32956 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

1Flood insurance is also available to cover the 

contents owned by tenants in a rental property. 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

44 CFR Parts 59, 61, and 62 

[Docket ID FEMA–2018–0026] 

RIN 1660–AA95 

National Flood Insurance Program 

(NFIP): Conforming Changes To 

Reflect the Biggert-Waters Flood 

Insurance Reform Act of 2012 (BW–12) 

and the Homeowners Flood Insurance 

Affordability Act of 2014 (HFIAA), and 

Additional Clarifications for Plain 

Language 

AGENCY: Federal Emergency 

Management Agency, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The National Flood Insurance 

Program (NFIP), established pursuant to 

the National Flood Insurance Act of 

1968, as amended, is a voluntary 

program in which participating 

communities adopt and enforce a set of 

minimum floodplain management 

requirements to reduce future flood 

damages. This proposed rule would 

revise the NFIP’s implementing 

regulations to codify certain provisions 

of the Biggert-Waters Flood Insurance 

Reform Act of 2012 and the Homeowner 

Flood Insurance Affordability Act of 

2014 that FEMA has already 

implemented and to clarify certain 

existing NFIP rules relating to NFIP 

operations and the Standard Flood 

Insurance Policy. 

DATES: Submit comments on or before 

September 14, 2018. 

ADDRESSES: You may submit comments, 

identified by Docket ID: FEMA–2018– 

0026, by one of the following methods: 

Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

Mail/Hand Delivery/Courier: 

Regulatory Affairs Division, Office of 

Chief Counsel, Federal Emergency 

Management Agency, Room 8NE, 500 C 

Street SW, Washington, DC 20472–3100. 

To avoid duplication, please use only 

one of these methods. FEMA will post 

all comments received without change 

to http://www.regulations.gov, including 

any personal information provided. For 

instructions on submitting comments, 

see the Public Participation portion of 

the SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Kelly Bronowicz, Director, Policyholder 

Services Division, Federal Insurance 

and Mitigation Administration, Federal 

Emergency Management Agency, 400 C 

Street SW, Washington, DC 20472, (202) 

557–9488. 

SUPPLEMENTARY INFORMATION: 

I. Public Participation 

The Federal Emergency Management 

Agency encourages the public to 

participate in this rulemaking by 

submitting comments and related 

materials. The Agency will consider all 

comments and material received during 

the comment period. 

When submitting a comment, identify 

the agency name and the docket ID for 

this rulemaking, indicate the specific 

section of this document to which each 

comment applies and give the reason for 

each comment. The public may submit 

comments and materials by electronic 

means, mail, or delivery to the address 

under the ADDRESSES section. Please 

submit comments and material by only 

one means. 

Regardless of the method used for 

submitting comments or material, all 

submissions will be posted without 

change to the Federal 

e-Rulemaking Portal at http://

www.regulations.gov and will include 

any personal information the 

commenter provides. Therefore, 

submitting this information makes it 

public. Those considering commenting 

may wish to read the Privacy and 

Security notice that is available via a 

link on the homepage of http://

www.regulations.gov. 

Viewing comments and documents: 

For access to the docket to read 

background documents or comments 

received, go to the Federal eRulemaking Portal at http://

www.regulations.gov. Background 

documents and submitted comments 

may also be inspected at FEMA, Office 

of Chief Counsel, Room 8NE, 500 C 

Street SW, Washington, DC 20472–3100. 

Public Meeting: We do not plan to 

hold a public meeting, but you may 

submit a request for one at the address 

under the ADDRESSSES section 

explaining why one would be 

beneficial. If FEMA determines that a 

public meeting would aid this 

rulemaking, it will hold one at a time 

and place announced by a notice in the 

Federal Register. 

II. Background and Authorities 

A. National Flood Insurance Program 

Congress created the National Flood 

Insurance Program (NFIP) through 

enactment of the National Flood 

Insurance Act of 1968 (NFIA) (Title XIII 

of Pub. L. 90–448, 82 Stat. 476), found 

at 42 U.S.C. 4001 et seq. The NFIP is a 

Federal program enabling property 

owners in participating communities to 

purchase insurance as a protection 

against flood losses in exchange for 

State and community floodplain 

management requirements that reduce 

the risk of future flood damages. 

Communities participate in the NFIP 

based on an agreement between the 

community and FEMA. If a community 

adopts and enforces a floodplain 

management ordinance to reduce future 

flood risk to new construction in 

floodplains, FEMA will make flood 

insurance available within the 

community as a financial protection 

against flood losses. Accordingly, the 

NFIP is comprised of three key 

activities: Flood insurance, floodplain 

management, and flood hazard 

mapping. 

1. Flood Insurance 

The NFIP makes flood insurance 

available to property owners or lessees 

in communities that participate in the 

NFIP through the adoption and 

enforcement of community-wide 

floodplain management requirements. If 

a community adopts and enforces a 

floodplain management ordinance that 

meets certain minimum floodplain 

management requirements to reduce 

future flood risks within an area known 

as the Special Flood Hazard Area 

(SFHA) the Federal Government will 

make flood insurance available to 

property owners in that community. 

NFIP flood insurance indemnifies 

property owners from flood losses, 

reducing the need for Federal disaster 

assistance. NFIP floodplain management 

requirements reduce future flood 

damages, thus further reducing the need 

for Federal disaster assistance. In 

addition to providing flood insurance 

and reducing flood damages through 

floodplain management, the NFIP 

identifies and maps the nation’s 

floodplains. FEMA disseminates maps 

depicting flood hazard information to 

create broad-based awareness of flood 

hazards, to provide data for rating flood 

insurance policies, and to apply the 

appropriate minimum floodplain 

management requirements for floodprone areas. 

Prior to enactment of the BiggertWaters Flood Insurance Reform Act of 

2012 (BW–12), the NFIA made federally 

subsidized flood insurance available to 

property owners or lessees of buildings 

in NFIP-participating communities.1

Subsidized flood insurance rates were 

available for policies covering existing 

buildings or buildings built prior to the 

community’s adoption of its initial 

Flood Insurance Rate Maps (FIRMs), 


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generally referred to as ‘‘pre-FIRM 

buildings.’’ Subject to certain short-term 

statutory exceptions, FEMA offers only 

actuarial rates to all buildings 

constructed, or substantially damaged or 

improved, on or after the effective date 

of the initial FIRM for the community or 

after December 31, 1974, whichever is 

later, generally referred to as ‘‘postFIRM buildings.’’ See 42 U.S.C. 

4014(a)(1), 4015(b). In addition, 

building owners must purchase flood 

insurance as a condition of receiving 

federally-backed or federally-regulated 

loans and Federal assistance in SFHAs 

of participating communities. See Flood 

Disaster Protection Act of 1973, sec. 103 

(Pub. L. 93–234, 87 Stat. 975 (codified 

as amended at 42 U.S.C. 4001 et seq.)). 

As discussed in more detail below, 

with the passage of BW–12, Congress 

mandated that FEMA phase out 

subsidies for certain pre-FIRM 

properties. These pre-FIRM properties 

include non-primary residences, 

business properties, severe repetitive 

loss properties, substantially damaged 

properties, substantially improved 

properties, and properties for which the 

cumulative claims payments exceed the 

fair market value of the property. 

The Homeowner Flood Insurance 

Affordability Act of 2014 (Pub. L. 113– 

89, 128 Stat. 1020) (HFIAA) requires a 

phase-out of subsidies on all pre-FIRM 

properties at a rate of no less than 5 

percent and no more than 15 percent 

premium increases per year, subject to 

certain exceptions established by statute 

(such as the BW–12 provisions) 

requiring a quicker phase-out for certain 

types of pre-FIRM properties. 

Accordingly, FEMA will likely phase 

out subsidies on all pre-FIRM properties 

within the next 12 to 17 years. 

A prospective policyholder may 

purchase an NFIP flood insurance 

policy either: (1) Directly from the 

Federal Government through a direct 

servicing agent (referred to as ‘‘NFIP 

Direct’’), or (2) from a participating 

private insurance company through the 

Write Your Own (WYO) Program. The 

Standard Flood Insurance Policy (SFIP) 

sets out the terms and conditions of 

insurance. See 44 CFR part 61, 

Appendix A. FEMA establishes terms, 

rate structures, and premium costs of 

SFIPs. The terms, coverage limits, and 

flood insurance premiums are the same 

whether purchased from the NFIP Direct 

or the WYO Program. See 44 CFR 

62.23(a). 

The SFIP is a single-peril (flood) 

policy that pays for direct physical 

damage to insured property. There are 

three forms of the SFIP: The Dwelling 

Form, the General Property Form, and 

the Residential Condominium Building 

Association Policy (RCBAP) Form. The 

Dwelling Form insures a one to four 

family residential building or a singlefamily dwelling unit in a condominium 

building. See 44 CFR part 61, Appendix 

A(1). Policies under the Dwelling Form 

offer coverage for building property, up 

to $250,000, and personal property up 

to $100,000. The General Property Form 

insures a five or more family residential 

building or a non-residential building. 

See 44 CFR part 61, Appendix A(2). The 

General Property Form offers coverage 

for building and contents up to 

$500,000 each. The RCBAP Form 

insures residential condominium 

association buildings and offers 

building coverage up to $250,000 

multiplied by the number of units and 

contents coverage up to $100,000 per 

building. See 44 CFR part 61, Appendix 

A(3). RCBAP contents coverage insures 

property owned by the insured 

condominium association. Individual 

unit owners must purchase their own 

Dwelling Form policy in order to insure 

their own contents. 

In addition to coverage for building or 

contents losses, most NFIP policies also 

include Increased Cost of Compliance 

(ICC) coverage. ICC coverage applies 

when flood damages are so severe that 

the local government declares the 

building ‘‘substantially damaged,’’ thus 

requiring the building owner to bring 

the building up to current community 

standards. If a community has a 

repetitive loss ordinance, ICC coverage 

will also cover compliance requirements 

for a repetitive loss structure. ICC 

coverage provides up to $30,000 of the 

cost to elevate, demolish, floodproof, or 

relocate an insured building or any 

combination thereof. 

FEMA publishes a Flood Insurance 

Manual with detailed explanations of 

the terms and conditions of the SFIP 

and relevant program policies and 

procedures. The Flood Insurance 

Manual is primarily used by insurers 

and agents selling and servicing Federal 

flood insurance. FEMA normally 

publishes the Flood Insurance Manual 

twice a year and 6 months prior to a 

new manual version becoming effective. 

The current version became effective on 

October 1, 2017. The current flood 

insurance manual, as well as previous 

versions, is available at https://

www.fema.gov/flood-insurance-manual. 

Page numbering restarts for each section 

of the Flood Insurance Manual, so 

FEMA cites to both the section and page 

number. For the purposes of this notice, 

all citations to the Flood Insurance 

Manual are to the version that became 

effective on October 1, 2017, which is 

available at https://www.fema.gov/ 

media-library/assets/documents/ 

133846. 

Additionally, FEMA publishes policy 

statements and underwriting bulletins 

to further explain and clarify the 

coverage under the SFIP. These are 

available at www.fema.gov/library and 

www.nfipservice.com. 

2. Floodplain Management 

A local community with land use 

authority may elect to participate in the 

NFIP. Communities participate under a 

voluntary agreement with FEMA. In 

order to participate in the NFIP, a 

community must adopt and enforce 

floodplain management requirements 

that incorporate the NFIP minimum 

floodplain management requirements. 

See 44 CFR 59.2(b), 59.22(a)(3), 60.1(d). 

The intent of these standards is to 

reduce flood risk and prevent loss of life 

and property. Communities incorporate 

these requirements into their zoning 

codes, subdivision ordinances, and 

building codes, or they adopt special 

purpose floodplain management 

ordinances. These NFIP requirements 

apply to areas mapped as SFHAs. The 

community ordinances must also 

include effective enforcement 

provisions. 44 CFR 59.2(b). The NFIP 

will suspend a participating community 

from theNFIP if the community fails to 

adopt the minimum NFIP floodplain 

management requirements within 6 

months from the date the NFIP provides 

the flood map. 44 CFR 59.24(a), 60.13. 

Moreover, the NFIP may suspend or put 

on probation any participating 

community that does not adequately 

enforce its floodplain management 

ordinance. 44 CFR 59.24(b)–(c). 

3. Flood Hazard Mapping 

Through its Flood Hazard Mapping 

Program, FEMA identifies flood 

hazards, assesses flood risks, and 

collaborates with States and 

communities to provide accurate flood 

hazard and risk data to guide them to 

mitigation actions. Congress requires 

FEMA to identify flood-prone areas and 

then subdivide them into flood risk 

zones. 42 U.S.C. 4101(a). FEMA then 

uses this data to support community 

floodplain management requirements 

and rate flood insurance policies. 

Mapping of flood hazards also promotes 

public awareness of the degree of hazard 

within such areas and provides for the 

expeditious identification and 

dissemination of flood hazard 

information. FEMA maintains and 

updates data through FIRMs and Flood 

Insurance Studies (FISs). 


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B. Recent Legislative Changes 

1. Biggert-Waters Flood Insurance 

Reform Act of 2012 

Congress enacted BW–12 (Title II, 

Subtitle A of Pub. L. 112–141, 126 Stat. 

405) to extend the NFIP’s authorities 

through September 30, 2017, and to 

adopt significant program reform. The 

law requires changes to all major 

components of the program, including 

flood insurance, flood hazard mapping, 

and the management of floodplains. 

The provisions of BW–12 relevant to 

this rulemaking include the following. 

First, BW–12 requires FEMA to increase 

the maximum coverage amount for 

multi-family properties to the same 

amount as that allowed for commercial 

properties. Second, BW–12 establishes a 

minimum deductible amount for NFIP 

polices. Third, BW–12 prohibits FEMA 

from denying payment to policyholders 

for damage or loss to a condominium 

unit under the Dwelling Form based 

solely on the fact that the condominium 

association has inadequate flood 

insurance coverage on the entire 

condominium. Fourth, BW–12 requires 

FEMA to review, among other things, 

the processes and procedures for 

making flood in progress 

determinations. See SFIP Article V.B. 

FEMA implemented these requirements 

by updating the Flood Insurance 

Manual after BW–12’s enactment. The 

NFIP described these program changes 

in WYO Bulletin W–13070 (Dec. 16, 

2013). FEMA also issued WYO Bulletin 

W–12045 (July 10, 2012), which 

implemented BW–12 section 100241’s 

waiver of the standard 30-day waiting 

period for coverage of flood damage due 

to flood on Federal land caused, or 

exacerbated, by post-wildfire 

conditions. FEMA now proposes to 

codify these changes in the NFIP 

regulations. 

2. Homeowner Flood Insurance 

Affordability Act of 2014 

Congress enacted HFIAA to address 

flood insurance affordability concerns 

related to BW–12. Accordingly, HFIAA 

repealed some provisions of BW–12, 

mostly related to establishing premium 

rates. HFIAA also made a number of 

new program changes. The provisions of 

HFIAA relevant to this rulemaking 

include a requirement in Section 8 of 

HFIAA that FEMA offer a high 

deductible option of $10,000, which 

FEMA discusses below. 

III. Discussion of Proposed Rule 

FEMA proposes to amend parts 59, 

61, and 62 of 44 CFR. These parts 

contain regulations implementing the 

NFIP. In addition, FEMA proposes to 

amend Appendices A(1)–A(3) of part 61, 

containing the three forms of the SFIP: 

The Dwelling Policy Form, the General 

Property Form, and the Residential 

Condominium Building Association 

Form. These forms are used in NFIP 

polices. 

FEMA proposes this rulemaking for 

three purposes. First, it intends to make 

several non-substantive changes 

designed to improve the readability, 

uniformity, and clarity of the NFIP 

regulations. Second, FEMA proposes to 

make several non-substantive updates to 

regulations to align with the 

requirements of BW–12 and HFIAA. 

Third, FEMA proposes two substantive, 

albeit miniminally so, changes to its 

regulations codifying the requirements 

of BW–12 and HFIAA. 

A. Part 59: General Provisions 

1. Part 59 Authority Citation 

FEMA proposes to update the 

authority citation for Part 59 to reflect 

changes to FEMA’s source of authority. 

Currently, the authority citation is 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. FEMA proposes to replace the 

citations to Reorganization Plan No. 3 

and Executive Order 12127 with a 

citation to the current codification of the 

Homeland Security Act of 2002, 6 

U.S.C. 101 et seq. The authority citation 

would therefore read, ‘‘42 U.S.C. 4001 et 

seq.; 6 U.S.C. 101 et seq.’’ FEMA 

proposes this change because 

Reorganization Plan No. 3 and 

Executive Order 12127 originally 

created FEMA as an executive agency 

and provided the legal basis for FEMA’s 

existence until the passage of the PostKatrina Emergency Management Reform 

Act of 2006, Public Law 109–295, 120 

Stat. 1394 (PKEMRA). PKEMRA 

amended the Homeland Security Act of 

2002, Public Law 107–296, 116 Stat. 

2135, to establish FEMA in statute and 

define the Agency’s authorities and 

responsibilities. A citation to the 

codification of the Homeland Security 

Act after the citation to the NFIA is 

therefore more appropriate. 

2. Section 59.1 Definitions 

44 CFR part 59 contains general 

provisions applicable to the NFIP’s 

regulations. Section 59.1 contains a list 

of definitions generally applicable 

throughout the NFIP regulations. FEMA 

proposes to add 13 new definitions and 

modify three definitions in this section 

to make this section consistent with its 

proposed rule changes to parts 61 and 

62. 

First, FEMA proposes to revise the 

definition of ‘‘act.’’ Currently, the 

regulation defines ‘‘act’’ to mean 

‘‘statutes authorizing the National Flood 

Insurance Program that are incorporated 

in 42 U.S.C. 4001–4128.’’ However, the 

NFIA now extends to section 4131. 

Rather than revise the citation to ‘‘42 

U.S.C. 4001–4131,’’ FEMA proposes to 

change the citation to ‘‘42 U.S.C. 4001 

et seq.’’ As the NFIA is amended often, 

it makes more sense to use ‘‘et seq.’’ so 

that the citation stays current and FEMA 

will not have to revise it every time 

sections are added. 

Second, FEMA proposes to revise the 

definition of ‘‘deductible.’’ Currently, 

‘‘deductible’’ is defined as ‘‘the fixed 

amount or percentage of any loss 

covered by insurance which is borne by 

the insured prior to the insurer’s 

liability.’’ FEMA proposes to revise the 

definition of ‘‘deductible’’ to mean ‘‘the 

amount of an insured loss that is the 

responsibility of the insured and that is 

incurred before any amounts are paid 

for the insured loss under the insurance 

policy.’’ While there is no substantive 

difference between the two definitions, 

FEMA believes the proposed definition 

is clearer and more consistent with the 

language in Article VI.A of the SFIP, as 

well as the language in proposed section 

61.5, which would provide guidance on 

deductibles available for NFIP policies 

(discussed in further detail below). 

Third, FEMA proposes to revise the 

definition of ‘‘Emergency Flood 

Insurance Program or emergency 

program.’’ Currently, ‘‘Emergency Flood 

Insurance Program or emergency 

program’’ is defined as ‘‘the Program as 

implemented on an emergency basis in 

accordance with section 1336 of the Act. 

It is intended as a program to provide 

a first layer amount of insurance on all 

insurable structures before the effective 

date of the initial FIRM.’’ FEMA 

proposes to remove ‘‘Emergency Flood 

Insurance Program’’ so the term only 

reads ‘‘Emergency Program,’’ and revise 

the definition to mean ‘‘the initial phase 

of a community’s participation in the 

National Flood Insurance Program, as 

prescribed by Section 1306 of the Act.’’ 

FEMA proposes this change because 

although the new definition is 

substantively the same as the current 

definition, it is clearer and more 

consistent with the definition of this 

term in the SFIP. 

FEMA also proposes to add 

definitions for several terms. These 

terms are: ‘‘condominium building,’’ 

‘‘mixed use building,’’ ‘‘multifamily 

building,’’ ‘‘non-residential building,’’ 

‘‘non-residential property,’’ ‘‘other 

residential building,’’ ‘‘other residential 

property’’ ‘‘residential building,’’ 


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‘‘residential property,’’ ‘‘single family 

dwelling,’’ and ‘‘two to four family 

building.’’ The NFIP already uses these 

terms when describing the program to 

the public because they align with the 

terminology used in the private 

insurance industry and addresses 

important nuances not adequately 

addressed in statute and regulation. 

FEMA proposes defining these terms in 

regulation because they support the 

consistent interpretation and 

application of the NFIA and its 

regulations. Accordingly, codifying 

them in regulation will support greater 

uniformity and clarity for the public. 

FEMA provides further explanation of 

these definitions elsewhere in this 

preamble, under discussion of the 

relevant sections where these terms 

appear. 

B. Part 61: Insurance Coverage and 

Rates 

1. Part 61 Authority Citation 

The current authority citation for part 

61 is 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. 

FEMA proposes to replace the citations 

to Reorganization Plan No. 3 and 

Executive Order 12127 with a citation to 

the current codification of the 

Homeland Security Act of 2002, 6 

U.S.C. 101 et seq. The authority citation 

would therefore read 42 U.S.C. 4001 et 

seq.; 6 U.S.C. 101 et seq. FEMA 

proposes this change because while 

Reorganization Plan No. 3 and 

Executive Order 12127 originally 

created FEMA as an executive agency, 

PKEMRA amended the Homeland 

Security Act of 2002, Public Law 107– 

296, by establishing the Agency in 

statute and defining the Agency’s 

authorities and responsibilities. 

Accordingly, a citation to the 

codification of the Homeland Security 

Act is more appropriate. 

2. Section 61.1 Purpose of Part 

Section 61.1 describes the overall 

purpose of part 61. It states that part 61 

describes the types of properties eligible 

for flood insurance coverage under the 

NFIP, the limits of such coverage, and 

the premium rates actually to be paid by 

insureds. It states that the specific 

communities eligible for coverage are 

designated by the Federal Insurance 

Administrator from time to time as 

applications are approved under the 

Emergency Program and as ratemaking 

studies of communities are completed 

prior to the regular program. Finally, it 

states that lists of such communities are 

periodically published under part 64 of 

this subchapter. FEMA proposes to 

remove the last two sentences of Section 

61.1 addressing the specific 

communities eligible for coverage and 

publication of the list of communities 

because they provide information 

relevant to part 64, not part 61. 

Removing these sentences would 

therefore avoid possible confusion 

regarding the subjects covered in part 

61. 

3. Section 61.3 Types of Coverage 

Section 61.3 states that insurance 

coverage under the NFIP is available for 

structures and their contents, and that 

coverage for each may be purchased 

separately. 

FEMA proposes to change the title of 

this section from ‘‘Types of coverage’’ to 

‘‘Coverage and benefits provided under 

the Standard Flood Insurance Policy’’ 

because this new title provides a more 

accurate description of the proposed 

revisions to this section. 

FEMA proposes to replace ‘‘structure’’ 

with ‘‘building’’ because in current 

practice the program uses the term 

‘‘building’’ rather than ‘‘structure’’ 

throughout its guidance documents and 

other communications. The term 

‘‘building’’ is a more precise and 

accurate term, because the SFIP insures 

buildings, not structures. While the term 

‘‘structure’’ encompasses the term 

‘‘building,’’ it also includes things that 

are not buildings, such as carports and 

gas or liquid storage tanks, and thus not 

insurable under the terms and 

conditions of the SFIP. Consistent use of 

this terminology will improve the 

overall clarity and accuracy of the 

regulation when viewed within the 

larger context of FEMA’s 

communications and guidance 

documents regarding the NFIP, as 

‘‘building’’ rather than ‘‘structure’’ is 

more commonly used outside of the 

CFR. 

FEMA proposes to add two new 

provisions to this section to provide a 

more accurate depiction of the 

coverages and benefits available under 

the SFIP and to improve the Section’s 

overall clarity. First, FEMA proposes to 

add paragraph (b) stating that in 

addition to building and contents 

coverage, each form of the SFIP 

provides coverage for other flood-related 

expenses. The Dwelling Form of the 

SFIP covers debris removal, loss 

avoidance measures, and condominium 

loss assessments. The General Property 

Form of the SFIP covers debris removal, 

loss avoidance measures, and pollution 

damage. The Residential Condominium 

Policy Form of the SFIP covers debris 

removal and loss avoidance measures. 

Second, FEMA proposes to add 

paragraph (c) stating that with the 

purchase of building coverage, the SFIP 

also covers costs associated with 

bringing the building into compliance 

with local floodplain ordinances. FEMA 

believes this information may be useful 

to a reader of the CFR. 

4. Section 61.4 Limitations on 

Coverage 

Section 61.4 provides that coverage 

obtained through the NFIP is subject to 

the NFIA, relevant regulations, the SFIP, 

and each individual policy’s declaration 

page, and the maximum limits of 

coverage. FEMA proposes to remove 

this section because it duplicates the 

provisions of current section 61.5(e), 

which provide that the SFIP ‘‘is 

authorized only under terms and 

conditions established by Federal 

statute, the program’s regulations, the 

Administrator’s interpretations and the 

express terms of the policy itself.’’ As 

section 61.5(e) conveys the same 

information as section 61.4, FEMA finds 

that section 61.4 is not necessary. (Note 

that FEMA proposes to move 61.5(e) to 

proposed 61.13, discussed below.) 

5. Section 61.5 Special Terms and 

Conditions 

Paragraph (a) of section 61.5 states 

that no new flood insurance or renewal 

of flood insurance policies shall be 

written for properties declared by a duly 

constituted State or local zoning or 

other authority to be in violation of any 

flood plain, mudslide (i.e., mudflow), or 

flood-related erosion area management 

or control law, regulation, or ordinance. 

FEMA proposes to change ‘‘shall’’ to 

‘‘will’’ to avoid ambiguity. 

Paragraph (b) of section 61.5 states 

that to reduce the administrative costs 

of the NFIP, of which the Federal 

Government pays a major share, 

payment of the full policyholder 

premium must be made at the time of 

application. FEMA proposes to reword 

‘‘payment of the full policyholder 

premium’’ to state ‘‘applicants must pay 

the full policy premium’’ because 

premiums are associated with policies, 

not policyholders. No substantive 

change is intended. 

FEMA proposes to retain the 

substance of paragraphs (a) and (b), but 

proposes to move them to their own 

section (proposed 61.4) but retaining the 

current title of the section (‘‘Special 

terms and conditions’’). 

Paragraph (c) of section 61.5 states 

that because of the seasonal nature of 

flooding, refunds of premiums upon 

cancellation of coverage by the insured 

are permitted only if the insurer ceases 

to have an ownership interest in the 


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covered property at the location 

described in the policy. It further states 

that refunds of premiums for any other 

reason are subject to the conditions set 

forth in 62.5 of this subchapter. FEMA 

proposes to remove paragraph (c) and 

add the substance of it to paragraph (b) 

of proposed 62.5 (the proposed changes 

to which are discussed more fully later 

in this preamble). Section 62.5 

addresses policy cancellations and 

nullifications, and thus the substance of 

current section 61.5(c) is more 

appropriate for section 62.5. 

Similar to current section 61.4, 

paragraph (e) of section 61.5 states that 

the SFIP is authorized only under terms 

and conditions established by Federal 

statute, the program’s regulations, the 

Administrator’s interpretations and the 

express terms of the policy itself. 

Section 61.5 also states that 

representations regarding the extent and 

scope of coverage which are not 

consistent with the NFIA or with NFIP 

regulations are void, and the duly 

licensed property or casualty agent acts 

for the insured and does not act as agent 

for the Federal Government, the Federal 

Emergency Management Agency, or the 

servicing agent. As noted above, FEMA 

proposes to move 61.5(e) to proposed 

61.13. The provisions appear in 

proposed paragraph (e) of section 61.13 

(‘‘Authorized only under terms and 

conditions established by the Act and 

Regulation’’) and paragraph (f) (‘‘Agent 

acts only for policyholder’’). These 

provisions are more appropriate for 

proposed section 61.13 because the 

section contains general provisions 

about the SFIP, and 61.5(e) also 

constitutes general provisions 

concerning the SFIP. These changes 

would improve the overall organization 

and cohesiveness of part 61. FEMA does 

not intend any substantive changes with 

these proposed revisions. 

6. Proposed Section 61.5 Deductibles 

(Formerly Paragraph (d) of Current 

Section 61.5) 

Current paragraph (d) of section 61.5 

states that optional deductibles are 

available in all zones for four categories 

of properties, and presents those 

categories as four tables. The Category 

One table lists some of the deductible 

options for one to four family building 

and contents coverage policies. The 

Category Two table lists some of the 

deductible options for one to four family 

building coverage only or contents 

coverage only policies. The Category 

Three table lists some of the deductible 

options for ‘‘other residential’’ 

(residential buildings with five or more 

units) and nonresidential policies. The 

Category Four table lists some of the 

deductible options for residential 

condominium building policies. A note 

to these tables indicates that 

policyholders may submit any other 

deductible combination for rating to the 

NFIP. This note allows FEMA to offer 

deductibles listed in the deductible 

tables in the Rating Section of Flood 

Insurance Manual, pages 17–18. 

FEMA proposes several revisions to 

paragraph (d). First, FEMA proposes to 

remove the number for the paragraph 

because, as noted above, paragraphs (a) 

and (b) would be moved to a new 

section 61.4 and paragraph (c) would be 

incorporated into section 62.5. As a 

result, paragraph (d) would be the only 

paragraph in the section, thus making 

the paragraph number unnecessary. 

FEMA proposes to replace the current 

contents of paragraph (d) (proposed 

unnumbered paragraph) with a 

requirement that FEMA must provide 

policyholders with deductible options 

in various amounts, up to and including 

$10,000, subject to certain minimum 

deductibles. FEMA proposes this 

change because the current regulation’s 

listing of deductible options may give 

readers the impression that the list is 

exhaustive even though the note 

following the Category Four table allows 

for FEMA to offer deductible options 

not listed in the table. The proposed text 

would make clear that FEMA may offer 

various options, subject to other 

restrictions. 

The proposed text would require 

FEMA to offer deductible options up to 

and including $10,000 to comply with 

the requirements of Section 1306(d) of 

the NFIA, as amended by section 12 of 

HFIAA (42 U.S.C. 4013(d)), which 

requires FEMA to offer deductibles up 

to $10,000 for residential properties. As 

previously explained, current 

regulations allow policyholders to 

request deductible amounts not 

currently listed in regulation (including 

the $10,000 deductible option required 

under HFIAA). Thus, this proposed 

change would clarify the regulatory text 

consistent with statutory requirements, 

but not expand or contract the 

deductible options offered by the NFIP 

under current regulations. 

FEMA also proposes to limit 

deductible options in accordance with 

section 1312(b) of the NFIA, as added by 

section 100210 of BW–12 (42 U.S.C. 

4019(b)). Per this provision, FEMA 

proposes to establish minimum 

deductibles as follows: (1) $1,500 for 

policies covering pre-FIRM buildings 

charged less than full-risk rates with 

building coverage amounts less than or 

equal to $100,000; (2) $2,000 for policies 

covering pre-FIRM buildings charged 

less than full risk rates with building 

coverage amounts greater than $100,000; 

(3) $1,000 for policies covering postFIRM buildings and pre-FIRM buildings 

charged full risk rates with building 

coverage amounts equal to or less than 

$100,000; and (4) $1,250 for policies 

covering post-FIRM buildings and preFIRM buildings charged full risk rates 

with building coverage amounts greater 

than $100,000. 

Overall, the proposed deductible 

section would provide readers with a 

clear understanding of available 

deductible options, including minimum 

deductibles required under Section 

1312(b) of the NFIA, as added by 

Section 100210 of BW–12 (42 U.S.C. 

4019(b)) and the $10,000 deductible 

option required by Section 1306(d) of 

the NFIA, as amended by Section 12 of 

HFIAA (42 U.S.C. 4013(d)). However, it 

would not expand or contract the 

deductibles available to policyholders 

under current law. 

FEMA also proposes to rename the 

section heading of 61.5 to ‘‘Deductibles’’ 

because section 61.5 would only 

address deductible amounts. 

7. Section 61.6 Maximum Amounts of 

Coverage Available 

Current section 61.6 details the 

maximum amounts of coverage 

available under the NFIA. See 42 U.S.C. 

4013(b). The current table shows 

varying coverage amounts available, 

depending on whether a policy is under 

the Emergency Program or the Regular 

Program, the use and occupancy of the 

building, and the building’s location. As 

provided under the NFIA, for residential 

occupancies, the table lists coverage 

limits of $250,000 for buildings and 

$100,000 for contents. See id. For 

nonresidential occupancies, the table 

lists coverage limits of $500,000 for 

buildings and $500,000 for contents. See 

id. FEMA proposes to revise the table to 

more closely conform it to the one 

currently in the Rating Section of the 

Flood Insurance Manual, page 1. The 

Manual more clearly describes the 

different coverage limits based on 

occupancy by using terminology that 

more accurately conveys relevant 

statutory requirements. In comparison, 

the current table in the CFR includes 

terminology and distinctions that are no 

longer programmatically relevant. 

i. Title of Table 

The current table does not have a title. 

FEMA proposes to entitle the table 

‘‘Maximum Amounts of Coverage 

Available.’’ While the Flood Insurance 

Manual uses the title ‘‘Amount of 

insurance available,’’ FEMA proposes to 

use ‘‘coverage’’ instead of ‘‘insurance’’ 

to conform to the current section title of 


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2http://www.fema.gov/txt/nfip/ 

manual200505.txt. 

section 61.6. There is no substantive 

difference between the two titles in this 

context. 

ii. Vertical Axis of Maximum Coverage 

Table 

The current table has one vertical axis 

that lists the different categories of 

occupancy applicable to both building 

and contents coverages. These 

categories are, in order: ‘‘Single Family 

Residential,’’ ‘‘Other Residential,’’ 

‘‘Nonresidential,’’ and ‘‘Contents.’’ 

Although the table provides a 

‘‘contents’’ heading on this axis, there is 

no corresponding label for the building 

coverages. FEMA proposes to add 

‘‘Building Coverage’’ to the vertical axis 

to distinguish between ‘‘building 

coverage’’ and ‘‘contents coverage.’’ 

This ‘‘Building Coverage’’ category 

would encompass ‘‘Single Family 

Residential,’’ ‘‘Other Residential,’’ and 

‘‘Nonresidential.’’ FEMA believes this 

change would prevent confusion by 

improving the table’s overall clarity and 

internal consistency. 

As noted above, the current table lists 

the different categories of occupancy 

applicable to each coverage—‘‘Single 

Family Residential,’’ ‘‘Other 

Residential,’’ and ‘‘Nonresidential.’’ The 

current table further divides the ‘‘Single 

Family Residential’’ and ‘‘Other 

Residential’’ categories by whether or 

not a subject property is located within 

Hawaii, Alaska, Guam, or the U.S. 

Virgin Islands. It divides the 

‘‘Nonresidential’’ category into either 

‘‘Small business’’ or ‘‘Churches and 

other properties.’’ Similarly, the 

‘‘Contents’’ coverage category only 

distinguishes between ‘‘Residential,’’ 

Small business,’’ and ‘‘Churches, other 

properties.’’ The proposed table would 

make several changes to the 

categorization to use standardized 

terminology, improve the overall design 

and readability of the table, and use 

occupancy categories that more 

accurately reflect statutory and program 

differences in available coverages. 

FEMA proposes to substitute the 

current use of ‘‘Single Family 

Residential’’ with ‘‘Single Family 

Dwelling’’ to describe a property. FEMA 

proposes this change because although 

the two terms (‘‘dwelling’’ and 

‘‘residential’’) are interchangeable 

within the NFIP, ‘‘Single Family 

Dwelling’’ is the term used most often 

in the NFIP, as reflected in the Rating 

section of the Flood Insurance Manual. 

The Flood Insurance Manual has used 

this term for many years. See Flood 

Insurance Manual (May 1, 2005).2

Because ‘‘single family dwelling’’ is 

not currently defined, FEMA proposes 

to define ‘‘single family dwelling’’ in 

section 59.1 to mean ‘‘either (a) a 

residential single-family building in 

which the total floor area devoted to 

non-residential uses is less than 50 

percent of the building’s total floor area, 

or (b) a single-family residential unit 

within a two to four family building, 

other residential building, business, or 

non-residential building, in which 

commercial uses within the unit are 

limited to less than 50 percent of the 

unit’s total floor area.’’ FEMA adopted 

this definition in the Flood Insurance 

Manual as early as 1978 to align with 

common industry practices in non-flood 

property insurance policies and it is the 

same definition found in the Definitions 

Section of the Flood Insurance Manual. 

This proposed definition reflects current 

NFIP practice and will not result in any 

substantive changes to the program. 

FEMA proposes to add a new 

occupancy category, ‘‘two to four family 

building.’’ (The table would list the 

same maximum coverage amounts as 

those for a Single Family Dwelling, 

$35,000 for Emergency Program and 

$250,000 for the Regular Program.) 

FEMA proposes to include this category 

because it would be clearer to provide 

the public with a complete spectrum of 

occupancy categories so that the 

coverage limits for all occupancy types 

are more transparent. This does not 

reflect a substantive change to the 

program. 

Because ‘‘two to four family building’’ 

is not currently defined, FEMA 

proposes to define it in section 59.1 to 

mean ‘‘a residential building, including 

an apartment building, containing two 

to four residential spaces and in which 

commercial uses are limited to less than 

25 percent of the building’s total floor 

area.’’ FEMA proposes to define ‘‘two to 

four family building’’ in this manner 

because it is the same definition used in 

the Flood Insurance Manual. This 

definition supports the NFIA’s 

distinctions between residential and 

non-residential properties. 

While FEMA proposes to maintain the 

‘‘Other Residential’’ occupancy category 

that is in the current table, FEMA 

proposes to revise the category to read, 

‘‘Other Residential Building (including 

Multifamily Building).’’ FEMA proposes 

to do this to make clear to the reader 

that ‘‘Other Residential Building’’ 

encompasses ‘‘Multifamily Buildings,’’ a 

term used in section 1305 of the NFIA, 

as added by section 100204 of BW–12 

(42 U.S.C 4012(d)). 

Because neither ‘‘other residential 

building’’ nor ‘‘multifamily building’’ is 

defined, FEMA proposes to define these 

in section 59.1. It proposes to define 

‘‘other residential building’’ to mean ‘‘a 

residential building that is designed for 

use as a residential space for 5 or more 

families or a mixed use building in 

which the total floor area devoted to 

non-residential uses is less than 25 

percent of the total floor area within the 

building.’’ It proposes to define 

‘‘multifamily building’’ to mean ‘‘an 

Other Residential Building that is not a 

condominium building.’’ FEMA 

proposes to define these terms in this 

manner because the program currently 

defines them as such; these definitions 

appear in the Definitions Section of the 

Flood Insurance Manual. FEMA 

believes this definition of ‘‘Other 

Residential Building’’ fairly 

distinguishes the term from the ‘‘single 

family dwelling’’ and ‘‘two to four 

family building’’ occupancy categories, 

in terms of either residential spaces or 

square-footage. Defining ‘‘multifamily 

building’’ this way enables easier 

reference to condominium-building 

specific policies that will be discussed 

below. 

FEMA proposes to add the 

‘‘Condominium Building’’ occupancy 

category to the table (with maximum 

coverage amounts of ‘‘$250,000 times 

the number of units in the building’’ 

under the Regular Program, and nothing 

available under the Emergency 

Program). FEMA proposes this addition 

to integrate into the table information 

contained in current section 61.6(b). 

Section 61.6(b) states that ‘‘[i]n the 

insuring of a residential condominium 

building in a regular program 

community, the maximum limit of 

building coverage is $250,000 times the 

number of units in the building (not to 

exceed the building’s replacement 

cost).’’ By adding the ‘‘Condominium 

Building’’ occupancy category to the 

table, FEMA plans to incorporate all the 

information in section 61.6(b) except the 

language in parentheses, ‘‘not to exceed 

the building’s replacement cost.’’ FEMA 

proposes to omit this language because 

Article V of the RCBAP form (44 CFR 

61, Appendix A(3)) already provides 

that FEMA will not pay beyond the 

replacement cost of the building. 

While FEMA proposes to maintain the 

‘‘Nonresidential’’ occupancy category, 

FEMA proposes to revise the category to 

read ‘‘Non-Residential Building.’’ This 

category would continue to have 

building limits of $100,000 in the 

Emergency Program and $500,000 in the 

Regular Program. 

In order to provide greater clarity, 

FEMA proposes to incorporate the 

existing definition of ‘‘non-residential 

building’’ into regulation. Current 

regulations and statute do not define the 


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32962 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

extent of the term ‘‘nonresidential’’ used 

in maximum coverage limits found at 

NFIA 1306(b)(4) (42 U.S.C. 4013(b)(4)) 

and 44 CFR 61.6(a). However, 42 U.S.C. 

4013(b)(3) does make clear that 

‘‘nonresidential building’’ includes 

churches. Accordingly, FEMA has 

previously defined the term ‘‘nonresidential building’’ as ‘‘a commercial 

or mixed-use building where the 

primary use is commercial or nonhabitational.’’ Definitions Section of 

Flood Insurance Manual, page 7. FEMA 

proposes to incorporate this definition 

into regulation because it aligns with 

the common understanding of the term 

and encompasses churches and other 

houses of worship. 

FEMA proposes to adjust the 

occupancy categories under the 

‘‘Contents Coverage’’ portion of the 

coverage limits table. Currently, the 

table at section 61.6(a) divides the 

contents coverage portion amongst three 

categories: ‘‘Residential,’’ ‘‘Small 

business,’’ and ‘‘Churches, other 

properties.’’ FEMA proposes to remove 

the distinction between ‘‘Small 

business’’ and ‘‘Churches, and other 

properties,’’ and divide contents 

coverage into just two categories: 

‘‘Residential Property’’ and ‘‘NonResidential Property.’’ FEMA proposes 

this change to reflect the current 

practice of the program. Although NFIA 

section 1306(b)(1)(B) (42 U.S.C. 

4013(b)(1)) provides a specific method 

for determining the maximum coverage 

available to small businesses, FEMA has 

opted to provide all other nonresidential properties with the same 

coverage limits available to small 

businesses. Accordingly, while the 

statute may still distinguish small 

businesses from all other properties, 

current NFIP practice does not. 

In addition to the adjustments to the 

categories of occupancy described 

above, FEMA proposes two changes to 

the footnotes. In the current table, there 

are two footnotes. Footnote 1 appends 

‘‘Emergency program’’ in ‘‘Emergency 

Program first layer’’ and provides that 

‘‘[o]nly [the] first layer [is] available 

under the emergency program.’’ 

Footnote 2 appends the ‘‘Contents’’ 

label and reads, ‘‘Per unit.’’ 

FEMA proposes to revise footnote 1 

by appending it to the title of the table, 

‘‘Maximum Amount of Coverage 

Available,’’ to describe the table 

generally. It would read, ‘‘This Table 

provides the maximum coverage 

amounts available under the Emergency 

Program and the Regular Program, and 

the columns cannot be aggregated to 

exceed the limits in the Regular 

Program, which are established by 

statute. The aggregate limits for building 

coverage are the maximum coverage 

amounts allowed by statute for each 

building included in the relevant 

Occupancy Category.’’ FEMA proposes 

this revision because, as described in 

greater detail below in subsection iv., 

Horizontal Axis of Maximum Coverage 

Table, the current footnote 1 is 

associated with the ‘‘layer’’ language 

FEMA proposes to remove, and the 

revised footnote’s language more 

accurately reflects the NFIP’s intent. 

FEMA proposes to leave footnote 2 in 

the same place (after ‘‘Contents 

Coverage’’—the term replacing 

‘‘Contents’’ in the current table), but 

expand it from ‘‘Per unit’’ to instead 

read, ‘‘The policy limits for contents 

coverage are not per building. Although 

a single insured may not have more than 

one policy covering contents in a 

building, several insureds may have 

separate policies of up to the policy 

limits.’’ FEMA proposes this revision to 

footnote 2 to more clearly reflect the 

restriction that the current footnote 2 

attempts to convey, which is that the 

coverage limits apply to each unit of the 

building. 

For instance, the tenants of a building 

with two independent living units may 

obtain separate contents policies for 

each unit. Each policy could have limits 

up to $100,000 and a contents claim for 

one unit would not affect the contents 

claim of the other unit. However, the 

existing NFIP rule—not reflected in the 

current footnote—is that the owner of 

the building cannot obtain two separate 

contents policies themselves. Instead, 

they could only obtain one contents 

policy with coverage up to $100,000. 

FEMA’s proposed language in footnote 

2 seeks to more clearly explain NFIP 

statutory authority that even though the 

contents coverage limits are per unit 

rather than per building, an insured 

cannot have more than one policy in a 

building. 

FEMA proposes to append a new 

footnote—footnote 3—to the 

‘‘Residential Property’’ occupancy 

category under ‘‘Contents Coverage.’’ 

Footnote 3 would explain that ‘‘[t]he 

Residential Property occupancy 

category includes the Single Family 

Dwelling, Two to Four Family Building, 

Other Residential Building, and 

Condominium Building occupancies 

categories.’’ FEMA proposes appending 

this new footnote to help improve the 

overall clarity of the table by linking the 

building coverage occupancy categories 

with the contents coverage occupancy 

categories. 

iii. Special Provisions for Property in 

Hawaii, Alaska, Guam, and the U.S. 

Virgin Islands 

The current maximum coverage table 

in section 61.6(a) lists separate 

increased limits in the Emergency 

Program within the ‘‘Single Family 

Residential’’ and ‘‘Other Residential’’ 

occupancy categories for residential 

structures located in Hawaii, Alaska, 

Guam, and the U.S. Virgin Islands. This 

is because the NFIP provides increased 

building coverage to these structures 

pursuant to 42 U.S.C. 4013(b)(1)(A)(iii). 

FEMA proposes to remove these lines 

referencing Hawaii, Alaska, Guam, and 

the U.S. Virgin Islands and place them 

instead in asterisked footnotes. FEMA 

does not intend any substantive change 

in these limits, but believes this design 

will improve the overall readability of 

the table. 

iv. Horizontal Axis of Maximum 

Coverage Table 

FEMA also proposes to make several 

clarifying, nonsubstantive changes to 

the horizontal axis of the table in 

section 61.6(a). The current table’s 

horizontal axis is one label, ‘‘Regular 

program.’’ Under that label are three 

sub-labels: ‘‘Emergency program first 

layer,’’ ‘‘Second layer,’’ and ‘‘Total 

amount available.’’ As noted above, 

‘‘Emergency program first layer’’ has a 

footnote (footnote 1) that reads, ‘‘Only 

first layer available under emergency 

program.’’ 

FEMA’s proposed replacement table 

would dispense with the ‘‘layer’’ 

language and use only two columns, 

‘‘Emergency Program’’ and ‘‘Regular 

Program.’’ Each column would list the 

applicable coverage limit for each 

occupancy type under each type of 

program. (The values under ‘‘Emergency 

Program’’ and ‘‘Regular Program’’ would 

be independent of each other and not 

subject to aggregation). 

FEMA proposes these simpler 

horizontal axis labels for two reasons. 

The first reason is to improve overall 

clarity, as the ‘‘layer’’ language is 

unclear and inaccessible to the reader. 

The second reason is to more accurately 

reflect the NFIP’s intent. This is because 

the current table reflects a previous 

approach for describing the NFIP’s 

coverage limits. The idea was that the 

NFIP divided the Regular Program’s 

coverage limits into two layers. The first 

layer was available for all NFIP policies, 

whether under the Emergency Program 

or the Regular Program. The NFIP only 

made the second layer of coverage 

available through the Regular Program. 

The current table attempts to capture 

this by placing the ‘‘Emergency program 


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first layer’’ and ‘‘Second layer’’ under 

the ‘‘Regular program’’ label. However, 

the table also combines the two layers 

under the ‘‘Total amount available’’ 

column, which is also under the 

‘‘Regular program’’ label. A person 

could read this formulation as 

indicating that the three sub-headings 

combined provided the maximum 

amount of coverage under the ‘‘Regular 

program.’’ This is not FEMA’s intent. 

The proposed replacement table 

conveys the same limits described in the 

current table, but it in a much clearer 

and concise way. 

Moreover, it is for this reason that 

FEMA proposes to revise footnote 1, as 

described above, to clarify that the 

maximum coverage amounts listed for 

the Emergency Program and the Regular 

Program are not cumulative. Rather, the 

maximum amounts listed under the 

Regular Program are the maximum 

amounts authorized under the NFIA and 

include the amounts for the Emergency 

Program. (In other words, the amounts 

for the Emergency Program are not in 

addition to the amounts for the Regular 

Program). 

v. Paragraph (b): Application of Limits 

to Additional Coverages 

As noted above, current paragraph (b) 

is being removed and its contents are 

being incorporated into the proposed 

table. FEMA proposes to add a new 

paragraph (b) that would state, 

‘‘[c]overage and benefits payable under 

the SFIP pursuant to sections 61.3(b) 

and 61.3(c) are included in, not in 

addition to, the coverage limits 

provided by the Act or stated in 

paragraph (a) of this section.’’ The 

purpose of this new paragraph is to 

explain that the coverage limits 

described in the table in section 61.6(a) 

apply to all coverages payable under the 

SFIP, including mitigation, and debris 

removal coverage described in proposed 

section 61.3(b) and ICC coverage 

described in proposed section 61.3(c). 

This revision would not make any 

substantive change to NFIP policy, but 

rather would provide a clarifying link to 

the coverage and benefits listed in 

proposed section 61.3 and how coverage 

limits relate to those coverages and 

benefits. 

Overall, FEMA intends for the 

proposed changes to section 61.6 to 

improve the clarity of the Section and 

ensure that it uses terminology 

consistent with that currently used by 

the NFIP. The Agency does not intend 

for the proposed changes to 61.6 to 

modify the substance of the NFIP flood 

insurance policies or the maximum 

coverage limits available for buildings 

and contents covered under such 

policies. 

