8282 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

1Climate change means that flood events are on 

the rise. Climate change is increasing flood risk 

through (1) more ‘‘extreme’’ rainfall events, caused 

by a warmer atmosphere holding more water vapor 

and changes in regional precipitation patterns; and 

(2) sea-level rise. See Rob Bailey, Claudio Saffioti, 

and Sumer Drall, Sunk Costs: The Socioeconomic 

Impacts of Flooding 3 and 8, MarshMcLennan 

(2021), found at https://www.marshmclennan.com/ 

content/dam/mmc-web/insights/publications/2021/ 

june/Sunk-Cost_Socioeconomic-impacts-offlooding_vF.pdf (last accessed Aug. 28, 2023). 

2Frances V. Davenport, Marshall Burke, and 

Noah S. Diffenbaugh, Contribution of historical 

precipitation change to US flood damages, 

Proceedings of the National Academy of Sciences 

of the United States of America, Jan. 2021, 118 (4) 

e2017524118; DOI: 10.1073/pnas.2017524118, 

found at https://www.pnas.org/content/118/4/ 

e2017524118 (last accessed Aug. 28, 2023). 

3See also Don Jergler, ‘‘Climate Change Could 

Push Flood Losses in U.S. to $40B by 2050,’’ 

Insurance Journal (Feb. 17, 2022), found at https:// 

www.insurancejournal.com/news/national/2022/ 

02/17/654831.htm (last accessed Aug. 28, 2023) 

(noting annual flood losses forecasted to increase by 

26.4% from $32B to $40.6B). 

4See http://www.floodsmart.gov/flood-insurance/ 

why (last accessed Aug. 28, 2023). 

5Flood insurance is one risk management tool. 

‘‘Governments tend to spend significantly more on 

disaster response than disaster prevention.’’ Rob 

Bailey, Claudio Saffioti & Sumer Drall, Sunk Costs: 

The Socioeconomic Impacts of Flooding 9, 

MarshMcLennan (2021), found at https://

www.marshmclennan.com/content/dam/mmc-web/ 

insights/publications/2021/june/Sunk-Cost_

Socioeconomic-impacts-of-flooding_vF.pdf (last 

accessed Aug. 28, 2023). 

6See 42 U.S.C. 4001(a). 

7From 1968 to 1979, the Department of Housing 

and Urban Development housed the Federal 

Insurance Administration, which administered the 

NFIP until its transfer to FEMA in Executive Order 

12127, 44 FR 19367, 3 CFR, 1979 Comp., p. 376. 

8See Peter John Robinson, W.J. Wouter Botzen, 

Howard Kunreuther, Shereen J. Chaudhry, Default 

Options and Insurance Demand, Journal of 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

44 CFR Part 61 

[Docket ID FEMA–2024–0004] 

RIN 1660–AB06 

National Flood Insurance Program: 

Standard Flood Insurance Policy, 

Homeowner Flood Form 

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, is a voluntary program in which 

participating communities adopt and 

enforce a set of minimum floodplain 

management requirements to reduce 

future flood damages. Property owners 

within participating communities are 

eligible to purchase NFIP flood 

insurance. This proposed rule would 

revise the Standard Flood Insurance 

Policy by adding a new Homeowner 

Flood Form and five accompanying 

endorsements. The new Homeowner 

Flood Form would replace the Dwelling 

Form as a source of coverage for 

homeowners of one-to-four family 

residences. Together, the new 

Homeowner Flood Form and 

endorsements would more closely align 

with property and casualty homeowners 

insurance and provide increased 

options and coverage in a more userfriendly and comprehensible format. 

DATES: Comments must be received on 

or before April 8, 2024. 

ADDRESSES: You may submit comments, 

identified by Docket ID FEMA–2024– 

0004, via the Federal eRulemaking 

Portal: http://www.regulations.gov. 

Follow the instructions for submitting 

comments. 

FOR FURTHER INFORMATION CONTACT: 

Kelly Bronowicz, Product and Policy 

Development Division Director, Federal 

Insurance Directorate, Resilience, (202) 

646–2559, FEMA-NFIP-FederalInsurance-Policy@fema.dhs.gov. 

SUPPLEMENTARY INFORMATION: 

I. Public Participation 

Interested persons are invited to 

participate in this rulemaking by 

submitting comments and related 

materials. We will consider all 

comments and material received during 

the comment period. 

If you submit a comment, include the 

Docket ID FEMA–2024–0004, indicate 

the specific section of this document to 

which each comment applies, and give 

the reason for each comment. All 

submissions may be posted, without 

change, to the Federal e-Rulemaking 

Portal at http://www.regulations.gov, 

and will include any personal 

information you provide. Therefore, 

submitting this information makes it 

public. For more information about 

privacy and the docket, visit https://

www.regulations.gov/ 

document?D=DHS-2018-0029-0001. 

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. 

II. Executive Summary 

The United States is experiencing 

increased flooding and flood risk from 

climate change.1 In a recent study, 

researchers found that changes in 

precipitation contributed to one-third of 

the flooding financial costs in the 

United States over the past three 

decades, totaling almost $75 billion of 

the estimated $199 billion in flood 

damages from 1988 to 2017.2

Intensifying precipitation associated 

with climate change, and the associated 

increases in precipitation extremes and 

flooding, thus presents a significant 

financial risk to homeowners.3

There are four main ways to manage 

any risk: (1) acceptance; (2) avoidance; 

(3) mitigation; and (4) transference. 

Flood risk is a reality. No home is 

completely safe from potential flooding. 

Just one inch of flood water in a home 

can cost more than $25,000 in damage.4

Homeowners must accept that the risk 

of flooding is increasing and with it, the 

potential for damage to their property. 

Homeowners can seek to reduce risk by 

building or purchasing homes away 

from natural flood hazards and can seek 

to mitigate risk by building or modifying 

homes to reduce potential damage from 

flooding. Homeowners can also transfer 

the risk by purchasing flood insurance.5

Congress created the National Flood 

Insurance Program (NFIP) in 1968 to 

help share the risk of flood losses 

through an insurance program to 

provide flood insurance coverage to 

those who need such protection.6 In the 

context of risk, the NFIP helps 

communities avoid and mitigate flood 

risk through adoption of floodplain 

management ordinances and helps 

policyholders transfer flood risk to the 

Federal Government. 

Over the past five decades, the NFIP 

has been implemented primarily by 

FEMA (the ‘‘Agency’’) to provide 

insurance to reduce the economic 

impact of floods.7 The Agency seeks to 

update the current Standard Flood 

Insurance Policy (SFIP) Dwelling Form 

to better serve a growing percentage of 

the public looking for ways to manage 

their risk through insurance, as they are 

now threatened by the increased risk of 

flooding. Most homeowners do not have 

flood insurance. Some homeowners are 

required to purchase flood insurance as 

a condition of any federal financial 

assistance for acquisition or 

construction of buildings in the special 

flood hazard area (SFHA) (e.g., 

mortgages, flood disaster grants) or as a 

condition of a loan secured by property 

in the SFHA while some homeowners 

choose to purchase it of their own 

volition. The decision to purchase flood 

insurance is frequently driven by 

whether they are subject to the 

mandatory purchase requirement rather 

than the actual flood risk to the 

property. Homeowners generally find it 

difficult to understand low probability/ 

high impact risks such as flood damage 

to their property.8 If purchasing flood 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8283 

Economic Behavior and Organization at 2 (2020), 

found at https://www.sciencedirect.com/science/ 

article/pii/S0167268120304765 (last accessed Aug. 

28, 2023). See also Rachel Cleetus Overwhelming 

Risk: Rethinking Flood Insurance in a World of 

Rising Seas, found at https://www.ucsusa.org/sites/ 

default/files/2019-09/Overwhelming-Risk-FullReport.pdf (last accessed Aug. 28, 2023) at 9: ‘‘In 

the wake of Sandy, it was estimated that only 15 

to 25 percent of at-risk properties in Special Flood 

Hazard Areas (SFHAs) in the Northeast were 

insured for flood losses. Many coastal property 

owners do not carry adequate insurance or are 

simply not insured at all. It is estimated that, 

nationally, only 18 percent of households in flood 

zone areas, which include inland (lakeside and 

riverside) and coastal areas, have flood insurance.’’ 

9See Rob Bailey, Claudio Saffioti & Sumer Drall, 

Sunk Costs: The Socioeconomic Impacts of 

Flooding 24, MarshMcLennan (2021), found at 

https://www.marshmclennan.com/content/dam/ 

mmc-web/insights/publications/2021/june/SunkCost_Socioeconomic-impacts-of-flooding_vF.pdf 

(last viewed accessed May 2, 2022Aug. 28, 2023). 

See also Noelwah R. Netusil, Carolyn Kousky, 

Shulav Neupane, Will Daniel & Howard 

Kunreuther, The Willingness to Pay for Flood 

Insurance at 33. ‘‘Among those who can afford a 

policy, they may not feel it provides value—that it 

is not ‘worth it’—if they fail to understand the role 

of insurance in their recovery, have challenges in 

assessing low probability events, or the policy terms 

do not meet their need,’’ found at https://

le.uwpress.org/content/wple/97/1/17.full.pdf (last 

accessed Aug. 28, 2023). See also Tom Hammond 

Lowering Costs of Customer Acquisition found at 

https://www.insurancethoughtleadership.com/ 

customer-experience/lowering-costs-customeracquisition (last accessed Aug. 28, 2023); Becky 

Yerak Direct insurers paying less to attract 

customers, found at https://

www.chicagotribune.com/business/ct-customeracquisition-costs-0515-biz-20150515-story.html (last 

accessed Aug. 28, 2023); How to Lower Customer 

Acquisition Cost in the Insurance Industry found at 

https://www.amsive.com/2021/09/14/how-to-lowercustomer-acquisition-cost-in-the-insuranceindustry-amsive/ (last accessed Aug. 28, 2023); and 

Insurtechs Need to Ace Customer Acquisition Cost 

(CAC) Optimization found at https://

rintupatnaik.medium.com/insurtechs-need-to-acecustomer-acquisition-cost-cac-optimizationb695bc45bf7b (last accessed Aug. 28, 2023). 

10 86 FR 71357 (Dec. 16, 2021). 

11The proposed Homeowner Flood Form would 

be offered to individuals owning a one-to-four 

family residential building. FEMA will evaluate any 

changes needed to forms for other types of 

policyholders (e.g., other residential and 

commercial) based on public comment associated 

with this rulemaking. 

12FEMA, 2022–2026 FEMA Strategic Plan, found 

at https://www.fema.gov/about/strategic-plan (last 

accessed Aug. 28, 2023). 

insurance is not mandatory, then 

homeowners may not be convinced that 

they should purchase it. Given the cost 

of customer acquisition is high, private 

insurance companies generally are not 

focused on homeowners that are not 

required to purchase flood insurance.9

FEMA has not substantively updated 

its flood insurance products—the 

Dwelling Form, the General Property 

Form, and the Residential 

Condominium Building Association 

Policy (RCBAP)—since 2000. While 

these products have performed ably 

over two decades of service, they are 

overdue for revision. Consistent with 

the National Flood Insurance Act 

(NFIA) of 1968, FEMA must provide by 

regulation the general terms and 

conditions of insurability for properties 

eligible for flood insurance coverage. 42 

U.S.C. 4013(a). Further, Executive Order 

13563, ‘‘Improving Regulation and 

Regulatory Review,’’ requires agencies 

to complete retrospective analyses of 

existing rules and periodically review 

existing significant regulations to 

determine whether they should be 

modified, streamlined, expanded, or 

repealed to better achieve the Agency’s 

regulatory objective. 76 FR 3821 (Jan. 

21, 2011). FEMA seeks to make these 

revisions consistent with the 

requirements under the NFIA and 

Executive Order 13563. The proposed 

new Homeowner Flood Form would 

update the general terms and conditions 

of insurability under the NFIP while 

also modifying the existing regulations 

and policy to make the program more 

effective and less burdensome for 

homeowner policyholders as explained 

below. Additionally, consistent with 

Executive Order 14058, ‘‘Transforming 

Federal Customer Experience and 

Service Delivery to Rebuild Trust in 

Government,’’ 10 FEMA seeks to 

improve the homeowner policyholder 

experience with the NFIP through the 

proposed Homeowner Flood Form, by 

simplifying coverage terms, reducing 

complexity, and resolving key 

challenges faced by homeowner 

policyholders. 

The proposed new Homeowner Flood 

Form provides a more personalized, 

customizable product than the NFIP has 

ever offered during its more than 50 

years in existence. Currently, the 

Dwelling Form serves homeowners, 

renters, landlords, mobile homeowners, 

and condo unit owners all in a single 

policy. The Dwelling Form also 

includes different coverage terms for 

certain buildings constructed, or 

substantially damaged or improved, on 

or after the effective date of the 

community’s initial Flood Insurance 

Rate Map (generally referred to as ‘‘postFIRM buildings’’) in an attempt to 

capture all possibilities. The current 

structure results in confusion for the 

homeowner policyholders looking for 

the specific coverage that applies 

directly to their situation, and imposes 

a series of choices onto consumers 

without offering an ability to change 

them. 

The proposed new Homeowner Flood 

Form offers more choices to 

policyholders who own their own 

homes,11 which help inform 

policyholders and prospective 

policyholders of increased risk of 

flooding and flood damage, and how 

best to cover their property as a result. 

The proposed new Homeowner Flood 

Form offers enhanced comprehensive 

default coverages. For example, while 

much of the default coverage proposed 

would mirror existing default coverage 

in the Dwelling Form, FEMA is 

proposing to shift the default loss 

settlement from actual cash value to 

replacement cost value to help 

policyholders more effectively and more 

fully recover from loss. These decisions 

FEMA made in setting coverage defaults 

(1) nudge homeowner policyholders

toward the more appropriate coverage to

insure against their risk, and (2)

represent FEMA’s strategic objective of

positioning individuals to understand

their risk and take well-informed

actions.12 This rulemaking also

proposes new endorsements for

additional coverages that homeowner

policyholders may want in order to

recover from flood events. A

homeowner policyholder may want to

expand their coverage and therefore

increase their policy’s flood risk

exposure (i.e., purchase the basement

coverage endorsement) even if it means

they will pay more for the additional

coverage, or they may wish to reduce

their premium (i.e., purchase the actual

cash value endorsement) even if it

means they stand to receive a smaller

benefit post-loss. Until now,

homeowner policyholders have been

unable to make any personalized

selections. FEMA is introducing choices

consumers can make in several ways,

through the use of endorsements that

modify coverage. These choices will

help homeowner policyholders learn

about their coverages prior to loss.

The proposed new Homeowner Flood 

Form does not presuppose that 

homeowner policyholders are 

knowledgeable about floodplain 

management and flood risk. By 

changing coverage based on pre- or postFIRM status, and by having certain 

terms only apply to certain zones, the 

Dwelling Form presupposes a level of 

homeowner policyholder floodplain 

management and flood risk knowledge. 

Unlike in the Dwelling Form, FEMA is 

not proposing to change coverage if the 

building covered is not a primary or 

principal residence, or if it is pre- or 

post-FIRM, or for any other reason. 

Ultimately, flood insurance coverage 

under the proposed new Homeowner 

Flood Form is there to help the 

homeowner policyholder recover. The 

premiums tied to the coverage choices 

homeowner policyholders make would 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8284 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

13See Louise Castoria, ‘‘Is there a duty to read 

insurance contracts?’’ available at https:// 

www.propertycasualty360.com/2019/11/07/is-therea-duty-to-read-insurance-contracts/ (last accessed 

on Aug. 28, 2023). 

14See Rob Bailey, Claudio Saffioti & Sumer Drall, 

Sunk Costs: The Socioeconomic Impacts of 

Flooding 3, MarshMcLennan (2021), found at 

https://www.marshmclennan.com/content/dam/ 

mmc-web/insights/publications/2021/june/SunkCost_Socioeconomic-impacts-of-flooding_vF.pdf 

(last accessed Aug. 28, 2023). 

signal the underlying risk and prompt 

mitigation efforts. 

The proposed new Homeowner Flood 

Form adds directly into the policy terms 

flexibilities the Agency has had to 

implement via bulletin or other means, 

such as special procedures during 

catastrophic flood events and advance 

payments. These changes would help 

homeowner policyholders better 

understand the options available to 

them and learn about special procedures 

under the policy up front, rather than 

making them wait to find out via a 

bulletin after a flood event. 

The proposed new Homeowner Flood 

Form also allows for a single deductible 

rather than multiple deductibles, 

reducing unnecessary administrative 

burdens for the homeowner 

policyholder. Additionally, the 

proposed new Homeowner Flood Form 

would provide FEMA with greater 

flexibility in implementing the flood 

insurance program. The proposed new 

Homeowner Flood Form removes 

unnecessary provisions of the current 

Dwelling Form policy, reducing the 

reliance on lists and pushing certain 

provisions to the declarations page for 

clarity. The insurance industry 

recognizes that many policyholders will 

not read their insurance policy 13 and 

has endeavored to put critical 

information onto the declarations page 

to increase policyholder understanding 

of what is and is not covered. In the 

context of the NFIP, policyholders with 

basements continue to be surprised that 

under the current Dwelling Form, the 

policy provides limited coverage in a 

basement. Under the proposed new 

Homeowner Flood Form, the 

declarations page would include 

language along the lines that ‘‘This 

property includes a basement. The 

Homeowner Flood Form provides 

limited coverage in a basement.’’ This 

upfront tailoring of the policy to suit the 

homeowner policyholder’s choices and 

the placement of critical information on 

the declarations page would reduce the 

administrative sludge a homeowner 

policyholder faces during the claims 

process. Homeowner policyholders 

would better understand the coverages 

they have selected, information would 

be easily accessible on their declarations 

page, and their claims should reflect a 

better understanding of their coverages. 

This better understanding of their 

coverages should result in fewer 

denials, faster claims payments, and an 

improved customer experience during a 

difficult time. 

By making these changes and 

updating coverage, FEMA seeks to 

address the increased risk of flooding 

from climate change in several ways. 

These ways include (1) re-baselining the 

market, (2) introducing optionality, (3) 

creating market buzz, (4) creating the 

opportunity to build back in more 

resilient ways to reduce future flood risk 

post-loss, and (5) revamping increased 

cost of compliance coverage. First, the 

proposed rule would reset the market. 

Currently the existing and small private 

market for flood insurance sets the 

Dwelling Form as a baseline level of 

coverage. By revising the coverage in the 

proposed Homeowner Form, FEMA 

would drive the market in the right 

direction to ensure that homeowner 

policyholders are able to effectively 

transfer their flood risk. By increasing 

coverage, people are able to recover 

faster so that the last flood does not 

leave them more vulnerable to the next 

flood.14

Second, FEMA has utilized the ‘‘one 

size fits all’’ coverage for policyholders 

for 50 years. The proposed Homeowner 

Form seeks to address specific needs of 

specific homeowner policyholders 

through the choices being made 

available. FEMA proposes to increase 

optionality and require homeowners to 

assess their own risks, communicating 

those risks through coverage options 

and the costs associated with them. 

