate

coverage for land subsidence in any

other situation.

TABLE 2.—LOSS MITIGATION MEASURES AND LOSS ASSESSMENTS

Proposed change in SFIP coverage Current SFIP coverage

Increase the amount we will pay for the labor and materials of certain

mitigation activities (e.g., sandbagging) to $1,000.

We currently pay up to $750 for materials and labor for mitigation efforts such as sandbagging.

Increase to $1,000 the amount we will pay for removal of personal

property from a flood-threatened building.

We currently pay up to $500 for the removal of personal property in

anticipation of the flood.

TABLE 3.—PERSONAL PROPERTY, MOTORIZED VEHICLES AND SPECIAL NEEDS

Proposed change in SFIP coverage Current SFIP coverage

We will permit a renter to apply 10% of contents coverage to cooking

stoves, ranges, or refrigerators belonging to the renter, as well as to

improvements by the renter to the building.

No coverage under the Dwelling Form.

We will permit a condominium unit owner to apply 10% of the contents

coverage to losses to interior walls, floors, and ceilings under the

Dwelling Form.

No coverage.

We will increase to $2500 what we will pay for flood losses to collectibles, artwork, furs, etc., and add to the list business contents.We now pay only up to $250 for eligible flood losses to collectibles, artwork, furs, etc.

Pay for losses to self-propelled vehicles that service the premises and

assist handicapped persons provided the vehicles are in a building

on the premises.

We only pay for losses to self-propelled vehicles that service the building.

TABLE 4.—LOSS SETTLEMENT FOR MANUFACTURED HOMES AND INTERPRETATION OF COMMON WALL

Proposed change in SFIP coverage Current SFIP coverage

We propose to change how we settle losses for double-wide manufactured homes. We propose to settle losses for these structures with

materials on a replacement cost basis but never more than 1.5 times

the actual cash value.

Replacement cost interpreted for total losses as the value shown in

NADA guide for mobile homes.

34826 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

TABLE 4.—LOSS SETTLEMENT FOR MANUFACTURED HOMES AND INTERPRETATION OF COMMON WALL—Continued

Proposed change in SFIP coverage Current SFIP coverage

We propose to treat as part of the building additions or extensions attached by a rigid exterior wall, a solid load-bearing interior wall, a

stairway, an elevated walkway, or a roof. At the insured’s option,

these additions and extensions may be separately insured. If the addition or extension is attached by a common interior wall, it may not

be insured as a separate building.

We currently only treat, as part of the building, extensions or additions

that are connected by a common wall. Additions and extensions connected by a covered breezeway, for example, are treated as separate buildings—not as part of the building.

TABLE 5.—REDUCTION AND RESTORATION (REFORMATION) OF COVERAGE LIMITS

Proposed change in SFIP coverage Current SFIP coverage

We propose to add a policy restoration (reformation) provision for situations when an application or endorsement is received without all the

necessary information. We propose to require the applicant to submit

the missing information within 60 days. If the missing information is

not received within 60 days, and a loss occurs, the maximum

amount of insurance available is limited to the lesser of: the amount

originally requested or the amount of coverage the original premium

paid would buy, using the correct rating information.

No such provision.

We are also proposing to add coverage

in basements and in enclosures of

elevated buildings for water softeners,

water filters and faucets. In addition, we

are proposing to add coverage for

damage from the pressure of water

against the structure with the

requirement that there be surface

flooding in the area as well. On the

other hand, we are proposing to exclude

from coverage scrip and stored value

cards. The revisions to the policy we are

proposing would also exclude any

losses caused by the policyholder’s

failure to inspect and maintain the

property after the flood recedes. We are

also proposing to eliminate the option

for a ‘‘scheduled building policy.’’ The

NFIP scheduled building policy has had

little use. The only incentive for the

insured to select this option, if eligible,

is a small saving on the expense

constant.

The proposed rule would change the

‘‘Closed Basin Lake’’ endorsement in all

three policy forms. Currently,

policyholders must have ‘‘NFIP flood

insurance continuously in effect from a

date established by FEMA until’’ the

policyholder files a claim. The current

rule is silent however about how much

flood insurance needs to be

continuously in force. This means that

a policyholder could technically meet

this criterion for continuous coverage by

buying a minimal amount of flood

coverage initially, keeping the minimal

amount of coverage in effect, and then

increasing the face amount of the policy

when the structure is eligible for

relocation. The proposed change would

require that policyholders have the

same amount of insurance in effect

continuously from the date set by FEMA

until the policyholder files a claim. The

proposed change would still allow the

policyholder to buy recommended

increases in coverage at policy renewal

to keep pace with inflation.

We are retaining in the proposed rule

coverage for detached garages, but we

are proposing also to eliminate coverage

for detached carports since they do not

have two walls—one of the criteria

under the definition of building. We are

also proposing to eliminate the

requirement for a minimum premium.

The proposed rule would add to the

definition of ‘‘flood’’ the criteria we

currently use for an event to qualify as

a ‘‘flood.’’ Those criteria—currently

included in the list of exclusions—

requires that a qualifying flood event

under the policy must inundate two

properties or two acres. The proposed

consolidation of the criteria into the

definition of ‘‘flood’’ would be much

more useful for the policyholder to

understand the scope of coverage under

the policy.

Of special note is the proposed

change on pollutants. The current SFIP

has a pollution exclusion for Increased

Cost of Compliance coverage only. We

are proposing to add to the SFIP a

general pollution exclusion, similar to

that in the industry’s HO–3 policy. The

HO–3 policy’s pollution exclusion only

applies, however, if the pollution

damage is caused by a peril other than

the sixteen named perils in that policy’s

Personal Property Coverage. Since we

cover only one peril, flood, our

proposed pollution exclusion is for all

coverage under the SFIP, and hence is

broader than the HO–3’s pollution

exclusion.

We are also proposing to eliminate the

reference to the policy’s minimum

premiums at 44 CFR 61.10 since our

proposed revision of the policy would

eliminate references to a minimum

premium as well.

In addition to these proposed

coverage changes, we are proposing to

change how we define loss in progress

to make our intent clearer on when

coverage begins in connection with loan

closings. Also, we are proposing a

change to the ‘‘Mortgage’’ clause, which

follows more closely the format of HO–

3. While the latter proposals are not

coverage changes per se, we believe, if

adopted, they would make the benefits

to and responsibilities of lenders

clearer.

Exclusive Federal Jurisdiction and

Applicable Law

Standard Flood Insurance Policies are

sold by a number of private Write Your

Own (WYO) insurance companies and

directly to the public by the Federal

Insurance Administration. Because the

National Flood Insurance Program is

national in scope and accomplishes a

number of programmatic missions in

addition to making affordable flood

insurance generally available to the

public, the SFIP provides that its terms

cannot be altered, varied or waived

except by the written authority of the

Federal Insurance Administrator. The

Administrator intends that the same

benefits should be available to insureds

wherever the insured property is

located, or whether the policy is

purchased from a WYO insurance

company or from the Federal

Government. Thus, there is a need for

uniformity in the interpretation of and

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34827

standards applicable to the policies and

their administration. Therefore, we have

clarified the policy language pertaining

to jurisdiction, venue and applicable

law to emphasize that matters

pertaining to the Standard Flood

Insurance Policy, including issues

relating to and arising out of claims

handling, must be heard in Federal

court and are governed exclusively by

Federal law.

National Environmental Policy Act

This proposed rule falls within the

exclusion category 44 CFR 10.8(d)(2)(ii)

which addresses the preparation,

revision, and adoption of regulations,

directives, and other guidance

documents related to actions that

qualify for categorical exclusions.

Qualifying for this exclusion and

because no other extraordinary

circumstances have been identified, this

proposed rule will not require the

preparation of either an environmental

assessment or environmental impact

statement as defined by the National

Environmental Policy Act.

Executive Order 12866, Regulatory

Planning and Review

In the course of preparing this

proposed rule we have considered the

requirements of Executive Order 12866

of September 30, 1993, 58 FR 51735,

and have concluded that this proposed

rule is not a significant regulatory action

within the meaning of section 2(f) of the

Executive Order. The rule would

accomplish three principal changes:

(1) It would render the SFIP in ‘‘plain

English’’;

(2) It restructures the format to

resemble the basic homeowners policy;

and

(3) It would make several changes in

the policy’s coverage.

In all other substantive aspects the SFIP

is unchanged from its past version.

Of 18 proposed changes that affect

coverage, we summarize 11 in Tables 1

through 5 of this preamble. We

summarize the remaining 7 changes in

the paragraphs that immediately follow

the tables. The 18 proposed changes are

evenly divided between changes that

add or increase coverage and changes

that reduce or remove coverage or

require certain coverage from a date

certain to the time a claim is filed for

‘‘closed basin lake’’ claims.

For each revised policy provision, we

made two estimates: the first was the

percentage of claims that would be

impacted by the revised provision; the

second estimate was the dollar impact

that provision would have on each

affected claim. We multiplied these two

amounts to develop the dollar impact of

each change spread over all program

claims. We then summed those dollar

amounts to arrive at an estimated

decrease of $83.12 in the average paid

claim under these revised policy

provisions. We estimate that during the

first fiscal year after enactment the NFIP

would have about 4.3 million

policyholders and about 55,900 total

flood losses. If so, that would result in

an annual savings to the Program of

approximately $4.6 million resulting

from the proposed changes to the

policy.

For the reasons stated we have

concluded that this rule is not a

significant regulatory action within the

meaning of Executive Order 12866. The

Office of Management and Budget has

reviewed the proposed rule under the

provisions of Executive Order 12866.

Paperwork Reduction Act

The Office of Management and Budget

(OMB) has approved the information

collection requirements in this proposed

rule under the provisions of the

Paperwork Reduction Act of 1980, as

amended. OMB has assigned control

numbers 3067–0021 and 3067–0022 to

the collection of information under this

proposed rule.

We estimate that the public reporting

and recordkeeping burden for the

collection of information titled ‘‘Claims

for National Flood Insurance Program’’

to average 4.0 hours per claim. The

estimate includes the time for reviewing

instructions, searching existing data

sources, gathering and maintaining the

data needed, and completing and

reviewing the information requirements.

The information required under the

terms of the Standard Flood Insurance

Policy described in appendices A(1),

A(2), and A(3) of the proposed rule is

collected using the following FEMA

forms:

FEMA Form No. Title Burden estimate

81–16 .................................. Application.

and

81–67 .................................. Preferred Risk Application ............................................................................................ 12 minutes.*

81–17 .................................. Cancellation ................................................................................................................... 7.5 minutes.

81–18 .................................. Endorsement ................................................................................................................. 9 minutes.

81–25 .................................. V-Zone Risk Factor ....................................................................................................... 15 minutes.

81–40 .................................. Worksheet-contents-personal property ......................................................................... 2.5 hours.

81–41 .................................. Worksheet-building ........................................................................................................ 2.5 hours.

81–41A. ............................... Worksheet-building (Cont’d) .......................................................................................... 1.0 hour.

81–42 .................................. Proof of loss .................................................................................................................. 5–6 minutes.

81–42A ................................ Increased Cost of Compliance Proof of Loss ............................................................... 2.0 hours.

81–43 .................................. Notice of loss ................................................................................................................ 4 minutes.

81–44 .................................. Statement as to full cost to repair ................................................................................. 6–7 minutes.

81–57 .................................. National Flood Insurance Program Preliminary report ................................................. 4 minutes.

81–58 .................................. National Flood Insurance Program Final report ........................................................... 4 minutes.

81–59 .................................. National Flood Insurance Program Narrative report ..................................................... 5–6 minutes.

81–63 .................................. Cause of Loss and Subrogation report ......................................................................... 45 minutes to 1 hour.

81–98 .................................. Increased Cost of Compliance Adjuster Report ........................................................... 15 minutes.

N/A ...................................... Renewal Premium Notice ............................................................................................. 3 minutes.

N/A ...................................... Request for Policy Processing and Renewal Information Letter .................................. 9 minutes.

* The Preferred Risk Applications and the regular Flood Insurance Applications are now processed and recorded together. There is no breakdown available to separate the burden of each application.

34828 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

Executive Order 13132, Federalism

This proposed rule involves no

policies that have federalism

implications under Executive Order

13132, Federalism, dated August 4,

1999.

Executive Order 12778, Civil Justice

Reform

This proposed rule meets the

applicable standards of section 2(b)(2) of

Executive Order 12778.

List of Subjects in 44 CFR Part 61

Claims, Flood insurance.

Accordingly, we propose to amend 44

CFR Part 61 as follows:

PART 61—INSURANCE COVERAGE

AND RATES

1. The authority citation for part 61

continues to read as follows:

Authority: 42 U.S.C. 4001 et seq.;

Reorganization Plan No. 3 of 1978, 43 FR

41943, 3 CFR, 1978 Comp., p. 329; E.O.

12127 of Mar. 31, 1979, 44 FR 19367, 3 CFR,

1979 Comp., p.376.

§ 61.10 [Removed]

2. We remove § 61.10.

3. We revise Appendix A(1) to Part

61, Dwelling Form, to read as follows:

APPENDIX A(1) TO PART 61

Federal Emergency Management

Agency, Federal Insurance

Administration

Standard Flood Insurance Policy

DWELLING FORM

Please read the policy carefully. The

flood insurance provided is subject to

limitations, restrictions and exclusions.

This policy covers only:

1. A non-condominium residential

building designed for principal use as a

dwelling place of one to four families,

or

2. A single family dwelling unit in a

condominium building.