8. Section 61.10 Requirements for 

Issuance or Renewal of Flood Insurance 

Coverage 

FEMA proposes to add a new section, 

61.10, entitled ‘‘Requirements for 

Issuance or Renewal of Flood Insurance 

Coverage.’’ The proposed section would 

state that FEMA will not issue or renew 

flood insurance unless FEMA receives: 

(1) The full amount due (including 

applicable premiums, surcharges, and 

fees); and (2) a complete application, 

including the information necessary to 

establish a premium rate for the policy, 

or submission of corrected or additional 

information necessary to calculate the 

premium for the renewal of the policy. 

FEMA proposes this new section 

because these requirements are already 

implicitly indicated in current sections 

61.5(b) and 61.11(b), but are nowhere 

explicitly stated. Pursuant to section 

61.5(b), ‘‘payment of the full 

policyholder premium must be made at 

the time of application.’’ Section 

61.11(b) provides that coverage is 

effective at the time of loan closing, 

‘‘provided the written request for the 

coverage is received by the NFIP and 

flood insurance policy is applied for 

and the presentment of payment of 

premium is made at or prior to the loan 

closing.’’ Further, the statutory 30-day 

waiting period begins on the ‘‘date that 

all obligations for [flood insurance] 

coverage (including completion of the 

application and payment of any initial 

premiums owed) are satisfactorily 

completed.’’ NFIA 1306(c)(1) (42 U.S.C. 

4013(c)(1)). FEMA believes that 

explicitly stating the requirements for 

issuance or renewal of a policy will 

provide policyholders with clearer 

descriptions of these requirements. 

9. Section 61.11 Effective Date and 

Time of Coverage Under the Standard 

Flood Insurance Policy—New Business 

Applications and Endorsements 

Section 61.11 describes the methods 

for calculating the effective dates of new 

policies. In general, under current 

paragraph (c), the effective date and 

time of any new policy or added 

coverage is ‘‘12:01 a.m. (local time) on 

the 30th calendar day after the 

application date and the presentment of 

payment of premium.’’ Current 

paragraphs (a) and (b) provide two 

exceptions to this 30-day waiting 

period. Section 61.11(a) provides for an 

effective date of 12:01 a.m. on the first 

calendar day after application and 

payment for the initial purchase of flood 

insurance pursuant to a revision or 

update of floodplain areas or flood risk 

zones under section 1360(f) of the NFIA, 

if such purchase took place within 1 

year of the notice of such revision or 

updating under section 1360(h). See 

also 42 U.S.C. 4013(c)(2). Section 

61.11(b) provides that for the initial 

purchase of flood insurance in 

connection with the making, increasing, 

extension, or renewal of a loan, coverage 

is effective as of the date of the loan 

closing as long as application and 

payment were made prior to that. See 

also 42 U.S.C. 4013(c)(2)(A). FEMA does 

not propose any changes to these 

exceptions in current paragraphs (a) and 

(b), as neither BW–12 nor HFIAA made 

any changes to these exceptions. 

FEMA proposes to add a third 

exception to the 30-day waiting period 

relating to flooding linked to postwildfire conditions in proposed 

paragraph (c), and proposes to 

redesignate current paragraph (c) as 

paragraph (d). The proposed provision 

would allow for a next-day effective 

date where (1) the FEMA Administrator 

determines that the property was 

affected by flooding on Federal land as 

a ‘‘result of, or is exacerbated by, postwildfire conditions,’’ and (2) that 

coverage was purchased no later than 60 

calendar days after the fire containment 

date of the wildfire relating to the postwildfire conditions described in clause 

(1). FEMA proposes adding this 

exception pursuant to BW–12. See NFIA 

section 1306 (42 U.S.C. 4013), as 

amended by BW–12 section 100241. 

FEMA has already implemented this 

provision, see the General Rules Section 

of the Flood Insurance Manual, and now 

proposes to codify the exception into 

regulation to provide a comprehensive 

list of effective date exceptions. 

As stated above, FEMA proposes to 

redesignate current paragraph (c) as 

paragraph (d). FEMA also proposes to 

make two minor changes to current 

paragraph (c). First, FEMA proposes to 

add a reference to new paragraph (c) to 

indicate that in addition to paragraphs 

(a) and (b), paragraph (c) is one of the 

exceptions to the 30-day waiting period. 

Second, FEMA proposes to change 

‘‘shall’’ to ‘‘will.’’ FEMA proposes this 

change to incorporate plainer language. 

This change would not change the 

substantive meaning of the provision. 

Current paragraph (d) allows 

policyholders to add new coverage or 

increase the amount of coverage in force 

during the term of any policy. FEMA 

proposes to redesignate current 

paragraph (d) as paragraph (e), and 

proposes to add the language ‘‘subject to 

any applicable waiting periods.’’ FEMA 

proposes adding this language to make 

it clear that unless the policy change 

qualifies under one of the exceptions in 


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32964 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

sections 61.11(a)–(c), such changes 

would be subject to the 30-day waiting 

period. This ensures that policyholders 

cannot suddenly expand their coverage 

immediately before needing it, for 

instance before a hurricane strikes. This 

requirement is already stated in current 

61.11(c) (proposed 61.11(d)), but its 

inclusion in proposed 61.11(e) would 

add additional clarity to this provision 

and ensure that 61.11(e) will not be 

mistakenly read without the limitations 

imposed by proposed 61.11(d). FEMA 

also proposes to change ‘‘shall’’ to 

‘‘will.’’ FEMA proposes this change to 

incorporate plainer language. 

Current paragraph (e) states that with 

respect to any submission of an 

application in connection with new 

business, the payment of the premium 

by an insured to an agent or the 

issuance of premium payment by the 

agent does not constitute payment to the 

NFIP. It further states that it is 

important that an application for flood 

insurance and its premium be mailed to 

the NFIP promptly to have the effective 

date of coverage based on the 

application date plus the waiting 

period. 

It states that if the application and the 

appropriate premium payment are 

received at the office of the NFIP within 

ten (10) calendar days from the date of 

application, the waiting period will be 

calculated from the date of application. 

FEMA proposes to revise this paragraph 

slightly to state that it is important that 

an application for flood insurance and 

the ‘‘full amount due’’ be mailed to the 

NFIP promptly. FEMA proposes to 

change ‘‘premium’’ to ‘‘full amount 

due’’ in the sentence following it as 

well. Making this change would make 

clear that the policyholder must pay the 

full amount due at that time (including 

any surcharges and fees), not just a 

portion thereof. 

FEMA proposes to redesignate current 

paragraph (e) as paragraph (f). Current 

paragraph (f) describes the method for 

determining the effective date when a 

WYO company receives a proper 

application, but decides to refer the 

application to the NFIP’s Direct 

Servicing Agent rather than write the 

policy itself. FEMA proposes to remove 

this paragraph because it describes the 

business model of a WYO company that 

is no longer participating in the WYO 

Program. FEMA is not aware of any 

other WYO company that is using this 

model, and therefore the provision is 

unnecessary. Any new companies 

entering the WYO Program would need 

to conform their practices to the 

resulting regulation. Accordingly, 

FEMA proposes to remove these 

provisions to avoid confusion. Because 

FEMA proposes to remove this 

paragraph, FEMA also proposes to 

remove the last two clauses of the first 

sentence of current paragraph (e) 

(proposed paragraph (f)) that addresses 

the application of applicable waiting 

periods for this model, as it too would 

no longer be necessary. Finally, FEMA 

proposes to make minor revisions to 

current paragraph (g) to reflect the 

removal of current paragraph (f). 

10. Section 61.13 Standard Flood 

Insurance Policy 

Section 61.13 describes the applicable 

sources of terms and conditions 

associated with polices issued through 

the NFIP, including the SFIP forms, 

endorsements, and applications. 

FEMA proposes to add new 

paragraphs (e) and (f), and redesignate 

current paragraphs (e) and (f) as (g) and 

(h). FEMA’s proposed new paragraph (e) 

would explain that flood insurance 

policies issued through the NFIP are 

subject to the NFIA, its regulations, and 

the terms and conditions of the SFIP. As 

discussed previously, similar language 

is in current sections 61.4(a) and (b), 

which FEMA proposes to remove. 

Moving this language into section 61.13 

provides a more logical organization. 

Further, FEMA proposes to add 

additional language that any 

representations not consistent with 

these sources are void. While implicit in 

the current regulations, this explicit 

language would make clear the sources 

of law applicable to NFIP policies. 

FEMA’s proposed new paragraph (f) 

would specify that the property or 

casualty agent acts on the behalf of the 

policyholder and never on behalf of the 

Federal Government, FEMA, or the 

WYO company. This language is similar 

to that which FEMA proposes to remove 

from 61.5(e), but would cover WYO 

companies as well. FEMA intends that 

the proposed provision would ensure 

that policyholders know that the 

representations of agents involved in the 

program do not bind the NFIP. Also, 

while current 61.5(e) uses the word 

‘‘insured,’’ FEMA proposes to substitute 

the word with ‘‘policyholder’’ in 

proposed section 61.13(f). 

‘‘Policyholder’’ refers specifically to the 

individual or business named in the 

policy itself, whereas the word 

‘‘insured’’ can refer to the policyholder 

as well as anyone who submits payment 

on behalf of the policyholder and/or 

who has the right to a claim payment 

under the policy (e.g., the mortgagee). 

‘‘Policyholder’’ is the more appropriate 

term in this context because FEMA is 

only referring to an agent’s relationship 

with the policyholder specifically, not 

any other party who may be submitting 

payment on behalf of the policyholder 

and/or who has a right to claims 

payments under the policy. 

Current paragraph (f) (proposed 

paragraph (h)), provides that private 

sector WYO property insurance 

companies may issue SFIPs. FEMA 

proposes to revise proposed paragraph 

(h) to provide that WYO companies will 

issue NFIP policies in their own name, 

rather than the current language 

providing that WYO companies may 

issue NFIP policies in their own name. 

This change would conform to the 

current FEMA–WYO company 

relationship described in Article I of 

Appendix A of 44 CFR part 62. Further, 

FEMA proposes to add language at the 

end of the paragraph stating that the risk 

of loss is borne by the NFIP, rather than 

the WYO company. This language 

would further clarify the existing 

relationship between FEMA and WYO 

companies. 

Overall, the proposed changes to 

61.13 would provide greater clarity to 

the public regarding the existing 

relationship between FEMA, 

policyholders, and WYO companies. 

C. Appendix A(1) to Part 61: Standard 

Flood Insurance Policy Dwelling Form 

Appendix A(1) to part 61 contains the 

Dwelling Form of the SFIP. This form, 

as well as the other two SFIP policy 

forms (the General Property Form and 

the RCBAP), defines the relationship 

between FEMA or the WYO company, 

as the insurers, and the insured. 

Throughout Appendix A(1), FEMA 

proposes to replace the word ‘‘covered’’ 

with the word ‘‘insured’’ because 

‘‘covered’’ is a generic and undefined 

term that does not conform to common 

industry or Agency usage. The use of 

‘‘insured’’ better conveys the 

application of the SFIP to property. 

1. Prefatory Paragraph and Article I 

‘‘Agreement’’ 

The prefatory paragraph states that 

the policy insures (1) a noncondominium 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. FEMA proposes 

to revise (1) to read ‘‘a one to four family 

residential building, not under a 

condominium form of ownership’’ 

because this language is clearer and 

more consistent with the wording used 

in the Definitions section for 

condominium buildings. FEMA 

proposes to add (3) ‘‘personal property 

in a building’’ to clarify that personal 

property is also insured under this 

policy. FEMA has always insured 

personal property under this policy, but 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 32965 

3Available at http://bsa.nfipstat.fema.gov/ 

wyobull/2015/w-15001.pdf. 

4Available at https://bsa.nfipstat.fema.gov/ 

wyobull/2016/w-16024.pdf. 

proposes to make this fact more explicit 

in this initial coverage statement. 

In the current policy, Article I 

‘‘Agreement’’ begins after the prefatory 

paragraph. It states in the first paragraph 

that FEMA provides flood insurance 

under the terms of the NFIA, its 

amendments, and 44 CFR. It states in 

the second paragraph that FEMA will 

pay for direct physical loss by or from 

flood to the insured property if the 

insured has paid the correct premium, 

complied with all terms and conditions 

of the policy, and furnished accurate 

information and statements. It states in 

the last paragraph that FEMA has the 

right to review the information provided 

by the insured at any time and to revise 

the policy based on this review. 

FEMA proposes to begin Article I 

before the prefatory paragraph, and to 

relabel the prefatory paragraph as 

Section A, current Article I’s first 

paragraph as Section B, the second 

paragraph as Section C, and the third 

paragraph as Section D. This is to clarify 

that the prefatory paragraph, which is 

actually an initial coverage statement, is 

part of the policy and not just an 

introduction to the policy. 

FEMA also proposes to modify 

proposed Section C (currently the 

second paragraph in Article I) and add 

three new sections to Article I (proposed 

sections E, F, and G) to clarify existing 

rules and limitations under the SFIP. 

i. Proposed Section C 

As previously described, FEMA 

proposes to renumber the second 

paragraph in Article I as Section C of 

Article I. This provision currently states 

that FEMA will pay for direct physical 

loss by or from flood to the insured 

property if (1) the insured has paid the 

correct premium; (2) complied with all 

terms and conditions of the policy; (3) 

and furnished accurate information and 

statements. FEMA proposes to modify 

the first prong of this statement by 

stating that coverage is contigent on the 

policyholder paying the ‘‘full amount 

due (including applicable premiums, 

surcharges, and fees)’’ instead of ‘‘the 

correct premium.’’ FEMA proposes this 

change to make clear that policyholders 

must pay any applicable surcharges, 

such as the one required under 42 U.S.C 

4015a, in addition to applicable 

premiums. 

ii. Proposed Section E 

Proposed Section E would state that 

the policy insures only one building. If 

the insured owns more than one 

building, coverage will apply to the 

single building specifically described in 

the Flood Insurance Application. While 

the SFIP’s limitation on coverage to one 

dwelling is already implied by current 

Article III.A, FEMA proposes to clarify 

this limitation here to allow 

policyholders to better understand the 

extent of coverage, particularly where 

an insured may own more than one 

building on the same land. 

iii. Proposed Section F 

Proposed Section F would state that 

multiple policies with building coverage 

cannot be issued to insure a single 

building to one insured or to different 

insureds, even if separate policies were 

issued through different NFIP insurers. 

It would also state that payment for 

damages may only be made under a 

single policy for building damages 

under Coverage A—Building Property. 

This proposed section would 

incorporate current Article VII.U’s 

general language stating that there may 

not be more than one NFIP policy on a 

property. Proposed section F would be 

subject to the exception in proposed 

Section G involving condominiums, 

which provides that a condominium 

unit may be covered by an RCBAP 

policy and a dwelling policy. 

FEMA proposes this clarification 

because there have been several 

instances where multiple persons have 

taken out multiple, overlapping 

building policies. This in turn may 

leave policyholders to believe they have 

more coverage than is allowed by the 

NFIA. This is most common in 

instances where both a building owner 

and a tenant obtain building policies. As 

described in WYO Bulletin W–15001 

(Jan. 13, 2015),3 FEMA has taken steps 

to identify such instances and inform 

policyholders as needed. FEMA believes 

that the language in proposed Section F 

would help avoid such situations. 

iv. Proposed Section G 

FEMA proposes to add Section G, 

which would define the relationship 

between a Dwelling Form policy and an 

RCBAP policy that insures the same 

condominium unit. Section G would 

state that a Dwelling Form policy with 

building coverage may be issued to a 

unit owner in a condominium building 

that is also insured under an RCBAP. 

However, no more than $250,000 may 

be paid in combined benefits for a single 

unit under the Dwelling Form policy 

and the RCBAP. This would explicitly 

state FEMA’s application of the 

statutory maximum coverage limits for 

one to four family residential buildings, 

found at 42 U.S.C. 4013(b)(2), as applied 

to condominium units. 

FEMA proposes this section to clarify 

instances where a condominium unit is 

covered by both a Dwelling Form policy 

and an RCBAP policy, and to codify its 

current practice (pursuant to BW–12) of 

waiving the requirement found in 

current regulation to limit payments to 

affected policyholders. Current Article 

VII (‘‘Coinsurance’’) of the RCBAP 

policy (Appendix A(3) to Part 61) 

restricts payments for damage to 

condominium associations that insure 

less than 80 percent of the full 

replacement cost of the RCBAP insured 

condominium building, or less than the 

maximum amount of insurance 

available. In turn, current Article 

III.C.3.b.4 of the Dwelling Form policy 

precludes payment for a loss assessment 

if the reason for the shortage is 

application of the RCBAP’s coinsurance 

penalty provision. Current Article 

VII.C.2 of the Dwelling Form policy 

provides that where a condominium 

unit is covered by both the Dwelling 

Form policy and an RCBAP (or other 

flood insurance coverage purchased by 

the condominium association), the 

Dwelling Form policy will be in excess 

over the RCBAP (or other insurance). 

Since 2007, FEMA has issued 

individual waivers of these provisions’ 

requirements to limit payments to 

affected policyholders. Section 100214 

of BW–12 (42 U.S.C. 4019(c)) validated 

this policy by prohibiting FEMA from 

limiting payments pursuant to Article 

III.C.3.b.4. FEMA implemented this 

prohibition through a general waiver. 

See WYO Bulletin W–16024 (April 7, 

2016).4 Accordingly, FEMA now seeks 

to codify this change in the SFIP by 

adding Section G. 

Proposed Section G would also state 

that FEMA will only pay for damage 

once, and items of damage paid for 

under an RCBAP cannot also be claimed 

under the Dwelling Form policy. FEMA 

proposes to add this language to clarify 

the existing rule under current Article 

VII.C.2 that if a single property is 

insured by both policies forms, the 

Dwelling Form will only pay what is not 

covered under the RCBAP policy. 

2. Article II Definitions 

i. General Changes 

FEMA proposes to remove the last 

sentence of the second paragraph in 

Article II.A which states, ‘‘The precise 

definitions are intended to protect you.’’ 

FEMA proposes removal of this 

sentence because it is an incorrect 

statement of the purpose of providing 

the definitions. The definitions are to 

provide clarity to the language of the 


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32966 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

Dwelling Form policy so that both 

FEMA and the policyholder will know 

the terms and conditions under which 

payments will be made under the 

policy. 

FEMA also proposes to move the 

definition of ‘‘flood,’’ which is currently 

in the third paragraph of Article II.A, to 

a separate Section B. Accordingly, 

FEMA also proposes to redesignate 

current Section B as Section C. 

ii. Proposed Removal of Definition 

FEMA proposes to remove one 

definition, ‘‘expense constant,’’ from the 

Dwelling Form. The term describes a 

flat charge assessed on all policies to 

defray expenses to the Federal 

Government related to flood insurance. 

FEMA proposes to remove this 

definition because FEMA no longer 

charges an expense constant and FEMA 

does not use this term in the Dwelling 

Form. 

iii. Proposed Addition of Definitions 

FEMA proposes to add a definition of 

‘‘condominium building’’ to mean a 

type of building for which the form of 

ownership is one in which each unit 

owner has an undivided interest in 

common elements of the building. 

FEMA intends for this addition to 

conform with the addition of the 

definition to 44 CFR 59.1. FEMA 

proposes to add this definition because 

it is used throughout the Dwelling 

Form. 

FEMA also proposes to define the 

term ‘‘deductible’’ as ‘‘the fixed amount 

of an insured loss that is your 

responsibility and that is incurred by 

you before any amounts are paid for the 

insured loss under this policy.’’ This 

definition aligns with the definition of 

‘‘deductible’’ currently proposed for 44 

CFR 59.1. FEMA proposes to include 

this definition in the SFIP to support 

related provisions in Article VI. 

iv. Proposed Changes to Existing 

Definitions 

FEMA proposes to modify several 

definitions currently in the Dwelling 

Form. First, FEMA proposes to revise 

the definition of ‘‘application’’ by 

striking the last sentence. FEMA 

proposes this change because the last 

sentence is not a definition, but rather 

a separate requirement. Further, the 

sentence does not align with proposed 

Article I.C, which states that 

policyholders must submit ‘‘the full 

amount due’’ which includes applicable 

premiums, surcharges, and fees. 

FEMA proposes to revise the 

definition of the term ‘‘basement.’’ 

Currently, ‘‘basement’’ is defined as 

‘‘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.’’ FEMA 

proposes to replace the word ‘‘the’’ 

before the word ‘‘building’’ with the 

word ‘‘a’’ to correct a grammar error in 

the current Dwelling Form SFIP. FEMA 

also proposes to remove the word 

‘‘subgrade’’ because, due to the many 

and varying definitions of this word, its 

use is causing confusion. Removal of the 

term ‘‘subgrade’’ is not intended to have 

any substantive effect. 

FEMA proposes to revise the term 

‘‘condominium.’’ Currently, 

‘‘condominium’’ is defined as ‘‘that 

form of ownership of real property in 

which each unit owner has an 

undivided interest in common 

elements.’’ FEMA proposes to replace 

the term ‘‘real property’’ with the phrase 

‘‘one or more buildings’’ because FEMA 

believes that this nonsubstantive change 

uses plainer language that the public 

can more easily understand. 

Similarly, FEMA proposes to adjust 

the definition of ‘‘condominium 

association.’’ Currently, this term is 

defined as the entity made up of the 

unit owners responsible for the 

maintenance and operation of (a) 

common elements owned in undivided 

shares by unit owners; and (b) other real 

property in which the unit owners have 

use rights; where membership in the 

entity is a required condition of unit 

ownership. FEMA proposes to replace 

the term ‘‘real property’’ with 

‘‘buildings’’ because FEMA believes that 

this change uses plainer language that 

the public can more easily understand 

while maintaining the substantive 

meaning of the definition. 

FEMA proposes to revise the 

definition of ‘‘dwelling.’’ Currently, 

‘‘dwelling’’ is defined as ‘‘a building 

designed for use as a residence for no 

more than four families or a singlefamily unit in a building under a 

condominium form of ownership.’’ 

FEMA proposes to replace the phrase 

‘‘building under a condominium form of 

ownership’’ with ‘‘condominium 

building’’ to integrate the defined term 

‘‘condominium building’’ while 

maintaining the substance of the current 

definition. 

FEMA proposes to revise the 

definition of ‘‘emergency program.’’ 

Currently, ‘‘emergency program’’ is 

defined as the initial phase of a 

community’s participation in the 

National Flood Insurance Program. The 

definition also states that during this 

phase, only limited amounts of 

insurance are available under the NFIA. 

FEMA proposes to retain this definition 

but add at the end the phrase ‘‘and the 

regulations prescribed pursuant to the 

Act.’’ FEMA proposes to add this phrase 

to align the SFIP definition of this term 

with its definition at 44 CFR 59.1. 

FEMA proposes minor revisions to 

the definition of ‘‘improvements.’’ 

Currently, this term is defined as 

‘‘fixtures, alterations, installations, or 

additions comprising a part of the 

insured dwelling or the apartment in 

which you reside.’’ FEMA proposes to 

remove the word ‘‘insured’’ because it is 

not necessary. It proposes to remove the 

word ‘‘the’’ from before the word 

‘‘apartment’’ for readability. 

FEMA proposes to move the 

definition of ‘‘principal residence’’ from 

Art. VII.V.1.a.1 (‘‘Loss Settlement’’) of 

the Dwelling Form to the Definitions 

Section (Article II). Currently, under 

Article VII.V.1 a principal residence 

means the single-family dwelling where 

the policyholder or the policyholder’s 

spouse has lived for at least 80 percent 

of (a) the 365 days immediately 

preceding the time of loss; or (b) the 

period of ownership, if either the 

policyholder or policyholder’s spouse 

owned the dwelling for less than 365 

days immediately preceding the time of 

loss. FEMA proposes to move the 

substantively unchanged definition to 

the Definitions Section of Article II 

because that is the more appropriate 

place to define terms used in the 

Dwelling Form. 

FEMA proposes to revise the 

definition for ‘‘probation premium’’ by 

replacing the defined term ‘‘probation 

premium’’ with the term ‘‘probation 

surcharge.’’ ‘‘Probation surcharge’’ 

would retain the same definition as the 

current definition for ‘‘probation 

premium,’’ which is a flat charge the 

policyholder must pay on each new or 

renewal policy issued covering property 

in a community the NFIP has placed on 

probation under the provisions of 44 

CFR 59.24. FEMA proposes this revision 

because there is no such thing as a 

‘‘probation premium;’’ this incorrect 

term was intended to reference the 

probation surcharge that is applied to 

policies in NFIP communities that have 

been placed on suspension from the 

NFIP. 

FEMA proposes to amend the 

definition of ‘‘regular program.’’ 

Currently, ‘‘regular program’’ is defined 

as 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 NFIA. FEMA proposes to add 

the phrase ‘‘and the regulations 

prescribed pursuant to the Act’’ at the 

end to clarify, without changing the 

substance of the definition, that the 

coverage amounts for NFIP policies are 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 32967 

subject to the rules established in both 

statute and regulation, not just statute. 

FEMA also proposes to modify the 

definition of ‘‘Special Flood Hazard 

Area’’ to include the appropriate 

acronym, ‘‘SFHA.’’ 

FEMA proposes to revise the term 

‘‘unit.’’ Currently, ‘‘unit’’ is defined as 

‘‘a single-family unit you own in a 

condominium building.’’ FEMA 

proposes to replace the word ‘‘unit’’ 

with ‘‘residential space’’ so that the 

word ‘‘unit’’ would not be used to 

define itself. 

3. Article III Property Covered 

Article III of the Dwelling Form 

(‘‘Property Covered’’) is divided into 

four sections, each addressing different 

types of property: Section A, ‘‘Coverage 

A—Building Property,’’ Section B, 

‘‘Coverage B—Personal Property,’’ 

Section C, ‘‘Coverage C—Other 

Coverages,’’ and Section D, ‘‘Coverage 

D—Increased Cost of Compliance.’’ 

i. Coverage A—Building Property 

Article III.A.5.b.2 describes the zones 

above which the lowest floor of a nonwalled or roofed building under 

construction, alteration, or repair must 

be to be covered. FEMA proposes to 

replace ‘‘levels are’’ with ‘‘level is’’ to 

improve readability. FEMA also 

proposes to replace ‘‘and’’ with ‘‘or,’’ 

also to improve readability. No 

substantive changes are intended. 

In Article III.A.6, FEMA proposes to 

replace the reference to ‘‘II.B.6.b and 

II.B.6.c’’ with a reference to ‘‘II.C.6’’ to 

reflect the renumbering proposed for 

Article II. 

Article III.A.7 provides a list of items 

of property covered under Coverage A 

only. FEMA proposes to replace 

‘‘covered’’ with ‘‘insured’’ because 

‘‘covered’’ is a generic and undefined 

term that does not conform to common 

industry or Agency usage. The use of 

‘‘insured’’ better conveys the 

application of the SFIP to property. 

Article III.A.8 limits coverage on 

items of property in a building 

enclosure below the lowest elevated 

floor of an elevated post-FIRM building 

in specified zones. FEMA proposes to 

remove the phrase ‘‘in a building 

enclosure’’ to clarify that the section 

only insures items of property that are 

below the lowest elevated floor, not the 

building enclosure itself. This has 

always been the case, but removing this 

language would make this clearer. 

Removing the language would also 

clarify that FEMA insures any property 

identified in Article III.A.8 that is below 

the lowest elevated floor within the 

footprint of the building, regardless of 

whether such property is located in a 

building enclosure. 

ii. Coverage B—Personal Property 

Article III.B.1 describes the conditions 

under which the policy covers personal 

property inside a building. Current 

Article III.B.1.b contains two 

unnumbered paragraphs. FEMA 

proposes to number these two 

unnumbered paragraphs as ‘‘1.’’ and 

‘‘2.’’ respectively, and to renumber 

subsequent paragraphs accordingly, to 

improve readability and organization. 

Article III.B.3 (renumbered B.5.in the 

proposed text) limits coverage for items 

of property in a building enclosure 

below the lowest elevated floor of an 

elevated post-FIRM building located in 

specified zones or a basement. FEMA 

proposes to remove the phrase ‘‘in a 

building enclosure’’ to clarify that the 

section only insures items of property 

that are below the lowest elevated floor, 

not the building enclosure itself. While 

FEMA has always interpreted this 

provision this way, removing this 

language would make this clearer to 

policyholders. In addition, this 

proposed change would also clarify that 

FEMA insures certain property 

identified in Article III.B.3 (proposed 

B.5) that is below the lowest elevated 

floor within the footprint of the 

building, regardless of whether such 

property is located in a building 

enclosure. 

iii. Coverage C—Other Coverages 

Article III.C describes other coverages 

under the SFIP, including for debris 

removal, property relocation, and 

condominium loss assessments. In 

III.C.2.b, FEMA proposes to number the 

currently unnumbered paragraphs 

immedietly following III.C.2.b.2 as 

III.C.2.b.3 and III.C.2.b.4, respectively, 

to improve organization and readability. 

Article III.C.3.a describes the terms of 

coverage for condominium loss 

assessments. FEMA proposes to revise 

the first sentence of Article III.C.3.a to 

add the phrase ‘‘Subject to III.C.3.b 

below’’ to the beginning of the sentence 

to clarify that the general statement in 

III.C.3.a that FEMA would pay for 

condominium loss assessments would 

be limited by the restrictions established 

in III.C.3.b. FEMA also proposes to add 

‘‘condominium’’ before ‘‘unit’’ in that 

sentence, for the sake of clarity. The 

second sentence in Article III.C.3.a 

states that 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. FEMA 

proposes to replace ‘‘as a result of’’ with 

‘‘because of’’ and ‘‘to the building’s 

common elements’’ with ‘‘to the unit or 

to the common elements of the NFIP 

insured condominium building in 

which this unit is located.’’ FEMA 

proposes to revise this language for 

greater clarity and consistency with the 

‘‘condominium building’’ definition 

added in Article II. 

Article III.C.3.b describes scenarios 

where FEMA will not pay any loss 

assessment charged against the 

policyholder. Article III.C.3.b.1 provides 

that FEMA will not pay any loss 

assessment charged against the 

policyholder ‘‘and the condominium 

association by any governmental body.’’ 

FEMA proposes to relocate the phrase 

‘‘charged against you’’ from III.C.3.b to 

III.C.3.b.1 to improve the sentence 

structure of the provision. 

Article III.C.3.b.4 states that the NFIP 

would not insure any loss assessments 

on units in a condominium building 

that were underinsured as described in 

this paragraph. FEMA proposes to 

remove this paragraph, as these 

restrictions were superseded by section 

100214 of BW–12, which prohibits 

FEMA from denying coverage for a 

condominium unit under a Dwelling 

Form policy based solely, or in part, on 

the flood insurance coverage of the 

condominium association or others on 

the overall property insured by the 

condominium association. Accordingly, 

to implement this requirement, FEMA 

proposes to remove Article III.C.3.b.4 as 

it prevents unit owners from recovering 

under the Dwelling Form policy for loss 

assessments charged against them 

because the condominium building in 

which the unit is located is 

underinsured. FEMA has waived this 

provision in current practice for affected 

individual policies. The proposed 

change would conform the language of 

the Dwelling Form to FEMA’s current 

practice and allow FEMA to discontinue 

use of the individual waiver process. 

Current Article III.C.3.b.5 provides 

that FEMA will not pay for loss 

assessments to the extent that payment 

under this policy for a condominium 

loss, in combination with payments 

under any other NFIP policies for the 

same building loss, exceeds the 

maximum amount of insurance 

permitted under the NFIA for that kind 

of building. Similarly, current section 

III.C.3.b.6 provides that FEMA will not 

pay for loss assessments to the extent 

that payment under this policy, in 

combination with any recovery 

available to the tenant in common under 

any NFIP condominium association 

policies for the same building loss, 

exceeds the amount of insurance 

permitted under the NFIA for a single 

family dwelling. FEMA proposes to 

renumber these subsections as (4) and 


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(5) respectively due to FEMA’s 

proposed removal of current subsection 

(4). In addition, FEMA proposes to 

revise current subsection (5) (proposed 

subsection (4)) to state ‘‘[i]n which the 

total payment combined under all 

policies exceeds the maximum amount 

of coverage available under the Act for 

a single unit in a condominium building 

where the unit is insured under both a 

Dwelling Policy and a RCBAP.’’ FEMA 

also proposes to revise current 

subsection (6) (proposed subsection (5)) 

to state ‘‘[o]n any item of damage that 

has already been paid under a RCBAP 

where a single unit in a condominium 

building is insured by both a Dwelling 

Policy and a RCBAP.’’ FEMA proposes 

this revised language to streamline these 

provisions and to make the same points 

more clearly. 

The last sentence of current III.C.3.b.6 

states that ‘‘[l]oss assessment coverage 

does not increase the Coverage A Limit 

of Liability.’’ FEMA proposes to 

renumber this sentence as III.C.3.c. 

FEMA also proposes to revise the 

language so that it reads ‘‘Condominium 

Loss Assessment coverage does not 

increase the Coverage A Limit of 

Liability and is subject to the maximum 

coverage limits available for a single 

family dwelling under the Act, payable 

between all policies issued and covering 

the unit, under the Act.’’ This would 

clarify that the combined payments 

under the Dwelling Form and the 

RCBAP, or any other payment issued 

under the Dwelling Form to a unit 

owner where there is also an RCBAP 

that covers the property, are subject to 

the $250,000 coverage limit on the 

combined payments under both 

policies. Congress only authorized a 

maximum coverage of $250,000 on a 

single dwelling, and both the RCBAP 

and Dwelling Forms rely upon that 

single authority for establishing the 

available policy limits. As such, the unit 

owner and the condominium 

association each filing separate claims 

under their separate policies cannot 

circumvent the limit imposed by 

Congress. FEMA proposes to add this 

language to emphasize the point that 

even though a condominium unit may 

be insured by both a Dwelling Form 

policy and an RCBAP, this fact does not 

alter the statutory coverage limits. 

iv. Coverage D—Increased Cost of 

Compliance 

Article III.D (‘‘Increased Cost of 

Compliance’’) describes the terms of 

coverage for costs associated with 

complying with State or local floodplain 

management laws or ordinances 

affecting repair or reconstruction of a 

structure suffering flood damage. FEMA 

proposes to revise the language in this 

section so that the word ‘‘structure’’ is 

replaced by the word ‘‘building’’ 

throughout the section. The reason for 

this change is the NFIP insures SFIP 

defined ‘‘buildings,’’ not structures. 

FEMA also proposes to replace the 

phrase ‘‘this coverage’’ with the phrase 

‘‘Coverage D in III.D.3.d and III.D.3.e’’ to 

clarify that the coverage referred to in 

these provisions is Coverage D. 

4. Article V Exclusions 

Article V of the Dwelling Form 

(‘‘Exclusions’’) provides the terms and 

conditions of the SFIP relating to what 

losses are excluded from coverage under 

the SFIP. Article V.B excludes coverage 

for losses resulting from a flood that 

began prior to the effective date of a 

policy; this is referred to as the ‘‘flood 

in progress’’ exclusion. If the SFIP 

covered losses for policies obtained after 

a flood became imminent, people could 

avoid paying for insurance during the 

times they did not need to make a claim. 

FEMA would then have to increase rates 

to compensate for the lost premiums 

and higher losses. This would in turn 

drive more people out of the program, 

which would require higher rates. 

Currently, the exclusion specifies that 

FEMA will not pay for a loss that was 

‘‘directly or indirectly caused by a flood 

that is already in progress’’ prior to the 

effective date of the policy. FEMA is 

proposing changes to Article V because 

the current language does not describe 

how a policyholder could determine 

when a flood was in progress. This 

ambiguous provision has historically 

caused significant confusion among the 

public. As a result, FEMA made several 

attempts to clarify the provision and 

apply it to the specific attributes of 

certain floods. See WYO Bulletin W– 

11030 (May 17, 2011); WYO Bulletin 

W–11034 (June 6, 2011); WYO Bulletin 

W–11045 (June 30, 2011); Definitions 

Section of the Flood Insurance Manual, 

page 4. 

While these clarifications provided 

workable guidance on the issue, BW–12 

directed the FEMA Administrator to 

review ‘‘the processes and procedures 

for determining that a flood event has 

commenced or is in progress for 

purposes of flood insurance coverage 

made available under the National 

Flood Insurance Program.’’ BW–12 

section 10227(a)(1)(A) (42 U.S.C. 4011 

note). Accordingly, FEMA now 

proposes to modify the Flood in 

Progress Exclusion to maintain its 

practical impact, but to provide clearer 

terms for its application. 

FEMA proposes to revise the language 

of Article V.B to allow for two separate 

exclusions for floods in progress, 

depending on how the policyholder 

applied for the policy. If the policy 

became effective at the time of a loan 

closing, as provided by 44 CFR 61.11(b), 

then FEMA would not pay for losses 

caused by a flood that is a continuation 

of a flood that existed prior to coverage 

becoming effective. In all other 

circumstances, FEMA would not pay for 

a loss caused by a flood that is a 

continuation of a flood that existed on 

or before the day the policyholder 

submitted the application for coverage 

and paid the full amount due. This 

exclusion would apply to new policies 

subject to the 30-day waiting period, as 

well as those for which the overnight 

waiting period is applied, as provided 

by 42 U.S.C. 4013(c)(2)(b). 

FEMA believes the proposed 

formulation provides a more thorough 

understanding of what constitutes a 

flood in progress, providing greater 

clarity to policyholders, without altering 

the actual effect of the provision 

because the proposed language captures 

the principles underlying the previous 

agency guidance. FEMA also believes 

the proposed language would 

successfully prevent a policyholder 

from waiting until flooding becomes 

imminent to apply for coverage, as well 

as prevent a person facing imminent 

flooding from obtaining a small 

mortgage to avoid the otherwise 30-day 

effective date waiting period required by 

42 U.S.C. 4013(c)(1). 

In article V.C.6, regarding gradual 

erosion, FEMA proposes to replace 

‘‘insured’’ with ‘‘covered’’ because 

‘‘covered’’ is a generic and undefined 

term that does not conform to common 

industry or Agency usage. The use of 

‘‘insured’’ better conveys the 

application of the SFIP to property. Also 

in article V.C.6, FEMA proposes to 

update the reference to the definition of 

flood to articles II.B.1.c and II.B.2. 

5. Article VII General Conditions 

Article VII (‘‘General Conditions’’) 

provides the general terms and 

conditions of the Dwelling Form SFIP, 

such as provisions related to other 

insurance; amendments, waivers, and 

assignments; policy reformation; policy 

renewal; requirements if there is a loss; 

and loss payments. 

i. Section B—Concealment or Fraud and 

Policy Avoidance 

Article VII.B (‘‘Concealment or Fraud 

and Policy Avoidance’’) provides the 

general terms and conditions of the 

Dwelling Form SFIP related to 

concealment or fraud and policy 

avoidance. FEMA proposes to move 

Article VII.B to a new Article VIII.A 

(‘‘Policy Nullification for Fraud, 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 32969 

Misrepresentation, or Making False 

Statements’’) and make some revisions, 

which are explained in the discussion of 

new Article VIII below. 

ii. Section C—Other Insurance 

Article VII.C (‘‘Other Insurance’’) 

discusses terms related to instances 

where property is covered by more than 

one insurance policy with flood 

coverage. FEMA proposes to redesignate 

Article VII.C as Article VII.B due to 

FEMA’s proposed removal of VII.B. 

Current Article VII.C.2 (proposed 

VII.B.2) states that where there is other 

insurance in the name of the 

policyholder’s condominium 

association covering the same property 

covered by this policy, then this policy 

will be in excess over the other 

insurance. FEMA proposes to replace 

the word ‘‘covered’’ with ‘‘insured.’’ 

FEMA proposes to replace the word 

‘‘covered’’ with the word ‘‘insured’’ 

because ‘‘covered’’ is a generic and 

undefined term that does not conform to 

common industry or Agency usage. The 

use of ‘‘insured’’ better conveys the 

application of the SFIP to property. 

FEMA also proposes to add the phrase 

‘‘issued under the Act’’ directly 

following the phrase ‘‘other insurance’’ 

to clarify that the language referring to 

other insurance is referring to other 

NFIP insurance, not other non-NFIP 

insurance. 

FEMA proposes to add language to 

Article VII.C.2 (proposed VII.B.2) to 

provide that the section does not apply 

where a condominium loss assessment 

to the unit owner results from a loss 

sustained by the condominium 

association that was not reimbursed 

under an RCBAP because the building 

was not insured for an amount equal to 

the lesser of: (a) 80 percent or more of 

its full replacement cost; or (b) the 

maximum amount of insurance 

permitted under the NFIA. FEMA 

proposes to add this exception to codify 

the existing implemention of section 

100214 of BW–12. Under the terms and 

conditions of the Dwelling Form policy 

and the RCBAP, the RCBAP is primary, 

and the Dwelling Form policy acts as an 

excess flood insurance policy. In order 

to allow the Dwelling Form to respond 

as if the RCBAP coverage has in fact 

been exhausted, FEMA must revise 

Article VII.C.2 (proposed VII.B.2) so that 

it does not apply in those situations in 

which the coinsurance provision of the 

RCBAP has been triggered. 

FEMA also proposes to add language 

to proposed Article VII.B.2 clarifying 

that even when a condominium unit is 

insured by two policies, the maximum 

statutory coverage limit available under 

the NFIA of $250,000 still applies. 

FEMA proposes to add this language to 

emphasize that the fact that a 

condominium unit is insured by both a 

Dwelling Form policy and an RCBAP 

does not alter or permit payments to 

exceed the statutory coverage limits. 

iii. Section D—Amendments, Waivers, 

Assignment 

Article VII.D (’’ Amendments, 

Waivers, Assignment’’) provides that 

any amendments or waivers to the 

policy require express written consent 

of the Federal Insurance Administrator. 

It allows a policyholder to assign this 

policy when transferring title of his or 

her property except when the policy (1) 

covers only personal property, or (2) 

covers a structure during the course of 

construction. FEMA proposes to 

redesignate Article VII.D as Article VII.C 

due to the proposed removal of VII.B 

and subsequent renumbering discussed 

above. FEMA proposes to replace the 

phrase ‘‘structure during the course of 

construction’’ with ‘‘building under 

construction’’ both to correspond with 

the replacement of the word ‘‘structure’’ 

with ‘‘building’’ throughout Article V of 

the policy, and also because ‘‘building 

under construction’’ is the proper term 

of art, as used in Article III.A.5.a and 

Article VI.A. Also, FEMA proposes to 

replace ‘‘covers’’ with ‘‘insures’’ because 

‘‘covered’’ is a generic and undefined 

term that does not conform to common 

industry or Agency usage. The use of 

‘‘insured’’ better conveys the 

application of the SFIP to property. 

iv. Section E—Cancellation of the Policy 

by You 

Article VII.E (‘‘Cancellation of the 

Policy by You’’) authorizes a 

policyholder to cancel the policy in 

accordance with the applicable rules 

and regulations of the NFIP and 

provides that a policyholder who 

cancels may be entitled to a full or 

partial refund of premium. FEMA 

proposes to move Article VII.E to a new 

Article VIII discussing policy 

nullifications, cancellations, and nonrenewals. The new Article VIII is 

discussed below. 

v. Section F—Non-Renewal of the 

Policy by Us 

Article VII.F (‘‘Non-Renewal of the 

Policy by Us’’) states that a policy will 

not be renewed if the community where 

the covered property is located stops 

participating in the NFIP, or the 

building has been declared ineligible 

under section 1316 of the NFIA. FEMA 

proposes to move Article VII.F to a new 

Article VIII discussing policy 

nullifications, cancellations, and nonrenewals. The new Article VIII is 

discussed below. 

vi. Section G—Reduction and 

Reformation of Coverage 

Article VII.G (‘‘Reduction and 

Reformation of Coverage’’) describes the 

terms and conditions of the policy 

related to situations in which it is 

discovered that the premium paid on an 

annual policy, or the information used 

to rate the policy, is insufficient. 

Specifically, this section details how 

coverage under the policy would be 

reformed in such situations and the 

policyholder’s options upon 

reformation. 

FEMA proposes to redesignate Article 

VII.G as Article VII.D to conform to the 

relocation and redesignation of 

preceding sections described above. 

FEMA proposes to change the title of 

the section from ‘‘Reduction and 

Reformation of Coverage’’ to 

‘‘Insufficient Premium or Rating 

Information.’’ FEMA proposes this 

change to the title because it is clearer 

than the current section title. 

Additionally, FEMA proposes to add the 

term ‘‘insufficient’’ before ‘‘rating 

information’’ to make it clear that this 

provision applies to both cases: Where 

the information needed to rate the 

policy is incomplete and where it is 

incorrect. With respect to the premium, 

the term ‘‘insufficient’’ applies to 

situations in which the premium paid is 

incorrect. With respect to the rating 

information, the term ‘‘insufficient’’ 

applies to situations in which the rating 

information provided for determining 

the premium rate is incomplete, such as 

when an elevation certificate is not 

provided or is incorrect. FEMA 

proposes to make corresponding 

language changes throughout this 

section to ensure that the provisions of 

this section are applied in both of these 

situations. 

FEMA proposes to add a new Article 

VII.D.1, entitled ‘‘Applicability.’’ The 

proposed Article would state that the 

provisions in proposed Article VII.D, 

Insufficient Premium or Rating 

Information, apply to all instances 

where the premium paid on a policy is 

insufficient or where the rating 

information is insufficient, such as 

where an Elevation Certificate is not 

provided. This change reflects FEMA’s 

current policies and would not 

substativently impact the NFIP. 

Current Article VII.G.1 provides that 

if the premium received was not enough 

to buy the kind and amount of coverage 

requested, FEMA will provide only the 

amount of coverage that can be 

purchased for the premium payment 

received. FEMA proposes to redesignate 


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32970 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

this section as Article VII.D.2 to 

correspond to the redesignations 

described above, and add a title, 

‘‘Reforming the Policy with Reduced 

Coverage,’’ for improved clarity. FEMA 

proposes to add the phrase ‘‘Except as 

otherwise provided in VII.D.1’’ at the 

beginning of the paragraph. FEMA 

proposes this change to correspond to 

the exception established in the new 

proposed language at VII.D.1. FEMA 

also proposes to replace the phrase ‘‘not 

enough’’ with the phrase ‘‘not 

sufficient,’’ the word ‘‘amount’’ to 

‘‘amounts,’’ and replace ‘‘only the 

amount of coverage’’ with ‘‘only the 

kinds and amounts of coverage.’’ FEMA 

believes that these non-substative 

changes would improve readability. 

FEMA proposes to add three 

paragraphs to this section. Proposed 

paragraph D.2.a clarifies that, for 

determining whether the premium is 

sufficient to buy the kinds and amounts 

of coverage requested, FEMA will first 

deduct all applicable fees and 

surcharges. Proposed paragraph D.2.b 

clarifies that if the amount paid, after 

deducting the costs of all applicable fees 

and surcharges, is not sufficient to buy 

any amount of coverage, the Program 

will refund the policyholder’s payment 

and there will be no coverage under the 

policy. FEMA proposes to add these 

clarifications because they are not 

explicitly stated in the current 

regulations, although FEMA has 

previously interpreted regulations to 

require this. Thus this is not a 

substantive change but merely reflects 

existing practice. Proposed paragraph 

D.2.c states that ‘‘[c]overage limits on 

the reformed policy will be based upon 

the amount of premium submitted per 

type of coverage, but will not exceed the 

amount originally requested.’’ FEMA 

proposes this paragraph to codify its 

current practice. When FEMA calculates 

the total policy cost, it knows how 

much of the total cost will be allocated 

to premium, surcharges, fees, etc. Under 

FEMA’s current practice, it tries to 

preserve the ratio of building coverage 

to contents coverage, regardless of how 

much premium the policyholder 

intended to allocate to each type of 

coverage. For example, if a policyholder 

originally requested $200,000 in 

building coverage and $100,000 in 

contents, FEMA would try to preserve 

the 2 to 1 ratio when reducing the 

coverage through reformation. The 

proposed rule seeks to clarify that 

FEMA’s practice is to reflect the 

policyholder’s intent by considering the 

amount of premium the policyholder 

intended to allocate to each type of 

coverage. Using the example above, 

therefore, if the policyholder paid a total 

of $600 premium, wishing to allocate 

$500 for the $200,000 in building 

coverage and $100 for the $100,000 in 

contents, FEMA would provide the 

amount of building coverage that $500 

would purchase under the reformed 

rate, and the amount of contents 

coverage that $100 would purchase 

under the reformed rate. 

Current Article VII.G.2 discusses how 

a policy can be reformed to increase the 

amount of coverage where insufficient 

premium or incomplete rating 

information is discovered before a loss 

(current paragraph (a)), and where 

insufficient premium or incomplete 

rating information is discovered after a 

loss (current paragraph (b)). FEMA 

proposes to redesignate current Article 

VII.G.2 as VII.D.3 and to restructure it to 

improve organization and readability. 

Specifically, FEMA proposes to 

combine the provisions on discovery of 

insufficient premium or rating 

information before a loss and discovery 

of insufficient premium or rating 

information after a loss. To that end, the 

Agency proposes to title proposed 

Article VII.D.3 as ‘‘Discovery of 

Insufficient Premium or Rating 

Information.’’ The proposed subsection 

would state that if the Program 

discovers that the premium or rating 

information is insufficient, the Program 

would reform the policy as described in 

proposed Article VII.D.2. The proposed 

subsection also gives policyholders the 

option of increasing the amount of 

coverage resulting from the reformation 

to the amount he or she requests in 

accordance with the rest of the section. 

This does not constitute a substantive 

change from the current regulations and 

procedure; rather, it is a streamlining of 

the current regulations without altering 

the substance. 

Proposed Article VII.D.3.a would be 

entitled ‘‘Insufficient Premium’’ and 

would address situations where FEMA 

discovers that the premium is 

insufficient. This section would retain 

the first sentence in current VII.G.2.a.1 

providing that where FEMA discovers 

the policyholder has not paid enough 

premium, the policyholder, and any 

mortgagee or trustee of which the 

insurer has written notice, will be sent 

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). From the 

current language, FEMA proposes to 

replace ‘‘enough’’ with ‘‘sufficient’’ to 

align with current program usage and 

proposes to add commas after ‘‘you’’ 

and ‘‘us’’ to improve readability. 