Third, FEMA also anticipates that the 

changes in the proposed Homeowner 

Form would generate more interest in 

flood insurance as the last update 

occurred over 20 years ago. This interest 

could include insurance agents, for 

whom it will be easier to learn about 

flood insurance coverage. The proposed 

Homeowner Form would make flood 

insurance align more with other 

insurance products and thus more 

accessible to agents, who may then seek 

to sell more flood insurance as they 

better see the value of coverage for their 

clients. 

Fourth, FEMA proposes to create the 

opportunity to build more resiliently by 

introducing provisions in its loss 

settlement clause that would enable 

homeowner policyholders to replace 

their damaged building elements with 

flood damage resistant materials. In 

addition, these same provisions would 

enable homeowner policyholders to 

elevate flood damaged machinery and 

equipment to reduce the likelihood of 

future flood damage. 

Finally, FEMA proposes to revamp its 

increased cost of compliance (ICC) 

provision. Previously, ICC appeared in 

the Dwelling Form as Coverage D, and 

its inclusion there was incongruous 

with the other coverages because it set 

out an eligibility framework and 

specifically listed out all the covered 

and uncovered compliance activities. 

FEMA proposes to simplify ICC so 

homeowner policyholders can better 

understand their ICC coverage, adjusters 

can more easily advise homeowner 

policyholders to consult their local 

floodplain management requirements, 

and local floodplain managers have 

appropriate discretion. 

What follows below is an overview of 

the major changes in each section in the 

proposed Homeowner Flood Form as 

well as an analysis of the degree of 

change compared to the Dwelling Form. 

A detailed description of the changes is 

found later in this preamble. 

Section I: Insuring Agreement. This 

section proposes a low level of change 

from the current Dwelling Form. It 

would simplify the language and 

organization of the global aspects of the 

Form, and replace references to Federal 

laws (e.g., the Coastal Barrier Resources 

Act and section 1316 of the NFIA) with 

a broader statement about conflicts with 

Federal law. 

Section II: Definitions. This section 

proposes a moderate to high level of 

change from the current Dwelling Form. 

It would eliminate definitions for words 

only used once within the policy that 

are currently defined in the Dwelling 

Form; refine definitions for simplicity 

and clarity; make substantive changes to 

the definitions for ‘‘Basement,’’ 

‘‘Building,’’ and ‘‘Flood’’; and add 

definitions for new concepts such as 

‘‘Flood Damage Resistant Materials’’ and 

‘‘Replacement Cost Value.’’ 

Section III: What We Cover. This 

section proposes a moderate to high 

level of change from the current 

Dwelling Form. It would combine 

sections III and IV from the Dwelling 

Form to present in one place all aspects 

of coverage (i.e., what is covered, what 

receives limited coverage, and what is 

not covered). It would also incorporate 

plain language, remove lists, and 

rephrase coverage currently phrased in 

the negative. In contrast to the Dwelling 

Form that offers different coverage 

based on flood zone and pre- or postFIRM designation, the proposed 

Homeowner’s Form provides uniform 

coverage. In addition: 

• Coverage A. It would allow 

homeowner policyholders to more 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8285 

15See 44 CFR 62.5. 16Public Law 108–264 (June 30, 2004). 

easily determine the existence of a 

basement for coverage purposes as 

further explained below. 

• Coverage B. Similar to homeowners 

insurance coverage, Coverage B would 

provide coverage to restore certain 

other, non-dwelling buildings to a 

functional level. The amount of 

coverage would be a sublimit of the 

amount selected for Coverage A, 

without requiring a separate insurance 

policy. 

• Coverage C. Due to the 

recharacterization of Coverage B for 

other buildings, and to align with 

homeowners coverage, Coverage C 

would address contents coverage and 

would expand personal property 

coverage to contents located anywhere 

in the United States. It would also 

clarify that coverage for items stored in 

digital format (like cryptocurrency) is 

excluded given challenges with proving 

loss. 

Section IV: Exclusions. This section 

proposes a low to moderate level of 

change from the current Dwelling Form. 

It would limit items excluded from 

coverage in this section to those items 

excluded based on cause of the loss 

consistent with industry practice. It 

would address earth movement, 

pollutants, increase in hazard, and other 

excluded losses under the general 

heading of ‘‘Excluded Losses,’’ 

consistent with other lines of property 

coverage. It would keep ‘‘Flood in 

Progress’’ as a separate provision, and 

explicitly exclude coverage for preexisting damage in a standalone 

provision. 

Section V: Policy Conditions. This 

section proposes a moderate to high 

level of change from the current 

Dwelling Form. It would separate out 

the provisions from section VII of the 

current Dwelling Form that specifically 

apply to how the policy is administered, 

the policyholder-facing underwriting 

aspects of the policy. It would state in 

simple, plain language the reasons a 

homeowner policyholder may cancel 

the policy in accordance with current 

regulation.15 It would give FEMA 

discretion to extend the deadline to 

submit proof of loss to 365 days from 

the date of loss, and the deadline for 

policy renewal to 60 days from the 

policy’s expiration date (referred to as a 

‘‘grace period’’), following a 

presidentially-declared flood disaster in 

accordance with the Robert T. Stafford 

Disaster Relief and Emergency 

Assistance Act. FEMA has established a 

business practice of issuing proof of loss 

extensions for claims following a major 

flood event and grace period extensions 

for flood insurance renewals. The 

proposed Homeowner Flood Form 

would normalize this course of business 

and make the provision discretionary, 

not mandatory, so that these flexibilities 

not found in the current Dwelling Form 

can be leveraged where appropriate. It 

would also allow insurers to accept and 

make payment on the adjuster’s reports 

and allow FEMA to issue special terms 

for advance payments not currently 

provided in the Dwelling Form. 

Section VI: Procedures and Duties 

When A Loss Occurs. This section 

proposes a moderate to high level of 

change from the current Dwelling Form. 

The current Dwelling Form includes 

various provisions under its section VII 

(General Conditions) and the proposed 

Homeowner Flood Form would separate 

out the provisions that specifically 

apply to how losses are proven and paid 

for the homeowner policyholder in this 

section (i.e., claims issues). It would 

simplify the options after a loss and 

extend the proof of loss deadline from 

the current Dwelling Form deadline of 

60 days to 90 days. It would allow 

insurers to issue a de minimis advance 

payment to insureds up to five percent 

of the Coverage A limit of liability 

(without requiring the mortgage 

company to be on the check). The 

proposed Homeowner Flood Form 

would fold the deductible section from 

the Dwelling Form into a larger section 

and introduce language that presents the 

deductible as a single deductible rather 

than separate deductibles. It would also 

simplify loss settlement by removing 

distinctions between principal and 

primary residences, using replacement 

cost value as the default rather than the 

current Dwelling Form’s actual cash 

value default, and removing all special 

situations where only actual cash value 

applies. 

Section VII: General Conditions. This 

section proposes a low to moderate level 

of change from the current Dwelling 

Form. It would reorganize the sections 

alphabetically and simplify language, 

add language to capture the ability to 

have other insurance from a private 

flood carrier not in the current Dwelling 

Form, and add sections on ‘‘Death,’’ 

‘‘Headings and Captions,’’ and ‘‘Your 

Options After Our Denial.’’ FEMA is 

proposing to add a section on death to 

address situations where there are 

questions regarding the household 

residents, and to help alleviate the 

challenges associated with claims 

involving a deceased homeowner 

policyholder for their survivors. Under 

the Dwelling Form, FEMA observed 

instances where the family of deceased 

policyholders would have their claims 

denied by insurers participating in the 

NFIP, on grounds that the SFIP 

prohibits assignment of claims. FEMA is 

therefore proposing to add a section on 

death to address and alleviate the 

challenges associated with claims 

involving a deceased homeowner 

policyholder for their survivors. FEMA 

proposes the ‘‘Your Options After Our 

Denial’’ section to present in one 

location the homeowner policyholder’s 

options after denial. This proposed 

section would reaffirm to homeowner 

policyholders that there are additional 

administrative options to work with the 

insurer to reach a resolution to a claim, 

but also incorporate requirements from 

the Bunning-Bereuter-Blumenauer 

Flood Insurance Reform Act of 2004 16

explaining the appeals process not 

currently found in the Dwelling Form. 

III. Background 

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. 572), found 

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

voluntary Federal program enabling 

property owners in participating 

communities to purchase flood 

insurance as a protection against flood 

losses. In exchange, participating 

communities must enact floodplain 

management regulations that 

incorporate the NFIP minimum 

floodplain management criteria. The 

minimum floodplain management 

criteria are designed to: (1) constrict the 

development of land which is exposed 

to flood damage where appropriate; (2) 

guide the development of proposed 

construction away from locations which 

are threatened by flood hazards; (3) 

assist in reducing damage caused by 

floods; and (4) otherwise improve the 

long-range land management and use of 

flood-prone areas. 42 U.S.C. 4102(c). 

These NFIP requirements apply to areas 

known as special flood hazard areas 

(SFHA) in participating communities. 

FEMA administers the NFIP so that 

the provision of insurance and adoption 

of minimum floodplain management 

criteria are mutually reinforcing. NFIP 

flood insurance indemnifies property 

owners from flood losses, reducing the 

need for Federal disaster assistance. 

And 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 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8286 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

17The Community Rating System (CRS) is a 

voluntary program for communities participating in 

the NFIP. The CRS offers NFIP policy premium 

discounts in communities that develop and execute 

extra measures beyond minimum floodplain 

management requirements to provide protection 

from flooding. See 42 U.S.C. 4022(b). 

18A misrated policy occurs when a policy 

premium is incorrect because one or more rating 

characteristics are incorrect. Rating characteristics 

used to determine premium include items such as: 

loss history, building occupancy, building use, and 

primary residency status, among others. For more 

information, see https://www.fema.gov/sites/ 

default/files/documents/fema_nfip-flood-insurancemanual-sections-1-6_oct2021.pdf (last accessd Aug. 

28, 2023). 

19There are other exceptions, which are seldom 

triggered, for properties where the policy has lapsed 

(42 U.S.C. 4014(g)(1)) and where the owner has 

refused mitigation assistance (42 U.S.C. 4014(g)(2)). 

20See 42 U.S.C. 4013(b). 

21 Id. 

22 ICC is authorized in 42 U.S.C. 4011(b). 

23FEMA adopted another substantive change in 

2003 when it increased the limits for ICC coverage 

from $20,000 to $30,000. See 68 FR 9895 (Mar. 3, 

2003). 

24See, e.g., The Institutes’ Handbook of Insurance 

Policies, American Institute for Chartered Property 

Casualty Underwriters, 12th ed. (2018) (containing 

copies of modern property casualty forms). The 

Insurance Services Office (ISO)’s template 

homeowners form (‘‘HO–3’’ form) appears on page 

5 and demonstrates the simplicity of this policy 

compared to the SFIP. The NFIP receives a high 

volume of inquiries on the SFIP, further 

demonstrating the challenges in reading and 

interpreting the SFIP. Policy inquiries generally 

make up 43 percent of the total inquiries received 

by FEMA’s ‘‘Ask the Experts’’ tracking system 

between 2019 and May 2021. See also Barlow, 

Christine G., Personal Flood Insurance Coverage 

Guide (2018) at 51: ‘‘The historic flooding from 

hurricanes in 2017 has only continued to highlight 

the issues with the current NFIP program and its 

ability to provide coverage for the claims that 

continue to occur. Because of this . . . ISO has 

developed a personal flood program to provide the 

industry with standalone private flood forms.’’ The 

Chapter (Chapter 4) goes on to compare the 

coverage to standard homeowner coverage and 

reference existing endorsements that agents can use 

with their flood form. See also id. at chapter 6 (p. 

85): ‘‘Because [the private flood form] was 

developed by ISO it bears similarities to the ISO 

Homeowners Policy, making it easier to dovetail 

coverages so that the insured has no gaps in 

coverage. Because of this, many sections of the 

flood policy are identical or very similar to the 

homeowners policy.’’ 

depicting flood hazard information to 

create broad-based awareness of flood 

hazards and to identify the areas where 

the minimum floodplain management 

requirements apply. 

Section 102 of the Flood Disaster 

Protection Act of 1973 (42 U.S.C. 4012a) 

makes flood insurance mandatory for all 

federally-backed mortgages of properties 

located in special flood hazard areas. 

This is commonly referred to as the 

‘‘mandatory purchase requirement.’’ 

Additionally, Federal agencies are 

prohibited from providing loans and 

grants to any property located in a 

special flood hazard area unless the 

property is covered by flood insurance. 

See 42 U.S.C. 4012a(a). 

In general, the NFIP charges premium 

rates sufficient to cover the expected 

claims payouts and operating expenses. 

Such premium rates are commonly 

referred to as risk-based or actuarial 

rates. See 42 U.S.C. 4014(a)(1), 4015(b). 

In general, FEMA offers only actuarial 

rates to all buildings constructed, or 

substantially damaged or improved, on 

or after the effective date of the 

community’s initial Flood Insurance 

Rate Map (FIRM), generally referred to 

as ‘‘post-FIRM buildings.’’ See 42 U.S.C. 

4015(c)(1). However, the NFIA makes 

available discounted rates for certain 

classes of properties. The most common 

discount is for certain policies covering 

buildings built or substantially 

improved prior to the community’s 

adoption of its initial FIRM, generally 

referred to as ‘‘pre-FIRM buildings.’’ See 

42 U.S.C. 4014(a)(2), 42 U.S.C. 4015(a). 

FEMA must also provide discounted 

rates for properties newly mapped into 

a SFHA for the first time. See 42 U.S.C. 

4015(i). FEMA gradually phases out 

these discounts within the premium 

increase caps set by statute. For the 

‘‘first policy year,’’ FEMA must provide 

homeowner policyholders of newly 

mapped-in properties the newly 

mapped discount and increase the 

premium ‘‘in accordance with’’ the 

Act’s annual limitation of premium 

increases until the premium reaches its 

full-risk rate. Id.; see also 42 U.S.C. 

4014(a)(1) (full-risk rates); 42 U.S.C. 

4015(e) (annual limitation). 

The NFIA limits annual premium 

increases to not more than 18 percent 

for any property, with limited 

exceptions. 42 U.S.C. 4015(e)(1). 

However, this premium increase cap 

does not apply (1) to certain pre-FIRM 

properties for which the NFIA mandates 

FEMA to increase premiums by 25 

percent a year until they reach full-risk 

rates; (2) to properties within a 

community which has experienced a 

downgrade in the NFIP’s community 

rating system; 17 (3) where the 

homeowner policyholder has changed 

the amount of coverage or deductible 

amounts; and (4) where the property 

was misrated.18 19

The NFIA requires FEMA to provide 

by regulation the ‘‘general terms and 

conditions of insurability . . . 

applicable to properties eligible for 

flood insurance coverage.’’ 42 U.S.C. 

4013(a). To comply with this 

requirement, FEMA adopts the Standard 

Flood Insurance Policy (SFIP) in 

regulation, which sets out the terms and 

conditions of insurance. See 44 CFR 

part 61, Appendix A. FEMA must use 

the SFIP for all flood insurance policies 

sold through the NFIP. See 44 CFR 

61.13. 

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 $100,000.20 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.21 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.22 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. 

IV. Discussion of the Proposed Rule 

FEMA last substantively revised the 

SFIP in 2000. See 65 FR 60758 (Oct. 12, 

2000).23 In 2020, FEMA published a 

final rule that made non-substantive 

clarifying and plain language 

improvements to the SFIP. See 85 FR 

43946 (July 20, 2020). However, many 

policyholders, agents, and adjusters 

continue to find the SFIP difficult to 

read and interpret compared to other, 

more modern, property and casualty 

insurance products found in the private 

market.24 To achieve Objective 2.2 of 

FEMA’s 2022–2026 Strategic Plan of 

building a climate resilient nation (i.e., 


ddrumheller on DSK120RN23PROD with PROPOSALS2
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25FEMA. 2022–2026 FEMA Strategic Plan. 

https://www.fema.gov/sites/default/files/ 

documents/fema_2022-2026-strategic-plan.pdf. 

26FEMA conducted interviews with flood 

insurance professionals in its loaned executive 

officer program in spring of 2017. FEMA procured 

insurance product expertise from Milliman, Stanley 

Parsons, and Hinshaw between 2017–2019. FEMA 

engaged with and sought feedback from ten Write 

Your Own companies in the summer of 2019. 

27An endorsement is a written document 

attached to an insurance policy that modifies the 

policy by changing the coverage provided by the 

policy. Also known as a ‘‘rider,’’ ‘‘addendum,’’ or 

‘‘attachment,’’ an endorsement can add coverage for 

acts or things not covered by the original policy, 

limit or subtract coverage, add or remove exclusions 

or conditions, or otherwise modify the policy. 

28 In 2017, a costly year due to Hurricanes 

Harvey, Irma, and Maria, the NFIP paid an average 

claim amount of more than $90,000, while the 

average disaster assistance grant was just $9,000. 

See FEMA Fact Sheet on Flood Insurance: A Small 

Price to Pay for Peace of Mind at: https://

agents.floodsmart.gov/sites/default/files/floodinsurance-small-price-pay-peace-mind_fact-sheet_

jun20.pdf (last accessed Aug. 28, 2023). 

29Public Law 93–288; 42 U.S.C. 5121 et seq. 

30See http://www.floodsmart.gov/floodinsurance/requirements (last accessed Aug. 28, 

2023). 

31 Id. See also https://www.fema.gov/datavisualization/historical-flood-risk-and-costs (last 

accessed Aug. 28, 2023). 

32Although the NFIP does not maintain data on 

the ownership status of policyholders, FEMA 

estimates that a majority of policyholders are 

homeowners. This estimation stems from certain 

assumptions based on NFIP eligibility rules and 

coverage type (for instance, a policyholder with 

building coverage must own the building, and a 

policyholder with contents coverage only is likely 

a renter). 

33FEMA estimates that roughly 88.4% of current 

Dwelling Form policyholders are homeowners and 

therefore would use the proposed Homeowner 

Flood Form. Homeowners as a percentage of 

policyholders was estimated using data from the 

PIVOT database from 2010 through 2019. The 

PIVOT database is the NFIP’s official system of 

record which contains NFIP information. 

34These endorsements would be available to 

homeowner policyholders to amend only the 

Homeowner Flood Form; they would not be 

available to amend the current SFIP forms for other 

types of policyholders. 

increasing the number of properties 

with flood insurance and ensuring 

adequate insurance coverage),25 FEMA 

consulted with property and casualty 

experts over time 26 and received 

valuable suggestions on ways to align 

the SFIP’s design with industry 

standards and practices and improve its 

readability. Accordingly, FEMA 

incorporated these suggestions into a 

new form of the SFIP, the Homeowner 

Flood Form, as well as several 

accompanying endorsements to that 

form.27 FEMA now proposes to adopt 

this new Homeowner Flood Form and 

its endorsements. FEMA intends that 

this new Homeowner Flood Form will 

be more user-friendly and 

comprehensible and, as a result, will 

make it easier for agents to sell flood 

insurance and close the insurance gap. 

