Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations 8391

Valley ozone nonattainment area as

defined in 40 CFR 81.339 may not be

challenged later in proceedings to

enforce its requirements. (See section

307(b)(2).)

List of Subjects in 40 CFR Part 81

Environmental protection, Air

pollution control, National parks,

Wilderness areas.

Dated: February 5, 1997.

W. Michael McCabe,

Regional Administrator, Region III.

Part 81 of chapter I, title 40 of the

Code of Federal Regulations is amended

as follows:

PART 81—[AMENDED]

1. The authority citation for part 81

continues to read as follows:

Authority: 42 U.S.C. 7401–7671q.

2. In § 81.339, the ‘‘Pennsylvania—

Ozone’’ table is amended by revising the

entry for ‘‘Pittsburgh-Beaver Valley

Area’’ to read as follows:

§ 81.339 Pennsylvania.

* * * * *

PENNSYLVANIA—OZONE

Designated area

Designation Classification

Date 1 Type Date 1 Type

* * * * * * *

Pittsburgh-Beaver Valley Area:

Allegheny County ................................................................................. ........................ Nonattainment ........................ Moderate.2

Armstrong County ................................................................................ ........................ Nonattainment ........................ Moderate.2

Beaver County ..................................................................................... ........................ Nonattainment ........................ Moderate.2

Butler County ....................................................................................... ........................ Nonattainment ........................ Moderate.2

Fayette County ..................................................................................... ........................ Nonattainment ........................ Moderate.2

Washington County .............................................................................. ........................ Nonattainment ........................ Moderate.2

Westmoreland County ......................................................................... ........................ Nonattainment ........................ Moderate.2

* * * * * * *

1This date is November 15, 1990, unless otherwise noted.

2Attainment date extended to 11/15/97.

[FR Doc. 97–4119 Filed 2–24–97; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL EMERGENCY

MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067–AC54

National Flood Insurance Program;

Standard Flood Insurance Policy

AGENCY: Federal Insurance

Administration (FEMA).

ACTION: Final rule.

SUMMARY: This rule amends the National

Flood Insurance Program (NFIP)

regulations to add coverage under the

Standard Flood Insurance Policy to pay

for the increased cost to rebuild or

otherwise alter flood-damaged

structures to conform with State or local

floodplain management ordinances or

laws consistent with the requirements

and guidance of the NFIP.

EFFECTIVE DATE: June 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Charles M. Plaxico, Jr., Federal

Insurance Administration, 500 C Street

SW., Washington, DC 20472, (202) 646–

3422.

SUPPLEMENTARY INFORMATION: On

September 23, 1996, FEMA published in

the Federal Register, 61 FR 49717, a

proposed rule to amend the National

Flood Insurance Program (NFIP)

regulations by adding coverage under

the Standard Flood Insurance Policy

(SFIP) for the increased cost, up to a

maximum liability of $15,000, to bring

structures into compliance with State or

community floodplain management

laws or ordinances after flood losses.

This coverage, which is referred to in

the proposed rule as ‘‘increased cost of

construction’’ coverage but hereinafter

referred to in this final rule as

‘‘increased cost of compliance’’ coverage

(ICC), is mandated by § 555 of Public

Law 103–325 which requires the NFIP

to ‘‘enable the purchase of insurance to

cover the cost of compliance with land

use and control measures established

under section 1361 * * *.’’

The following are the principal

features of the September 23, 1996

proposed rule:

(1) The limit for ICC coverage would

be $15,000.

(2) Only flood-damaged structures

would be eligible for the coverage.

(3) Only those structures substantially

or repetitively damaged by flood would

be eligible for ICC coverage.

(4) Only structures in areas of special

flood hazard would be eligible for ICC

payments.

(5) ICC payments would be limited to

the amount necessary to meet but not

exceed the NFIP elevation requirements

after flood damage. (This feature of the

proposed rule has been changed. See

below.)

(6) Repetitive loss structures would be

eligible for ICC payments when two

conditions are met:

(a) The community has adopted and

is enforcing a cumulative substantial

damage provision or repetitive loss

provision in its floodplain management

ordinance that requires action by the

property owner; and

(b) The structure has a history of flood

claims under the NFIP that satisfies the

statutory definition of repetitive loss

structure.

During the comment period, sixteen

(16) sets of comments were received by

FEMA. In many cases, commenters

shared similar views and

recommendations on individual issues.

The commenters’ recommendations,

concerns, and questions have been

considered and, where appropriate,

incorporated into this final rule.

$15,000 Maximum Benefit

Five commenters objected to the

maximum benefit of $15,000 proposed

in the rule for ICC coverage. The

underlying concern is that $15,000 will

be insufficient to pay for the increased

costs to elevate or floodproof a structure

substantially or repetitively damaged by

flood. For example, one commenter

concluded, ‘‘the ICC’s maximum

coverage of $15,000 is far below the

$35,000 average cost to elevate a
8392 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations

structure.’’ Another commenter

recommended ‘‘full Ordinance or Law

coverage up to the statutory limit’’

which, for a single family dwelling,

would be $250,000. One commenter,

however, supported this maximum

benefit for ICC coverage saying, ‘‘In

order to maintain fiscal control over the

program the $15,000 cap on ICC

payment should be retained.’’

FEMA arrived at the $15,000 cap from

basic pricing considerations and the

current status of the National Flood

Insurance Fund. After years of surplus

in the Fund, FEMA currently has in

excess of $600 million on loan from the

Treasury under the program’s borrowing

authority as a result of unusually heavy

flood losses since 1993. With this as a

backdrop, FEMA had to consider several

issues in establishing the coverage and

in pricing ICC. First, the pricing for this

coverage should be actuarially sound

with premiums varying, to the extent

practical, by risk. Second, § 555 of the

National Flood Insurance Reform Act of

1994 sets a cap on the amount the NFIP

may charge on each policy for ICC

coverage. The statute says, ‘‘The

Director shall impose a surcharge on

each insured of not more than $75 per

policy to provide cost of compliance

coverage.’’ (Emphasis added.) Third,

FEMA estimates that on average 3400–

3700 ICC claims will be made each year

to bring flood-damaged structures into

compliance with State or local

floodplain management laws or

ordinances. Fourth, FEMA has drawn

on its NFIP underwriting experience to

make projections for ICC coverage, but

there are uncertainties associated with

the introduction of any new product,

particularly one for which there is no

direct experience. Fifth, aside from the

NFIP’s borrowing authority, there is

currently no surplus of funds to provide

a cushion against uncertainties.

For these reasons, FEMA has

determined that a $15,000 limit on ICC

coverage is a prudent amount for the

introduction of this new product. FEMA

recognizes that $15,000 generally will

not be sufficient to pay all of the costs

to bring the structure into compliance

with state and community floodplain

management laws and ordinances, but it

will make a significant contribution

toward those costs. Although the

individual property owner will have to

bear a portion of the cost of the selected

mitigation measure (elevation,

floodproofing, relocation or demolition

or combinations thereof), there should

be a commensurate increase in the value

of the property that will offset at least

part of those costs. FEMA will review its

experience with ICC from time to time

to determine whether adjustments

should be made in the pricing, the

amount of the benefit, or other aspects

of the coverage.