The last sentence in current 

VII.G.2.a.1 provides that where the 

policyholder pays the additional 

premium within 30 days from the date 

the bill is sent, the Program will reform 

the policy to the originally requested 

amount of coverage. FEMA proposes to 

relocate this last sentence to its own 

separate subsection (proposed 

VII.D.3.a.1) and replace it with language 

stating that if it is discovered that the 

initial amount charged for any fees or 

surcharges is incorrect, the difference 

will be added or deducted, as 

applicable, to the total amount in this 

bill. FEMA proposes this sentence 

because in addition to the premium, 

policyholders must pay additional fees 

and surcharges, which can vary based 

on the characteristics of the property 

and its use; this language reflects its 

existing practice that FEMA adjusts the 

total bill for overpayment or 

underpayment of fees and surcharges. 

As mentioned above, FEMA proposes 

to relocate the last sentence in current 

Article VII.G.2.a.1 to its own separate 

subsection (proposed VII.D.3.a.1). 

Because this language only addresses 

what happens if the policyholder pays 

the additional premium within 30 days 

from the date the bill is sent, FEMA 

proposes to add additional language 

(proposed VII.D.3.a.2) clarifying that if 

the policyholder does not pay the 

premium within 30 days from the date 

of the bill, the Program would settle any 

flood insurance claim based on the 

reduced amount of coverage (as reduced 

pursuant to Article VII.D.2). This is 

already implicitly in the current 

regulation and FEMA’s current practice, 

but FEMA proposes to add it to improve 

the clarity of the regulation. 

FEMA proposes to add a third 

subsection (proposed VII.D.3.a.3) 

allowing the policyholder the option of 

paying all or part of the amount due out 

of a claim payment based on the 

originally requested amount of coverage. 

Though not explicitly anticipated in the 

SFIP, FEMA currently provides this 

option to policyholders through 

coordination of disbursement of claim 

proceeds and additional premium 

collections with the insurer. FEMA 

proposes to incorporate this option into 

the SFIP to provide policyholders with 

a comprehensive understanding of their 

options after FEMA discovers a 

misrating after a loss. 

Proposed Article VII.D.3.b would be 

entitled ‘‘Insufficient Rating 

Information’’ and would address 

situations where it is discovered that the 

rating information is insufficient. This 

section would retain the substance of 

the first sentence in VII.G.2.a. stating 

that if it is determined that the rating 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 32971 

information for the policy is insufficient 

and prevents the insurer from 

calculating the additional premium, the 

policyholder would be required to 

provide this information within 60 days 

of a request by the insurer. The last 

sentence in current VII.G.2.a.2 provides 

that once the amount of additional 

premium for the current policy term is 

determined, the procedures outlined in 

G.2.a.1 will be followed. FEMA 

proposes to relocate this sentence to its 

own subsection (proposed VII.D.3.b.1) 

and revise it to state that where 

information is received within 60 days, 

the amount of additional premium for 

the current policy term would be 

determined and the procedures in 

VII.D.3.a would be followed. 

Current VII.G.2.a.3 and G.2.b.3 

address situations where the additional 

premium or information is not received 

by the date it is due. FEMA proposes to 

replace these sections with proposed 

VII.D.3.b.2 to state that where 

information is not received within 60 

days of the request, no claims would be 

paid until the requested information is 

provided. Coverage would be limited to 

the amount of coverage that could be 

purchased for the payments received, as 

determined when the requested 

information is provided. The proposed 

provision reflects FEMA’s existing 

interpretation of the SFIP, as reflected in 

the General Rules Section of the Flood 

Insurance Manual, page 13. FEMA 

proposes this provision to clearly reflect 

FEMA’s policy. 

FEMA proposes to add a new Article 

VII.D.4, entitled ‘‘Coverage Increases,’’ 

which would incorporate the language 

in current Articles VII.G.2.a.3 and 

VII.G.2.b.3. The proposed language 

states that if the policyholder does not 

submit the amounts requested in Article 

VII.D.3.a or the additional information 

requested in Article VII.D.3.b by the 

date it is due, the amount of coverage 

could only be increased by endorsement 

subject to the appropriate waiting 

period. However, no coverage increases 

would be allowed until the information 

requested in Article VII.D.3.b is 

provided. FEMA proposes this 

additional language to explicitly state 

the currently implied consequence of 

not providing the necessary payment or 

information. 

Finally, FEMA proposes to 

redesignate current Article VII.G.3 as 

Article VII.D.5, which would be entitled 

‘‘Falsifying Information.’’ Currently, this 

paragraph states that if the policyholder 

or their agent intentionally did not tell 

FEMA about, or falsified, any important 

fact or circumstance or did anything 

fraudulent relating to this insurance, the 

provisions allowing policy cancellations 

for fraud will apply. FEMA proposes to 

update the references to other policy 

provisions to align with the citations as 

revised under this proposed rule. 

In section J (proposed section G) 

(‘‘Requirements in Case of Loss’’), 

section L (proposed section I) (‘‘No 

Benefit to Bailee’’), and section T 

(propsed section Q) (‘‘Continious Lake 

Flooding’’), FEMA proposes to replace 

‘‘covers’’ with ‘‘insures’’ because 

‘‘covered’’ is a generic and undefined 

term that does not conform to common 

industry or Agency usage. The use of 

‘‘insured’’ better conveys the 

application of the SFIP to property. 

As a consequence of the changes 

proposed above, FEMA also proposes to 

renumber sections H through T as 

sections E through Q. No other changes 

were made to these sections other than 

conforming cross-references. 

vii. Section U—Duplicate Policies Not 

Allowed 

Article VII.U (‘‘Duplicate Policies Not 

Allowed’’) currently describes 

restrictions on insuring property with 

more than one NFIP policy. FEMA 

proposes to remove the Section and 

incorporate the language into the new 

language at Articles I.F and VIII.D 

(discussed in III.C.1.ii and III.C.6.iv of 

this document, respectively). FEMA 

further proposes to redesignate all 

subsequent sections in Article VII, 

starting with section ‘‘VII.V’’ as ‘‘VII.R.’’ 

viii. Section V—Loss Settlement 

Current Article VII.V (‘‘Loss 

Settlement’’) (proposed VII.R) describes 

the three methods for settling losses 

under the SFIP: Replacement cost loss 

settlement, special loss settlement, and 

actual cash value loss settlement. 

Article VII.V.1.a.1 (proposed VII.R.1.a.1) 

provides that replacement cost loss 

settlement applies to a single-family 

dwelling provided that it is the 

policyholder’s principal residence 

within the meaning described further in 

the paragraph. As discussed in III.C.2, 

FEMA proposes to remove the 

definition of ‘‘principal residence’’ 

currently embedded in this provision 

and move it to the Definitions article of 

the SFIP. This change would improve 

readability of the provision without 

substantive impact. 

Throughout proposed section VII.R, 

FEMA proposes to update internal 

references to this section (i.e., replacing 

‘‘V’’ with ‘‘R’’). 

ix. Internal Citation Updates Within 

Article VII 

FEMA proposes to redesignate the 

letter identifiers for the following 

sections due to the resdesignation of 

earlier sections of Article VII. The 

changes are as follows: Current Article 

VII.J (proposed VII.G), Requirements in 

Case of Loss; current Article VII.M 

(proposed VII.J), Loss Payment; current 

Article VII.T (proposed VII.Q), 

Continuous Lake Flooding; and current 

Article VII.V (proposed VII.R), Loss 

Settlement. 

6. Article VIII Policy Nullification, 

Cancellation, and Non-Renewal 

As discussed above, FEMA proposes 

to add a new Article VIII (‘‘Policy 

Nullification, Cancellation, and NonRenewal’’), which would address in one 

place all the current reasons for which 

a policy may be nullified, cancelled, or 

non-renewed. This would consolidate 

the policy nullification, cancellation, 

and non-renewal reasons currently in 

the Dwelling Form at Article VII.B 

(‘‘Concealment or Fraud and Policy 

Voidance’’), VII.E (‘‘Cancellation of the 

Policy by You’’), and VII.F (‘‘NonRenewal of the Policy by Us’’), and 

VII.U (‘‘Duplicate Policies Not 

Allowed’’). It would also incorporate the 

reasons that are being codified into 

regulation at 44 CFR 62.5 (discussed 

below). This consolidation would 

improve the organization and structure 

of the document. This new article 

would also improve transparency to the 

policyholder regarding the reasons for 

which a policy may be nullified, 

cancelled, or non-renewed. 

i. Section A—Policy Nullification for 

Fraud, Misrepresentation, or Making 

False Statements 

Current Article VII.B.1–3 provides 

that a policy is void, has no legal force 

or effect, cannot be renewed, and cannot 

be replaced by a new NFIP policy if the 

policyholder (or another insured or 

agent) has intentionally concealed or 

misrepresented any material fact or 

circumstance, engaged in fraudulent 

conduct, or made false statements 

related to this or any other NFIP policy. 

It also provides that the policy would be 

void as of the date the wrongful acts 

were committed, and that fines, civil 

penalties, and imprisonment may also 

apply. FEMA proposes to move these 

sections to Article VIII.A, rename it 

‘‘Policy Nullification for Fraud, 

Misrepresentation, or Making False 

Statements,’’ and reorganize it without 

substantive change for greater clarity. 

ii. Section B—Policy Nullification for 

Reasons Other Than Fraud 

Current Article VII.B.4 provides that 

the policy is void and has no legal force 

where the property is located in a 

community not participating in the 

NFIP on the policy’s inception date and 


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did not join or reenter the program 

during the policy term and before the 

loss occurred, or if the property is not 

otherwise eligible for NFIP coverage. 

FEMA proposes to establish a new 

Article VIII.B, entitled ‘‘Policy 

Nullification for Reasons Other Than 

Fraud’’ which would incorporate the 

provisions of current VII.B.4 but add 

additional reasons that a policy may be 

void. These are: (1) The applicant or 

policyholder never had an insurable 

interest (proposed VIII.B.1.c); (2) the 

policyholder provided an agent with an 

application and payment, but the 

payment did not clear (proposed 

VIII.B.1.d); and (3) the insurer received 

notice from the policyholder, prior to 

the policy effective date, that the 

policyholder has decided not to take the 

policy and the policyholder is not 

subject to a requirement to obtain and 

maintain flood insurance pursuant to 

any statute, regulation, or contract. 

These added reasons for policy 

voidance reflect current agency 

interpretations and practices, as 

reflected in the Cancellation/ 

Nullification Section of the Flood 

Insurance Manual. 

FEMA proposes to add Article VIII.B 

to state that the applicant or 

policyholder would be entitled to a full 

refund of all premium, fees, and 

surcharges received, but if a claim was 

paid for a policy that is void, the claim 

payment must be returned to FEMA or 

offset from the premiums to be refunded 

before the refund will be processed. 

This reflects current agency 

interpretations and procedures, as 

reflected in the Cancellation/ 

Nullification Section of the Flood 

Insurance Manual. 

iii. Section C—Cancellation of the 

Policy by You 

Current Article VII.E (‘‘Cancellation of 

the Policy by You’’) provides that a 

policyholder may cancel the policy in 

accordance with the NFIP’s rules and 

regulations, in which event they may be 

entitled to a full or partial refund of 

premium under those same rules and 

regulations. FEMA proposes to 

incorporate the provisions of current 

Article VII.E into a new Article VIII.C, 

entitled ‘‘Cancellation of the Policy by 

You.’’ The proposed section C would 

retain the same language except for two 

changes. First, instead of stating ‘‘in 

accordance with the applicable rules 

and regulations of the NFIP,’’ it would 

state ‘‘in accordance with the terms and 

conditions of this policy and the 

applicable rules and regulations of the 

NFIP.’’ Second, it would replace the 

phrase ‘‘premium also under the 

applicable rules and regulations of the 

NFIP’’ with ‘‘premium, surcharges, or 

fees under the terms and conditions of 

this policy and the applicable rules and 

regulations of the NFIP.’’ No substantive 

change is intended. 

iv. Section D—Cancellation of the 

Policy by Us 

FEMA proposes to establish a new 

Article VIII.D, entitled ‘‘Cancellation of 

the Policy by Us,’’ which would state 

four reasons for which a policy may be 

cancelled by the insurer: 1. Cancellation 

for underpayment of amounts owed on 

the policy, 2. cancellation due to lack of 

an insurable interest, 3. cancellation of 

duplicate policies, and 4. cancellation 

due to physical alteration of property. 

The first reason for which the insurer 

may cancel a policy is in proposed 

Article VIII.D.1, entitled ‘‘Cancellation 

for Underpayment of Amounts Owed on 

Policy.’’ This provision would state that 

the insurer may cancel the policy if, 

pursuant to VII.D.2, it is determined that 

the amounts paid by the policyholder 

were not sufficient to buy any amount 

of coverage, and the policyholder did 

not pay the additional amount of 

premium owed to increase the coverage 

to the originally requested amount 

within the required time period. FEMA 

proposes to add this cancellation reason 

to align with current practice, as 

reflected in proposed VII.D.2, that 

FEMA will cancel a policy where the 

policyholder has paid a premium that is 

insufficient to buy a policy with the 

lowest available coverage limits. 

FEMA proposes to add the second 

reason for which the insurer may cancel 

a policy in proposed Article VIII.D.2, 

entitled ‘‘Cancellation Due to Lack of an 

Insurable Interest.’’ Proposed Article 

VIII.D.2.a would state that if the 

policyholder no longer has an insurable 

interest in the insured property, the 

insurer will cancel the policy, and that 

the policyholder would cease to have an 

insurable interest if (1) for building 

coverage, the building was sold, 

destroyed, or removed, and (2) for 

contents coverage, the contents were 

sold or transferred ownership, or the 

contents were completely removed from 

the described location. Proposed Article 

III.D.2.b would state that if a policy is 

cancelled for these reasons, the 

policyholder may be entitled to a partial 

refund of premium under the applicable 

rules and regulations of the NFIP. This 

reflects FEMA’s current practice and 

interpretations, as shown in the 

Cancellation/Nullification section of the 

Flood Insurance Manual, pages 1–2 (‘‘1. 

Building Sold or Removed, Destroyed or 

Physically Altered to no Longer Meet 

the Definition of an Eligible Building’’). 

FEMA proposes to add the third 

reason for which the insurer may cancel 

a policy in proposed Article VIII.D.3, 

entitled ‘‘Cancellation of Duplicate 

Policies.’’ Article VIII.D.3 would have 

three subsections. Subsection (a) would 

state that except as allowed under 

Article I.G (i.e., for a Dwelling Form 

policy on a condominium unit that is 

also insured by an RCBAP policy), 

property may not be insured by more 

than one NFIP policy. This would 

incorporate the language in the current 

Article VII.U, stating that duplicate 

policies are not allowed under the NFIP, 

as well as the exception to that rule 

created in Article I.G. FEMA also 

proposes to add that payment for 

damages will only be made under one 

policy. This would align with current 

Article VII.U, which prevents coverage 

under more than one NFIP policy and 

VII.U.2, which states which one policy 

will pay for a loss in the case of 

duplicate policies. This proposed 

language would improve the clarity of 

the policy by explicitly stating what is 

currently strongly implied in the SFIP. 

Subsection (b) would state that except 

as allowed under Article I.G, if the 

property is insured by more than one 

NFIP policy, all but one of the policies 

will be cancelled, and that the policy, or 

policies, will be selected for 

cancellation in accordance with 44 CFR 

62.5 and the applicable rules and 

guidance of the NFIP. FEMA proposes 

to add this provision in conjunction 

with its proposed revisions to the 

cancellation provisions at 44 CFR 62.5 

(discussed below). 

Subsection (c) would state that if a 

policy is cancelled pursuant to 

VIII.D.4.b, the policyholder may be 

entitled to a full or partial refund of 

premium, surcharges, or fees. FEMA 

proposes to add the third subsection in 

conjunction with the refund rules 

proposed at 44 CFR 62.5. 

FEMA proposes to add the fourth 

reason for which the insurer may cancel 

a policy in proposed Article VIII.D.4, 

entitled ‘‘Cancellation Due to Physical 

Alteration of Property.’’ The proposed 

provision states that the insurer may 

cancel the policy if the insured building 

has been physically altered in such a 

manner that it is no longer eligible for 

flood insurance coverage, and that if the 

policy is cancelled for this reason, the 

policyholder may be entitled to a partial 

refund of premium under the terms and 

conditions of the policy and the 

applicable regulations of the NFIP. This 

reflects current agency practice and 

interpretations, as shown in the 

Cancellation/Nullification section of the 

Flood Insurance Manual, pages 1–2. 


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v. Section E—Non-Renewal of the 

Policy by Us 

Current Article VII.F (‘‘Non-Renewal 

of the Policy by Us’’) provides that a 

policy will not be renewed if the 

community where the covered property 

is located stops participating in the 

NFIP, or if the building has been 

declared ineligible under the section 

1316 of the NFIA. FEMA proposes to 

incorporate these provisions into 

proposed Article VIII.E, entitled ‘‘NonRenewal of the Policy by Us.’’ FEMA 

proposes to retain both provisions 

stating that the property is located in a 

suspended or non-participating 

community and the building is 

ineligible for NFIP coverage, but 

proposes to move the words ‘‘if’’ from 

the beginning of each subsection and 

instead put the word ‘‘if’’ directly after 

the phrase ‘‘will not be renewed’’; to 

replace the word ‘‘covered’’ with 

‘‘insured,’’ and replace the phrase ‘‘has 

been declared’’ with the phrase ‘‘is 

otherwise.’’ FEMA proposes these 

revisions to improve the language. 

FEMA also proposes to add a new 

provision stating that the policy will not 

be renewed if the policyholder has not 

provided the information necessary to 

rate the policy within the required 

deadline. FEMA proposes to add this 

third reason for which a policy will not 

be renewed to clarify that a policyholder 

has an obligation to provide the 

information needed to rate the policy 

and that failure to provide this 

information within the required 

deadline will result in that policy not 

being renewed. This is implicit in the 

language of Article I of the SFIP and 

reflects FEMA’s current practices, but 

the proposed language is a more explicit 

statement needed to increase the 

transparency and clarity of the policy. 

FEMA further proposes to renumber 

current Articles VIII and IX as IX and X, 

respectively, due to the renumbering of 

prior articles. 

7. Article IX What Law Governs 

Current Article IX (‘‘What Law 

Governs’’) describes which law applies 

to the SFIP. FEMA proposes to 

redesignate current Article IX as Article 

X and to add ‘‘the insurer’s policy 

issuance’’ and ‘‘policy administration’’ 

to the list of insurer activities taken 

under the NFIP that must be governed 

exclusively by the National Flood 

Insurance Act of 1968, the regulations 

prescribed pursuant to the Act, and 

Federal common law. FEMA proposes 

this change to clarify that the NFIP 

insurer’s policy issuance and policy 

administration operations are also 

governed solely by the Act, the NFIP’s 

regulations, and Federal common law. 

8. Signing Statement 

The Dwelling Form of the Standard 

Flood Insurance Policy concludes with 

a signing statement that references the 

‘‘Federal Insurance Administration.’’ 

FEMA proposes to changes this to the 

‘‘Federal Insurance and Mitigation 

Administration’’ to align with the 

current organizational title. 

D. Appendix A(2) to Part 61: General 

Property Form 

FEMA proposes to revise the General 

Property Form of the SFIP in a manner 

consistent with the revisions to the 

Dwelling Form of the SFIP described 

above. Except as indicated in the 

sections below, the changes FEMA is 

proposing to the General Property Form 

are identical to those in the Dwelling 

Form. 

1. Article I Agreement 

In the current General Property Form, 

the first paragraph is a prefatory 

statement regarding what the policy 

does not cover, and it is outside of 

Article I. As FEMA proposed above in 

Article I of the Dwelling Form of the 

SFIP, FEMA proposes to move this 

statement so that it is included in 

Article I and labeled section ‘‘A.’’ FEMA 

proposes to further revise this section in 

the General Property Form to include a 

statement about what the General 

Property Form does cover. FEMA 

proposes to add language stating that 

except as provided in Article I.A.2 (the 

current language stating what the policy 

does not cover), ‘‘this policy provides 

coverage for multifamily buildings 

(residential buildings designed for use 

by 5 or more families that is not a 

condominium building), non-residential 

buildings, and their contents.’’ This 

clear statement would help differentiate 

the General Property Form from the 

other SFIP policy forms. 

In addition, the proposed General 

Property Form would not include the 

proposed Dwelling Form’s Art. I.G, 

which provides that a building may be 

covered under both a Dwelling Form 

policy and a RCBAP. General Property 

Form policies may only insure nonresidential buildings, while RCBAP may 

only insure residential condominium 

buildings. Accordingly, Art. I.G would 

not apply similarly in the General 

Property Form. 

2. Article II Definitions 

The definitions FEMA proposes to 

add, delete, or revise in Article II of the 

General Property Form of the SFIP, 

‘‘Definitions,’’ would be the same as 

those in the Dwelling Form of the SFIP, 

insofar as those terms are also defined 

in the General Property Form, with one 

exception. FEMA proposes to revise the 

definition of ‘‘unit’’ in the General 

Property form to mean ‘‘a single-family 

residential or non-residential space you 

own in a condominium building.’’ 

Although this is different from the 

definition used in the Dwelling Form 

(the Dwelling Form covers only 

residential properties, whereas the 

General Property Form covers both 

residential and non-residential 

properties), the reason for this proposed 

revision is the same—to remove the 

word ‘‘unit’’ within the definition of 

‘‘unit.’’ 

3. Article III Property Covered 

Article III.A. describes the conditions 

under which the policy covers building 

property. Article III.A.2 provides that 

the policy covers building property at a 

location other than the one described on 

the Declarations Page according to 

certain conditions. FEMA proposes to 

replace the phrase ‘‘We also insure 

building property . . .’’ with ‘‘Building 

property located at another location 

. . .’’ to reduce redundancy and 

improve readability with the first 

sentence of the paragraph, which states 

‘‘We insure against direct physical loss 

by or from flood to:’’. Article III.A.6.a 

provides the conditions for coverage 

where the structure is not yet walled or 

roofed as described in the definition for 

‘‘building.’’ The subsection erroneously 

cites to ‘‘II. 6.a.’’ rather than to 

‘‘II.B.6.a.’’ as the location for the 

definition of ‘‘building.’’ FEMA 

proposes to add ‘‘B’’ to the citation to 

correct the typographical error. 

Article III.B.1 describes the conditions 

under which the policy covers personal 

property inside a building. Current 

Article III.B.1.b contains an 

unnumbered paragraph after paragraph 

B.1.b. FEMA proposes to number this 

unnumbered paragraphs as ‘‘2’’, and to 

renumber subsequent paragraphs 

accordingly, to improve readability and 

organization. 

E. Appendix A(3) to Part 61: Residential 

Condominium Building Association 

Policy 

FEMA proposes to amend the 

Residential Condominium Building 

Association Policy (RCBAP) Form of the 

SFIP in a manner consistent with the 

revisions to the Dwelling Form of the 

SFIP. The changes made to the RCBAP 

Form would be identical to those in the 

Dwelling Form for all provisions that 

these two forms have in common. 

Additionally, FEMA proposes to replace 

reference to the ‘‘FEMA Regional 


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32974 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

5See 48 CFR part 37. 

Director’’ with ‘‘FEMA Regional 

Administrator’’ in current VIII.T.2.h 

(proposed VIII.Q.2.h) to align with the 

current organizational title. 

F. Part 62: Sale of Insurance and 

Adjustment of Claims 

Part 62 sets forth the manner in which 

NFIP flood insurance is made available 

to the public in participating 

communities, prescribes the general 

method by which FEMA exercises its 

responsibility regarding the manner in 

which claims for losses are paid, and 

states reasons for which a policy may be 

nullified or cancelled and the associated 

refunds. 

1. Part 62 Authority Citation 

The current authority citation for part 

62 is 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. 

FEMA proposes to replace the citations 

to Reorganization Plan No. 3 and 

Executive Order 12127 with a citation to 

the codification of the Homeland 

Security Act of 2002, 6 U.S.C. 101 et 

seq. The authority citation would 

therefore read 42 U.S.C. 4001 et seq.; 6 

U.S.C. 101 et seq. FEMA proposes this 

change because while Reorganization 

Plan No. 3 and Executive Order 12127 

originally created FEMA as an executive 

agency, PKEMRA amended the 

Homeland Security Act of 2002, Public 

Law 107–296, by establishing the 

Agency in statute and defining the 

Agency’s authorities and 

responsibilities. Accordingly, a citation 

to the codification of the Homeland 

Security Act is more appropriate. 

2. Section 62.3 Servicing Agent 

Section 62.3 currently describes the 

Flood Insurance Administrator’s 

authority to enter into an agreement 

with a servicing agent that can service 

policies and claims on behalf of the 

Agency. Paragraph (a) currently states 

that the Federal Insurance 

Administrator ‘‘has entered into the 

Agreement’’ with a servicing agent. 

Section 62.3(b) currently names 

National Con-Serv, Inc. (NCSI) as 

FEMA’s servicing agent for its direct 

side policies. FEMA proposes to make a 

change to paragraphs (a), remove 

paragraph (b), and renumber paragraph 

(c) as paragraph (b) to better describe the 

present status of the direct servicing 

agent. 

In section 62.3(a), FEMA proposes to 

replace the words ‘‘has entered into the 

Agreement’’ with the words ‘‘may enter 

into an agreement.’’ The current 

formulation states a current fact, rather 

than defining the Agency’s powers and 

duties, which is a traditional role of a 

rule. Further, the use of ‘‘the 

Agreement’’ seems to imply that a 

particular agreement must be entered 

into with the servicing agent. However, 

no such standard agreement exists in 

regards to contracting with a direct 

servicing agent. FEMA contracts with 

servicing agents in accord with the 

Federal Acquisition Regulations.5 This 

adjustment better describes the 

Administrator’s authority to decide 

whether or not to use the services of a 

servicing agent, and if choosing to do so, 

the terms of the agreement. 

FEMA proposes to remove section 

62.3(b) because the current regulation 

lists NCSI as the NFIP Direct Servicing 

Agent even though this is not accurate 

and it is uncessary to name a 

government contractor in the Code of 

Federal Regulations. Contact 

information for the Direct Servicing 

Agent is provided to each policyholder 

sold NFIP flood insurance through the 

Direct Servicing Agent. FEMA also 

provides this information on its 

website.6 Removing this from regulation 

would reduce the burden on FEMA to 

undertake a rulemaking each time the 

Direct Servicing Agent changes, while 

not materially impacting the public. 

After removing current paragraph (b), 

FEMA proposes to renumber current 

paragraph (c) as paragraph (b). 

With respect to section 62.3(b), FEMA 

proposes to remove the paragraph 

because the named servicing agent is no 

longer accurate—NCSI is no longer 

FEMA’s direct servicing agent. FEMA 

proposes to add a new paragraph (b) 

stating that FEMA will provide public 

notice of the name of the servicing agent 

in the Federal Register. This change 

will allow the agency greater flexibility 

in providing public notice of the 

identity of its direct servicing agent 

without having to undertake a full 

rulemaking to do so. 

3. Section 62.5 Premium Refund 

Section 62.5 describes reasons for 

which FEMA will allow cancellation of 

a policy. Section 62.5 currently allows 

a policyholder to cancel a policy for two 

reasons. First, the policyholder may 

cancel a policy that covers property for 

which the policyholder is no longer 

required to maintain flood insurance 

because a Letter of Map Amendment 

issued under part 70 has determined 

that the property is not located in an 

SFHA. Second, the policyholder may 

cancel a policy that is a three-year 

policy where the policyholder has either 

obtained a replacement flood insurance 

policy or the lender has provided the 

NFIP with actual notice that the 

mortgage has been paid off and/or the 

lender no longer requires the 

policyholder to maintain flood 

insurance. 

In addition to section 62.5, section 

61.5(c) and certain sections of the SFIP 

also describe the reasons for which 

FEMA will allow cancellation of a 

policy. FEMA proposes to remove 

current section 62.5 and replace these 

various regulatory provisions with a 

comprehensive new section 62.5 

codifying all the reasons for which 

FEMA allows a policyholder to cancel 

or nullify a policy, as well as the 

handling of associated premium 

refunds. FEMA proposes to entitle 

section 62.5 ‘‘Nullifications, 

Cancellations, and Premium Refunds.’’ 

In this new section 62.5, FEMA 

proposes to incorporate the first policy 

cancellation reason (e.g., the property is 

no longer in a SFHA), discussed in more 

detail below. FEMA proposes to remove 

the second reason because it refers to a 

three-year insurance policy the NFIP no 

longer uses. FEMA proposes to 

consolidate the remaining reasons for 

which the NFIP may nullify or cancel a 

policy in section 62.5. 

i. Paragraph (a): Nullification 

Paragraph (a) of this new section, 

entitled ‘‘Nullification,’’ would describe 

all the reasons for which FEMA may 

terminate a policy. Subparagraph (1), 

entitled ‘‘Property Ineligible at Time of 

Application,’’ would state that a policy 

for a property that was not eligible for 

coverage at the time of the initial 

application will be considered void 

from commencement. This paragraph 

would also provide the rules and 

limitations governing the applicability 

of this nullification reason, as well as 

the associated premium refunds. FEMA 

has previously handled situations where 

property was ineligible for flood 

insurance at the time of application via 

NFIP procedures. FEMA proposes to 

codify existing practice, found at Reason 

Code 6 from the Nullification/ 

Cancellation section of the Flood 

Insurance Manual, into regulation to 

ensure consistent application of the 

procedures and to provide a 

comprehensive nullification section in 

regulation. 

Subparagraph (2), entitled ‘‘Property 

Later Becomes Ineligible,’’ would state 

that a policy for a property that was 

eligible for coverage at the time of the 

initial application, but later became 

ineligible for coverage, may not be 

renewed and will be void from the first 

renewal date after the property became 

ineligible. This paragraph would also 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 32975 

provide the rules and limitations 

governing the applicability of this 

nullification reason, as well as the 

associated premium refunds. This 

would further codify Reason Codes 1 

and 6 from the Nullification/ 

Cancellation section of the Flood 

Insurance Manual into regulation. 

Paragraph (3), entitled ‘‘Nullification 

Prior to Policy Effective Date,’’ would 

clarify that in cases where a policy is 

nullified before it becomes effective, the 

NFIP will void the policy from the 

beginning of the policy term. Such a 

situation may arise where a 

policyholder’s premium payment check 

is returned for insufficient balance or 

where a policyholder cancels his or her 

policy before it becomes effective. The 

provision would also clarify that in the 

rare instance where the NFIP pays a 

claim for a policy that was actually 

nullified before the policy’s effective 

date, the policyholder would have to 

either return the claim payment or pay 

the premium using the claim payment. 

This paragraph would also provide the 

rules and limitations governing the 

applicability of this nullification reason, 

as well as the associated premium 

refunds. Overall, this provision will 

codify existing Reason Codes 5, 7, and 

13 from the Nullification/Cancellation 

section of the Flood Insurance Manual 

into regulation. These reason codes are 

based on basic principles of insurance 

that the program has applied with 

regulatory instruction. FEMA proposes 

to codify these cancelation/nullification 

reasons in regulation to provide 

stakeholders with a comprehensive 

regulatory basis for nullification. 

ii. Section 62.5(b): Cancellation Due to 

Lack of an Insurable Interest 

Section (b), entitled ‘‘Cancellation 

Due to Lack of an Insurable Interest,’’ 

would be taken from the current 61.5(c) 

and would allow policy cancellations 

when a policyholder ceases to have an 

insurable interest in the insured 

property (i.e., because the property was 

sold, destroyed, or removed). This 

subsection would state that for building 

coverage, a policyholder ceases to have 

an insurable interest if the building has 

been sold, destroyed, or removed. This 

subsection would further state that for 

contents coverage, a policyholder ceases 

to have an insurable interest if the 

contents were sold, transferred 

ownership, or have been removed from 

the described location. This paragraph 

would also provide the rules and 

limitations governing the applicability 

of this cancellation reason, as well as 

the associated premium refunds. This 

will codify Reason Codes 1 and 2 from 

the Nullification/Cancellation section of 

the Flood Insurance Manual into 

regulation. Reason Codes 1 and 2 are 

necessitated by basic principles of 

insurance that prevent an insurer from 

insuring property in which the 

policyholder does not have an insurable 

interest. FEMA proposes to codify these 

cancelation/nullification reasons in 

regulation to provide stakeholders with 

a comprehensive regulatory basis for 

nullification. 

iii. Section 62.5(c): No Insurance 

Coverage Requirement 

Paragraph (c), entitled ‘‘No Insurance 

Coverage Requirement,’’ would allow 

cancellation in cases where the 

policyholder is no longer required to 

maintain flood insurance on the 

property. The new paragraph would 

state that a policyholder may cancel a 

policy if there was a requirement by a 

lender, loss payee, or other Federal 

agency to obtain and maintain flood 

insurance pursuant to statute, 

regulation, or contract, but there no 

longer is such a requirement. Such 

situatons would include where (i) the 

policyholder has paid off his or her 

mortgage, (ii) the policy was required by 

the mortgagee in error, or (iii) the 

property has been removed from the 

SFHA, and accordingly from the 

mandatory purchase requirement, 

through a revision or amendment to the 

FIRM, including the issuance of a Letter 

of Map Amendment (LOMA) removing 

a property from an SFHA. 

The paragraph will further state that 

in such instances, FEMA would only 

provide a pro rata refund of the 

premium for the current policy year, as 

calculated from the date of the 

cancellation request. Surcharges or 

other fees would not be refunded. This 

will codify into regulation FEMA’s 

interpretation of 44 CFR 62.5, which is 

currently found in Reason Codes 9, 12, 

15, 18, and 19 from the Nullification/ 

Cancellation section of the Flood 

Insurance Manual. 

iv. Subsection 62.5(d): Establishment of 

a Common Expiration Date 

Subsection (d), entitled 

‘‘Establishment of a Common Expiration 

Date,’’ would codify parts of current 

Article VII.U of the SFIP. The provision 

would allow policyholders to create 

duplicate policies, and then cancel the 

policy with the earlier effective date, to 

establish common expiration dates with 

other coverage. This paragraph would 

also provide the rules and limitations 

governing the applicability of this 

nullification reason, as well as the 

associated premium refunds. This 

would codify into regulation the NFIP’s 

existing cancellation reason found 

under Reason Code 3 in the 

Nullification/Cancellation section of the 

Flood Insurance Manual. 

v. Subsection 62.5(e): Cancellation or 

Nullification of Duplicate NFIP Policies 

Subsection (e) would be entitled 

‘‘Cancellation or Nullification of 

Duplicate NFIP Policies.’’ The 

subsection would incorporate 

provisions of current Article VII.U, 

which allow for cancellation of 

duplicate NFIP policies. The proposed 

subsection would include two 

paragraphs. Paragraph (1), entitled 

‘‘Generally,’’ would have two 

paragraphs. Paragraph (i) would state 

that if more than one policy covers the 

same building not in accordance with 

applicable regulation and SFIP terms 

and conditions, FEMA must nullify the 

policy with the later effective date. This 

paragraph would also provide the rules 

and limitations governing the 

applicability of this nullification reason, 

as well as the associated premium 

refunds. 

Paragraph (ii) would state that if both 

policies have the same effective date, 

the policyholder may choose which 

policy will remain in effect, at which 

point the same refund rules laid out in 

paragraph (i) apply. This paragraph 

would also provide the rules and 

limitations governing the applicability 

of this nullification reason. 

Paragraph (2), entitled ‘‘Exceptions,’’ 

would establish the exceptions to 

Paragraph (1) and would state that in 

certain cases, the policy with the earlier 

effective date may be cancelled instead 

of the policy with the later effective 

date. The first exception, contained in 

paragraph (i) and entitled ‘‘Earlier 

Policy Expired’’ would allow the policy 

with the earlier effective date to be 

cancelled where that policy has expired 

for more than 30 days. The second 

exception, in paragraph (ii) entitled 

‘‘Group Flood Insurance Policy (GFIP)’’ 

would provide that the policy with the 

earlier effective date may be cancelled if 

that policy is a GFIP. The third 

exception, in paragraph (iii) entitled 

‘‘Cancellations to Establish a Common 

Expiration Date’’ would provide that the 

policy with the earlier effective date 

may be cancelled pursuant to paragraph 

(d) of this proposed section (i.e., to 

establish a common expiration date). 

The fourth exception, in paragraph (iv) 

entitled ‘‘Force-Placed Policy’’ would 

allow the policy with the earlier 

effective date to be cancelled if the the 

mortgagee buys a flood insurance policy 

through the Mortgage Portfolio 

Protection Program after the property 

owner fails to obtain a flood insurance 

policy on their own. This is often 


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refered to as ‘‘force placing’’ a policy. 

The last exception, in paragraph (v) 

entitled ‘‘Condominium Unit Covered 

by a Dwelling Form Policy and an 

RCBAP’’ would provide that if the 

policy with the earlier effective date is 

a Dwelling Form policy with building 

coverage on a condominium unit that is 

also covered by an RCBAP with 

coverage that equals the statutory 

maximum building coverage limit, the 

Dwelling Form Policy may be cancelled. 

Each paragraph establishing an 

exception would also provide the 

premium refunds associated with 

cancellations falling under the 

exception. This proposed section would 

clarify, in regulation, how FEMA has 

interpreted Article VII.U of the SFIP in 

practice. This cancellation reason is 

currently found in Reason Code 4 in the 

Nullification/Cancellation section of the 

Flood Insurance Manual. 

vi. Subsection 62.5(f): Other 

Cancellations and Nullifications 

Subsection (f) would be entitled 

‘‘Other Cancellations and 

Nullifications,’’ and clarify the other 

current reasons for which a policy may 

be cancelled. This section would also 

state that the policyholder will not 

receive a refund of any premium, fees, 

or surcharges for policies cancelled 

pursuant to this section. Paragraph (1), 

entitled ‘‘Fraud,’’ would state that 

FEMA will cancel a policy for fraud 

committed by the policyholder or agent 

and may cancel a policy for 

misrepresentation of a material fact by 

the policyholder or agent. In either case, 

the cancellation would take effect as of 

the date of the fraudulent act or material 

misrepresentation of fact. This is taken 

from current Article VII.B of the SFIP, 

which states that fraud by the agent or 

the insured voids a policy. This 

nullification reason may be found under 

Reason Code 23 in the Nullification/ 

Cancellation section of the Flood 

Insurance Manual. 

Paragraph (2), entitled 

‘‘Administrative Cancellation,’’ would 

allow a policy to be cancelled and 

rewritten to correct an administrative 

error, such as when the policy is written 

with the wrong effective date, and any 

excess premium, fees, or surcharges 

would be refunded. This cancellation 

reason may be found under Reason 

Code 20 in the Nullification/ 

Cancellation section of the Flood 

Insurance Manual. 

Paragraph (3), entitled ‘‘Nullification 

for Properties Ineligible Due to Physical 

Alteration of Property,’’ would state that 

a policy insuring a building or its 

contents, or both, may be cancelled if 

the building has been physically altered 

so that the building and its contents are 

no longer eligible for flood insurance 

coverage. This paragraph would also 

provide the rules and limitations 

governing the applicability of this 

nullification reason, as well as the 

associated premium refunds. This 

nullification may be found under 

Reason Codes 1 and 2 in the 

Nullification/Cancellation section of the 

Flood Insurance Manual. 

4. Section 62.6 Minimum 

Commissions 

Current section 62.6 contains 

provisions applicable to insurance 

agents and brokers writing NFIP policies 

through the NFIP Direct Services Agent. 

It does not apply to agents or brokers 

associated with WYO companies. FEMA 

proposes several nonsubstantive 

changes designed to clarify the existing 

section. 

i. Section Heading 

Currently, section 62.6 is titled, 

‘‘Minimum Commissions.’’ FEMA 

proposes to revise the title of section 

62.6 to ‘‘Brokers and Agents Writing 

NFIP Policies through the NFIP Direct 

Servicing Agent’’ because the section 

covers more than just commissions. 

FEMA believes the proposed title better 

reflects the contents of the section. 

ii. Paragraph (a): Agent and Broker 

Licensing Requirements 

Currently, section 62.6(a) defines the 

commissions paid to agents and brokers 

participating in the Direct Servicing 

Agent (DSA) portion of the NFIP. 

However, it also includes a requirement 

that such agents and brokers are ‘‘duly 

licensed by a state insurance regulatory 

authority.’’ FEMA proposes to move this 

important requirement from within the 

minimum commission provision and set 

it out in its own paragraph. 

Accordingly, FEMA proposes to add a 

new paragraph (a) that only includes the 

requirement and to redesignate current 

paragraphs (a) and (b) as paragraphs (b) 

and (c), respectively. Accordingly, 

FEMA also proposes to make 

corresponding changes to proposed 

paragraph (b) by removing the existing 

references to state licensing 

requirements. FEMA does not intend to 

substantively change the licensing 

requirements of DSA agents, but rather 

intends to separate this requirement 

from other subject matter to improve 

overall clarity of the section. FEMA also 

proposes to change the uses of ‘‘shall’’ 

to ‘‘will’’ to incorporate plainer 

language without making substantive 

change. 

5. Section 62.22 Judicial Review 

Section 62.22 provides that actions for 

disallowed claims must be instituted in 

the U.S. District Court for the district in 

which the insured property was situated 

and describes service of process 

requirements. FEMA proposes to revise 

section 62.22 to replace references to the 

‘‘Federal Insurance Administration’’ 

with the current organizational title, 

‘‘Federal Insurance and Mitigation 

Administration.’’ 

IV. Regulatory and Economic Analysis 

A. Executive Order 12866, Regulatory 

Planning and Review & Executive Order 

13563, Improving Regulation and 

Regulatory Review 

Executive Orders 13563 (‘‘Improving 

Regulation and Regulatory Review’’) 

and 12866 (‘‘Regulatory Planning and 

Review’’) direct agencies to assess the 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. Executive 

Order 13771 (‘‘Reducing Regulation and 

Controlling Regulatory Costs’’) directs 

agencies to reduce regulation and 

control regulatory costs and provides 

that ‘‘for every one new regulation 

issued, at least two prior regulations be 

identified for elimination, and that the 

cost of planned regulations be prudently 

managed and controlled through a 

budgeting process.’’ 

The Office of Management and Budget 

(OMB) has not designated this rule a 

‘‘significant regulatory action’’ under 

section 3(f) of Executive Order 12866. 

Accordingly, OMB has not reviewed it. 

As this rule is not a significant 

regulatory action, this rule is exempt 

from the requirements of Executive 

Order 13771. See OMB’s Memorandum 

‘‘Guidance Implementing Executive 

Order 13771, titled ‘Reducing 

Regulation and Controlling Regulatory 

Costs’ ’’ (April 5, 2017). 

In this rule, FEMA proposes to make 

several nonsubstantive changes to the 

National Flood Insurance Program’s 

(NFIP) regulations at Parts 59, 61, and 

62, as well as the Appendices to Part 61. 

FEMA proposes to codify in regulation 

certain provisions of the Biggert Waters 

Flood Insurance Reform Act of 2012 

(BW–12) and the Homeowner Flood 

Insurance Affordability Act of 2014 

(HFIAA) that have already been 


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implemented. FEMA implemented these 

changes via the Flood Insurance Manual 

or other related guidance documents as 

they were unambiguous changes that 

left no discretion on the part of the 

agency to implement. Now FEMA 

proposes to update the regulations 

accordingly. FEMA also proposes to 

clarify certain existing NFIP regulations 

relating to NFIP operations and the 

Standard Flood Insurance Policy 

unrelated to recent legislation by 

consolidating and stylistically updating 

the regulatory text and standardizing 

key terminology. 

Overall, there are 34 identified 

proposed regulatory changes in this rule 

(itemized in Table 1 below). The vast 

majority of these changes are limited to 

nonsubtantive clarifications. The 

remaining provisions are considered 

‘‘Codifications,’’ that codify in 

regulation either an existing practice or 

policy, or a process heretofore requiring 

special waiver by FEMA. 

Following guidance in OMB Circular 

A–4, FEMA assesses the impacts of this 

rule against the no-action baseline as 

well as a pre-statutory baseline. The no 

action baseline is an assessment against 

what the world would be like if the 

proposed rule is not adopted. The prestatutory baseline is an assessment 

against what the world would be like if 

the relevant statute(s) had not been 

adopted. By considering both baselines 

we are able to consider full costs of the 

action. 

Under a no-action baseline, this 

proposed rule would carry no transfers 

or quantifiable costs. The proposed 

rulemaking would make material 

improvements to the language and 

organization of the NFIP’s regulations, 

but such clarifications and codifications 

would not result in any quantifiable 

burden or benefit. The proposed rule 

also would codify certain changes 

pursuant to BW–12 and HFIAA that 

FEMA has already implemented via the 

Flood Insurance Manual or other related 

guidance documents. WYO companies 

would, however, incur opportunity 

costs as they spend time becoming 

familiar with the proposed changes. The 

proposed rule would result in cost 

savings associated with no longer 

requiring individual waivers for 

condominium loss assessment 

restrictions. 

The below analysis adopts a 

consistent pre-statutory baseline of 2012 

in order to capture the effects of the 

proposed rule, including those of 

modifications already implemented 

through interim actions. The summary 

table below (Table 1) presents the 

proposed rule’s components based on 

the two categorizations above, including 

the related statutory mandates (BW–12, 

HFIAA or both), a description of their 

effects and their likely impact. 

TABLE 1—SUMMARY OF PROPOSED CHANGES

Current section No./ 

subject matter Proposed change 

Mandatory or 

discretionary 

action 

Impact 

Nonsubstantive Clarifications & Consolidations 

1. § 59 Definitions ........... FEMA proposes to add and revise definitions to support clarifications and 

codificatons described below. This is a nonsubstantive change that clarifies existing definitions and does not alter the administration of the program.

Discretionary ..... No change in compliance burden. 

2. § 61.1 Purpose of part FEMA proposes to remove irrelevant second sentence that does not relate 

to the substantive content of part 61. This is a nonsubstantive change 

that does not alter the administration of the program but rather provides 

greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

3. § 61.3 Coverage and 

benefits provided 

under the SFIP.

FEMA proposes to clarify language to provide a more complete statement 

of coverage and benefits provided by the SFIP. The coverage and benefits provided under the SFIP are already stated in regulations; this is just 

a consolidated, unified statement of coverage and benefits under the 

SFIP. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

4. § 61.5 Deductibles ...... An application of BW–12 section 100210 and HFIAA section 12, that would 

clarify existing policy/practice by moving content of 61.5 to new unified 

cancellation/nullification section in 44 CFR 62.5 (discussed below). FEMA 

also proposes to replace the current deductible tables with provisions describing the minimum deductibles required by BW–12 section 100210 and 

the $10,000 deductible option required by HFIAA section 12. This is a 

nonsubstantive change because FEMA has always had this authority and 

has always made these deductible options available to policyholders despite not being explicitly provided for in the CFR.

Mandatory ......... No change in compliance burden. 

5. § 61.6 Maximum 

amounts of coverage 

available.

FEMA proposes to clarify the maximum coverage limit tables in section 61.6 

with nonsubstantive changes to improve readability and conformance with 

standard program terminology and terminology introduced by BW–12. 

This is a nonsubstantive change that does not alter the administration of 

the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

6. § 61.10 Requirements 

for Issuance or Renewal of Flood Insurance Coverage.

FEMA proposes to clarify/consolide existing regulation language. This new 

provision would clarify that no flood insurance coverage will be issued unless there is (a) receipt of full amount due and (b) submission of a complete application with all the required rating information. Although this has 

always been the case, and these concepts are covered in sections 61.5 

and 61.11, FEMA believes that increased clarity is needed by adding a 

consolidated statement in the regulations. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 


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TABLE 1—SUMMARY OF PROPOSED CHANGES—Continued 

Current section No./ 

subject matter Proposed change 

Mandatory or 

discretionary 

action 

Impact 

7. § 61.13 Standard 

Flood Insurance Policy.

This provision would clarify that SFIP is authorized only under terms and 

conditions established by Act, regulations, SFIP, and Administrator interpretations. FEMA also proposes to clarify that the agent acts only for policyholder and that the risk of loss is borne by the National Flood Insurance Fund, not the WYO company. This does not represent a substantive 

change in policy or terms and conditions of the SFIP, but instead would 

make terms clearer.

Discretionary ..... No change in compliance burden. 

8. § 62.5 Policy Nullification and Cancellation.FEMA proposes to make changes that would clarify and consolidate the existing reasons for which a policy may be cancelled or nullified. The current reasons for which a policy may be cancelled or nullified are spread 

throughout the regulations and FEMA’s interpretations of those regulations in the Flood Insurance Manual. This would consolidate those reasons into one section for greater clarity and transparency to the public. 

This is a nonsubstantive change that does not alter the administration of 

the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

9. § 62.6 Broker and 

Agents for Servicing 

Agent.

This provision would clarify FEMA’s existing policy by adding it to regulation 

that a broker or agent selling NFIP policies must be licensed in the state 

in which the property is located. This is a nonsubstantive change that 

does not alter the administration of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

10. SFIP Article I ............ FEMA proposes changes to SFIP Article I that would clarify the types of 

property covered by the SFIP. Proposed clarifications are about coverage 

limits and multiple policies covering one building. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

11. SFIP Article II-Definitions.FEMA proposes to revise and add some definitions for clarity. In particular, 

the proposed changes would clarify that the named insured must also include the building owner if building coverage is purchased. This is a nonsubstantive change that does not alter the administration of the program 

but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

12. SFIP Article III .......... FEMA proposes to clarify that references to insured property do not extend 

coverage to any type or item of property not otherwise insured in accordance with the terms and conditions of SFIP. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

13. SFIP Article III.A ...... FEMA proposes minor nonsubstantive changes to Article III.A.5.b.2 to improve the grammar of the section; revise Article III.A.8 to remove the 

phrase ‘‘in a building enclosure.’’ This is a nonsubstantive change that 

does not alter the administration of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

14. SFIP Article III.B ...... FEMA proposes to revise the numbering in this section to improve readability and organization; revise Article III.B.3 by removing the phrase ‘‘in a 

building enclosure.’’ This is a nonsubstantive change that does not alter 

the administration of the program but rather provides greater clarity for 

the reader.