I. Agreement

The Federal Emergency Management

Agency 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.

We will pay you for direct physical

loss by or from flood to your insured

property if you:

1. 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.

II. Definitions

A. In this policy, ‘‘you’’ and ‘‘your’’

refer to the insured(s) shown on the

Declarations Page of this policy. ‘‘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 at least two or more properties (one

of which is your property) from:

a. The overflow of inland or tidal

waters.

b. The unusual and rapid

accumulation or runoff of surface waters

from any source.

c. Mudflows.

2. The collapse or subsidence of land

along the shore of a lake or similar body

of water as a result of erosion or

undermining caused by waves or

currents of water exceeding anticipated

cyclical levels which result in a flood as

defined in Flood, paragraph A.1.a above.

B. The following are the other key

definitions we use in this policy:

1. Act. The National Flood Insurance

Act of 1968 and any amendments to it.

2. Actual Cash Value. The cost to

replace an insured item of property at

the time of loss, less the value of its

physical depreciation.

3. Application. The statement made

and signed by you or your agent in

applying for this policy. The application

gives information we use to determine

the eligibility of the risk, the kind of

policy to be issued and the correct

premium payment. The application is

part of this flood insurance policy. For

us to issue you a policy, the correct

premium payment must accompany the

application.

4. Base Flood. A flood having a one

percent chance of being equaled 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.

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 that is built

on a permanent chassis and affixed to a

permanent foundation and that is

transported to its site in one or more

sections); 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 recreational vehicle,

park trailer or other similar vehicle,

except as described in 6.c., above.

7. Cancellation. The ending of the

insurance coverage provided by this

policy before the expiration date.

8. Condominium. That form of

ownership of 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;

b. Other real property in which the

unit owners have use rights; where

membership in the entity is a required

condition of unit ownership.

10. Declarations Page. A computergenerated summary of information you

furnish 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 building(s) or personal

property are found. The described

location is shown on the declarations

page.

12. Direct Physical Loss By or From

Flood. Loss or damage to insured

property, directly caused by a flood.

Direct physical loss must be evidenced

by physical changes to the property.

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.

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

that 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

that you must pay on each new or

renewal policy to defray certain

administrative expenses incurred in

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34829

carrying out the National Flood

Insurance Program. This fee covers

expenses not covered by the expense

constant.

18. Improvements. Fixtures,

alterations, installations, or additions

comprising a part of the insured

dwelling or the apartment unit in which

you reside.

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.

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 endorsements 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, specifically

described by you in the application,

may be insured under this policy.

22. Pollutants. Includes, but is not

limited to, any solid, liquid, gaseous or

thermal irritant or contaminant,

including smoke, vapor, soot, fumes,

acids, alkalis, chemicals and waste.

Waste includes, but is not limited to,

materials to be recycled, reconditioned

or reclaimed.

23. Post-FIRM Building. A building for

which construction or substantial

improvement occurred after December

31, 1974, or on or after the effective date

of an initial Flood Insurance Rate Map

(FIRM), whichever is later.

24. Probation Premium. A flat charge

you must pay on each new or renewal

policy issued covering property in a

community that has been placed on

probation under the provisions of 44

CFR 59.24.

25. Regular Program. The final phase

of a community’s participation in the

National Flood Insurance Program. In

this phase, a Flood Insurance Rate Map

is in effect and full limits of coverage

are available under the Act.

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, A1–30, AE, A99, AH, AR,

AR/A, AR/AE, AR/AH, AR/AO, AR/A1–

30, V1–30, VE, or V.

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 the event of a total loss.

The Standard Flood Insurance Policy is

not a valued policy.

III. Property Covered

A. Coverage A—Building Property

We insure against direct physical loss

by or from flood to:

1. The dwelling at the described

location, or for a period of 45 days at

another location as set forth in III.C.2.b.,

Property Removed to Safety.

2. Additions and extensions attached

to and in contact with the dwelling by

means of a rigid exterior wall, a solid

load-bearing interior wall, a stairway, an

elevated walkway, or a roof. At your

option, additions and extensions

connected by any of these methods may

be separately insured. Additions and

extensions attached to and in contact

with the building by means of a

common interior wall that is not a solid

load-bearing wall are always considered

part of the dwelling and may not be

separately insured.

3. A detached garage, used as such, at

the described location. Coverage is

limited to no more than 10% of the limit

of liability on the dwelling. Use of this

insurance is at your option but reduces

the building limit of liability.

4. Materials and supplies to be used

for construction, alteration or repair of

the dwelling or a detached garage while

the materials and supplies are stored in

a fully enclosed building at the

described location or on an adjacent

property.

5. A building under construction,

alteration or repair at the described

location.

a. If the structure is not yet walled or

roofed as described in the definition for

building (See B.6.a.) then coverage

applies:

(1) Only while such work is in

progress; or

(2) If such work is halted, only for a

period of up to 90 continuous days

thereafter.

b. However, coverage does not apply

until the building is walled and roofed

if the lowest floor, including the

basement floor, of a non-elevated

building or the lowest elevated floor of

an elevated building is:

(1) Below the base flood elevation in

Zones AH, AE, A1–30, AR, AR/AE, AR/

AH, AR/A1–30, AR/A, AR/AO; or

(2) Below the base flood elevation

adjusted to include the effect of wave

action in Zones VE or V1–30.

The lowest floor levels are based on

the bottom of the lowest horizontal

structural member of the floor in Zones

VE or V1–30 and the top of the floor in

Zones AH, AE, A1–30, AR, AR/AE, AR/

AH, AR/A1–30, 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.

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. Freezers, walk-in.

j. Furnaces and radiators;

k. Garbage disposal units;

l. Hot water heaters, including solar

water heaters;

m. Light fixtures;

n. Outdoor antennas and aerials

fastened to buildings;

o. Permanently installed cupboards,

bookcases, cabinets, paneling, and

wallpaper;

p. Plumbing fixtures;

q. Pumps and machinery for operating

pumps;

r. Ranges, cooking stoves, and ovens;

s. Refrigerators; and

t. Wall mirrors, permanently installed.

8. Items of property in a building

enclosure lower than the lowest

elevated floor of an elevated post-FIRM

building located in zones A1–30, AE,

AH, AR, AR/A, AR/AE, AR/AH, AR/

A1–A30, V1–30, 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;

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(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, unless 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) Oil tanks and oil in them;

(12) Pumps and tanks used in solar

energy systems;

(13) Stairways and staircases attached

to the building, not separated from it by

elevated walkways;

(14) Sump pumps;

(15) Water softeners, water filters and

faucets installed as an integral part of

the plumbing system;

(16) Well water tanks and pumps;

(17) Required utility connections for

any item in this list; and

(18) Footings, foundations, posts,

pilings, piers, or other foundation walls

and anchorage systems required to

support a building.

b. Clean-up.

B. Coverage B—Personal Property

1. If you have purchased personal

property coverage, we insure against

direct physical loss by or from flood to

personal property inside a building at

the described location, if:

a. The property is owned by you or

your household family members; and

b. At your option, the property is

owned by guests and servants.

Personal property is also covered for

a period of 45 days at another location

as set forth in III.C.2.b., Property

Removed to Safety.

Personal property in a building that is

not fully enclosed must be secured to

prevent flotation out of the building. If

the personal property does float out

during a flood, it will be conclusively

presumed that it was not reasonably

secured. In that case there is no

coverage for such property.

2. Coverage for personal property

includes the following property, subject

to paragraph 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 lower than the

lowest elevated floor of an elevated

post-FIRM building located in zones

A1–30, AE, AH, AR, AR/A, AR/AE, AR/

AH, AR/A1–A30, V1–30, 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;

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 unit in which you reside,

but for not more than 10% 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.

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% 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.

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, manuscripts or

autographed items;

c. Jewelry, watches, precious and

semi-precious stones, 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.

C. Coverage C—Other Coverages

1. Debris Removal.

We will pay reasonable expenses to

remove debris directly caused by flood,

provided the debris is:

a. Debris from property:

(1) That you do not own;

(2) That originates from beyond the

boundaries of the described location,

and

(3) That is physically on or in the

insured building; or

b. Debris of the insured property

anywhere.

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.

This coverage does not increase the

Coverage A or Coverage B Limit of

Liability.

2. Loss Avoidance Measures

a. Sandbags, Supplies and Labor

(1) We will pay up to $1,000 for costs

you incur to protect the insured

building from a flood or imminent

danger of flood, including:

(a) Your reasonable expenses to buy:

(i) Sandbags, including sand to fill

them;

(ii) Fill for temporary levees;

(iii) Pumps; and

(iv) Plastic sheeting and lumber used

in connection with these items.

(b) The value of work, at the Federal

minimum wage, that you or a member

of your household perform.

(2) This coverage for Sandbags,

Supplies and Labor only applies if

damage to insured property by or from

flood is imminent and the threat of

flood damage is apparent enough to lead

a person of common prudence to

anticipate flood damage. One of the

following must also occur:

(a) A general and temporary condition

of flooding in the area near the

described location must occur, even if

the flood does not reach the building; or

(b) A legally authorized official must

issue an evacuation order or other civil

order for the community in which the

building is located calling for measures

to preserve life and property from the

peril of flood.

This coverage does not increase the

Coverage A or Coverage B Limit of

Liability.

b. Property Removed to Safety

(1) We will pay up to $1,000 for the

reasonable expenses you incur to move

insured property to another 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

another location other than the

described location that contains the

property, in order to protect it from

flood or the imminent danger of flood,

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34831

we will cover such property while at

that location for a period of 45

consecutive days from the date you first

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

moveable home described in Definition

6. Building, paragraphs 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.

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 governmental body;

(2) That results from a deductible

under the insurance purchased by the

condominium association insuring

common elements;

(3) That results from a loss to personal

property, including contents of a

condominium building;

(4) 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% 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.

D. Coverage D—Increased Cost of

Compliance

A. 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:

1. Non-residential structures.

2. Residential structures with

basements that satisfy FEMA’s

standards published in the Code of

Federal Regulations (44 CFR 60.6 (b) or

(c)).

B. Limit of Liability.

$20,000 is the maximum we will pay

you for this Coverage D (Increased Cost

of Compliance), which only applies to

policies with building coverage

(Coverage A). Our payment of claims

under Coverage D is in addition to the

amount of coverage which you selected

on the application and which appears

on the Declarations Page. But the

maximum you can collect under this

policy for both Coverage A (Building

Property) and Coverage D (Increased

Cost of Compliance) cannot exceed the

maximum permitted under the Act. We

do NOT charge a separate deductible for

a claim under Coverage D.

C. Eligibility.

1. A structure covered under Coverage

A—Building Property sustaining a loss

caused by a flood as defined by this

policy must:

a. Be a ‘‘repetitive loss structure.’’ A

‘‘repetitive loss structure’’ is one that

meets the following conditions:

(1) The structure is covered by a

contract of flood insurance issued under

the NFIP.

(2) The structure has suffered flood

damage on 2 occasions during a 10-year

period which ends on the date of the

second loss.

(3) The cost to repair the flood

damage, on average, equaled or

exceeded 25% of the market value of the

structure at the time of each flood loss.

(4) 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

b. Be a structure that has had flood

damage in which the cost to repair

equals or exceeds 50% 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.

2. 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:

a. Paragraph C. 1. a. above.

b. 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 flooddamaged 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

apply to situations in B, C, X, or D zones

where the community has derived its

own elevations and is enforcing

elevation or floodproofing requirements

for flood-damaged structures to

elevations derived solely by the

community.

c. 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.

3. 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 Coverage D.

4. 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 E.7.

below.

5. 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

34832 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

loss from the applicable floodplain

management requirements.

D. Conditions.

1. 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 onsite utilities.

2. 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.

E. Exclusions.

Under this Coverage D (Increased Cost

of Compliance) we will not pay for:

1. The cost to comply with any

floodplain management law or

ordinance in communities participating

in the Emergency Program.

2. 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.

3. The loss in value to any insured

building or other structure due to the

requirements of any ordinance or law.

4. 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.

5. Any Increased Cost of Compliance

under this Coverage D:

a. Until the building is elevated,

floodproofed, demolished, or relocated

on the same or to another premises; and

b. Unless the building is elevated,

floodproofed, demolished, or relocated

as soon as reasonably possible after the

loss, not to exceed two years.

6. Any code upgrade requirements,

e.g., plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or

ordinance.

7. 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.

8. Loss due to any ordinance or law

that you were required to comply with

before the current loss.

9. 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.

10. Increased Cost of Compliance for

a garage or carport.

11. Any structure insured under an

NFIP Group Flood Insurance Policy.

12. 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.

F. Other Provisions.

1. Increased Cost of Compliance

coverage will not be included in the

calculation to determine whether

coverage meets the 80% insurance-tovalue requirement for replacement cost

coverage as set forth in Section VII. V.

Loss Settlement.

2. All other conditions and provisions

of the policy apply.