Furthermore, other mitigation

resources and programs from FEMA, as

well as other Federal, State and local

resources, can be used to supplement

the ICC payment to help property

owners comply with State and

community laws and ordinances. For

example, currently, the Hazard

Mitigation Grant Program available

pursuant to § 404 of the Robert T.

Stafford Disaster Relief and Emergency

Assistance Act, Pub. L. 93–288, as

amended, could be used to supplement

the ICC benefit in communities which

initiate mitigation projects.

Limitation of ICC to Flood Damaged

Structures

One commenter recommended that

ICC coverage not be limited to flood

damages. This recommendation,

however, cannot be incorporated in the

final rule since § 555 of the National

Flood Insurance Reform Act of 1994

authorizes ICC coverage only for flooddamaged structures. The statute

authorizes ICC coverage for ‘‘(1)

properties that are repetitive loss

structures; (2) properties that have flood

damage in which the cost of repairs

equals or exceeds 50 percent of the

value of the structure at the time of the

flood event; and (3) properties that have

sustained flood damage on multiple

occasions * * *.’’ ‘‘Repetitive loss

structure’’ is defined at § 512 of Pub. L.

103–325 as ‘‘a structure covered by a

contract for flood insurance under this

title that has incurred flood-related

damage on 2 occasions during a 10-year

period ending on the date of the event

for which a second claim is made, in

which the cost of repair, on the average,

equaled or exceeded 25 percent of the

value of the structure at the time of each

such flood event.’’ (Emphasis added.)

The final rule limits the benefit of ICC

coverage under Coverage D of the

Standard Flood Insurance Policy to

bring flood-damaged structures into

compliance with State or local

floodplain management laws or

ordinances.

ICC Benefits Within the Maximum

Limits of Insurance Coverage

One commenter objected that the

$15,000 ICC benefit was included

within, and not in addition to, the

maximum statutory limits of flood

insurance coverage available to property

owners for direct, physical damage from

flood, which for a single family

dwelling is $250,000. The commenter

felt that the maximum liability of

$250,000 for a single family dwelling for

Coverage A (direct, physical loss from

flood), combined with the new Coverage

D (increased cost of compliance),

effectively denied $15,000 of flood

insurance benefits to the policyholder

who has purchased the statutory limits

of coverage.

FEMA considered this objection but

concluded it does not have the authority

to exceed the maximum statutory limits

set by Congress for the NFIP in the Act,

as amended (42 U.S.C. 4013).

Consequently, as stated in the proposed

rule, the ICC benefit would be added to

the policy limit for direct loss from

flood, but the total payment for the ICC

benefit and the direct loss payment for

flood would not be greater than the

maximum limits of coverage for that

class of structure authorized under the

Act, as amended. In that connection,

§ 573 of Pub. L. 103–325 increased the

maximum limit of flood insurance

coverage for a single family dwelling

from $185,000 to $250,000 and for nonresidential structures from $250,000 to

$500,000. For structures insured to the

statutory limit, FEMA’s pricing of ICC

coverage, however, reflects the

possibility that, under some conditions,

a full $15,000 could not be collected.

Types of Mitigation Allowed

One commenter stated that the

proposed rule centers on elevation and

floodproofing and does not address

relocation or demolition. The Proposed

Rule for ICC coverage indicated in the

Standard Flood Insurance Policy and in

the ‘‘Supplementary Information’’

section that the allowable mitigation

measures under ICC include elevation,

floodproofing, relocation, and

demolition, or any combination thereof.

These allowable mitigation activities

have been retained in the final rule. It

is the property owner’s decision which

mitigation measure will be undertaken

provided that he or she complies with

applicable State or community

floodplain management laws or

ordinances. However, FEMA expects

that States or communities will work

closely with the property owner to

determine the most technically feasible

and cost effective mitigation measure for

the damaged structure. It is also

expected that States or communities

that have adopted a mitigation plan will

ensure that the selection of the

mitigation measure will be consistent

with the approved plan and coordinated

with other mitigation programs and

activities.

Another commenter asked whether

ICC is available for floodproofing

residential buildings in those

communities that are permitted by

FEMA to adopt standards for residential
Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations 8393

floodproofed basements. Under 44 CFR

60.6 (b) or (c) of the NFIP’s Floodplain

Management Regulations, communities

that have been approved for residential

basement exceptions by FEMA may

adopt standards for floodproofed

residential buildings. The ICC benefit

can be used to floodproof a residential

basement only if the building is located

in one of these communities approved

for residential basements exceptions.

The final rule says this and also

indicates that ICC payments will be

made in connection with nonresidential floodproofing to meet State

or local floodplain management

requirements.

Payments for Elevating or

Floodproofing to Elevations Which

Exceed NFIP Minimum Requirements

Seven comments objected to the

limitation in the proposed rule that ICC

pay for the cost of elevation or

floodproofing flood-damaged structures

only to the base flood elevation, the

NFIP minimum standard, and not to a

higher elevation required in some State

and community laws and ordinances.

The comments pointed out that some

States and communities, in the interest

of sound floodplain management and in

recognition of future floodplain

development, exceed the NFIP’s

minimum standards by requiring new or

substantially improved structures to be

elevated or floodproofed to one or more

feet above the base flood elevation. This

more restrictive elevation requirement is

generally referred to as ‘‘freeboard.’’

Furthermore, the comments noted that

FEMA has, as a matter of policy,

encouraged communities to exceed the

NFIP’s minimum standards, and that

FEMA’s Community Rating System

(CRS) in fact provides premium rate

discounts to communities that exceed

the minimum requirements.

FEMA agrees with these comments

that the cost to elevate or floodproof

structures to higher State or community

floodplain management standards

should be eligible for ICC benefits. The

final rule has, therefore, been revised to

permit ICC payments, up to the $15,000

limit of coverage, to elevate or

floodproof structures to the ‘‘freeboard’’

established and enforced in the State or

community’s floodplain management

law or ordinance.

ICC Benefits for Map Revisions and

Areas Designated as Zone A

Two aspects of ICC that should be

clarified are: (1) How ICC coverage will

respond to situations where FEMA

issues an advisory map or has issued a

preliminary or draft Flood Insurance

Study, and (2) how ICC will respond to

elevation requirements in areas

designated as Zone A. If FEMA issues

an advisory map and increases the base

flood elevation, and the community

adopts the map and the higher base

flood elevations, ICC benefits will be

paid to elevate or floodproof flooddamaged structures to these preliminary

or advisory base flood elevations. ICC

benefits will be paid even if the zone

was previously designated Zone B, C, X,

or D. Also, in communities that have

areas designated as unnumbered A

Zones on their Flood Insurance Rate

Map, ICC benefits will be paid on a

flood damaged structure for elevation,

floodproofing, demolition, relocation, or

any combination thereof. The

community must obtain, review and

reasonably utilize any base flood

elevation data available from a Federal,

State, or other sources in accordance

with 44 CFR 60.3(b)(4) and require that

the structure be elevated or

floodproofed to that elevation. The base

flood elevation data should be used as

long as the data: (1) Reasonably reflect

flooding conditions expected during the

base (100-year) flood, (2) are not known

to be scientifically or technically

incorrect, and (3) represent the best data

available.