FEMA is committed to building a 

culture of preparedness, and such a 

culture necessarily includes 

individuals, communities, and 

businesses managing risks through 

proper insurance coverage. One of 

FEMA’s roles is to help people 

understand their risk and the available 

options to best manage those risks. 

Flood insurance is an effective tool to 

transfer risk and enable rapid recovery. 

The proposed Homeowner Flood form 

would help build this culture by better 

advising homeowners of their flood 

risks and options to manage those risks. 

Flooding can be an emotionally and 

financially devastating event. 

Experience has shown repeatedly that 

individuals, communities, and 

businesses who manage risk through 

insurance accelerate their financial 

recovery after a disaster.28 If an 

individual does not have adequate 

savings to repair or replace their 

property, flood insurance will help fill 

that gap when a flood occurs. Flood 

insurance allows homeowners to 

recover quicker by providing the funds 

needed to repair or replace property 

after a disaster. The proposed 

Homeowner Flood Form would provide 

homeowners with options to more 

quickly receive funds to help accelerate 

their financial recovery. 

With flood insurance, individuals are 

able to financially recover faster. While 

grants provided under the Robert T. 

Stafford Disaster Relief and Emergency 

Assistance Act (‘‘Stafford Act’’) 29 may 

support survivors in the immediate 

aftermath of a presidentially-declared 

disaster, this Federal support is only 

intended to meet basic needs as a 

survivor moves forward with recovery. 

Federal disaster assistance typically 

comes in two forms to individuals: a 

loan, which must be paid back with 

interest, or a FEMA disaster grant, 

which averages approximately $5,000 

per household.30 A disaster grant is not 

intended to make survivors whole and 

is not a substitute for insurance. The 

average flood insurance claim in 2019 

was more than $50,000.31 Maintaining 

flood insurance is therefore critical to 

rebuilding a home and replacing 

belongings following a flood. 

Moreover, when a flood results in a 

presidentially-declared disaster, flood 

insurance not only benefits those 

directly affected by a flood, it also 

reduces the need for Federal disaster 

assistance and lowers costs for 

taxpayers. Because one of FEMA’s goals 

is to close the Nation’s insurance gap, 

and because homeowners make up the 

majority of NFIP policyholders, FEMA 

is working to encourage homeowners to 

better understand their risk and 

purchase adequate insurance coverage 

to reduce their losses from flood.32

FEMA is proposing this new Form for 

that purpose. 

The new Homeowner Flood Form, 

which FEMA proposes to add to its 

regulations at 44 CFR 61 Appendix A(4), 

would protect property owners in a oneto-four family residence. Upon 

adoption, the Homeowner Flood Form 

would replace the Dwelling Form as a 

source of coverage for this class of 

residential properties.33 FEMA would 

continue to use the Dwelling Form to 

insure landlords, renters, and owners of 

mobile homes, travel trailers, and 

condominium units. (FEMA will 

evaluate any changes needed for these 

other types of residential policyholders, 

as well as commercial policyholders, 

based on public comment associated 

with this rulemaking). Compared to the 

current Dwelling Form, the new 

Homeowner Flood Form would clarify 

coverage and more clearly highlight 

conditions, limitations, and exclusions 

in coverage as well as add and modify 

coverages and coverage options. FEMA 

also proposes adding to its regulations 

five endorsements to accompany the 

new Form: Increased Cost of 

Compliance Coverage, Actual Cash 

Value Loss Settlement, Temporary 

Housing Expense, Basement Coverage, 

and Builder’s Risk. These endorsements, 

which FEMA proposes to codify at 44 

CFR 61 Appendices A(101)-(105), 

respectively, would give homeowner 

policyholders the option of amending 

the Homeowner Flood Form to modify 

coverage with a commensurate 

adjustment to premiums charged.34

Together, the Homeowner Flood Form 

and accompanying endorsements would 

increase options and coverage for 

owners of one-to-four family residences. 

A. 44 CFR 61.2: Definitions 

44 CFR 61.2 provides that the 

definitions set forth in 44 CFR part 59 

apply to 44 CFR part 61. FEMA 

proposes to revise this provision to 

clarify that the definitions set forth in 

part 59 apply to part 61, including 

appendices, but if an appendix defines 

a term differently, that definition 

controls for the purposes of that 

appendix. FEMA proposes this revision 

for clarity and accuracy. 

B. 44 CFR 61.13: Standard Flood 

Insurance Policy 

44 CFR 61.13 describes the Standard 

Flood Insurance Policy. Section 

61.13(a), ‘‘Incorporation of forms,’’ 

states that each of the SFIP forms 

included in Appendix A hereto (General 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8288 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

35Although the Form would offer the same 

coverage regardless of flood zone, the premiums 

charged would continue to differ based on risk. For 

instance, owners of riskier buildings, such as preFIRM buildings and buildings with the lowest level 

below Base Flood Elevation, would continue to pay 

more in premiums for the same level of coverage 

compared to a building carrying less risk. This is 

because the NFIP will continue charging the most 

accurate actuarial rates it can based not just on 

flood maps, but other information (such as distance 

to water sources and elevations) as improvements 

in technology allow, as discussed in greater detail 

below. 

Property, Dwelling, and Residential 

Condominium Building Association) 

and incorporated herein shall be 

incorporated into the SFIP. FEMA 

proposes to remove ‘‘(General Property, 

Dwelling, and Residential 

Condominium Building Association)’’ 

so that the provision states simply that 

each of the SFIP forms included in 

Appendix A hereto and by reference 

incorporated herein shall be 

incorporated into the SFIP. The removal 

of this phrase would allow FEMA to 

incorporate the new Homeowner Flood 

Form, as well as any additional forms 

that FEMA may implement in the 

future, without having to revise this 

section upon issuance of each new form. 

C. Appendix A(4): Homeowner Flood 

Form 

As mentioned above, FEMA has not 

substantively updated the SFIP since 

2000. While the SFIP has performed 

ably over the last two decades, FEMA 

recognizes that changes in consumer 

expectations, technology, and the 

insurance industry over the last 20 years 

warrant an update to it. The new 

Homeowner Flood Form and its 

accompanying endorsements would 

provide a more personalized, 

customizable product than the NFIP has 

offered during its 50 years. In addition 

to aligning with property and casualty 

homeowners insurance, the result 

would increase consumer choice. For 

instance, rather than universally 

limiting basement coverage, the new 

Form allows homeowner policyholders 

to choose their coverage based on their 

understanding of flood risk and the 

coverage they desire. The Form would 

also simplify coverage, such as offering 

the same coverage on a building 

regardless of whether it is a primary 

residence or not, or pre- or post-FIRM, 

and removing the importance of flood 

zones for purposes of coverage.35

Ultimately, the purpose of coverage is to 

help homeowner policyholders recover, 

and FEMA anticipates that the 

premiums tied to homeowner 

policyholders’ coverage choices would 

signal the underlying risk and prompt 

mitigation efforts. 

The following chart illustrates how 

homeowner policyholders could 

customize their policy at the point of 

sale: 

BILLING CODE 9111–52–P 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8289 

36FEMA currently provides special procedures 

for catastrophic events through bulletins issued on 

a catastrophe-by-catastrophe basis. See e.g., Bulletin 

W–17030, ‘‘Activation of NFIP Catastrophic Event 

Enhanced Claim Payment Process for Hurricane 

Harvey,’’ (Sept. 3, 2017), found at https:// 

nfipservices.floodsmart.gov/sites/default/files/w17030.pdf (last accessed Aug. 28, 2023); Bulletin 

W–17031a, ‘‘Guidance for Advance Payments for 

Hurricane Harvey,’’ (Sept. 4, 2017), found at https:// 

nfipservices.floodsmart.gov/sites/default/files/w17031a.pdf (last accessed Aug. 28, 2023); Bulletin 

W–17035, ‘‘Hurricane Harvey Enhanced Claim 

Handling for Prior Loss and Contents Claims under 

the Dwelling Form of the SFIP,’’ (Sept. 9, 2017), 

found at https://nfipservices.floodsmart.gov/sites/ 

default/files/w-17035.pdf (last accessed Aug. 28 

2023). FEMA proposes to incorporate these special 

procedures into the Homeowner Flood Form for 

ease of administration and to increase transparency. 

BILLING CODE 9111–52–C 

Simplifying the Policy for Homeowner 

Policyholders and Plain Language 

Efforts 

The Form would provide FEMA with 

greater flexibility in administering flood 

insurance. Unlike the Dwelling Form, 

which is highly prescriptive and 

includes long lists of covered items, the 

new Form would further incorporate 

plain language, remove unnecessary 

provisions, reduce reliance on lists, and 

highlight certain specifics on the 

declarations page. Moreover, the Form 

would add in flexibilities, like special 

procedures during catastrophic flood 

events.36 Altogether, the proposed 

products would allow FEMA to provide 

homeowners with better, more tailored 

coverage. 


ddrumheller on DSK120RN23PROD with PROPOSALS2EP06FE24.021</GPH>

Policyholder with Agent: Homeowner Flood Form Point of Sale-Choice Architecture 

AGENT 

Is properly eligible 

for NFfP coverage? 

Yes 

AGENT 

Is y0ur property being 

built right now? 

I ! 

~Answers--1 

! 

-AGENT 

Do y0u want to cover 

your property for tlooi:l? 

Yes 

AGENT. 

Qtrestfons about 

property characteristies 

,-----Yes---+ I AGENT 

I Does the property 

..----No -----------------~j nave a basement?* '------~ I 

AGENT 

Doyouwantto 

reduce your 

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event of a 1-0ss'l 

AGENT 

ProVides 

intormation about 

anyef1SCOunts and 

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team more about 

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mitigation Options_ 

Yes 

AGENT 

Do you wantto add 

more coverage tor 

the basement? 

No 

AGENT 

Yes No 

AGENT 

Discuss 

umnanons on 

coverage 

ProvriJeprefimmary premium based on chorces so tar; discuss risk 

~---Yes------t 

Final Premium 

Quote 

AGENT 

Do you want to 

add coverage 

for temporary 

housing 

expenses. in 

the eventihat 

a 1100d makes. 

yournome 

inaccessible or 

uninhabitable? 

*Theagentwoufd feada d/scUSSion about11owa 

basement is defined, coverage options available to 

fhepof,cyholder,, and the pnc/rig of those options_ . . ... 
8290 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

37FEMA believes additional equitable and 

affordability solutions require legislative change. 

See generally https://www.fema.gov/floodinsurance/rules-legislation/congressionalreauthorization/legislative-proposals (last accessed 

Aug. 28, 2023). 

38See generally 42 U.S.C. 4011(a), 4053, 4072; 44 

CFR 59.2, 61.5(e), 62.22, 62.23(g). 

39See also Nelson v. Becton, 929 F.2d 1287, 1291 

(8th Cir. 1991) (‘‘The purpose of the National Flood 

Insurance Program is to provide flood insurance, 

which otherwise would not be available, on a 

uniform nationwide basis. To apply the varying 

reasonable expectations doctrines of the insurance 

laws of individual states would ‘frustrate [these] 

specific objectives of the Federal program[ ]’ ’’ 

(citing United States v. Kimbell Foods, 440 U.S. 

715, 728 (1979))). 

40For example, the current Dwelling Form 

contains references to other legal authority 

throughout, such as in sections IV.15 (referencing 

the Coastal Barrier Resources Act, the Coastal 

Barrier Improvement Act, and related amendments) 

and V.E (discussing leasing land from the Federal 

Government). 

As an insurance contract, the new 

Form has to be capable of being read 

from start to finish as well as quickly 

navigable to find the specific 

information in the event of an issue or 

a loss. To maintain certain decades-old 

foundational concepts, limit 

implementation errors, and minimize 

disruption to the administration of the 

NFIP, FEMA found it necessary to favor 

certain flood insurance terminology 

and/or terms of art even where the 

phrasing may seem stuffy or 

overworked. FEMA is proposing several 

changes with plain language in mind 

and seeks comment on whether the 

proposed changes result in the desired 

clarity. Specifically, FEMA proposed to 

change the organization of the policy, 

such that fewer sections are provided in 

the overall policy and similar concepts 

are grouped together to allow the reader 

to know what is and is not covered 

without having to review a section and 

then have to return to it again for clarity. 

FEMA is also proposing to add headers 

and captions to guide the reader and 

improve comprehension. Insurance 

professionals often ‘‘speak by citation,’’ 

quoting the policy provisions by 

location rather than name. The headers 

and captions will help non-insurance 

professionals quickly understand what 

is in those citations. FEMA proposes 

italicizing defined terms throughout the 

policy as a signal to the reader that this 

is one of those defined terms they read 

and thus allowing the reader to refer 

back to the definitions as appropriate. 

FEMA is also proposing to define 

specific terms not used elsewhere in the 

policy within the clause. For example, 

‘‘pollutants’’ is defined in the proposed 

III.A.3.d, rather than in the proposed

section II. FEMA is proposing to remove

technical information. The Dwelling

Form makes reference to specific flood

zones, post-FIRM buildings, and defines

numerous terms not relevant to the

policyholder with coverage under the

SFIP. FEMA also seeks comment on

other ways the Form can be revised to

improve the policy’s language and

decrease confusion.

Potential Benefits and Impacts on 

Disadvantaged Communities 

FEMA believes that the proposed 

changes to the Homeowner Flood Form 

will reduce burdens on low-income and 

other disadvantaged communities 

particularly affected by changing 

conditions and increased flooding. 

FEMA’s current authority requires 

actuarial rates, which can impact lowincome and other disadvantaged 

communities. By offering choices such 

as options for actual cash value or 

replacement cost value coverage and 

basement coverage options, FEMA 

believes that homeowner policyholders 

can make a value judgment regarding 

the extent of their coverage.37 FEMA 

seeks specific comment on the potential 

benefits and impacts of this proposed 

rulemaking on various geographic 

regions and communities, including 

based on income, insurance access, and 

affordability. 

Premium Rates 

The changes proposed in this rule 

would generally not impact the NFIP’s 

premium structure. A decision to select 

more robust coverage, as with all 

insurance coverage, would result in 

increased premiums. 

Homeowner Flood Form 

1. Section I: Insuring Agreement

FEMA proposes to consolidate

multiple sections from the Dwelling 

Form into one larger section. 

Specifically, elements of sections I and 

X of the Dwelling Form appear in 

proposed section I.A on governing law 

to make clear that this is a Federal 

policy and is governed by Federal law.38

Proposed section I.A would retain the 

language indicating that Federal law 

governs all disputes regarding the policy 

and claims handling. Standard Flood 

Insurance Policies are sold by private 

WYO insurance companies and directly 

to the public by FEMA’s direct servicing 

agent, NFIP Direct. Because the NFIP is 

national in scope and accomplishes a 

number of programmatic missions in 

addition to making affordable flood 

insurance generally available to the 

public, the SFIP provides that its terms 

cannot be altered, varied, or waived 

except by the written authority of the 

Federal Insurance Administrator.39 The 

Administrator intends that the same 

benefits should be available to all those 

insured wherever the insured property 

is located, or whether the policy is 

purchased from a WYO insurance 

company or from NFIP Direct. There is 

a continued need for uniformity in the 

interpretation of and standards 

applicable to the policies and their 

administration. FEMA is reiterating the 

policy language pertaining to applicable 

law to emphasize that matters 

pertaining to the SFIP are governed 

exclusively by Federal law. Proposed 

section I.B on conflicts with Federal law 

would eliminate the need to list specific 

legal authorities that currently or could 

eventually conflict with the policy.40

Listing all potentially applicable laws 

here is unnecessary, unwieldly, and 

constrains any future flexibility. 

Consistent with the goals of updating 

the SFIP, this revised section would 

increase readability and 

comprehensibility. 

Like the Dwelling Form at section I.C, 

proposed section I.C of the new Form 

would detail the terms of the agreement 

to pay for direct physical loss by or from 

flood and would also state that a 

homeowner policyholder would only 

receive compensation up to the limits of 

liability listed on the declarations page. 

This proposed section would continue 

to clarify that the ‘‘full amount due’’ 

includes applicable premiums, 

surcharges, and fees to help homeowner 

policyholders understand that the full 

amount due can be reduced by these 

outstanding amounts. Additionally, the 

section would require that the 

information furnished by the 

homeowner policyholder be ‘‘complete’’ 

and accurate to negate incomplete proof 

of loss issues that can delay claims 

processing. 

Proposed section I.D would move the 

policy term (currently in the Dwelling 

Form at section VII.E.1) to the front of 

the agreement section, separated from 

the policy renewal content, to make 

clear to the homeowner policyholder at 

the top of the form, how long the 

agreement lasts. Proposed section I.E 

would incorporate the liberalization 

clause from the Dwelling Form (article 

IX), authorizing FEMA to make changes 

that broaden coverage without an 

additional premium and making those 

changes automatically apply to the 

policy as of the date the change is 

implemented with certain caveats. 

Throughout the policy, FEMA proposes 

to modify timeframes to ensure clarity 

on how days are calculated under the 

policy. For example, proposed section 

I.E. would specify a 60 ‘‘calendar’’ day

window prior to or during the policy

term rather than a 60-day window as the

Dwelling Form provides. The NFIP


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41Prior to 1982, the forms referred to ‘‘insurer’’ 

and ‘‘insured’’ throughout. See e.g., 44 CFR 61 App. 

A(1) (1981). 

42See ‘‘Federal Plain Language Guidelines,’’ Mar. 

2011, at 30, found at https:// 

www.plainlanguage.gov/media/ 

FederalPLGuidelines.pdf (last accessed Aug. 28, 

2023). 

43The proposed Homeowner Flood Form may 

insure some manufactured homes. Guidance 

regarding this coverage will be detailed in future 

updates to the underwriting rules used by the 

Program. 

44See Donovan Finn and John Travis Marshall, 

Superstorm Sandy at Five: Lessons on Law as 

Catalyst and Obstacle to Long-Term Recovery 

Following Catastrophic Disasters, 48 Envtl. L. Rep. 

10494 (2018), found at https:// 

commons.library.stonybrook.edu/cgi/ 

viewcontent.cgi?article=1004&context=somas_

articles (last accessed Aug. 28, 2023). ‘‘For instance, 

consider flood insurance regulations and the 

seemingly simple question: what is a basement? In 

many parts of the country that would cause little 

confusion; according to the NFIP a basement is 

‘[a]ny area of the building having its floor subgrade 

(below ground level) on all sides.’ However, this 

seemingly straightforward definition became a 

source of significant concern for many building 

owners after Sandy. In New York City, Hoboken, 

Jersey City, and other municipalities in the region, 

the NFIP definition of a basement also technically 

describes many thousands of housing and retail 

units at the lowest level of attached row houses that 

are known in the local vernacular as ‘ground floor’ 

or ‘garden units.’ Such units may be located 

anywhere from a few inches to three feet below 

grade and, if conforming to stipulations in local 

laws, are legal for use as individual apartments, 

shops, offices, or fully habitable levels of a singlefamily home. Many buildings containing this kind 

of unit actually have an additional cellar or 

basement level underneath this ‘ground’ level. 