IV. Property Not Covered

We do not cover any of the following:

1. Personal property not inside a

building;

2. A building, and personal property

in it, located entirely in, on, or over

water or seaward of mean high tide if it

was constructed or substantially

improved after September 30, 1982;

3. Open structures, including a

building used as a boathouse or any

structure or building into which boats

are floated, and personal property

located in, on or over water;

4. Recreational vehicles other than

travel trailers described in the

Definitions Section (see II.B.6.c.)

whether affixed to a permanent

foundation or on wheels;

5. Self-propelled vehicles or

machines, including their parts and

equipment. However, we do cover selfpropelled 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% of the actual

cash value of the building is below

ground, unless the lowest level is at or

above the base flood elevation and is

below ground by reason of earth having

been used as insulation material in

conjunction with energy efficient

building techniques;

12. Fences, retaining walls, seawalls,

bulkheads, wharves, piers, bridges, and

docks;

13. Aircraft or watercraft, or their

furnishings and equipment;

14. Swimming pools, hot tubs, spas,

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. Loss to any building or personal

property located on land leased from the

Federal Government, arising from or

incident to the flooding of the land by

the Federal Government, where the

lease expressly holds the Federal

Government harmless under flood

insurance issued under any Federal

Government program.

17. A detached garage used or held for

use for residential (i.e. dwelling),

business or farming purposes;

18. Personal property you own in

common with other unit owners

comprising the membership of a

condominium association.

V. Exclusions

A. We only pay for direct physical

loss by or from flood, which means that

we do not pay you for:

1. Loss of revenue or profits;

2. Loss of access to the insured

property or described location;

3. Loss of use of the insured property

or described location;

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34833

4. Loss from interruption of business

or production;

5. Any additional living expenses

incurred while the insured building is

being repaired or is unable to be

occupied for any reason;

6. The cost of complying with any

ordinance or law:

a. 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

b. Requiring you or others to test for,

monitor, clean up, remove, contain,

treat, detoxify, or neutralize, or in any

way respond to, or assess the effect of,

any pollutant; or

7. Any other economic loss you suffer.

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

erosion and mudflows that are

specifically covered under our

definition of flood.

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) Failures, stoppages, or breakage of

water or sewer lines, drains, pumps,

fixtures, or equipment; or

(3) Failure to inspect and maintain the

property after a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

b. Discharges or overflows from a

sump, sump pump or related

equipment; or

c. Seeps or leaks on or through the

covered property, unless the property

has been, at the same time, damaged by

flood;

6. The pressure or weight of water

unless the damaged property has been,

at the same time, damaged by flood;

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. Discharge, dispersal, seepage,

migration, release, or escape of

pollutants;

9. Theft, fire, explosion, wind, or

windstorm;

10. Anything that you or any member

of your household do or conspires to do

to deliberately cause loss by flood; or

11. Alteration of the insured property

that significantly increases the risk of

flooding.

VI. Deductibles

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 Coverage; or

3. III.D. Increased Cost of Compliance

Coverage.

VII. General Conditions

A. Pair and Set Clause.

In case of loss to an article that is part

of a pair or set, we will have the option

of paying you:

1. An amount equal to the cost of

replacing the lost, damaged or destroyed

article, minus its depreciation, or

2. The amount that represents the fair

proportion of the total value of the pair

or set that the lost, damaged or

destroyed article bears to the pair or set.

B. 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 flood

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 wrongful acts of 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 reasons

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 re-enter 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.

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 b. or c. below applies.

b. If the other policy has a provision

stating that it is excess insurance, this

policy will be primary.

c. This policy will be primary (but

subject to its own deductible) up to the

deductible in the other flood policy

(except another policy as described in

Paragraph 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.

D. Amendments, Waivers,

Assignment.

34834 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

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.

E. Cancellation of the Policy by You.

1. You may cancel this policy at any

time.

2. If you cancel this policy, you may

be entitled to a full or partial refund of

premium under our applicable rules and

regulations.

F. Non-Renewal 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. Your building has been declared

ineligible under section 1316 of the Act.

G. Reduction and Restoration 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 amount of coverage resulting

from the reduction described in 1. above

can be restored 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 30 days from the date

of our bill, we will restore 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 60 days of our

request. Once we determine the amount

of additional premium for the current

policy term, we will follow the

procedure in (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 restored by

endorsement with any appropriate

waiting period.

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 30 days of the date of our bill,

we will restore 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 (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 restored 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. above apply.

H. Policy Renewal.

1. This policy will expire at 12:01

a.m. on the last day of the policy term.

2. We must receive the payment of the

appropriate renewal premium within 30

days of the expiration date.

3. If we find, however, that your

renewal notice was not placed into the

U.S. Postal Service, or if it was mailed

properly, it was prepared in a way, e.g.,

with an incorrect, incomplete, or

illegible address, to delay its delivery to

you before the due date for the renewal

premium, then we will follow these

procedures:

a. If you or your agent notified us, not

later than one year after the date on

which the payment of the renewal

premium was due, of non-receipt of a

renewal notice before the due date for

the renewal premium, and we

determine that the circumstances in the

preceding paragraph apply, we will mail

a second bill providing a revised due

date, which will be 30 days after the

date on which the bill is mailed.

b. If we do not receive the premium

requested in the second bill by the

revised due date, then we will not

renew the policy. In that case, the policy

will remain as an expired policy as of

the expiration date shown on the

declarations page.

4. In connection with the renewal of

this policy, we may ask you during the

policy term to re-certify, on a

Recertification Questionnaire that we

will provide to you, the rating

information used to rate your most

recent application for or renewal of

insurance.

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.

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 60 days after the loss, send

us a proof of loss, which is your

statement of the amount you are

claiming under the policy signed and

sworn to by you, and which furnishes

us with the following information:

a. The date and time of loss;

b. A brief explanation of how the loss

happened;

c. Your interest (for example,

‘‘owner’’) and the interest, if any, of

others in the damaged property;

d. Details of any other insurance that

may cover the loss;

e. Changes in title or occupancy of the

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 insured property;

h. Details about who occupied any

insured building at the time of loss and

for what purpose; and

i. The inventory of damaged personal

property described in 3. above.

5. In completing the proof of loss, you

must use your own judgment

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34835

concerning the amount of loss and

justify that amount.

6. You must cooperate with our

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 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 an

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.

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; and

(3) All books of accounts, bills,

invoices and other vouchers, or certified

copies pertaining to the damaged

property if the originals are lost.

2. We may request, in writing, that

you furnish us with a complete

inventory of the lost, damaged or

destroyed property, including:

a. Quantities and costs;

b. Actual cash values or replacement

cost (whichever is appropriate);

c. Amounts of loss claimed; and

d. Any written plans and

specifications for repair of the damaged

property that you can make reasonably

available to us.

3. If we give you written notice within

30 days after we receive your signed,

sworn proof of loss, we may:

a. Repair, rebuild or replace any part

of the lost, damaged or destroyed

property with material or property of

like kind and quality or its functional

equivalent; and

b. Take all or any part of the damaged

property at the value that we agree upon

or its appraised value.

L. No Benefit To Bailee.

No person or organization, other than

you, having custody of covered property

will benefit from this insurance.

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 60 days after we

receive your proof of loss (or within 90

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 60 days of the

date of the loss or within any extension

of time allowed by the Administrator.

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

property insured under this policy after

a loss and we will reduce the amount of

the loss proceeds payable to you under

the policy by the value of the salvage.

P. Appraisal.

If you and we fail to agree on the

actual cash value or, if applicable,

replacement cost of your damaged

property to settle upon the amount of

loss, then either may demand an

appraisal of the loss. In this event, you

and we will each choose a competent

and impartial appraiser within 20 days

after receiving a written request from

the other. The two appraisers will

choose an umpire. If they cannot agree

upon an umpire within 15 days, you or

we may request that the choice be made

by a judge of a court of record in the

state where the 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.

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 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 60 days after receiving

notice from us of your failure to do so.

All of the terms of this policy will

then apply directly to the mortgagee.

If we decide to cancel or not renew

this policy, it will continue in effect for

the benefit of the mortgagee only for 30

days after we notify the mortgagee of the

cancellation or non-renewal.

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.

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 of the date of

the written denial of all or part of the

claim, and you must file the suit in the

United States District Court of the

district in which the covered 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.

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

34836 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

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.

T. Continuous Lake Flooding.

1. Where an insured building has

been flooded by rising lake waters

continuously for 90 days or more and it

appears reasonably certain that a

continuation of this flooding will result

in a covered loss to an insured building

equal to or greater than the building

policy limits plus the deductible or the

maximum payable under the policy for

any one building loss, we will pay you

the lesser of these two amounts without

waiting for the further damage to occur

if you sign a release agreeing:

a. To make no further claim under

this policy;

b. Not to seek renewal of this policy;

c. Not to apply for any flood

insurance under the Act for property at

the described location, and;

d. Not to seek a premium refund for

current or prior terms.

If the policy term ends before an

insured building has been flooded

continuously for 90 days, the provisions

of this paragraph 1. will apply as long

as 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 1. above

or this paragraph 2. (A ‘‘closed basin

lake’’ is a natural lake from which water

leaves primarily through evaporation

and whose surface area now exceeds or

has exceeded one square mile at any

time in the recorded past. Most of the

nation’s closed basin lakes are in the

western half of the United States where

annual evaporation exceeds annual

precipitation and where lake levels and

surface areas are subject to considerable

fluctuation due to wide variations in the

climate. These lakes may overtop their

basins on rare occasions.) Under this

paragraph we will pay your claim as if

the building is a total loss even though

it has not been continuously inundated

for 90 days, subject to the following

conditions:

a. Lake flood waters must damage or

imminently threaten to damage your

building.

b. Before approval of your claim, you

must:

(1) Agree to a claim payment that

reflects your buying back the salvage on

a negotiated basis; and

(2) Grant the conservation easement

contained in the Federal Emergency

Management Agency’s (FEMA) ‘‘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 agreedupon map showing the ASC. This

easement will only apply to that portion

of the property in the ASC. It will allow

certain agricultural and recreational

uses of the land. The only structures

that it will allow on any portion of the

property within the ASC are certain,

simple agricultural and recreational

structures. If any of these allowable

structures are insurable buildings under

the NFIP and are insured under the

NFIP, they will not be eligible for the

benefits of this paragraph 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 90 days of approval of your

claim, you must move your building to

a new location outside the ASC. FEMA

will give you an additional 30 days to

move if you show there is sufficient

reason to extend the time.

d. Before the final payment of your

claim, you must acquire an elevation

certificate and a floodplain development

permit from the local floodplain

administrator for the new location of

your building.

e. Before the approval of your claim,

the community having jurisdiction over

your building must:

(1) Adopt a permanent land use

ordinance, or a temporary moratorium

for a period not to exceed 6 months to

be followed immediately by a

permanent land use ordinance, that is

consistent with the provisions specified

in the easement required in paragraph

T. 2.b. above.

(2) Agree to declare and report any

violations of this ordinance to FEMA so

that under Sec. 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 deedrestricted, 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 non-profit land

trust organization receives the property

as a donation, that organization must

maintain the property as deedrestricted, 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 60

days of the date of transfer of title, any

gap in coverage during that 60-day

period will not be a violation of this

continuous coverage requirement. For

the purpose of honoring a claim under

this paragraph 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 e. and f. above, and

(2) The date by which you must have

flood insurance in effect.

U. Duplicate Policies Not Allowed.

1. 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 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 will

become 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

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34837

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 30 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. The insured’s 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 must be canceled.

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 paragraphs V.1. a., b., and c. below.

a. Replacement Cost Loss Settlement

described in 2. below applies to a

single-family dwelling provided:

(1) It is your principal residence,

which means, at the time of loss, you or

your spouse lived there for 80% 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% 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 3. below applies to a single-family

dwelling that is a travel trailer or a

manufactured or mobile home.

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 paragraph V.4. below.

2. Replacement Cost Loss Settlement.

The following loss settlement

conditions apply to a single-family

dwelling described in paragraph 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 in the declarations;

(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 $1000 or more

than 5% of the whole amount of

insurance that applies to the dwelling,

we will not be liable for any loss under

paragraph V.2.a. above or paragraph

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 paragraphs 2.a., b.,

and c. above, provided you notify us of

your intent to do so within 180 days

after the date of loss.

e. If the community in which your

dwelling is located has been converted

from the Emergency Program to the

Regular Program during the current

policy term then we will consider the

maximum amount of available NFIP

insurance to be the amount that was

available at the beginning of the current

policy term.

3. Special Loss Settlement.

The following loss settlement

conditions apply to a dwelling that is a

manufactured or mobile home or a

travel trailer, as defined in Section II

Definitions, B., paragraphs 6.b. and c.:

a. If such a dwelling is at least 16 feet

wide when fully assembled and has at

least 600 square feet within its

perimeter walls when fully assembled,

and is totally destroyed or damaged to

such an extent that, in our judgment, it

is not economically feasible to repair, at

least to its pre-damaged condition, we

will, at our discretion:

(1) Pay the least of the following

amounts:

(a) The lesser of the replacement cost

of the dwelling or 1.5 times the actual

cash value.

(b) The Building Limit of liability

shown on your Declarations Page.

b. If such a dwelling is partially

damaged and, in our judgment, it is

economically feasible to repair it to its

pre-damaged condition, we will settle

the loss according to the Replacement

Cost conditions in paragraph V.2. above.

4. Actual Cash Value.

The types of property noted below are

subject to actual cash value (or in the

case of V.a.(2), proportional) loss

settlement. ‘‘Actual cash value’’ is

defined in Section II—Definitions.

a. A dwelling, at the time of loss,

when the amount of insurance on the

dwelling is both less than 80% 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 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% 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% of its full

replacement cost. But if 80% 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 the principal

residence of the insured.

5. Amount of Insurance Required.

To determine the amount of insurance

required for a dwelling immediately

before the 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 a. above,

that are below the surface of the ground

inside the foundation walls if there is no

basement; and

34838 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

c. Excavations and underground flues,

pipes, wiring, and drains.