Demolition

An issue needing clarification is

where a structure is demolished, and a

replacement structure is built at the

same or another site. In this situation,

ICC coverage will pay for the cost of

demolition as well as for the

incremental costs to elevate or

floodproof the structure during the

course of rebuilding to meet elevation

requirements at the same site or another

location provided the elevation or

floodproofing is to comply with State or

community floodplain management

laws or ordinances. The ICC payment,

within the $15,000 limit, will also be

made when the structure, after

demolition, is rebuilt at a new site even

if the base flood elevations are higher

there than at the original location.

FEMA’s decision to permit ICC benefits

to pay for the incremental costs of

elevation or floodproofing after a

structure has been demolished is based

on the statutory language of § 555 of

Public Law 103–325, i.e., that the new

coverage is to pay for ‘‘increased cost of

compliance’’ with land use and control

measures being enforced by the State or

community that meet the standards of

44 CFR 60.3 established under § 1361 of

the National Flood Insurance Act of

1968, as amended.

In sum, ICC benefits will be paid to

perform mitigation activities to help

bring a structure into compliance with

State and community floodplain

management laws or ordinances. Not

included in any ICC payment for

demolition will be the residual value of

the undamaged portion of the structure.

FEMA considered whether to pay for

loss of residual value when the

demolition option is selected. Offering

ICC benefits for loss of residual value is

a potentially costly initiative—one that

could undermine FEMA’s ability to

raise the initial cap of $15,000 at some

later date if program experience

warrants such an increase. Hence,

FEMA has decided to gain experience

with ICC and to analyze that program

experience in order to determine the

feasibility of providing ICC benefits for

loss of residual value. FEMA will

initiate this analysis after nine months

from the effective date on this final rule.

Market Value versus Replacement Cost

and Substantial Improvements

One commenter stated that ‘‘market

value’’ was not defined and

recommended the use of ‘‘replacement

cost’’ instead. Another commenter asked

how States or communities that use

‘‘replacement cost’’ instead of ‘‘market

value’’ implement the substantial

damage requirement.

While the statute does not specify

what value should be used in

determining substantially damaged or

repetitive loss structures, ‘‘market

value’’ is currently used in the

definitions of ‘‘substantial damage’’ and

‘‘substantial improvement’’ in the

NFIP’s Regulations (44 CFR 59.1). For

this reason, ‘‘market value’’ will be used

for consistency for ICC substantial

damage and repetitive loss

determinations. Under the NFIP,

substantially damaged structures must

be elevated or floodproofed (nonresidential structures only) to or above

the Base Flood Elevation. States and

communities participating in the NFIP

are required to use market value in

determining whether a structure has

been substantially damaged. Use of

‘‘replacement cost’’ is not permitted

under the NFIP’s floodplain

management regulations.

A related issue that should be

clarified is how ICC coverage will

respond to situations involving

improvements that are made to a

damaged structure at the same time that

it is being repaired. The final rule

provides that payment be made to help

policyholders comply with State and

community floodplain management

laws and ordinances after a flood loss.

Unless the flood loss alone constitutes

‘‘substantial damage’’ or the loss meets

the criteria for a ‘‘repetitive loss’’, ICC

will not provide coverage even if the
8394 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations

combination of the cost of the repair and

the cost of the improvement exceeds the

50 percent of market value threshold for

a ‘‘substantial improvement’’ under the

community’s ordinance. The

improvement represents a voluntary

decision by the individual to improve or

add on to an existing structure in a

special flood hazard area and is not a

flood loss as required by the statute. In

addition, ICC will not cover the costs to

bring into compliance with State or

community elevation or floodproofing

requirements any improvements or

additions to damaged structures at the

time repairs are made, such as a new

addition. Although ICC benefits are not

paid for substantial improvements,

substantially improved structures and

improvements made along with repairs

to a substantially damaged structure

must still meet all the minimum

requirements of the NFIP.

Repetitive Loss Structures

A number of comments were received

on implementation of the repetitive loss

coverage under ICC. These comments

relate to ordinance adoption, timing of

the flood losses relative to the effective

date of the final rule, and how losses are

counted toward a repetitive loss

determination.

There were several questions and

comments on whether States and

communities will be required to amend

their floodplain management ordinances

to include a repetitive loss provision.

One commenter suggested that

communities be given a reasonable time

frame within which to adopt this

provision before the coverage goes into

effect. One commenter recommended

that the requirement to adopt a

repetitive loss provision be eliminated

as a condition for receiving the benefit.

Two other commenters noted that very

few communities currently have a

repetitive loss provision in their

floodplain management ordinance and

that the requirement to adopt such a

provision would be at great expense and

difficulty. A commenter also asked what

the effect would be on a policyholder if

a community did not adopt a repetitive

loss provision.

Based on a review of the statute and

the NFIP’s other authorities, FEMA has

concluded that the statute does not

mandate that it change the NFIP’s

floodplain management regulations at

44 CFR 59.1 and 60.3 to require States

and communities to adopt a repetitive

loss requirement. Therefore, adoption of

a cumulative substantial damage

provision or a repetitive loss provision

is voluntary and will be at the discretion

of the State or community. Making

adoption of such a provision voluntary

recognizes that very few of the

approximately 18,500 participating

NFIP communities have adopted a

cumulative substantial damage

provision or repetitive loss provision in

their floodplain management laws or

ordinances. Furthermore, FEMA

recognizes that there is an added

administrative burden to communities

in adopting and administering these

types of provisions. Finally, not all NFIP

communities have a history of repetitive

flood losses to existing structures.

Making this feature of ICC

implementation voluntary will allow

States and communities to evaluate

historic flood losses carefully to

determine whether such a provision

would significantly mitigate the flood

risk to existing structures. While the ICC

benefit will not be paid for a repetitive

loss structure if the State or local

government has not adopted a

cumulative substantial damage or

repetitive loss provision in its

floodplain management law or

ordinance, the ICC benefit will still be

paid for substantially damaged

structures whether or not the

community adopts a repetitive loss

provision. A State or community can

adopt a law or ordinance addressing

repetitive loss structures at any time

before or after this final rule becomes

effective.

FEMA has concluded that since the

statute ties the availability of ICC to the

land use and control measures under

§ 1361 of the Act (42 U.S.C. 4102), as

amended, ICC coverage is intended to

respond only to State or local

ordinances or laws requiring repetitive

loss structures to be rebuilt to at least

NFIP floodplain management

requirements for substantially damaged

structures. Therefore, one of the

conditions for the ICC benefit to be paid

under the SFIP for repetitive loss

structures is for the State or community

to be enforcing a repetitive loss

provision or a cumulative substantial

damage provision requiring action by

the property owner. The second

condition that must be met is that the

structure have a history of claims

payments that satisfy the statutory

definition of repetitive loss structure.