However, while these units may sit above a second 

basement, and although they are discrete legal 

residences or commercial units according to local 

zoning and building codes, these units are classified 

by FEMA as basements and are therefore ineligible 

for NFIP reimbursement. One infamous case 

involved a Hoboken resident whose NFIP claim was 

denied because his apartment was determined to be 

0.13 inches below grade.’’ See also https:// 

www.wxyz.com/news/what-does-fema-cover-ifyoure-denied-help-after-floods-here-are-some-otheroptions (last accessed Aug. 28, 2023) and https:// 

www.wxyz.com/news/why-many-people-are-beingdenied-fema-flood-assistance (last accessed Aug. 

28, 2023). 

currently operates based on calendar 

days, and specifying this in the policy 

promotes consistency and transparency, 

reducing the likelihood that a 

homeowner policyholder might wrongly 

assume that ‘‘days’’ are ‘‘business’’ days. 

Finally, proposed section I.F would 

retain the right of review language 

currently in section I.D of the Dwelling 

Form and incorporate concepts from 

section VII.D of that form, including the 

right to request additional information 

and revising the amounts due from the 

homeowner policyholder based on any 

information reviewed. These revisions 

would ensure the homeowner 

policyholder is aware of the key terms 

of the agreement at the onset. 

3. Section II: Definitions

First, FEMA proposes to retain in

proposed section II.A the upfront 

clarification that the pronouns ‘‘you’’ 

and ‘‘your’’ refer to the insured(s), and 

that ‘‘we,’’ ‘‘us,’’ and ‘‘our’’ refer to the 

insurer. This clarification concerning 

the use of pronouns has been in the 

current SFIP forms since 1982,41 and 

retaining this clarification comports 

with plain language guidelines.42 FEMA 

proposes to move the language currently 

in section II.A of the Dwelling Form 

regarding the policyholder’s spouse and 

the language defining ‘‘insured(s)’’ to a 

new definition for ‘‘Insured(s).’’ FEMA 

also proposes not to retain the statement 

that some definitions are complex due 

to their presence in statute, regulation, 

or case law, because this sentence is 

unnecessary. 

In section II.B, FEMA proposes to 

change the definition of ‘‘flood.’’ FEMA 

proposes ‘‘Flood’’ to mean a general and 

temporary condition of partial or 

complete inundation of normally dry 

land from (1) overflow of inland or tidal 

waters; (2) unusual and rapid 

accumulation or runoff of surface waters 

from any source; (3) mudflow, defined 

as a river of liquid and flowing mud on 

the surface of normally dry land, as 

when earth is carried by a current of 

water; or (4) sudden erosion or 

undermining of land along the shore of 

a lake or similar body of water caused 

by waves or currents of water exceeding 

anticipated cyclical levels that causes 

collapse or subsidence of land resulting 

in a flood. FEMA proposes not to retain 

the language currently in the Dwelling 

Form at section II.B.1 limiting flood to 

two or more acres, or two or more 

properties, one of which is the 

policyholder’s, because it is 

unnecessarily restrictive: It deviates 

from the definition at 44 CFR 59.1, 

which does not include this limitation, 

and flood insurance adjusters can 

experience issues with finding a second 

property to qualify as a flood, or 

accessing other properties to investigate 

whether flooding occurred. FEMA 

proposes to define ‘‘mudflow’’ where it 

appears (i.e., within the definition of 

flood), rather than later in the 

definitions, to save homeowner 

policyholders from having to reference 

a separate part of the policy for it. This 

is a change to the location of the 

definition, and not the meaning, as 

FEMA would continue to use the 

definition of ‘‘mudflow’’ from the 

Dwelling Form. FEMA’s proposed subdefinition for ‘‘erosion’’ is substantively 

the same as the Dwelling Form’s except 

that it specifies that the erosion must be 

sudden, making it clear that gradual 

erosion would not result in a flood 

under the policy. These proposed 

changes to the definition of ‘‘Flood’’ 

would simplify coverage; FEMA does 

not intend to broaden or narrow 

coverage here, and would continue to 

limit coverage where a homeowner 

policyholder causes a flood or where the 

cause is wind-driven rain (through a 

roof or window, etc.) or some other 

water source (see proposed section 

IV.A.5).

FEMA proposes to relocate and revise

the definition of ‘‘Building’’ and 

incorporate a revised definition of 

‘‘Basement’’ and add a definition for 

‘‘Enclosure’’ within proximity of the 

definition of ‘‘Building’’ in section II.C. 

This relocation of terms will make it 

easier to read the definiition of the 

structural elements applicable to 

buildings in context of one another. 

‘‘Building’’ would be defined as ‘‘a 

structure, the construction of which has 

been completed, that has a fully secured 

roof and solid, vertical, load-bearing 

walls and is affixed to a permanent 

site.’’ FEMA proposes to replace the 

phrase ‘‘two or more outside rigid 

walls’’ with ‘‘solid, vertical, loadbearing walls’’ because this description 

is more accurate, and specifying a 

number is unnecessary as ‘‘walls’’ is 

already plural. This proposed definition 

would not include the sub-definitions 

for mobile homes or travel trailers 

because, as mentioned above, owners of 

these units would continue to be 

covered under the Dwelling Form.43 In 

addition, FEMA proposes to remove 

references to gas or liquid storage tanks, 

shipping containers, recreational 

vehicles, park trailers, or other similar 

vehicles—because as these are not 

buildings, specifically excluding them 

from the definition is unnecessary. 

Under the current Dwelling Form at 

section II.C.5, a ‘‘Basement’’ is defined 

as ‘‘[a]ny area of a building, including 

any sunken room or sunken portion of 

a room, having its floor below ground 

level on all sides.’’ Sometimes this 

definition does not align with 

homeowner policyholder expectations 

that may consider what is defined in the 

Dwelling Form as a basement to be the 

first floor of their home.44 Under the 

current Dwelling Form, coverage is 

limited in basements to specific items 

and homeowner policyholders cannot 

choose to increase coverage if they want 

it for areas of their home they may not 

otherwise consider to be a ‘‘Basement.’’ 

The proposed definition for ‘‘Basement’’ 

would state that a basement is ‘‘any area 

of a building having its floor level below 

ground level on all sides, regardless of 

design or use.’’ The proposed definition 

would further clarify that ‘‘An area of a 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8292 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

45The NFIP Claims Manual currently explains 

each of the 17 items listed in section III.A.8.a of the 

Dwelling Form, and the explanations of these items 

can also include several related items themselves. 

See National Flood Insurance Program Claims 

Manual (May 1, 2020), found at https:// 

building is below ground level when the 

land touching the exterior of the 

building is above its floor level. An area 

of a building is presumed to be below 

ground level when it is necessary to 

walk up steps or a slope to reach the 

land surrounding the building. A 

professional land survey or report may 

rebut this presumption.’’ 

FEMA proposes this definition to 

better explain its application to the area 

in the building, to the extent the 

definition is not aligned with a 

homeowner policyholder’s conception 

of a basement. This proposed definition 

would better allow homeowner 

policyholders and their agents to 

identify whether they have a basement 

at the point of sale. The Homeowner 

Flood Form offers homeowner 

policyholders limited coverage for a 

basement by default. FEMA seeks 

comment on this proposed definition of 

basements to better address the needs 

and understanding of homeowner 

policyholders. 

‘‘Enclosure’’ would mean an area that 

exists below the dwelling and used in 

accordance with local floodplain 

management ordinances or law for the 

parking of vehicles, building access, or 

storage, and is shown on the 

declarations page. FEMA proposes this 

new definition to more clearly 

differentiate enclosures from basements. 

FEMA is proposing to relocate the 

definitions currently found in section 

II.B of the Dwelling Form to section II.D 

and is proposing to include or modify 

several, but not all, definitions that are 

currently in the Dwelling Form, and to 

add several others. First, FEMA 

proposes to retain, with minimal to no 

changes, the definitions for ‘‘Act,’’ 

‘‘Described Location,’’ ‘‘National Flood 

Insurance Program,’’ and ‘‘Policy.’’ 

‘‘Act’’ would continue to be defined as 

the National Flood Insurance Act of 

1968 (42 U.S.C. 4001 et seq.). 

‘‘Described Location’’ would be defined 

as the location of the insured building, 

as shown on the declarations page. The 

‘‘National Flood Insurance Program’’ 

would continue to be defined as 

FEMA’s program of flood insurance 

coverage and floodplain management 

administered under the ‘‘Act.’’ Lastly, 

the definition for ‘‘Policy’’ would 

specify that it is the entire written 

contract between the homeowner 

policyholder and FEMA to include: (1) 

the Homeowner Flood Form; (2) the 

completed application for insurance; (3) 

the declarations page; (4) any 

endorsements issued; and (5) any 

addenda FEMA attaches to the Form 

upon application or renewal. 

FEMA proposes minor, but somewhat 

more meaningful changes to the 

definitions for ‘‘Actual Cash Value,’’ 

‘‘Declarations Page,’’ ‘‘Direct Physical 

Loss By or From Flood,’’ and 

‘‘Dwelling.’’ The definition for ‘‘Actual 

Cash Value’’ would continue to be the 

cost to replace an insured item of 

property at the time of loss, but FEMA 

proposes to replace the phrase ‘‘less the 

value of its physical depreciation’’ with 

‘‘less depreciation based on its age and 

condition.’’ FEMA proposes to specify 

that depreciation is based on the 

insured item’s age and condition to 

explain what ‘‘physical depreciation’’ 

means. The definition for ‘‘Declarations 

Page’’ would state that it is a document 

provided to homeowner policyholders 

summarizing the coverage limit(s), 

premium, insured(s), and other 

information about the policy, and that it 

is a part of the policy. FEMA proposes 

this definition because it is more 

modern than the Dwelling Form’s 

current definition of a ‘‘computergenerated summary. . . .’’ FEMA 

proposes ‘‘Direct Physical Loss By or 

From Flood’’ to mean actual physical 

loss or damage to the insured property 

directly caused by a flood. FEMA chose 

not to retain the sentence currently in 

the Dwelling Form that ‘‘there must be 

evidence of physical changes to the 

property.’’ The addition of the words 

‘‘actual physical’’ to describe loss or 

damage to the insured property obviates 

the need for that sentence and makes it 

clearer that FEMA may only pay for 

physical loss or damage directly caused 

by a flood. Lastly, FEMA proposes to 

define ‘‘Dwelling’’ as a building in use 

as a one-to-four family residence, and 

specify that it is not a mobile home, 

travel trailer, or condominium unit. 

FEMA proposes to specify that mobile 

homes, travel trailers, or condominium 

units are not ‘‘dwellings’’ under this 

Form because FEMA intends that this 

Form only cover homeowners of one-tofour family site-built residential 

buildings. At this time, the Dwelling 

Form would continue to serve as the 

Standard Flood Insurance Policy Form 

covering mobile homes, travel trailers, 

and condominium units, as well as 

landlords and tenants. 

FEMA proposes to add definitions for 

‘‘Administrator,’’ ‘‘Claim,’’ ‘‘Flood 

Damage Resistant Materials,’’ 

‘‘Insured(s),’’ ‘‘Machinery and 

Equipment,’’ ‘‘Proof of Loss,’’ and 

‘‘Replacement Cost Value.’’ FEMA 

proposes to specify that 

‘‘Administrator’’ refers to the FEMA 

Administrator or designee for clarity. 

FEMA proposes to define ‘‘Claim’’ as 

the homeowner policyholder’s assertion 

that (s)he is entitled to payment for a 

covered loss under the terms and 

conditions of the policy and specify that 

there is only one claim per flood event. 

This definition would complement the 

proposed definition for ‘‘Proof of Loss.’’ 

FEMA proposes to define ‘‘Flood 

Damage Resistant Materials’’ as building 

materials identified by the 

Administrator as resistant to flood 

damage to encourage homeowner 

policyholders to rebuild smarter. Use of 

materials that are resistant to flood 

damage reduces the likelihood of 

replacement in a future flood, and the 

ability to clean and repair items instead 

of replacing them would likely result in 

net savings to the NFIP and its 

policyholders. The definition of 

‘‘Insured(s)’’ would include the 

homeowner policyholder and (1) any 

additional persons identified on the 

declarations page; (2) any mortgagee or 

loss payee named in the application for 

insurance, as well as any other 

mortgagee or loss payee determined to 

exist at the time of loss; and (3) the 

homeowner policyholder’s spouse, if a 

resident of the same household. This 

definition is substantively the same as 

the definition of ‘‘you’’ from the 

Dwelling Form in II.A, but includes the 

homeowner policyholder’s spouse here, 

to simplify and consolidate in one place 

the concept of who has an interest 

under the policy. FEMA proposes to 

specify that ‘‘Machinery and 

Equipment,’’ when contained within a 

building at the described location, 

would include functional electrical, 

plumbing, heating, cooling, and safety 

elements necessary for the operation of 

a building, and elevators. Outside of a 

building, ‘‘Machinery and Equipment’’ 

would include a heating and air 

conditioning system’s condenser unit 

and heat pump, solar panels, and 

permanently installed whole house 

standby generators when these units are 

connected to and are servicing a 

building at the described location. 

FEMA proposes this definition to avoid 

long lists of items in the coverage 

section. The coverage limitations in the 

Dwelling Form (at III.A.8) appear in a 

list of 17 items. This new definition 

would condense these 17 entries into a 

single definition. While the new 

definition would still call out some 

items specifically, it is FEMA’s position 

that this more condensed, succinct 

approach would be less cumbersome to 

homeowner policyholders and give the 

Agency increased flexibility in its 

implementation of the NFIP.45 FEMA 


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www.fema.gov/sites/default/files/2020-07/fema_

nfip_claims-manual_2020.pdf (last accessed Aug. 

28, 2023) (‘‘Claims Manual’’). For instance, the 

Claims Manual explains that ‘‘nonflammable 

insulation in a basement’’ [III.A.8.a(10)] includes 

the nonflammable insulation in walls and ceilings 

between joists in the lowest elevated floor and 

unfinished protective weather barriers affixed to 

floor joists and unattached protective barriers 

located in a crawlspace. Id. at 41. In addition, ‘‘well 

water tanks and pumps’’ [III.A.8.a(15)] include 

pressure switches, pressure valves, and gauges. Id. 

at 43. The removal of these lists would provide 

FEMA flexibility to the extent that the Agency can 

continue to clarify in the Claims Manual terms 

defined in the policy. 

46 During the aftermath of Superstorm Sandy, 

policyholders and their representatives attempted 

to submit ‘‘placeholder’’ proofs of loss where they 

filled out the coversheet for FEMA’s Proof of Loss 

Form (FEMA Form 086–0–9) with ‘‘TBD’’ on every 

line. This was not appropriate or within the terms 

of the SFIP, creating problems for these 

policyholders and for FEMA. (In this case, the 

insurance carriers had to deny these claims because 

these policyholders failed to meet the requirements 

of the SFIP. Many of these policyholders pursued 

litigation, creating the need for FEMA’s NFIP 

Transformation Task Force established in 2015). 

See NFIP Bulletin w–14036, found at https:// 

nfipservices.floodsmart.gov/sites/default/files/w14036.pdf (last accessed Aug. 28, 2023) and NFIP 

Bulletin w–12092a, found at https:// 

nfipservices.floodsmart.gov/sites/default/files/w12092a.pdf (last accessed Aug. 28, 2023). 

47FEMA includes ‘‘property not covered’’ in 

proposed section III, ‘‘What We Cover,’’ rather than 

proposed section IV, ‘‘Exclusions,’’ to conform with 

industry standards and address in the same section 

those items for which the policyholder has the 

burden of proof. The burden of proving that 

property is covered falls on the insured, but the 

burden of proving that property is excluded falls on 

the insurer. 

48Until 1983, FEMA offered coverage in a 

basement. See e.g., 44 CFR 61 App. A(1) Art. IV 

(1982). At that time, FEMA determined that it was 

paying out $5 for every $1 collected on buildings 

with damaged basements. See GAO Report on Flood 

Insurance: Federal Emergency Management 

Agency’s Basement Coverage Limitations, RCED– 

86–10FS (Jan. 31, 1986) found at http:// 

www.gao.gov/assets/rced-86-10fs.pdf (last accessed 

Aug. 28, 2023). In the 1990s, FEMA explored but 

abandoned an effort to offer some level of basement 

coverage and throughout the entirety of the 

Dwelling Form (i.e., the last 20 years), there has 

been no option for basement coverage. 

49See Donovan Finn and John Travis Marshall, 

Superstorm Sandy at Five: Lessons on Law as 

Catalyst and Obstacle to Long-Term Recovery 

Following Catastrophic Disasters, 48 Envtl. L. Rep. 

10494 (2018), found at https:// 

commons.library.stonybrook.edu/cgi/ 

viewcontent.cgi?article=1004&context=somas_

articles (last accessed Aug. 28, 2023). See also 

https://www.wxyz.com/news/what-does-femacover-if-youre-denied-help-after-floods-here-aresome-other-options (last accessed Aug. 28, 2023) 

and https://www.wxyz.com/news/why-manypeople-are-being-denied-fema-flood-assistance (last 

accessed Aug. 28, 2023). 

also anticipates applying this definition 

during loss settlements to encourage 

homeowners to move these relatively 

costly items from their basements/lower 

enclosures to a less risky area of the 

property, increasing savings to the NFIP 

and its policyholders. FEMA would 

define ‘‘Proof of Loss’’ as a signed and 

sworn statement by the homeowner 

policyholder containing documentary 

evidence in support of one’s loss and 

the amount one is claiming. FEMA 

proposes to define this term to mitigate 

confusion over what a proof of loss is,46

further differentiate proof of loss from a 

claim, and to facilitate implementation 

of proposed V.E, ‘‘Disaster Conditions.’’ 

Lastly, ‘‘Replacement Cost Value’’ 

would mean the necessary cost, without 

deduction of depreciation, to repair or 

replace an item of property at the time 

of loss with an item of like kind and 

quality. FEMA proposes to add this 

definition because the new Homeowner 

Flood Form would offer homeowner 

policyholders replacement cost value as 

the default, rather than actual cash 

value as the Dwelling Form does, so 

defining the term would assist FEMA in 

administering the Form. 

Finally, FEMA proposes not to carry 

over into the new Homeowner Flood 

Form three definitions currently in the 

Dwelling Form: ‘‘Base Flood,’’ 

‘‘Deductible,’’ and ‘‘Principal 

Residence.’’ Because ‘‘base flood’’ 

would not have any impact on the terms 

and conditions of insurability in the 

new Form, defining it would be 

unnecessary. Because ‘‘deductible’’ is a 

commonly understood term in the 

insurance industry, it is FEMA’s 

position that including a definition for 

it would be unnecessary. In addition, 

because the Homeowner Flood Form 

would not vary coverage between 

principal and secondary, etc., 

residences, defining the term ‘‘principal 

residence’’ would likewise be 

unnecessary. 