Note: The Coverage D limit of liability

is not included in the determination of

the amount of insurance required.

VIII. Liberalization Clause

If we make a change that broadens

your coverage under this edition of our

policy, but does not require any

additional premium, then that change

will automatically apply to your

insurance as of the date we implement

the change, provided that this

implementation date falls within 60

days before or during the policy term

stated in the Declarations Page.

IX. What Law Governs

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.

In Witness Whereof, we have signed

this policy below and hereby enter into

this Insurance Agreement.

Jo Ann Howard,

Administrator,

Federal Insurance Administration.

4. We revise Appendix A(2) to Part

61, General Property Form, to read as

follows:

APPENDIX A(2) TO PART 61

Federal Emergency Management

Agency, Federal Insurance

Administration

Standard Flood Insurance Policy

GENERAL PROPERTY POLICY

Please read the policy carefully. The

flood insurance coverage provided is

subject to limitations, restrictions and

exclusions.

This policy provides no coverage:

1. In a regular program community,

for a residential condominium building,

as defined in this policy; and

2. Except for personal property

coverage, for a unit in a condominium

building.

I. Agreement

The Federal Emergency Management

Agency 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.

We will pay you for direct physical

loss by or from flood to your insured

property if you:

1. 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.

II. Definitions

A. In this policy, ‘‘you’’ and ‘‘your’’

refer to the insured(s) shown on the

Declarations Page of this policy. ‘‘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 at least two or more properties (one

of which is your property) from:

a. The overflow of inland or tidal

waters.

b. The unusual and rapid

accumulation or runoff of surface waters

from any source.

c. Mudflows.

2. The collapse or subsidence of land

along the shore of a lake or similar body

of water as a result of erosion or

undermining caused by waves or

currents of water exceeding anticipated

cyclical levels which result in a flood as

defined in paragraph A.1.a. above.

B. The following are the other key

definitions we use in this policy:

1. Act. The National Flood Insurance

Act of 1968 and any amendments to it.

2. Actual Cash Value. The cost to

replace an insured item of property at

the time of loss, less the value of its

physical depreciation.

3. Application. The statement made

and signed by you or your agent in

applying for this policy. The application

gives information we use to determine

the eligibility of the risk, the kind of

policy to be issued and the correct

premium payment. The application is

part of this flood insurance policy. For

us to issue you a policy, the correct

premium payment must accompany the

application.

4. Base Flood. A flood having a one

percent chance of being equaled 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.

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 that is built

on a permanent chassis and affixed to a

permanent foundation and that is

transported to its site in one or more

sections); 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.

d. Building does not mean a gas or

liquid storage tank or a recreational

vehicle, park trailer or other similar

vehicle, except as described in

paragraph 6. c., above.

7. Cancellation. The ending of the

insurance coverage provided by this

policy before the expiration date.

8. Condominium. That form of

ownership of real property in which

each unit owner has an undivided

interest in common elements.

9. Condominium Association. The

entity, formed by 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 when

membership in the entity is a required

condition of unit ownership.

10. Declarations Page. A computergenerated summary of information you

furnish 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 building or personal property

is found. The described location is

shown on the declarations page.

12. Direct Physical Loss By or From

Flood. Loss or damage to insured

property, directly caused by a flood.

Direct physical loss must be evidenced

by physical changes to the property.

13. 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.

14. 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.

15. Expense Constant. A flat charge

that you must pay on each new or

renewal policy to defray the expenses of

the Federal Government related to flood

insurance.

16. Federal Policy Fee. A flat charge

that you must pay on each new or

renewal policy to defray certain

administrative expenses incurred in

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34839

carrying out the National Flood

Insurance Program. This fee covers

expenses not covered by the expense

constant.

17. Improvements. Fixtures,

alterations, installations, or additions

comprising a part of the insured

building.

18. 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.

19. 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.

20. Policy. The entire written contract

between you and us. It includes:

a. This printed form;

b. The application and declarations

page;

c. Any endorsements that may be

issued; and,

d. Any renewal certificate indicating

that coverage has been instituted for a

new policy and new policy term.

Only one building, specifically

described by you in the application,

may be insured under this policy.

21. Pollutants. Includes, but is 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.

22. 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.

23. Probation Premium. A flat charge

you must pay on each new or renewal

policy issued covering property in a

community that has been placed on

probation under the provisions of 44

CFR 59.24.

24. 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.

25. Residential Condominium

Building. A building, owned and

administered as a condominium,

containing one or more family units and

in which at least 75% of the floor area

is residential.

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, A1–30, AE, A99, AH, AR,

AR/A, AR/AE, AR/AH, AR/AO, AR/A1–

30, V1–30, VE, V.

27. Stock means merchandise held in

storage or for sale, raw materials and inprocess or finished goods, including

supplies used in their packing or

shipping. Stock does not include any

property not covered under Section IV.

Property Not Covered, except the

following:

a. Parts and equipment for selfpropelled vehicles;

b. Furnishings and equipment for

watercraft;

c. Spas and hot-tubs, including their

equipment; and

d. Swimming pool equipment.

28. Unit. A unit in a condominium

building.

29. Valued Policy. A policy in which

the insured and the insurer agree on the

value of the property insured, that value

being payable in the event of a total loss.

The Standard Flood Insurance Policy is

not a valued policy.

III. Property Covered

A. Coverage A—Building Property

We insure against direct physical loss

by or from flood to:

1. A building described in the

declarations page at the described

location. If the building is a

condominium building and the named

insured is the condominium

association, Coverage A includes all

units within the building and the

improvements within the units,

provided the units are owned in

common by all unit owners.

2. We also insure building property

for a period of 45 days at another

location, as set forth in III.C.2.b.,

Property Removed to Safety.

3. Additions and extensions attached

to and in contact with the building by

means of a rigid exterior wall, a solid

load-bearing interior wall, a stairway, an

elevated walkway, or a roof. At your

option, additions and extensions

connected by any of these methods may

be separately insured. Additions and

extensions attached to and in contact

with the building by means of a

common interior wall that is not a solid

load-bearing wall are always considered

part of the building and may not be

separately insured.

4. The following fixtures, machinery

and equipment, all while within the

building or fastened to the building, and

owned by the named insured, which are

covered under Coverage A only;

a. Awnings and canopies;

b. Blinds;

c. Carpet permanently installed over

unfinished flooring;

d. Central air conditioners;

e. Elevator equipment;

f. Fire extinguishing apparatus;

g. Fire sprinkler systems;

h. Freezers, walk-in;

i. Furnaces;

j. Light fixtures;

k. Outdoor antennas and aerials

attached to buildings;

l. Permanently installed corner

cupboards, bookcases, paneling, and

wallpaper;

m. Pumps and machinery for

operating pumps;

n. Ventilating equipment; and

o. Wall mirrors, permanently

installed.

p. In the units within the building,

installed:

(1) Built-in dishwashers;

(2) Built-in microwave ovens;

(3) Garbage disposal units;

(4) Hot water heaters, including solar

water heaters;

(5) Kitchen cabinets;

(6) Plumbing fixtures;

(7) Radiators;

(8) Ranges;

(9) Refrigerators; and

(10) Stoves.

5. Materials and supplies to be used

for construction, alteration or repair of

the insured building while the materials

and supplies are stored in a fully

enclosed building at the described

location or an adjacent property.

6. A building under construction,

alteration or repair at the described

location.

a. If the structure is not yet walled or

roofed as described in the definition for

building (See II.6.a.), then coverage

applies:

(1) Only while such work is in

progress; or

(2) The work is halted, only for a

period of up to 90 continuous days

thereafter.

b. However, coverage does not apply

until the building is walled and roofed

if the lowest floor, including the

basement floor, of a non-elevated

building or the lowest elevated floor of

an elevated building is:

(1) Below the base flood elevation in

Zones AH, AE, A1–30, AR, AR/AE, AR/

AH, AR/A1–30, AR/A, AR/AO; or

(2) Below the base flood elevation

adjusted to include the effect of wave

action in Zones VE or V1–30.

7. The lowest floor levels are based on

the bottom of the lowest horizontal

structural member of the floor in Zones

VE or V1–30 and the top of the floor in

Zones AH, AE, A1–30, AR, AR/AE, AR/

AH, AR/A1–30, AR/A, AR/AO.

34840 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

8. 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.

9. Items of property in a building

enclosure lower than the lowest

elevated floor of an elevated post-FIRM

building located in zones A1–30, AE,

AH, AR, AR/A, AR/AE, AR/AH, AR/

A1–A30, V1–30, 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, unless 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) Oil tanks and oil in them;

(12) Pumps and tanks used in solar

energy system;

(13) Stairways and staircases attached

to the building, not separated from it by

elevated walkways;

(14) Sump pumps;

(15) Water softeners, water filters and

faucets installed as an integral part of

the plumbing system;

(16) Well water tanks and pumps;

(17) Required utility connections for

any item in this list; and

(18) Footings, foundations, posts,

pilings, piers, or other foundation walls

and anchorage systems required to

support a building.

b. Clean-up.

B. Coverage B—Personal Property

1. If you have purchased personal

property coverage, we insure, subject to

paragraphs B.2., 3. and 4. below, against

direct physical loss by or from flood to

personal property inside a fully

enclosed insured building:

a. Owned solely by you, or in the case

of a condominium, owned solely by the

condominium association and used

exclusively in the conduct of the

business affairs of the condominium

association; or

b. Owned in common by the unit

owners of the condominium association.

We also insure such personal property

for 45 days while stored at a temporary

location, as set forth in III.C.2.b.,

Property Removed to Safety.

2. When this policy covers personal

property, coverage will be either for

household personal property or other

than household personal property,

while within the insured building, but

not both.

a. If this policy covers household

personal property, it will insure

household personal property usual to a

living quarters, that:

(1) Belongs to you, or a member of

your household, or at your option:

(a) Your domestic worker;

(b) Your guest; or

(2) You may be legally liable for.

b. If this policy covers other than

household personal property, it will

insure your:

(1) Furniture and fixtures;

(2) Machinery and equipment;

(3) Stock; and

(4) All other personal property owned

by you and used in your business.

3. Coverage for personal property

includes the following property, subject

to paragraphs B.1.a. and B.1.b. above,

which is covered under Coverage B.

only:

a. Air conditioning units installed in

the building;

b. Carpet, 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 the food in any freezer;

g. Outdoor equipment and furniture

stored inside the insured building;

h. Ovens and the like;

i. Portable microwave ovens and

portable dishwashers; and

j. Refrigerators.

4. Items of property in a building

enclosure lower than the lowest

elevated floor of an elevated post-FIRM

building located in zones A1–30, AE,

AH, AR, AR/A, AR/AE, AR/AH, AR/

A1–A30, V1–30, or VE, or in a

basement, regardless of the zone, is

limited to the following items, if

installed in their functioning locations

and, if necessary for operation,

connected to a power source:

a. Air conditioning units—portable or

window type;

b. Clothes washers and dryers; and

c. Food freezers, other than walk-in,

and food in any freezer.

5. Special Limits. We will pay no

more than $2,500 for any 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, manuscripts or

autographed items;

c. Jewelry, watches, precious and

semi-precious stones, articles of gold,

silver or platinum;

d. Furs or any article containing fur

which represents its principal value; or

6. We will pay only for the functional

value of antiques.

7. If you are a tenant, you may apply

up to 10% of the Coverage B limit to

improvements:

a. Made a part of the building you

occupy; and

b. You acquired, or made at your

expense, even though you cannot legally

remove.

This coverage does not increase the

amount of insurance that applies to

insured personal property.

8. If you are a condominium unit

owner, you may apply up to 10% of the

Coverage B limit to cover loss to

interior:

a. Walls,

b. Floors, and

c. Ceilings, that are not covered under

a policy issued to the condominium

association insuring the condominium

building.

This coverage does not increase the

amount of insurance that applies to

insured personal property.

9. If you are a tenant, personal

property must be inside a fully enclosed

building.

C. Coverage C—Other Coverages

1. Debris Removal.

We will pay reasonable expenses to

remove debris directly caused by flood

provided the debris is:

a. Debris from property:

(1) That you do not own;

(2) That originates from beyond the

boundaries of the described location,

and

(3) That is physically on or in the

insured building; or

b. Debris of the insured property

anywhere.

If you perform the removal work, the

value of your work will be based on the

Federal minimum wage.

This coverage does not increase the

Coverage A or Coverage B Limit of

Liability.

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34841

2. Loss Avoidance Measures.

a. Sandbags, Supplies and Labor.

(1) We will pay up to $1,000 for the

costs you incur to protect the insured

building from a flood or imminent

danger of flood, including:

(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; and

(b) The value of work, at the Federal

minimum wage, that you perform.

(2) This coverage for Sandbags,

Supplies and Labor only applies if

damage to insured property by or from

flood is imminent and the threat of

flood damage is apparent enough to lead

a person of common prudence to

anticipate flood damage. One of the

following must also occur:

(a) A general and temporary condition

of flooding in the area near the

described location must occur, even if

the flood does not reach the 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 another 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 perform.

(2) If you move insured property to

another location other than the

described location that contains the

property, in order to protect it from

flood or the imminent danger of flood,

we will cover such property while at

that location for a period of 45

consecutive days from the date you first

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

moveable home described in II.

Definitions, Building, paragraphs 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.

D. Coverage D—Increased Cost of

Compliance Coverage

A. 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:

1. Non-residential structures.

2. Residential structures with

basements that satisfy FEMA’s

standards published in the Code of

Federal Regulations (44 CFR 60.6 (b) or

(c)).