Several commenters recommended

that ordinance language be flexible to

meet local concerns. One commenter

noted that communities may already

have a cumulative substantial damage

requirement that is inconsistent with

the repetitive loss definition in the

proposed rule. The State or

community’s requirement for a property

owner to bring a building into

compliance can be triggered by a

cumulative substantial damage or

repetitive loss ordinance that deviates

from the National Flood Insurance

Reform Act’s definition; however, a

policyholder will only be eligible for

ICC payments when the Act’s repetitive

loss definition is satisfied. With either

type of provision, the State or

community must apply it consistently to

all structures regardless of whether or

not the structure is covered by a

contract for flood insurance. At a

minimum, structures that met the

definition of a ‘‘repetitive loss

structure’’ would be required to meet

the minimum floodplain management

requirements that apply to substantially

damaged structures.

FEMA will develop model ordinance

language for addressing repetitive loss

structures consistent with the statute’s

definition. FEMA also will be

developing guidance on adoption of the

repetitive loss provision; however,

States or communities with questions

concerning whether an existing

repetitive loss or cumulative substantial

damage provision in a community’s law

or ordinance is consistent with the

definition in the final rule can contact

their respective FEMA Regional Offices

for assistance.

Questions were raised concerning the

timing of the first and second loss

relative to when the ICC coverage takes

effect and when the community adopts

a repetitive loss provision for

determining if a structure has been

repetitively damaged. Specifically, the

comments questioned why the first

qualifying loss has to occur after the

State or community amends its law or

ordinance to include a repetitive loss

provision or why both claims have to

occur after ICC coverage takes effect. In

a related comment, it was asked how

FEMA intends to treat a loss after the

effective date of the final rule on ICC

coverage, but before community

adoption of a repetitive loss provision.

The proposed rule stated that the

benefit of ICC under the SFIP for

repetitive loss structures requires that

two conditions be met. First, the State

or community must be enforcing a

cumulative substantial damage or

repetitive loss provision requiring

action by the property owner. Second,

the NFIP must have a history of claims

payments for the structure that satisfies

the statutory definition of repetitive loss

structure.

FEMA is implementing the repetitive

loss provision of the statute by

providing ICC coverage when a property

owner is required to rebuild in

compliance with a community’s

substantial damage or repetitive loss

provision and the accumulated damage

based on two losses within a 10-year
Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations 8395

period that, combined, total more than

50% of the value of the structure. The

date on which the first loss occurred is

immaterial as to eligibility, even if the

loss occurred before the effective date of

this final rule since ICC coverage will

respond to enforceable State or

community floodplain management

laws or ordinances for compliance.

Several comments and questions were

received on how repetitive losses are

counted toward a repetitive loss

determination. One commenter asked

whether each of the two losses have to

equal at least 25% of the value of the

structure for a total of 50% in order to

qualify as a repetitive loss structure.

Another commenter suggested that the

determination should be flexible to

reach a 50% loss, whether the first loss

is only 10% and the second is 40%.

The definition of ‘‘repetitive loss

structure’’ in the statute, states that ‘‘the

cost of repair, on the average, equaled or

exceeded 25 percent of the value of the

structure at the time of each such flood

event’’. In the proposed rule, FEMA

stated that the two losses, when

combined, must equal or exceed 50

percent of the market value of the

structure within a 10-year period ending

on the date of the event for which the

second claim is made. Therefore, if the

first loss is only 10% and the second

loss is 40% and the State or community

enforces the repetitive loss ordinance

for these losses, the structure qualifies

for the ICC payment. However, two or

more losses that when combined are

less than 50 percent of the market value

of the structure do not qualify under the

statutory definition of a ‘‘repetitive loss

structure.’’

ICC Coverage for Multiple Flood

Damages

Two commenters mentioned that

specific guidance should be developed

as soon as possible for the third category

of flood-damaged structures eligible

under the statute for ICC coverage. The

third category consists of structures

damaged by flood ‘‘on multiple

occasions, if the Director determines

that it is cost-effective and in the best

interests of the National Flood

Insurance Fund to require compliance

with the land use and control measures’’

(42 U.S.C. 4011). As mentioned in the

‘‘Supplementary Information’’ section of

the September 23, 1996 proposed rule,

since the statute does not specify a

specific loss threshold for the third

category of multiple losses, the NFIP

needs specific experience with this new

coverage to determine what multiple

loss situations would be reasonable,

cost-effective candidates for compliance

with State or local land use and control

measures after a flood loss. FEMA will

review the loss history for ICC coverage

and the status of the National Flood

Insurance Fund after the first several

years of implementation of this

coverage. At that point, FEMA will

decide whether ICC coverage should be

implemented for the third category of

structures ‘‘damaged by flood on

multiple occasions where the FEMA

Director had determined it is in the best

interests of the National Flood

Insurance Fund to require compliance

with land use and control measures (42

U.S.C. 4011).’’ The decision will be

based on the best interests of the NFIP’s

financial status at that time, and

whether the pricing constraints imposed

by the statute can accommodate an

expansion of coverage.

Adjustment of ICC Claims

Three commenters raised specific

questions about the adjustment process

for ICC claims under the SFIP. FEMA is

drafting detailed procedures to be used

by adjusters for ICC claims. The final

loss adjustment procedures

implementing ICC coverage will be

distributed to the companies

participating in the Write Your Own

program as well as the adjusters

servicing the NFIP business written

directly by the Government

approximately 30–60 days before the

effective date of this final rule. Also,

FEMA in conjunction with the NFIP

Bureau and Statistical Agent will

conduct approximately 30 workshops

for insurance adjusters to address ICC.

ICC: Optional vs. Mandatory Coverage

Two commenters recommended that

ICC coverage should be made optional.

Section 555 of Public Law 103–325

requires the NFIP to ‘‘enable the

purchase of this coverage * * *’’ What

makes any coverage under an insurance

contract possible, however, is the spread

of the risk over a sufficiently large

population exposed to a common peril.

For this reason, and the high potential

that only the worst risks would

purchase ICC coverage if it were

optional, it is necessary to provide this

coverage by incorporating it as a

standard coverage for every flood

insurance policy. Reasonable pricing

would be impossible otherwise.

One commenter raised a related

question whether policyholders outside

areas of special flood hazard could ever

be eligible to make an ICC claim. ICC

coverage for policies in zones B, C, X,

and D insures against the possibility

that, after the rating of policies in those

zones, the Flood Insurance Rate Map

(FIRM) is changed and the community

requires such structures to be in

compliance after substantial or

cumulative substantial flood damage.

Because of the lower potential for ICC

claims from policies rated outside of the

current special flood hazard area, the

premium charges are considerably less,

at $6 per year, than for the higher risk,

i.e., pre-FIRM properties in the special

flood hazard area at $75 per year.