4. Section III: What We Cover

FEMA proposes to incorporate

language currently in the Dwelling Form 

with section III to improve the customer 

experience by presenting the material in 

a more organized manner. The Dwelling 

Form addresses property covered 

(article III), property not covered (article 

IV), and exclusions (article V) in 

different sections. In proposed section 

III, FEMA addresses in a single section 

what the policy covers, where coverage 

is limited, any conditional coverage, 

and then property that is not covered.47

The proposed changes to Coverages B 

and C also generally align with coverage 

specifically for homeowners, the focus 

of this proposed form. These changes 

also remove lists and ‘‘hidden’’ coverage 

and simplify policy language to enhance 

understanding and functionality of the 

policy. Relying on the definitional 

concepts instead of specific lists gives 

FEMA the opportunity to clarify 

coverage and improve readability of the 

form while also providing increased 

flexibility to implement the policy. 

FEMA proposes to rephrase coverage 

that is currently phrased in the negative 

in the Dwelling Form to ensure a better 

understanding of coverage. The 

proposed revisions would also remove 

all references to flood zones in special 

flood hazard areas, and instead provide 

universal default coverage that applies 

to all buildings regardless of flood zone. 

These revisions reduce the complexity 

of the policy, as homeowner 

policyholders may not immediately 

recall what zone they are in. These 

revisions also help alleviate concerns 

raised in understanding flood risks 

through mapping alone and allowing 

the premium to inform the homeowner 

policyholder about flood risk. 

FEMA proposes to remove specific 

dollar amounts from the policy, giving 

the Agency the ability to increase these 

limits based on statutory changes. 

Eliminating these specific dollar 

amounts also allows FEMA to offer 

different coverage limit choices to 

different homeowner policyholders by 

placing special limit amounts on the 

declarations page of the policy. 

FEMA proposes to allow more 

consumer choice by allowing 

homeowner policyholders to choose 

whether they want basement coverage 

under Coverage A through the Enhanced 

Basement Endorsement Option detailed 

below. FEMA has long presumed that 

homeowner policyholders would not 

want to pay for full coverage in a 

basement because it would be too 

expensive,48 but in doing so 

inadvertently made it more likely that 

homeowner policyholders would not 

realize the limitations on basement 

coverage until they experienced a loss.49

FEMA has offered this restrictive 

coverage in basements for four decades 

and the proposed new Homeowner 

Flood Form would not change that 

coverage absent a homeowner 

policyholder purchasing an 

endorsement. FEMA believes the 

limited basement coverage creates 

challenges in the flood insurance sales 

context for homeowner policyholders 

who want more coverage than the 

current Dwelling Form and new Form 

would allow and in the recovery context 

for homeowner policyholders who need 

it to more fully recover from a flood 

event. Given these challenges, FEMA 

considered three approaches to 

basement coverage: (1) the current 

Dwelling Form approach of retaining 

the current restricted coverage, with a 

focus on training agents selling flood 

insurance to further discuss what 

constitutes a basement under the 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8294 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

50See https://www.redfin.com/news/redliningflood-risk/(last accessed Aug. 28, 2023) and https:// 

www.njspotlightnews.org/2021/04/redliningatlantic-city-nj-overlooked-underfunded-minorityneighborhoods-back-bay-racist-maps-superstormsandy/(last accessed Aug. 28, 2023). Note that in 

these areas, it is common to have a basement 

because of the necessity of building below the frost 

line, so that pipes do not burst. 

51 Digital storage was not a substantial concern 

when the SFIP was drafted in 1999. However, 

modern technology (allowing for cryptocurrency, 

etc.), renders it sufficiently important to include 

here. 

52The Dwelling Form provides different types of 

coverage based on FIRM status and zone: basements 

receive limited coverage regardless of zone; certain 

post-FIRM elevated buildings receive limited 

coverage below the lowest elevated floor; and the 

remainder do not experience coverage limitations. 

The coverage limitations for post-FIRM elevated 

buildings are a passive enforcement mechanism for 

floodplain management rules concerning use of 

these spaces (i.e., 44 CFR 60.3(c)(5), allowing 

parking of vehicles, building access, and storage). 

In practice, this often means policyholders do not 

learn about the coverage restrictions until they 

experience a loss. In the proposed Homeowner 

Flood Form, the policy would not provide different 

types of coverage based on FIRM status and zone. 

Basements continue to receive limited coverage 

regardless of zone. A building with an enclosure— 

meaning it is used in accordance with the 

floodplain management regulations—will continue 

to receive limited coverage. However, if a 

policyholder does not indicate that they have a 

basement or an enclosure at the time of application, 

they will receive full coverage, but will also pay 

additional premium based on the height of the first 

floor. The higher premium should also act as a more 

timely signal to the policyholder, who may then 

choose to not use the space for residential purposes. 

In other words, the insurance policy will no longer 

passively enforce floodplain management rules at 

the time of loss, but will complement those rules 

through risk signaling, and floodplain management 

officials may still take appropriate action on 

unacceptable uses of enclosures. 

Homeowner Flood Form and the 

restrictions on coverage at the point of 

sale to better inform homeowner 

policyholders and those seeking to 

purchase new homeowner flood 

insurance of the coverage restrictions; 

(2) FEMA’s preferred approach of

offering an endorsement to the proposed

Homeowner Flood Form that would

allow homeowner policyholders to

purchase, for an additional premium, an

enhanced basement endorsement to

remove the restrictions in basement

coverage (‘‘Enhanced Basement

Coverage Endorsement’’); and (3) a third

approach of offering a basement

endorsement to remove coverage

limitations, for an additional premium,

for (a) homeowners with split-level

homes or sunken room(s) (approach 3.1)

and (b) homeowner policyholders who

need to occupy part of their basement

(approach 3.2). Occupancy means the

basement is being used by the

homeowner as bedrooms, bathrooms,

and kitchens/kitchettes. Each of the

approaches is further detailed in

Appendix A(104): Basement Coverage

Endorsement Option below.

FEMA does not expect the availability 

of optional basement coverage 

(approaches 2, 3.1, or 3.2 above) to 

encourage riskier behavior by 

homeowner policyholders. In general, 

policyholders do not wish to experience 

flood losses. The act of choosing an 

option will require the policyholder to 

envision their property being damaged 

by a flood. Accordingly, rather than 

encouraging risky behavior, FEMA 

believes the option would help 

homeowner policyholders to transfer 

their risk to better recover after a flood 

while also encouraging homeowner 

policyholders with basements to 

consider ways to mitigate their risks in 

those areas. The current inventory of 

housing in the United States contains 

homes built with basements. Recent 

studies on marginalized communities 

show that formerly redlined areas face 

higher flood risks, and several of the 

cities where this is most prevalent (New 

York, Boston, Chicago, Camden, Detroit, 

Newark) have older housing stock that 

are often built with basements.50 By 

offering options to increase basement 

coverage, FEMA is proposing to increase 

the ability of these homeowners to 

better protect their investment from 

flood risks. FEMA understands that the 

additional coverage will result in 

additional premiums for policyholders, 

but the pricing associated with these 

additional premiums will reflect the 

reality of the structure above all and 

will align with the risk. By offering 

choice, FEMA can better educate 

homeowner policyholders on their 

coverage options, discuss the flood risks 

associated with their property (i.e., 

through the price signal provided by 

comparing the premium options), and 

how they can better protect their 

property and mitigate those risks. FEMA 

seeks specific comments on the 

expansion of basement coverage and the 

approaches considered in this proposed 

rule as detailed in the basement 

coverage endorsement options below. 

Proposed section III would not 

include ICC as Coverage D for all 

homeowner policyholders as the 

Dwelling Form does (in section III.D), 

but instead would make it an 

endorsement required to be purchased 

only by those homeowner policyholders 

who may be eligible for it. Proposed 

section III would also remove buildings 

under construction from default 

coverage (as is the case under the 

Dwelling Form at section III.A.5), as a 

Builder’s Risk Endorsement naming the 

builder as an additional insured party 

(with specific business rules associated 

with renewals) would provide 

homeowner policyholders the option to 

address such coverage. Finally, FEMA 

proposes to clarify that the policy would 

not cover certain losses to items stored 

in a digital format or other intangible 

format due to the complexity of 

demonstrating proof of loss.51

Throughout the section, FEMA proposes 

minor edits to the Form for clarity. 

FEMA anticipates the proposed changes 

to section III would generally make the 

policy easier for agents to sell while also 

being more understandable and 

desirable for homeowner policyholders 

as the changes more closely align with 

other insurance policies with which 

homeowners are familiar and the 

changes generally provide homeowners 

with more flexibility by offering more 

coverage options. 

a. Coverage A—Dwelling

FEMA proposes to label Coverage A

as ‘‘Dwelling’’ (rather than retain the 

Dwelling Form’s title of ‘‘Building 

Property’’) to differentiate coverage for 

the primary building—the dwelling—as 

opposed to other buildings that may be 

covered. In proposed sections III.A.1.a, 

III.A.2.b, III.A.2.c, III.A.3.c(1), and

III.A.4.f, FEMA proposes to update the

language to clarify the coverage detailed

in this section of the policy relates

specifically to the dwelling and to

distinguish between the dwelling and

other buildings that may be covered

under Coverage B. Proposed section

III.A.2, ‘‘Limited Coverage for

Basements and Enclosures,’’ would

remove the differentiation of coverage

based on flood zone type or pre- or postFIRM status found in the Dwelling Form

at section III.A.8. This proposed section

would clarify the limited coverage

provided for basements regardless of

where the property is located. As

explained above, FEMA is proposing to

remove differences in coverage based on

flood zone type or pre- or post-FIRM

status and provide universal default

coverage that applies to all structures

regardless of flood zone.52 Maps

generally create challenges for the

application of policy coverage. In a

flood event, the flood does not simply

stop at the map boundary and a

homeowner policyholder with property

that is mapped in a higher risk zone

could be paying more for less coverage

than their neighbors across the street,

when both are equally impacted by the

flood event. By eliminating these

distinctions in the policy, FEMA

proposes to simplify the explanation of

policy coverage for homeowner

policyholders so that they have a full

understanding of the risks associated

with their property and can protect


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53See W–13009, found at http:// 

nfipservices.floodsmart.gov/sites/default/files/w13009.pdf, (last accessed Aug. 28, 2023); W–16061, 

found at http://nfipservices.floodsmart.gov/sites/ 

default/files/w-16061.pdf (last accessed Aug. 28, 

2023); W–20017, found at http:// 

nfipservices.floodsmart.gov/sites/default/files/w20017.pdf (last accessed Aug. 28, 2023); W–11062 

found at http://nfipservices.floodsmart.gov/sites/ 

default/files/w-11062.pdf (last accessed Aug. 28, 

2023); and W–04020, found at http:// 

nfipservices.floodsmart.gov/sites/default/files/w04020.pdf (last accessed Aug. 28, 2023). 54 16 U.S.C. 3501 et seq. 

55These proposed changes would restore 

coverage for other buildings to the NFIP’s 1970’s 

approach. See 24 CFR 1911.4(f)(5) (1970): ‘‘The 

insured may apply up to, but not in excess of, 10 

percent of the face amount of the policy to 

appurtenant structures and outbuildings (such as 

carports, garages, and guest houses) if they do not 

constitute a separate residence. If they do constitute 

a separate residence, or a residential structure still 

under construction, they must be insured under a 

separate policy.’’ This approach insures what the 

homeowner policyholder has and that the modern 

consumer expects, an experience customized and 

tailored to themselves. 

themselves against flood peril by 

choosing their coverage accordingly. 

The proposed changes in section 

III.A.2.a eliminate the list of covered 

items from current section III.A.8.a as 

these items are defined in proposed 

section II. Elimination of the list is 

intended to make the policy more 

readable. Additionally, FEMA proposes 

changes in section III.A.2.d to simplify 

the understanding of coverage for 

unfinished drywall in a basement or 

enclosure. The Dwelling Form details 

drywall coverage for walls and ceilings 

in a basement and the cost to nail it, 

unfinished and unfloated and not taped, 

to the framing (section III.A.8.a(3)). 

FEMA proposes to simplify this by 

covering any unfinished drywall in a 

basement and removing the restriction 

that the drywall must be unfloated and 

not taped. FEMA also proposes to 

continue coverage for nonflammable 

insulation in basements and enclosures. 

(See Dwelling Form section 

III.A.8.a(10)). 

FEMA proposes to add section III.A.3, 

‘‘Dwelling Limitations,’’ to summarize 

the limitations throughout the policy 

and list them in one location. Proposed 

section III.A.3.a, ‘‘Limitations on mold 

and mildew,’’ would revise Dwelling 

Form section V.D.4 to restate coverage 

in positive rather than negative terms, 

simplifying the explanation that the 

policy covers damage to the dwelling 

due to mold and mildew caused by a 

flood only when it is outside of the 

homeowner policyholder’s control, i.e., 

when it is not in the homeowner 

policyholder’s control to inspect and 

maintain the property after a flood 

recedes. FEMA is proposing this change 

to help resolve current challenges faced 

with claims in this area, as the Agency 

has experienced that implementation of 

this coverage is more challenging than 

it should be. FEMA historically issued 

several bulletins to clarify this coverage 

and its limitations 53 and believes 

making these proposed changes would 

reduce complexity and simplify the 

process for homeowner policyholders, 

insurance adjusters, and companies. 

FEMA proposes similar updates in 

proposed sections III.A.3.b, ‘‘Limitations 

on power, heating, or cooling failure,’’ 

III.A.3.c, ‘‘Limitations on flood in the 

area,’’ and III.A.3.d, ‘‘Limitations on 

pollutants,’’ for simplicity and 

readability, and to positively affirm 

coverage of specific items rather than 

stating coverage in the negative as the 

Dwelling Form does in sections V.D.7, 

V.D.5–6, and V.F.II.B.22 respectively. 

The policy would continue to cover 

damage to any covered building 

electrical system, such as the building’s 

main service or home security system, 

or to the HVAC system, when a flood 

physically damages equipment installed 

at the described location (proposed 

section III.A.3.b) as well as pollutant 

testing and monitoring after a flood 

when required by law or ordinance 

(proposed section III.A.3.d). FEMA also 

proposes to continue coverage for losses 

when there is a flood in the area and the 

flood causes a back-up of water or 

waterborne material through sewers or 

drains, discharge or overflow of a sump 

pump or related equipment, or seepage/ 

leakage on or through the dwelling 

(proposed section III.A.3.c(1)) as well as 

losses by or from water pressure or 

weight (hydrostatic pressure) (proposed 

section III.A.3.c(2)). FEMA would also 

continue to cover losses to the dwelling 

by or from the pressure or weight of 

water on or below the land’s surface in 

proposed section III.A.3.c(2). 

Proposed section III.A.4 addresses the 

items not covered under the policy, 

moving several provisions from article 

IV of the Dwelling Form (Property Not 

Covered) to keep all ‘‘coverage’’ 

elements together. FEMA proposes not 

to retain references to the Coastal 

Barrier Resources Act and the Coastal 

Barrier Improvement Act 54 in this 

section because the language in 

proposed section I concerning conflicts 

with Federal law renders it unnecessary. 

FEMA is incorporating into proposed 

section III.A.4.a information from the 

Dwelling Form at sections V.A.2, V.A.3, 

and V.A.5 to confirm that the policy 

does not cover loss of use at the 

described location, including any living 

expenses incurred while the dwelling is 

inaccessible or is unhabitable for any 

reason. FEMA proposes incorporating 

this into one section for simplicity and 

readability. In addition, FEMA proposes 

including it under this section rather 

than Section IV, ‘‘Exclusions,’’ because 

the new Form generally restricts 

‘‘exclusions’’ to specific causes, and this 

language does not speak to causation. In 

sections III.A.4.b and III.A.4.c, FEMA 

proposes separating land and land 

values from lawns, trees, shrubs, plants, 

growing crops, and landscaping to 

clarify that land and land values are 

distinct from items that are on the land. 

Proposed section III.A.4.d restates the 

current requirement in section IV.3 of 

the Dwelling Form that no open 

structures including but not limited to 

those in, on, or over water are covered, 

regardless of boat usage. In the proposed 

form, FEMA retains in section III.A.4.e 

the substance of the language currently 

in the Dwelling Form at section IV.2 

except to remove the reference to 

‘‘personal property’’ because Coverage A 

of this Form treats dwellings, not 

personal property. In section III.A.4.f, 

FEMA proposes to clarify that in 

addition to underground structures and 

equipment like wells and septic tanks/ 

systems, which are currently explicitly 

listed as not covered in section IV.8 of 

the Dwelling Form, sewer, plumbing 

supply, waste lines, gas supply lines, 

electrical and HVAC system 

components (not addressed in the 

proposed definition of ‘‘machinery and 

equipment’’) that are not located in the 

dwelling would also continue to not be 

covered. In section III.A.4.g, FEMA 

proposes not to retain the phrase ‘‘or the 

building in which the insured unit is 

located’’ (found in the Dwelling Form at 

IV.9) for clarity of coverage as the new 

Form would not be available to 

condominium unit owners. FEMA is 

proposing additional minor changes in 

section III.A.4.h for clarity regarding 

containers and related equipment. 

Proposed sections III.A.4.i detailing 

fences, retaining walls, seawalls, 

bulkheads, wharves, piers, bridges, and 

docks and III.A.4.j detailing hot tubs 

and spas as well as swimming pools 

would be unchanged from Dwelling 

Form sections IV.12 and IV.14, 

respectively. 

b. Coverage B—Other Buildings 

Coverage B would insure buildings 

other than the residence located at the 

described location.55 This coverage 

would contain fewer limitations than in 

the Dwelling Form, but with the same 

10 percent limit (see Dwelling Form 

section III.A.3). FEMA is proposing to 

require the homeowner policyholder to 

specify the specific sublimits of this 

coverage applicable to each of the 


ddrumheller on DSK120RN23PROD with PROPOSALS2
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56 42 U.S.C. 4011(a). 

buildings on the declarations page to 

make sure that both the homeowner 

policyholder and FEMA share an 

understanding of what is on the 

property, to spur the conversation 

between the homeowner policyholder 

and the insurance agent that higher 

coverage limits are available by 

separately insuring these properties, and 

to capture data points for repetitive loss 

purposes. The changes proposed to 

Coverage B would restore non-dwelling 

buildings to a functional level but 

would not fully restore these buildings. 

A homeowner policyholder seeking 

more robust coverage should purchase a 

separate policy for these other 

buildings. Coverage B is not an 

additional coverage, as it would reduce 

the liability limit for the main building. 

Proposed section III.B.1 would clarify 

that FEMA would apply the terms of 

Coverage A to other buildings at the 

described location except as modified in 

proposed section III.B.2. As noted 

above, proposed section III.B.1.a would 

require the homeowner policyholder to 

schedule the buildings on the 

declarations page to confirm their 

location on the property. In doing so, 

FEMA anticipates homeowner 

policyholders would have discussions 

with agents regarding higher coverage 

limits if these buildings are separately 

insured. By capturing the information 

here, FEMA can also gather data on 

buildings that are repeatedly damaged 

during flooding. Proposed section 

III.B.1.b would replace section III.A.3 of 

the Dwelling Form and allow other 

buildings—not simply a detached 

garage—to receive coverage with fewer 

limitations than in the Dwelling Form, 

but with the same 10 percent limit. 