B. Limit of Liability.

$20,000 is the maximum we will pay

you for this Coverage D (Increased Cost

of Compliance), which only applies to

policies with building coverage

(Coverage A). Our payment of claims

under Coverage D is in addition to the

amount of coverage which you selected

on the application and which appears

on the Declarations Page. But the

maximum you can collect under this

policy for both Coverage A (Building

Property) and Coverage D (Increased

Cost of Compliance) cannot exceed the

maximum permitted under the Act. We

do NOT charge a separate deductible for

a claim under Coverage D.

C. Eligibility.

1. A structure covered under Coverage

A—Building Property sustaining a loss

caused by a flood as defined by this

policy must:

a. Be a ‘‘repetitive loss structure.’’ A

‘‘repetitive loss structure’’ is one that

meets the following conditions:

(1) The structure is covered by a

contract of flood insurance issued under

the NFIP.

(2) The structure has suffered flood

damage on 2 occasions during a 10-year

period which ends on the date of the

second loss.

(3) The cost to repair the flood

damage, on average, equaled or

exceeded 25% of the market value of the

structure at the time of each flood loss.

(4) 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

b. Be a structure that has had flood

damage in which the cost to repair

equals or exceeds 50% 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.

2. 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:

a. C.1.a. above.

b. 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 flooddamaged 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

apply to situations in B, C, X, or D zones

where the community has derived its

own elevations and is enforcing

elevation or floodproofing requirements

for flood-damaged structures to

elevations derived solely by the

community.

c. 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.

3. 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 Coverage D.

4. 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 E.7.

below.

5. 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 floodplain

management requirements.

D. Conditions.

34842 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

1. 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 onsite utilities.

2. 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.

E. Exclusions.

Under this Coverage D (Increased Cost

of Compliance) we will not pay for:

1. The cost to comply with any

floodplain management law or

ordinance in communities participating

in the Emergency Program.

2. 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.

3. The loss in value to any insured

building or other structure due to the

requirements of any ordinance or law.

4. 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.

5. Any Increased Cost of Compliance

under this Coverage D:

a. Until the building is elevated,

floodproofed, demolished, or relocated

on the same or to another premises; and

b. Unless the building is elevated,

floodproofed, demolished, or relocated

as soon as reasonably possible after the

loss, not to exceed two years.

6. Any code upgrade requirements,

e.g., plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or

ordinance.

7. 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.

8. Loss due to any ordinance or law

that you were required to comply with

before the current loss.

9. 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.

10. Increased Cost of Compliance for

a garage or carport.

11. Any structure insured under an

NFIP Group Flood Insurance Policy.

12. 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.

F. Other Provisions.

All other conditions and provisions of

the policy apply.

IV. Property Not Covered

A. We do not cover any of the

following property:

1. Personal property not inside a

building;

2. A building, and personal property

in it, located entirely in, on, or over

water or seaward of mean high tide, if

it was constructed or substantially

improved after September 30, 1982;

3. Open structures, including a

building used as a boathouse or any

structure or building into which boats

are floated, and personal property

located in, on or over water;

4. Recreational vehicles other than

travel trailers described in the II.

Definitions, Building, paragraph c.,

whether affixed to a permanent

foundation or on wheels;

5. Self-propelled vehicles or

machines, including their parts and

equipment. However, we do cover selfpropelled vehicles or machines,

provided they are not licensed for use

on public roads and are:

a. Used mainly to service the

described location or

b. Designed and used to assist

handicapped persons, while the

vehicles or machines are inside a

building at the described location;

6. Land, land values, lawns, trees,

shrubs, plants, growing crops, or

animals;

7. Accounts, bills, coins, currency,

deeds, evidences of debt, medals,

money, scrip, stored value cards,

postage stamps, securities, bullion,

manuscripts, or other valuable papers;

8. Underground structures and

equipment, including wells, septic tanks

and septic systems;

9. Those portions of walks, walkways,

decks, driveways, patios and other

surfaces, all whether protected by a roof

or not, located outside the perimeter,

exterior walls of the insured building;

10. Containers including related

equipment, such as, but not limited to,

tanks containing gases or liquids;

11. Buildings or units and all their

contents if more than 49% of the actual

cash value of the building is below

ground, unless the lowest level is at or

above the base flood elevation and is

below ground by reason of earth having

been used as insulation material in

conjunction with energy efficient

building techniques;

12. Fences, retaining walls, seawalls,

bulkheads, wharves, piers, bridges, and

docks;

13. Aircraft or watercraft, or their

furnishings and equipment;

14. Swimming pools, hot tubs, spas,

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 of

1990 and amendments to these Acts;

and

16. Loss to any building or personal

property located on land leased from the

Federal Government, arising from or

incident to the flooding of the land by

the Federal Government, where the

lease expressly holds the Federal

Government harmless under flood

insurance issued under any Federal

Government program.

17. Personal property used in

connection with any incidental

commercial occupancy or use of the

building;

18. Personal property owned by or in

the care, custody or control of a unit

owner, except for property of the type

and under the circumstances set forth

under III. Coverage B—Personal

Property of this policy;

19. A residential condominium

building located in a Regular Program

community.

V. Exclusions

A. We only provide coverage for

direct physical loss by or from flood,

which means that we do not pay you

for:

1. Loss of revenue or profits;

2. Loss of access to the insured

property or described location;

3. Loss of use of the insured property

or described location;

4. Loss from interruption of business

or production;

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34843

5. Any additional 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:

a. 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

b. Requiring you or others to test for,

monitor, clean up, remove, contain,

treat, detoxify, or neutralize, or in any

way respond to, or assess the effect of,

any pollutant; or

7. Any other economic loss.

B. We do not insure a loss directly or

indirectly caused by a flood that is 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 areas; or

6. Gradual erosion. We do, however,

pay for losses from erosion and

mudflows that are specifically covered

under our definition of flood.

D. We do not insure for direct

physical loss caused directly or

indirectly by:

1. The pressure or weight of ice;

2. Freezing or thawing;

3. Rain, snow, sleet, hail, or water

spray;

4. Water, moisture, mildew, or mold

damage that results primarily from any

condition:

a. Substantially confined to the

insured building; or

b. That is within your control

including, but not limited to:

(1) Design, structural or mechanical

defects;

(2) Failures, stoppages, or breakage of

water or sewer lines, drains, pumps,

fixtures, or equipment; or

(3) Failure to inspect and maintain the

property after a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

b. Discharges or overflows from a

sump, sump pump or related

equipment; or

c. Seeps or leaks on or through

insured property,

unless the damaged insured property

has been, at the same time, damaged by

flood;

6. The pressure or weight of water

unless the damaged insured property

has been, at the same time, damaged by

flood;

7. Power, heating or cooling failure

unless the failure results from direct

physical loss by or from flood to power,

heating or cooling equipment situated

on the described location;

8. Discharge, dispersal, seepage,

migration, release, or escape of

pollutants;

9. Theft, fire, explosion, wind, or

windstorm;

10. Anything that you or your agents

do or conspire to do to deliberately

cause loss by flood; or

11. Alteration of the insured property

that significantly increases the risk of

flooding.

VI. Deductibles

A. When a loss is covered under this

policy, we will pay only that part of the

loss that exceeds the applicable

deductible amount, subject to the limit

of liability that applies. The deductible

amount is shown on the declarations

page.

However, when a building under

construction, alteration or repair does

not have at least two rigid exterior walls

and a fully secured roof at the time of

loss, your deductible amount will be

two times the deductible that would

otherwise apply to a completed

building.

B. In each loss from flood, separate

deductibles apply to the building and

personal property insured by this

policy.

C. No deductible applies to:

1. III.C.2. Loss Avoidance Measures;

or

2. III.D. Increased Cost of Compliance

Coverage.

VII. General Conditions

A. Pair and Set Clause.

In case of loss to an article that is part

of a pair or set, we will have the option

of paying you:

1. An amount equal to the cost of

replacing the lost, damaged or destroyed

article, less depreciation, or

2. An amount which represents the

fair proportion of the total value of the

pair or set that the lost, damaged or

destroyed article bears to the pair or set.

B. 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 flood

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 reasons

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 listed on the

application is not eligible for coverage

under the NFIP; or

b. 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 re-enter the program

during the policy term and before the

loss occurred.

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 b. or c. below applies.

b. If the other policy has a provision

stating that it is excess insurance, this

policy will be primary.

c. This policy will be primary (but

subject to its own deductible) up to the

deductible in the other flood policy

(except another policy as described in

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. Where this policy covers a

condominium association and there is a

flood insurance policy in the name of a

unit-owner that covers the same loss as

this policy, then this policy will be

primary.

D. Amendments, Waivers,

Assignment.

34844 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

This policy cannot be changed nor

can any of its provisions be waived

without the express written consent of

the Federal Insurance Administrator. No

action that we take under the terms of

this policy can constitute a waiver of

any of our rights. You may assign this

policy in writing when you transfer title

of your property to someone else except

under these conditions:

1. When this policy covers only

personal property; or

2. When this policy covers a structure

during the course of construction.

E. Cancellation of Policy by You.

1. You may cancel this policy at any

time.

If you cancel this policy, you may be

entitled to a full or partial refund of

premium under our applicable rules and

regulations.

F. Non-Renewal 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. Your building has been declared

ineligible under section 1316 of the Act.

G. Reduction and Restoration 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 amount of coverage resulting

from the reduction described in 1. above

can be restored 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 30 days from the date

of our bill, we will restore 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 60 days of our

request. Once we determine the amount

of additional premium for the current

policy term, we will follow the

procedure in (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 restored by

endorsement subject to any appropriate

waiting period.

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 30 days of the date of our bill,

we will restore 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 (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 restored 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. above apply.

H. Policy Renewal.

1. This policy will expire at 12:01

a.m. on the last day of the policy term.

2. We must receive the payment of the

appropriate renewal premium within 30

days of the expiration date.

3. If we find, however, that your

renewal notice was not placed into the

U.S. Postal Service, or if it was mailed

properly, it was prepared in a such a

way, e.g., with an incorrect, incomplete,

or illegible address, as to delay 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 30 days after the

date on which the bill is mailed.

b. If we do not receive the premium

requested in the second bill by the

revised due date, then we will not

renew the policy. In that case, the policy

will remain as an expired policy as of

the expiration date shown on the

declarations page.

4. In connection with the renewal of

this policy, we may ask you during the

policy term to re-certify, on a

Recertification Questionnaire that we

will provide to you, the rating

information used to rate your most

recent application for or renewal of

insurance.

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.

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 60 days after the loss, send

us a proof of loss, which is your

statement as to the amount you are

claiming under the policy signed and

sworn to by you, and which furnishes

us with the following information:

a. The date and time of loss;

b. A brief explanation of how the loss

happened;

c. Your interest (for example,

‘‘owner’’) and the interest, if any, of

others in the damaged property;

d. Details of any other insurance that

may cover the loss;

e. Changes in title or occupancy of the

insured property during the term of the

policy;

f. Specifications of damaged buildings

and detailed repair estimates;

g. Names of mortgagees or anyone else

having a lien, charge or claim against

the insured property;

h. Details about who occupied any

insured building at the time of loss and

for what purpose; and

i. The inventory of damaged property

described in 3. above.

5. In completing the proof of loss, you

must use your own judgment

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34845

concerning the amount of loss and

justify that amount.

6. You must cooperate with our

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 to 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 an

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.

K. Our Options After a Loss.

Options that we may, in our sole

discretion, exercise after loss include

the following:

1. At such reasonable times and

places that we may designate, you must:

a. Show us or our representative the

damaged property;

b. Submit to examination under oath,

while not in the presence of another

insured, and sign the same; and

c. Permit us to examine and make

extracts and copies of:

(1) Any policies of property insurance

insuring you against loss and the deed

establishing your ownership of the

insured real property;

(2) Condominium association

documents including the Declarations of

the condominium, its Articles of

Association or Incorporation, Bylaws,

and rules and regulations; and

(3) All books of accounts, bills,

invoices and other vouchers, or certified

copies pertaining to the damaged

property if the originals are lost.

2. We may request, in writing, that

you furnish us with a complete

inventory of the lost, damaged, or

destroyed property, including:

a. Quantities and costs;

b. Actual cash value;

c. Amounts of loss claimed; and

d. Any written plans and

specifications for repair of the damaged

property that you can make reasonably

available to us.

3. If we give you written notice within

30 days after we receive your signed,

sworn proof of loss, we may:

a. Repair, rebuild or replace any part

of the lost, damaged or destroyed

property with material or property of

like kind and quality or its functional

equivalent; and

b. Take all or any part of the damaged

property at the value that we agree upon

or its appraised value.

L. No Benefit to Bailee.

No person or organization, other than

you, having custody of covered property

will benefit from this insurance.

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 60 days after we

receive your proof of loss (or within 90

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 such denial of your claim;

b. Exercise your rights under this

policy; or

c. File an amended proof of loss as

long as it is filed within 60 days of the

date of the loss or within any extension

of time allowed by the Administrator.

N. Abandonment.

You may not abandon damaged or

undamaged insured property to us.

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.

P. Appraisal.

If you and we fail to agree on the

actual cash value of the damaged

property so as to determine the amount

of loss, either may demand an appraisal

of the loss. In this event, you and we

will each choose a competent and

impartial appraiser within 20 days after

receiving a written request from the

other. The two appraisers will choose an

umpire. If they cannot agree upon an

umpire within 15 days, you or we may

request that the choice be made by a

judge of a court of record in the state

where the insured property is located.