Range of Premiums Charged for ICC

Coverage

On a related issue, four commenters

asked how the premiums charged for

ICC would be calculated and whether

the maximum surcharge of $75 would

be applied to all structures. As

explained above, the surcharge for ICC

coverage ranges from $6 to $75 and is

based on the likelihood of loss

payments for each risk zone. The

underlying concern was that surcharges

would be assessed of policyholders who

would not be eligible for the ICC

coverage. As indicated above, all

structures regardless of risk zone are

eligible for ICC coverage, and premium

surcharges, reflective of the risk, have

been set for ICC coverage.

Exclusions

The September 23, 1996 proposed

rule was silent on the availability of ICC

coverage in Emergency Program

communities and for those recipients of

Individual and Family Grant (IFG)

awards insured under a Group Flood

Insurance Policy (GFIP). FEMA’s pricing

considerations for ICC coverage have

never included policyholders in

Emergency Program communities or IFG

recipients insured under the GFIP since

any premium surcharge would be

onerous in light of the limited amount

of structure coverage available to these

categories of policyholders. (The

maximum amount of structure coverage

authorized by the Act for a single family

dwelling under the Emergency Program

is $35,000 which would also be the

limit on the combined building and ICC

loss payment.)

With regard to the GFIP, FEMA is

considering whether to issue a proposed

rule soliciting comments on adding ICC

coverage to the certificate holders

covered under the GFIP. At this

juncture, however, those insured under

the GFIP are excluded from ICC

coverage.

This final rule addresses the

omissions by excluding from ICC

coverage ‘‘the cost associated with

enforcement of any floodplain

management ordinance or law in

communities participating in the

Emergency Program’’ and ‘‘for any

structure insured under a Group Flood
8396 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations

Insurance Policy issued pursuant to 44

CFR 61.17.’’

Appurtenant Structures

One commenter asked whether ICC

coverage would apply to appurtenant

structures. Only the SFIP’s Dwelling

Form provides coverage against direct,

physical loss from flood for appurtenant

structures. As indicated in the

‘‘Exclusions’’ section of the Dwelling

Form of the SFIP (see new Article 4 of

Appendix A (1) being added by this

final rule), ICC coverage does not apply

to appurtenant structures. No similar

exclusionary language is needed for ICC

coverage in the General Property Form

(Appendix A (2)) and the Residential

Condominium Building Association

Policy Form (Appendix A (3)) since

there is no coverage for direct physical

loss from flood for appurtenant

structures in these forms. ICC coverage

is available for appurtenant structures

only when a separate flood insurance

policy is written on an appurtenant

structure, since ICC coverage will be

included as Coverage D in every SFIP

written or renewed on and after June 1,

1997.

Cancellations and Refunds

Two commenters asked specific

questions on cancellations and refunds.

One commenter asked, since it will be

possible for the owners of 3-year

policies to cancel on the anniversary

date and purchase a new policy with

ICC coverage on and after the effective

date of the final rule on ICC coverage,

will the owners of 1-year policies have

the option of canceling mid-term.

Cancellations in connection with ICC

will be subject to the NFIP’s current

rules. A policyholder of a 1-year policy

will have to wait until the policy is

renewed at which time the premium

surcharge will automatically be charged

for ICC coverage. A policyholder of a 3-

year policy written before this coverage

becomes effective may cancel and

rewrite on the anniversary date of the

policy on and after June 1, 1997 in order

to add ICC coverage. To ensure

continuous coverage, policyholders

must submit policy applications and

premium payments 30 days before the

anniversary date of the policy since

‘‘cancel-rewrite’’ situations for 3-year

policies are subject to the statutory 30-

day waiting period.

One commenter also asked about

whether a refund of premium for ICC

coverage is available when a policy is

canceled. Refunds for ICC coverage will

also be subject to the NFIP’s current

rules for premium refunds.

Interim Final Rule vs. Final Rule

Three commenters recommended

that, in implementing ICC coverage,

FEMA publish this rule as an ‘‘interim

final’’ rule rather than a ‘‘final rule’’

which would conceivably permit more

time by States to recommend

adjustments to the implementation of

ICC coverage.

The Office of the Federal Register,

National Archives and Records

Administration, has issued guidance to

Federal agencies on the appropriate type

of action, i.e., proposed, interim, or final

rule, to be selected for any rule making

activity. The following selection from

the Federal Register’s Document

Drafting Handbook says, ‘‘An interim

rule is usually issued without prior

notice of proposed rule making. An

immediate effective date is generally

specified and comments on the interim

rule may be requested. The interim rule

is designed to respond to an emergency

situation and is usually followed by a

final rule which confirms that the

interim rule is final and may include

further amendments.’’ (p. 39). The

particulars of this final rule do not

warrant publication as an interim final

rule since proposed rule making has

been conducted, comments have been

solicited on the proposed rule,

substantive changes have been made to

this final rule based on comments

received during the comment period,

and no emergency situation exists.

Consistent with agency policy, FEMA

considers State and local governments

to be essential partners in the

implementation of a national emergency

management program, and mitigation is

the cornerstone of that program. As a

result, during the first years of

implementing ICC coverage, FEMA

expects to benefit from the experience of

States, local governments,

policyholders, insurance agents,

insurance adjusters, and the Write Your

Own companies selling and servicing a

majority of the SFIPs and make any

necessary changes to the rule

implementing ICC coverage as

necessary.

Increased Cost of Compliance Coverage

One commenter from the insurance

industry recommended that the title for

Coverage D read ‘‘increased cost of

compliance’’ coverage rather than

‘‘increased cost of construction’’ as

reflected in the September 23, 1996

proposed rule. FEMA agrees with this

recommendation since the new coverage

mandated by § 555 of Pub. L. 103–325

is described as ‘‘compliance coverage’’

in the statute. ‘‘Increased cost of

compliance’’ more accurately describes

the kind of coverage being added to the

SFIP and is consistent with the

terminology in the industry’s Law and

Ordinance coverage.

Guidance and Technical Assistance

Questions were also raised on how

FEMA intends to inform policyholders

as well as States and communities and

others impacted on the availability of

this new coverage. Several commenters

stated that implementation procedures

will need to be developed for State and

local officials who may potentially have

increased responsibility as a result of

this new coverage. In addition, it was

recommended that a model ordinance

on the repetitive loss aspect of ICC be

developed and assistance be provided to

communities regarding this provision. It

was also recommended that FEMA

provide an explanatory letter or

brochure to accompany each policy

which fully explains the new coverage.

It is FEMA’s intention to inform

policyholders in the renewal notice on

the new ICC coverage. All future

insurance adjuster and agents

workshops will include a segment

explaining the new coverage. It is also

FEMA’s intention to develop before the

effective date of the final rule a

publication for use by State and local

officials explaining the details of the

new coverage, their responsibilities

under their floodplain management

laws and ordinances as it pertains to the

ICC coverage, their relationship to the

flood insurance adjustment process, as

well as information on cost effective

mitigation measures. FEMA will also

include in this guidance model

ordinance language on a repetitive loss

provision. FEMA Regional Office will

provide technical assistance to States

and communities on technically feasible

and cost-effective mitigation measures.