Discretionary ..... No change in compliance burden. 

15. SFIP Article III.D ...... FEMA proposes to revise the language in this section so that the word 

‘‘structure’’ is replaced by the word ‘‘building’’ throughout the section except at III.D.5.c. The reason for this change is the NFIP insures SFIP defined ‘‘buildings,’’ not any structure that does not meet the definition of 

‘‘building’’ as defined in the SFIP. FEMA also proposes to improve the 

language in III.D.3.d and III.D.3.e by replacing the phrase ‘‘this coverage’’ 

with the phrase ‘‘Coverage D’’ to clarify that the coverage referred to in 

these provisions is Coverage D. This is a nonsubstantive change that 

does not alter the administration of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

16. SFIP Article V.B ....... FEMA proposes a nonsubstantive, clarifying adjustment to the Flood in 

Progress Exclusion at SFIP Art. V.B to align with reports required by BW– 

12 section 100227. This change does not impact the application of the 

exclusion, but will help support more consistent reading of the provison.

Discretionary ..... No change in compliance burden. 

17. SFIP Article VII.B ..... FEMA proposes to move the provision on concealment of fraud and policy 

voidance for consolidation into unified section on policy cancellations and 

nullifications (discussed below). This is a nonsubstantive change that 

does not alter the administration of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

18. SFIP Article VII.E ..... FEMA proposes to remove Article VII.E, Cancellation of the Policy by You, 

and incorporate the language into a new consolidated section on policy 

nullifications, cancellations, and non-renewals. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 


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TABLE 1—SUMMARY OF PROPOSED CHANGES—Continued 

Current section No./ 

subject matter Proposed change 

Mandatory or 

discretionary 

action 

Impact 

19. SFIP Article VII.F ..... FEMA proposes to remove Article VII.F, Non-Renewal of the Policy by Us, 

and incorporate the language into a new Article VIII discussing policy nullifications, cancellations, and non-renewals. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

20. SFIP Article VII.G ..... This provision would revise the reformation section for clarity/readability. 

This is a nonsubstantive change that does not alter the administration of 

the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

21. SFIP Article VII.U ..... FEMA proposes to move the provision on duplicate policies for consolidation into unified section on policy cancellations and nullifications (discussed below). This is a nonsubstantive change that does not alter the 

administration of the program but rather provides greater clarity for the 

reader.

Discretionary ..... No change in compliance burden. 

22. SFIP Article VII.V ..... FEMA proposes to revise Article VII.V.1.a.1 of the current policy to remove 

all the language after ‘‘It is your principal residence.’’ The reason for this 

proposed change is that this language, which is essentially a definition of 

the term ‘‘principal residence,’’ has been incorporated into the new definition of ‘‘principal residence’’ being added to Definitions section in Article 

II. This is a nonsubstantive change that does not alter the administration 

of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

23. SFIP Article VIII ....... FEMA proposes to clarify the existing reasons for which a policy may be 

cancelled, nullified, or not renewed. This would mirror similar section 

being established at 44 CFR 62.5 (discussed above). This is a nonsubstantive change that does not alter the administration of the program but 

rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

24. SFIP Article IX ......... FEMA proposes to clarify that the SFIP and all disputes arising from the insurer’s policy issuance, policy administration, or the handling of any claim 

under the SFIP are governed by the National Flood Insurance Act and the 

regulations. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

25. Entire SFIP—Global 

Language Replacements.

FEMA proposes to replace the word ‘‘covered’’ with the word ‘‘insured’’ because the word ‘‘covered’’ does not conform to common industry or Agency usage. This is a nonsubstantive change that does not alter the administration of the program but rather provides greater clarity for the reader.Discretionary ..... No change in compliance burden. 

26. 62.22 Judicial Review (preamble sec. 

III.F.5).

FEMA proposes to replace references to the ‘‘Federal Insurance Administration’’ with the current organizational title, ‘‘Federal Insurance and Mitigation Administration.’’ This is a nonsubstantive change that does not alter 

the administration of the program but rather provides greater clarity for 

the reader.

Discretionary ..... No change in compliance burden. 

27. SFIP Article VII.D ..... FEMA proposes to redesignate Article VII.D as Article VII.C. Replaces the 

phrase ‘‘structure during the course of construction’’ in Article VII.D.2 of 

the current rule with ‘‘building under construction,’’ which is the proper 

term of art, as used in Article III.A.5.a and Article VI.A. This is a nonsubstantive change that does not alter the administration of the program but 

rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

28. § 61.4 Limitations on 

Coverage.

FEMA proposes to delete this provision because some of the language is 

duplicative with language in other sections, and the rest of the language 

is more appropriately moved to other sections of the regulation. Move 

61.5(a) and (b) to become a new 44 CFR 61.4. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

29. § 62.3 Servicing 

agent.

FEMA proposes to remove the name of specific direct servicing agent. This 

is a nonsubstantive change that codifies current practices that began 

more than a decade before the baseline regarding the public announcement of the direct servicing agent.

Discretionary ..... No change in compliance burden. 

30. Part 59 Authority Citation.FEMA proposes to replace the citations to Reorganization Plan No. 3 and 

Executive Order 12127 with a citation to the codification of the Homeland 

Security Act of 2002, 6 U.S.C. 101 et seq. This is a nonsubstantive 

change that does not alter the administration of the program but rather 

provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

31. Part 61 Authority Citation.FEMA proposes to update authority citations to reflect changes to FEMA’s 

source of authority from Executive orders to statute. This is a nonsubstantive change that does not alter the administration of the program but 

rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 

32. Part 62 Authority Citation.FEMA propose to update authority citations to reflect changes to FEMA’s 

source of authority from Executive orders to statute. This is a nonsubstantive change that does not alter the administration of the program but 

rather provides greater clarity for the reader.

Discretionary ..... No change in compliance burden. 


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TABLE 1—SUMMARY OF PROPOSED CHANGES—Continued 

Current section No./ 

subject matter Proposed change 

Mandatory or 

discretionary 

action 

Impact 

Codification of Existing Policy and Practice 

33. § 61.11 Effective date 

and time of coverage 

under the Standard 

Flood Insurance Policy—New Business 

Applications and Endorsements.

FEMA proposes to codify BW–12’s addition of the Post-Wildfire Exception to 

the 30-day waiting period required by 42 U.S.C. 4013(c). This change 

does not alter the current administration of the program because FEMA 

immediately complied with the law.

FEMA also proposes a clarification by removing the second clause of the 

first sentence of 61.11(e) and 61.11(f) because thse clauses accommodate a business model that the WYO companies no longer use. This 

change does not alter the current administration of the program but rather 

provides greater clarity for the reader.

Mandatory ........ No change in compliance burden. 

34. SFIP Article III.C ...... FEMA proposes to codify BW–12 section 100214, which prohibits the application of SFIP Article III.C.3.b.4 (disallowing the payment of a condominium loss assessment on a unit policy if the condominium building is 

underinsured). Prior to BW–12, FEMA issued individual waivers of this 

provision as the need arose. The proposed changes would delete Article 

III.C.3.b.4, thus no longer requiring FEMA to issue individual waivers.

Mandatory ........ Cost savings of 

$2,048 over 10 

years ($1,799 at 

3 percent and 

$1,539 at 7 percent discount 

rates). 

1. Costs of Rulemaking 

While the proposed rulemaking 

would make material improvements to 

the language and organization of the 

NFIP’s regulations, such changes would 

not result in any quantifiable burden or 

benefit. WYO companies would, 

however, incur opportunity costs as 

they spend time becoming familiar with 

the proposed changes. 

FEMA proposes to revise section 

61.11 to codify an additional exception 

to the 30-day waiting period before 

coverage on a flood insurance policy 

takes effect. Prior to BW–12, there were 

only two exceptions to this 30-day 

waiting period. The first exception was 

for the initial purchase of flood 

insurance in connection with the 

making, increasing, extension, or 

renewal of a loan. The second exception 

was for the initial purchase of flood 

insurance pursuant to a revision or 

updating of floodplain areas or flood 

risk zones, if such purchase took place 

within one year of the notice of such 

revision. 

The proposed rule would codify in 

regulation Section 100241 of BW–12, 

which amended Section 1306(c) of the 

NFIA (42 U.S.C. 4013(c)), by placing a 

third exception to the 30-day new 

policy waiting period in regulation. This 

new exception applies to situations 

where the flooding to an insured 

privately owned property is the result of 

flooding on Federal land that was 

caused or exacerbated by post-wildfire 

conditions, also on Federal land. FEMA 

implemented this new exception via 

bulletin. See WYO Bulletin W–12045 

(July 10, 2012) (announcing the 

implementation of Section 100241), see 

also, WYO Bulletin W–18001 (Jan. 16, 

2018) (replacing WYO Bulletin W– 

12045). To date, circumstances have not 

existed requiring FEMA to apply this 

exception. The proposed change 

updates the regulations to reflect the 

revised statutory language and existing 

Agency practice. 

When looking at the NFIP claim data 

from FEMA, since implementation of 

this exception in July 2012, no parties 

have made claims that would apply to 

this provision. Additionally, due to both 

the brief window of applicability (the 

30-day waiting period after initial 

enrollment in the NFIP) and the narrow 

circumstances to which this exception 

applies (flood damage due to flood on 

Federal land caused, or exacerbated, by 

post-wildfire conditions), FEMA 

believes the exception would continue 

to be rarely invoked. This provision 

serves as an added enticement to 

potential enrollees of the NFIP to join 

the NFIP if they believe that a wildfire 

on Federal land may cause, or 

exacerbate, flooding on their property. 

This provision serves mostly as an 

added comfort to potential enrollees of 

the NFIP. In accordance with the data 

examined, there has not been and FEMA 

estimates that there would continue to 

be no additional burden on any party. 

This provision would ensure that 

FEMA’s regulation concerning the 

application of the 30-day waiting period 

includes all statutory exceptions. FEMA 

requests comments regarding this 

assumption and estimated frequency of 

applicable occurrence. 

2. Benefits of Rulemaking 

The vast majority of provisions 

represent clarifications to the regulation 

or program documents, or remove 

regulations that are no longer 

applicable. The few non-clarifying 

provisions reflect in regulations certain 

provisions that have already been 

implemented through policy that 

streamline operations, or meet greater 

potential needs of policyholders 

(codifications). It is only with 

codifications where any quantifiable 

impacts appear. This analysis considers 

the following as possible benefits of this 

rule: 

i. Clarification of NFIP Terms and 

Conditions 

This analysis looks at the many 

efficiencies of the proposed rule, 

however, the bulk of these benefits are 

unquantifiable. Although they have not 

been quantified, they are essential to the 

justification of the proposed rule and 

should be considered as they provide 

significant benefits that will be seen for 

all stakeholders involved. 

Under current conditions, the NFIPrelated sections of the CFR contain 

inconsistencies or vague language that 

may cause confusion to stakeholders. 

The following are selected examples of 

proposed changes presented in Table 1 

that would be introduced by the rule: 

a. Making Explicit the Implicit 

The NFIP deductible charts currently 

in the regulations at 44 CFR 61.5(d) 

show several possible deductible 

options, but not all the deductible 

options available under the program. A 

note to these tables indicates that 

policyholders may submit any other 

other deductible amounts not currently 

listed in this chart (including the 

$10,000 deductible option required 

under HFIAA). Notwithstanding this 

note, the current regulation’s listing of 


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7 GS Scale based on 2018 OPM tables, hourly 

basic wage rates by grade and step for the locality 

pay area of Washington-Baltimore-Arlington, DCMD-VA-WV-PA Accessed March 1st, 2018. https:// 

www.opm.gov/policy-data-oversight/pay-leave/ 

salaries-wages/salary-tables/18Tables/html/DCB_

h.aspx. 

8Bureau of Labor Statistics, Employer Cost for 

Employee Compensation News Release, Table 1. 

Employer costs per hour worked for employee 

compensation and costs as a percent of total 

compensation; civilian workers, by major 

occupational and industry group, December 2017. 

https://www.bls.gov/news.release/archives/ecec_

03202018.htm. 

The per hour benefits multiplier is calculated by 

dividing total compensation for all workers ($35.87) 

by wages and salaries for all workers ($24.49), 

which yields a per hour benefits multiplier of 1.46. 

($35.87 ÷ $24.49 = 1.46468). Fully-loaded wage 

rates are calculated by multiplying the per hour 

benefits multiplier by the applicable wage rate. GS– 

14: $62.23 × 1.46 = $90.85 and GS–15: $73.20 × 1.46 

= $106.87. 

9 $90.85 (hourly wage rate of $62.23 × 1.46) * 1.5 

hours = $136.28. 

10 $106.87 (hourly wage rate of $73.20 × 1.46) * 

1.5 hours = $160.30. 

11FEMA bases SES salary estimates on OPM’s 

Senior Executive Service Report. The latest report 

available is for 2016. Across all agencies the median 

SES pay is $173,882 (see table 13 at the following 

link) https://www.opm.gov/policy-data-oversight/ 

data-analysis-documentation/federal-employmentreports/reports-publications/ses-summary-2016.pdf. 

Accessed June 4, 2018. 

12 $173,882 annual wage/2087 annual hours = 

$83.32 hourly wage rate × 1.46 benefits multiplier 

= $121.65 fully loaded hourly wage × 1.04115 

inflation adjustment = $126.66 fully loaded $2018 

hourly wage. 

We calculated the inflation adjustment by 

subtracting the July 2016 CPI–U (240.6) from the 

April 2018 CPI–U (250.5). We divided the result 

(9.9) by the July 2016 CPI–U (240.0). Calculation: 

(250.5¥240.6)/240.6 = 0.04115. BLS CPI–U data is 

available at http://data.bls.gov/cgi-bin/ 

surveymost?bls. Select CPI for All Urban Consumers 

(CPI–U) 1982¥84 = 100 (Unadjusted) ¥ 

CUUR0000SA0 and click the Retrieve data button. 

Accessed June 8, 2018. 

13 $126.96 * 5 minutes = $10.56. 

14 $136.28 + $160.30 + $10.56 = $307.14. 

deductible options may give readers the 

impression that the list is exhaustive. 

FEMA proposes to remove the 

deductible charts and replace them with 

a requirement that FEMA must provide 

policyholders with deductible options 

in various amounts, up to and including 

$10,000, subject to certain minimum 

deductibles. This change would not 

expand or contract the deductible 

options offered by the NFIP under 

current regulations; rather, it would 

clarify that FEMA offers various 

options, including the $10,000 

deductible, subject to other restrictions. 

FEMA also proposes to change the 

language in Appendix A(1) of Part 61 to 

clarify that personal property is also 

insured under this policy. FEMA has 

always insured personal property under 

this policy, but the proposed change 

will make this more explicit in the 

initial coverage statement. Also under 

Appendix A(2) to Part 61, FEMA would 

state that the policy will only cover one 

building and that the building covered 

is the one specifically described in the 

Flood Insurance Application. Coverage 

under the SFIP has always been limited 

to one building, but FEMA is proposing 

that this language be clearly stated at the 

very beginning of the SFIP. 

b. Modifying, Adding or Removing 

Definitions 

FEMA proposes to revise definitions 

such as ‘‘deductible,’’ ‘‘emergency 

program,’’ ‘‘act,’’ or ‘‘basement.’’ FEMA 

believes these non-substantive changes 

will be clearer and more consistent with 

the language in the Articles of the SFIP. 

The same can be said of the proposed 

changes to add acronyms for ease of 

repetitive use (such as that for the 

Special Flood Hazard Area as ‘‘SFHA’’) 

or to remove a term or definition that is 

no longer used (e.g., ‘‘Expense 

Constant’’ which no longer applies, or 

‘‘Probation Premium’’ which is better 

changed to ‘‘Probation Surcharge’’). 

FEMA believes that this increased 

precision and consistent use of terms 

would increase clarity of FEMA’s NFIP 

regulations for the insurance companies, 

flood insurance policyholders, academic 

researchers, and private citizens. This 

improved accuracy will help to 

minimize confusion. 

ii. Codification of Dwelling Policy 

Underinsurance Exception 

Presently, Article III.C.3.b.4 of the 

SFIP, found in Appendix A(1) to Part 

61, prevents payment of condominium 

loss assessments on a unit policy if the 

condominium building itself is 

underinsured. The SFIP also requires 

the coverage limits of the RCBAP policy 

(the primary policy) to be exhausted 

before the Dwelling Policy (the 

secondary policy). This poses a 

challenge in the event the primary 

policy was disallowed in the above 

circumstance. Since 2007, policyholders 

facing such a predicament were 

required to obtain a waiver from FEMA 

to process such claims. 

As directed by Section 100214 of BW– 

12, the proposed changes would delete 

Article III.C.3.b.4 of the SFIP, which 

would otherwise prohibit such claim 

payments and necessitate the 

submission and processing of waivers. 

As a result, waivers for this prohibition 

would no longer be required. 

To estimate the cost savings that 

would result from omitting this process, 

FEMA considered the frequency these 

specific circumstances have occurred. 

Between 2007, when FEMA began 

issuing the waivers, and 2013 when 

FEMA terminated the waiver process 

(following the passage and FEMA’s 

provisional implementation of BW–12), 

there have been four occurrences of the 

aforementioned conditions. The 

applicable cases were reported twice in 

Illinois, once in Texas and once in 

Tennessee. Four occurrences over six 

years equate to an estimated frequency 

of 0.667 instances each year, assuming 

that the rate remains consistent in the 

future. 

The reported time required for FEMA 

to process the resulting waiver requests 

is around three hours per wavier. This 

process is undertaken by two General 

Schedule (GS) Federal employees in the 

National Capital Region, at the GS–14 

and GS–15 levels, in equal proportion. 

Obtaining 2018 GS scale 7 published 

hourly wage rates from the Office of 

Personnel Management (OPM) for the 

midpoint (step 5) of these grade levels 

produces fully loaded 8 wage rates of 

$90.85 and $106.87 per hour, 

respectively. At approximately 90 

minutes per officer for each expected 

waiver, the subtotal is $136.28 9 and 

$160.30,10 respectively. The waivers 

also require concurrence, cleared by the 

appropriate Assistant Administrator. 

This review and approval takes 

approximately five minutes at the 

estimated midpoint in the Senior 

Executive Service (SES).11 FEMA 

estimates that a fully loaded SES hourly 

rate is $126.66 per hour.12 The subtotal 

of the SES time is $10.56.13 The total 

opportunity cost of FEMA processing 

each wavier is $307.16.14


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Applying this cost to the estimated 

frequency of occurrence of 0.67 waivers 

per year and extending the avoided 

costs over a ten-year period would 

project a total undiscounted cost savings 

of $2,048. The ten-year total would 

equate to $1,799 and $1,539, when 

discounted at three percent and seven 

percent respectively. 

3. Alternatives Considered 

Given that this rule has no direct 

compliance costs, no less burdensome 

alternatives to the proposed rule are 

available. In the absence of this 

proposed rule, stakeholders would 

continue to experience the negative 

repercussions of inconsistences between 

the statutes, regulations, and agency 

policy documents. 

FEMA invites all interested parties to 

submit data and information regarding 

the potential economic impact that 

would result from adoption of the 

proposals in this NPRM. FEMA will 

consider all comments received in the 

public comment process. 

4. Summary 

For the 10-year period analyzed, 

FEMA does not anticipate any costs 

resulting from the selected provisions of 

BW–12 and HFIAA that the rule is 

implementing. During that same period 

analyzed, the estimated quantified 

benefits total $2,048. The present value, 

discounted at 7 percent, of the estimated 

quantified benefits is approximately 

$1,539 and $1,799 discounted at 3 

percent. FEMA’s ability to administer 

the NFIP in a more streamlined manner, 

and the public’s enhanced 

understanding of the terms and 

conditions of the program would justify 

the proposed rule, compliant with the 

respective Congressional mandates. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 1980 

(5 U.S.C. 601 et seq.) requires agency 

review of proposed and final rules to 

assess their impact on small entities. 

When an agency is required by 5 U.S.C. 

553, or any other law, to publish a 

general notice of proposed rulemaking 

for any proposed rule, the agency must 

prepare an initial regulatory flexibility 

analysis (IRFA) or have the head of the 

agency certify pursuant to 5 U.S.C. 

605(b) that the rule will not, if 

promulgated, have a significant 

economic impact on a substantial 

number of small entities. FEMA believes 

this proposed rule, if promulgated, will 

not have a significant economic impact 

on a substantial number of small 

entities. However, FEMA is publishing 

this IRFA to aid the public in 

commenting on the potential impacts of 

the proposed requirements in this 

NPRM on small entities. FEMA invites 

all interested parties to submit data and 

information regarding the potential 

economic impact on small entities that 

would result from the adoption of this 

NPRM. FEMA will consider all 

comments received in the public 

comment process when making a final 

determination. 

In accordance with the Regulatory 

Flexibility Act, an IFRA must contain: 

(1) A description of the reasons why the 

action by the agency is being 

considered; (2) A succinct statement of 

the objectives of, and legal basis for, the 

proposed rule; (3) A description—and, 

where feasible, an estimate of the 

number—of small entities to which the 

proposed rule will apply; (4) A 

description of the projected reporting, 

recordkeeping, and other compliance 

requirements of the proposed rule, 

including an estimate of the classes of 

small entities that will be subject to the 

requirements and the types of 

professional skills necessary for 

preparation of the report or record; (5) 

An identification, to the extent 

practicable, of all relevant Federal rules 

that may duplicate, overlap, or conflict 

with the proposed rule; and (6) A 

description of significant alternatives to 

the rule. 

1. A Description of the Reasons Why 

Action by the Agency Is Being 

Considered 

The proposed rule would revise the 

NFIP implementing regulations at parts 

59, 61, and 62, as well as the 

Appendices to part 61, to codify in 

regulation certain provisions of the 

Biggert-Waters Flood Insurance Reform 

Act of 2012 and the Homeowner Flood 

Insurance Affordability Act of 2014 that 

FEMA has already implemented and to 

clarify certain existing NFIP rules 

relating to NFIP operations and the 

SFIP. 

2. A Succinct Statement of the 

Objectives of, and Legal Basis for, the 

Proposed Rule 

The proposed changes to the 

regulation would codify FEMA’s 

implementation of the legislative 

requirements of the Biggert-Waters 

Flood Insurance Reform Act of 2012 and 

the Homeowner Flood Insurance 

Affordability Act of 2014, and clarify 

existing rules. These required changes 

have already been implemented and this 

rule would conform NFIP regulations 

with existing policies and practices. 

FEMA anticipates that this 

rulemaking will result in a more 

streamlined operation of the NFIP and 

enhance customer service because of 

greater information and clarity for 

policyholders and all stakeholders. 

The NFIA authorizes FEMA to ‘‘enter 

into any contracts, agreements, or other 

arrangements’’ with private insurance 

companies to utilize their facilities and 

services in administering the NFIP, and 

on such terms and conditions as may be 

agreed upon. See 42 U.S.C. 4081. 

Pursuant to this authority, FEMA enters 

into a standard Financial Assistance/ 

Subsidy Arrangement with private 

sector property insurers, also known as 

the WYO companies. Under this 


sradovich on DSK3GMQ082PROD with PROPOSALS2EP16JY18.000</GPH>
Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 32983 

15U.S. Small Business Administration Table of 

Small Business Size Standards Matched to North 

American Industry Classification System Codes 

effective October 1, 2017. Available at https://

www.sba.gov/content/small-business-sizestandards. 

16Number of firms participating in the WYO 

Program as of May 2018. https://www.fema.gov/ 

wyo_company. 

arrangement, WYO companies sell NFIP 

flood insurance policies under their 

own names and adjust and pay claims 

arising under the policy. It is in 

reference to these specific authorities to 

administer the NFIP, and the WYO 

program that is encompassed within it, 

that FEMA is proposing to continue to 

streamline operations and remove 

confusing obsolete or redundant 

language that may confuse stakeholders, 

including its policyholders, the WYO 

companies, and FEMA. 

3. A Description of and, Where Feasible, 

an Estimate of the Number of Small 

Entities to Which the Proposed Rule 

Will Apply 

‘‘Small entity’’ is defined in 5 U.S.C. 

601. The term ‘‘small entity’’ can have 

the same meaning as the terms ‘‘small 

business,’’ ‘‘small organization’’ and 

‘‘small governmental jurisdiction.’’ 

Section 601(3) defines a ‘‘small 

business’’ as having the same meaning 

as ‘‘small business concern’’ under 

Section 3 of the Small Business Act. 

This includes any small business 

concern that is independently owned 

and operated, and is not dominant in its 

field of operation. Section 601(4) 

defines a ‘‘small organization’’ as any 

not-for-profit enterprises that are 

independently owned and operated, and 

are not dominant in their field of 

operation. Section 601(5) defines ‘‘small 

governmental jurisdictions’’ as 

governments of cities, counties, towns, 

townships, villages, school districts, or 

special districts with a population of 

less than 50,000. No small organization 

or governmental jurisdiction is a party 

to the WYO program and therefore 

would be affected. 

The SBA stipulates in its size 

standards the largest business may be 

and still be classified as a ‘‘small 

entity.’’ 15 The small business size 

standard for North American Industry 

Classification System (NAICS) code 

524126 (direct property and casualty 

insurance carriers) is 1,500 employees. 

The size standard for 524210 (Insurance 

Agencies and Brokerages) is $7.5 

million, and $32.5 million for 524292 

(Third Party Administration of 

Insurance and Pension Funds). For the 

two remaining applicable codes of 

524113 (Direct Life Insurance Carriers), 

and 524128 (Other Direct Insurance), 

the threshold is $38.5 million in 

revenue as modified by the SBA, 

effective October 1, 2017. 

There are currently 67 companies 16

participating in the WYO Program. 

These 67 companies are subject to the 

terms of the Arrangement and the 

standards and requirements in the 

Financial Control Plan. FEMA 

researched each WYO company to 

determine the NAICS code, number of 

employees, and revenue for the 

individual companies. FEMA used the 

open-access database, www.manta.com, 

as well as www.cortera.com to find this 

information for the size determination. 

The database was used to help 

determine the metric of company size, 

compliant with the SBA thresholds 

based on the assigned NAICS code. Of 

the 67 WYO companies, we found a 

majority of 46 firms were under code 

524210 (Insurance Agencies and 

Brokerages), of which 17 firms, or 37 

percent, were small (with only one 

lacking full data but presumed to be 

small). The second largest contingent of 

16 firms were under 524126 (direct 

property and casualty insurance 

carriers), of which 10 firms, or 63 

percent, were small (with only one 

missing data points but presumed to be 

small). Of the other three 

aforementioned industry codes, 524113, 

524292 and 524128, there was one firm 

under each and none were small. 

Finally, two firms were missing 

industry classifications, and FEMA 

assumes these are small firms. In total, 

we found that 29 of the 67 companies 

are below this maximum, and therefore 

would be considered small entities. 

Consequently, small entities comprise 

43 percent of participating companies. 

4. A Description of the Projected 

Reporting, Recordkeeping, and Other 

Compliance Requirements of the 

Proposed Rule, Including an Estimate of 

the Classes of Small Entities Which Will 

Be Subject to the Requirement and the 

Types of Professional Skills Necessary 

for Preparation of the Report or Record 

FEMA believes that the rule would 

impose no burdens on any participating 

company because it does not consist of 

any substantive policy changes, but 

instead would make changes for clarity 

and to accurately reflect current FEMA 

policies and practices. There may be 

familiarization costs incurred by WYO 

companies as they review these 

changes, despite the lack of any 

substantive changes that would 

ultimately affect them. Therefore, FEMA 

anticipates that the rule would not have 

a significant economic impact on a 

substantial number of small entities. 

5. An Identification, to the Extent 

Practicable, of All Relevant Federal 

Rules Which May Duplicate, Overlap, or 

Conflict With the Proposed Rule 

There are no relevant Federal rules 

that may duplicate, overlap, or conflict 

with the proposed rule. 

6. A Description of Any Significant 

Alternatives to the Proposed Rule 

Which Accomplish the Stated 

Objectives of Applicable Statutes and 

Which Minimize Any Significant 

Economic Impact of the Proposed Rule 

on Small Entities 

Given that this rule has no direct 

compliance costs, no less burdensome 

alternatives to the proposed rule are 

available. In the absence of this 

proposed rule, small entities would 

continue to experience the negative 

repercussions of inconsistences between 

the statutes, regulations and agency 

policy documents. 

FEMA invites all interested parties to 

submit data and information regarding 

the potential economic impact that 

would result from adoption of the 

proposals in this NPRM. FEMA will 

consider all comments received in the 

public comment process. 

C. Unfunded Mandates Reform Act 

Pursuant to section 201 of the 

Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4, 2 U.S.C. 1531), each 

Federal agency ‘‘shall, unless otherwise 

prohibited by law, assess the effects of 

Federal regulatory actions on State, 

local, and Tribal governments, and the 

private sector (other than to the extent 

that such regulations incorporate 

requirements specifically set forth in 

law).’’ Section 202 of the Act (2 U.S.C. 

1532) further requires that ‘‘before 

promulgating any general notice of 

proposed rulemaking that is likely to 

result in the promulgation of any rule 

that includes any Federal mandate that 

may result in expenditure by State, 

local, and Tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more (adjusted annually 

for inflation) in any one year, and before 

promulgating any final rule for which a 

general notice of proposed rulemaking 

was published, the agency shall prepare 

a written statement’’ detailing the effect 

on State, local, and Tribal governments 

and the private sector. The proposed 

rule would not result in such an 

expenditure, and thus preparation of 

such a statement is not required. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
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D. National Environmental Policy Act of 

1969 (NEPA) 

Section 102 of the National 

Environmental Policy Act of 1969 

(NEPA), 83 Stat. 852 (Jan. 1, 1970) (42 

U.S.C. 4321 et seq.) requires agencies to 

consider the impacts of their proposed 

actions on the quality of the human 

environment. The Council on 

Environmental Quality’s procedures for 

implementing NEPA, 40 CFR 1500 et 

seq., require Federal agencies to prepare 

Environmental Impact Statements (EIS) 

for major Federal actions significantly 

affecting the quality of the human 

environment. Each agency can develop 

categorical exclusions to cover actions 

that have been demonstrated to not 

typically trigger significant impacts to 

the human environment individually or 

cumulatively. Agencies develop 

environmental assessments (EA) to 

evaluate those actions that do not fit an 

agency’s categorical exclusion and for 

which the need for an EIS is not readily 

apparent. At the end of the EA process, 

the agency will determine whether to 

make a Finding of No Significant Impact 

(FONSI) or whether to initiate the EIS 

process. 

Rulemaking is a major Federal action 

subject to NEPA. The List of exclusion 

categories at DHS Instruction Manual 

023–01–001–01, Appendix A excludes 

the promulgation of rules that are of a 

strictly administrative or procedural 

nature and rules that implement, 

without substantive change, statutory or 

regulatory requirements from the 

preparation of an EA or EIS. (Catex 

A3(a) and (b)). The purpose of this rule 

is to implement some statutory 

requirements of BW–12 and HFIAA, 

along with making non-substantive 

clarifications designed to improve 

overall clarity and readability. These 

changes are administrative-related 

changes that are categorically excluded 

under Catex A3(a) and (b) of DHS 

Instruction Manual 023–01–001–01, 

Appendix A. No extraordinary 

circumstances exist that will trigger the 

need to develop an EA or EIS. See DHS 

Instruction Manual 023–01–001–01 

V(B)(2). An EA will not be prepared 

because a categorical exclusion applies 

to this rulemaking action and no 

extraordinary circumstances exist. 

E. Privacy Act/E-Government Act 

Under the Privacy Act of 1974, 5 

U.S.C. 552a, an agency must determine 

whether implementation of a proposed 

regulation will result in a system of 

records. A ‘‘record’’ is any item, 

collection, or grouping of information 

about an individual that is maintained 

by an agency, including, but not limited 

to, his/her education, financial 

transactions, medical history, and 

criminal or employment history and 

that contains his/her name, or the 

identifying number, symbol, or other 

identifying particular assigned to the 

individual, such as a finger or voice 

print or a photograph. See 5 U.S.C. 

552a(a)(4). A ‘‘system of records’’ is a 

group of records under the control of an 

agency from which information is 

retrieved by the name of the individual 

or by some identifying number, 

symbols, or other identifying particular 

assigned to the individual. An agency 

cannot disclose any record that is 

contained in a system of records except 

by following specific procedures. The EGovernment Act of 2002, 44 U.S.C. 3501 

note, also requires specific procedures 

when an agency takes action to develop 

or procure information technology that 

collects, maintains, or disseminates 

information that is in an identifiable 

form. This Act also applies when an 

agency initiates a new collection of 

information that will be collected, 

maintained, or disseminated using 

information technology if it includes 

any information in an identifiable form 

permitting the physical or online 

contacting of a specific individual. 

In accordance with DHS policy, 

FEMA has completed a Privacy 

Threshold Analysis (PTA) for this 

proposed rule. DHS/FEMA has 

determined that this proposed 

rulemaking does not affect the 1660– 

0006 OMB Control Number’s current 

compliance with the E-Government Act 

of 2002 or the Privacy Ac of 1974, as 

amended. As a result, DHS/FEMA has 

concluded that the 1660–0006 OMB 

Control Number is covered by the DHS/ 

FEMA/PIA–011—National Flood 

Insurance Program Information 

Technology Systems (NFIP ITS) Privacy 

Impact Assessment (PIA). Additionally, 

DHS/FEMA has decided that the 1660– 

0006 OMB Control Number is covered 

by the DHS/FEMA–003 National Flood 

Insurance Program Files, 79 FR 28747, 

May 19, 2014 System of Records Notice 

(SORN). 

F. Paperwork Reduction Act of 1995 

Under the Paperwork Reduction Act 

of 1995 (PRA), as amended, 44 U.S.C. 

3501–3520, an agency may not conduct 

or sponsor, and a person is not required 

to respond to, a collection of 

information unless the agency obtains 

approval from the Office of Management 

and Budget (OMB) for the collection and 

the collection displays a valid OMB 

control number. See 44 U.S.C. 3506, 

3507. This proposed rulemaking does 

not call for a new collection of 

information under the PRA. There is an 

existing collection of information, 1660– 

0006, the National Flood Insurance 

Program Policy Forms, Public Law 90– 

448 (1968) (expanded by Pub. L. 93–234 

(1973)) included in this rulemaking. 

BW–12 and HFIAA require 

modifications to the NFIP. Program 

changes resulting from BW–12 and 

HFIAA necessitated revision of the NFIP 

Policy Forms to assure proper 

classification of properties for rating 

purposes and to rate and issue the 

policies in accordance with the 

provisions of BW–12 and HFIAA. 

However, this proposed rule will not 

impact this collection because the forms 

have already been updated as needed. 

G. Executive Order 13175 Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175, ‘‘Consultation 

and Coordination with Indian Tribal 

Governments,’’ 65 FR 67249 (Nov. 9, 

2000), applies to agency regulations that 

have Tribal implications, that is, 

regulations that have substantial direct 

effects on one or more Indian Tribes, on 

the relationship between the Federal 

Government and Indian Tribes, or on 

the distribution of power and 

responsibilities between the Federal 

Government and Indian Tribes. Under 

this Executive Order, to the extent 

practicable and permitted by law, no 

agency shall promulgate any regulation 

that has Tribal implications, that 

imposes substantial direct compliance 

costs on Indian Tribal governments, and 

that is not required by statute, unless 

funds necessary to pay the direct costs 

incurred by the Indian Tribal 

government in complying with the 

regulation are provided by the Federal 

Government or the agency consults with 

Tribal officials. Nor, to the extent 

practicable by law, may an agency 

promulgate a regulation that has Tribal 

implications and preempts Tribal law, 

unless the agency consults with Tribal 

officials. This proposed rule involves no 

policies that have Tribal implications 

under Executive Order 13175. This 

rulemaking makes limited changes to 

the comprehensive, longstanding 

National Flood Insurance Program 

regulations applicable to communities, 

including participating Indian Tribal 

governments and Tribes, which 

voluntarily choose to participate in the 

program. Because these program 

updates are limited, they will not have 

substantial direct effects on Indian 

Tribes, on the relationship between the 

national government and Indian Tribes, 

or the distribution of power between the 

Federal Government and Indian Tribes. 


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H. Executive Order 13132 Federalism 

Executive Order 13132, ‘‘Federalism,’’ 

64 FR 43255 (Aug. 10, 1999), sets forth 

principles and criteria that agencies 

must adhere to in formulating and 

implementing policies that have 

federalism implications, that is, 

regulations that have ‘‘substantial direct 

effects on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government.’’ For the 

purposes of this Executive Order, the 

term States also includes local 

governments or other subdivisions 

established by the States. Under this 

Executive Order, Federal agencies must 

closely examine the statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States. Further, to the extent practicable 

and permitted by law, no agency shall 

promulgate any regulation that has 

federalism implications, that imposes 

substantial direct compliance costs on 

State and local governments, and that is 

not required by statute, unless the 

Federal Government provides funds 

necessary to pay the direct costs 

incurred by the State and local 

governments in complying with the 

regulation, or the agency consults with 

State and local officials. Nor, to the 

extent practicable by law, may an 

agency promulgate a regulation that has 

federalism implications and preempts 

State law, unless the agency consults 

with State and local officials. 

FEMA has reviewed this proposed 

rule under Executive Order 13132 and 

has determined that does not have 

substantial direct effects on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, and therefore does 

not have federalism implications as 

defined by the Executive Order. This 

rulemaking makes limited changes to 

the comprehensive, longstanding 

National Flood Insurance Program 

regulations governing the communities’ 

participation in the program. Because 

these program updates are limited, they 

will not have substantial direct effects 

on the States or participating 

communities, on the relationship 

between the national government and 

the States or participating communities, 

or the distribution of power among the 

various levels of government. 

I. Executive Order 11988 Floodplain 

Management 

Pursuant to Executive Order 11988, 

‘‘Floodplain Management,’’ 42 FR 26951 

(May 24, 1977), each agency must 

provide leadership and take action to 

reduce the risk of flood loss, to 

minimize the impact of floods on 

human safety, health and welfare, and 

to restore and preserve the natural and 

beneficial values served by floodplains 

in carrying out its responsibilities for (1) 

acquiring, managing, and disposing of 

Federal lands and facilities; (2) 

providing Federally undertaken, 

financed, or assisted construction and 

improvements; and (3) conducting 

Federal activities and programs affecting 

land use, including but not limited to 

water and related land resources 

planning, regulating, and licensing 

activities. In carrying out these 

responsibilities, each agency must 

evaluate the potential effects of any 

actions it may take in a floodplain; 

ensure that its planning programs and 

budget requests reflect consideration of 

flood hazards and floodplain 

management; and prescribe procedures 

to implement the policies and 

requirements of the Executive Order. 

Before promulgating any regulation, 

an agency must determine whether the 

proposed regulations will affect a 

floodplain(s), and if so, the agency must 

consider alternatives to avoid adverse 

effects and incompatible development 

in the floodplain(s). If the head of the 

agency finds that the only practicable 

alternative consistent with the law and 

with the policy set forth in Executive 

Order 11988 is to promulgate a 

regulation that affects a floodplain(s), 

the agency must, prior to promulgating 

the regulation, design or modify the 

regulation in order to minimize 

potential harm to or within the 

floodplain, consistent with the agency’s 

floodplain management regulations. It 

must also prepare and circulate a notice 

containing an explanation of why the 

action is proposed to be located in the 

floodplain. 

The purpose of this proposed rule is 

to implement insurance-related 

administrative changes to clarify 

coverage, rates, and terms and 

conditions. The changes proposed in 

this rule would not have an effect on 

land use, floodplain management, or 

wetlands. 

J. Executive Order 11990 Protection of 

Wetlands 

Executive Order 11990, ‘‘Protection of 

Wetlands,’’ 42 FR 26961 (May 24, 1977) 

sets forth that each agency must provide 

leadership and take action to minimize 

the destruction, loss or degradation of 

wetlands, and to preserve and enhance 

the natural and beneficial values of 

wetlands in carrying out the agency’s 

responsibilities. These responsibilities 

include (1) acquiring, managing, and 

disposing of Federal lands and facilities; 

and (2) providing Federally undertaken, 

financed, or assisted construction and 

improvements; and (3) conducting 

Federal activities and programs affecting 

land use, including but not limited to 

water and related land resources 

planning, regulating, and licensing 

activities. Each agency, to the extent 

permitted by law, must avoid 

undertaking or providing assistance for 

new construction located in wetlands 

unless the head of the agency finds (1) 

that there is no practicable alternative to 

such construction, and (2) that the 

proposed action includes all practicable 

measures to minimize harm to wetlands 

which may result from such use. In 

making this finding, the head of the 

agency may take into account economic, 

environmental and other pertinent 

factors. 

In carrying out the activities described 

in Executive Order 11990, each agency 

must consider factors relevant to a 

proposal’s effect on the survival and 

quality of the wetlands. These include 

public health, safety, and welfare, 

including water supply, quality, 

recharge and discharge; pollution; flood 

and storm hazards; sediment and 

erosion; maintenance of natural 

systems, including conservation and 

long term productivity of existing flora 

and fauna, species and habitat diversity 

and stability, hydrologic utility, fish, 

wildlife, timber, and food and fiber 

resources. They also include other uses 

of wetlands in the public interest, 

including recreational, scientific, and 

cultural uses. The purpose of this 

proposed rule is to implement 

insurance-related administrative 

changes to clarify coverage, rates, and 

terms and conditions. The changes 

proposed in this rule would not have an 

effect on land use, floodplain 

management, or wetlands. 

K. Executive Order 12898 

Environmental Justice 

Under Executive Order 12898, 

‘‘Federal Actions to Address 

Environmental Justice in Minority 

Populations and Low-Income 

Populations,’’ 59 FR 7629 (Feb. 16, 

1994), as amended by Executive Order 

12948, 60 FR 6381, (Feb. 1, 1995), 

FEMA incorporates environmental 

justice into its policies and programs. 

The Executive Order requires each 

Federal agency to conduct its programs, 

policies, and activities that substantially 

affect human health or the environment 

in a manner that ensures that those 

programs, policies, and activities do not 

have the effect of excluding persons 

from participation in programs, denying 


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persons the benefits of programs, or 

subjecting persons to discrimination 

because of race, color, or national origin. 

This rulemaking will not have a 

disproportionately high or adverse effect 

on human health or the environment, 

nor will it exclude persons from 

participation in FEMA programs, deny 

persons the benefits of FEMA programs, 

or subject persons to discrimination 

because of race, color, or national origin. 

L. Congressional Review of Agency 

Rulemaking 

Before a rule can take effect, the 

Congressional Review of Agency 

Rulemaking Act (CRA), 5 U.S.C. 801– 

808, requires the Federal agency 

promulgating the rule to submit to 

Congress and to the Government 

Accountability Office (GAO) a copy of 

the rule, a concise general statement 

relating to the rule, including whether it 

is a major rule, the proposed effective 

date of the rule, a copy of any costbenefit analysis, descriptions of the 

agency’s actions under the Regulatory 

Flexibility Act and the Unfunded 

Mandates Reform Act, and any other 

information or statements required by 

relevant Executive orders. 

FEMA will send this rule to the 

Congress and to GAO pursuant to the 

CRA if the rule is finalized. This 

proposed rule is not a ‘‘major rule’’ 

within the meaning of the CRA. It will 

not have an annual effect on the 

economy of $100,000,000 or more or 

result in a major increase in costs or 

prices for consumers, individual 

industries, Federal, State, or local 

government agencies, or geographic 

regions. Nor will it have significant 

adverse effects on competition, 

employment, investment, productivity, 

innovation, or on the ability of United 

States-based enterprises to compete 

with foreign-based enterprises in 

domestic and export markets. 

List of Subjects 

44 CFR Parts 59 and 61 

Flood insurance, Reporting and 

recordkeeping requirements. 

44 CFR Part 62 

Claims, Flood insurance, Reporting 

and recordkeeping requirements. 

For the reasons stated in the 

preamble, FEMA proposes to amend 44 

CFR Chapter I as follows: 

PART 59—GENERAL PROVISIONS 

■ 1. Revise authority citation for part 59 

to read as follows: 

Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 

101 et seq. 

■ 2. In section 59.1, add definitions, in 

alphabetical order, for ‘‘Condominium 

Building,’’ ‘‘Mixed Use Building,’’ 

‘‘Multifamily Building,’’ ‘‘NonResidential Building,’’ ‘‘Non-Residential 

Property,’’ ‘‘Other Residential 

Building,’’ ‘‘Other Residential 

Property,’’ ‘‘Residential Building,’’ 

‘‘Residential Property,’’ ‘‘Single Family 

Dwelling,’’ and ‘‘Two to Four Family 

Building’’ and revise the definitions for 

‘‘Act,’’ ‘‘Deductible,’’ and ‘‘Emergency 

Program’’ to read as follows: 

§ 59.1 Definitions. 

* * * * * 

Act means the statutes authorizing the 

National Flood Insurance Program that 

are incorporated in 42 U.S.C. 4001—et 

seq. 

* * * * * 

Condominium Building means a type 

of building in the form of ownership in 

which each unit owner has an 

undivided interest in common elements 

of the building. 

* * * * * 

Deductible means the amount of an 

insured loss that is the responsibility of 

the insured and that is incurred before 

any amounts are paid for the insured 

loss under the insurance policy. 

* * * * * 

Emergency Program means the initial 

phase of a community’s participation in 

the National Flood Insurance Program, 

as prescribed by Section 1306 of the 

Act. 

* * * * * 

Mixed Use Building means a building 

that has both residential and nonresidential uses. 

* * * * * 

Multifamily Building means an other 

residential building that is not a 

condominium building. 

* * * * * 

Non-Residential Building means a 

commercial or mixed-use building 

where the primary use is commercial or 

non-habitational. 

Non-Residential Property means 

either a non-residential building, the 

contents within a non-residential 

building, or both. 

* * * * * 

Other Residential Building means a 

residential building that is designed for 

use as a residential space for 5 or more 

families or a mixed use building in 

which the total floor area devoted to 

non-residential uses is less than 25 

percent of the total floor area within the 

building. 

Other Residential Property means 

either an other residential building, the 

contents within an other residential 

building, or both. 

* * * * * 

Residential Building means a noncommercial building designed for 

habitation by one or more families or a 

mixed use building that qualifies as a 

single-family, two to four family, or 

other residential building. 

Residential Property means either a 

residential building or the contents 

within a residential building, or both. 

* * * * * 

Single Family Dwelling means either 

(a) a residential single-family building 

in which the total floor area devoted to 

non-residential uses is less than 50 

percent of the building’s total floor area, 

or (b) a single-family residential unit 

within a two to four family building, 

other-residential building, business, or 

non-residential building, in which 

commercial uses within the unit are 

limited to less than 50 percent of the 

unit’s total floor area. 

* * * * * 

Two to Four Family Building means a 

residential building, including an 

apartment building, containing two to 

four residential spaces and in which 

commercial uses are limited to less than 

25 percent of the building’s total floor 

area. 

* * * * * 

PART 61—INSURANCE COVERAGE 

AND RATES 

■ 3. Revise the authority citation for part 

61 to read as follows: 

Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 

101 et seq. 

■ 4. Revise § 61.1 to read as follows: 

§ 61.1 Purpose of part. 

This part describes the types of 

properties eligible for flood insurance 

coverage under the Program, the limits 

of such coverage, and the premium rates 

actually to be paid by insureds. 

■ 5. Revise § 61.3 to read as follows: 

§ 61.3 Coverage and benefits provided 

under the Standard Flood Insurance Policy. 

(a) Insurance coverage under the 

Program is available for buildings and 

their contents. Coverage for each may be 

purchased separately. 

(b) In addition to building and 

contents coverage, the Dwelling Form of 

the Standard Flood Insurance Policy 

(SFIP) covers debris removal, loss 

avoidance measures, and condominium 

loss assessments. The General Property 

Form of the SFIP covers debris removal, 

loss avoidance measures, and pollution 

damage. The Residential Condominium 

Policy Form of the SFIP covers debris 

removal and loss avoidance measures. 


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(c) With the purchase of building 

coverage, the Standard Flood Insurance 

Policy covers the costs associated with 

bringing the building into compliance 

with local floodplain ordinances. 

■ 6. Revise § 61.4 to read as follows: 

§ 61.4 Special terms and conditions. 

(a) No new flood insurance or renewal 

of flood insurance policies will be 

written for properties declared by a duly 

constituted State or local zoning or 

other authority to be in violation of any 

flood plain, mudslide (i.e., mudflow), or 

flood-related erosion area management 

or control law, regulation, or ordinance. 

(b) In order to reduce the 

administrative costs of the Program, of 

which the Federal Government pays a 

major share, applicants must pay the 

full policy premium at the time of 

application. 

■ 7. Revise § 61.5 to read as follows: 

§ 61.5 Deductibles. 

FEMA must provide policyholders 

with deductible options in various 

amounts, up to and including $10,000, 

subject to the following minimum 

deductible amounts: 

(a) The minimum deductible for 

policies covering pre-FIRM buildings 

charged less than full-risk rates with 

building coverage amounts less than or 

equal to $100,000 is $1,500. 

(b) The minimum deductible for 

policies covering pre-FIRM buildings 

charged less than full-risk rates with 

building coverage amounts greater than 

$100,000 is $2,000. 

(c) The minimum deductible for 

policies covering post-FIRM buildings 

and pre-FIRM buildings charged full 

risk rates, with building coverage 

amounts equal to or less than $100,000 

is $1,000. 

(d) The minimum deductible for 

policies covering post-FIRM buildings 

and pre-FIRM buildings charged full 

risk rates, with building coverage 

amounts greater than $100,000 is $1,250 

■ 8. Revise § 61.6 to read as follows: 

§ 61.6 Maximum amounts of coverage 

available. 

(a) Pursuant to section 1306 of the 

Act, the following are the limits of 

coverage available under the emergency 

program and under the regular program. 