The appraisers will separately state the

actual cash value and the amount of loss

to each item. If the appraisers submit a

written report of an agreement to us, the

amount agreed upon will be the amount

of loss. If they fail to agree, they will

submit their differences to the umpire.

A decision agreed to by any two will set

the amount of actual cash value and

loss.

Each party will:

1. Pay its own appraiser; and

2. Bear the other expenses of the

appraisal and umpire equally.

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 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 60 days after receiving

notice from us of your failure to do so.

All of the terms of this policy will

then apply directly to the mortgagee.

If we decide to cancel or not renew

this policy, it will continue in effect for

the benefit of the mortgagee only for 30

days after we notify the mortgagee of the

cancellation or non-renewal.

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.

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 of the date of

the written denial of all or part of the

claim and you must file the suit in the

United States District Court of the

district in which the insured property

was located at the time of loss. This

requirement applies to any claim that

you may have under this policy and to

any dispute that you may have arising

out of the handling of any claim under

the policy.

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

34846 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

or do anything which 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.

T. Continuous Lake Flooding.

1. Where an insured building has

been flooded by rising lake waters

continuously for 90 days or more and it

appears reasonably certain that a

continuation of this flooding will result

in a covered loss to an insured building

equal to or greater than the building

policy limits plus the deductible or the

maximum payable under the policy for

any one building loss, we will pay you

the lesser of these two amounts without

waiting for the further damage to occur

if you sign a release agreeing:

a. To make no further claim under

this policy;

b. Not to seek renewal of this policy;

c. Not to apply for any flood

insurance under the Act for property at

the described location, and;

d. Not to seek a premium refund for

current or prior terms.

If the policy term ends before an

insured building has been flooded

continuously for 90 days, the provisions

of this paragraph 1. will apply as long

as 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 1. above

or this paragraph 2. (A ‘‘closed basin

lake’’ is a natural lake from which water

leaves primarily through evaporation

and whose surface area now exceeds or

has exceeded one square mile at any

time in the recorded past. Most of the

nation’s closed basin lakes are in the

western half of the United States where

annual evaporation exceeds annual

precipitation and where lake levels and

surface areas are subject to considerable

fluctuation due to wide variations in the

climate. These lakes may overtop their

basins on rare occasions.) Under this

paragraph we will pay your claim as if

the building is a total loss even though

it has not been continuously inundated

for 90 days, subject to the following

conditions:

a. Lake flood waters must damage or

imminently threaten to damage your

building.

b. Before approval of your claim, you

must:

(1) Agree to a claim payment that

reflects your buying back the salvage on

a negotiated basis; and

(2) Grant the conservation easement

contained in the Federal Emergency

Management Agency’s (FEMA) ‘‘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 agreedupon map showing the ASC. This

easement will only apply to that portion

of the property in the ASC. It will allow

certain agricultural and recreational

uses of the land. The only structures

that it will allow on any portion of the

property within the ASC are certain,

simple agricultural and recreational

structures. If any of these allowable

structures are insurable buildings under

the NFIP and are insured under the

NFIP, they will not be eligible for the

benefits of this paragraph 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 T.1.a. through T.1.d.

above.

c. Within 90 days of approval of your

claim, you must move your building to

a new location outside the ASC. FEMA

will give you an additional 30 days to

move if you show there is sufficient

reason to extend the time.

d. Before the final payment of your

claim, you must acquire an elevation

certificate and a floodplain development

permit from your local floodplain

administrator for the new location of

your building.

e. Before the approval of your claim,

the community having jurisdiction over

your building must:

(1) Adopt a permanent land use

ordinance, or a temporary moratorium

for a period not to exceed 6 months to

be followed immediately by a

permanent land use ordinance, that is

consistent with the provisions specified

in the easement required in T.2.b.

above.

(2) Agree to declare and report any

violations of this ordinance to FEMA so

that under Sec. 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 deedrestricted, 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

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 non-profit land

trust organization receives the property

as a donation, that organization must

maintain the property as deedrestricted, consistent with the

provisions of 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 this

paragraph 2. If a subsequent owner buys

NFIP insurance that goes into effect

within 60 days of the date of transfer of

title, any gap in coverage during that 60-

day period will not be a violation of this

continuous coverage requirement. For

the purpose of honoring a claim under

this paragraph 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 T.2.e. and T.2.f. above,

and

(2) The date by which you must have

flood insurance in effect.

U. Duplicate Policies Not Allowed.

1. Property may not be insured 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 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 will

become 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

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34847

limits within 30 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. The insured’s option under this

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 must be canceled.

V. Loss Settlement.

We will pay the least of the following

amounts after application of the

deductible:

1. The applicable amount of insurance

under this policy;

2. The actual cash value; or

3. The amount it would cost to repair

or replace the property with material of

like kind and quality within a

reasonable time after the loss.

VIII. Liberalization Clause

If we make a change that broadens

your coverage under this edition of our

policy, but does not require any

additional premium, then that change

will automatically apply to your

insurance as of the date we implement

the change, provided that this

implementation date falls within 60

days before or during the policy term

stated in the Declarations Page.

IX. What Law Governs

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.

In Witness Whereof, we have signed

this policy below and hereby enter into

this Insurance Agreement.

Jo Ann Howard,

Administrator, Federal Insurance

Administration.

5. We revise Appendix A(3) to Part

61, Residential Condominium Building

Association Policy, to read as follows:

APPENDIX A(3) TO PART 61

Federal Emergency Management

Agency, Federal Insurance

Administration

Standard Flood Insurance Policy

RESIDENTIAL CONDOMINIUM

BUILDING ASSOCIATION POLICY

I. Agreement

Please read the policy carefully. The

flood insurance provided is subject to

limitations, restrictions and exclusions.

This policy covers only a residential

condominium building in a regular

program community. if the community

reverts to emergency program status

during the policy term and remains as

an emergency program community at

time of renewal, this policy cannot be

renewed.

The Federal Emergency Management

Agency 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.

We will pay you for direct physical

loss by or from flood to your insured

property if you:

1. 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.

II. Definitions

A. In this policy, ‘‘you’’ and ‘‘your’’

refer to the insured(s) shown on the

Declarations Page of this policy. ‘‘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 at least two or more properties (one

of which is your property) from:

a. The overflow of inland or tidal

waters.

b. The unusual and rapid

accumulation or runoff of surface waters

from any source.

c. Mudflows.

2. The collapse or subsidence of land

along the shore of a lake or similar body

of water as a result of erosion or

undermining caused by waves or

currents of water exceeding anticipated

cyclical levels which result in a flood as

defined in ‘‘Flood’’ paragraph A.1.a

above.

B. The following are the other key

definitions we use in this policy:

1. Act. The National Flood Insurance

Act of 1968 and any amendments to it.

2. Actual Cash Value. The cost to

replace an insured item of property at

the time of loss, less the value of its

physical depreciation.

3. Application. The statement made

and signed by you or your agent in

applying for this policy. The application

gives information we use to determine

the eligibility of the risk, the kind of

policy to be issued and the correct

premium payment. The application is

part of this flood insurance policy for us

to issue you a policy, the correct

premium payment must accompany the

application.

4. Base Flood. A flood having a one

percent chance of being equaled 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.

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 that is built

on a permanent chassis and affixed to a

permanent foundation and that is

transported to its site in one or more

sections); 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 recreational vehicle,

park trailer or other similar vehicle,

except as described in 6.c., above.

7. Cancellation. The ending of the

insurance coverage provided by this

policy before the expiration date.

8. Condominium. That form of

ownership of real property in which

each unit owner has an undivided

interest in common elements.

9. Condominium Association. The

entity, formed by 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; when

membership in the entity is a required

condition of unit ownership.

10. Declarations Page. A computergenerated summary of information you

furnish in the application for insurance.

34848 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

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 building or personal property

are found. The described location is

shown on the declarations page.

12. Direct Physical Loss By or From

Flood. Loss or damage to insured

property, directly caused by a flood.

Direct physical loss must be evidenced

by physical changes to the property.

13. 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.

14. 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.

15. Expense Constant. A flat charge

that you must pay on each new or

renewal policy to defray the expenses of

the Federal Government related to flood

insurance.

16. Federal Policy Fee. A flat charge

that 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.

17. Improvements. Fixtures,

alterations, installations, or additions

comprising a part of the residential

condominium building, including

improvements in the units.

18. 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.

19. 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.

20. Policy. The entire written contract

between you and us. It includes:

a. This printed form;

b. The application and declarations

page;

c. Any endorsements that may be

issued; and

d. Any renewal certificate indicating

that coverage has been instituted for a

new policy and new policy term.

Only one building, specifically

described by you in the application,

may be insured under this policy.

21. Pollutants. Includes, but is 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.

22. 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.

23. Probation Premium. A flat charge

you must pay on each new or renewal

policy issued covering property in a

community that has been placed on

probation under the provisions of 44

CFR 59.24.

24. 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.

25. Residential Condominium

Building. A building, owned and

administered as a condominium,

containing one or more family units and

in which at least 75% of the floor area

is residential.

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, A1–30, AE, A99, AH, AR,

AR/A, AR/AE, AR/AH, AR/AO, AR/A1–

30, V1–30, VE, V.

27. Unit. A single-family unit in a

residential 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 the event of a total loss.

The Standard Flood Insurance Policy is

not a valued policy.

III. Property Covered

A. Coverage A—Building Property

We insure against direct physical loss

by or from flood to:

1. The residential condominium

building described in the declarations

page at the described location, including

all units within the building and the

improvements within the units.

2. We also insure such building

property for a period of 45 days at

another location, as set forth in

III.C.2.b., Property Removed to Safety.

3. Additions and extensions attached

to and in contact with the building by

means of a rigid exterior wall, a solid

load-bearing interior wall, a stairway, an

elevated walkway, or a roof. At your

option, additions and extensions

connected by any of these methods may

be separately insured. Additions and

extensions attached to and in contact

with the building by means of a

common interior wall that is not a solid

load-bearing wall are always considered

part of the building and may not be

separately insured.

4. The following fixtures, machinery

and equipment, all while within the

building or fastened to the building,

including its units, which are covered

under Coverage A only:

a. Awnings and canopies;

b. Blinds;

c. Carpet permanently installed over

unfinished flooring;

d. Central air conditioners;

e. Elevator equipment;

f. Fire extinguishing apparatus;

g. Fire sprinkler systems;

h. Freezers, walk-in;

i. Furnaces;

j. Light fixtures;

k. Outdoor antennas and aerials

fastened to buildings;

l. Permanently installed corner

cupboards, bookcases, paneling, and

wallpaper;

m. Pumps and machinery for

operating pumps;

n. Ventilating equipment; and

o. Wall mirrors, permanently

installed.

p. In the units within the building,

installed:

(1) Built-in dishwashers;

(2) Built-in microwave ovens;

(3) Garbage disposal units;

(4) Hot water heaters, including solar

water heaters;

(5) Kitchen cabinets;

(6) Plumbing fixtures;

(7) Radiators;

(8) Ranges;

(9) Refrigerators; and

(10) Stoves.

5. Materials and supplies to be used

for construction, alteration or repair of

the insured building while the materials

and supplies are stored in a fully

enclosed building at the described

location or an adjacent property.

6. A building under construction,

alteration or repair at the described

location.

a. If the structure is not yet walled or

roofed as described in the definition for

building (see II. Definitions, B.6.

Building, paragraph a.), then coverage

applies:

(1) Only while such work is in

progress; or

(2) If such work is halted, only for a

period of up to 90 continuous days

thereafter.

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34849

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:

(3) Below the base flood elevation in

Zones AH, AE, A1–30, AR, AR/AE, AR/

AH, AR/A1–30, AR/A, AR/AO; or

(4) Below the base flood elevation

adjusted to include the effect of wave

action in Zones VE or V1–30.

The lowest floor levels are based on

the bottom of the lowest horizontal

structural member of the floor in Zones

VE or V1–30 and the top of the floor in

Zones AH, AE, A1–30, AR, AR/AE, AR/

AH, AR/A1–30, AR/A, AR/AO.

7. A manufactured home or a travel

trailer as described in the Definitions

Section (See II. Definitions, B.

Building, paragraphs b. and c.).

If the manufactured home is in a

special flood hazard area, it must be

anchored in the following manner at the

time of the loss:

a. By over-the-top or frame ties to

ground anchors; or

b. In accordance with the

manufacturer’s specifications; or

c. In compliance with the

community’s floodplain management

requirements unless it has been

continuously insured by the NFIP at the

same described location since

September 30, 1982.

8. Items of property in a building

enclosure lower than the lowest

elevated floor of an elevated post-FIRM

building located in zones A1–30, AE,

AH, AR, AR/A, AR/AE, AR/AH, AR/

A1–A30, V1–30, 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, unless 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) Oil tanks and oil in them;

(12) Pumps and tanks used in solar

energy systems;

(13) Stairways and staircases attached

to the building, not separated from it by

elevated walkways;

(14) Sump pumps;

(15) Water softeners, water filters and

faucets installed as an integral part of

the plumbing system;

(16) Well water tanks and pumps;

(17) Required utility connections for

any item in this list; and

(18) Footings, foundations, posts,

pilings, piers, or other foundation walls

and anchorage systems required to

support a building.

b. Clean-up.