FEMA proposes to add section III.B.2 

to highlight the limitations of coverage 

for other buildings. FEMA is proposing 

to use Coverage A as a ‘‘base’’ layer of 

coverage specifically for the dwelling. 

Certain items previously covered under 

Coverage A related to other buildings 

are instead covered by this proposed 

section. Proposed section III.B.2.a 

would remind homeowner 

policyholders that FEMA would not 

cover anything already excluded under 

Coverage A. Proposed section III.B.2.b 

would state that FEMA would not cover 

basements or enclosures for any 

building that is not the dwelling. FEMA 

is proposing this addition as a public 

policy measure to ensure that the 

riskiest parts of a building that is not the 

property owner’s residence are not 

afforded coverage. For example, 

homeowner policyholders may have a 

building near the beach on a coastal 

property containing a bathroom and 

storage space, with an outdoor shower 

in an enclosure for convenience. The 

proposed policy would allow for 

coverage of the building at the 

homeowner policyholder’s request, but 

would not cover the enclosure given the 

enhanced risks associated with the 

enclosure. If a homeowner policyholder 

wants to invest in these enclosures, a 

separate NFIP flood insurance policy 

could be purchased to cover the other 

building with the enclosure (i.e., under 

Coverage A), with restricted coverage 

applied to the enclosure. Proposed 

section III.B.2.c would provide that 

FEMA would not cover other buildings 

held or used for commercial purposes. 

The purpose of Coverage B is to extend 

coverage to other buildings that may 

have a residential use, such as a living 

space built above a detached garage; 

buildings held or used for commercial 

purposes are more appropriately suited 

for a commercial policy. Proposed 

section III.B.2.d would provide that 

coverage can only extend to property 

the homeowner policyholder owns. This 

addition is consistent with the broader 

principle of ‘‘insurable interest,’’ which 

requires that the insured have a right or 

relationship to the item insured such 

that the insured can suffer a financial 

loss from damage, loss, or destruction to 

it. By affirming this requirement, FEMA 

seeks to reduce the risk of moral hazard, 

whereby a homeowner policyholder 

might have a financial incentive to 

allow or even cause a loss. 

c. Coverage C—Personal Property 

FEMA proposes to move personal 

property coverage to proposed section 

III.C and to further align it with 

common industry practices. In contrast 

to section III.B.1 of the Dwelling Form 

that is conditioned on whether or not 

the homeowner policyholder has 

purchased contents coverage, FEMA 

proposes to change coverage in section 

III.C.1 to insure all property inside a 

building at the described location with 

coverage up to the limits listed on the 

declarations page. (Separate coverage for 

personal property not at the described 

location is detailed in proposed section 

III.C.2). Section III.C.1.a would remain 

unchanged from section III.B.1.a of the 

Dwelling Form. Proposed section 

III.C.1.b would provide that FEMA 

would insure property owned by nonpaying guests or laborers. By specifying 

that the guests be non-paying, FEMA 

seeks to specifically exclude the 

possibility of short-term rentals, such as 

vacation rentals, to clarify the rental 

agreement would govern any such 

arrangement and ensure there is no 

contractual overlay, and also to avoid 

the scenario where a renter seeks 

payment pursuant to this policy. By 

changing ‘‘servants’’ to ‘‘laborers,’’ 

FEMA seeks to modernize the language 

and include more individuals that may 

have personal property in the described 

location. 

In section III.C.2, FEMA is proposing 

to provide some coverage away from the 

described location to ensure that the 

homeowner policyholder gets an 

additional benefit of flood coverage to 

protect their personal property. 

Homeowner policyholders may 

experience flooding while on travel, 

may experience a flood loss if they have 

personal property at a family member’s 

house, or if they keep items in a storage 

unit. Under the Dwelling Form at 

section III.C.2.b, a homeowner 

policyholder may already claim this 

type of coverage at another location if 

they moved the property because of a 

reasonable threat of flood. Expanding 

coverage would eliminate the 

cumbersome adjudication analysis of 

whether the homeowner policyholder 

moved the property to safety in advance 

of a flood. With a storage unit, a 

homeowner policyholder could rent a 

storage locker and, following a flood 

event, claim that he or she relocated 

certain property from the dwelling to 

the storage unit for safety. Under the 

Dwelling Form, if a flood occurs at the 

storage unit, absent a dated photo 

showing the property located in the 

storage unit, in the same position, the 

insurer would be unable to determine 

when the property was placed in the 

storage unit. The proposed expansion 

avoids this complex adjudication by 

providing the homeowner policyholder 

with coverage in that situation. 

Moreover, expanding coverage to 

contents that are not at the described 

location aligns with industry standards 

for homeowners personal property 

coverage. 

FEMA notes that although 

homeowners coverage can extend to 

personal property anywhere in the 

world, the NFIA only authorizes flood 

insurance in the United States.56 Thus, 

FEMA proposes limited coverage for 

personal property anywhere in the 

United States. Under proposed section 

III.C.2.a, FEMA would pay no more than 

10 percent of the Coverage C limits for 

personal property located anywhere in 

the United States if the property is in a 

building at a location other than the 

described location, or in a storage 

facility building. FEMA proposes these 

changes to reaffirm the requirement that 

the personal property be located inside 

a ‘‘building’’ (defined as a fully enclosed 

structure) for coverage and to align with 

other common insurance products. 


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57Property must be placed above ground level. 

See Dwelling Form section III.C.2.b(3). 

Under proposed section III.C.2.b, the 10 

percent coverage limitation would not 

apply to personal property moved to a 

building reasonably safe from flood, and 

not in a basement or enclosure, due to 

flooding near the described location. 

This provision would not retain the 

language in section III.C.2.b(3) of the 

Dwelling Form requiring moving 

personal property outside of a special 

flood hazard area, but would instead 

just require a reasonable assurance of 

safety to expand coverage beyond the 10 

percent limitation. It is difficult for 

homeowner policyholders to ascertain 

where special flood hazard areas are 

located, and an attic in a special flood 

hazard area may reasonably be more 

secure than a ground floor 57 just outside 

of that area. In section III.C.2.b(1), 

FEMA proposes language to clarify that 

it would cover personal property where 

a homeowner policyholder moves it 

from his or her home to another location 

for protection, but the home ultimately 

does not flood. Section III.C.2.b(2) 

would affirm coverage when an 

evacuation order is issued. Finally, in 

section III.C.2.b(3), FEMA proposes to 

extend coverage beyond the 10 percent 

limitation where the personal property 

was moved due to repairs, renovations, 

reconstruction, or other conditions 

rendering the described location 

uninhabitable or unsuitable for property 

storage. 

In proposed section III.C.3, ‘‘Personal 

Property Limitations,’’ subsection 3.a 

would provide that in a basement or 

enclosure, the policy would only cover 

appliances installed in their functioning 

locations and, if necessary for operation, 

connected to a power source. FEMA 

proposes not to retain the references to 

flood zones and pre- or post-FIRM status 

found in the current Dwelling Form (in 

section III.B.5) to conform with other 

proposed changes to the policy. FEMA 

anticipates that homeowner 

policyholders would better understand 

the scope of the coverage available 

without the additional complicating 

language around the property’s flood 

zone location and the pre- or post-FIRM 

status of the property. Additionally, 

rather than listing out specific 

appliances, FEMA proposes to 

categorize the items listed in section 

III.B.4 of the Dwelling Form as 

‘‘appliances’’ for simplicity. Proposed 

section III.C.3.b would further clarify 

the Dwelling Form’s requirement at 

section III.B.3 that personal property in 

any portion of a building that is not 

fully enclosed must be secured to 

prevent flotation out of the building. 

Like section III.B.8 of the Dwelling 

Form, proposed section III.C.4 would 

provide special limits for specific kinds 

of personal property. Rather than 

retaining the dollar limit in this section, 

FEMA proposes instead to move it to 

the declarations page for readability and 

ease of understanding. While proposed 

sections III.C.4.a, III.C.4.b, III.C.4.c, 

III.C.4.d and III.C.4.f mirror existing 

provisions in the Dwelling Form for 

special limits to personal property 

coverage, FEMA proposes to add a new 

provision (section III.C.4.e) to 

specifically clarify coverage limits for 

portable electronic devices. A 

homeowner policyholder should be able 

to transport such personal property 

away from a flood and such property 

may also have separate insurance 

available. For instance, cell phones 

come with an offer of cell phone 

insurance; laptops and tablets often 

come with offers of insurance as well. 

The distinction between whether 

something is designed as portable or not 

should serve as the bright line rule. For 

example, a laptop computer is portable 

while a desktop computer is not, and a 

Sony PlayStation and a Microsoft Xbox 

are not designed as portable whereas a 

Nintendo Switch is. Proposed section 

III.C.4.f would also clarify that personal 

property primarily used ‘‘for any 

commercial purposes,’’ rather than the 

current ‘‘in any business’’ requirement 

in section III.B.6.e of the Dwelling Form, 

falls within these special limits. FEMA 

proposes to specify that coverage is 

limited for ‘‘commercial purposes’’ 

rather than ‘‘any business’’ to continue 

providing coverage for hobbyists who 

may occasionally sell what they create, 

but who do not operate as a business or 

have a Federal Employment 

Identification Number for commercial 

tax purposes. Finally, FEMA proposes 

to add section III.C.4.g to provide 

coverage for up to 10 percent of the 

special limit on the declarations page 

for valued paper, metals, or other 

similarly valued objects such as 

accounts, bills, coins, currency, deeds, 

evidences of debt, medals, money, scrip, 

stored value cards, postage stamps, 

securities, bullion, or manuscripts. 

FEMA proposes this additional coverage 

because coverage of these items is the 

industry standard. Proposed section 

III.C.5 would retain the statement 

currently in the Dwelling Form at 

section III.B.9 that FEMA would only 

pay for the functional value of antiques. 

In proposed section III.C.6, FEMA 

seeks to consolidate all exclusions 

specific to personal property into one 

section to enhance readability and 

ensure that homeowner policyholders 

and insurance agents make appropriate 

decisions regarding how they insure the 

property. Proposed section III.C.6.a 

would make it clear that FEMA would 

not cover anything already excluded 

under Coverages A and B. FEMA 

proposes to categorically narrow the 

coverage for personal property in this 

respect to clarify that there can be no 

instance where something excluded 

from either Coverage A or Coverage B 

could be eligible for coverage under 

Coverage C. Proposed sections III.C.6.b 

and III.C.6.c (excluding coverage for loss 

of use of personal property at the 

described location, and personal 

property not inside a building) remain 

unchanged from existing language in the 

Dwelling Form. Consistent with 

coverage limitations in the current 

Dwelling Form, proposed section 

III.C.6.d of the Homeowner Flood Form 

provides that FEMA would not cover 

personal property in a basement or 

enclosure, except as stated in III.C.3 

which limits coverage to appliances 

installed in their functioning locations 

consistent with the current Dwelling 

Form. FEMA is proposing to make a 

change to this section to eliminate 

references to flood zones or pre- or postFIRM status of a building, consistent 

with other changes throughout the 

policy. Similarly, proposed section 

III.C.6.e, excluding coverage for 

personal property in a building 

constructed or substantially improved 

after September 30, 1982, that is located 

in, on, or over water or seaward of mean 

high tide, would include nonsubstantive, grammatical revisions to 

conform to other organizational changes 

within the policy. Proposed section 

III.C.6.f would clarify that personal 

property in any open structure that is in, 

on, or over water is not covered 

regardless of its use. FEMA proposes to 

add section III.C.6.g to exclude losses to 

items stored in digital or other 

intangible formats, consistent with 

broader industry standards and other 

insurance products. This addition 

would have the effect of excluding 

cryptocurrency and other such digital 

items, given the challenges with proving 

such losses. For example, a flood could 

cause a server or desktop computer with 

valuable information on it to stop 

working. The policy would not cover 

these losses given the challenges 

associated with proof of loss, such as 

demonstrating the existence of the 

information at the time of loss, the 

inability to access or restore the 

information through other means, the 

valuation of such information, and other 

concerns. In proposed section III.C.6.h, 

FEMA seeks to add items held in 


ddrumheller on DSK120RN23PROD with PROPOSALS2
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58For example, a separate automobile insurance 

policy would be more appropriate for all-terrain 

vehicles (ATVs) and golf carts because their use is 

not limited to servicing the location or assisting 

those with disabilities. By contrast, this policy 

would cover farm vehicles not licensed for use on 

a public road. See NFIP Claims Manual (June 2023) 

at COVERAGE–19, available at https://

www.fema.gov/sites/default/files/documents/fema_

nfip-claims-manual_062023.pdf (last accessed Aug. 

28, 2023). 

violation of state or Federal law to the 

list of exclusions to clarify that the 

Agency would not pay to indemnify 

against inherently illegal activity. FEMA 

also proposes to add section III.C.6.i to 

exclude coverage for living things, 

consistent with current Agency policy, 

broader industry standards, and other 

insurance products. In section III.C.6.j, 

FEMA proposes a minor change to the 

exclusion from coverage of any selfpropelled vehicle or machine to prohibit 

coverage for those vehicles or machines 

capable of transporting people or cargo 

while continuing to allow coverage for 

vehicles or machines not registered for 

use on public roads that are used solely 

to service the described location or to 

assist people with disabilities when 

such property is inside a building at the 

described location. FEMA is proposing 

this change to clarify that coverage 

would not extend to vehicles that do not 

service the property or aid those with a 

disability, as other insurance is more 

appropriate for those items.58

d. Coverage D—Other Coverages 

FEMA proposes organizing section 

III.D to align with the policy’s 

organizational structure. Section III.D.1, 

‘‘Debris Removal,’’ clarifies what debris 

is covered and what is not. Specifically, 

FEMA proposes in section III.D.1.a to 

cover labor and expense to remove 

debris from anywhere that comes onto 

or into the dwelling or other insured 

buildings, and debris of insured 

property anywhere. FEMA proposes the 

clarification in section III.D.1.a(1) to 

emphasize that labor is an element of 

the total covered expense. Additionally, 

FEMA proposes a slight broadening of 

coverage from the current Dwelling 

Form in proposed section III.D.1.a(1)(a) 

of the Homeowner Flood Form to state 

that the removal of any debris inside the 

insured buildings is covered. Proposed 

section III.D.1.a(2) would clarify that 

FEMA would pay the value of any 

debris removal work performed by the 

homeowner policyholder or a member 

of one’s household using the Federal 

minimum wage, and that this coverage 

does not increase the coverage limit on 

the declarations page. Proposed section 

III.D.1.b, ‘‘Debris Not Covered,’’ would 

provide that the policy does not cover 

debris from other locations on the land 

surrounding the dwelling or other 

insured buildings or any non-covered 

items of property from the dwelling or 

buildings, even if the removal facilitates 

covered cleanup or repairs. FEMA 

proposes this clarifying language to 

ensure that homeowner policyholders 

appropriately insure their property and 

to avoid duplication of benefits to both 

owners of debris and the homeowner 

policyholder upon whose land the 

debris resides. 

FEMA proposes to slightly broaden 

coverage in section III.D.2, ‘‘Loss 

Prevention.’’ Section III.D.2.a would 

provide that FEMA would pay up to the 

coverage sublimit specified on the 

declarations page for the expenses a 

homeowner policyholder incurs to 

protect one’s insured property from a 

flood or imminent danger of flood. 

These expenses would be limited to: (1) 

reasonable expenses to buy materials to 

use temporary measures to avoid or 

reduce the harm from an imminent 

flood, including sandbags, fill for 

temporary levees, and pumps; and (2) 

the value of work, at the Federal 

minimum wage, that a homeowner 

policyholder or a member of her 

household performs to protect the 

property. Section III.D.2.b would specify 

that this coverage for materials and 

labor only applies if damage to the 

insured property by or from flood is 

imminent and the threat of flood 

damage is apparent enough to 

reasonably anticipate flood damage, and 

only if one of the following occurs: (1) 

a general and temporary condition of 

flooding in the area near the described 

location occurs, even if the flood does 

not reach the insured building; or (2) a 

legally-authorized official issues an 

evacuation order or other civil order for 

the community in which the property is 

located to preserve life and property 

from flood. FEMA proposes this 

language for increased clarity and 

consistency with other sections in the 

Form. For instance, while the Dwelling 

Form at section III.C.2.a(1) limits 

coverage to $1,000, this proposed 

section would remove the dollar limit 

from the Form itself, allowing it to be 

altered through the declarations page or 

other guidance. The proposed language 

would also limit the use of lists 

(compare with sections III.C.2.a(1)(a)(i)– 

(iv) of the Dwelling Form) and allow 

coverage where there may be 

technological or local variances in what 

items are used to prevent losses rather 

than restrict it to the specific items in 

the policy as is currently the case. 

Proposed section III.D.3, ‘‘Property 

Removed to Safety,’’ would provide that 

FEMA would pay up to the coverage 

limit on the declarations page, at the 

Federal minimum wage, for reasonable 

expenses and labor a homeowner 

policyholder or member of her 

household, incurs for moving insured 

property to a secure location to protect 

it from flood or the imminent danger of 

flood. Consistent with other sections in 

the Form, this language would simplify 

coverage by removing mention of 

special flood hazard areas, as well as the 

coverage limit, allowing the limit to be 

altered through the declarations page or 

other guidance. Proposed section III.D.4 

would specify that Coverage D does not 

increase the limits of Coverages A, B, or 

C. 

5. Section IV: Exclusions 

Proposed section IV would replace 

article V of the Dwelling Form. By 

continuing to address exclusions 

separately from coverage, FEMA seeks 

to clearly delineate between the types of 

property covered and not covered from 

the sources of damage excluded. This is 

to conform with industry standards, as 

insurance companies generally combine 

what is covered and not covered in the 

coverage section of their policies, and 

address excluded causation in the 

exclusions section. As this is a single 

peril policy, it is FEMA’s position that 

a shorter, simplified exclusions section 

would reduce confusion on the part of 

the homeowner policyholder. Proposed 

section IV is structured to address three 

main concepts: excluded losses; flood in 

progress; and pre-existing damage. 

a. Excluded Losses 

For excluded losses, FEMA proposes 

to exclude other perils, economic losses 

(including loss of business or losses 

associated with upgrading to code per 

law or ordinance), earth movement, 

gradual erosion, several non-flood but 

water-related causes of loss, and damage 

from defects, rot, or infestation. Many of 

the exclusions in the proposed policy 

mirror in substance those in the existing 

Dwelling Form. In proposed section 

IV.A.1, FEMA seeks to simplify the 

language to exclude other perils as this 

is a single-peril policy. Consistent with 

other changes in the policy, FEMA 

proposes to condense the list of 

economic losses excluded from coverage 

currently in sections V.A.1–7 of the 

Dwelling Form into section IV.A.2 for 

clarity. 