Existing opportunities, such as

Community Assistance Visits,

workshops, conferences, and FEMA

sponsored flood mitigation courses will

be utilized to explain this new coverage.

There are also a number of FEMA

publications available to assist States,

communities, architects, engineers,

builders, and contractors, as well as

individual property owners on various

mitigation measures and techniques for

elevation, floodproofing, and relocation

(e.g., Engineering Principles and

Practices for Retrofitting Flood Prone

Residential Structures’’, ‘‘Elevated

Residential Structures’’, ‘‘Floodproofing

Non-Residential Structures’’, and

‘‘Technical Bulletins’’ on NFIP building

standards).
Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations 8397

Technical Corrections to the Policy

Language

The final rule clarifies coverage issues

and corrects several technical

inconsistencies in the policy language

as it appeared in the September 23, 1996

proposed rule. For example, to make it

clear for the policyholder, community

officials, and insurance adjusters

precisely what floodproofing activities

are eligible for ICC coverage, eligible

floodproofing have been related to the

applicable NFIP floodplain management

standards at 44 CFR 60.3(b) or (c). As

mentioned above, the proposed rule was

silent on several exclusions, and the

final rule has been revised to correct

that omission. Also, Coverage A was

incorrectly referred to in the proposed

rule as ‘‘Dwelling’’ in the proposed

addition to Appendix A (1) and

‘‘Building’’ in the proposed addition to

Appendices A (2) and (3). The final rule

has been revised to correctly identify

Coverage A in each of the SFIP’s Forms

as ‘‘Building Property.’’ Also, the

reference to ‘‘other insurance’’ which

was contained in the proposed rule has

been removed from Coverage D since

the SFIP already treats the issue of

‘‘other insurance’’ in Article 9 of the

Dwelling Form, Article 8 of the General

Property Form, and Article 10 of the

Residential Condominium Building

Association Policy Form.

National Environmental Policy Act

This final rule is categorically

excluded from the requirements of 44

CFR Part 10, Environmental

Consideration. No environmental

assessment has been prepared.

Executive Order 12898, Environmental

Justice

The socioeconomic conditions to this

final rule were reviewed and a finding

was made that no disproportionately

high and adverse effect on minority or

low income populations would result

from this final rule.

Executive Order 12866, Regulatory

Planning and Review

This final rule is not a significant

regulatory action within the meaning of

sec. 2(f) of E.O. 12866 of September 30,

1993, 58 FR 51735, and has not been

reviewed by the Office of Management

and Budget. Nevertheless, this final rule

adheres to the regulatory principles set

forth in E.O. 12866.

Paperwork Reduction Act

This final rule does not contain a

collection of information and is

therefore not subject to the provisions of

the Paperwork Reduction Act.

Executive Order 12612, Federalism

This final rule involves no policies

that have federalism implications under

Executive Order 12612, Federalism,

dated October 26, 1987.

Executive Order 12778, Civil Justice

Reform

This final rule meets the applicable

standards of section 2(b)(2) of Executive

Order 12778.

List of Subjects in 44 CFR Part 61

Flood insurance.

Accordingly, 44 CFR Part 61 is

amended 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.

Appendix A(1)—[Amended]

2. Paragraph A.6. of Article 3 of

Appendix A (1) is amended to add the

following phrase at the end:

* * * * *

* * * except as provided in Coverage D—

Increased Cost of Compliance.

* * * * *

3. A new section is added to Article

4 of Appendix A (1) to read as follows:

* * * * *

Coverage D—Increased Cost of Compliance

Coverage

Increased Cost of Compliance coverage

(Coverage D) is for the consequential loss

brought on by a floodplain management

ordinance or law affecting repair and

reconstruction involving elevation,

floodproofing, relocation, or demolition (or

any combination thereof) of a structure, after

a direct loss caused by a ‘‘flood’’ as defined

by this policy. (Floodproofing activities

eligible for Coverage D and referred to

hereafter in this policy are limited to

residential structures with basements that

satisfy the criteria of 44 CFR 60.6 (b) or (c)

and to non-residential structures.)

The limit of liability under this Coverage

D (Increased Cost of Compliance) will not

exceed $15,000. This coverage is only

applicable to policies with building coverage

(Coverage A) and is in addition to the

Building limit you selected on your

application, and appears on the Declarations

Page. No separate deductible applies. The

maximum amount collectible under this

policy for both Coverage A (Building

Property) and Coverage D (Increased Cost of

Compliance), however, cannot exceed the

maximum permitted under the Act.

Eligibility

A structure covered under Coverage A—

Building Property—sustaining a loss caused

by a ‘‘flood’’ as defined by this policy must:

1. Be a structure that is a repetitive loss

structure. A ‘‘repetitive loss structure’’ means

a structure, covered by a contract for flood

insurance issued pursuant to the Act, that

has incurred flood-related damage on 2

occasions during a 10-year period ending on

the date of the event for which a second

claim is made, in which the cost of repairing

the flood damage, on the average, equaled or

exceeded 25% of the market value of the

structure at the time of each such flood event.

In addition to the current claim, the National

Flood Insurance Program 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 flood plain management

law or ordinance being enforced against the

structure; or

2. Be a structure that has had flood damage

in which the cost to repair equals or exceeds

50% of the market value of the structure at

the time of the flood event. The State or

community must have a substantial damage

provision in its floodplain management law

or ordinance being enforced against the

structure.

This Coverage D will not pay for Increased

Cost of Compliance to meet State or

community floodplain management laws or

ordinances which exceed the minimum

criteria at 44 CFR 60.3, except as provided in

1. above or a. or b. as follows:

a. elevation or floodproofing in any risk

zone to preliminary or advisory base flood

elevations provided by FEMA which the

State or local government has adopted and is

enforcing for flood-damaged structures in

such areas. (This includes compliance

activities in B, C, X, or D zones which are

being changed to zones with base flood

elevations. This also includes compliance

activities in zones where base flood

elevations are being increased, and a flooddamaged structure must comply with the

higher advisory base flood elevation.)

Increased Cost of Compliance coverage does

not respond to situations in B, C, X, or D

zones where the community has derived its

own elevations and is enforcing elevation or

floodproofing requirements for flooddamaged structures to elevations derived

solely by the community.

b. 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.

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 are

obtained from a Federal, State, or other

source. Such compliance activities are also

eligible for this Coverage D.

This coverage will also pay for the

incremental cost, after demolition, or

relocation, of elevating or floodproofing a

structure during its rebuilding at the same or

another site to meet State or local floodplain

management laws or ordinances, subject to

Exclusion (7).
8398 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations

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.

Conditions

(1) When a structure covered under

Coverage A—Building Property—sustains a

loss caused by a ‘‘flood’’ as defined by this

policy, our payment for the loss under this

Coverage D will be for the increased cost to

elevate, floodproof, relocate, demolish, or

any combination thereof, caused by

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 or a portion

thereof caused by 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.