B. Coverage B—Personal Property

1. If you have purchased personal

property coverage, we insure, subject to

paragraphs 2. and 3. below, against

direct physical loss by or from flood to

personal property that is inside a fully

enclosed insured building and is:

a. Owned by the unit owners of the

condominium association in common,

meaning property in which each unit

owner has an undivided ownership

interest; or

b. Owned solely by the condominium

association and used exclusively in the

conduct of the business affairs of the

condominium association.

We also insure such personal property

for 45 days while stored at a temporary

location, as set forth in III.C.2.b.,

Property Removed to Safety.

2. Coverage for personal property

includes the following property, subject

to paragraph B.1., above, which is

covered under Coverage B only:

a. Air conditioning units—portable or

window type;

b. Carpet, 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 the food in any freezer;

g. Outdoor equipment and furniture

stored inside the insured building;

h. Ovens and the like;

i. Portable microwave ovens and

portable dishwashers; and

j. Refrigerators.

3. Items of property in a building

enclosure lower than the lowest

elevated floor of an elevated post-FIRM

building located in zones A1–30, AE,

AH, AR, AR/A, AR/AE, AR/AH, AR/

A1–A30, V1–30, 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 the food in any freezer.

4. 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, manuscripts or

autographed items;

c. Jewelry, watches, precious and

semi-precious stones, articles of gold,

silver or platinum;

d. Furs or any article containing fur

which represents its principal value.

5. We will pay only for the functional

value of antiques.

C. Coverage C—Other Coverages

1. Debris Removal.

We will pay reasonable expenses to

remove debris directly caused by flood

provided the debris is:

a. Debris from property:

(1) That you do not own;

(2) That originates from beyond the

boundaries of the described location;

and

(3) That is physically on or in the

insured building; or

b. Debris of the insured property

anywhere.

If you perform the removal work, the

value of your work will be based on the

Federal minimum wage.

This coverage does not increase the

Coverage A or Coverage B Limit of

Liability.

2. Loss Avoidance Measures.

a. Sandbags, Supplies and Labor.

(1) We will pay up to $1,000 for the

costs you incur to protect the insured

building from a flood or imminent

danger of flood, including:

(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; and

(b) The value of work, at the Federal

minimum wage, that you perform.

(2) This coverage for Sandbags,

Supplies and Labor is subject to the

following: 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

34850 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

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 another 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 perform.

(2) If you move insured property to

another location other than the

described location that contains the

property, in order to protect it from

flood or the imminent danger of flood,

we will cover such property while at

that location for a period of 45

consecutive days from the date you first

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

moveable home described in Definition

6. Building, paragraphs 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.

D. Coverage D—Increased Cost of

Compliance Coverage

A. 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:

1. Non-residential structures.

2. Residential structures with

basements that satisfy FEMA’s

standards published in the Code of

Federal Regulations [44 CFR 60.6 (b) or

(c)].

B. Limit of Liability.

$20,000 is the maximum we will pay

you for this Coverage D (Increased Cost

of Compliance), which only applies to

policies with building coverage

(Coverage A). Our payment of claims

under Coverage D is in addition to the

amount of coverage which you selected

on the application and which appears

on the Declarations Page. But the

maximum you can collect under this

policy for both Coverage A (Building

Property) and Coverage D (Increased

Cost of Compliance) cannot exceed the

maximum permitted under the Act. We

do NOT charge a separate deductible for

a claim under Coverage D.

C. Eligibility.

1. A structure covered under Coverage

A—Building Property sustaining a loss

caused by a flood as defined by this

policy must:

a. Be a ‘‘repetitive loss structure.’’ A

‘‘repetitive loss structure’’ is one that

meets the following conditions:

(1) The structure is covered by a

contract of flood insurance issued under

the NFIP.

(2) The structure has suffered flood

damage on 2 occasions during a 10-year

period which ends on the date of the

second loss.

(3) The cost to repair the flood

damage, on average, equaled or

exceeded 25% of the market value of the

structure at the time of each flood loss.

(4) 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

b. Be a structure that has had flood

damage in which the cost to repair

equals or exceeds 50% 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.

2. 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:

a. C.1.a. above.

b. 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 flooddamaged 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

apply to situations in B, C, X, or D zones

where the community has derived its

own elevations and is enforcing

elevation or floodproofing requirements

for flood-damaged structures to

elevations derived solely by the

community.

c. 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.

3. 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 Coverage D.

4. 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 E.7.

below relating to improvements.

5. 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 floodplain

management requirements.

D. Conditions.

1. 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 onsite utilities.

2. 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.

E. Exclusions.

Under this Coverage D (Increased Cost

of Compliance) we will not pay for:

1. The cost to comply with any

floodplain management law or

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34851

ordinance in communities participating

in the Emergency Program.

2. 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.

3. The loss in value to any insured

building or other structure due to the

requirements of any ordinance or law.

4. 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.

5. Any Increased Cost of Compliance

under this Coverage D:

a. Until the building is elevated,

floodproofed, demolished, or relocated

on the same or to another premises; and

b. Unless the building is elevated,

floodproofed, demolished, or relocated

as soon as reasonably possible after the

loss, not to exceed two years.

6. Any code upgrade requirements,

e.g., plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or

ordinance.

7. 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.

8. Loss due to any ordinance or law

that you were required to comply with

before the current loss.

9. 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.

10. Increased Cost of Compliance for

a garage or carport.

11. Any structure insured under an

NFIP Group Flood Insurance Policy.

12. 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.

F. Other Provisions.

1. Increased Cost of Compliance

coverage will not be included in the

calculation to determine whether

coverage meets the coinsurance

requirement for replacement cost

coverage under VIII. General

Conditions, V. Loss Settlement.

2. All other conditions and provisions

of the policy apply.

IV. Property Not Covered

We do not cover any of the following:

1. Personal property not inside a

building;

2. A building, and personal property

in it, located entirely in, on, or over

water or seaward of mean high tide, if

constructed or substantially improved

after September 30, 1982;

3. Open structures, including a

building used as a boathouse or any

structure or building into which boats

are floated, and personal property

located in, on or over water;

4. Recreational vehicles other than

travel trailers described in the

Definitions Section (see II.B.6.c.)

whether affixed to a permanent

foundation or on wheels;

5. Self-propelled vehicles or

machines, including their parts and

equipment. However, we do cover selfpropelled vehicles or machines,

provided they are not licensed for use

on public roads that are:

a. Used mainly to service the

described location or

b. Designed and used to assist

handicapped persons, while the

vehicles or machines are inside a

building at the described location;

6. Land, land values, lawns, trees,

shrubs, plants, growing crops, or

animals;

7. Accounts, bills, coins, currency,

deeds, evidences of debt, medals,

money, scrip, stored value cards,

postage stamps, securities, bullion,

manuscripts, or other valuable papers;

8. Underground structures and

equipment, including wells, septic tanks

and septic systems;

9. Those portions of walks, walkways,

decks, driveways, patios and other

surfaces, all whether protected by a roof

or not, located outside the perimeter,

exterior walls of the insured building;

10. Containers, including related

equipment, such as, but not limited to,

tanks containing gases or liquids;

11. Buildings and all their contents if

more than 49% of the actual cash value

of the building is below ground, unless

the lowest level is at or above the base

flood elevation and is below ground by

reason of earth having been used as

insulation material in conjunction with

energy efficient building techniques;

12. Fences, retaining walls, seawalls,

bulkheads, wharves, piers, bridges, and

docks;

13. Aircraft or watercraft, or their

furnishings and equipment;

14. Swimming pools, hot tubs, spas,

and their equipment such as, but not

limited to, heaters, filters, pumps, and

pipes, wherever located;

15. Property not eligible for flood

insurance pursuant to the provisions of

the Coastal Barrier Resources Act and

the Coastal Barrier Improvements Act of

1990 and amendments to these Acts.

16. Loss to any building or personal

property located on land leased from the

Federal Government, arising from or

incident to the flooding of the land by

the Federal Government, where the

lease expressly holds the Federal

Government harmless under flood

insurance issued under any Federal

Government program.

17. Personal property used in

connection with any incidental

commercial occupancy or use of the

building.

V. Exclusions

A. We only pay for direct physical

loss by or from flood, which means that

we do not pay you for:

1. Loss of revenue or profits;

2. Loss of access to the insured

property or described location;

3. Loss of use of the insured property

or described location;

4. Loss from interruption of business

or production;

5. Any additional living expenses

incurred while the insured building is

being repaired or is unable to be

occupied for any reason;

6. The cost of complying with any

ordinance or law:

a. 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

b. Requiring you or others to test for,

monitor, clean up, remove, contain,

treat, detoxify, or neutralize, or in any

way respond to, or assess the effect of,

any pollutant; or

7. Any other economic loss.

B. We do not insure a loss directly or

indirectly caused by a flood that is 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 areas; or

34852 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

6. Gradual erosion.

We do, however, pay for losses from

erosion and mudflows that are

specifically covered under our

definition of flood.

D. We do not insure for direct

physical loss caused directly or

indirectly by:

1. The pressure or weight of ice;

2. Freezing or thawing;

3. Rain, snow, sleet, hail, or water

spray;

4. Water, moisture, mildew, or mold

damage that results primarily from any

condition:

a. Substantially confined to the

insured building; or

b. That is within your control

including, but not limited to:

(1) Design, structural or mechanical

defects;

(2) Failures, stoppages, or breakage of

water or sewer lines, drains, pumps,

fixtures or equipment; or

(3) Failure to inspect and maintain the

property after a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

or

b. Discharges or overflows from a

sump, sump pump or related

equipment; or

c. Seeps or leaks on or through

insured property, unless the damaged

insured property has been, at the same

time, damaged by flood;

6. The pressure or weight of water

unless the damaged insured property

has been, at the same time, damaged by

flood;

7. Power, heating or cooling failure

unless the failure results from direct

physical loss by or from flood to power,

heating or cooling equipment situated

on the described location;

8. Discharge, dispersal, seepage,

migration, release, or escape of

pollutants;

9. Theft, fire, explosion, wind, or

windstorm;

10. Anything that you or your agents

do or conspire to do to deliberately

cause loss by flood; or

11. Alteration of the insured property

that significantly increases the risk of

flooding.

VI. Deductibles

A. When a loss is covered under this

policy, we will pay only that part of the

loss that exceeds the applicable

deductible amount, subject to the limit

of insurance that applies. The

deductible amount is shown on the

declarations page.

However, when a building under

construction, alteration or repair does

not have at least two rigid exterior walls

and a fully secured roof at the time of

loss, your deductible amount will be

two times the deductible that would

otherwise apply to a completed

building.

B. In each loss from flood, separate

deductibles apply to the building and

personal property insured by this

policy.

C. No deductible applies to:

1. III.C.2. Loss Avoidance Measures;

or

2. III.D. Increased Cost of Compliance

Coverage.

VII. Coinsurance

A. This Coinsurance Section applies

only to coverage on the building.

B. We will impose a penalty on loss

payment unless the amount of insurance

applicable to the damaged building is:

1. At least 80% of its replacement

cost; or

2. The maximum amount of insurance

available for that building under the

NFIP, whichever is less.

C. If the actual amount of insurance

on the building is less than the required

amount in accordance with the terms of

VII. B. above, then loss payment is

determined as follows (subject to all

other relevant conditions in this policy

including those pertaining to valuation,

adjustment, settlement and payment of

loss):

1. Divide the actual amount of

insurance carried on the building by the

required amount of insurance.

2. Multiply the amount of loss, before

application of the deductible, by the

figure determined in C.1. above.

3. Subtract the deductible from the

figure determined in C.2. above.

We will pay the amount determined

in C.3. above, or the amount of

insurance carried, whichever is less.

The amount of insurance carried, if in

excess of the applicable maximum

amount of insurance available under the

NFIP, is reduced accordingly.

Examples

EXAMPLE #1 (INADEQUATE INSURANCE)

Replacement value of the

building ........................ $250,000

Required amount of insurance ......................... $200,000

(80% of replacement

value of $250,000)

Actual amount of insurance carried ................. $180,000

Amount of the loss ......... $150,000

Deductible ....................... $500

Step 1: 180,000 ÷ 200,000 = .90

(90% of what should be carried.)

Step 2: 150,000 × .90 = 135,000

Step 3: 135,000 ¥ 500 = 134,500

We will pay no more than $134,500.

The remaining $15,500 is not covered

due to the coinsurance penalty

($15,000) and application of the

deductible ($500).

EXAMPLE #2 (ADEQUATE INSURANCE)

Replacement value of the

building ........................ $500,000

(80% of replacement

value is $400,000)

Required amount of insurance ......................... $400,000

Actual amount of insurance carried ................. $400,000

Amount of the loss ......... $200,000

Deductible ....................... $500

In this example there is no

coinsurance penalty, because the actual

amount of insurance carried meets the

required amount. We will pay no more

than $199,500 ($200,000 amount of loss

minus the $500 deductible).

D. In calculating the full replacement

cost of a building:

1. The replacement cost value of any

covered building property will be

included;

2. The replacement cost value of any

building property not covered under

this policy will not be included; and

3. Only the replacement cost value of

improvements installed by the

condominium association will be

included.

VIII. General Conditions

A. Pair and Set Clause.

In case of loss to an article that is part

of a pair or set, we will have the option

of paying you:

1. An amount equal to the cost of

replacing the lost, damaged or destroyed

article, less depreciation; or

2. An amount which represents the

fair proportion of the total value of the

pair or set that the lost, damaged or

destroyed article bears to the pair or set.