MAXIMUM AMOUNTS OF COVERAGE AVAILABLE 1

Occupancy 

Emergency program Regular program 

Amount Amount 

Building Coverage: 

Single Family Dwelling ............................................................

Two to Four Family Building ...................................................

* $35,000 

* 35,000 

$250,000. 

$250,000. 

Other Residential Building (including Multifamily Building) .....

Condominium Building .............................................................

Non-Residential Building .........................................................

** 100,000 

N/A 

** 100,000 

$500,000. 

$250,000 times the number of units in the building. 

$500,000. 

Contents Coverage: 2

Residential Property 3 ..............................................................

Non-Residential Property ........................................................

10,000 

$100,000 

100,000. 

$500,000. 

1This Table provides the maximum coverage amounts available under the Emergency Program and the Regular Program, and the columns

cannot be aggregated to exceed the limits in the Regular Program, which are established by statute. The aggregate limits for building coverage 

are the maximum coverage amounts allowed by statute for each building included in the relevant Occupancy Category. 2The policy limits for contents coverage are not per building. Although a single insured may not have more than one policy covering contents 

in a building, several insureds may have separate policies of up to the policy limits. 3The Residential Property occupancy category includes the Single Family Dwelling, Two to Four Family Building, Other Residential Building, 

and Condominium Building occupancies categories. 

* In Alaska, Guam, Hawaii, and U.S. Virgin Islands, the amount available is $50,000. 

** In Alaska, Guam, Hawaii, and U.S. Virgin Islands, the amount available is $150,000. 

(b) Coverage and benefits payable 

under the SFIP pursuant to § 61.3(b) and 

§ 61.3(c) are included in, not in addition 

to, the coverage limits provided by the 

Act or stated in paragraph (a) of this 

section. 

■ 9. Add § 61.10 to read as follows: 

§ 61.10 Requirements for issuance or 

renewal of flood insurance coverage. 

FEMA will not issue or renew flood 

insurance unless FEMA receives: 

(a) The full amount due (including 

applicable premiums, surcharges, and 

fees); and 

(b) A complete application, including 

the information necessary to establish a 

premium rate for the policy, or 

submission of corrected or additional 

information necessary to calculate the 

premium for the renewal of the policy. 

§ 61.11 Effective date and time of coverage 

under the Standard Flood Insurance 

Policy—New Business Applications and 

Endorsements. 

■ 10. Amend § 61.11 by revising 

paragraphs (c) through (g) to read as 

follows: 

* * * * * 

(c) Where the following conditions are 

met, the effective date and time of any 

initial purchase of flood insurance 

coverage for any privately-owned 

property will be 12:01 a.m. (local time) 

on the first calendar day after the 

application date and the presentment of 

payment of premium or initial 

installment payment: 

(1) The Administrator has determined 

that the property is affected by flooding 

on Federal land that is a result of, or is 

exacerbated by, post-wildfire 

conditions, after consultation with an 

authorized employee of the Federal 

agency that has jurisdiction of the land 

on which the wildfire that caused the 

post-wildfire conditions occurred; and 

(2) The flood insurance coverage was 

purchased not later than 60 calendar 

days after the fire containment date, as 

determined by the appropriate Federal 

employee, relating to the wildfire that 

caused the post-wildfire conditions 

described in clause (1). 

(d) Except as provided by paragraphs 

(a), (b), and (c) of this section, the 

effective date and time of any new 

policy or added coverage or increase in 

the amount of coverage will be 12:01 

a.m. (local time) on the 30th calendar 

day after the application date and the 

presentment of payment of premium; for 

example, a flood insurance policy 

applied for with the payment of the 

premium on May 1 will become 

effective at 12:01 a.m. on May 31. 

(e) Adding new coverage or increasing 

the amount of coverage in force is 

permitted during the term of any policy, 


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subject to any applicable waiting 

periods. The additional premium for 

any new coverage or increase in the 

amount of coverage will be calculated 

pro rata in accordance with the rates 

currently in force. 

(f) With respect to any submission of 

an application in connection with new 

business, the payment by an insured to 

an agent or the issuance of premium 

payment by the agent does not 

constitute payment to the NFIP. 

Therefore, it is important that an 

application for flood insurance, as well 

as the full amount due, be mailed to the 

NFIP promptly in order to have the 

effective date of the coverage based on 

the application date plus the waiting 

period. If the application and the full 

amount due are received at the office of 

the NFIP within ten (10) calendar days 

from the date of application, the waiting 

period will be calculated from the date 

of application. Also, as an alternative, in 

those cases where the application and 

premium payment are mailed by 

certified mail within four (4) calendar 

days from the date of application, the 

waiting period will be calculated from 

the date of application even though the 

application and full amount due are 

received at the office of the NFIP after 

ten (10) calendar days following the 

date of application. Thus, if the 

application and premium payment are 

received after ten (10) calendar days 

from the date of the application or are 

not mailed by certified mail within four 

(4) calendar days from the date of 

application, the waiting period will be 

calculated from the date of receipt at the 

office of the NFIP. To determine the 

effective date of any coverage added by 

endorsement to a flood insurance policy 

already in effect, substitute the term 

endorsement for the term application in 

this paragraph (f). 

(g) The rules set forth in paragraphs 

(a) through (f) of this section apply to 

Write Your Own (WYO) companies, 

except that agents must mail the 

premium payments and accompanying 

applications and endorsements to the 

WYO company and the WYO company 

must receive the applications and 

endorsements, rather than the NFIP. 

§ 61.13 Standard Flood Insurance Policy. 

■ 11. Amend § 61.13 by revising 

paragraphs (e) and (f) and adding 

paragraphs (g) and (h) to read as follows: 

* * * * * 

(e) Authorized only under terms and 

conditions established by the Act and 

Regulation. The Standard Flood 

Insurance Policy is authorized only 

under terms and conditions established 

by Federal statute, the program’s 

regulations, the Federal Insurance 

Administrator’s interpretations, and the 

express terms of the policy itself. 

Accordingly, representations regarding 

the extent and scope of coverage that are 

not consistent with Federal statute, the 

program’s regulations, the Federal 

Insurance Administrator’s 

interpretations, and the express terms of 

the policy itself, are void. 

(f) Agent acts only for policyholder. 

The duly licensed property or casualty 

agent acts for the policyholder and does 

not act as agent for the Federal 

Government, the Federal Emergency 

Management Agency, the Write Your 

Own (WYO) program participating 

insurance company authorized by part 

62 of this chapter, or the NFIP servicing 

agent. 

(g) Oral and written binders. No oral 

binder or contract will be effective. No 

written binder will be effective unless 

issued with express authorization of the 

Federal Insurance Administrator. 

(h) The Standard Flood Insurance 

Policy and endorsements may be issued 

by private sector Write Your Own 

(WYO) property insurance companies, 

based upon flood insurance applications 

and renewal forms, all of which 

instruments of flood insurance may bear 

the name, as Insurer, of the issuing 

WYO company. In the case of any 

Standard Flood Insurance Policy, and 

its related forms, issued by a WYO 

company, wherever the names ‘‘Federal 

Emergency Management Agency’’ and 

‘‘Federal Insurance and Mitigation 

Administration’’ appear, a WYO 

company must substitute its own name 

therefor. Standard Flood Insurance 

Policies issued by WYO companies may 

be executed by the issuing WYO 

company as Insurer, in the place and 

stead of the Federal Insurance 

Administrator, but the risk of loss is 

borne by the National Flood Insurance 

Fund, not the WYO company. 

■ 12. Revise Appendix A(1) to part 61 

to read as follows: 

Appendix A(1) to Part 61 

Federal Emergency Management Agency, 

Federal Insurance and Mitigation 

Administration 

Standard Flood Insurance Policy 

Dwelling Form 

Please read the policy carefully. The flood 

insurance provided is subject to limitations, 

restrictions, and exclusions. 

I. Agreement 

A. This policy covers the following types 

of property only: 

1. A one to four family residential building, 

not under a condominium form of 

ownership; 

2. A single family dwelling unit in a 

condominium building; and 

3. Personal property in a building. 

B. The Federal Emergency Management 

Agency (FEMA) provides flood insurance 

under the terms of the National Flood 

Insurance Act of 1968 and its amendments, 

and Title 44 of the Code of Federal 

Regulations. 

C. We will pay you for direct physical loss 

by or from flood to your insured property if 

you: 

1. Have paid the full amount due 

(including applicable premiums, surcharges, 

and fees); 

2. Comply with all terms and conditions of 

this policy; and 

3. Have furnished accurate information and 

statements. 

D. We have the right to review the 

information you give us at any time and 

revise your policy based on our review. 

E. This policy insures only one building. 

If you own more than one building, coverage 

will apply to the single building specifically 

described in the Flood Insurance 

Application. 

F. Subject to the exception in I.G below, 

multiple policies with building coverage 

cannot be issued to insure a single building 

to one insured or to different insureds, even 

if separate policies were issued through 

different NFIP insurers. Payment for damages 

may only be made under a single policy for 

building damages under Coverage A— 

Building Property. 

G. A Dwelling Form policy with building 

coverage may be issued to a unit owner in 

a condominium building that is also insured 

under a Residential Condominium Building 

Association Policy (RCBAP). However, no 

more than $250,000 may be paid in 

combined benefits for a single unit under the 

Dwelling Form policy and the RCBAP. We 

will only pay for damage once. Items of 

damage paid for under an RCBAP cannot also 

be claimed under the Dwelling Form policy. 

II. Definitions 

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

to the named insured(s) shown on the 

Declarations Page of this policy and the 

spouse of the named insured, if a resident of 

the same household. Insured(s) also includes: 

Any mortgagee and loss payee named in the 

Application and Declarations Page, as well as 

any other mortgagee or loss payee 

determined to exist at the time of loss, in the 

order of precedence. ‘‘We,’’ ‘‘us,’’ and ‘‘our’’ 

refer to the insurer. 

Some definitions are complex because they 

are provided as they appear in the law or 

regulations, or result from court cases. 

B. Flood, as used in this flood insurance 

policy, means: 

1. A general and temporary condition of 

partial or complete inundation of two or 

more acres of normally dry land area or of 

two or more properties (one of which is your 

property) from: 

a. Overflow of inland or tidal waters, 

b. Unusual and rapid accumulation or 

runoff of surface waters from any source, 

c. Mudflow. 

2. Collapse or subsidence of land along the 

shore of a lake or similar body of water as 

a result of erosion or undermining caused by 

waves or currents of water exceeding 


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anticipated cyclical levels that result in a 

flood as defined in B.1.a above. 

C. The following are the other key 

definitions we use in this policy: 

1. Act. The National Flood Insurance Act 

of 1968 and any amendments to it. 

2. Actual Cash Value. The cost to replace 

an insured item of property at the time of 

loss, less the value of its physical 

depreciation. 

3. Application. The statement made and 

signed by you or your agent in applying for 

this policy. The application gives 

information we use to determine the 

eligibility of the risk, the kind of policy to be 

issued, and the correct premium payment. 

The application is part of this flood 

insurance policy. 

4. Base Flood. A flood having a one percent 

chance of being equaled or exceeded in any 

given year. 

5. Basement. Any area of a building, 

including any sunken room or sunken 

portion of a room, having its floor below 

ground level on all sides. 

6. Building. 

a. A structure with two or more outside 

rigid walls and a fully secured roof that is 

affixed to a permanent site; 

b. A manufactured home, also known as a 

mobile home, is a structure: built on a 

permanent chassis, transported to its site in 

one or more sections, and affixed to a 

permanent foundation); or 

c. A travel trailer without wheels, built on 

a chassis and affixed to a permanent 

foundation, that is regulated under the 

community’s floodplain management and 

building ordinances or laws. 

Building does not mean a gas or liquid 

storage tank, shipping container, or a 

recreational vehicle, park trailer, or other 

similar vehicle, except as described in C.6.c 

above. 

7. Cancellation. The ending of the 

insurance coverage provided by this policy 

before the expiration date. 

8. Condominium. That form of ownership 

of one or more buildings in which each unit 

owner has an undivided interest in common 

elements. 

9. Condominium Association. The entity 

made up of the unit owners responsible for 

the maintenance and operation of: 

a. Common elements owned in undivided 

shares by unit owners; and 

b. Other buildings in which the unit 

owners have use rights; where membership 

in the entity is a required condition of 

ownership. 

10. Condominium Building. A type of 

building for which the form of ownership is 

one in which each unit owner has an 

undivided interest in common elements of 

the building. 

11. Declarations Page. A computergenerated summary of information you 

provided in your application for insurance. 

The Declarations Page also describes the term 

of the policy, limits of coverage, and displays 

the premium and our name. The Declarations 

Page is a part of this flood insurance policy. 

12. Deductible. The amount of an insured 

loss that is your responsibility and that is 

incurred by you before any amounts are paid 

for the insured loss under this policy. 

13. Described Location. The location where 

the insured building(s) or personal property 

are found. The described location is shown 

on the Declarations Page. 

14. Direct Physical Loss By or From Flood. 

Loss or damage to insured property, directly 

caused by a flood. There must be evidence 

of physical changes to the property. 

15. Dwelling. A building designed for use 

as a residence for no more than four families 

or a single-family unit in a condominium 

building. 

16. Elevated Building. A building that has 

no basement and that has its lowest elevated 

floor raised above ground level by foundation 

walls, shear walls, posts, piers, pilings, or 

columns. 

17. Emergency Program. The initial phase 

of a community’s participation in the 

National Flood Insurance Program. During 

this phase, only limited amounts of 

insurance are available under the Act and the 

regulations prescribed pursuant to the Act. 

18. Federal Policy Fee. A flat rate charge 

you must pay on each new or renewal policy 

to defray certain administrative expenses 

incurred in carrying out the National Flood 

Insurance Program. 

19. Improvements. Fixtures, alterations, 

installations, or additions comprising a part 

of the dwelling or apartment in which you 

reside. 

20. Mudflow. A river of liquid and flowing 

mud on the surface of normally dry land 

areas, as when earth is carried by a current 

of water. Other earth movements, such as 

landslide, slope failure, or a saturated soil 

mass moving by liquidity down a slope, are 

not mudflows. 

21. National Flood Insurance Program 

(NFIP). The program of flood insurance 

coverage and floodplain management 

administered under the Act and applicable 

Federal regulations in Title 44 of the Code of 

Federal Regulations, Subchapter B. 

22. Policy. The entire written contract 

between you and us. It includes: 

a. This printed form; 

b. The application and Declarations Page; 

c. Any endorsement(s) that may be issued; 

and 

d. Any renewal certificate indicating that 

coverage has been instituted for a new policy 

and new policy term. Only one dwelling, 

which you specifically described in the 

application, may be insured under this 

policy. 

23. Pollutants. Substances that include, but 

are not limited to, any solid, liquid, gaseous, 

or thermal irritant or contaminant, including 

smoke, vapor, soot, fumes, acids, alkalis, 

chemicals, and waste. ‘‘Waste’’ includes, but 

is not limited to, materials to be recycled, 

reconditioned, or reclaimed. 

24. Post-FIRM Building. A building for 

which construction or substantial 

improvement occurred after December 31, 

1974, or on or after the effective date of an 

initial Flood Insurance Rate Map (FIRM), 

whichever is later. 

25. Principal Residence. The dwelling in 

which you or your spouse have lived for at 

least 80 percent of (a) the 365 days 

immediately preceding the time of loss; or (b) 

the period of ownership of you or your 

spouse, if either you or your spouse owned 

the dwelling for less than 365 days 

immediately preceding the time of loss. 

26. Probation Surcharge. A flat charge you 

must pay on each new or renewal policy 

issued covering property in a community the 

NFIP has placed on probation under the 

provisions of 44 CFR 59.24. 

27. Regular Program. The final phase of a 

community’s participation in the National 

Flood Insurance Program. In this phase, a 

Flood Insurance Rate Map is in effect and full 

limits of coverage are available under the Act 

and the regulations prescribed pursuant to 

the Act. 

28. Special Flood Hazard Area (SFHA). An 

area having special flood or mudflow, and/ 

or flood-related erosion hazards, and shown 

on a Flood Hazard Boundary Map or Flood 

Insurance Rate Map as Zone A, AO, A1–A30, 

AE, A99, AH, AR, AR/A, AR/AE, AR/AH, 

AR/AO, AR/A1–A30, V1–V30, VE, or V. 

29. Unit. A single-family residential space 

you own in a condominium building. 

30. Valued Policy. A policy in which the 

insured and the insurer agree on the value of 

the property insured, that value being 

payable in the event of a total loss. The 

Standard Flood Insurance Policy is not a 

valued policy. 

III. Property 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 loadbearing wall are always considered part of 

the dwelling and cannot be separately 

insured. 

3. A detached garage at the described 

location. Coverage is limited to no more than 

10 percent of the limit of liability on the 

dwelling. Use of this insurance is at your 

option but reduces the building limit of 

liability. We do not cover any detached 

garage used or held for use for residential 

(i.e., dwelling), business, or farming 

purposes. 

4. Materials and supplies to be used for 

construction, alteration, or repair of the 

dwelling or a detached garage while the 

materials and supplies are stored in a fully 

enclosed building at the described location or 

on an adjacent property. 

5. A building under construction, 

alteration, or repair at the described location. 

a. If the structure is not yet walled or 

roofed as described in the definition for 

building (see II.B.6.a) then coverage applies: 

(1) Only while such work is in progress; or 

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

of up to 90 continuous days thereafter. 

b. However, coverage does not apply until 

the building is walled and roofed if the 


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lowest floor, including the basement floor, of 

a non-elevated building or the lowest 

elevated floor of an elevated building is: 

(1) Below the base flood elevation in Zones 

AH, AE, A1–A30, AR, AR/AE, AR/AH, AR/ 

A1–A30, AR/A, AR/AO; or 

(2) Below the base flood elevation adjusted 

to include the effect of wave action in Zones 

VE or V1–V30. 

The lowest floor level is based on the 

bottom of the lowest horizontal structural 

member of the floor in Zones VE or V1–V30 

or the top of the floor in Zones AH, AE, 

A1–A30, AR, AR/AE, AR/AH, AR/A1–A30, 

AR/A, and AR/AO. 

6. A manufactured home or a travel trailer, 

as described in the II.C.6. If the manufactured 

home or travel trailer is in a special flood 

hazard area, it must be anchored in the 

following manner at the time of the loss: 

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

anchors; or 

b. In accordance with the manufacturer’s 

specifications; or 

c. In compliance with the community’s 

floodplain management requirements unless 

it has been continuously insured by the NFIP 

at the same described location since 

September 30, 1982. 

7. The following items of property which 

are insured under Coverage A only: 

a. Awnings and canopies; 

b. Blinds; 

c. Built-in dishwashers; 

d. Built-in microwave ovens; 

e. Carpet permanently installed over 

unfinished flooring; 

f. Central air conditioners; 

g. Elevator equipment; 

h. Fire sprinkler systems; 

i. Walk-in freezers; 

j. Furnaces and radiators; 

k. Garbage disposal units; 

l. Hot water heaters, including solar water 

heaters; 

m. Light fixtures; 

n. Outdoor antennas and aerials fastened to 

buildings; 

o. Permanently installed cupboards, 

bookcases, cabinets, paneling, and wallpaper; 

p. Plumbing fixtures; 

q. Pumps and machinery for operating 

pumps; 

r. Ranges, cooking stoves, and ovens; 

s. Refrigerators; and 

t. Wall mirrors, permanently installed. 

8. Items of property below the lowest 

elevated floor of an elevated post-FIRM 

building located in Zones A1–A30, AE, AH, 

AR, AR/A, AR/AE, AR/AH, AR/A1–A30, V1– 

V30, or VE, or in a basement, regardless of 

the zone. Coverage is limited to the 

following: 

a. Any of the following items, if installed 

in their functioning locations and, if 

necessary for operation, connected to a 

power source: 

(1) Central air conditioners; 

(2) Cisterns and the water in them; 

(3) Drywall for walls and ceilings in a 

basement and the cost of labor to nail it, 

unfinished and unfloated and not taped, to 

the framing; 

(4) Electrical junction and circuit breaker 

boxes; 

(5) Electrical outlets and switches; 

(6) Elevators, dumbwaiters and related 

equipment, except for related equipment 

installed below the base flood elevation after 

September 30, 1987; 

(7) Fuel tanks and the fuel in them; 

(8) Furnaces and hot water heaters; 

(9) Heat pumps; 

(10) Nonflammable insulation in a 

basement; 

(11) Pumps and tanks used in solar energy 

systems; 

(12) Stairways and staircases attached to 

the building, not separated from it by 

elevated walkways; 

(13) Sump pumps; 

(14) Water softeners and the chemicals in 

them, water filters, and faucets installed as 

an integral part of the plumbing system; 

(15) Well water tanks and pumps; 

(16) Required utility connections for any 

item in this list; and 

(17) Footings, foundations, posts, pilings, 

piers, or other foundation walls and 

anchorage systems required to support a 

building. 

b. Clean-up. 

B. Coverage B—Personal Property 

1. If you have purchased personal property 

coverage, we insure against direct physical 

loss by or from flood to personal property 

inside a building at the described location, if: 

a. The property is owned by you or your 

household family members; and 

b. At your option, the property is owned 

by guests or servants. 

2. Personal property is also insured for a 

period of 45 days at another location as set 

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

3. Personal property in a building that is 

not fully enclosed must be secured to prevent 

flotation out of the building. If the personal 

property does float out during a flood, it will 

be conclusively presumed that it was not 

reasonably secured. In that case, there is no 

coverage for such property. 

4. Coverage for personal property includes 

the following property, subject to B.1 above, 

which is insured under Coverage B only: 

a. Air conditioning units, portable or 

window type; 

b. Carpets, not permanently installed, over 

unfinished flooring; 

c. Carpets over finished flooring; 

d. Clothes washers and dryers; 

e. ‘‘Cook-out’’ grills; 

f. Food freezers, other than walk-in, and 

food in any freezer; and 

g. Portable microwave ovens and portable 

dishwashers. 

5. Coverage for items of property below the 

lowest elevated floor of an elevated postFIRM building located in Zones A1–A30, AE, 

AH, AR, AR/A, AR/AE, AR/AH, AR/A1–A30, 

V1–V30, or VE, or in a basement, regardless 

of the zone, is limited to the following items, 

if installed in their functioning locations and, 

if necessary for operation, connected to a 

power source: 

a. Air conditioning units, portable or 

window type; 

b. Clothes washers and dryers; and 

c. Food freezers, other than walk-in, and 

food in any freezer. 

6. If you are a tenant and have insured 

personal property under Coverage B in this 

policy, we will cover such property, 

including your cooking stove or range and 

refrigerator. The policy will also cover 

improvements made or acquired solely at 

your expense in the dwelling or apartment in 

which you reside, but for not more than 10 

percent of the limit of liability shown for 

personal property on the Declarations Page. 

Use of this insurance is at your option but 

reduces the personal property limit of 

liability. 

7. If you are the owner of a unit and have 

insured personal property under Coverage B 

in this policy, we will also cover your 

interior walls, floor, and ceiling (not 

otherwise insured under a flood insurance 

policy purchased by your condominium 

association) for not more than 10 percent of 

the limit of liability shown for personal 

property on the Declarations Page. Use of this 

insurance is at your option but reduces the 

personal property limit of liability. 

8. Special Limits. We will pay no more 

than $2,500 for any one loss to one or more 

of the following kinds of personal property: 

a. Artwork, photographs, collectibles, or 

memorabilia, including but not limited to, 

porcelain or other figures, and sports cards; 

b. Rare books or autographed items; 

c. Jewelry, watches, precious and semiprecious stones, or articles of gold, silver, or 

platinum; 

d. Furs or any article containing fur that 

represents its principal value; or 

e. Personal property used in any business. 

9. We will pay only for the functional 

value of antiques. 

C. Coverage C—Other Coverages 

1. Debris Removal. 

a. We will pay the expense to remove nonowned debris that is on or in insured 

property and debris of insured property 

anywhere. 

b. If you or a member of your household 

perform the removal work, the value of your 

work will be based on the Federal minimum 

wage. 

c. This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

2. Loss Avoidance Measures. 

a. Sandbags, Supplies, and Labor. 

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

incur to protect the insured building from a 

flood or imminent danger of flood, for the 

following: 

(a) Your reasonable expenses to buy: 

(i) Sandbags, including sand to fill them; 

(ii) Fill for temporary levees; 

(iii) Pumps; and 

(iv) Plastic sheeting and lumber used in 

connection with these items. 

(b) The value of work, at the Federal 

minimum wage, that you 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 


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(b) A legally authorized official must issue 

an evacuation order or other civil order for 

the community in which the building is 

located calling for measures to preserve life 

and property from the peril of flood. 

This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

b. Property Removed to Safety. 

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

reasonable expenses you incur to move 

insured property to a place other than the 

described location that contains the property 

in order to protect it from flood or the 

imminent danger of flood. Reasonable 

expenses include the value of work, at the 

Federal minimum wage, you or a member of 

your household perform. 

(2) If you move insured property to a 

location other than the described location 

that contains the property, in order to protect 

it from flood or the imminent danger of flood, 

we will cover such property while at that 

location for a period of 45 consecutive days 

from the date you begin to move it there. The 

personal property that is moved must be 

placed in a fully enclosed building or 

otherwise reasonably protected from the 

elements. 

(3) Any property removed, including a 

moveable home described in II.6.b and c, 

must be placed above ground level or outside 

of the special flood hazard area. 

(4) This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

3. Condominium Loss Assessments. 

a. Subject to III.C.3.b below, if this policy 

insures a condominium unit, we will pay, up 

to the Coverage A limit of liability, your 

share of loss assessments charged against you 

by the condominium association in 

accordance with the condominium 

association’s articles of association, 

declarations and your deed. 

The assessment must be made because of 

direct physical loss by or from flood during 

the policy term, to the unit or to the common 

elements of the NFIP insured condominium 

building in which this unit is located. 

b. We will not pay any loss assessment: 

(1) Charged against you and the 

condominium association by any 

governmental body; 

(2) That results from a deductible under 

the insurance purchased by the 

condominium association insuring common 

elements; 

(3) That results from a loss to personal 

property, including contents of a 

condominium building, 

(4) In which the total payment combined 

under all policies exceeds the maximum 

amount of coverage available under the Act 

for a single unit in a condominium building 

where the unit is insured under both a 

Dwelling Policy and a RCBAP. 

(5) On any item of damage that has already 

been paid under a RCBAP where a single unit 

in a condominium building is insured by 

both a Dwelling Policy and a RCBAP. 

c. Condominium Loss Assessment coverage 

does not increase the Coverage A Limit of 

Liability and is subject to the maximum 

coverage limits available for a single family 

dwelling under the Act, payable between all 

policies issued and covering the unit, under 

the Act. 

D. Coverage D—Increased Cost of 

Compliance 

1. General. 

This policy pays you to comply with a 

State or local floodplain management law or 

ordinance affecting repair or reconstruction 

of a building suffering flood damage. 

Compliance activities eligible for payment 

are: Elevation, floodproofing, relocation, or 

demolition (or any combination of these 

activities) of your building. Eligible 

floodproofing activities are limited to: 

a. Non-residential buildings. 

b. Residential buildings with basements 

that satisfy FEMA’s standards published in 

the Code of Federal Regulations [44 CFR 

60.6(b) or (c)]. 

2. Limit of Liability. 

We will pay you up to $30,000 under this 

Coverage D—Increased Cost of Compliance, 

which only applies to policies with building 

coverage (Coverage A). Our payment of 

claims under Coverage D is in addition to the 

amount of coverage which you selected on 

the application and which appears on the 

Declarations Page. But the maximum you can 

collect under this policy for both Coverage 

A—Building Property and Coverage D— 

Increased Cost of Compliance cannot exceed 

the maximum permitted under the Act. We 

do not charge a separate deductible for a 

claim under Coverage D. 

3. Eligibility. 

a. A building covered under Coverage A— 

Building Property sustaining a loss caused by 

a flood as defined by this policy must: 

(1) Be a ‘‘repetitive loss building.’’ A 

repetitive loss building is one that meets the 

following conditions: 

(a) The building is insured by a contract of 

flood insurance issued under the NFIP. 

(b) The building has suffered flood damage 

on two occasions during a 10-year period 

which ends on the date of the second loss. 

(c) The cost to repair the flood damage, on 

average, equaled or exceeded 25 percent of 

the market value of the building at the time 

of each flood loss. 

(d) In addition to the current claim, the 

NFIP must have paid the previous qualifying 

claim, and the State or community must have 

a cumulative, substantial damage provision 

or repetitive loss provision in its floodplain 

management law or ordinance being enforced 

against the building; or 

(2) Be a building that has had flood damage 

in which the cost to repair equals or exceeds 

50 percent of the market value of the building 

at the time of the flood. The State or 

community must have a substantial damage 

provision in its floodplain management law 

or ordinance being enforced against the 

building. 

b. This Coverage D pays you to comply 

with State or local floodplain management 

laws or ordinances that meet the minimum 

standards of the National Flood Insurance 

Program found in the Code of Federal 

Regulations at 44 CFR 60.3. We pay for 

compliance activities that exceed those 

standards under these conditions: 

(1) 3.a.1 above. 

(2) Elevation or floodproofing in any risk 

zone to preliminary or advisory base flood 

elevations provided by FEMA which the 

State or local government has adopted and is 

enforcing for flood-damaged buildings in 

such areas. (This includes compliance 

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

being changed to zones with base flood 

elevations. This also includes compliance 

activities in zones where base flood 

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

higher advisory base flood elevation.) 

Increased Cost of Compliance coverage does 

not apply to situations in B, C, X, or D zones 

where the community has derived its own 

elevations and is enforcing elevation or 

floodproofing requirements for flooddamaged buildings to elevations derived 

solely by the community. 

(3) Elevation or floodproofing above the 

base flood elevation to meet State or local 

‘‘free-board’’ requirements, i.e., that a 

building must be elevated above the base 

flood elevation. 

c. Under the minimum NFIP criteria at 44 

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

require the elevation or floodproofing of 

buildings in unnumbered A zones to the base 

flood elevation where elevation data is 

obtained from a Federal, State, or other 

source. Such compliance activities are 

eligible for Coverage D. 

d. Coverage D will pay for the incremental 

cost, after demolition or relocation, of 

elevating or floodproofing a building during 

its rebuilding at the same or another site to 

meet State or local floodplain management 

laws or ordinances, subject to Coverage D 

Exclusion 5.g below. 

e. Coverage D will pay to bring a flooddamaged building into compliance with State 

or local floodplain management laws or 

ordinances even if the building had received 

a variance before the present loss from the 

applicable floodplain management 

requirements. 

4. Conditions. 

a. When a building insured under Coverage 

A—Building Property sustains a loss caused 

by a flood, our payment for the loss under 

this Coverage D will be for the increased cost 

to elevate, floodproof, relocate, or demolish 

(or any combination of these activities) 

caused by the enforcement of current State or 

local floodplain management ordinances or 

laws. Our payment for eligible demolition 

activities will be for the cost to demolish and 

clear the site of the building debris or a 

portion thereof caused by the enforcement of 

current State or local floodplain management 

ordinances or laws. Eligible activities for the 

cost of clearing the site will include those 

necessary to discontinue utility service to the 

site and ensure proper abandonment of onsite utilities. 

b. When the building is repaired or rebuilt, 

it must be intended for the same occupancy 

as the present building unless otherwise 

required by current floodplain management 

ordinances or laws. 

5. Exclusions. 

Under this Coverage D (Increased Cost of 

Compliance), we will not pay for: 

a. The cost to comply with any floodplain 

management law or ordinance in 

communities participating in the Emergency 

Program. 

b. The cost associated with enforcement of 

any ordinance or law that requires any 


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insured or others to test for, monitor, clean 

up, remove, contain, treat, detoxify or 

neutralize, or in any way respond to, or 

assess the effects of pollutants. 

c. The loss in value to any insured building 

due to the requirements of any ordinance or 

law. 

d. The loss in residual value of the 

undamaged portion of a building demolished 

as a consequence of enforcement of any State 

or local floodplain management law or 

ordinance. 

e. Any Increased Cost of Compliance under 

this Coverage D: 

(1) Until the building is elevated, 

floodproofed, demolished, or relocated on 

the same or to another premises; and 

(2) Unless the building is elevated, 

floodproofed, demolished, or relocated as 

soon as reasonably possible after the loss, not 

to exceed two years. 

f. Any code upgrade requirements, e.g., 

plumbing or electrical wiring, not 

specifically related to the State or local 

floodplain management law or ordinance. 

g. Any compliance activities needed to 

bring additions or improvements made after 

the loss occurred into compliance with State 

or local floodplain management laws or 

ordinances. 

h. Loss due to any ordinance or law that 

you were required to comply with before the 

current loss. 

i. Any rebuilding activity to standards that 

do not meet the NFIP’s minimum 

requirements. This includes any situation 

where the insured has received from the 

State or community a variance in connection 

with the current flood loss to rebuild the 

property to an elevation below the base flood 

elevation. 

j. Increased Cost of Compliance for a garage 

or carport. 

k. Any building insured under an NFIP 

Group Flood Insurance Policy. 

l. Assessments made by a condominium 

association on individual condominium unit 

owners to pay increased costs of repairing 

commonly owned buildings after a flood in 

compliance with State or local floodplain 

management ordinances or laws. 

6. Other Provisions. 

a. Increased Cost of Compliance coverage 

will not be included in the calculation to 

determine whether coverage meets the 80 

percent insurance-to-value requirement for 

replacement cost coverage as set forth in Art. 

VII.R (‘‘Loss Settlement’’) of this policy. 

b. All other conditions and provisions of 

this policy apply. 

IV. Property Not Covered 

We do not insure any of the following: 

1. Personal property not inside a building; 

2. A building, and personal property in it, 

located entirely in, on, or over water or 

seaward of mean high tide if it was 

constructed or substantially improved after 

September 30, 1982; 

3. Open structures, including a building 

used as a boathouse or any structure or 

building into which boats are floated, and 

personal property located in, on, or over 

water; 

4. Recreational vehicles other than travel 

trailers described in the Definitions section 

(see II.B.6.c) whether affixed to a permanent 

foundation or on wheels; 

5. Self-propelled vehicles or machines, 

including their parts and equipment. 

However, we do cover self-propelled vehicles 

or machines not licensed for use on public 

roads that are: 

a. Used mainly to service the described 

location or 

b. Designed and used to assist handicapped 

persons, while the vehicles or machines are 

inside a building at the described location; 

6. Land, land values, lawns, trees, shrubs, 

plants, growing crops, or animals; 

7. Accounts, bills, coins, currency, deeds, 

evidences of debt, medals, money, scrip, 

stored value cards, postage stamps, 

securities, bullion, manuscripts, or other 

valuable papers; 

8. Underground structures and equipment, 

including wells, septic tanks, and septic 

systems; 

9. Those portions of walks, walkways, 

decks, driveways, patios and other surfaces, 

all whether protected by a roof or not, located 

outside the perimeter, exterior walls of the 

insured building or the building in which the 

insured unit is located; 

10. Containers, including related 

equipment, such as, but not limited to, tanks 

containing gases or liquids; 

11. Buildings or units and all their contents 

if more than 49 percent of the actual cash 

value of the building is below ground, unless 

the lowest level is at or above the base flood 

elevation and is below ground by reason of 

earth having been used as insulation material 

in conjunction with energy efficient building 

techniques; 

12. Fences, retaining walls, seawalls, 

bulkheads, wharves, piers, bridges, and 

docks; 

13. Aircraft or watercraft, or their 

furnishings and equipment; 

14. Hot tubs and spas that are not bathroom 

fixtures, and swimming pools, and their 

equipment, such as, but not limited to, 

heaters, filters, pumps, and pipes, wherever 

located; 

15. Property not eligible for flood 

insurance pursuant to the provisions of the 

Coastal Barrier Resources Act and the Coastal 

Barrier Improvement Act and amendments to 

these Acts; 

16. Personal property you own in common 

with other unit owners comprising the 

membership of a condominium association. 

V. Exclusions 

A. We only pay for direct physical loss by 

or from flood, which means that we do not 

pay you for: 

1. Loss of revenue or profits; 

2. Loss of access to the insured property or 

described location; 

3. Loss of use of the insured property or 

described location; 

4. Loss from interruption of business or 

production; 

5. Any additional living expenses incurred 

while the insured building is being repaired 

or is unable to be occupied for any reason; 

6. The cost of complying with any 

ordinance or law requiring or regulating the 

construction, demolition, remodeling, 

renovation, or repair of property, including 

removal of any resulting debris. This 

exclusion does not apply to any eligible 

activities we describe in Coverage D— 

Increased Cost of Compliance; or 

7. Any other economic loss you suffer. 

B. Flood in Progress. If this policy became 

effective as of the time of a loan closing, as 

provided by 44 CFR 61.11(b), we will not pay 

for a loss caused by a flood that is a 

continuation of a flood that existed prior to 

coverage becoming effective. In all other 

circumstances, we will not pay for a loss 

caused by a flood that is a continuation of a 

flood that existed on or before the day you 

submitted the application for coverage under 

this policy and the full amount due. We will 

determine the date of application using 44 

CFR 61.11(f). 

C. We do not insure for loss to property 

caused directly by earth movement even if 

the earth movement is caused by flood. Some 

examples of earth movement that we do not 

cover are: 

1. Earthquake; 

2. Landslide; 

3. Land subsidence; 

4. Sinkholes; 

5. Destabilization or movement of land that 

results from accumulation of water in 

subsurface land area; or 

6. Gradual erosion. 

We do, however, pay for losses from 

mudflow and land subsidence as a result of 

erosion that are specifically insured under 

our definition of flood (see II.B.1.c and 

II.B.2). 

D. We do not insure for direct physical loss 

caused directly or indirectly by any of the 

following: 

1. The pressure or weight of ice; 

2. Freezing or thawing; 

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

4. Water, moisture, mildew, or mold 

damage that results primarily from any 

condition: 

a. Substantially confined to the dwelling; 

or 

b. That is within your control, including 

but not limited to: 

(1) Design, structural, or mechanical 

defects; 

(2) Failure, stoppage, or breakage of water 

or sewer lines, drains, pumps, fixtures, or 

equipment; or 

(3) Failure to inspect and maintain the 

property after a flood recedes; 

5. Water or water-borne material that: 

a. Backs up through sewers or drains; 

b. Discharges or overflows from a sump, 

sump pump or related equipment; or 

c. Seeps or leaks on or through the insured 

property; unless there is a flood in the area 

and the flood is the proximate cause of the 

sewer or drain backup, sump pump discharge 

or overflow, or the seepage of water; 

6. The pressure or weight of water unless 

there is a flood in the area and the flood is 

the proximate cause of the damage from the 

pressure or weight of water; 

7. Power, heating, or cooling failure unless 

the failure results from direct physical loss 

by or from flood to power, heating, or cooling 

equipment on the described location; 

8. Theft, fire, explosion, wind, or 

windstorm; 


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9. Anything you or any member of your 

household do or conspire to do to 

deliberately cause loss by flood; or 

10. Alteration of the insured property that 

significantly increases the risk of flooding. 

E. We do not insure for loss to any building 

or personal property located on land leased 

from the Federal Government, arising from or 

incident to the flooding of the land by the 

Federal Government, where the lease 

expressly holds the Federal Government 

harmless under flood insurance issued under 

any Federal Government program. 

F. We do not pay for the testing for or 

monitoring of pollutants unless required by 

law or ordinance. 

VI. Deductibles 

A. When a loss is insured under this 

policy, we will pay only that part of the loss 

that exceeds your deductible amount, subject 

to the limit of liability that applies. The 

deductible amount is shown on the 

Declarations Page. 

However, when a building under 

construction, alteration, or repair does not 

have at least two rigid exterior walls and a 

fully secured roof at the time of loss, your 

deductible amount will be two times the 

deductible that would otherwise apply to a 

completed building. 

B. In each loss from flood, separate 

deductibles apply to the building and 

personal property insured by this policy. 

C. The deductible does NOT apply to: 

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

2. III.C.3. Condominium Loss Assessments; 

or 

3. III.D. Increased Cost of Compliance. 

VII. General Conditions 

A. Pair and Set Clause 

In case of loss to an article that is part of 

a pair or set, we will have the option of 

paying you: 

1. An amount equal to the cost of replacing 

the lost, damaged, or destroyed article, minus 

its depreciation, or 

2. The amount that represents the fair 

proportion of the total value of the pair or set 

that the lost, damaged, or destroyed article 

bears to the pair or set. 

B. Other Insurance 

1. If a loss insured by this policy is also 

insured by other insurance that includes 

flood coverage not issued under the Act, we 

will not pay more than the amount of 

insurance you are entitled to for lost, 

damaged, or destroyed property insured 

under this policy subject to the following: 

a. We will pay only the proportion of the 

loss that the amount of insurance that applies 

under this policy bears to the total amount 

of insurance covering the loss, unless 

VII.B.1.b or c immediately below applies. 

b. If the other policy has a provision stating 

that it is excess insurance, this policy will be 

primary. 

c. This policy will be primary (but subject 

to its own deductible) up to the deductible 

in the other flood policy (except another 

policy as described in VII.B.1.b above). When 

the other deductible amount is reached, this 

policy will participate in the same proportion 

that the amount of insurance under this 

policy bears to the total amount of both 

policies, for the remainder of the loss. 

2. If there is other insurance issued under 

the Act in the name of your condominium 

association covering the same property 

insured by this policy, then this policy will 

be in excess over the other insurance, except 

where a condominium loss assessment to the 

unit owner results from a loss sustained by 

the condominium association that was not 

reimbursed under a flood insurance policy 

written in the name of the association under 

the Act because the building was not, at the 

time of loss, insured for an amount equal to 

the lesser of: 

a. 80 percent or more of its full 

replacement cost; or 

b. The maximum amount of insurance 

permitted under the Act; 

The combined coverage payment under the 

other NFIP insurance and this policy cannot 

exceed the maximum coverage available 

under the Act, of $250,000 per single unit. 

C. Amendments, Waivers, Assignment 

This policy cannot be changed, nor can any 

of its provisions be waived, without the 

express written consent of the Federal 

Insurance Administrator. No action we take 

under the terms of this policy constitutes a 

waiver of any of our rights. You may assign 

this policy in writing when you transfer title 

of your property to someone else except 

under these conditions: 

a. When this policy insures only personal 

property; or 

b. When this policy insures a building 

under construction. 

D. Insufficient Premium or Rating 

Information 

1. Applicability. The following provisions 

apply to all instances where the premium 

paid on this policy is insufficient or where 

the rating information is insufficient, such as 

where an Elevation Certificate is not 

provided. 

2. Reforming the Policy with Reduced 

Coverage. Except as otherwise provided in 

VII.D.1, if the premium we received from you 

was not sufficient to buy the kinds and 

amounts of coverage you requested, we will 

provide only the kinds and amounts of 

coverage that can be purchased for the 

premium payment we received. 

a. For the purpose of determining whether 

your premium payment is sufficient to buy 

the kinds and amounts of coverage you 

requested, we will first deduct the costs of all 

applicable fees and surcharges. 

b. If the amount paid, after deducting the 

costs of all applicable fees and surcharges, is 

not sufficient to buy any amount of coverage, 

your payment will be refunded. Unless the 

policy is reformed to increase the coverage 

amount to the amount originally requested 

pursuant to VII.D.3, this policy will be 

cancelled, and no claims will be paid under 

this policy. 

c. Coverage limits on the reformed policy 

will be based upon the amount of premium 

submitted per type of coverage, but will not 

exceed the amount originally requested. 

3. Discovery of Insufficient Premium or 

Rating Information. If we discover that your 

premium payment was not sufficient to buy 

the requested amount of coverage, the policy 

will be reformed as described in VII.D.2. You 

have the option of increasing the amount of 

coverage resulting from this reformation to 

the amount you requested as follows: 

a. Insufficient Premium. If we discover that 

your premium payment was not sufficient to 

buy the requested amount of coverage, we 

will send you, and any mortgagee or trustee 

known to us, a bill for the required additional 

premium for the current policy term (or that 

portion of the current policy term following 

any endorsement changing the amount of 

coverage). If it is discovered that the initial 

amount charged to you for any fees or 

surcharges is incorrect, the difference will be 

added or deducted, as applicable, to the total 

amount in this bill. 

(1) If you or the mortgagee or trustee pays 

the additional premium amount due within 

30 days from the date of our bill, we will 

reform the policy to increase the amount of 

coverage to the originally requested amount, 

effective to the beginning of the current 

policy term (or subsequent date of any 

endorsement changing the amount of 

coverage). 

(2) If you or the mortgagee or trustee do not 

pay the additional amount due within 30 

days of the date of our bill, any flood 

insurance claim will be settled based on the 

reduced amount of coverage. 

(3) As applicable, you have the option of 

paying all or part of the amount due out of 

a claim payment based on the originally 

requested amount of coverage. 

b. Insufficient Rating Information. If we 

determine that the rating information we 

have is insufficient and prevents us from 

calculating the additional premium, we will 

ask you to send the required information. 

You must submit the information within 60 

days of our request. 

(1) If we receive the information within 60 

days of our request, we will determine the 

amount of additional premium for the 

current policy term, and follow the 

procedure in VII.D.3.a above. 

(2) If we do not receive the information 

within 60 days of our request, no claims will 

be paid until the requested information is 

provided. Coverage will be limited to the 

amount of coverage that can be purchased for 

the payments we received, as determined 

when the requested information is provided. 

4. Coverage Increases. If we do not receive 

the amounts requested in VII.D.3.a or the 

additional information requested in VII.D.3.b 

by the date it is due, the amount of coverage 

under this policy can only be increased by 

endorsement subject to the appropriate 

waiting period. However, no coverage 

increases will be allowed until you have 

provided the information requested in 

VII.D.3.b. 

5. Falsifying Information. However, if we 

find that you or your agent intentionally did 

not tell us, or falsified any important fact or 

circumstance or did anything fraudulent 

relating to this insurance, the provisions of 

VIII.A apply. 

E. Policy Renewal 

1. This policy will expire at 12:01 a.m. on 

the last day of the policy term. 


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2. We must receive the payment of the 

appropriate renewal premium within 30 days 

of the expiration date. 

3. If we find, however, that we did not 

place your renewal notice into the U.S. Postal 

Service, or if we did mail it, we made a 

mistake, e.g., we used an incorrect, 

incomplete, or illegible address, which 

delayed its delivery to you before the due 

date for the renewal premium, then we will 

follow these procedures: 

a. If you or your agent notified us, not later 

than one year after the date on which the 

payment of the renewal premium was due, of 

non-receipt of a renewal notice before the 

due date for the renewal premium, and we 

determine that the circumstances in the 

preceding paragraph apply, we will mail a 

second bill providing a revised due date, 

which will be 30 days after the date on which 

the bill is mailed. 

b. If we do not receive the premium 

requested in the second bill by the revised 

due date, then we will not renew the policy. 

In that case, the policy will remain an 

expired policy as of the expiration date 

shown on the Declarations Page. 

4. In connection with the renewal of this 

policy, we may ask you during the policy 

term to recertify, on a Recertification 

Questionnaire we will provide to you, the 

rating information used to rate your most 

recent application for or renewal of 

insurance. 

F. Conditions Suspending or Restricting 

Insurance 

We are not liable for loss that occurs while 

there is a hazard that is increased by any 

means within your control or knowledge. 

G. Requirements in Case of Loss 

In case of a flood loss to insured property, 

you must: 

1. Give prompt written notice to us; 

2. As soon as reasonably possible, separate 

the damaged and undamaged property, 

putting it in the best possible order so that 

we may examine it; 

3. Prepare an inventory of damaged 

property showing the quantity, description, 

actual cash value, and amount of loss. Attach 

all bills, receipts, and related documents; 

4. Within 60 days after the loss, send us 

a proof of loss, which is your statement of the 

amount you are claiming under the policy 

signed and sworn to by you, and which 

furnishes us with the following information: 

a. The date and time of loss; 

b. A brief explanation of how the loss 

happened; 

c. Your interest (for example, ‘‘owner’’) and 

the interest, if any, of others in the damaged 

property; 

d. Details of any other insurance that may 

cover the loss; 

e. Changes in title or occupancy of the 

insured property during the term of the 

policy; 

f. Specifications of damaged buildings and 

detailed repair estimates; 

g. Names of mortgagees or anyone else 

having a lien, charge, or claim against the 

insured property; 

h. Details about who occupied any insured 

building at the time of loss and for what 

purpose; and 

i. The inventory of damaged personal 

property described in G.3 above. 

5. In completing the proof of loss, you must 

use your own judgment concerning the 

amount of loss and justify that amount. 

6. You must cooperate with the adjuster or 

representative in the investigation of the 

claim. 

7. The insurance adjuster whom we hire to 

investigate your claim may furnish you with 

a proof of loss form, and she or he may help 

you complete it. However, this is a matter of 

courtesy only, and you must still send us a 

proof of loss within 60 days after the loss 

even if the adjuster does not furnish the form 

or help you complete it. 

8. We have not authorized the adjuster to 

approve or disapprove claims or to tell you 

whether we will approve your claim. 

9. At our option, we may accept the 

adjuster’s report of the loss instead of your 

proof of loss. The adjuster’s report will 

include information about your loss and the 

damages you sustained. You must sign the 

adjuster’s report. At our option, we may 

require you to swear to the report. 

H. Our Options After a Loss 

Options we may, in our sole discretion, 

exercise after loss include the following: 

1. At such reasonable times and places that 

we may designate, you must: 

a. Show us or our representative the 

damaged property; 

b. Submit to examination under oath, 

while not in the presence of another insured, 

and sign the same; and 

c. Permit us to examine and make extracts 

and copies of: 

(1) Any policies of property insurance 

insuring you against loss and the deed 

establishing your ownership of the insured 

real property; 

(2) Condominium association documents 

including the Declarations of the 

condominium, its Articles of Association or 

Incorporation, Bylaws, rules and regulations, 

and other relevant documents if you are a 

unit owner in a condominium building; and 

(3) All books of accounts, bills, invoices 

and other vouchers, or certified copies 

pertaining to the damaged property if the 

originals are lost. 