Exclusions

Under this Coverage D (Increased Cost of

Compliance), we will not pay for:

(1) The cost associated with enforcement of

any floodplain management ordinance or law

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. Pollutants

include but are not limited to any solid,

liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot,

fumes, acid, alkalis, chemicals and waste.

Waste includes but is not limited to materials

to be recycled, reconditioned or reclaimed.

(3) The loss in value to any covered

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 covered building is actually

elevated, floodproofed, demolished or

relocated on the same or to another premises;

and

(b) Unless the covered building is elevated,

floodproofed, demolished, or relocated as

soon as reasonably possible after the loss, not

to exceed two years.

(6) For any code upgrade requirements,

e.g., plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or ordinance.

(7) For 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) For 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

appurtenant structure(s).

(11) For any structure insured under a

Group Flood Insurance Policy issued

pursuant to 44 CFR 61.17.

(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.

Other Provisions

(1) Increased Cost of Compliance coverage

will not be included in the calculation to

determine whether coverage meets the 80%

insurance-to-value requirement for

replacement cost coverage under Article 8 or

for payment under Article 3.B.3 for loss from

land subsidence, sewer backup, or seepage of

water.

(2) All other conditions and provisions of

the policy apply.

* * * * *

Appendix A(2)—[Amended]

4. Paragraph A.6. of Article 3 of

Appendix A (2) is amended to add the

following phrase at the end:

* * * * *

* * * except as provided in Coverage D—

Increased Cost of Compliance.

* * * * *

5. A new section is added to Article

4 of Appendix A (2), to read as follows:

* * * * *

Coverage D—Increased Cost of Compliance

Coverage

Increased Cost of Compliance coverage

(Coverage D) is for the consequential loss

brought on by a floodplain management

ordinance or law affecting repair and

reconstruction involving elevation,

floodproofing, relocation, or demolition (or

any combination thereof) of a structure, after

a direct loss caused by a ‘‘flood’’ as defined

by this policy. (Floodproofing activities

eligible for Coverage D and referred to

hereafter in this policy are limited to

residential structures with basements that

satisfy the criteria of 44 CFR 60.6 (b) or (c)

and to non-residential structures.)

The limit of liability under this Coverage

D (Increased Cost of Compliance) will not

exceed $15,000. This coverage is only

applicable to policies with building coverage

(Coverage A) and is in addition to the

Building limit you selected on your

application, and appears on the Declarations

Page. No separate deductible applies. The

maximum amount collectible under this

policy for both Coverage A (Building

Property) and Coverage D (Increased Cost of

Compliance), however, cannot exceed the

maximum permitted under the Act.

Eligibility

A structure covered under Coverage A—

Building Property—sustaining a loss caused

by a ‘‘flood’’ as defined by this policy must:

1. Be a structure that is a repetitive loss

structure. A ‘‘repetitive loss structure’’ means

a structure, covered by a contract for flood

insurance issued pursuant to the Act, that

has incurred flood-related damage on 2

occasions during a 10-year period ending on

the date of the event for which a second

claim is made, in which the cost of repairing

the flood damage, on the average, equaled or

exceeded 25% of the market value of the

structure at the time of each such flood event.

In addition to the current claim, the National

Flood Insurance Program 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 flood plain management

law or ordinance being enforced against the

structure; or

2. Be a structure that has had flood damage

in which the cost to repair equals or exceeds

50% of the market value of the structure at

the time of the flood event. The State or

community must have a substantial damage

provision in its floodplain management law

or ordinance being enforced against the

structure.

This Coverage D will not pay for Increased

Cost of Compliance to meet State or

community floodplain management laws or

ordinances which exceed the minimum

criteria at 44 CFR 60.3, except as provided in

1. above or a. or b. as follows:

a. Elevation or floodproofing in any risk

zone to preliminary or advisory base flood

elevations provided by FEMA which the

State or local government has adopted and is

enforcing for flood-damaged structures in

such areas. (This includes compliance

activities in B, C, X, or D zones which are

being changed to zones with base flood

elevations. This also includes compliance

activities in zones where base flood

elevations are being increased, and a flooddamaged structure must comply with the

higher advisory base flood elevation.)

Increased Cost of Compliance coverage does

not respond to situations in B, C, X, or D

zones where the community has derived its

own elevations and is enforcing elevation or

floodproofing requirements for flooddamaged structures to elevations derived

solely by the community.

b. 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.

Under the minimum NFIP criteria at 44

CFR 60.3(b)(4), States and communities must

require the elevation or floodproofing of

structures to the base flood elevation where

elevation data are obtained from a Federal,
Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations 8399

State, or other source. Such compliance

activities are also eligible for this Coverage D.

This coverage will also pay for the

incremental cost, after demolition, or

relocation, of elevating or floodproofing a

structure during its rebuilding at the same or

another site to meet State or local floodplain

management laws or ordinances, subject to

Exclusion (7).

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.

Conditions

(1) When a structure covered under

Coverage A—Building Property—sustains a

loss caused by a ‘‘flood’’ as defined by this

policy, our payment for the loss under this

Coverage D will be for the increased cost to

elevate, floodproof, relocate, demolish, or

any combination thereof, caused by

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 or a portion

thereof caused by 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.

Exclusions

Under this Coverage D (Increased Cost of

Compliance), we will not pay for:

(1) The cost associated with enforcement of

any floodplain management ordinance or law

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. Pollutants

include but are not limited to any solid,

liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot,

fumes, acid, alkalis, chemicals and waste.

Waste includes but is not limited to materials

to be recycled, reconditioned or reclaimed.

(3) The loss in value to any covered

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 covered building is actually

elevated, floodproofed, demolished or

relocated on the same or to another premises;

and

(b) Unless the covered building is elevated,

floodproofed, demolished, or relocated as

soon as reasonably possible after the loss, not

to exceed two years.

(6) For any code upgrade requirements,

e.g., plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or ordinance.

(7) For 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) For 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) For any structure insured under a

Group Flood Insurance Policy issued

pursuant to 44 CFR 61.17.

Other Provisions

(1) Increased Cost of Compliance coverage

will not be included in the calculation to

determine whether coverage meets the 80%

insurance-to-value requirement for payment

under Article 3.B.3 for loss from land

subsidence, sewer backup, or seepage of

water.

(2) All other conditions and provisions of

the policy apply.

* * * * *

Appendix A (3)—[Amended]

6. Paragraph A.6. of Article 3 of

Appendix A (3) is amended to add to

the end the following phrase:

* * * * *

* * * except as provided in Coverage D—

Increased Cost of Compliance.

* * * * *

7. A new section is added to Article

4 of Appendix A (3), to read as follows:

* * * * *

Coverage D—Increased Cost of Compliance

Coverage

Increased Cost of Compliance coverage

(Coverage D) is for the consequential loss

brought on by a floodplain management

ordinance or law affecting repair and

reconstruction involving elevation,

floodproofing, relocation, or demolition (or

any combination thereof) of a structure, after

a direct loss caused by a ‘‘flood’’ as defined

by this policy. (Floodproofing activities

eligible for Coverage D and referred to

hereafter in this policy are limited to

residential structures with basements that

satisfy the criteria of 44 CFR 60.6 (b) or (c)

and to non-residential structures.)