B. 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 flood

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.

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34853

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 reasons

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 listed on the

application is not eligible for coverage

under the NFIP; or

b. 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 re-enter the program

during the policy term and before the

loss occurred.

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 paragraph C.1.b. or

paragraph C.1.c. immediately below

applies.

b. If the other policy has a provision

stating that it is excess insurance, this

policy will be primary.

c. This policy will be primary (but

subject to its own deductible) up to the

deductible in the other flood policy

(except another policy as described in

paragraph 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.

Where there is a flood insurance

policy in the name of a unit-owner that

covers the same loss as this policy, then

this policy will be primary.

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.

E. Cancellation of Policy by You.

1. You may cancel this policy at any

time.

2. If you cancel this policy, you may

be entitled to a full or partial refund of

premium under our applicable rules and

regulations.

F. Non-Renewal 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. Your building has been declared

ineligible under section 1316 of the Act.

G. Reduction and Restoration 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 amount of coverage resulting

from the reduction described in 1. above

can be restored 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 30 days from the date

of our bill, we will restore 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 60 days of our

request. Once we determine the amount

of additional premium for the current

policy term, we will follow the

procedure in (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 restored by

endorsement subject to any appropriate

waiting period.

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 30 days of the date of our bill,

we will restore 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 (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 restored 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 paragraph B. Concealment or Fraud

and Policy Voidance above apply.

H. Policy Renewal.

1. This policy will expire at 12:01

a.m. on the last day of the policy term.

2. We must receive the payment of the

appropriate renewal premium within 30

days of the expiration date.

3. If we find, however, that your

renewal notice was not placed into the

U.S. Postal Service, or if it was mailed

properly, it was prepared in such a way,

e.g., with an incorrect, incomplete, or

illegible address, as to delay 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 30 days after the

date on which the bill is mailed.

b. If we do not receive the premium

requested in the second bill by the

revised due date, then we will not

renew the policy. In that case, the policy

will remain as an expired policy as of

the expiration date shown on the

declarations page.

34854 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

4. In connection with the renewal of

this policy, we may ask you during the

policy term to re-certify, on a

Recertification Questionnaire that we

will provide to you, the rating

information used to rate your most

recent application for or renewal of

insurance.

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.

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

personal property showing the quantity,

description, actual cash value, and

amount of loss. Attach all bills, receipts

and related documents;

4. Within 60 days after the loss, send

us a proof of loss, which is your

statement as to the amount you are

claiming under the policy signed and

sworn to by you, and which furnishes

us with the following information:

a. The date and time of loss;

b. A brief explanation of how the loss

happened;

c. Your interest (for example,

‘‘owner’’) and the interest, if any, of

others in the damaged property;

d. Details of any other insurance that

may cover the loss;

e. Changes in title or occupancy of the

insured property during the term of the

policy;

f. Specifications of damaged insured

buildings and detailed repair estimates;

g. Names of mortgagees or anyone else

having a lien, charge or claim against

the insured property;

h. Details about who occupied any

insured building at the time of loss and

for what purpose; and

i. The inventory of damaged personal

property described in 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 our

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 an

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.

K. Our Options After a Loss.

Options that we may, in our sole

discretion, exercise after loss include

the following:

1. At such reasonable times and

places that we may designate, you must:

a. Show us or our representative the

damaged property;

b. Submit to examination under oath,

while not in the presence of another

insured, and sign the same; and

c. Permit us to examine and make

extracts and copies of:

(1) Any policies of property insurance

insuring you against loss and the deed

establishing your ownership of the

insured real property;

(2) Condominium association

documents including the Declarations of

the condominium, its Articles of

Association or Incorporation, Bylaws,

and rules and regulations; and

(3) All books of accounts, bills,

invoices and other vouchers, or certified

copies pertaining to the damaged

property if the originals are lost.

2. We may request, in writing, that

you furnish us with a complete

inventory of the lost, damaged, or

destroyed property, including:

a. Quantities and costs;

b. Actual cash values or replacement

cost (whichever is appropriate);

c. Amounts of loss claimed; and

d. Any written plans and

specifications for repair of the damaged

property that you can make reasonably

available to us.

3. If we give you written notice within

30 days after we receive your signed,

sworn proof of loss, we may:

a. Repair, rebuild or replace any part

of the lost, damaged or destroyed

property with material or property of

like kind and quality or its functional

equivalent; and

b. Take all or any part of the damaged

property at the value that we agree upon

or its appraised value.

L. No Benefit to Bailee.

No person or organization, other than

you, having custody of covered property

will benefit from this insurance.

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 60 days after we

receive your proof of loss (or within 90

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 VIII. P.

2. If we reject your proof of loss in

whole or in part you may:

a. Accept such denial of your claim;

b. Exercise your rights under this

policy; or

c. File an amended proof of loss as

long as it is filed within 60 days of the

date of the loss or within any extension

of time allowed by the Administrator.

N. Abandonment.

You may not abandon damaged or

undamaged insured property to us.

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.

P. Appraisal.

If you and we fail to agree on the

actual cash value or, if applicable,

replacement cost of the damaged

property so as to determine the amount

of loss, then either may demand an

appraisal of the loss. In this event, you

and we will each choose a competent

and impartial appraiser within 20 days

after receiving a written request from

the other. The two appraisers will

choose an umpire. If they cannot agree

upon an umpire within 15 days, you or

we may request that the choice be made

by a judge of a court of record in the

state where the insured property is

located. The appraisers will separately

state the actual cash value, the

replacement cost and the amount of loss

to each item. If the appraisers submit a

written report of an agreement to us, the

amount agreed upon will be the amount

of loss. If they fail to agree, they will

submit their differences to the umpire.

A decision agreed to by any two will set

the amount of actual cash value and

loss, or if it applies, the replacement

cost and loss.

Each party will:

1. Pay its own appraiser; and

2. Bear the other expenses of the

appraisal and umpire equally.

Q. Mortgage Clause.

The word ‘‘mortgagee’’ includes

trustee.

Any loss payable under Coverage A—

Building will be paid to any mortgagee

of whom we have actual notice and you,

as interests appear. If more than one

mortgagee is named, the order of

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34855

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 60 days after receiving

notice from us of your failure to do so.

All of the terms of this policy will

then apply directly to the mortgagee.

If we decide to cancel or not renew

this policy, it will continue in effect for

the benefit of the mortgagee only for 30

days after we notify the mortgagee of the

cancellation or non-renewal.

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.

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 of the date of

the written denial of all or part of the

claim and you must file the suit in the

United States District Court of the

district in which the insured property

was located at the time of loss. This

requirement applies to any claim that

you may have under this policy and to

any dispute that you may have arising

out of the handling of any claim under

the policy.

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.

T. Continuous Lake Flooding.

1. Where an insured building has

been flooded by rising lake waters

continuously for 90 days or more and it

appears reasonably certain that a

continuation of this flooding will result

in a covered loss to an insured building

equal to or greater than the building

policy limits plus the deductible or the

maximum payable under the policy for

any one building loss, we will pay you

the lesser of these two amounts without

waiting for the further damage to occur

if you sign a release agreeing:

a. To make no further claim under

this policy;

b. Not to seek renewal of this policy;

c. Not to apply for any flood

insurance under the Act for property at

the described location and;

d. Not to seek a premium refund for

current or prior terms.

If the policy term ends before an

insured building has been flooded

continuously for 90 days, the provisions

of this paragraph T.1. will apply as long

as 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 this 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 one square

mile at any time in the recorded past.

Most of the nation’s closed basin lakes

are in the western half of the United

States where annual evaporation

exceeds annual precipitation and where

lake levels and surface areas are subject

to considerable fluctuation due to wide

variations in the climate. These lakes

may overtop their basins on rare

occasions.) Under this paragraph we

will pay your claim as if the building is

a total loss even though it has not been

continuously inundated for 90 days,

subject to the following conditions:

a. Lake flood waters must damage or

imminently threaten to damage your

building.

b. Before approval of your claim, you

must:

(1) Agree to a claim payment that

reflects your buying back the salvage on

a negotiated basis; and

(2) Grant the conservation easement

contained in the Federal Emergency

Management Agency’s (FEMA) ‘‘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 agreedupon map showing the ASC. This

easement will only apply to that portion

of the property in the ASC. It will allow

certain agricultural and recreational

uses of the land. The only structures

that it will allow on any portion of the

property within the ASC are certain,

simple agricultural and recreational

structures. If any of these allowable

structures are insurable buildings under

the NFIP and are insured under the

NFIP, they will not be eligible for the

benefits of this paragraph 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 90 days of approval of your

claim, you must move your building to

a new location outside the ASC. FEMA

will give you an additional 30 days to

move if you show there is sufficient

reason to extend the time.

d. Before the final payment of your

claim, you must acquire an elevation

certificate and a floodplain development

permit from your local floodplain

administrator for the new location of

your building.

e. Before the approval of your claim,

the community having jurisdiction over

your building must:

(1) Adopt a permanent land use

ordinance, or a temporary moratorium

for a period not to exceed 6 months to

be followed immediately by a

permanent land use ordinance, that is

consistent with the provisions specified

in the easement required in paragraph

T.2.b. above.

(2) Agree to declare and report any

violations of this ordinance to FEMA so

that under Sec. 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 deedrestricted, 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

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 non-profit land

trust organization receives the property

as a donation, that organization must

maintain the property as deedVerDate 11<MAY>2000 21:04 May 30, 2000 Jkt 190000 PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 E:\FR\FM\31MYP2.SGM pfrm01 PsN: 31MYP2
34856 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules

restricted, consistent with the

provisions of 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 this

paragraph T.2. If a subsequent owner

buys NFIP insurance that goes into

effect within 60 days of the date of

transfer of title, any gap in coverage

during that 60-day period will not be a

violation of this continuous coverage

requirement. For the purpose of

honoring a claim under this paragraph

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.

U. Duplicate Policies Not Allowed.

1. 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 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 will

become 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 30 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. The insured’s option under this

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 must be canceled.

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 paragraphs V.1.a., b., and c. below.

a. Replacement Cost Loss Settlement

described in paragraph V.2. below

applies to buildings.

b. Special Loss Settlement described

in paragraph V.3. below applies to a

travel trailer or a manufactured home.

c. Actual Cash Value loss settlement

applies to all other property covered

under this policy, as outlined in

paragraph V.4. below.

2. Replacement Cost Loss Settlement

a. We will pay to repair or replace a

damaged or destroyed building, after

application of the deductible and

without deduction for depreciation, but

not more than the least of the following

amounts:

(1) The amount of insurance in this

policy that applies to the building;

(2) The replacement cost of that part

of the building damaged, with materials

of like kind and quality and for like

occupancy and use; or

(3) The necessary amount actually

spent to repair or replace the damaged

part of the building for like occupancy

and use.

b. We will not be liable for any loss

on a Replacement Cost Coverage basis

unless and until actual repair or

replacement of the damaged building or

parts thereof, is completed.

c. If a building is rebuilt at a location

other than the described location, we

will pay no more than it would have

cost to repair or rebuild at the described

location, subject to all other terms of

Replacement Cost Loss Settlement.

3. Special Loss Settlement.

The following loss settlement

conditions apply to a manufactured

home or a travel trailer, as defined in

Section II—Definitions, B., paragraphs

6.b. and c.:

a. If such a manufactured home or

travel trailer is at least 16 feet wide

when fully assembled and has at least

600 square feet within its perimeter

walls when fully assembled, and is

totally destroyed or damaged to such an

extent that, in our judgment, it is not

economically feasible to repair, at least

to its pre-damaged condition, we will, at

our discretion pay the least of the

following amounts:

(1) The lesser of the replacement cost

of the manufactured home or travel

trailer or 1.5 times the actual cash value;

or

(2) The Building Limit of liability

shown on your Declarations Page.

b. If such a manufactured home or

travel trailer is partially damaged and,

in our judgment, it is economically

feasible to repair it to its pre-damaged

condition, we will settle the loss

according to the Replacement Cost Loss

Settlement conditions in paragraph V.2.

above.

4. Actual Cash Value.

a. The types of property noted below

are subject to actual cash value loss

settlement. ‘‘Actual cash value’’ is

defined in II. Definitions.

(1) Personal property;

(2) Insured property abandoned after

a loss and that remains as debris at the

described location.

(3) Outside antennas and aerials,

awning, and other outdoor equipment,

all whether attached to the buildings or

not;

(4) Carpeting and pads; and

(5) Appliances.

b. We will pay the least of the

following amounts:

(1) The applicable amount of

insurance under this policy;

(2) The actual cash value; or

(3) The amount it would cost to repair

or replace the property with material of

like kind and quality within a

reasonable time after the loss.

VIII. Liberalization Clause

If we make a change that broadens

your coverage under this edition of our

policy, but does not require any

additional premium, then that change

will automatically apply to your

insurance as of the date we implement

the change, provided that this

implementation date falls within 60

days before or during the policy term

stated in the Declarations Page.

IX. What Law Governs

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.

In Witness Whereof, we have signed

this policy below and hereby enter into

this Insurance Agreement.

Jo Ann Howard,

Administrator,

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Proposed Rules 34857

Federal Insurance Administration.

(Catalog of Federal Domestic Assistance

No. 83.100,’’Flood Insurance’’)

Dated: May 18, 2000.

Jo Ann Howard,

Administrator, Federal Insurance

Administration.

[FR Doc. 00–13298 Filed 5–30–00; 8:45 am]

BILLING CODE 6718–03–P