2. We may request, in writing, that you 

furnish us with a complete inventory of the 

lost, damaged or destroyed property, 

including: 

a. Quantities and costs; 

b. Actual cash values or replacement cost 

(whichever is appropriate); 

c. Amounts of loss claimed; 

d. Any written plans and specifications for 

repair of the damaged property that you can 

reasonably make available to us; and 

e. Evidence that prior flood damage has 

been repaired. 

3. If we give you written notice within 30 

days after we receive your signed, sworn 

proof of loss, we may: 

a. Repair, rebuild, or replace any part of the 

lost, damaged, or destroyed property with 

material or property of like kind and quality 

or its functional equivalent; and 

b. Take all or any part of the damaged 

property at the value that we agree upon or 

its appraised value. 

I. No Benefit to Bailee 

No person or organization, other than you, 

having custody of insured property will 

benefit from this insurance. 

J. Loss Payment 

1. We will adjust all losses with you. We 

will pay you unless some other person or 

entity is named in the policy or is legally 

entitled to receive payment. Loss will be 

payable 60 days after we receive your proof 

of loss (or within 90 days after the insurance 

adjuster files the adjuster’s report signed and 

sworn to by you in lieu of a proof of loss) 

and: 

a. We reach an agreement with you; 

b. There is an entry of a final judgment; or 

c. There is a filing of an appraisal award 

with us, as provided in VII.M. 

2. If we reject your proof of loss in whole 

or in part you may: 

a. Accept our denial of your claim; 

b. Exercise your rights under this policy; or 

c. File an amended proof of loss as long as 

it is filed within 60 days of the date of the 

loss. 

K. Abandonment 

You may not abandon to us damaged or 

undamaged property insured under this 

policy. 

L. Salvage 

We may permit you to keep damaged 

property insured under this policy after a 

loss, and we will reduce the amount of the 

loss proceeds payable to you under the 

policy by the value of the salvage. 

M. Appraisal 

If you and we fail to agree on the actual 

cash value or, if applicable, replacement cost 

of your damaged property to settle upon the 

amount of loss, then either may demand an 

appraisal of the loss. In this event, you and 

we will each choose a competent and 

impartial appraiser within 20 days after 

receiving a written request from the other. 

The two appraisers will choose an umpire. If 

they cannot agree upon an umpire within 15 

days, you or we may request that the choice 

be made by a judge of a court of record in 

the state where the insured property is 

located. The appraisers will separately state 

the actual cash value, the replacement cost, 

and the amount of loss to each item. If the 

appraisers submit a written report of an 

agreement to us, the amount agreed upon 

will be the amount of loss. If they fail to 

agree, they will submit their differences to 

the umpire. A decision agreed to by any two 

will set the amount of actual cash value and 

loss, or if it applies, the replacement cost and 

loss. 

Each party will: 

1. Pay its own appraiser; and 

2. Bear the other expenses of the appraisal 

and umpire equally. 

N. Mortgage Clause 

1. The word ‘‘mortgagee’’ includes trustee. 

2. Any loss payable under Coverage A— 

Building Property will be paid to any 

mortgagee of whom we have actual notice, as 

well as any other mortgagee or loss payee 

determined to exist at the time of loss, and 


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you, as interests appear. If more than one 

mortgagee is named, the order of payment 

will be the same as the order of precedence 

of the mortgages. 

3. If we deny your claim, that denial will 

not apply to a valid claim of the mortgagee, 

if the mortgagee: 

a. Notifies us of any change in the 

ownership or occupancy, or substantial 

change in risk of which the mortgagee is 

aware; 

b. Pays any premium due under this policy 

on demand if you have neglected to pay the 

premium; and 

c. Submits a signed, sworn proof of loss 

within 60 days after receiving notice from us 

of your failure to do so. 

4. All of the terms of this policy apply to 

the mortgagee. 

5. The mortgagee has the right to receive 

loss payment even if the mortgagee has 

started foreclosure or similar action on the 

building. 

6. If we decide to cancel or not renew this 

policy, it will continue in effect for the 

benefit of the mortgagee only for 30 days after 

we notify the mortgagee of the cancellation 

or non-renewal. 

7. If we pay the mortgagee for any loss and 

deny payment to you, we are subrogated to 

all the rights of the mortgagee granted under 

the mortgage on the property. Subrogation 

will not impair the right of the mortgagee to 

recover the full amount of the mortgagee’s 

claim. 

O. Suit Against Us 

You may not sue us to recover money 

under this policy unless you have complied 

with all the requirements of the policy. If you 

do sue, you must start the suit within one 

year after the date of the written denial of all 

or part of the claim, and you must file the 

suit in the United States District Court of the 

district in which the insured property was 

located at the time of loss. This requirement 

applies to any claim that you may have under 

this policy and to any dispute that you may 

have arising out of the handling of any claim 

under the policy. 

P. Subrogation 

Whenever we make a payment for a loss 

under this policy, we are subrogated to your 

right to recover for that loss from any other 

person. That means that your right to recover 

for a loss that was partly or totally caused by 

someone else is automatically transferred to 

us, to the extent that we have paid you for 

the loss. We may require you to acknowledge 

this transfer in writing. After the loss, you 

may not give up our right to recover this 

money or do anything that would prevent us 

from recovering it. If you make any claim 

against any person who caused your loss and 

recover any money, you must pay us back 

first before you may keep any of that money. 

Q. Continuous Lake Flooding 

1. If an insured building has been flooded 

by rising lake waters continuously for 90 

days or more and it appears reasonably 

certain that a continuation of this flooding 

will result in an insured loss to the insured 

building equal to or greater than the building 

policy limits plus the deductible or the 

maximum payable under the policy for any 

one building loss, we will pay you the lesser 

of these two amounts without waiting for the 

further damage to occur if you sign a release 

agreeing: 

a. To make no further claim under this 

policy; 

b. Not to seek renewal of this policy; 

c. Not to apply for any flood insurance 

under the Act for property at the described 

location; 

d. Not to seek a premium refund for 

current or prior terms. 

If the policy term ends before the insured 

building has been flooded continuously for 

90 days, the provisions of this paragraph Q.1 

will apply when the insured building suffers 

a covered loss before the policy term ends. 

2. If your insured building is subject to 

continuous lake flooding from a closed basin 

lake, you may elect to file a claim under 

either paragraph Q.1 above or Q.2 (A ‘‘closed 

basin lake’’ is a natural lake from which 

water leaves primarily through evaporation 

and whose surface area now exceeds or has 

exceeded one square mile at any time in the 

recorded past. Most of the nation’s closed 

basin lakes are in the western half of the 

United States where annual evaporation 

exceeds annual precipitation and where lake 

levels and surface areas are subject to 

considerable fluctuation due to wide 

variations in the climate. These lakes may 

overtop their basins on rare occasions.) 

Under this paragraph Q.2, we will pay your 

claim as if the building is a total loss even 

though it has not been continuously 

inundated for 90 days, subject to the 

following conditions: 

a. Lake floodwaters must damage or 

imminently threaten to damage your 

building. 

b. Before approval of your claim, you must: 

(1) Agree to a claim payment that reflects 

your buying back the salvage on a negotiated 

basis; and 

(2) Grant the conservation easement 

described in FEMA’s ‘‘Policy Guidance for 

Closed Basin Lakes’’ to be recorded in the 

office of the local recorder of deeds. FEMA, 

in consultation with the community in which 

the property is located, will identify on a 

map an area or areas of special consideration 

(ASC) in which there is a potential for flood 

damage from continuous lake flooding. 

FEMA will give the community the 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 it will allow on any 

portion of the property within the ASC are 

certain simple agricultural and recreational 

structures. If any of these allowable 

structures are insurable buildings under the 

NFIP and are insured under the NFIP, they 

will not be eligible for the benefits of this 

paragraph Q.2. If a U.S. Army Corps of 

Engineers certified flood control project or 

otherwise certified flood control project later 

protects the property, FEMA will, upon 

request, amend the ASC to remove areas 

protected by those projects. The restrictions 

of the easement will then no longer apply to 

any portion of the property removed from the 

ASC; and 

(3) Comply with paragraphs Q.1.a through 

Q.1.d above. 

c. Within 90 days of approval of your 

claim, you must move your building to a new 

location outside the ASC. FEMA will give 

you an additional 30 days to move if you 

show there is sufficient reason to extend the 

time. 

d. Before the final payment of your claim, 

you must acquire an elevation certificate and 

a floodplain development permit from the 

local floodplain administrator for the new 

location of your building. 

e. Before the approval of your claim, the 

community having jurisdiction over your 

building must: 

(1) Adopt a permanent land use ordinance, 

or a temporary moratorium for a period not 

to exceed 6 months to be followed 

immediately by a permanent land use 

ordinance that is consistent with the 

provisions specified in the easement required 

in paragraph Q.2.b above. 

(2) Agree to declare and report any 

violations of this ordinance to FEMA so that 

under Section 1316 of the National Flood 

Insurance Act of 1968, as amended, flood 

insurance to the building can be denied; and 

(3) Agree to maintain as deed-restricted, for 

purposes compatible with open space or 

agricultural or recreational use only, any 

affected property the community acquires an 

interest in. These deed restrictions must be 

consistent with the provisions of paragraph 

Q.2.b above, except that, even if a certified 

project protects the property, the land use 

restrictions continue to apply if the property 

was acquired under the Hazard Mitigation 

Grant Program or the Flood Mitigation 

Assistance Program. If a non-profit land trust 

organization receives the property as a 

donation, that organization must maintain 

the property as deed-restricted, consistent 

with the provisions of paragraph Q2.b above. 

f. Before the approval of your claim, the 

affected State must take all action set forth 

in FEMA’s ‘‘Policy Guidance for Closed 

Basin Lakes.’’ 

g. You must have NFIP flood insurance 

coverage continuously in effect from a date 

established by FEMA until you file a claim 

under paragraph Q.2. If a subsequent owner 

buys NFIP insurance that goes into effect 

within 60 days of the date of transfer of title, 

any gap in coverage during that 60-day 

period will not be a violation of this 

continuous coverage requirement. For the 

purpose of honoring a claim under this 

paragraph Q.2, we will not consider to be in 

effect any increased coverage that became 

effective after the date established by FEMA. 

The exception to this is any in-creased 

coverage in the amount suggested by your 

insurer as an inflation adjustment. 

h. This paragraph Q.2 will be in effect for 

a community when the FEMA Regional 

Administrator for the affected region 

provides to the community, in writing, the 

following: 

(1) Confirmation that the community and 

the State are in compliance with the 

conditions in paragraphs Q.2.e and Q.2.f 

above, and 

(2) The date by which you must have flood 

insurance in effect. 


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R. Loss Settlement 

1. Introduction 

This policy provides three methods of 

settling losses: Replacement Cost, Special 

Loss Settlement, and Actual Cash Value. 

Each method is used for a different type of 

property, as explained in paragraphs a-c 

below. 

a. Replacement Cost Loss Settlement, 

described in R.2 below, applies to a single 

family dwelling provided: 

(1) It is your principal residence and (2) At 

the time of loss, the amount of insurance in 

this policy that applies to the dwelling is 80 

percent or more of its full replacement cost 

immediately before the loss, or is the 

maximum amount of insurance available 

under the NFIP. 

b. Special Loss Settlement, described in 

R.3 below, applies to a single family dwelling 

that is a manufactured or mobile home or a 

travel trailer. 

c. Actual Cash Value loss settlement 

applies to a single family dwelling not 

subject to replacement cost or special loss 

settlement, and to the property listed in R.4 

below. 

2. Replacement Cost Loss Settlement 

The following loss settlement conditions 

apply to a single-family dwelling described 

in R.1.a above: 

a. We will pay to repair or replace the 

damaged dwelling after application of the 

deductible and without deduction for 

depreciation, but not more than the least of 

the following amounts: 

(1) The building limit of liability shown on 

your Declarations Page; 

(2) The replacement cost of that part of the 

dwelling damaged, with materials of like 

kind and quality and for like use; or 

(3) The necessary amount actually spent to 

repair or replace the damaged part of the 

dwelling for like use. 

b. If the dwelling is rebuilt at a new 

location, the cost described above is limited 

to the cost that would have been incurred if 

the dwelling had been rebuilt at its former 

location. 

c. When the full cost of repair or 

replacement is more than $1,000, or more 

than 5 percent of the whole amount of 

insurance that applies to the dwelling, we 

will not be liable for any loss under R.2.a 

above or R.4.a.2 below unless and until 

actual repair or replacement is completed. 

d. You may disregard the replacement cost 

conditions above and make claim under this 

policy for loss to dwellings on an actual cash 

value basis. You may then make claim for 

any additional liability according to R.2.a, b, 

and c above, provided you notify us of your 

intent to do so within 180 days after the date 

of loss. 

e. If the community in which your 

dwelling is located has been converted from 

the Emergency Program to the Regular 

Program during the current policy term, then 

we will consider the maximum amount of 

available NFIP insurance to be the amount 

that was available at the beginning of the 

current policy term. 

3. Special Loss Settlement 

a. The following loss settlement conditions 

apply to a single family dwelling that: 

(1) is a manufactured or mobile home or a 

travel trailer, as defined in II.C.6.b and c, 

(2) is at least 16 feet wide when fully 

assembled and has an area of at least 600 

square feet within its perimeter walls when 

fully assembled, and 

(3) is your principal residence as specified 

in R.1.a.1 above. 

b. If such a dwelling is totally destroyed or 

damaged to such an extent that, in our 

judgment, it is not economically feasible to 

repair, at least to its pre-damage condition, 

we will, at our discretion pay the least of the 

following amounts: 

(1) The lesser of the replacement cost of the 

dwelling or 1.5 times the actual cash value, 

or 

(2) The building limit of liability shown on 

your Declarations Page. 

c. If such a dwelling is partially damaged 

and, in our judgment, it is economically 

feasible to repair it to its pre-damage 

condition, we will settle the loss according 

to the Replacement Cost conditions in R.2 

above. 

4. Actual Cash Value Loss Settlement 

The types of property noted below are 

subject to actual cash value (or in the case 

of R.4.a.2., below, proportional) loss 

settlement. 

a. A dwelling, at the time of loss, when the 

amount of insurance on the dwelling is both 

less than 80 percent of its full replacement 

cost immediately before the loss and less 

than the maximum amount of insurance 

available under the NFIP. In that case, we 

will pay the greater of the following amounts, 

but not more than the amount of insurance 

that applies to that dwelling: 

(1) The actual cash value, as defined in 

II.C.2, of the damaged part of the dwelling; 

or 

(2) A proportion of the cost to repair or 

replace the damaged part of the dwelling, 

without deduction for physical depreciation 

and after application of the deductible. 

This proportion is determined as follows: 

If 80 percent of the full replacement cost of 

the dwelling is less than the maximum 

amount of insurance available under the 

NFIP, then the proportion is determined by 

dividing the actual amount of insurance on 

the dwelling by the amount of insurance that 

represents 80 percent of its full replacement 

cost. But if 80 percent of the full replacement 

cost of the dwelling is greater than the 

maximum amount of insurance available 

under the NFIP, then the proportion is 

determined by dividing the actual amount of 

insurance on the dwelling by the maximum 

amount of insurance available under the 

NFIP. 

b. A two-, three-, or four-family dwelling. 

c. A unit that is not used exclusively for 

single-family dwelling purposes. 

d. Detached garages. 

e. Personal property. 

f. Appliances, carpets, and carpet pads. 

g. Outdoor awnings, outdoor antennas or 

aerials of any type, and other outdoor 

equipment. 

h. Any property insured under this policy 

that is abandoned after a loss and remains as 

debris anywhere on the described location. 

i. A dwelling that is not your principal 

residence. 

5. Amount of Insurance Required 

To determine the amount of insurance 

required for a dwelling immediately before 

the loss, we do not include the value of: 

a. Footings, foundations, piers, or any other 

structures or devices that are below the 

undersurface of the lowest basement floor 

and support all or part of the dwelling; 

b. Those supports listed in R.5.a above, 

that are below the surface of the ground 

inside the foundation walls if there is no 

basement; and 

c. Excavations and underground flues, 

pipes, wiring, and drains. 

Note: The Coverage D—Increased Cost of 

Compliance limit of liability is not included 

in the determination of the amount of 

insurance required. 

VIII. Policy Nullification, Cancellation, and 

Non-Renewal 

A. Policy Nullification for Fraud, 

Misrepresentation, or Making False 

Statements 

1. With respect to all insureds under this 

policy, this policy is void and has no legal 

force and effect if at any time, before or after 

a loss, you or any other insured or your agent 

have, with respect to this policy or any other 

NFIP insurance: 

a. Concealed or misrepresented any 

material fact or circumstance; 

b. Engaged in fraudulent conduct; or 

c. Made false statements. 

2. Policies voided under A.1 cannot be 

renewed or replaced by a new NFIP policy. 

3. Policies are void as of the date the acts 

described in A.1 above were committed. 

4. Fines, civil penalties, and imprisonment 

under applicable Federal laws may also 

apply to the acts of fraud or concealment 

described above. 

B. Policy Nullification for Reasons Other 

Than Fraud 

1. This policy is void from its inception, 

and has no legal force or effect, if: 

a. The property listed on the application is 

located in a community that was not 

participating in the NFIP on this policy’s 

inception date and did not join or reenter the 

program during the policy term and before 

the loss occurred; 

b. The property listed on the application is 

otherwise not eligible for coverage under the 

NFIP at the time of the initial application; 

c. You never had an insurable interest in 

the property listed on the application; 

d. You provided an agent with an 

application and payment, but the payment 

did not clear; or 

e. We receive notice from you, prior to the 

policy effective date, that you have 

determined not to take the policy and you are 

not subject a requirement to obtain and 

maintain flood insurance pursuant to any 

statute, regulation, or contract. 

2. In such cases, you will be entitled to a 

full refund of all premium, fees, and 

surcharges received. However, if a claim was 

paid for a policy that is void, the claim 

payment must be returned to FEMA or offset 

from the premiums to be refunded before the 

refund will be processed. 


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C. Cancellation of the Policy by You 

1. You may cancel this policy in 

accordance with the terms and conditions of 

this policy and the applicable rules and 

regulations of the NFIP. 

2. If you cancel this policy, you may be 

entitled to a full or partial refund of 

premium, surcharges, or fees under the terms 

and conditions of this policy and the 

applicable rules and regulations of the NFIP. 

D. Cancellation of the Policy by Us 

1. Cancellation for Underpayment of 

Amounts Owed on Policy. This policy will 

be cancelled, pursuant to VII.D.2, if it is 

determined that the premium amount you 

paid is not sufficient to buy any amount of 

coverage, and you do not pay the additional 

amount of premium owed to increase the 

coverage to the originally requested amount 

within the required time period. 

2. Cancellation Due to Lack of an Insurable 

Interest. 

a. If you no longer have an insurable 

interest in the insured property, we will 

cancel this policy. You will cease to have an 

insurable interest if: 

(1) For building coverage, the building was 

sold, destroyed, or removed. 

(2) For contents coverage, the contents 

were sold or transferred ownership, or the 

contents were completely removed from the 

described location. 

b. If your policy is cancelled for this 

reason, you may be entitled to a partial 

refund of premium under the applicable 

rules and regulations of the NFIP. 

3. Cancellation of Duplicate Policies. 

a. Except as allowed under Article I.G, 

your property may not be insured by more 

than one NFIP policy, and payment for 

damages to your property will only be made 

under one policy. 

b. Except as allowed under Article I.G, if 

the property is insured by more than one 

NFIP policy, we will cancel all but one of the 

policies. The policy, or policies, will be 

selected for cancellation in accordance with 

44 CFR 62.5 and the applicable rules and 

guidance of the NFIP. 

c. If this policy is cancelled pursuant to 

VIII.D.4.b, you may be entitled to a full or 

partial refund of premium, surcharges, or fees 

under the terms and conditions of this policy 

and the applicable rules and regulations of 

the NFIP. 

4. Cancellation Due to Physical Alteration 

of Property. 

a. If the insured building has been 

physically altered in such a manner that it is 

no longer eligible for flood insurance 

coverage, we will cancel this policy. 

b. If your policy is cancelled for this 

reason, you may be entitled to a partial 

refund of premium under the terms and 

conditions of this policy and the applicable 

rules and regulations of the NFIP. 

E. Non-Renewal of the Policy by Us 

Your policy will not be renewed if: 

1. The community where your insured 

property is located is suspended or stops 

participating in the NFIP; 

2. Your building is otherwise ineligible for 

flood insurance under the Act; 

3. You have failed to provide the 

information we requested for the purpose of 

rating the policy within the required 

deadline. 

IX. Liberalization Clause 

If we make a change that broadens your 

coverage under this edition of our policy, but 

does not re-quire any additional premium, 

then that change will automatically apply to 

your insurance as of the date we implement 

the change, provided that this 

implementation date falls within 60 days 

before or during the policy term stated on the 

Declarations Page. 

X. What Law Governs 

This policy and all disputes arising from 

the insurer’s policy issuance, policy 

administration, or the handling of any claim 

under the policy are governed exclusively by 

the flood insurance regulations issued by 

FEMA, the National Flood Insurance Act of 

1968, as amended (42 U.S.C. 4001, et seq.), 

and Federal common law. 

In Witness Whereof, we have signed this 

policy below and hereby enter into this 

Insurance Agreement. 

Administrator, Federal Insurance and 

Mitigation Administration 

■ 13. Revise Appendix A(2) to Part 61 

to read as follows: 

Appendix A(2) to Part 61 

Federal Emergency Management Agency, 

Federal Insurance and Mitigation 

Administration 

Standard Flood Insurance Policy 

GENERAL PROPERTY FORM 

Please read the policy carefully. The flood 

insurance provided is subject to limitations, 

restrictions, and exclusions. 

I. Agreement 

A. Coverage Under This Policy. 

1. Except as provided in I.A.2, this policy 

provides coverage for multifamily buildings 

(residential buildings designed for use by 5 

or more families that are not condominmum 

buildings), non-residential buildings, and 

their contents. 

2. There is no coverage for a residential 

condominium building in a regular program 

community, except for personal property 

coverage for a unit in a condominium 

building. 

B. The Federal Emergency Management 

Agency (FEMA) provides flood insurance 

under the terms of the National Flood 

Insurance Act of 1968 and its amendments, 

and Title 44 of the Code of Federal 

Regulations. 

C. We will pay you for direct physical loss 

by or from flood to your insured property if 

you: 

1. Have paid the full amount due 

(including applicable premiums, surcharges, 

and fees); 

2. Comply with all terms and conditions of 

this policy; and 

3. Have furnished accurate information and 

statements. 

D. We have the right to review the 

information you give us at any time and 

revise your policy based on our review. 

E. This policy insures only one building. 

If you own more than one building, coverage 

will apply to the single building specifically 

described in the Flood Insurance 

Application. 

F. Multiple policies with building coverage 

cannot be issued to insure a single building 

to one insured or to different insureds, even 

if issued through different NFIP insurers. 

Payment for damages may only be made 

under a single policy for building damages 

under Coverage A—Building Property. 

II. Definitions 

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

to the named insured(s) shown on the 

Declarations Page of this policy and the 

spouse of the named insured, if a resident of 

the same household. Insured(s) also includes: 

Any mortgagee and loss payee named in the 

Application and Declarations Page, as well as 

any other mortgagee or loss payee 

determined to exist at the time of loss, in the 

order of precedence. ‘‘We,’’ ‘‘us,’’ and ‘‘our’’ 

refer to the insurer. 

Some definitions are complex because they 

are provided as they appear in the law or 

regulations, or result from court cases. 

B. Flood, as used in this flood insurance 

policy, means: 

1. A general and temporary condition of 

partial or complete inundation of two or 

more acres of normally dry land area or of 

two or more properties (one of which is your 

property) from: 

a. Overflow of inland or tidal waters, 

b. Unusual and rapid accumulation or 

runoff of surface waters from any source, 

c. Mudflow 

2. Collapse or subsidence of land along the 

shore of a lake or similar body of water as 

a result of erosion or undermining caused by 

waves or currents of water exceeding 

anticipated cyclical levels that result in a 

flood as defined in B.1.a above. 

C. The following are the other key 

definitions we use in this policy: 

1. Act. The National Flood Insurance Act 

of 1968 and any amendments to it. 

2. Actual Cash Value. The cost to replace 

an insured item of property at the time of 

loss, less the value of its physical 

depreciation. 

3. Application. The statement made and 

signed by you or your agent in applying for 

this policy. The application gives 

information we use to determine the 

eligibility of the risk, the kind of policy to be 

issued, and the correct premium payment. 

The application is part of this flood 

insurance policy. 

4. Base Flood. A flood having a one percent 

chance of being equaled or exceeded in any 

given year. 

5. Basement. Any area of a building, 

including any sunken room or sunken 

portion of a room, having its floor below 

ground level on all sides. 

6. Building. 

a. A structure with two or more outside 

rigid walls and a fully secured roof, that is 

affixed to a permanent site; 

b. A manufactured home, also known as a 

mobile home, is a structure built on a 

permanent chassis, transported to its site in 

one or more sections, and affixed to a 

permanent foundation); or 

c. A travel trailer without wheels, built on 

a chassis and affixed to a permanent 


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foundation, that is regulated under the 

community’s floodplain management and 

building ordinances or laws. 

Building does not mean a gas or liquid 

storage tank, shipping container, or a 

recreational vehicle, park trailer, or other 

similar vehicle, except as described in C.6.c 

above. 

7. Cancellation. The ending of the 

insurance coverage provided by this policy 

before the expiration date. 

8. Condominium. That form of ownership 

of one or more buildings in which each unit 

owner has an undivided interest in common 

elements. 

9. Condominium Association. The entity 

made up of the unit owners responsible for 

the maintenance and operation of: 

a. Common elements owned in undivided 

shares by unit owners; and 

b. Other buildings in which the unit 

owners have use rights where membership in 

the entity is a required condition of unit 

ownership. 

10. Condominium Building. A type of 

building for which the form of ownership is 

one in which each unit owner has an 

undivided interest in common elements of 

the building. 

11. Declarations Page. A computergenerated summary of information you 

provided in your application for insurance. 

The Declarations Page also describes the term 

of the policy, limits of coverage, and displays 

the premium and our name. The Declarations 

Page is a part of this flood insurance policy. 

12. Deductible. The fixed amount of an 

insured loss that is your responsibility and 

that is incurred by you before any amounts 

are paid for the insured loss under this 

policy. 

13. Described Location. The location where 

the insured building(s) or personal property 

are found. The described location is shown 

on the Declarations Page. 

14. Direct Physical Loss By or From Flood. 

Loss or damage to insured property, directly 

caused by a flood. There must be evidence 

of physical changes to the property. 

15. Elevated Building. A building that has 

no basement and that has its lowest elevated 

floor raised above ground level by foundation 

walls, shear walls, posts, piers, pilings, or 

columns. 

16. Emergency Program. The initial phase 

of a community’s participation in the 

National Flood Insurance Program. During 

this phase, only limited amounts of 

insurance are available under the Act and the 

regulations prescribed pursuant to the Act. 

17. Federal Policy Fee. A flat rate charge 

you must pay on each new or renewal policy 

to defray certain administrative expenses 

incurred in carrying out the National Flood 

Insurance Program. 

18. Improvements. Fixtures, alterations, 

installations, or additions comprising a part 

of the dwelling or apartment in which you 

reside. 

19. Mudflow. A river of liquid and flowing 

mud on the surface of normally dry land 

areas, as when earth is carried by a current 

of water. Other earth movements, such as 

landslide, slope failure, or a saturated soil 

mass moving by liquidity down a slope, are 

not mudflows. 

20. National Flood Insurance Program 

(NFIP). The program of flood insurance 

coverage and floodplain management 

administered under the Act and applicable 

Federal regulations in Title 44 of the Code of 

Federal Regulations, Subchapter B. 

21. Policy. The entire written contract 

between you and us. It includes: 

a. This printed form; 

b. The application and Declarations Page; 

c. Any endorsement(s) that may be issued; 

and 

d. Any renewal certificate indicating that 

coverage has been instituted for a new policy 

and new policy term. Only one building, 

which you specifically described in the 

application, may be insured under this 

policy. 

22. Pollutants. Substances that include, but 

are not limited to, any solid, liquid, gaseous, 

or thermal irritant or contaminant, including 

smoke, vapor, soot, fumes, acids, alkalis, 

chemicals, and waste. ‘‘Waste’’ includes, but 

is not limited to, materials to be recycled, 

reconditioned, or reclaimed. 

23. Post-FIRM Building. A building for 

which construction or substantial 

improvement occurred after December 31, 

1974, or on or after the effective date of an 

initial Flood Insurance Rate Map (FIRM), 

whichever is later. 

24. Probation Surcharge. A flat charge you 

must pay on each new or renewal policy 

issued covering property in a community the 

NFIP has placed on probation under the 

provisions of 44 CFR 59.24. 

25. Regular Program. The final phase of a 

community’s participation in the National 

Flood Insurance Program. In this phase, a 

Flood Insurance Rate Map is in effect and full 

limits of coverage are available under the Act 

and the regulations prescribed pursuant to 

the Act. 

26. Residential Condominium Building. A 

condominium building, containing one or 

more family units and in which at least 75 

percent of the floor area is residential. 

27. Special Flood Hazard Area (SFHA). An 

area having special flood or mudflow, and/ 

or flood-related erosion hazards, and shown 

on a Flood Hazard Boundary Map or Flood 

Insurance Rate Map as Zone A, AO, A1–A30, 

AE, A99, AH, AR, AR/A, AR/AE, AR/AH, 

AR/AO, AR/A1–A30, V1–V30, VE, or V. 

28. Stock means merchandise held in 

storage or for sale, raw materials, and 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 self-propelled 

vehicles; 

b. Furnishings and equipment for 

watercraft; 

c. Spas and hot-tubs, including their 

equipment; and 

d. Swimming pool equipment. 

29. Unit. A single-family residential or 

non-residential space you own in a 

condominium building. 

30. Valued Policy. A policy in which the 

insured and the insurer agree on the value of 

the property insured, that value being 

payable in the event of a total loss. The 

Standard Flood Insurance Policy is not a 

valued policy. 

III. Property Covered 

A. Coverage A—Building Property 

We insure against direct physical loss by 

or from flood to: 

1. The building described on the 

Declarations Page at the described location. 

If the building is a condominium building 

and the named insured is the condominium 

association, Coverage A includes all units 

within the building and the improvements 

within the units, provided the units are 

owned in common by all unit owners. 

2. Building property located at another 

location for a period of 45 days at another 

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

Removed to Safety. 

3. Additions and extensions attached to 

and in contact with the building by means of 

a rigid exterior wall, a solid load-bearing 

interior wall, a stairway, an elevated 

walkway, or a roof. At your option, additions 

and extensions connected by any of these 

methods may be separately insured. 

Additions and extensions attached to and in 

contact with the building by means of a 

common interior wall that is not a solid loadbearing wall are always considered part of 

the building and cannot be separately 

insured. 

4. The following fixtures, machinery, and 

equipment, which are insured under 

Coverage A only: 

a. Awnings and canopies; 

b. Blinds; 

c. Carpet permanently installed over 

unfinished flooring; 

d. Central air conditioners; 

e. Elevator equipment; 

f. Fire extinguishing apparatus; 

g. Fire sprinkler systems; 

h. Walk-in freezers; 

i. Furnaces; 

j. Light fixtures; 

k. Outdoor antennas and aerials attached to 

buildings; 

l. Permanently installed cupboards, 

bookcases, paneling, and wallpaper; 

m. Pumps and machinery for operating 

pumps; 

n. Ventilating equipment; 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 on an 

adjacent property. 

6. A building under construction, 

alteration, or repair at the described location. 

a. If the structure is not yet walled or 

roofed as described in the definition for 

building (see II.B.6.a.) then coverage applies: 


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(1) Only while such work is in progress; or 

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

of up to 90 continuous days thereafter. 

b. However, coverage does not apply until 

the building is walled and roofed if the 

lowest floor, including the basement floor, of 

a non-elevated building or the lowest 

elevated floor of an elevated building is: 

(1) Below the base flood elevation in Zones 

AH, AE, A1–A30, AR, AR/AE, AR/AH, AR/ 

A1–A30, AR/A, AR/AO; or 

(2) Below the base flood elevation adjusted 

to include the effect of wave action in Zones 

VE or V1–V30. 

The lowest floor level is based on the 

bottom of the lowest horizontal structural 

member of the floor in Zones VE or V1–V30 

or the top of the floor in Zones AH, AE, A1– 

A30, AR, AR/AE, AR/AH, AR/A1–A30, AR/ 

A, and AR/AO. 

7. A manufactured home or a travel trailer, 

as described in the II.C.6. If the manufactured 

home or travel trailer is in a special flood 

hazard area, it must be anchored in the 

following manner at the time of the loss: 

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

anchors; or 

b. In accordance with the manufacturer’s 

specifications; or 

c. In compliance with the community’s 

floodplain management requirements unless 

it has been continuously insured by the NFIP 

at the same described location since 

September 30, 1982. 

8. Items of property below the lowest 

elevated floor of an elevated post-FIRM 

building located in zones A1–A30, AE, AH, 

AR, AR/A, AR/AE, AR/AH, AR/A1–A30, V1– 

V30, or VE, or in a basement, regardless of 

the zone. Coverage is limited to the 

following: 

a. Any of the following items, if installed 

in their functioning locations and, if 

necessary for operation, connected to a 

power source: 

(1) Central air conditioners; 

(2) Cisterns and the water in them; 

(3) Drywall for walls and ceilings in a 

basement and the cost of labor to nail it, 

unfinished and unfloated and not taped, to 

the framing; 

(4) Electrical junction and circuit breaker 

boxes; 

(5) Electrical outlets and switches; 

(6) Elevators, dumbwaiters, and related 

equipment, except for related equipment 

installed below the base flood elevation after 

September 30, 1987; 

(7) Fuel tanks and the fuel in them; 

(8) Furnaces and hot water heaters; 

(9) Heat pumps; 

(10) Nonflammable insulation in a 

basement; 

(11) Pumps and tanks used in solar energy 

systems; 

(12) Stairways and staircases attached to 

the building, not separated from it by 

elevated walkways; 

(13) Sump pumps; 

(14) Water softeners and the chemicals in 

them, water filters, and faucets installed as 

an integral part of the plumbing system; 

(15) Well water tanks and pumps; 

(16) Required utility connections for any 

item in this list; and 

(17) Footings, foundations, posts, pilings, 

piers, or other foundation walls and 

anchorage systems required to support a 

building. 

b. Clean-up. 

B. Coverage B—Personal Property 

1. If you have purchased personal property 

coverage, we insure, subject to B.2–4 below, 

against direct physical loss by or from flood 

to personal property inside the fully enclosed 

insured building: 

a. Owned solely by you, or in the case of 

a condominium, owned solely by the 

condominium association and used 

exclusively in the conduct of the business 

affairs of the condominium association; or 

b. Owned in common by the unit owners 

of the condominium association. 

2. We also insure such personal property 

for 45 days while stored at a temporary 

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

Removed to Safety. 

3. When this policy 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) Other personal property owned by you 

and used in your business, subject to IV, 

Property Not Covered. 

4. Coverage for personal property includes 

the following property, subject to B.1.a and 

B.1.b above, which is insured under Coverage 

B, only: 

a. Air conditioning units, portable or 

window type; 

b. Carpets, not permanently installed, over 

unfinished flooring; 

c. Carpets over finished flooring; 

d. Clothes washers and dryers; 

e. ‘‘Cook-out’’ grills; 

f. Food freezers, other than walk-in, and 

food in any freezer; 

g. Outdoor equipment and furniture stored 

inside the insured building; 

h. Ovens and the like; and 

i. Portable microwave ovens and portable 

dishwashers. 

5. Coverage for items of property below the 

lowest elevated floor of an elevated postFIRM building located in Zones A1–A30, AE, 

AH, AR, AR/A, AR/AE, AR/AH, AR/A1–A30, 

V1–V30, or VE, or in a basement, regardless 

of the zone, is limited to the following items, 

if installed in their functioning locations and, 

if necessary for operation, connected to a 

power source: 

a. Air conditioning units, portable or 

window type; 

b. Clothes washers and dryers; and 

c. Food freezers, other than walk-in, and 

food in any freezer. 

6. Special Limits. We will pay no more 

than $2,500 for any loss to one or more of 

the following kinds of personal property: 

a. Artwork, photographs, collectibles, or 

memorabilia, including but not limited to, 

porcelain or other figures, and sports cards; 

b. Rare books or autographed items; 

c. Jewelry, watches, precious and semiprecious stones, or articles of gold, silver, or 

platinum; 

d. Furs or any article containing fur that 

represents its principal value. 

7. We will pay only for the functional 

value of antiques. 

8. If you are a tenant, you may apply up 

to 10 percent of the Coverage B limit to 

improvements: 

a. Made a part of the building you occupy; 

and 

b. You acquired, or made at your expense, 

even though you cannot legally remove. 

This coverage does not increase the 

amount of insurance that applies to insured 

personal property. 

9. If you are a condominium unit owner, 

you may apply up to 10 percent of the 

Coverage B limit to cover loss to interior: 

a. Walls, 

b. floors, and 

c. ceilings, 

that are not 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. 

10. If you are a tenant, personal property 

must be inside the fully enclosed building. 

C. Coverage C—Other Coverages 

1. Debris Removal 

a. We will pay the expense to remove nonowned debris that is on or in insured 

property and debris of insured property 

anywhere. 

b. If you or a member of your household 

perform the removal work, the value of your 

work will be based on the Federal minimum 

wage. 

c. This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

2. Loss Avoidance Measures 

a. Sandbags, Supplies, and Labor 

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

incur to protect the insured building from a 

flood or imminent danger of flood, for the 

following: 

(a) Your reasonable expenses to buy: 

(i) Sandbags, including sand to fill them; 

(ii) Fill for temporary levees; 

(iii) Pumps; and 

(iv) Plastic sheeting and lumber used in 

connection with these items. 

(b) The value of work, at the Federal 

minimum wage, that you perform. 

(2) This coverage for Sandbags, Supplies 

and Labor only applies if damage to insured 

property by or from flood is imminent and 

the threat of flood damage is apparent 

enough to lead a person of common prudence 

to anticipate flood damage. One of the 

following must also occur: 

(a) A general and temporary condition of 

flooding in the area near the described 


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location must occur, even if the flood does 

not reach the building; or 

(b) A legally authorized official must issue 

an evacuation order or other civil order for 

the community in which the building is 

located calling for measures to preserve life 

and property from the peril of flood. 

This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

b. Property Removed to Safety 

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

reasonable expenses you incur to move 

insured property to a place other than the 

described location that contains the property 

in order to protect it from flood or the 

imminent danger of flood. Reasonable 

expenses include the value of work, at the 

Federal minimum wage, you or a member of 

your household perform. 

(2) If you move insured property to a 

location other than the described location 

that contains the property, in order to protect 

it from flood or the imminent danger of flood, 

we will cover such property while at that 

location for a period of 45 consecutive days 

from the date you begin to move it there. The 

personal property that is moved must be 

placed in a fully enclosed building or 

otherwise reasonably protected from the 

elements. 

(3) Any property removed, including a 

moveable home described in II.6, must be 

placed above ground level or outside of the 

special flood hazard area. 

(4) This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

3. Pollution Damage 

We will pay for damage caused by 

pollutants to covered property if the 

discharge, seepage, migration, release, or 

escape of the pollutants is caused by or 

results from flood. The most we will pay 

under this coverage is $10,000. This coverage 

does not increase the Coverage A or Coverage 

B limits of liability. Any payment under this 

provision when combined with all other 

payments for the same loss cannot exceed the 

replacement cost or actual cash value, as 

appropriate, of the covered property. This 

coverage does not include the testing for or 

monitoring of pollutants unless required by 

law or ordinance. 

D. Coverage D—Increased Cost of 

Compliance 

1. General. 

This policy pays you to comply with a 

State or local floodplain management law or 

ordinance affecting repair or reconstruction 

of a building suffering flood damage. 

Compliance activities eligible for payment 

are: Elevation, floodproofing, relocation, or 

demolition (or any combination of these 

activities) of your building. Eligible 

floodproofing activities are limited to: 

a. Non-residential buildings. 

b. Residential buildings with basements 

that satisfy FEMA’s standards published in 

the Code of Federal Regulations [44 CFR 

60.6(b) or (c)]. 

2. Limits of Liability. 

We will pay you up to $30,000 under this 

Coverage D (Increased Cost of Compliance), 

which only applies to policies with building 

coverage (Coverage A). Our payment of 

claims under Coverage D is in addition to the 

amount of coverage which you selected on 

the application and which appears on the 

Declarations Page. However, the maximum 

you can collect under this policy for both 

Coverage A (Building Property) and Coverage 

D (Increased Cost of Compliance) cannot 

exceed the maximum permitted under the 

Act. We do NOT charge a separate deductible 

for a claim under Coverage D. 

3. Eligibility. 

a. A building covered under Coverage A 

(Building Property) sustaining a loss caused 

by a flood as defined by this policy must: 

(1) Be a ‘‘repetitive loss building.’’ A 

repetitive loss building is one that meets the 

following conditions: 

(a) The building is insured by a contract of 

flood insurance issued under the NFIP. 

(b) The building has suffered flood damage 

on two occasions during a 10-year period 

which ends on the date of the second loss. 

(c) The cost to repair the flood damage, on 

average, equaled or exceeded 25 percent of 

the market value of the building at the time 

of each flood loss. 

(d) In addition to the current claim, the 

NFIP must have paid the previous qualifying 

claim, and the State or community must have 

a cumulative, substantial damage provision 

or repetitive loss provision in its floodplain 

management law or ordinance being enforced 

against the building; or 

(2) Be a building that has had flood damage 

in which the cost to repair equals or exceeds 

50 percent of the market value of the building 

at the time of the flood. The State or 

community must have a substantial damage 

provision in its floodplain management law 

or ordinance being enforced against the 

building. 

b. This Coverage D pays you to comply 

with State or local floodplain management 

laws or ordinances that meet the minimum 

standards of the National Flood Insurance 

Program found in the Code of Federal 

Regulations at 44 CFR 60.3. We pay for 

compliance activities that exceed those 

standards under these conditions: 

(1) 3.a.1 above. 

(2) Elevation or floodproofing in any risk 

zone to preliminary or advisory base flood 

elevations provided by FEMA which the 

State or local government has adopted and is 

enforcing for flood-damaged buildings in 

such areas. (This includes compliance 

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

being changed to zones with base flood 

elevations. This also includes compliance 

activities in zones where base flood 

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

higher advisory base flood elevation.) 

Increased Cost of Compliance coverage does 

not apply to situations in B, C, X, or D zones 

where the community has derived its own 

elevations and is enforcing elevation or 

floodproofing requirements for flooddamaged buildings to elevations derived 

solely by the community. 

(3) Elevation or floodproofing above the 

base flood elevation to meet State or local 

‘‘free-board’’ requirements, i.e., that a 

building must be elevated above the base 

flood elevation. 

c. Under the minimum NFIP criteria at 44 

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

require the elevation or floodproofing of 

buildings in unnumbered A zones to the base 

flood elevation where elevation data is 

obtained from a Federal, State, or other 

source. Such compliance activities are also 

eligible for Coverage D. 

d. This coverage will pay for the 

incremental cost, after demolition or 

relocation, of elevating or floodproofing a 

building during its rebuilding at the same or 

another site to meet State or local floodplain 

management laws or ordinances, subject to 

the exclusion at III.D.5.g. 

e. This coverage will pay to bring a flooddamaged building into compliance with State 

or local floodplain management laws or 

ordinances even if the building had received 

a variance before the present loss from the 

applicable floodplain management 

requirements. 

4. Conditions. 

a. When a building insured under Coverage 

A—Building Property sustains a loss caused 

by a flood, our payment for the loss under 

this Coverage D will be for the increased cost 

to elevate, floodproof, relocate, or demolish 

(or any combination of these activities) 

caused by the enforcement of current State or 

local floodplain management ordinances or 

laws. Our payment for eligible demolition 

activities will be for the cost to demolish and 

clear the site of the building debris or a 

portion thereof caused by the enforcement of 

current State or local floodplain management 

ordinances or laws. Eligible activities for the 

cost of clearing the site will include those 

necessary to discontinue utility service to the 

site and ensure proper abandonment of onsite utilities. 

b. When the building is repaired or rebuilt, 

it must be intended for the same occupancy 

as the present building unless otherwise 

required by current floodplain management 

ordinances or laws. 

5. Exclusions. 

Under this Coverage D (Increased Cost of 

Compliance), we will not pay for: 

a. The cost to comply with any floodplain 

management law or ordinance in 

communities participating in the Emergency 

Program. 

b. The cost associated with enforcement of 

any ordinance or law that requires any 

insured or others to test for, monitor, clean 

up, remove, contain, treat, detoxify or 

neutralize, or in any way respond to, or 

assess the effects of pollutants. 

c. The loss in value to any insured building 

due to the requirements of any ordinance or 

law. 

d. The loss in residual value of the 

undamaged portion of a building demolished 

as a consequence of enforcement of any State 

or local floodplain management law or 

ordinance. 

e. Any Increased Cost of Compliance under 

this Coverage D: 

(1) Until the building is elevated, 

floodproofed, demolished, or relocated on 

the same or to another premises; and 

(2) Unless the building is elevated, 

floodproofed, demolished, or relocated as 

soon as reasonably possible after the loss, not 

to exceed two years. 

f. Any code upgrade requirements, e.g., 

plumbing or electrical wiring, not 


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specifically related to the State or local 

floodplain management law or ordinance. 

g. Any compliance activities needed to 

bring additions or improvements made after 

the loss occurred into compliance with State 

or local floodplain management laws or 

ordinances. 

h. Loss due to any ordinance or law that 

you were required to comply with before the 

current loss. 

i. Any rebuilding activity to standards that 

do not meet the NFIP’s minimum 

requirements. This includes any situation 

where the insured has received from the 

State or community a variance in connection 

with the current flood loss to rebuild the 

property to an elevation below the base flood 

elevation. 

j. Increased Cost of Compliance for a garage 

or carport. 

k. Any building insured under an NFIP 

Group Flood Insurance Policy. 

l. Assessments made by a condominium 

association on individual condominium unit 

owners to pay increased costs of repairing 

commonly owned buildings after a flood in 

compliance with State or local floodplain 

management ordinances or laws. 

6. Other Provisions. 

All other conditions and provisions of the 

policy apply. 

IV. Property not Covered 

We do not insure any of the following 

property: 

1. Personal property not inside the fully 

enclosed building; 

2. A building, and personal property in it, 

located entirely in, on, or over water or 

seaward of mean high tide if it was 

constructed or substantially improved after 

September 30, 1982; 

3. Open structures, including a building 

used as a boathouse or any structure or 

building into which boats are floated, and 

personal property located in, on, or over 

water; 

4. Recreational vehicles other than travel 

trailers described in the II.C.6.c, whether 

affixed to a permanent foundation or on 

wheels; 

5. Self-propelled vehicles or machines, 

including their parts and equipment. 

However, we do cover self-propelled vehicles 

or machines not licensed for use on public 

roads and are: 

a. Used mainly to service the described 

location; or 

b. Designed and used to assist handicapped 

persons, while the vehicles or machines are 

inside a building at the described location; 

6. Land, land values, lawns, trees, shrubs, 

plants, growing crops, or animals; 

7. Accounts, bills, coins, currency, deeds, 

evidences of debt, medals, money, scrip, 

stored value cards, postage stamps, 

securities, bullion, manuscripts, or other 

valuable papers; 

8. Underground structures and equipment, 

including wells, septic tanks, and septic 

systems; 

9. Those portions of walks, walkways, 

decks, driveways, patios, and other surfaces, 

all whether protected by a roof or not, located 

outside the perimeter, exterior walls of the 

insured building; 

10. Containers, including related 

equipment, such as, but not limited to, tanks 

containing gases or liquids; 

11. Buildings or units and all their contents 

if more than 49 percent of the actual cash 

value of the building is below ground, unless 

the lowest level is at or above the base flood 

elevation and is be-low ground by reason of 

earth having been used as insulation material 

in conjunction with energy efficient building 

techniques; 

12. Fences, retaining walls, seawalls, 

bulkheads, wharves, piers, bridges, and 

docks; 

13. Aircraft or watercraft, or their 

furnishings and equipment; 

14. Hot tubs and spas that are not bathroom 

fixtures, and swimming pools, and their 

equipment, such as, but not limited to, 

heaters, filters, pumps, and pipes, wherever 

located; 

15. Property not eligible for flood 

insurance pursuant to the provisions of the 

Coastal Barrier Resources Act and the Coastal 

Barrier Improvement Act and amendments to 

these Acts; 

16. Personal property owned by or in the 

care, custody or control of a unit owner, 

except for property of the type and under the 

circumstances set forth under III. Coverage 

B—Personal Property of this policy; 

17. A residential condominium building 

located in a Regular Program community. 

V. Exclusions 

A. We only pay for ‘‘direct physical loss by 

or from flood,’’ which means that we do not 

pay you for: 

1. Loss of revenue or profits; 

2. Loss of access to the insured property or 

described location; 

3. Loss of use of the insured property or 

described location; 

4. Loss from interruption of business or 

production; 

5. Any additional living expenses incurred 

while the insured building is being repaired 

or is unable to be occupied for any reason; 

6. The cost of complying with any 

ordinance or law requiring or regulating the 

construction, demolition, remodeling, 

renovation, or repair of property, including 

removal of any resulting debris. This 

exclusion does not apply to any eligible 

activities we describe in Coverage D— 

Increased Cost of Compliance; or 

7. Any other economic loss you suffer. 

B. Flood in Progress. If this policy became 

effective as of the time of a loan closing, as 

provided by 44 CFR 61.11(b), we will not pay 

for a loss caused by a flood that is a 

continuation of a flood that existed prior to 

coverage becoming effective. In all other 

circumstances, we will not pay for a loss 

caused by a flood that is a continuation of a 

flood that existed on or before the day you 

submitted the application for coverage under 

this policy and the correct premium. We will 

determine the date of application using 44 

CFR 611.11(f). 