The limit of liability under this Coverage

D (Increased Cost of Compliance) will not

exceed $15,000. This coverage is only

applicable to policies with building coverage

(Coverage A) and is in addition to the

Building limit you selected on your

application, and appears on the Declarations

Page. No separate deductible applies. The

maximum amount collectible under this

policy for both Coverage A (Building

Property) and Coverage D (Increased Cost of

Compliance), however, cannot exceed the

maximum permitted under the Act.

Eligibility

A structure covered under Coverage A—

Building Property—sustaining a loss caused

by a ‘‘flood’’ as defined by this policy must:

1. Be a structure that is a repetitive loss

structure. A ‘‘repetitive loss structure’’ means

a structure, covered by a contract for flood

insurance issued pursuant to the Act, that

has incurred flood-related damage on 2

occasions during a 10-year period ending on

the date of the event for which a second

claim is made, in which the cost of repairing

the flood damage, on the average, equaled or

exceeded 25% of the market value of the

structure at the time of each such flood event.

In addition to the current claim, the National

Flood Insurance Program 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 flood plain management

law or ordinance being enforced against the

structure; or

2. Be a structure that has had flood damage

in which the cost to repair equals or exceeds

50% of the market value of the structure at

the time of the flood event. The State or

community must have a substantial damage

provision in its floodplain management law

or ordinance being enforced against the

structure.

This Coverage D will not pay for Increased

Cost of Compliance to meet State or

community floodplain management laws or

ordinances which exceed the minimum

criteria at 44 CFR 60.3, except as provided in

1. above or a. or b. as follows:

a. Elevation or floodproofing in any risk

zone to preliminary or advisory base flood

elevations provided by FEMA which the

State or local government has adopted and is

enforcing for flood-damaged structures in

such areas. (This includes compliance

activities in B, C, X, or D zones which are

being changed to zones with base flood

elevations. This also includes compliance

activities in zones where base flood

elevations are being increased, and a flooddamaged structure must comply with the

higher advisory base flood elevation.)

Increased Cost of Compliance coverage does

not respond to situations in B, C, X, or D

zones where the community has derived its

own elevations and is enforcing elevation or

floodproofing requirements for flooddamaged structures to elevations derived

solely by the community.

b. 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.

Under the minimum NFIP criteria at 44

CFR 60.3(b)(4), States and communities must

require the elevation or floodproofing of

structures to the base flood elevation where

elevation data are obtained from a Federal,

State, or other source. Such compliance

activities are also eligible for this Coverage D.
8400 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Rules and Regulations

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 (7).

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.

Conditions

(1) When a structure covered under

Coverage A—Building Property—sustains a

loss caused by a ‘‘flood’’ as defined by this

policy, our payment for the loss under this

Coverage D will be for the increased cost to

elevate, floodproof, relocate, demolish, or

any combination thereof, caused by

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 or a portion

thereof caused by 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.

Exclusions

Under this Coverage D (Increased Cost of

Compliance), we will not pay for:

(1) The cost associated with enforcement of

any floodplain management ordinance or law

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. Pollutants

include but are not limited to any solid,

liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot,

fumes, acid, alkalis, chemicals and waste.

Waste includes but is not limited to materials

to be recycled, reconditioned or reclaimed.

(3) The loss in value to any covered

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 covered building is actually

elevated, floodproofed, demolished or

relocated on the same or to another premises;

and

(b) Unless the covered building is elevated,

floodproofed, demolished, or relocated as

soon as reasonably possible after the loss, not

to exceed two years.

(6) For any code upgrade requirements,

e.g., plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or ordinance.

(7) For 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) For 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) For any structure insured under a

Group Flood Insurance Policy issued

pursuant to 44 CFR 61.17.

Other Provisions

(1) Increased Cost of Compliance coverage

will not be included in the calculation to

determine whether coverage meets the 80%

replacement cost requirement under Article 9

or for payment under Article 3.B.3 for loss

from land subsidence, sewer backup, or

seepage of water.

(2) All other conditions and provisions of

the policy apply.

* * * * *

(Catalog of Federal Domestic Assistance No.

83.100, ‘‘Flood Insurance’’)

Dated: February 18, 1997.

Spence W. Perry,

Executive Administrator, Federal Insurance

Administration.

[FR Doc. 97–4640 Filed 2–24–97; 8:45 am]

BILLING CODE 6718–03–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 0

[FCC 96–467]

Commission Organization; Cable

Services Bureau

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: In this Order, we amend the

Commission’s rules regarding the

functions of the Cable Services Bureau

and the delegated authority of the Chief

of the Cable Services Bureau. This

action is necessary to permit the Cable

Services Bureau to oversee pole

attachment matters and administration

and enforcement of relevant provisions

of the Telecommunications Act of 1996.

EFFECTIVE DATE: February 25, 1997.

FOR FURTHER INFORMATION CONTACT: For

additional information concerning this

rulemaking contact Meryl S. Icove,

Cable Services Bureau, (202) 418–7200.

SUPPLEMENTARY INFORMATION: This is a

synopsis of the Order, FCC 96–467,

adopted December 3, 1996 and released

December 5, 1996. The complete text of

this Order is available for inspection

and copying during normal business

hours in the FCC Reference Center

(room 239), 1919 M Street, NW.,

Washington, DC, and also may be

purchased from the Commission’s copy

contractor, International Transcription

Services, Inc. (‘‘ITS Inc.’’) at (202) 857–

3800, 2100 M Street, NW., Suite 140,

Washington, DC 20017.

Synopsis of Order

In this Order, we amend the

Commission’s rules regarding the

functions of the Cable Services Bureau

and the delegated authority of the Chief

of the Cable Services Bureau.

This action is necessary to permit the

Cable Services Bureau to oversee pole

attachment matters and administration

and enforcement of relevant provisions

of the Telecommunications Act of 1996.

The amendments adopted herein

pertain to agency organization,

procedure and practice. Consequently,

the requirements of notice and comment

rulemaking contained in 5 U.S.C. 553(b)

and the effective date provisions of 5

U.S.C. 553(d) of the Administrative

Procedure Act do not apply. Authority

for the amendments adopted herein is

contained in section 4(i), 5(c)(1), 303(r)

of the Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 155(c)(1),

303(r).

It is ordered that §§ 0.91, 0.101 and

0.321 of the Commission’s rules, 47 CFR

0.91, 0.101, 0.321 are amended as set

forth below, effective February 25, 1997.

Lists of Subjects in 47 CFR Part 0

Organization and functions

(Government agencies).

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 0 of Title 47 of the Code of

Federal Regulations is amended as

follows:

PART 0—COMMISSION

ORGANIZATION

1. The authority citation for part 0

continues to read as follows:

Authority: Secs. 5, 48 Stat. 1068, as

amended; 47 U.S.C. 155.

2. Section 0.91 is amended by revising

the introductory text, removing