The proposed earth movement section 

at IV.A.3 would clarify what is and what 

is not considered earth movement. In 

proposed section IV.A.3.a, FEMA would 

retain but revise the list of items in the 

corresponding sections of V.C of the 

Dwelling Form for clarity; this list 

describes what earth movement 

includes, even if caused by flood. While 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8299 

59See NFIA sec. 1370(b)–(c) (42 U.S.C. 4121(b)– 

(c)). 

60State laws govern disclosures of prior losses in 

property transfers and the SFIP cannot change state 

disclosure laws that apply to prior losses. 

FEMA would retain earthquake, 

landslide, subsidence, and sinkholes on 

the list in proposed sections of IV.A.3, 

other changes are being proposed for 

modest clarifications. For instance, 

proposed section IV.A.3.a(5) would not 

retain the phrase ‘‘movement of land 

that results from accumulation of water 

in subsurface land area’’ from section 

V.C.5 of the Dwelling Form for clarity. 

In addition, FEMA proposes to add 

section IV.A.3.a(6) (‘‘Any other 

movement such as sinking, rising, 

shifting, expanding or contracting of the 

earth’’) as a further catch all for any 

variety of geological phenomena not 

specifically listed in subsections (1)–(5). 

In IV.A.3.b, FEMA proposes to 

provide further specificity that the earth 

movement coverage exclusion does not 

include hydrostatic pressures or 

hydrodynamic forces, buoyancy, and 

frictional force from floodwater moving 

along the surface of the ground. These 

terms are subsumed in the statutory 

definition of a ‘‘flood.’’ 59 These terms 

appear in the engineering reports 

included in claims files. The ability to 

line up an engineering report with the 

policy language should help provide 

policyholders with additional clarity 

regarding what is and is not excluded. 

Proposed section IV.A.4 would 

exclude coverage for gradual erosion 

caused by the normal water action that 

wears an area of land away over time 

and contains minor clarifying edits for 

readability. FEMA proposes similar 

clarifying edits in section IV.A.5, ‘‘Other 

excluded causes of damage.’’ These 

clarifying edits include combining 

sections V.D.1 and V.D.2 of the 

Dwelling Form into proposed section 

IV.A.5.a because the listed items relate 

to ice; excluding in section IV.A.5.c 

damage from exposure to water of any 

form other than flood (as detailed in 

sections V.D.4.b(2), V.D.5, and V.D.6 of 

the Dwelling Form); and excluding in 

section IV.A.5.e actions taken by 

homeowner policyholders or any 

members of their household that 

deliberately cause direct physical loss 

by or from flood (see section V.D.9 of 

the Dwelling Form). Proposed section 

IV.A.5.b would remain unchanged from 

section V.D.3 of the Dwelling Form. In 

section IV.A.5.d, FEMA proposes to add 

other related conditions to clarify that 

design, structural, or mechanical 

defects; deterioration, rot, or corrosion; 

or damage from insects and rodents 

would be excluded as these are all preexisting conditions at the time of claims 

adjustment. Homeowner policyholders 

may not be aware of these conditions 

prior to experiencing a loss, but these 

conditions are generally not attributable 

to a single flood event and thus would 

not be covered under the policy. 

The Dwelling Form currently 

excludes coverage for losses that occur 

because of an alteration to the insured 

property that significantly increases the 

risk of flooding at section V.D.10. 

Proposed section IV.A.6 would clarify 

that this exclusion covers any 

homeowner policyholder actions, 

whether an alteration to the insured 

property or a more general change, that 

causes the hazard to increase by any 

means within the homeowner 

policyholder’s control or with the 

homeowner policyholder’s knowledge. 

FEMA is proposing this revision to 

streamline the policy by stating in one 

location rather than the two sections 

found in the current Dwelling Form 

(sections V.D.10 and VII.F) that FEMA 

would not pay for a loss where the 

homeowner policyholder took action or 

allowed an action to happen that 

increased their risk of flooding. 

b. Flood in Progress 

In section IV.B, ‘‘Flood in Progress,’’ 

FEMA proposes to define what 

constitutes a flood in progress, and to 

address concerns where there is a strong 

moral hazard. This clarity would help 

ensure that policies are not written for 

a property while a flood is in progress 

at the described location. Further, this 

proposed revision ensures that if a 

policy is written while a flood is in 

progress, the exclusion is well-defined 

to help avoid disputes when the 

homeowner policyholder attempts to 

submit a claim. With this proposed 

revision, FEMA seeks to avoid 

situations where a homeowner 

policyholder purchases flood insurance 

as a means of ‘‘buying a claim’’ while 

also allowing homeowner policyholders 

to perceive their risk and take an 

appropriate action. FEMA proposes to 

explain in section IV.B.1 that a flood is 

in progress when (1) there is a near 

certainty of a flood loss at the described 

location from a flood control effort such 

as opening a spillway, breaching a 

levee, or releasing water from a dam, or 

(2) there is a flood at the described 

location. FEMA proposes to explain in 

section IV.B.2 that if the policy becomes 

effective in connection with a loan 

closing, FEMA would not pay for loss 

caused by a flood in progress at the time 

of the loan closing. Proposed section 

IV.B.3 would provide that in all other 

circumstances, FEMA would not pay for 

a loss caused by a flood in progress that 

existed on or before the day the 

homeowner policyholder submitted the 

application. While proposed sections 

IV.B.2 and IV.B.3 mirror in substance 

the language in section V.B of the 

Dwelling Form, the added clarity in 

proposed section IV.B.1 would help 

ensure that policies are written and 

administered consistently. 

c. Pre-Existing Damage 

FEMA proposes in section IV.C to 

explicitly exclude coverage for preexisting damage. This section would 

specify that pre-existing damage 

includes flood loss or damage that 

occurred prior to the date of loss, 

whether direct physical loss or not, and 

whether paid or unpaid, and damage 

attributable to any non-flood peril that 

occurred prior to the date of loss. Under 

section VII.H.2.e of the Dwelling Form, 

when an insurance company suspects 

that damage existed prior to the flood 

event, it can request evidence that prior 

flood damage has been repaired. In 

some instances, the property may have 

been sold without disclosure of a prior 

flood loss.60 In other instances, the 

insurer may know that a homeowner 

policyholder had a loss from another 

peril and was paid for the same items. 

More explicitly excluding coverage for 

pre-existing damage would make the 

exclusion clearer to homeowner 

policyholders and help prevent disputes 

over unrepaired flood damage or from 

unrepaired items from other perils that 

often arise when property changes 

owners. It would also better align the 

policy with traditional insurance 

concepts and FEMA’s longstanding 

practice of not paying for pre-existing 

damage. Lastly, it would reinforce 

proposed VI.A.3.g(5) (requiring proof of 

repairs for prior losses to ensure 

coverage of damages occurring from the 

current loss). Note that FEMA is 

proposing not to retain in this section 

language regarding ICC coverage, as that 

would be detailed in the ICC 

Endorsement. 

6. Section V: Policy Conditions 

Proposed section V would combine 

provisions from articles VII, ‘‘General 

Conditions,’’ and VIII, ‘‘Policy 

Nullification, Cancellation, and NonRenewal,’’ of the Dwelling Form that 

specifically apply to how FEMA 

administers the policy. These provisions 

represent homeowner policyholderfacing underwriting aspects of the 

policy. 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8300 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

61 16 U.S.C. 3501 et seq. 

a. Actions and Conditions That Can 

Void Your Policy 

Proposed section V.A would describe 

the actions and conditions that can void 

a policy. Section V.A.1, ‘‘NFIP 

Ineligibility,’’ would provide scenarios 

where the policy is void from inception 

and has no legal force due to underlying 

ineligibilities. Retaining language from 

section VIII.B.1.a of the Dwelling Form, 

proposed section V.A.1.a would provide 

that the policy is void if the described 

location is in a community that was not 

participating in the NFIP at the policy’s 

inception and did not join or reenter the 

NFIP during the policy term and before 

loss occurred. Similarly, proposed 

section V.A.1.b would retain the 

substance of section VIII.B.1.b of the 

Dwelling Form and provide that the 

policy is void where the described 

location or other property is otherwise 

not eligible for coverage under the NFIA 

or its implementing regulations, for 

reasons of noncompliance with local 

floodplain ordinances or otherwise. 

Subsection A.1.c would provide that the 

policy is void where any other Federal 

law prevents coverage of property at the 

described location. FEMA proposes not 

to retain the language in sections 

VIII.B.1.c–e and VIII.B.2 of the Dwelling 

Form; because these provisions do not 

relate to coverage, they are better suited 

to guidance. 

Section V.A.2, ‘‘Concealment or 

Fraud,’’ contains much of the same 

language in the Dwelling Form, with 

three primary clarifications. Proposed 

section V.A.2.a provides that the policy 

is void and cannot be renewed if the 

insured or agent, at any time before or 

after a loss, intentionally concealed or 

misrepresented any material fact or 

circumstance, engaged in fraudulent 

conduct relating to the policy, or 

knowingly made false statements 

relating to the policy or any other NFIP 

insurance at any time. FEMA proposes 

to add the word ‘‘intentionally’’ to 

clarify that a homeowner policyholder 

must intend to conceal or misrepresent 

in order for the policy to be void; a 

scrivener’s error would not result in 

voidance. FEMA proposes to specify 

that the fraudulent activity must relate 

to the policy, because any fraudulent 

activity beyond the scope of the policy 

is not a cause for voidance. FEMA also 

proposes to specify that any false 

statements must have been made 

‘‘knowingly’’ to ensure that the policy is 

only voided in situations involving 

malfeasance on the part of the insured 

or agent. Like section VIII.A.3 of the 

Dwelling Form, proposed section 

V.A.2.b would specify that the policy 

would be void as of the date the acts 

described in subsection A.2.a were 

committed. Proposed section V.A.2 

would not retain the language in section 

VIII.A.4 of the Dwelling Form regarding 

applicable Federal laws, consistent with 

other changes. 

b. Policy Renewal 

Proposed section V.B, ‘‘Policy 

Renewal,’’ would require that FEMA 

receive the renewal premium within 30 

calendar days of the expiration date of 

the prior policy; it would also state the 

FEMA would not renew the policy if 

Federal law prevents coverage of 

property at the described location. This 

section is considerably shorter than the 

corresponding section in the Dwelling 

Form (at section VII.E) and conforms to 

modifications elsewhere in the policy. 

For instance, this section would no 

longer contain the policy term or right 

for review, as those would be addressed 

in proposed sections I.D and I.F, 

respectively. Additionally, the Dwelling 

Form explains the consequences when 

the insurer fails to mail the renewal 

notice or makes a mistake, such as by 

mailing the notice to the incorrect 

address. There is no analogous 

provision in other property insurance 

contracts, and FEMA is proposing to 

eliminate this language given the rarity 

of these situations. Lastly, section V.B.2 

would reference ‘‘Federal law’’ for 

brevity, as this would include section 

1316 and other relevant provisions of 

the NFIA, relevant provisions of the 

Coastal Barrier Resources Act,61 and any 

future statutory changes. 

c. Cancellation of the Policy by You 

Proposed section V.C, ‘‘Cancellation 

of the Policy by You,’’ would provide 

that the homeowner policyholder may 

cancel the policy when the homeowner 

policyholder (1) no longer has an 

insurable interest in the property, (2) is 

no longer required to maintain flood 

insurance pursuant to Federal law or 

lender requirements, or (3) has a 

duplicate NFIP policy. It would also 

provide that if a homeowner 

policyholder cancels the policy, he or 

she may be entitled to a full or partial 

refund of premium for the current 

policy term. While the NFIP uses over 

a dozen cancellation reason codes, not 

all of these are for homeowner 

policyholder cancellation. FEMA 

isolated the reasons specific to 

homeowner policyholder cancellation, 

found that they fell into the three broad 

categories outlined just above, and now 

proposes to highlight those categories in 

the policy itself. It is FEMA’s position 

that these changes offer increased clarity 

for the homeowner policyholder 

compared to the language in the 

Dwelling Form at section VIII.C. 

d. Reduction and Reformation of 

Coverage 

Proposed section V.D, ‘‘Reduction and 

Reformation of Coverage,’’ would 

explain to homeowner policyholders 

what occurs when the premium FEMA 

receives is insufficient for the coverage 

sought, but in a shorter and easier to 

read format compared to the Dwelling 

Form (see section VII.D of the Dwelling 

Form). Proposed section V.D.1 would 

provide that where the premium is not 

enough to purchase the requested 

amount of coverage, FEMA would issue 

the policy, but only for the amount of 

coverage that the premium would 

purchase for a one-year term. This 

section would substantively mirror 

section VII.D.2 of the Dwelling Form but 

would be more readable. Proposed 

section V.D.2 would provide that FEMA 

would increase the reduced amount of 

coverage to the amount originally 

requested without regard to whether a 

loss occurred when FEMA bills for the 

additional premium, or if necessary to 

calculate the additional premium, 

requests information (V.D.2.a), and the 

homeowner policyholder responds to 

the request for additional premium 

within 30 calendar days, or responds to 

the request for additional information 

within 60 calendar days (V.D.2.b). 

Proposed section V.D.2.c would provide 

that a homeowner policyholder’s failure 

to timely respond may result in a 

waiting period for additional coverage if 

a loss has not occurred within the 

policy term, or the settlement of a claim 

under the reduced limit if a loss has 

occurred within the term. Functionally, 

there is no difference between 

determining that there is an insufficient 

premium before loss or after loss, so 

treating these concepts together should 

simplify the policy. Altogether, section 

V.D.2 would condense sections VII.D.3.a 

and b of the Dwelling Form into one 

more concise and readable section and 

would conform to other changes in the 

policy (e.g., specifying ‘‘calendar’’ days). 

e. Disaster Conditions 

FEMA proposes to add section V.E, 

‘‘Disaster Conditions,’’ which would be 

a new section. This section would 

incorporate existing practices when a 

flood reaches such a magnitude that 

FEMA anticipates logistical challenges 

with adjusting losses and reasonably 

expects increased competition for 

limited contractor services in the 

disaster-effected area, or where 

homeowner policyholders may not be in 

a position to receive and respond to 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8301 

62Public Law 93–288, as amended; 42 U.S.C. 

5121 et seq. 

63Section 1337(b)(1) of the National Flood 

Insurance Act of 1968 (NFIA) (42 U.S.C. 4057(b)(1)), 

as added by section 100253 of the Consumer Option 

for an Alternative System to Allocate Losses Act of 

2012 (also referred to as the COASTAL Act of 2012) 

(Pub. L. 112–141, div. F, title II), requires FEMA to 

‘‘establish by rule a standard formula to determine 

and allocate wind losses and flood losses for claims 

involving indeterminate losses.’’ This formula is 

referred to as the ‘‘COASTAL Formula’’ pursuant to 

NFIA sec. 1337(a)(2) (42 U.S.C. 4057(a)(2)). Once 

FEMA adopts a COASTAL Formula in regulation, 

FEMA may use the formula to oversee the handling 

of claims involving indeterminate losses and, for 

floods resulting in a Federal disaster declaration, 

make claim payments based on the formula. See 

NFIA sec. 1337(c) (42 U.S.C. 4057(c)). 

mail regarding the renewal of their flood 

insurance policy. In these scenarios, 

FEMA has, as a courtesy to homeowner 

policyholders, extended both the proof 

of loss deadline beyond the 60 days 

stated in the policy and the grace period 

to renew coverage without experiencing 

a lapse. (For example, FEMA extended 

the proof of loss and grace period 

deadlines for Hurricanes Harvey, Irma, 

and Maria in 2017 and Hurricane 

Michael in 2018). FEMA has issued 

these extensions via bulletin to the 

WYO companies, and via public 

communications to policyholders who 

would otherwise lack awareness of 

these extensions and the flexibility they 

bring. In the absence of policy language 

governing extensions, however, 

stakeholders have often requested 

longer proof of loss timeframes for 

smaller flooding events, or have asked 

FEMA to continue to extend deadlines 

indefinitely for even longer periods 

following major flooding. To provide 

clarity and uniformity, therefore, 

proposed section V.E.1 would provide 

that in the event of a flood associated 

with a major disaster or emergency 

declared by the President under the 

Stafford Act,62 the FEMA Administrator 

may, after written notice, extend the 

timeframes for proof of loss up to 365 

calendar days from the date of loss, and 

the timeframes for policy renewal up to 

60 calendar days from the policy’s 

expiration date. Placing an explicit, 

objective trigger in the policy would 

allow it to indicate when these 

‘‘special’’ provisions might apply to any 

homeowner policyholder. In addition, 

establishing clear upper limits for proof 

of loss and policy renewal extensions 

would enhance clarity and reduce 

requests for indefinite extensions. 

Furthermore, by making the provision 

discretionary and not mandatory, FEMA 

seeks to continue to offer flexibility. 

These flexibilities would allow FEMA to 

extend one or both deadlines when 

necessary and choose shorter 

timeframes when appropriate. 

Proposed section V.E.2 would provide 

new flexibilities that in the event of a 

flood associated with a declared major 

disaster or emergency, the 

Administrator may, after written notice, 

conditionally waive the requirement in 

proposed sections VI.A.3 and VI.B.2 that 

an insured must sign or swear to a proof 

of loss or an adjuster’s report. This 

would authorize the insurer to accept 

and make payment on the adjuster’s 

report. This payment based on the 

adjuster’s report is ‘‘undisputed’’ which 

allows the insurer to accept that a 

covered loss took place without any 

further action needed from the 

policyholder. The flexibility provided 

here would not stop the homeowner 

policyholder from seeking additional 

payment through a proof of loss but 

would help ensure payment as quickly 

and safely as possible to the homeowner 

policyholder. 

Proposed section V.E.3 would provide 

new flexibilities that in the event of a 

flood associated with a declared major 

disaster or emergency, the 

Administrator may, after written notice, 

establish special procedures for advance 

payments to insured(s) in accordance 

with proposed section VI.C.3. (As 

discussed below at section III.A.7.c of 

this preamble, this section would allow 

the insurer to make an advance payment 

for up to 5 percent of the Coverage A 

limit to a homeowner policyholder 

without putting the mortgage company 

on the check). Under the current 

Dwelling Form, a homeowner 

policyholder with Coverage A receives a 

check issued to the homeowner 

policyholder and any secured interest 

(i.e., a mortgage or second mortgage, 

etc.) and the homeowner policyholder 

may have to negotiate with the secured 

interest holder before the check can be 

cashed to provide payment to a 

contractor for repairs. Some secured 

interest holders may be reluctant to 

endorse the check until they know the 

repairs have been made to protect their 

financial position. Doing so, however, 

can negatively impact the homeowner 

policyholder who is then required to 

secure the contractor with out-of-pocket 

funds. By allowing for advance 

payment, homeowner policyholders 

without contents coverage should be 

able to secure a contractor without 

necessarily utilizing out-of-pocket funds 

while not affecting the mortgage 

company’s ability to file its own claim. 