C. We do not insure for loss to property 

caused directly by earth movement even if 

the earth movement is caused by flood. Some 

examples of earth movement that we do not 

cover are: 

1. Earthquake; 

2. Landslide; 

3. Land subsidence; 

4. Sinkholes; 

5. Destabilization or movement of land that 

results from accumulation of water in 

subsurface land areas; or 

6. Gradual erosion. 

We do, however, pay for losses from 

mudflow and land subsidence as a result of 

erosion that are specifically insured under 

our definition of flood (see II.B.1.c and 

II.B.2). 

D. We do not insure for direct physical loss 

caused directly or indirectly by: 

1. The pressure or weight of ice; 

2. Freezing or thawing; 

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

4. Water, moisture, mildew, or mold 

damage that results primarily from any 

condition: 

a. Substantially confined to the insured 

building; or 

b. That is within your control including, 

but not limited to: 

(1) Design, structural, or mechanical 

defects; 

(2) Failures, stoppages, or breakage of 

water or sewer lines, drains, pumps, fixtures, 

or equipment; or 

(3) Failure to inspect and maintain the 

property after a flood recedes; 

5. Water or water-borne material that: 

a. Backs up through sewers or drains; 

b. Discharges or overflows from a sump, 

sump pump or related equipment; or 

c. Seeps or leaks on or through the insured 

property; unless there is a flood in the area 

and the flood is the proximate cause of the 

sewer or drain backup, sump pump discharge 

or overflow, or the seepage of water; 

6. The pressure or weight of water unless 

there is a flood in the area and the flood is 

the proximate cause of the damage from the 

pressure or weight of water; 

7. Power, heating, or cooling failure unless 

the failure results from direct physical loss 

by or from flood to power, heating, or cooling 

equipment on the described location; 

8. Theft, fire, explosion, wind, or 

windstorm; 

9. Anything you or any member of your 

household do or conspires to do to 

deliberately cause loss by flood; or 

10. Alteration of the insured property that 

significantly increases the risk of flooding. 

E. We do not insure for loss to any building 

or personal property located on land leased 

from the Federal Government, arising from or 

incident to the flooding of the land by the 

Federal Government, where the lease 

expressly holds the Federal Government 

harmless under flood insurance issued under 

any Federal Government program. 

VI. Deductibles 

A. When a loss is insured under this 

policy, we will pay only that part of the loss 

that exceeds your deductible amount, subject 

to the limit of liability that applies. The 

deductible amount is shown on the 

Declarations Page. 

However, when a building under 

construction, alteration, or repair does not 

have at least two rigid exterior walls and a 

fully secured roof at the time of loss, your 

deductible amount will be two times the 


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deductible that would otherwise apply to a 

completed building. 

B. In each loss from flood, separate 

deductibles apply to the building and 

personal property insured by this policy. 

C. The deductible does NOT apply to: 

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

2. III.D. Increased Cost of Compliance. 

VII. General Conditions 

A. Pair and Set Clause 

In case of loss to an article that is part of 

a pair or set, we will have the option of 

paying you: 

1. An amount equal to the cost of replacing 

the lost, damaged, or destroyed article, minus 

its depreciation, or 

2. The amount that represents the fair 

proportion of the total value of the pair or set 

that the lost, damaged, or destroyed article 

bears to the pair or set. 

B. Other Insurance 

1. If a loss insured by this policy is also 

insured by other insurance that includes 

flood coverage not issued under the Act, we 

will not pay more than the amount of 

insurance that you are entitled to for lost, 

damaged, or destroyed property insured 

under this policy subject to the following: 

a. We will pay only the proportion of the 

loss that the amount of insurance that applies 

under this policy bears to the total amount 

of insurance covering the loss, unless 

VII.B.1.b or c below applies. 

b. If the other policy has a provision stating 

that it is excess insurance, this policy will be 

primary. 

c. This policy will be primary (but subject 

to its own deductible) up to the deductible 

in the other flood policy (except another 

policy as described in VII.B.1.b above). When 

the other deductible amount is reached, this 

policy will participate in the same proportion 

that the amount of insurance under this 

policy bears to the total amount of both 

policies, for the remainder of the loss. 

2. Where this policy covers a 

condominium association and there is a 

National Flood Insurance Program flood 

insurance policy in the name of a unit owner 

that insures the same loss as this policy, then 

this policy will be primary. 

C. Amendments, Waivers, Assignment 

This policy cannot be changed, nor can any 

of its provisions be waived, without the 

express written consent of the Federal 

Insurance Administrator. No action that we 

take under the terms of this policy can 

constitute a waiver of any of our rights. You 

may assign this policy in writing when you 

transfer title of your property to someone else 

except under these conditions: 

1. When this policy covers only personal 

property; or 

2. When this policy covers a building 

under construction. 

D. Insufficient Premium or Rating 

Information 

1. Applicability. The following provisions 

apply to all instances where the premium 

paid on this policy is insufficient or where 

the rating information is insufficient, such as 

where an Elevation Certificate is not 

provided. 

2. Reforming the Policy with Reduced 

Coverage. Except as otherwise provided in 

VII.D.1 and VII.D.4, if the premium we 

received from you was not sufficient to buy 

the kinds and amounts of coverage you 

requested, we will provide only the kinds 

and amounts of coverage that can be 

purchased for the premium payment we 

received. 

a. For the purpose of determining whether 

your premium payment is sufficient to buy 

the kinds and amounts of coverage you 

requested, we will first deduct the costs of all 

applicable fees and surcharges. 

b. If the amount paid, after deducting the 

costs of all applicable fees and surcharges, is 

not sufficient to buy any amount of coverage, 

your payment will be refunded. Unless the 

policy is reformed to increase the coverage 

amount to the amount originally requested 

pursuant to VII.D.3, this policy will be 

cancelled, and no claims will be paid under 

this policy. 

c. Coverage limits on the reformed policy 

will be based upon the amount of premium 

submitted per type of coverage, but will not 

exceed the amount originally requested. 

3. Discovery of Insufficient Premium or 

Rating Information. If we discover that your 

premium payment was not sufficient to buy 

the requested amount of coverage, the policy 

will be reformed as described in VII.D.2. You 

have the option of increasing the amount of 

coverage resulting from this reformation to 

the amount you requested as follows: 

a. Insufficient Premium. If we discover that 

your premium payment was not sufficient to 

buy the requested amount of coverage, we 

will send you, and any mortgagee or trustee 

known to us, a bill for the required additional 

premium for the current policy term (or that 

portion of the current policy term following 

any endorsement changing the amount of 

coverage). If it is discovered that the initial 

amount charged to you for any fees or 

surcharges is incorrect, the difference will be 

added or deducted, as applicable, to the total 

amount in this bill. 

(1) If you or the mortgagee or trustee pay 

the additional amount due within 30 days 

from the date of our bill, we will reform the 

policy to increase the amount of coverage to 

the originally requested amount, effective to 

the beginning of the current policy term (or 

subsequent date of any endorsement 

changing the amount of coverage). 

(2) If you or the mortgagee or trustee do not 

pay the additional amount due within 30 

days of the date of our bill, any flood 

insurance claim will be settled based on the 

reduced amount of coverage. 

(3) As applicable, you have the option of 

paying all or part of the amount due out of 

a claim payment based on the originally 

requested amount of coverage. 

b. Insufficient Rating Information. If we 

determine that the rating information we 

have is insufficient and prevents us from 

calculating the additional premium, we will 

ask you to send the required information. 

You must submit the information within 60 

days of our request. 

(1) If we receive the information within 60 

days of our request, we will determine the 

amount of additional premium for the 

current policy term and follow the procedure 

in VII.D.3.a above. 

(2) If we do not receive the information 

within 60 days of our request, no claims will 

be paid until the requested information is 

provided. Coverage will be limited to the 

amount of coverage that can be purchased for 

the payments we received, as determined 

when the requested information is provided. 

4. Coverage Increases. If we do not receive 

the amounts requested in VII.D.3.a or the 

additional information requested in VII.D.3.b 

by the date it is due, the amount of coverage 

under this policy can only be increased by 

endorsement subject to the appropriate 

waiting period. However, no coverage 

increases will be allowed until you have 

provided the information requested in 

VII.D.3.b is provided. 

5. Falsifying Information. However, if we 

find that you or your agent intentionally did 

not tell us, or falsified, any important fact or 

circumstance or did anything fraudulent 

relating to this insurance, the provisions of 

VIII.A apply. 

E. Policy Renewal 

1. This policy will expire at 12:01 a.m. on 

the last day of the policy term. 

2. We must receive the payment of the 

appropriate renewal premium within 30 days 

of the expiration date. 

3. If we find, however, that we did not 

place your renewal notice into the U.S. Postal 

Service, or if we did mail it, we made a 

mistake, e.g., we used an incorrect, 

incomplete, or illegible address, which 

delayed its delivery to you before the due 

date for the renewal premium, then we will 

follow these procedures: 

a. If you or your agent notified us, not later 

than one year after the date on which the 

payment of the renewal premium was due, of 

non-receipt of a renewal notice before the 

due date for the renewal premium, and we 

determine that the circumstances in the 

preceding paragraph apply, we will mail a 

second bill providing a revised due date, 

which will be 30 days after the date on which 

the bill is mailed. 

b. If we do not receive the premium 

requested in the second bill by the revised 

due date, then we will not renew the policy. 

In that case, the policy will remain as an 

expired policy as of the expiration date 

shown on the Declarations Page. 

4. In connection with the renewal of this 

policy, we may ask you during the policy 

term to recertify, on a Recertification 

Questionnaire that we will provide to you, 

the rating information used to rate your most 

recent application for or renewal of 

insurance. 

F. Conditions Suspending or Restricting 

Insurance 

We are not liable for loss that occurs while 

there is a hazard that is increased by any 

means within your control or knowledge. 

G. Requirements in Case of Loss 

In case of a flood loss to insured property, 

you must: 

1. Give prompt written notice to us; 

2. As soon as reasonably possible, separate 

the damaged and undamaged property, 

putting it in the best possible order so that 

we may examine it; 


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3. Prepare an inventory of damaged 

property showing the quantity, description, 

actual cash value, and amount of loss. Attach 

all bills, receipts, and related documents; 

4. Within 60 days after the loss, send us 

a proof of loss, which is your statement of the 

amount you are claiming under the policy 

signed and sworn to by you, and which 

furnishes us with the following information: 

a. The date and time of loss; 

b. A brief explanation of how the loss 

happened; 

c. Your interest (for example, ‘‘owner’’) and 

the interest, if any, of others in the damaged 

property; 

d. Details of any other insurance that may 

cover the loss; 

e. Changes in title or occupancy of the 

insured property during the term of the 

policy; 

f. Specifications of damaged buildings and 

detailed repair estimates; 

g. Names of mortgagees or anyone else 

having a lien, charge, or claim against the 

insured property; 

h. Details about who occupied any insured 

building at the time of loss and for what 

purpose; and 

i. The inventory of damaged personal 

property described in G.3 above. 

5. In completing the proof of loss, you must 

use your own judgment concerning the 

amount of loss and justify that amount. 

6. You must cooperate with the adjuster or 

representative in the investigation of the 

claim. 

7. The insurance adjuster whom we hire to 

investigate your claim may furnish you with 

a proof of loss form, and she or he may help 

you complete it. However, this is a matter of 

courtesy only, and you must still send us a 

proof of loss within 60 days after the loss 

even if the adjuster does not furnish the form 

or help you complete it. 

8. We have not authorized the adjuster to 

approve or disapprove claims or to tell you 

whether we will approve your claim. 

9. At our option, we may accept the 

adjuster’s report of the loss instead of your 

proof of loss. The adjuster’s report will 

include information about your loss and the 

damages you sustained. You must sign the 

adjuster’s report. At our option, we may 

require you to swear to the report. 

H. Our Options After a Loss 

Options we may, in our sole discretion, 

exercise after loss include the following: 

1. At such reasonable times and places that 

we may designate, you must: 

a. Show us or our representative the 

damaged property; 

b. Submit to examination under oath, 

while not in the presence of another insured, 

and sign the same; and 

c. Permit us to examine and make extracts 

and copies of: 

(1) Any policies of property insurance 

insuring you against loss and the deed 

establishing your ownership of the insured 

real property; 

(2) Condominium association documents 

including the Declarations of the 

condominium, its Articles of Association or 

Incorporation, Bylaws, rules and regulations, 

and other relevant documents if you are a 

unit owner in a condominium building; and 

(3) All books of accounts, bills, invoices 

and other vouchers, or certified copies 

pertaining to the damaged property if the 

originals are lost. 

2. We may request, in writing, that you 

furnish us with a complete inventory of the 

lost, damaged or destroyed property, 

including: 

a. Quantities and costs; 

b. Actual cash values or replacement cost 

(whichever is appropriate); 

c. Amounts of loss claimed; 

d. Any written plans and specifications for 

repair of the damaged property that you can 

reasonably make available to us; and 

e. Evidence that prior flood damage has 

been repaired. 

3. If we give you written notice within 30 

days after we receive your signed, sworn 

proof of loss, we may: 

a. Repair, rebuild, or replace any part of the 

lost, damaged, or destroyed property with 

material or property of like kind and quality 

or its functional equivalent; and 

b. Take all or any part of the damaged 

property at the value that we agree upon or 

its appraised value. 

I. No Benefit to Bailee 

No person or organization, other than you, 

having custody of insured property will 

benefit from this insurance. 

J. Loss Payment 

1. We will adjust all losses with you. We 

will pay you unless some other person or 

entity is named in the policy or is legally 

entitled to receive payment. Loss will be 

payable 60 days after we receive your proof 

of loss (or within 90 days after the insurance 

adjuster files the adjuster’s report signed and 

sworn to by you in lieu of a proof of loss) 

and: 

a. We reach an agreement with you; 

b. There is an entry of a final judgment; or 

c. There is a filing of an appraisal award 

with us, as provided in VII.M. 

2. If we reject your proof of loss in whole 

or in part you may: 

a. Accept our denial of your claim; 

b. Exercise your rights under this policy; or 

c. File an amended proof of loss as long as 

it is filed within 60 days of the date of the 

loss. 

K. Abandonment 

You may not abandon damaged or 

undamaged insured property to us. 

L. Salvage 

We may permit you to keep damaged 

insured property after a loss, and we will 

reduce the amount of the loss proceeds 

payable to you under the policy by the value 

of the salvage. 

M. Appraisal 

If you and we fail to agree on the actual 

cash value of the damaged property so as to 

determine the amount of loss, either may 

demand an appraisal of the loss. In this 

event, you and we will each choose a 

competent and impartial appraiser within 20 

days after receiving a written request from 

the other. The two appraisers will choose an 

umpire. If they cannot agree upon an umpire 

within 15 days, you or we may request that 

the choice be made by a judge of a court of 

record in the state where the insured 

property is located. The appraisers will 

separately state the actual cash value and the 

amount of loss to each item. If the appraisers 

submit a written report of an agreement to us, 

the amount agreed upon will be the amount 

of loss. If they fail to agree, they will submit 

their differences to the umpire. A decision 

agreed to by any two will set the amount of 

actual cash value and loss. 

Each party will: 

1. Pay its own appraiser; and 

2. Bear the other expenses of the appraisal 

and umpire equally. 

N. Mortgage Clause 

1. The word ‘‘mortgagee’’ includes trustee. 

2. Any loss payable under Coverage A— 

Building Property will be paid to any 

mortgagee of whom we have actual notice, as 

well as any other mortgagee or loss payee 

determined to exist at the time of loss, and 

you, as interests appear. If more than one 

mortgagee is named, the order of payment 

will be the same as the order of precedence 

of the mortgages. 

3. If we deny your claim, that denial will 

not apply to a valid claim of the mortgagee, 

if the mortgagee: 

a. Notifies us of any change in the 

ownership or occupancy, or substantial 

change in risk of which the mortgagee is 

aware; 

b. Pays any premium due under this policy 

on demand if you have neglected to pay the 

premium; and 

c. Submits a signed, sworn proof of loss 

within 60 days after receiving notice from us 

of your failure to do so. 

4. All terms of this policy apply to the 

mortgagee. 

5. The mortgagee has the right to receive 

loss payment even if the mortgagee has 

started foreclosure or similar action on the 

building. 

6. If we decide to cancel or not renew this 

policy, it will continue in effect for the 

benefit of the mortgagee only for 30 days after 

we notify the mortgagee of the cancellation 

or non-renewal. 

7. If we pay the mortgagee for any loss and 

deny payment to you, we are subrogated to 

all the rights of the mortgagee granted under 

the mortgage on the property. Subrogation 

will not impair the right of the mortgagee to 

recover the full amount of the mortgagee’s 

claim. 

O. Suit Against Us 

You may not sue us to recover money 

under this policy unless you have complied 

with all the requirements of the policy. If you 

do sue, you must start the suit within one 

year of the date of the written denial of all 

or part of the claim, and you must file the 

suit in the United States District Court of the 

district in which the insured property was 

located at the time of loss. This requirement 

applies to any claim that you may have under 

this policy and to any dispute that you may 

have arising out of the handling of any claim 

under the policy. 

P. Subrogation 

Whenever we make a payment for a loss 

under this policy, we are subrogated to your 


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right to re-cover for that loss from any other 

person. That means that your right to recover 

for a loss that was partly or totally caused by 

someone else is automatically transferred to 

us, to the extent that we have paid you for 

the loss. We may require you to acknowledge 

this transfer in writing. After the loss, you 

may not give up our right to recover this 

money or do anything that would prevent us 

from recovering it. If you make any claim 

against any person who caused your loss and 

recover any money, you must pay us back 

first before you may keep any of that money. 

Q. Continuous Lake Flood 

1. If an insured building has been flooded 

by rising lake waters continuously for 90 

days or more and it appears reasonably 

certain that a continuation of this flooding 

will result in an insured loss to the insured 

building equal to or greater than the building 

policy limits plus the deductible or the 

maximum payable under the policy for any 

one building loss, we will pay you the lesser 

of these two amounts without waiting for the 

further damage to occur if you sign a release 

agreeing: 

a. To make no further claim under this 

policy; 

b. Not to seek renewal of this policy; 

c. Not to apply for any flood insurance 

under the Act for property at the described 

location; 

d. Not to seek a premium refund for 

current or prior terms. 

If the policy term ends before the insured 

building has been flooded continuously for 

90 days, the provisions of this paragraph Q.1 

will apply when the insured building suffers 

a covered loss before the policy term ends. 

2. If your insured building is subject to 

continuous lake flooding from a closed basin 

lake, you may elect to file a claim under 

either paragraph Q.1 above or Q.2 (A ‘‘closed 

basin lake’’ is a natural lake from which 

water leaves primarily through evaporation 

and whose surface area now exceeds or has 

exceeded one square mile at any time in the 

recorded past. Most of the nation’s closed 

basin lakes are in the western half of the 

United States where annual evaporation 

exceeds annual precipitation and where lake 

levels and surface areas are subject to 

considerable fluctuation due to wide 

variations in the climate. These lakes may 

overtop their basins on rare occasions.) 

Under this paragraph Q.2, we will pay your 

claim as if the building is a total loss even 

though it has not been continuously 

inundated for 90 days, subject to the 

following conditions: 

a. Lake floodwaters must damage or 

imminently threaten to damage your 

building. 

b. Before approval of your claim, you must: 

(1) Agree to a claim payment that reflects 

your buying back the salvage on a negotiated 

basis; and 

(2) Grant the conservation easement 

described in FEMA’s ‘‘Policy Guidance for 

Closed Basin Lakes’’ to be recorded in the 

office of the local recorder of deeds. FEMA, 

in consultation with the community in which 

the property is located, will identify on a 

map an area or areas of special consideration 

(ASC) in which there is a potential for flood 

damage from continuous lake flooding. 

FEMA will give the community the 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 it will allow on any 

portion of the property within the ASC are 

certain simple agricultural and recreational 

structures. If any of these allowable 

structures are insurable buildings under the 

NFIP and are insured under the NFIP, they 

will not be eligible for the benefits of this 

paragraph Q.2. If a U.S. Army Corps of 

Engineers certified flood control project or 

otherwise certified flood control project later 

protects the property, FEMA will, upon 

request, amend the ASC to remove areas 

protected by those projects. The restrictions 

of the easement will then no longer apply to 

any portion of the property removed from the 

ASC; and 

(3) Comply with paragraphs Q.1.a through 

Q.1.d above. 

c. Within 90 days of approval of your 

claim, you must move your building to a new 

location outside the ASC. FEMA will give 

you an additional 30 days to move if you 

show there is sufficient reason to extend the 

time. 

d. Before the final payment of your claim, 

you must acquire an elevation certificate and 

a floodplain development permit from the 

local floodplain administrator for the new 

location of your building. 

e. Before the approval of your claim, the 

community having jurisdiction over your 

building must: 

(1) Adopt a permanent land use ordinance, 

or a temporary moratorium for a period not 

to exceed 6 months to be followed 

immediately by a permanent land use 

ordinance that is consistent with the 

provisions specified in the easement required 

in paragraph Q.2.b above. 

(2) Agree to declare and report any 

violations of this ordinance to FEMA so that 

under Section 1316 of the National Flood 

Insurance Act of 1968, as amended, flood 

insurance to the building can be denied; and 

(3) Agree to maintain as deed-restricted, for 

purposes compatible with open space or 

agricultural or recreational use only, any 

affected property the community acquires an 

interest in. These deed restrictions must be 

consistent with the provisions of paragraph 

Q.2.b above, except that, even if a certified 

project protects the property, the land use 

restrictions continue to apply if the property 

was acquired under the Hazard Mitigation 

Grant Program or the Flood Mitigation 

Assistance Program. If a non-profit land trust 

organization receives the property as a 

donation, that organization must maintain 

the property as deed-restricted, consistent 

with the provisions of paragraph Q2.b. above. 

f. Before the approval of your claim, the 

affected State must take all action set forth 

in FEMA’s ‘‘Policy Guidance for Closed 

Basin Lakes.’’ 

g. You must have NFIP flood insurance 

coverage continuously in effect from a date 

established by FEMA until you file a claim 

under paragraph Q.2. If a subsequent owner 

buys NFIP insurance that goes into effect 

within 60 days of the date of transfer of title, 

any gap in coverage during that 60-day 

period will not be a violation of this 

continuous coverage requirement. For the 

purpose of honoring a claim under this 

paragraph Q.2, we will not consider to be in 

effect any increased coverage that became 

effective after the date established by FEMA. 

The exception to this is any in-creased 

coverage in the amount suggested by your 

insurer as an inflation adjustment. 

h. This paragraph Q.2 will be in effect for 

a community when the FEMA Regional 

Administrator for the affected region 

provides to the community, in writing, the 

following: 

(1) Confirmation that the community and 

the State are in compliance with the 

conditions in paragraphs Q.2.e and Q.2.f 

above, and 

(2) The date by which you must have flood 

insurance in effect. 

R. Loss Settlement 

We will pay the least of the following 

amounts after application of the deductible: 

1. The applicable amount of insurance 

under this policy; 

2. The actual cash value; or 

3. The amount it would cost to repair or 

replace the property with material of like 

kind and quality within a reasonable time 

after the loss. 

VIII. Policy Nullification, Cancellation, and 

Non-Renewal 

A. Policy Nullification for Fraud, 

Misrepresentation, or Making False 

Statements 

1. With respect to all insureds under this 

policy, this policy is void and has no legal 

force and effect if at any time, before or after 

a loss, you or any other insured or your agent 

have, with respect to this policy or any other 

NFIP insurance: 

a. Concealed or misrepresented any 

material fact or circumstance; 

b. Engaged in fraudulent conduct; or 

c. Made false statements. 

2. Policies voided under A.1 cannot be 

renewed or replaced by a new NFIP policy. 

3. Policies are void as of the date the acts 

described in A.1 above were committed. 

4. Fines, civil penalties, and imprisonment 

under applicable Federal laws may also 

apply to the acts of fraud or concealment 

described above. 

B. Policy Nullification for Reasons Other 

Than Fraud 

1. This policy is void from its inception, 

and has no legal force or effect, if: 

a. The property listed on the application is 

located in a community that was not 

participating in the NFIP on this policy’s 

inception date and did not join or reenter the 

program during the policy term and before 

the loss occurred; 

b. The property listed on the application is 

otherwise not eligible for coverage under the 

NFIP at the time of the initial application; 

c. You never had an insurable interest in 

the property listed on the application; 

d. You provided an agent with an 

application and payment, but the payment 

did not clear; or 

e. We receive notice from you, prior to the 

policy effective date, that you have 


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determined not to take the policy and you are 

not subject a requirement to obtain and 

maintain flood insurance pursuant to any 

statute, regulation, or contract. 

2. In such cases, you will be entitled to a 

full refund of all premium, fees, and 

surcharges received. However, if a claim was 

paid for a policy that is void, the claim 

payment must be returned to FEMA or offset 

from the premiums to be refunded before the 

refund will be processed. 

C. Cancellation of the Policy by You 

1. You may cancel this policy in 

accordance with the terms and conditions of 

this policy and the applicable rules and 

regulations of the NFIP. 

2. If you cancel this policy, you may be 

entitled to a full or partial refund of 

premium, surcharges, or fees under the terms 

and conditions of this policy and the 

applicable rules and regulations of the NFIP. 

D. Cancellation of the Policy by Us 

1. Cancellation for Underpayment of 

Amounts Owed on Policy. This policy will 

be cancelled, pursuant to VII.D.2, if it is 

determined that the premium amount you 

paid is not sufficient to buy any amount of 

coverage, and you do not pay the additional 

amount of premium owed to increase the 

coverage to the originally requested amount 

within the required time period. 

2. Cancellation Due to Lack of an Insurable 

Interest. 

a. If you no longer have an insurable 

interest in the insured property, we will 

cancel this policy. You will cease to have an 

insurable interest if: 

(1) For building coverage, the building was 

sold, destroyed, or removed. 

(2) For contents coverage, the contents 

were sold or transferred ownership, or the 

contents were completely removed from the 

described location. 

b. If your policy is cancelled for this 

reason, you may be entitled to a partial 

refund of premium under the applicable 

rules and regulations of the NFIP. 

3. Cancellation of Duplicate Policies. 

a. Your property may not be insured by 

more than one NFIP policy, and payment for 

damages to your property will only be made 

under one policy. 

b. If the property is insured by more than 

one NFIP policy, we will cancel all but one 

of the policies. The policy, or policies, will 

be selected for cancellation in accordance 

with 44 CFR 62.5 and the applicable rules 

and guidance of the NFIP. 

c. If this policy is cancelled pursuant to 

VIII.D.4.b, you may be entitled to a full or 

partial refund of premium, surcharges, or fees 

under the terms and conditions of this policy 

and the applicable rules and regulations of 

the NFIP. 

4. Cancellation Due to Physical Alteration 

of Property. 

a. If the insured building has been 

physically altered in such a manner that it is 

no longer eligible for flood insurance 

coverage, we will cancel this policy. 

b. If your policy is cancelled for this 

reason, you may be entitled to a partial 

refund of premium under the terms and 

conditions of this policy and the applicable 

rules and regulations of the NFIP. 

E. Non-Renewal of the Policy by Us 

Your policy will not be renewed if: 

1. The community where your insured 

property is located is suspended or stops 

participating in the NFIP; 

2. Your building is otherwise ineligible for 

flood insurance under the Act; 

3. You have failed to provide the 

information we requested for the purpose of 

rating the policy within the required 

deadline. 

IX. Liberalization Clause 

If we make a change that broadens your 

coverage under this edition of our policy, but 

does not re-quire any additional premium, 

then that change will automatically apply to 

your insurance as of the date we implement 

the change, provided that this 

implementation date falls within 60 days 

before or during the policy term stated on the 

Declarations Page. 

X. What Law Governs 

This policy and all disputes arising from 

the insurer’s policy issuance, policy 

administration, or the handling of any claim 

under the policy are governed exclusively by 

the flood insurance regulations issued by 

FEMA, the National Flood Insurance Act of 

1968, as amended (42 U.S.C. 4001, et seq.), 

and Federal common law. 

In Witness Whereof, we have signed this 

policy below and hereby enter into this 

Insurance Agreement. 

Administrator, Federal Insurance and 

Mitigation Administration 

■ 14. Revise Appendix A(3) to Part 61 

to read as follows: 

Appendix A(3) to Part 61 

Federal Emergency Management Agency, 

Federal Insurance and Mitigation 

Administration 

Standard Flood Insurance Policy 

RESIDENTIAL CONDOMINIUM BUILDING 

ASSOCIATION POLICY 

Please read the policy carefully. The flood 

insurance provided is subject to limitations, 

restrictions, and exclusions. 

I. Agreement 

A. This policy 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. 

B. The Federal Emergency Management 

Agency (FEMA) provides flood insurance 

under the terms of the National Flood 

Insurance Act of 1968 and its amendments, 

and Title 44 of the Code of Federal 

Regulations. 

C. We will pay you for direct physical loss 

by or from flood to your insured property if 

you: 

1. Have paid the full amount due 

(including applicable premiums, surcharges, 

and fees); 

2. Comply with all terms and conditions of 

this policy; and 

3. Have furnished accurate information and 

statements. 

D. We have the right to review the 

information you give us at any time and 

revise your policy based on our review. 

E. This policy insures only one building. 

If you own more than one building, coverage 

will apply to the single building specifically 

described in the Flood Insurance 

Application. 

F. Subject to the exception in Section I.G 

below, multiple policies with building 

coverage cannot be issued to insure a single 

building to one insured or to different 

insureds, even if issued through different 

NFIP insurers. Payment for damages may 

only be made under a single policy for 

building damages under Coverage A— 

Building Property. 

G. A Dwelling Form policy with building 

coverage may be issued to a unit owner in 

a condominium building that is also insured 

under a Residential Condominium Building 

Association Policy (RCBAP). However, no 

more than $250,000 may be paid in 

combined benefits for a single unit under the 

Dwelling Form and the RCBAP. We will only 

pay for damage once. Items of damage paid 

for under a RCBAP cannot also be claimed 

under the Dwelling Form policy. 

II. Definitions 

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

to the named insured(s) shown on the 

Declarations Page of this policy. The named 

insured must also include the building owner 

if building coverage is purchased. Insured(s) 

includes: Any mortgagee and loss payee 

named in the Application and Declarations 

Page, as well as any other mortgagee or loss 

payee determined to have an existing interest 

at the time of loss, in the order of precedence. 

‘‘We,’’ ‘‘us,’’ and ‘‘our’’ refer to the insurer. 

Some definitions are complex because they 

are provided as they appear in the law or 

regulations, or result from court cases. 

B. Flood, as used in this flood insurance 

policy, means: 

1. A general and temporary condition of 

partial or complete inundation of two or 

more acres of normally dry land area or of 

two or more properties (one of which is your 

property) from: 

a. Overflow of inland or tidal waters, 

b. Unusual and rapid accumulation or 

runoff of surface waters from any source, 

c. Mudflow. 

2. Collapse or subsidence of land along the 

shore of a lake or similar body of water as 

a result of erosion or undermining caused by 

waves or currents of water exceeding 

anticipated cyclical levels which result in a 

flood as defined in B.1.a above. 

C. The following are the other key 

definitions we use in this policy: 

1. Act. The National Flood Insurance Act 

of 1968 and any amendments to it. 

2. Actual Cash Value. The cost to replace 

an insured item of property at the time of 

loss, less the value of its physical 

depreciation. 

3. Application. The statement made and 

signed by you or your agent in applying for 

this policy. The application gives 

information we use to determine the 

eligibility of the risk, the kind of policy to be 

issued, and the correct premium payment. 

The application is part of this flood 

insurance policy. 


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33006 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

4. Base Flood. A flood having a one percent 

chance of being equaled or exceeded in any 

given year. 

5. Basement. Any area of a building, 

including any sunken room or sunken 

portion of a room, having its floor below 

ground level on all sides. 

6. Building. 

a. A structure with two or more outside 

rigid walls and a fully secured roof that is 

affixed to a permanent site; 

b. A manufactured home, also known as a 

mobile home, is a structure built on a 

permanent chassis, transported to its site in 

one or more sections, and affixed to a 

permanent foundation); or 

c. A travel trailer without wheels, built on 

a chassis and affixed to a permanent 

foundation, that is regulated under the 

community’s floodplain management and 

building ordinances or laws. 

Building does not mean a gas or liquid 

storage tank, shipping container, or a 

recreational vehicle, park trailer, or other 

similar vehicle, except as described in C.6.c 

above. 

7. Cancellation. The ending of the 

insurance coverage provided by this policy 

before the expiration date. 

8. Condominium. That form of ownership 

of one or more buildings in which each unit 

owner has an undivided interest in common 

elements. 

9. Condominium Association. The entity 

made up of the unit owners responsible for 

the maintenance and operation of: 

a. Common elements owned in undivided 

shares by unit owners; and 

b. Other buildings in which the unit 

owners have use rights; where membership 

in the entity is a required condition of 

ownership. 

10. Condominium Building. A type of 

building for which the form of ownership is 

one in which each unit owner has an 

undivided interest in common elements of 

the building. 

11. Declarations Page. A computergenerated summary of information you 

provided in your application for insurance. 

The Declarations Page also describes the term 

of the policy, limits of coverage, and displays 

the premium and our name. The Declarations 

Page is a part of this flood insurance policy. 

12. Deductible. The fixed amount of an 

insured loss that is your responsibility and 

that is incurred by you before any amounts 

are paid for the insured loss under this 

policy. 

13. Described Location. The location where 

the insured building or personal property are 

found. The described location is shown on 

the Declarations Page. 

14. Direct Physical Loss By or From Flood. 

Loss or damage to insured property, directly 

caused by a flood. There must be evidence 

of physical changes to the property. 

15. Elevated Building. A building that has 

no basement and that has its lowest elevated 

floor raised above ground level by foundation 

walls, shear walls, posts, piers, pilings, or 

columns. 

16. Emergency Program. The initial phase 

of a community’s participation in the 

National Flood Insurance Program. During 

this phase, only limited amounts of 

insurance are available under the Act and the 

regulations prescribed pursuant to the Act. 

17. Federal Policy Fee. A flat rate charge 

you must pay on each new or renewal policy 

to defray certain administrative expenses 

incurred in carrying out the National Flood 

Insurance Program. 

18. Improvements. Fixtures, alterations, 

installations, or additions comprising a part 

of the residential condominium building, 

including improvements in the units. 

19. Mudflow. A river of liquid and flowing 

mud on the surface of normally dry land 

areas, as when earth is carried by a current 

of water. Other earth movements, such as 

landslide, slope failure, or a saturated soil 

mass moving by liquidity down a slope, are 

not mudflows. 

20. National Flood Insurance Program 

(NFIP). The program of flood insurance 

coverage and floodplain management 

administered under the Act and applicable 

Federal regulations in Title 44 of the Code of 

Federal Regulations, Subchapter B. 

21. Policy. The entire written contract 

between you and us. It includes: 

a. This printed form; 

b. The application and Declarations Page; 

c. Any endorsement(s) that may be issued; 

and 

d. Any renewal certificate indicating that 

coverage has been instituted for a new policy 

and new policy term. Only one building, 

which you specifically described in the 

application, may be insured under this 

policy. 

22. Pollutants. Substances that include, but 

are not limited to, any solid, liquid, gaseous, 

or thermal irritant or contaminant, including 

smoke, vapor, soot, fumes, acids, alkalis, 

chemicals, and waste. ‘‘Waste’’ includes, but 

is not limited to, materials to be recycled, 

reconditioned, or reclaimed. 

23. Post-FIRM Building. A building for 

which construction or substantial 

improvement occurred after December 31, 

1974, or on or after the effective date of an 

initial Flood Insurance Rate Map (FIRM), 

whichever is later. 

24. Probation Surcharge. A flat charge you 

must pay on each new or renewal policy 

issued covering property in a community the 

NFIP has placed on probation under the 

provisions of 44 CFR 59.24. 

25. Regular Program. The final phase of a 

community’s participation in the National 

Flood Insurance Program. In this phase, a 

Flood Insurance Rate Map is in effect and full 

limits of coverage are available under the Act 

and the regulations prescribed pursuant to 

the Act. 

26. Residential Condominium Building. A 

building, condominium, containing one or 

more family units and in which at least 75 

percent of the floor area is residential. 

27. Special Flood Hazard Area (SFHA). An 

area having special flood or mudflow, and/ 

or flood-related erosion hazards, and shown 

on a Flood Hazard Boundary Map or Flood 

Insurance Rate Map as Zone A, AO, A1–A30, 

AE, A99, AH, AR, AR/A, AR/AE, AR/AH, 

AR/AO, AR/A1–A30, V1–V30, VE, or V. 

28. Unit. A single-family residential space 

in a residential condominium building. 

29. Valued Policy. A policy in which the 

insured and the insurer agree on the value of 

the property insured, that value being 

payable in the event of a total loss. The 

Standard Flood Insurance Policy is not a 

valued policy. 

III. Property Covered 

A. Coverage A—Building Property 

We insure against direct physical loss by 

or from flood to: 

1. The residential condominium building 

described on the Declarations Page at the 

described location, including all units within 

the building and the improvements within 

the units. 

2. We also insure such building property 

for a period of 45 days at another location, 

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

Safety. 

3. Additions and extensions attached to 

and in contact with the building by means of 

a rigid exterior wall, a solid load-bearing 

interior wall, a stairway, an elevated 

walkway, or a roof. At your option, additions 

and extensions connected by any of these 

methods may be separately insured. 

Additions and extensions attached to and in 

contact with the building by means of a 

common interior wall that is not a solid loadbearing wall are always considered part of 

the building and cannot be separately 

insured. 

4. The following fixtures, machinery and 

equipment, including its units, which are 

insured under Coverage A only: 

a. Awnings and canopies; 

b. Blinds; 

c. Carpet permanently installed over 

unfinished flooring; 

d. Central air conditioners; 

e. Elevator equipment; 

f. Fire extinguishing apparatus; 

g. Fire sprinkler systems; 

h. Walk-in freezers; 

i. Furnaces; 

j. Light fixtures; 

k. Outdoor antennas and aerials fastened to 

buildings; 

l. Permanently installed cupboards, 

bookcases, paneling, and wallpaper; 

m. Pumps and machinery for operating 

pumps; 

n. Ventilating equipment; 

o. Wall mirrors, permanently installed; and 

p. In the units within the building, 

installed: 

(1) Built-in dishwashers; 

(2) Built-in microwave ovens; 

(3) Garbage disposal units; 

(4) Hot water heaters, including solar water 

heaters; 

(5) Kitchen cabinets; 

(6) Plumbing fixtures; 

(7) Radiators; 

(8) Ranges; 

(9) Refrigerators; and 

(10) Stoves. 

5. Materials and supplies to be used for 

construction, alteration or repair of the 

insured building while the materials and 

supplies are stored in a fully enclosed 

building at the described location or on an 

adjacent property. 

6. A building under construction, 

alteration, or repair at the described location. 

a. If the structure is not yet walled or 

roofed as described in the definition for 

building (see II.B.6.a.) then coverage applies: 


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(1) Only while such work is in progress; or 

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

of up to 90 continuous days thereafter. 

b. However, coverage does not apply until 

the building is walled and roofed if the 

lowest floor, including the basement floor, of 

a non-elevated building or the lowest 

elevated floor of an elevated building is: 

(1) Below the base flood elevation in Zones 

AH, AE, A1–30, AR, AR/AE, AR/AH, AR/ 

A1–30, AR/A, AR/AO; or 

(2) Below the base flood elevation adjusted 

to include the effect of wave action in Zones 

VE or V1–30. 

The lowest floor level is based on the 

bottom of the lowest horizontal structural 

member of the floor in Zones VE or V1–V30 

or top of the floor in Zones AH, AE, A1–A30, 

AR, AR/AE, AR/AH, AR/A1–A30, AR/A, and 

AR/AO. 

7. A manufactured home or a travel trailer, 

as described in the II.C.6. If the manufactured 

home is in a special flood hazard area, it 

must be anchored in the following manner at 

the time of the loss: 

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

anchors; or 

b. In accordance with the manufacturer’s 

specifications; or 

c. In compliance with the community’s 

floodplain management requirements unless 

it has been continuously insured by the NFIP 

at the same described location since 

September 30, 1982. 

8. Items of property below the lowest 

elevated floor of an elevated post-FIRM 

building located in zones A1–A30, AE, AH, 

AR, AR/A, AR/AE, AR/AH, AR/A1–A30, V1– 

V30, or VE, or in a basement, regardless of 

the zone. Coverage is limited to the 

following: 

a. Any of the following items, if installed 

in their functioning locations and, if 

necessary for operation, connected to a 

power source: 

(1) Central air conditioners; 

(2) Cisterns and the water in them; 

(3) Drywall for walls and ceilings in a 

basement and the cost of labor to nail it, 

unfinished and unfloated and not taped, to 

the framing; 

(4) Electrical junction and circuit breaker 

boxes; 

(5) Electrical outlets and switches; 

(6) Elevators, dumbwaiters, and related 

equipment, except for related equipment 

installed below the base flood elevation after 

September 30, 1987; 

(7) Fuel tanks and the fuel in them; 

(8) Furnaces and hot water heaters; 

(9) Heat pumps; 

(10) Nonflammable insulation in a 

basement; 

(11) Pumps and tanks used in solar energy 

systems; 

(12) Stairways and staircases attached to 

the building, not separated from it by 

elevated walkways; 

(13) Sump pumps; 

(14) Water softeners and the chemicals in 

them, water filters, and faucets installed as 

an integral part of the plumbing system; 

(15) Well water tanks and pumps; 

(16) Required utility connections for any 

item in this list; and 

(17) Footings, foundations, posts, pilings, 

piers, or other foundation walls and 

anchorage systems required to support a 

building. 

b. Clean-up. 

B. Coverage B—Personal Property 

1. If you have purchased personal property 

coverage, we insure, subject to B.2 and B.3 

below, against direct physical loss by or from 

flood to personal property that is inside the 

fully enclosed insured building and is: 

a. Owned by the unit owners of the 

condominium association in common, 

meaning property in which each unit owner 

has an undivided ownership interest; or 

b. Owned solely by the condominium 

association and used exclusively in the 

conduct of the business affairs of the 

condominium association. 

2. We also insure such personal property 

for 45 days while stored at a temporary 

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

Removed to Safety. 

3. Coverage for personal property includes 

the following property, subject to B.1. above, 

which is 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; 

g. Outdoor equipment and furniture stored 

inside the insured building; 

h. Ovens and the like; and 

i. Portable microwave ovens and portable 

dishwashers. 

4. Coverage for items of property in a 

building enclosure below the lowest elevated 

floor of an elevated post-FIRM building 

located in zones A1–A30, AE, AH, AR, AR/ 

A, AR/AE, AR/AH, AR/A1–A30, V1–V30, or 

VE, or in a basement, regardless of the zone, 

is limited to the following items, if installed 

in their functioning locations and, if 

necessary for operation, connected to a 

power source: 

a. Air conditioning units, portable or 

window type; 

b. Clothes washers and dryers; and 

c. Food freezers, other than walk-in, and 

food in any freezer. 

5. Special Limits. We will pay no more 

than $2,500 for any one loss to one or more 

of the following kinds of personal property: 

a. Artwork, photographs, collectibles, or 

memorabilia, including but not limited to, 

porcelain or other figures, and sports cards; 

b. Rare books or autographed items; 

c. Jewelry, watches, precious and semiprecious stones, or articles of gold, silver, or 

platinum; 

d. Furs or any article containing fur which 

represents its principal value. 

6. We will pay only for the functional 

value of antiques. 

C. Coverage C—Other Coverages 

1. Debris Removal. 

a. We will pay the expense to remove nonowned debris that is on or in insured 

property and debris of insured property 

anywhere. 

b. If you or a member of your household 

perform the removal work, the value of your 

work will be based on the Federal minimum 

wage. 

c. This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

2. Loss Avoidance Measures. 

a. Sandbags, Supplies, and Labor. 

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

incur to protect the insured building from a 

flood or imminent danger of flood, for the 

following: 

(a) Your reasonable expenses to buy: 

(i) Sandbags, including sand to fill them; 

(ii) Fill for temporary levees; 

(iii) Pumps; and 

(iv) Plastic sheeting and lumber used in 

connection with these items. 

(b) The value of work, at the Federal 

minimum wage, that you perform. 

(2) This coverage for Sandbags, Supplies 

and Labor only applies if damage to insured 

property by or from flood is imminent and 

the threat of flood damage is apparent 

enough to lead a person of common prudence 

to anticipate flood damage. One of the 

following must also occur: 

(a) A general and temporary condition of 

flooding in the area near the described 

location must occur, even if the flood does 

not reach the building; or 

(b) A legally authorized official must issue 

an evacuation order or other civil order for 

the community in which the building is 

located calling for measures to preserve life 

and property from the peril of flood. 

b. Property Removed to Safety. 

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

reasonable expenses you incur to move 

insured property to a place other than the 

described location that contains the property 

in order to protect it from flood or the 

imminent danger of flood. Reasonable 

expenses include the value of work, at the 

Federal minimum wage, you or a member of 

your household perform. 

(2) If you move insured property to a 

location other than the described location 

that contains the property, in order to protect 

it from flood or the imminent danger of flood, 

we will cover such property while at that 

location for a period of 45 consecutive days 

from the date you begin to move it there. 

(3) The personal property that is moved 

must be placed in a fully enclosed building 

or otherwise reasonably protected from the 

elements. Any property removed, including a 

moveable home described in II.6.b and c, 

must be placed above ground level or outside 

of the special flood hazard area 

(4) This coverage does not increase the 

Coverage A or Coverage B limit of liability. 

D. Coverage D—Increased Cost of 

Compliance 

1. General. 

This policy pays you to comply with a 

State or local floodplain management law or 

ordinance affecting repair or reconstruction 

of a building suffering flood damage. 

Compliance activities eligible for payment 

are: elevation, floodproofing, relocation, or 

demolition (or any combination of these 

activities) of your building. Eligible 

floodproofing activities are limited to: 

a. Non-residential buildings. 

b. Residential buildings with basements 

that satisfy FEMA’s standards published in 


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the Code of Federal Regulations [44 CFR 60.6 

(b) or (c)]. 

2. Limit of Liability. 

We will pay you up to $30,000 under this 

Coverage D (Increased Cost of Compliance), 

which only applies to policies with building 

coverage (Coverage A). Our payment of 

claims under Coverage D is in addition to the 

amount of coverage which you selected on 

the application and which appears on the 

Declarations Page. But, the maximum you 

can collect under this policy for both 

Coverage A—Building Property and Coverage 

D—Increased Cost of Compliance cannot 

exceed the maximum permitted under the 

Act. We do not charge a separate deductible 

for a claim under Coverage D. 

3. Eligibility. 

a. A building covered under Coverage A 

(Building Property) sustaining a loss caused 

by a flood as defined by this policy must: 

(1) Be a ‘‘repetitive loss building.’’ A 

repetitive loss building is one that meets the 

following conditions: 

(a) The building is insured by a contract of 

flood insurance issued under the NFIP. 

(b) The building has suffered flood damage 

on two occasions during a 10-year period 

which ends on the date of the second loss. 

(c) The cost to repair the flood damage, on 

average, equaled or exceeded 25 percent of 

the market value of the building at the time 

of each flood loss. 

(d) In addition to the current claim, the 

NFIP must have paid the previous qualifying 

claim, and the State or community must have 

a cumulative, substantial damage provision 

or repetitive loss provision in its floodplain 

management law or ordinance being enforced 

against the building; or 

(2) Be a building that has had flood damage 

in which the cost to repair equals or exceeds 

50 percent of the market value of the building 

at the time of the flood. The State or 

community must have a substantial damage 

provision in its floodplain management law 

or ordinance being enforced against the 

building. 

b. This Coverage D pays you to comply 

with State or local floodplain management 

laws or ordinances that meet the minimum 

standards of the National Flood Insurance 

Program found in the Code of Federal 

Regulations at 44 CFR 60.3. We pay for 

compliance activities that exceed those 

standards under these conditions: 

(1) 3.a.1 above. 

(2) Elevation or floodproofing in any risk 

zone to preliminary or advisory base flood 

elevations provided by FEMA which the 

State or local government has adopted and is 

enforcing for flood-damaged buildings in 

such areas. (This includes compliance 

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

being changed to zones with base flood 

elevations. This also includes compliance 

activities in zones where base flood 

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

higher advisory base flood elevation.) 

Increased Cost of Compliance coverage does 

not apply to situations in B, C, X, or D zones 

where the community has derived its own 

elevations and is enforcing elevation or 

floodproofing requirements for flooddamaged buildings to elevations derived 

solely by the community. 

(3) Elevation or floodproofing above the 

base flood elevation to meet State or local 

‘‘freeboard’’ requirements, i.e., that a building 

must be elevated above the base flood 

elevation. 

c. Under the minimum NFIP criteria at 44 

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

require the elevation or floodproofing of 

buildings in unnumbered A zones to the base 

flood elevation where elevation data is 

obtained from a Federal, State, or other 

source. Such compliance activities are also 

eligible for Coverage D. 

d. Coverage D will pay for the incremental 

cost, after demolition or relocation, of 

elevating or floodproofing a building during 

its rebuilding at the same or another site to 

meet State or local floodplain management 

laws or ordinances, subject to Exclusion 

D.5.g below relating to improvements. 

e. Coverage D will pay to bring a flooddamaged building into compliance with State 

or local floodplain management laws or 

ordinances even if the building had received 

a variance before the present loss from the 

applicable floodplain management 

requirements. 

4. Conditions. 

a. When a building covered under 

Coverage A—Building Property sustains a 

loss caused by a flood, our payment for the 

loss under this Coverage D will be for the 

increased cost to elevate, floodproof, relocate, 

or demolish (or any combination of these 

activities) caused by the enforcement of 

current State or local floodplain management 

ordinances or laws. Our payment for eligible 

demolition activities will be for the cost to 

demolish and clear the site of the building 

debris or a portion thereof caused by the 

enforcement of current State or local 

floodplain management ordinances or laws. 

Eligible activities for the cost of clearing the 

site will include those necessary to 

discontinue utility service to the site and 

ensure proper abandonment of on-site 

utilities. 

b. When the building is repaired or rebuilt, 

it must be intended for the same occupancy 

as the present building unless otherwise 

required by current floodplain management 

ordinances or laws. 

5. Exclusions. 

Under this Coverage D (Increased Cost of 

Compliance) we will not pay for: 

a. The cost to comply with any floodplain 

management law or ordinance in 

communities participating in the Emergency 

Program. 

b. The cost associated with enforcement of 

any ordinance or law that requires any 

insured or others to test for, monitor, clean 

up, remove, contain, treat, detoxify or 

neutralize, or in any way respond to, or 

assess the effects of pollutants. 

c. The loss in value to any insured building 

due to the requirements of any ordinance or 

law. 

d. The loss in residual value of the 

undamaged portion of a building demolished 

as a consequence of enforcement of any State 

or local floodplain management law or 

ordinance. 

e. Any Increased Cost of Compliance under 

this Coverage D: 

(1) Until the building is elevated, 

floodproofed, demolished, or relocated on 

the same or to another premises; and 

(2) Unless the building is elevated, 

floodproofed, demolished, or relocated as 

soon as reasonably possible after the loss, not 

to exceed two years. 

f. Any code upgrade requirements, e.g., 

plumbing or electrical wiring, not 

specifically related to the State or local 

floodplain management law or ordinance. 

g. Any compliance activities needed to 

bring additions or improvements made after 

the loss occurred into compliance with State 

or local floodplain management laws or 

ordinances. 

h. Loss due to any ordinance or law that 

you were required to comply with before the 

current loss. 

i. Any rebuilding activity to standards that 

do not meet the NFIP’s minimum 

requirements. This includes any situation 

where the insured has received from the 

State or community a variance in connection 

with the current flood loss to rebuild the 

property to an elevation below the base flood 

elevation. 

j. Increased Cost of Compliance for a garage 

or carport. 

k. Any building insured under an NFIP 

Group Flood Insurance Policy. 

l. Assessments made by a condominium 

association on individual condominium unit 

owners to pay increased costs of repairing 

commonly owned buildings after a flood in 

compliance with State or local floodplain 

management ordinances or laws. 

6. Other Provisions. 

a. Increased Cost of Compliance coverage 

will not be included in the calculation to 

determine whether coverage meets the 

coinsurance requirement for replacement 

cost coverage under Art. VIII.R. (‘‘Loss 

Settlement’’). 

b. All other conditions and provisions of 

this policy apply. 

IV. Property Not Covered 

We do not insure any of the following: 

1. Personal property not inside a building; 

2. A building, and personal property in it, 

located entirely in, on, or over water or 

seaward of mean high tide if it was 

constructed or substantially improved after 

September 30, 1982; 

3. Open structures, including a building 

used as a boathouse or any structure or 

building into which boats are floated, and 

personal property located in, on, or over 

water; 

4. Recreational vehicles other than travel 

trailers described in the Definitions section 

(see II.C.6.c) whether affixed to a permanent 

foundation or on wheels; 

5. Self-propelled vehicles or machines, 

including their parts and equipment. 

However, we do cover self-propelled vehicles 

or machines not licensed for use on public 

roads that are: 

a. Used mainly to service the described 

location or 

b. Designed and used to assist handicapped 

persons, while the vehicles or machines are 

inside a building at the described location; 

6. Land, land values, lawns, trees, shrubs, 

plants, growing crops, or animals; 


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7. Accounts, bills, coins, currency, deeds, 

evidences of debt, medals, money, scrip, 

stored value cards, postage stamps, 

securities, bullion, manuscripts, or other 

valuable papers; 

8. Underground structures and equipment, 

including wells, septic tanks, and septic 

systems; 

9. Those portions of walks, walkways, 

decks, driveways, patios, and other surfaces, 

all whether protected by a roof or not, located 

outside the perimeter, exterior walls of the 

insured building; 

10. Containers, including related 

equipment, such as, but not limited to, tanks 

containing gases or liquids; 

11. Buildings and all their contents if more 

than 49 percent of the actual cash value of 

the building is below ground, unless the 

lowest level is at or above the base flood 

elevation and is below ground by reason of 

earth having been used as insulation material 

in conjunction with energy efficient building 

techniques; 

12. Fences, retaining walls, seawalls, 

bulkheads, wharves, piers, bridges, and 

docks; 

13. Aircraft or watercraft, or their 

furnishings and equipment; 

14. Hot tubs and spas that are not bathroom 

fixtures, and swimming pools, and their 

equipment such as, but not limited to, 

heaters, filters, pumps, and pipes, wherever 

located; 

15. Property not eligible for flood 

insurance pursuant to the provisions of the 

Coastal Barrier Resources Act and the Coastal 

Barrier Improvements Act of 1990 and 

amendments to these Acts; 

16. Personal property used in connection 

with any incidental commercial occupancy 

or use of the building. 

V. Exclusions 

A. We only pay for ‘‘direct physical loss by 

or from flood,’’ which means that we do not 

pay you for: 

1. Loss of revenue or profits; 

2. Loss of access to the insured property or 

described location; 

3. Loss of use of the insured property or 

described location; 

4. Loss from interruption of business or 

production; 

5. Any additional living expenses incurred 

while the insured building is being repaired 

or is unable to be occupied for any reason; 

6. The cost of complying with any 

ordinance or law requiring or regulating the 

construction, demolition, remodeling, 

renovation, or repair of property, including 

removal of any resulting debris. This 

exclusion does not apply to any eligible 

activities we describe in Coverage D— 

Increased Cost of Compliance; or 

7. Any other economic loss you suffer. 

B. Flood in Progress. If this policy became 

effective as of the time of a loan closing, as 

provided by 44 CFR 61.11(b), we will not pay 

for a loss caused by a flood that is a 

continuation of a flood that existed prior to 

coverage becoming effective. In all other 

circumstances, we will not pay for a loss 

caused by a flood that is a continuation of a 

flood that existed on or before the day you 

submitted the application for coverage under 

this policy and the correct premium. We will 

determine the date of application using 44 

CFR 611.11(f). 

C. We do not insure for loss to property 

caused directly by earth movement even if 

the earth movement is caused by flood. Some 

examples of earth movement that we do not 

cover are: 

1. Earthquake; 

2. Landslide; 

3. Land subsidence; 

4. Sinkholes; 

5. Destabilization or movement of land that 

results from accumulation of water in 

subsurface land areas; or 

6. Gradual erosion. 

We do, however, pay for losses from 

mudflow and land subsidence as a result of 

erosion that are specifically covered under 

our definition of flood (see II.B.1.c and 

II.B.2). 

D. We do not insure for direct physical loss 

caused directly or indirectly by: 

1. The pressure or weight of ice; 

2. Freezing or thawing; 

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

4. Water, moisture, mildew, or mold 

damage that results primarily from any 

condition: 

a. Substantially confined to the insured 

building; or 

b. That is within your control including, 

but not limited to: 

(1) Design, structural, or mechanical 

defects; 

(2) Failures, stoppages, or breakage of 

water or sewer lines, drains, pumps, fixtures, 

or equipment; or 

(3) Failure to inspect and maintain the 

property after a flood recedes; 

5. Water or water-borne material that: 

a. Backs up through sewers or drains; 

b. Discharges or overflows from a sump, 

sump pump or related equipment; or 

c. Seeps or leaks on or through the insured 

property; 

unless there is a flood in the area and the 

flood is the proximate cause of the sewer or 

drain backup, sump pump discharge or 

overflow, or the seepage of water; 

6. The pressure or weight of water unless 

there is a flood in the area and the flood is 

the proximate cause of the damage from the 

pressure or weight of water; 

7. Power, heating, or cooling failure unless 

the failure results from direct physical loss 

by or from flood to power, heating, or cooling 

equipment on the described location; 

8. Theft, fire, explosion, wind, or 

windstorm; 

9. Anything you or your agents do or 

conspire to do to cause loss by flood 

deliberately; or 

10. Alteration of the insured property that 

significantly increases the risk of flooding. 

E. We do not insure for loss to any building 

or personal property located on land leased 

from the Federal Government, arising from or 

incident to the flooding of the land by the 

Federal Government, where the lease 

expressly holds the Federal Government 

harmless under flood insurance issued under 

any Federal Government program. 

F. We do not pay for the testing for or 

monitoring of pollutants unless required by 

law or ordinance. 

VI. Deductibles 

A. When a loss is insured under this 

policy, we will pay only that part of the loss 

that exceeds your deductible amount, subject 

to the limit of liability that applies. The 

deductible amount is shown on the 

Declarations Page. 

However, when a building under 

construction, alteration, or repair does not 

have at least two rigid exterior walls and a 

fully secured roof at the time of loss, your 

deductible amount will be two times the 

deductible that would otherwise apply to a 

completed building. 

B. In each loss from flood, separate 

deductibles apply to the building and 

personal property insured by this policy. 

C. No deductible applies to: 

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

2. III.D. Increased Cost of Compliance. 

VII. Coinsurance 

A. This Coinsurance Section applies only 

to coverage on the building. 

B. We will impose a penalty on loss 

payment unless the amount of insurance 

applicable to the damaged building is: 

1. At least 80 percent of its replacement 

cost; or 

2. The maximum amount of insurance 

available for that building under the NFIP, 

whichever is less. 

C. If the actual amount of insurance on the 

building is less than the required amount in 

accordance with the terms of VII.B above, 

then loss payment is determined as follows 

(subject to all other relevant conditions in 

this policy, including those pertaining to 

valuation, adjustment, settlement, and 

payment of loss): 

1. Divide the actual amount of insurance 

carried on the building by the required 

amount of insurance. 

2. Multiply the amount of loss, before 

application of the deductible, by the figure 

determined in C.1 above. 

3. Subtract the deductible from the figure 

determined in C.2 above. 

We will pay the amount determined in C.3 

above, or the amount of insurance carried, 

whichever is less. The amount of insurance 

carried, if in excess of the applicable 

maximum amount of insurance available 

under the NFIP, is reduced accordingly. 

Examples 

Example #1 (Inadequate Insurance) 

Replacement value of the building—$250,000 

Required amount of insurance—$200,000 

(80 percent of replacement value of $250,000) 

Actual amount of insurance carried— 

$180,000 

Amount of the loss—$150,000 

Deductible—$500 

Step 1: 180,000/200,000 = .90 

(90 percent of what should be carried.) 

Step 2: 150,000 × .90 = 135,000 

Step 3: 135,000 500 = 134,500 

We will pay no more than $134,500. The 

remaining $15,500 is not covered due to the 

coinsurance penalty ($15,000) and 

application of the deductible ($500). 

Example #2 (Adequate Insurance) 

Replacement value of the building—$500,000 

Required amount of insurance—$400,000 

(80 percent of replacement value of $500,000) 


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33010 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

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, minus 

its depreciation, or 

2. The amount that represents the fair 

proportion of the total value of the pair or set 

that the lost, damaged, or destroyed article 

bears to the pair or set. 

B. Other Insurance 

1. If a loss insured by this policy is also 

insured by other insurance that includes 

flood coverage not issued under the Act, we 

will not pay more than the amount of 

insurance that you are entitled to for lost, 

damaged, or destroyed property insured 

under this policy subject to the following: 

a. We will pay only the proportion of the 

loss that the amount of insurance that applies 

under this policy bears to the total amount 

of insurance covering the loss, unless 

VIII.B.1.b or c immediately below applies. 

b. If the other policy has a provision stating 

that it is excess insurance, this policy will be 

primary. 

c. This policy will be primary (but subject 

to its own deductible) up to the deductible 

in the other flood policy (except another 

policy as described in VIII.B.1.b. above). 

When the other deductible amount is 

reached, this policy will participate in the 

same proportion that the amount of 

insurance under this policy bears to the total 

amount of both policies, for the remainder of 

the loss. 

2. If there is a National Flood Insurance 

Program flood insurance policy in the name 

of a unit owner that covers the same loss as 

this policy, then this policy will be primary. 

C. Amendments, Waivers, Assignment 

This policy cannot be changed, nor can any 

of its provisions be waived, without the 

express written consent of the Federal 

Insurance Administrator. No action we take 

under the terms of this policy constitutes a 

waiver of any of our rights. You may assign 

this policy in writing when you transfer title 

of your property to someone else except 

under these conditions: 

1. When this policy insures only personal 

property; or 

2. When this policy insures a building 

under construction. 

D. Insufficient Premium or Rating 

Information 

1. Applicability. The following provisions 

apply to all instances where the premium 

paid on this policy is insufficient or where 

the rating information is insufficient, such as 

where an Elevation Certificate is not 

provided. 

2. Reforming the Policy with Reduced 

Coverage. Except as otherwise provided in 

VIII.D.1 and VIII.D.4, if the premium we 

received from you was not sufficient to buy 

the kinds and amounts of coverage you 

requested, we will provide only the kinds 

and amounts of coverage that can be 

purchased for the premium payment we 

received. 

a. For the purpose of determining whether 

your premium payment is sufficient to buy 

the kinds and amounts of coverage you 

requested, we will first deduct the costs of all 

applicable fees and surcharges. 

b. If the amount paid, after deducting the 

costs of all applicable fees and surcharges, is 

not sufficient to buy any amount of coverage, 

your payment will be refunded. Unless the 

policy is reformed to increase the coverage 

amount to the amount originally requested 

pursuant to VIII.E.3, this policy will be 

cancelled, and no claims will be paid under 

this policy. 

c. Coverage limits on the reformed policy 

will be based upon the amount of premium 

submitted per type of coverage, but will not 

exceed the amount originally requested. 

3. Discovery of Insufficient Premium or 

Rating Information. If we discover that your 

premium payment was not sufficient to buy 

the requested amount of coverage, the policy 

will be reformed as described in VIII.D.2. 

You have the option of increasing the amount 

of coverage resulting from this reformation to 

the amount you requested as follows: 

a. Insufficient Premium. If we discover that 

your premium payment was not sufficient to 

buy the requested amount of coverage, we 

will send you, and any mortgagee or trustee 

known to us, a bill for the required additional 

premium for the current policy term (or that 

portion of the current policy term following 

any endorsement changing the amount of 

coverage). If it is discovered that the initial 

amount charged to you for any fees or 

surcharges is incorrect, the difference will be 

added or deducted, as applicable, to the total 

amount in this bill. 

(1) If you or the mortgagee or trustee pay 

the additional amount due within 30 days 

from the date of our bill, we will reform the 

policy to increase the amount of coverage to 

the originally requested amount, effective to 

the beginning of the current policy term (or 

subsequent date of any endorsement 

changing the amount of coverage). 

(2) If you or the mortgagee or trustee do not 

pay the additional amount due within 30 

days of the date of our bill, any flood 

insurance claim will be settled based on the 

reduced amount of coverage. 

(3) As applicable, you have the option of 

paying all or part of the amount due out of 

a claim payment based on the originally 

requested amount of coverage. 

b. Insufficient Rating Information. If we 

determine that the rating information we 

have is insufficient and prevents us from 

calculating the additional premium, we will 

ask you to send the required information. 

You must submit the information within 60 

days of our request. 

(1) If we receive the information within 60 

days of our request, we will determine the 

amount of additional premium for the 

current policy term and follow the procedure 

in VIII.D.3.a above. 

(2) If we do not receive the information 

within 60 days of our request, no claims will 

be paid until the requested information is 

provided. Coverage will be limited to the 

amount of coverage that can be purchased for 

the payments we received, as determined 

when the requested information is provided. 

4. Coverage Increases. If we do not receive 

the amount requested in VIII.D.3.a or 

VIII.D.4.a, or the additional information 

requested in VIII.D.3.b or VIII.D.4.b by the 

date it is due, the amount of coverage under 

this policy can only be increased by 

endorsement subject to the appropriate 

waiting period. However, no coverage 

increases will be allowed until you have 

provided the information requested in 

VIII.D.3.b or VIII.D.4.b. 

5. Falsifying Information. However, if we 

find that you or your agent intentionally did 

not tell us, or falsified, any important fact or 

circumstance or did anything fraudulent 

relating to this insurance, the provisions of 

IX.A apply. 

E. Policy Renewal 

1. This policy will expire at 12:01 a.m. on 

the last day of the policy term. 

2. We must receive the payment of the 

appropriate renewal premium within 30 days 

of the expiration date. 

3. If we find, however, that we did not 

place your renewal notice into the U.S. Postal 

Service, or if we did mail it, we made a 

mistake, e.g., we used an incorrect, 

incomplete, or illegible address, which 

delayed its delivery to you before the due 

date for the renewal premium, then we will 

follow these procedures: 

a. If you or your agent notified us, not later 

than one year after the date on which the 

payment of the renewal premium was due, of 

non-receipt of a renewal notice before the 

due date for the renewal premium, and we 

determine that the circumstances in the 

preceding paragraph apply, we will mail a 

second bill providing a revised due date, 

which will be 30 days after the date on which 

the bill is mailed. 

b. If we do not receive the premium 

requested in the second bill by the revised 

due date, then we will not renew the policy. 

In that case, the policy will remain as an 

expired policy as of the expiration date 

shown on the Declarations Page. 

c. In connection with the renewal of this 

policy, we may ask you during the policy 

term to recertify, on a Recertification 

Questionnaire that we will provide you, the 

rating information used to rate your most 

recent application for or renewal of 

insurance. 


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F. Conditions Suspending or Restricting 

Insurance 

We are not liable for loss that occurs while 

there is a hazard that is increased by any 

means within your control or knowledge. 

G. Requirements in Case of Loss 

In case of a flood loss to insured property, 

you must: 

1. Give prompt written notice to us; 

2. As soon as reasonably possible, separate 

the damaged and undamaged property, 

putting it in the best possible order so that 

we may examine it; 

3. Prepare an inventory of damaged 

property showing the quantity, description, 

actual cash value, and amount of loss. Attach 

all bills, receipts, and related documents; 

4. Within 60 days after the loss, send us 

a proof of loss, which is your statement of the 

amount you are claiming under the policy 

signed and sworn to by you, and which 

furnishes us with the following information: 

a. The date and time of loss; 

b. A brief explanation of how the loss 

happened; 

c. Your interest (for example, ‘‘owner’’) and 

the interest, if any, of others in the damaged 

property; 

d. Details of any other insurance that may 

cover the loss; 

e. Changes in title or occupancy of the 

insured property during the term of the 

policy; 

f. Specifications of damaged buildings and 

detailed repair estimates; 

g. Names of mortgagees or anyone else 

having a lien, charge, or claim against the 

insured property; 

h. Details about who occupied any insured 

building at the time of loss and for what 

purpose; and 

i. The inventory of damaged personal 

property described in G.3 above. 

5. In completing the proof of loss, you must 

use your own judgment concerning the 

amount of loss and justify that amount. 

6. You must cooperate with the adjuster or 

representative in the investigation of the 

claim. 

7. The insurance adjuster whom we hire to 

investigate your claim may furnish you with 

a proof of loss form, and she or he may help 

you complete it. However, this is a matter of 

courtesy only, and you must still send us a 

proof of loss within 60 days after the loss 

even if the adjuster does not furnish the form 

or help you complete it. 

8. We have not authorized the adjuster to 

approve or disapprove claims or to tell you 

whether we will approve your claim. 

9. At our option, we may accept the 

adjuster’s report of the loss instead of your 

proof of loss. The adjuster’s report will 

include information about your loss and the 

damages you sustained. You must sign the 

adjuster’s report. At our option, we may 

require you to swear to the report. 

H. Our Options After a Loss 

Options we may, in our sole discretion, 

exercise after loss include the following: 

1. At such reasonable times and places that 

we may designate, you must: 

a. Show us or our representative the 

damaged property; 

b. Submit to examination under oath, 

while not in the presence of another insured, 

and sign the same; and 

c. Permit us to examine and make extracts 

and copies of: 

(1) Any policies of property insurance 

insuring you against loss and the deed 

establishing your ownership of the insured 

real property; 

(2) Condominium association documents 

including the Declarations of the 

condominium, its Articles of Association or 

Incorporation, Bylaws, and rules and 

regulations; and 

(3) All books of accounts, bills, invoices 

and other vouchers, or certified copies 

pertaining to the damaged property if the 

originals are lost. 

2. We may request, in writing, that you 

furnish us with a complete inventory of the 

lost, damaged, or destroyed property, 

including: 

a. Quantities and costs; 

b. Actual cash values or replacement cost 

(whichever is appropriate); 

c. Amounts of loss claimed; 

d. Any written plans and specifications for 

repair of the damaged property that you can 

reasonably make available to us; and 

e. Evidence that prior flood damage has 

been repaired. 

3. If we give you written notice within 30 

days after we receive your signed, sworn 

proof of loss, we may: 

a. Repair, rebuild, or replace any part of the 

lost, damaged, or destroyed property with 

material or property of like kind and quality 

or its functional equivalent; and 

b. Take all or any part of the damaged 

property at the value that we agree upon or 

its appraised value. 

I. No Benefit to Bailee 

No person or organization, other than you, 

having custody of insured property will 

benefit from this insurance. 

J. Loss Payment 

1. We will adjust all losses with you. We 

will pay you unless some other person or 

entity is named in the policy or is legally 

entitled to receive payment. Loss will be 

payable 60 days after we receive your proof 

of loss (or within 90 days after the insurance 

adjuster files the adjuster’s report signed and 

sworn to by you in lieu of a proof of loss) 

and: 

a. We reach an agreement with you; 

b. There is an entry of a final judgment; or 

c. There is a filing of an appraisal award 

with us, as provided in VIII.M. 

2. If we reject your proof of loss in whole 

or in part you may: 

a. Accept our denial of your claim; 

b. Exercise your rights under this policy; or 

c. File an amended proof of loss as long as 

it is filed within 60 days of the date of the 

loss. 

K. Abandonment 

You may not abandon damaged or 

undamaged insured property to us. 

L. Salvage 

We may permit you to keep damaged 

insured property after a loss, and we will 

reduce the amount of the loss proceeds 

payable to you under the policy by the value 

of the salvage. 

M. Appraisal 

If you and we fail to agree on the actual 

cash value or, if applicable, replacement cost 

of the damaged property so as to determine 

the amount of loss, then either may demand 

an appraisal of the loss. In this event, you 

and we will each choose a competent and 

impartial appraiser within 20 days after 

receiving a written request from the other. 

The two appraisers will choose an umpire. If 

they cannot agree upon an umpire within 15 

days, you or we may request that the choice 

be made by a judge of a court of record in 

the state where the insured property is 

located. The appraisers will separately state 

the actual cash value, the replacement cost, 

and the amount of loss to each item. If the 

appraisers submit a written report of an 

agreement to us, the amount agreed upon 

will be the amount of loss. If they fail to 

agree, they will submit their differences to 

the umpire. A decision agreed to by any two 

will set the amount of actual cash value and 

loss, or if it applies, the replacement cost and 

loss. 

Each party will: 

1. Pay its own appraiser; and 

2. Bear the other expenses of the appraisal 

and umpire equally. 

N. Mortgage Clause 

1. The word ‘‘mortgagee’’ includes trustee. 

2. Any loss payable under Coverage A— 

Building Property will be paid to any 

mortgagee of whom we have actual notice, as 

well as any other mortgagee or loss payee 

determined to exist at the time of loss, and 

you, as interests appear. If more than one 

mortgagee is named, the order of payment 

will be the same as the order of precedence 

of the mortgages. 

3. If we deny your claim, that denial will 

not apply to a valid claim of the mortgagee, 

if the mortgagee: 

a. Notifies us of any change in the 

ownership or occupancy, or substantial 

change in risk of which the mortgagee is 

aware; 

b. Pays any premium due under this policy 

on demand if you have neglected to pay the 

premium; and 

c. Submits a signed, sworn proof of loss 

within 60 days after receiving notice from us 

of your failure to do so. 

4. All terms of this policy apply to the 

mortgagee. 

5. The mortgagee has the right to receive 

loss payment even if the mortgagee has 

started foreclosure or similar action on the 

building. 

6. If we decide to cancel or not renew this 

policy, it will continue in effect for the 

benefit of the mortgagee only for 30 days after 

we notify the mortgagee of the cancellation 

or non-renewal. 

7. If we pay the mortgagee for any loss and 

deny payment to you, we are subrogated to 

all the rights of the mortgagee granted under 

the mortgage on the property. Subrogation 

will not impair the right of the mortgagee to 

recover the full amount of the mortgagee’s 

claim. 


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33012 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

O. Suit Against Us 

You may not sue us to recover money 

under this policy unless you have complied 

with all the requirements of the policy. If you 

do sue, you must start the suit within one 

year of the date of the written denial of all 

or part of the claim, and you must file the 

suit in the United States District Court of the 

district in which the insured property was 

located at the time of loss. This requirement 

applies to any claim that you may have under 

this policy and to any dispute that you may 

have arising out of the handling of any claim 

under the policy. 

P. Subrogation 

Whenever we make a payment for a loss 

under this policy, we are subrogated to your 

right to recover for that loss from any other 

person. That means that your right to recover 

for a loss that was partly or totally caused by 

someone else is automatically transferred to 

us, to the extent that we have paid you for 

the loss. We may require you to acknowledge 

this transfer in writing. After the loss, you 

may not give up our right to recover this 

money or do anything that would prevent us 

from recovering it. If you make any claim 

against any person who caused your loss and 

recover any money, you must pay us back 

first before you may keep any of that money. 

Q. Continuous Lake Flood 

1. If an insured building has been flooded 

by rising lake waters continuously for 90 

days or more and it appears reasonably 

certain that a continuation of this flooding 

will result in an insured loss to the insured 

building equal to or greater than the building 

policy limits plus the deductible or the 

maximum payable under the policy for any 

one building loss, we will pay you the lesser 

of these two amounts without waiting for the 

further damage to occur if you sign a release 

agreeing: 

a. To make no further claim under this 

policy; 

b. Not to seek renewal of this policy; 

c. Not to apply for any flood insurance 

under the Act for property at the described 

location; 

d. Not to seek a premium refund for 

current or prior terms. 

If the policy term ends before the insured 

building has been flooded continuously for 

90 days, the provisions of this paragraph Q.1 

will apply when the insured building suffers 

a covered loss before the policy term ends. 

2. If your insured building is subject to 

continuous lake flooding from a closed basin 

lake, you may elect to file a claim under 

either paragraph Q.1 above or this paragraph 

Q.2 (A ‘‘closed basin lake’’ is a natural lake 

from which water leaves primarily through 

evaporation and whose surface area now 

exceeds or has exceeded one square mile at 

any time in the recorded past. Most of the 

nation’s closed basin lakes are in the western 

half of the United States where annual 

evaporation exceeds annual precipitation and 

where lake levels and surface areas are 

subject to considerable fluctuation due to 

wide variations in the climate. These lakes 

may overtop their basins on rare occasions.) 

Under this paragraph Q.2, we will pay your 

claim as if the building is a total loss even 

though it has not been continuously 

inundated for 90 days, subject to the 

following conditions: 

a. Lake floodwaters must damage or 

imminently threaten to damage your 

building. 

b. Before approval of your claim, you must: 

(1) Agree to a claim payment that reflects 

your buying back the salvage on a negotiated 

basis; and 

(2) Grant the conservation easement 

contained in FEMA’s ‘‘Policy Guidance for 

Closed Basin Lakes,’’ to be recorded in the 

office of the local recorder of deeds. FEMA, 

in consultation with the community in which 

the property is located, will identify on a 

map an area or areas of special consideration 

(ASC) in which there is a potential for flood 

damage from continuous lake flooding. 

FEMA will give the community the 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 Q.2. If a U.S. Army Corps of 

Engineers certified flood control project or 

otherwise certified flood control project later 

protects the property, FEMA will, upon 

request, amend the ASC to remove areas 

protected by those projects. The restrictions 

of the easement will then no longer apply to 

any portion of the property removed from the 

ASC; and 

(3) Comply with paragraphs Q.1.a through 

Q.1.d above. 

c. Within 90 days of approval of your 

claim, you must move your building to a new 

location outside the ASC. FEMA will give 

you an additional 30 days to move if you 

show there is sufficient reason to extend the 

time. 

d. Before the final payment of your claim, 

you must acquire an elevation certificate and 

a floodplain development permit from the 

local floodplain administrator for the new 

location of your building. 

e. Before the approval of your claim, the 

community having jurisdiction over your 

building must: 

(1) Adopt a permanent land use ordinance, 

or a temporary moratorium for a period not 

to exceed 6 months to be followed 

immediately by a permanent land use 

ordinance, that is consistent with the 

provisions specified in the easement required 

in paragraph Q.2.b above; 

(2) Agree to declare and report any 

violations of this ordinance to FEMA so that 

under Section 1316 of the National Flood 

Insurance Act of 1968, as amended, flood 

insurance to the building can be denied; and 

(3) Agree to maintain as deed-restricted, for 

purposes compatible with open space or 

agricultural or recreational use only, any 

affected property the community acquires an 

interest in. These deed restrictions must be 

consistent with the provisions of paragraph 

Q.2.b above, except that even if a certified 

project protects the property, the land use 

restrictions continue to apply if the property 

was acquired under the Hazard Mitigation 

Grant Program or the Flood Mitigation 

Assistance Program. If a non-profit land trust 

organization receives the property as a 

donation, that organization must maintain 

the property as deed-restricted, consistent 

with the provisions of paragraph Q.2.b above. 

f. Before the approval of your claim, the 

affected State must take all action set forth 

in FEMA’s ‘‘Policy Guidance for Closed 

Basin Lakes.’’ 

g. You must have NFIP flood insurance 

coverage continuously in effect from a date 

established by FEMA until you file a claim 

under this paragraph Q.2. If a subsequent 

owner buys NFIP insurance that goes into 

effect within 60 days of the date of transfer 

of title, any gap in coverage during that 60- 

day period will not be a violation of this 

continuous coverage requirement. For the 

purpose of honoring a claim under this 

paragraph Q.2, we will not consider to be in 

effect any increased coverage that became 

effective after the date established by FEMA. 

The exception to this is any increased 

coverage in the amount suggested by your 

insurer as an inflation adjustment. 

h. This paragraph Q.2 will be in effect for 

a community when the FEMA Regional 

Administrator for the affected region 

provides to the community, in writing, the 

following: 

(1) Confirmation that the community and 

the State are in compliance with the 

conditions in paragraphs Q2.e and Q.2.f 

above, and 

(2) The date by which you must have flood 

insurance in effect. 

R. Loss Settlement 

1. Introduction 

This policy provides three methods of 

settling losses: Replacement Cost, Special 

Loss Settlement, and Actual Cash Value. 

Each method is used for a different type of 

property, as explained in a–c below. 

a. Replacement Cost Loss, Settlement 

described in R.2 below applies to buildings 

other than manufactured homes or travel 

trailers. 

b. Special Loss Settlement, described in 

R.3 below applies to a residential 

condominium building that is a travel trailer 

or a manufactured home. 

c. Actual Cash Value loss settlement 

applies to all other property covered under 

this policy, as outlined in R.4. below. 

2. Replacement Cost Loss Settlement 

a. We will pay to repair or replace a 

damaged or destroyed building, after 

application of the deductible and without 

deduction for depreciation, but not more 

than the least of the following amounts: 

(1) The amount of insurance in this policy 

that applies to the building; 

(2) The replacement cost of that part of the 

building damaged, with materials of like kind 

and quality, and for like occupancy and use; 

or 

(3) The necessary amount actually spent to 

repair or replace the damaged part of the 

building for like occupancy and use. 

b. We will not be liable for any loss on a 

Replacement Cost Coverage basis unless and 


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Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 33013 

until actual repair or replacement of the 

damaged building or parts thereof, is 

completed. 

c. If a building is rebuilt at a location other 

than the described location, we will pay no 

more than it would have cost to repair or 

rebuild at the described location, subject to 

all other terms of Replacement Cost Loss 

Settlement. 

3. Special Loss Settlement 

a. The following loss settlement conditions 

apply to a residential condominium building 

that is: 

(1) A manufactured home or travel trailer, 

as defined in II.C.6.b and c, and 

(2) at least 16 feet wide when fully 

assembled and has at least 600 square feet 

within its perimeter walls when fully 

assembled. 

b. If such a building is totally destroyed or 

damaged to such an extent that, in our 

judgment, it is not economically feasible to 

repair, at least to its pre-damaged condition, 

we will, at our discretion, pay the least of the 

following amounts: 

(1) The lesser of the replacement cost of the 

manufactured home or travel trailer or 1.5 

times the actual cash value; or 

(2) The Building Limit of liability shown 

on your Declarations Page. 

c. If such a manufactured home or travel 

trailer is partially damaged and, in our 

judgment, it is economically feasible to repair 

it to its pre-damaged condition, we will settle 

the loss according to the Replacement Cost 

Loss Settlement conditions in R.2 above. 

4. Actual Cash Value Loss Settlement 

a. The types of property noted below are 

subject to actual cash value loss settlement: 

(1) Personal property; 

(2) Insured property abandoned after a loss 

and that remains as debris at the described 

location; 

(3) Outside antennas and aerials, awning, 

and other outdoor equipment; 

(4) Carpeting and pads; 

(5) Appliances; and 

(6) A manufactured home or mobile home 

or a travel trailer as defined in II.C.6.b or c 

that does not meet the conditions for special 

loss settlement in R.3 above. 

b. We will pay the least of the following 

amounts: 

(1) The applicable amount of insurance 

under this policy; 

(2) The actual cash value, as defined in 

II.C.2; or 

(3) The amount it would cost to repair or 

replace the property with material of like 

kind and quality within a reasonable time 

after the loss. 

IX. Policy Nullification, Cancellation, and 

Non-Renewal 

A. Policy Nullification for Fraud, 

Misrepresentation, or Making False 

Statements 

1. With respect to all insureds under this 

policy, this policy is void and has no legal 

force and effect if at any time, before or after 

a loss, you or any other insured or your agent 

have, with respect to this policy or any other 

NFIP insurance: 

a. Concealed or misrepresented any 

material fact or circumstance; 

b. Engaged in fraudulent conduct; or 

c. Made false statements. 

2. Policies voided under A.1 cannot be 

renewed or replaced by a new NFIP policy. 

3. Policies are void as of the date the acts 

described in A.1.above were committed. 

4. Fines, civil penalties, and imprisonment 

under applicable Federal laws may also 

apply to the acts of fraud or concealment 

described above. 

B. Policy Nullification for Reasons Other 

Than Fraud 

1. This policy is void from its inception, 

and has no legal force or effect, if: 

a. The property listed on the application is 

located in a community that was not 

participating in the NFIP on this policy’s 

inception date and did not join or reenter the 

program during the policy term and before 

the loss occurred; 

b. The property listed on the application is 

otherwise not eligible for coverage under the 

NFIP at the time of the initial application; 

c. You never had an insurable interest in 

the property listed on the application; 

d. You provided an agent with an 

application and payment, but the payment 

did not clear; or 

e. We receive notice from you, prior to the 

policy effective date, that you have 

determined not to take the policy and you are 

not subject a requirement to obtain and 

maintain flood insurance pursuant to any 

statute, regulation, or contract. 

2. In such cases, you will be entitled to a 

full refund of all premium, fees, and 

surcharges received. However, if a claim was 

paid for a policy that is void, the claim 

payment must be returned to FEMA or offset 

from the premiums to be refunded before the 

refund will be processed. 

C. Cancellation of the Policy by You 

1. You may cancel this policy in 

accordance with the terms and conditions of 

this policy and the applicable rules and 

regulations of the NFIP. 

2. If you cancel this policy, you may be 

entitled to a full or partial refund of 

premium, surcharges, or fees under the terms 

and conditions of this policy and the 

applicable rules and regulations of the NFIP. 

D. Cancellation of the Policy by Us 

1. Cancellation for Underpayment of 

Amounts Owed on This Policy. This policy 

will be cancelled, pursuant to VIII.D.2, if it 

is determined that the premium amount you 

paid is not sufficient to buy any amount of 

coverage, and you do not pay the additional 

amount of premium owed to increase the 

coverage to the originally requested amount 

within the required time period. 

2. Cancellation Due to Lack of an Insurable 

Interest. 

a. If you no longer have an insurable 

interest in the insured property, we will 

cancel this policy. You will cease to have an 

insurable interest if: 

(1) For building coverage, the building was 

sold, destroyed, or removed. 

(2) For contents coverage, the contents 

were sold or transferred ownership, or the 

contents were completely removed from the 

described location. 

b. If your policy is cancelled for this 

reason, you may be entitled to a partial 

refund of premium under the applicable 

rules and regulations of the NFIP. 

3. Cancellation of Duplicate Policies. 

a. Except as allowed under Article I.F, your 

property may not be insured by more than 

one NFIP policy, and payment for damages 

to your property will only be made under one 

policy. 

b. Except as allowed under Article I.G, if 

the property is insured by more than one 

NFIP policy, we will cancel all but one of the 

policies. The policy, or policies, will be 

selected for cancellation in accordance with 

44 CFR 62.5 and the applicable rules and 

guidance of the NFIP. 

c. If this policy is cancelled pursuant to 

VIII.D.3.a, you may be entitled to a full or 

partial refund of premium, surcharges, or fees 

under the terms and conditions of this policy 

and the applicable rules and regulations of 

the NFIP. 

4. Cancellation Due to Physical Alteration 

of Property. 

a. If the insured building has been 

physically altered in such a manner that it is 

no longer eligible for flood insurance 

coverage, we will cancel this policy. 

b. If your policy is cancelled for this 

reason, you may be entitled to a partial 

refund of premium under the terms and 

conditions of this policy and the applicable 

rules and regulations of the NFIP. 

E. Non-Renewal of the Policy by Us 

Your policy will not be renewed if: 

1. The community where your insured 

property is located is suspended or stops 

participating in the NFIP; 

2. Your building is otherwise ineligible for 

flood insurance under the Act; 

3. You have failed to provide the 

information we requested for the purpose of 

rating the policy within the required 

deadline. 

X. Liberalization Clause 

If we make a change that broadens your 

coverage under this edition of our policy, but 

does not require any additional premium, 

then that change will automatically apply to 

your insurance as of the date we implement 

the change, provided that this 

implementation date falls within 60 days 

before or during the policy term stated on the 

Declarations Page. 

XI. What Law Governs 

This policy and all disputes arising from 

the insurer’s policy issuance, policy 

administration, or the handling of any claim 

under the policy are governed exclusively by 

the flood insurance regulations issued by 

FEMA, the National Flood Insurance Act of 

1968, as amended (42 U.S.C. 4001, et seq.), 

and Federal common law. 

In Witness Whereof, we have signed this 

policy below and hereby enter into this 

Insurance Agreement. 

Administrator, Federal Insurance and 

Mitigation Administration 


sradovich on DSK3GMQ082PROD with PROPOSALS2
33014 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 

PART 62—SALE OF INSURANCE AND 

ADJUSTMENT OF CLAIMS 

■ 15. Revise the authority citation for 

Part 62 to read as follows: 

Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 

101 et seq. 

■ 16. Revise § 62.3 to read as follows: 

§ 62.3 Servicing Agent. 

(a) Pursuant to sections 1345 and 

1346 of the Act, the Federal Insurance 

Administrator may enter into an 

agreement with a servicing agent to 

authorize it to assist in issuing flood 

insurance policies under the Program in 

communities designated by the Federal 

Insurance Administrator and to accept 

responsibility for delivery of policies 

and payment of claims for losses as 

prescribed by and at the discretion of 

the Federal Insurance Administrator. 

(b) The servicing agent will arrange 

for the issuance of flood insurance to 

any person qualifying for such coverage 

under parts 61 and 64 of this subchapter 

who submits an application to the 

servicing agent in accordance with the 

terms and conditions of the contract 

between the Agency and the servicing 

agent. 

■ 17. Revise § 62.5 to read as follows: 

§ 62.5 Nullifications, Cancellations, and 

Premium Refunds. 

(a) Nullification. 

(1) Property Ineligible at Time of 

Application. FEMA will void a policy 

for a property that was not eligible for 

coverage at the time of the initial 

application from the commencement of 

the policy. FEMA must pay the 

policyholder a refund of all premium, 

fees, and surcharges paid from the date 

of commencement of the policy, but no 

more than 5 years prior to the date of 

date of receipt of verifiable evidence 

that the property was ineligible for 

coverage at the time of the initial 

application. If FEMA paid a claim for an 

ineligible property, the policyholder 

must return the claim payment to 

FEMA, or offset the payment from the 

premiums to be refunded, before FEMA 

will process the refund. 

(2) Property Later Becomes Ineligible. 

FEMA may not renew a policy for a 

property that was eligible for coverage at 

the time of the initial application, but 

later became ineligible for coverage. In 

such instances, the FEMA must nullify 

the policy from the first renewal date 

after the property became ineligible. 

FEMA must refund all premium, fees, 

and surcharges paid from the first 

renewal date after the property became 

ineligible, but no more than 5 years 

prior to the date of receipt of verifiable 

evidence that the property was eligible 

for coverage at the time of the initial 

application, but later became ineligible 

for coverage. If FEMA paid a claim for 

a property after it became ineligible for 

coverage, the policyholder must return 

the claim payment to FEMA or FEMA 

must offset the amount of claim 

payment from the premiums to be 

refunded before FEMA may process the 

refund. 

(3) Nullification Prior to Policy 

Effective Date. If FEMA nullifies a 

policy prior to the policy effective date, 

that policy will be void from the 

commencement of the nullified policy 

term. In such case, FEMA will refund all 

premium, fees, and surcharges paid for 

the current policy term only. If FEMA 

paid a claim for a policy that was 

improperly issued, the policyholder 

must return the claim payment to FEMA 

or FEMA must offset the amount of 

claim payment from the premiums to be 

refunded before the NFIP may process 

the refund. 

(b) Cancellation Due to Lack of an 

Insurable Interest. If the policyholder 

had an insurable interest, but no longer 

has an insurable interest, in the insured 

property, FEMA must cancel the policy 

on the insured property. If FEMA 

cancels a policy for this reason, FEMA 

must refund the policyholder a pro rata 

share of the premium from the date the 

policyholder lost an insurable interest 

in the property, but no more than 5 

years prior to the date of the 

cancellation request. FEMA must pay 

the policyholder a refund of all fees or 

surcharges for any full policy term 

during which the policyholder had no 

insurable interest in the insured 

property, but no more than 5 years prior 

to the date of the cancellation request. 

A policyholder ceases to have an 

insurable interest if: 

(1) For building coverage, the building 

was sold, destroyed, or removed. 

(2) For contents coverage, the contents 

were sold or transferred ownership, or 

the contents were completely removed 

from the described location. 

(c) No Insurance Coverage 

Requirement. A policyholder may 

cancel a policy if the policyholder was 

subject to a requirement by a lender, 

loss payee, or other Federal agency to 

obtain and maintain flood insurance 

pursuant to statute, regulation, or 

contract, but there is no longer such a 

requirement. The policyholder will 

receive a refund of a pro rata share of 

the premium for the current policy term 

only, calculated from the date of the 

cancellation request, but will not 

receive a refund of any fees or 

surcharges. 

(d) Establishment of a Common 

Expiration Date. A policyholder may 

purchase a new policy and cancel an 

existing policy in order to establish a 

common expiration date between flood 

insurance coverage and other coverage. 

The policyholder will receive a refund 

of a pro rata share of the premium 

calculated from the effective date of the 

new policy to the end date of the 

previous policy. The policyholder will 

not receive a refund of any fees or 

surcharges. In order to rewrite and 

cancel the policy, the following 

conditions must apply: 

(1) The new policy must be written 

with the same company for the same or 

higher amount of coverage. If the policy 

is written for a higher amount or 

different type of coverage, the waiting 

period in § 61.11 will apply. 

(2) The other insurance coverage for 

which the common expiration date is 

being established must be for coverage 

on the same building that is insured by 

the flood policy being cancelled and 

rewritten. 

(3) The coverage for the new policy 

must be effective prior to the cancelling 

the existing policy. 

(e) Cancelation or Nullification of 

Duplicate NFIP Policies. 

(1) Generally. 

(i) Except as described in 44 CFR 

62.5(e)(2), if an insured property is 

covered by more than one NFIP policy 

not in accordance with applicable 

regulations and the Standard Flood 

Insurance Policy, FEMA must nullify 

the policy with the later effective date. 

The policy with the earlier effective date 

will continue. The policyholder will 

receive a pro rata refund of all premium 

for the nullified policy from the 

effective date of the nullified policy, but 

no more than 5 years prior to the date 

of receipt of verifiable evidence that the 

insured property is covered by more 

than one NFIP policy. The policyholder 

will receive a refund of all fees or 

surcharges for any full policy term 

during which the policyholder was 

covered by more than one policy, but no 

more than 5 years prior to the date of 

receipt of verifiable evidence that the 

insured property is covered by more 

than one NFIP policy. 

(ii) If both polices have the same 

policy effective date, the policyholder 

may choose which policy will remain in 

effect, and the policyholder will receive 

a refund of all premium, fees, and 

surcharges for the cancelled policy from 

the effective date of the cancelled 

policy, but no more than 5 years prior 

to the date of receipt of verifiable 

evidence that the insured property is 

covered by more than one NFIP policy. 

(2) Exceptions. In the following cases, 

the policyholder may maintain the 

policy with the later policy effective 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Proposed Rules 33015 

date while cancelling the policy with 

the earlier policy effective date: 

(i) Earlier Policy Expired—The policy 

with the earlier effective date has 

expired for more than 30 days. In such 

cases, the policyholder will receive a 

refund of a pro rata share of the 

premium, calculated from the effective 

date of the policy with the later effective 

date to the end date of the policy with 

the earlier effective date, but no more 

than 5 years prior to the date of 

cancellation. The policyholder will also 

receive a refund of all fees and 

surcharges for any full policy terms 

during which the insured property is 

covered by both policies, but no more 

than 5 years prior to the date of the 

cancellation request. 

(ii) Group Flood Insurance Policy 

(GFIP)—The policy with the earlier 

policy effective date is a Group Flood 

Insurance Policy. In such cases, there 

will be no refund of any premium, fees, 

or surcharges. 

(iii) Cancellations to Establish a 

Common Expiration Date—The policy 

with the earlier effective date is 

cancelled to establish a common policy 

expiration date pursuant to paragraph 

(d) of this section. In such cases, refunds 

will be provided in accordance with 

paragraph (d) of this section. 

(iv) Force-Placed Policy—The policy 

with the earlier effective date was force 

placed pursuant to 42 U.S.C. 4012a 

using the NFIP’s Mortgage Portfolio 

Protection Program. In such cases, the 

policyholder will receive a refund of the 

pro rata share of the premium calculated 

from the policy effective date of the new 

policy to the expiration date of the 

cancelled policy. There will be no 

refund of any fees or surcharges. 

(v) Condominium Unit Covered by a 

Dwelling Form Policy and an RCBAP— 

The policy with the earlier effective date 

is a Dwelling Form Policy with building 

coverage on a condominium unit that is 

also covered by a Residential 

Condominium Building Association 

Policy (RCBAP) that is issued at the 

statutory maximum coverage limit for 

buildings. In such cases, the 

policyholder will receive a refund of a 

pro rata share of the premium for the 

building coverage issued under the 

Dwelling Form policy, as calculated 

from the effective date of the RCBAP 

policy to the end date of the Dwelling 

Form policy. The policyholder will also 

receive a refund of all fees and 

surcharges for any full policy terms 

during which the condominium unit is 

covered by both a Dwelling Form policy 

and an RCBAP in which the coverage 

equals the statutory maximum coverage 

limits for buildings, but no more than 5 

years prior to the date of the 

cancellation request. 

(f) Other Cancellations and 

Nullifications. Except as indicated 

below, FEMA will not refund 

premiums, assessments, fees, or 

surcharges if FEMA cancels a policy for 

any of the following reasons: 

(1) Fraud. FEMA will cancel a policy 

for fraud committed by the policyholder 

or the agent. FEMA may cancel a policy 

for misrepresentation of a material fact 

by the policyholder or agent. Such 

cancellations will take effect as of the 

date of the fraudulent act or material 

misrepresentation of fact. 

(2) Administrative Cancellation. 

FEMA may cancel and rewrite a policy 

to correct an administrative error, such 

as when the policy is written with the 

wrong policy effective date. In such 

cases, FEMA will apply any premium, 

assessments, fees, or surcharges to the 

new policy. FEMA will refund any 

excess premium, fees, surcharges, or 

assessments paid. 

(3) Nullification for Properties 

Ineligible Due to Physical Alteration of 

Property. A policy insuring a building 

or its contents, or both, may be 

cancelled if the building has been 

physically altered in such a manner that 

the building and its contents are no 

longer eligible for flood insurance 

coverage. The policyholder will receive 

a refund of a pro rata share of the 

premium for the current policy term 

only, but the policyholder will not 

receive a refund of any fees or 

surcharges. 

■ 18. Revise § 62.6 to read as follows: 

§ 62.6 Brokers and Agents Writing NFIP 

Policies through the NFIP Direct Servicing 

Agent. 

(a) A broker or agent selling policies 

of flood insurance placed with the NFIP 

at the offices of its servicing agent must 

be duly licensed by the state insurance 

regulatory authority in the state in 

which the property is located. 

(b) The earned commission which 

will be paid to any property or casualty 

insurance agent or broker, with respect 

to each policy or renewal the agent duly 

procures on behalf of the insured, in 

connection with policies of flood 

insurance placed with the NFIP at the 

offices of its servicing agent, but not 

with respect to policies of flood 

insurance issued pursuant to Subpart C 

of this Part, will not be less than $10 

and is computed as follows: 

* * * * * 

§ 62.22 [Amended] 

■ 19. In § 62.22, amend paragraph (a) by 

removing the two instances of the words 

‘‘Federal Insurance Administration’’ and 

replacing them with ‘‘Federal Insurance 

and Mitigation Administration.’’ 

Brock Long, 

Administrator, Federal Emergency 

Management Agency. 

[FR Doc. 2018–13292 Filed 7–13–18; 8:45 am] 

BILLING CODE 9111–52–P 


sradovich on DSK3GMQ082PROD with PROPOSALS2