FEMA understands the proposed 5 

percent advance payment would benefit 

the homeowner policyholder so they 

can rebuild more quickly. FEMA 

believes the proposed 5 percent advance 

payment is an insurance industry 

standard and seeks comment from the 

public specifically on whether or not 

the 5 percent advance payment is 

standard. 

Finally, proposed section V.E.4 would 

provide new flexibilities that in the 

event of a flood associated with a 

declared major disaster or emergency, 

the Administrator may, after written 

notice, settle losses in accordance with 

any formula established under Federal 

law that allocates covered damages 

amongst multiple perils, including 

flood. This would add flexibility if a 

declared disaster allows the use of the 

COASTAL Formula for settling losses 

that allocate damages amongst multiple 

perils.63

7. Section VI: Procedures and Duties 

When a Loss Occurs 

The Dwelling Form includes various 

provisions under article VII, ‘‘General 

Conditions.’’ FEMA proposes to 

combine all provisions relating to how 

losses are proven and paid (traditionally 

claims issues) in proposed section VI, 

‘‘Procedures and Duties When A Loss 

Occurs.’’ The organization of this 

section would mirror the sequence that 

a homeowner policyholder would use 

the policy following a loss, first 

addressing what the homeowner 

policyholder must do, then what insurer 

options exist, how the claims 

adjustment process works, what 

deductible applies, how loss is settled, 

and how the appraisal process works 

when required. It is FEMA’s position 

that organizing this section according to 

the logical progression of the process 

would aid homeowner policyholders 

who experience a loss, helping ensure 

that they understand the policy’s terms 

and conditions as well as the process. 

a. Your Duties After a Loss 

In organizing section VI.A, ‘‘Your 

Duties After a Loss,’’ FEMA focused 

extensively on proof of loss. The proof 

of loss is an industry standard concept 

and is the foundation of payment of any 

claim. In the NFIP, the proof of loss is 

a crucial customer service tool, ensuring 

that the flood adjuster takes the time to 

explain coverage and helps the 

homeowner policyholder understand 

how to address situations where the 

insurance estimate and contractor 

estimate (or quote) deviate. Absent the 

proof of loss, an adjuster can submit a 

report to an examiner and the insurer 

can make payment without the 

homeowner policyholder ever 

understanding what they did or did not 

get paid for as part of the claim. In 

proposed section VI.A, FEMA seeks to 

simplify the language around proof of 

loss where possible and address what is 


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64The changes align with the Insurance Services 

Office’s ‘‘HO–3’’ form, the template behind most 

standard homeowners insurance policies. See supra 

note 24. 

65See Nevada Department of Insurance Allstate 

Homeowner’s Form, page 12, Section 1 Conditions 

3.g (stating that signed, sworn proof of loss 

statements must be submitted within 60 days after 

the loss), found at http://docs.nv.gov/doi/ 

documents/home_policies/AllStateForms/ 

AP783.pdf (last accessed Aug. 28, 2023). 

66As a government program, the NFIP does not 

have the variety of flexibilities available to the 

private sector regarding post-loss options. If a 

policyholder experiences a loss, a private industry 

insurer can send over their preferred contractors to 

handle everything for the policyholder after the 

payment of the deductible. In the NFIP, utilizing 

treasury funds and other governmental 

requirements generally require a greater degree of 

precision and puts an added burden on SFIP 

policyholders as compared to their general 

homeowners coverage through private insurance. 

By providing more time in this proposed revision, 

FEMA is offering SFIP customers extra time beyond 

the industry standard to help alleviate this added 

burden. 

67For example, FEMA extended these deadlines 

for Hurricane Maria (see e.g., Bulletin W–17057, 

‘‘Activation of NFIP Catastrophic Event Enhanced 

Claim Payment Process and Proof of Loss Extension 

for Hurricane Maria,’’ (Sept. 28, 2017), found at 

https://nfipservices.floodsmart.gov/sites/default/ 

files/w-17057.pdf (last accessed Aug. 28, 2023)), 

Hurricane Irma (see e.g., Bulletin W–17040, 

‘‘Activation of NFIP Catastrophic Event Enhanced 

Claim Payment Process and Proof of Loss Extension 

of Hurricane Irma,’’ (Sept. 17, 2017), found at 

https://nfipservices.floodsmart.gov/sites/default/ 

files/w-17040.pdf (last accessed Aug. 28, 2023)), 

and the August 2016 floods in Louisiana (see e.g., 

Bulletin W–16028, ‘‘Notice of the Limited Waiver 

of the Standard Flood Insurance Policy (‘‘SFIP’’) to 

Extend the Time for Sending Proofs of Loss in the 

States of Louisiana and Mississippi for Claims 

Related to Severe Winter Storms Commencing on 

March 7, 2016 through March 19, 2016,’’ (Apr. 21, 

2016), found at https://nfipservices.floodsmart.gov/ 

sites/default/files/w-16028.pdf (last accessed Aug. 

28, 2023)); Bulletin W–16038, ‘‘Notice of the 

Limited Waiver of the Standard Flood Insurance 

Policy (‘‘SFIP’’) to Extend the Time for Sending 

Proofs of Loss in the State of Louisiana for Claims 

Related to Severe Spring Storms Commencing on 

April 17, 2016 through April 20, 2016,’’ (Jun. 15, 

2016), found at https://nfipservices.floodsmart.gov/ 

sites/default/files/w-16038.pdf (last accessed Aug. 

28, 2023)); Bulletin W–16067, ‘‘Notice of the 

Limited Waiver of the Standard Flood Insurance 

Policy (‘‘SFIP’’) to Extend the Time for Sending 

Proofs of Loss in the State of Louisiana for Claims 

Related to the Mid-Summer Severe Storms 

Commencing on August 9, 2016 through August 31, 

2016,’’ (Sept. 9, 2016), found at https://

nfipservices.floodsmart.gov/sites/default/files/w16067.pdf (last accessed Aug. 28, 2023)), among 

others. 

expected of the homeowner 

policyholder separately from what 

options the insurer has (proposed 

section VI.B). These changes align with 

other property insurance forms in the 

marketplace 64 and make clear that 

certain duties exist for both parties to 

the insurance transaction. 

Proposed section VI.A would provide 

that if the described location 

experiences a direct physical loss by or 

from flood, the homeowner 

policyholder must comply with all of 

the duties listed in VI.A.1–7. This 

would ensure that the homeowner 

policyholder knows they must comply 

with these duties, and that substantial 

compliance would not suffice. Proposed 

section VI.A.1 outlines the first duty, 

which is to give prompt notice to the 

insurer. This would be a change from 

the Dwelling Form (see section VII.G) 

and allow for a reasonable form of 

prompt notice to the insurer when a loss 

occurs rather than specifically requiring 

a written notice. The critical element of 

the notice requirement is timing, not the 

form the notice takes. This proposed 

revision provides flexibility to the 

homeowner policyholder regarding the 

ways prompt notification can be given 

and reflects current practice, as some 

homeowner policyholders provide 

prompt notice by calling or emailing 

their insurance agents when a loss 

occurs. Proposed section VI.A.2 would 

require that the homeowner 

policyholder separate the damaged and 

undamaged property as soon as possible 

so that it can be examined and take all 

reasonable measures to protect covered 

property from any further loss. This 

section would not retain the phrase 

‘‘best possible order’’ found in section 

VII.G.2 of the Dwelling Form because 

this language is unnecessary, as FEMA 

does not deny claims because there was 

a better possible order available. In 

addition, the requirement that 

homeowner policyholders take 

reasonable measures to protect 

undamaged property would help avoid 

scenarios where avoidable damage or 

intervening causes of loss occur, which 

could result in denial of coverage. This 

additional language reinforces the duty 

to mitigate loss and reduce the potential 

for intervening causes of loss which 

generally result in denial of insurance 

claims. 

Proposed section VI.A.3 makes a 

significant change from the Dwelling 

Form (see section VII.G.4) regarding 

timing of submission of the proof of 

loss. It would require that within 90 

calendar days after the loss, the 

homeowner policyholder must send 

FEMA a signed and sworn proof of loss 

containing the date and time of loss, 

how the loss occurred, details of any 

other insurance, changes in title or 

occupancy of the property during the 

policy term, names of mortgagees or 

anyone else with a lien, charge, or claim 

against the property, a description of all 

damages and detailed repair estimates 

(if available), and an inventory of the 

lost, damaged, or destroyed property. 

The inventory must show the quantity, 

description, replacement cost value or 

actual cash value (whichever is 

applicable), amount of loss, evidence 

that prior flood damage has been 

repaired, any written plans for repair of 

the property that the homeowner 

policyholder can reasonably make 

available, and all funds the homeowner 

policyholder spends recovering from the 

loss. The homeowner policyholder must 

also attach copies of all bills, receipts, 

invoices, written estimates, and related 

documents. 

This proposed section would increase 

the timeframe to submit a proof of loss 

from 60 to 90 days, and, consistent with 

other provisions in the Homeowner 

Flood Form, specify that these are 

calendar days. FEMA has historically 

provided a 60-day window for 

providing proof of loss. FEMA 

recognizes that 60 days, the industry 

standard,65 is normally a sufficient 

timeframe for homeowner policyholders 

to provide the proof of loss information 

in a non-disaster scenario. FEMA 

proposes, however, to surpass the 

industry standard regarding this 

timeframe given the nature of the peril 

involved—flooding—the governmental 

nature of the NFIP,66 and the fact that 

as mentioned previously, FEMA has 

often provided homeowner 

policyholders with extensions of the 60- 

day window in catastrophic 

conditions.67 Flooding, often resulting 

from severe storms, can require 

extended evacuation periods. After a 

flood, securing contractors to determine 

the full scope of damage to a property 

can be challenging given the increased 

demand in impacted areas for these 

services. Increasing the timeframe to 

provide proof of loss should assist 

homeowner policyholders by providing 

additional time to return to the property 

after an evacuation and secure a 

contractor. FEMA anticipates that this 

increased timeframe would also result 

in fewer homeowner policyholder 

requests for additional payment that 

FEMA currently sees with the 60-day 

window. In a catastrophic event, 

homeowner policyholders need to 

coordinate with contractors to obtain 

price quotes which can take time given 

the volume of demand after an event. 

While the insurance policy would 

provide payment based on an adjuster’s 

estimate, it is just that—an estimate. An 

occasion may arise where an estimate is 

insufficient to cover the cost of repairs 

that are within the policy’s coverage 

that a contractor’s quote would capture. 

Additionally, there may be an occasion 

where a contractor’s quote may include 

repairs that are not covered under the 

policy. For example, a garage door is 

damaged by flood. The adjuster finds 

coverage and identifies the scope of the 


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covered damage and estimates the value 

of the covered damage at $500. The 

contractor’s quote may indicate a $1,000 

price to replace the garage door. The 

additional $500 in the contractor’s quote 

may be due to an increase in the price 

of the unit following the disaster and 

such cost may be covered. The 

additional $500 in the contractor’s quote 

could be for rewiring to conform to local 

building codes and such a code upgrade 

would generally not be covered. The 

proposed additional time would allow 

homeowner policyholders to obtain 

contractor services and resolve these 

questions in advance, improving the 

efficiency of the process overall. 

FEMA proposes to retain in proposed 

section VI.A.3 the Dwelling Form’s 

existing requirements in section VII.G.4 

for documenting the proof of loss with 

a few minor adjustments. These include 

proposed VI.A.3.c’s requirement that the 

homeowner policyholder provide 

details of any other insurance that may 

cover some or all of the loss, as this 

would make the insurer aware of the 

other insurance regardless of the extent 

of coverage it may provide for the loss. 

In addition, VI.A.3.f’s requirement that 

the homeowner policyholder provide a 

description of all damages to the 

dwelling and other covered buildings 

with detailed repair estimates would 

help remind homeowner policyholders 

of the requirements to prepare their 

claim for Coverages A and B. While 

much of the required inventory list 

remains the same, FEMA highlights a 

few changes here. First, proposed 

section VI.A.3.g would require 

homeowner policyholders to list not 

only damaged property, but also 

property that may have been lost or 

destroyed, as that property may still be 

eligible for coverage. Second, proposed 

section VI.A.3.g(3) would add in 

replacement cost value, as Coverage C 

would be eligible for replacement cost 

value loss settlement instead of only 

actual cash value. Third, proposed 

section VI.A.3.g(7)’s requirement of 

information on all funds actually spent 

recovering from the loss, including 

copies of all bills, receipts, invoices, 

written estimates, and related 

documents, would enhance the insurer’s 

ability to accurately and completely 

settle the loss. 

FEMA proposes minor clarifying edits 

in proposed sections VI.A.4, VI.A.5, 

VI.A.6, and VI.A.7. Like section VII.G.5 

of the Dwelling Form, proposed section 

VI.A.4 would continue requiring 

homeowner policyholders to use their 

own judgment concerning the amount of 

loss and justify that amount before 

signing it. Like section VII.G.6 of the 

Dwelling Form, proposed section VI.A.5 

would clarify that there may be 

additional parties beyond an adjuster 

involved in the investigation of a claim. 

In proposed section VI.A.6, FEMA 

would add an industry standard 

provision requiring the homeowner 

policyholder make the damaged 

property accessible for inspection, to 

ensure that the insurer can inspect the 

damaged property as appropriate for the 

claims review process. FEMA also 

proposes conforming changes in section 

VI.A.7 (section VII.G.7 of the Dwelling 

Form) to the deadline for submission of 

proof of loss to 90 calendar days as 

reflected in proposed section VI.A.3. 

b. Our Options After a Loss 

In proposed section VI.B, ‘‘Our 

Options After a Loss,’’ FEMA seeks to 

simplify and further clarify the insurer’s 

options. Section VI.B.1. would provide 

that after a loss and at the insurer’s sole 

discretion, it may require that the 

homeowner policyholder provide it 

access to the damaged property, submit 

to examination under oath upon request 

and sign the transcript from such 

examination, and permit the insurer to 

examine and make copies of all or any 

portion of any policies of property 

insurance against loss and the deed 

establishing ownership of the insured 

property, and all bills, invoices, 

receipts, and other records pertaining to 

the damaged property (or certified 

copies if originals are lost). Section 

VI.B.2 would allow the insurer to accept 

its adjuster’s report of the loss in lieu of 

a proof of loss and require the 

homeowner policyholder to sign the 

report, and it would also allow the 

insurer to require the homeowner 

policyholder to swear to the report. This 

section does not mirror its counterpart 

in the Dwelling Form (at section VII.H) 

because the section in the Dwelling 

Form includes several concepts that the 

Homeowner Flood Form would cover in 

other sections (e.g., inventory 

requirements, which the Form would 

cover in VI.A.g, discussed above). 

FEMA proposes to add the requirement 

in VI.B.1.a that the homeowner 

policyholder provide the insurer access 

to the damaged property as this would 

formally enable the inspection of 

damaged property to better facilitate the 

claims review process. FEMA’s 

proposed reorganization and 

restatement of the requirement to 

provide transactional and other records 

related to the damaged property in 

section VI.B.1.c(2) would increase 

clarity for homeowner policyholders 

and ensure they understand that 

insurers can examine and make copies 

of these records. The language in 

proposed VI.B.2 is currently in the 

Dwelling Form (at section VII.G.9), but 

FEMA proposes not to retain the 

language describing what the adjuster’s 

report includes (information about the 

loss and damages sustained) because 

this language is unnecessary. This 

section would also not retain the option 

currently in section VII.H.3.a of the 

Dwelling Form for insurers to make 

repairs directly, as it is unnecessary. 

This repair option has been a part of the 

Dwelling Form for several years, yet 

FEMA data show that insurers have not 

invoked this option. 

c. Loss Payment 

Proposed section VI.C, ‘‘Loss 

Payment,’’ would retain much of the 

current Dwelling Form’s language at 

VII.J with minor changes. In section 

VI.C.1, ‘‘Adjustment of Claims,’’ 

paragraph a. would state that the insurer 

has not authorized the adjuster to 

approve or disapprove any claim. This 

language would eliminate the 

redundancy currently in the Dwelling 

Form and clarify that the adjuster is not 

authorized to approve or disapprove any 

claim. Paragraph VI.C.1.b would retain 

the language in section VII.J.1 of the 

Dwelling Form except for the 

clarification that the 60 and 90-day 

timeframes are calendar days, consistent 

with other proposed changes. Proposed 

section VI.C.2 would similarly retain the 

language in the Dwelling Form at 

section VII.J.2, except it would increase 

the timeframe a homeowner 

policyholder has to file an amended 

proof of loss from 60 to 90 calendar days 

from the date of loss, and would add 

references to the appeal, appraisal, and 

litigation sections of the policy to make 

clear to homeowner policyholders the 

additional rights available to them. 

FEMA proposes to add a section on 

‘‘Advance Payments’’ at proposed 

VI.C.3. Section VI.C.3.a would provide 

that the insurer may provide the 

homeowner policyholder with an 

advance payment prior to the 

completion of the claim, and the 

homeowner policyholder may request 

an advance payment after providing the 

notice of loss. It would further provide 

that these payments may include 

amounts totaling no more than 5 percent 

of the Coverage A limit to an insured 

without regard to proposed section VII.F 

(‘‘Mortgage Clause,’’ discussed below). 

Section VI.C.3.b would provide that the 

insurer may approve or reject the 

request for advance payment, and that 

such approval or rejection does not 

affect the final adjustment of the claim 

and does not change the homeowner 

policyholder’s duties or insurer’s 

options. Section VI.C.3.c would state 

that if the insurer provides an advance 


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68See Claims Manual at 217. 

69The National Flood Insurance Act authorizes 

FEMA to deliver the NFIP in one of two ways. The 

first (Part A), envisions an industry program 

supported by the Federal Government whereby 

FEMA serves as a backstop for a pool of private 

insurers which sell a flood insurance policy 

containing terms provided by FEMA. The second 

(Part B, under which the NFIP currently operates), 

envisions a Government program with industry 

support whereby FEMA leads a program where 

private insurers agree to sell and service a Federal 

flood insurance policy. When the NFIP operated 

under Part A, the Department of Housing and Urban 

Development (HUD) set certain flood insurance 

terms and conditions by regulation that FEMA 

continued to utilize even after the switch to 

operating under Part B. See generally 24 CFR 

1911(f)(3) (1970): ‘‘The policy contains a deductible 

clause. Each loss sustained by the insured is subject 

to a deductible provision under which the insured 

bears a portion of the loss before payment is made 

under the policy. The amount of this deductible is 

either $100 for each type of loss (that is, $100 on 

the structure and $100 on the contents) or 2 percent 

of the amount of insurance applicable to the type 

of loss, whichever is greater;’’ and 44 CFR 

61.5(d)(1980): ‘‘Each loss sustained by the insured 

is subject to a deductible provision under which the 

insured bears a portion of the loss before payment 

is made under the policy. The amount of the 

deductible for each loss occurrence is (1) For 

structural losses, $200, and (2) for contents losses, 

$200.’’ 

70 42 U.S.C. 4019(b). 

71Public Law 112–141, 126 Stat. 916 (2012). 

72Using replacement cost value allows FEMA to 

pay a policyholder to replace what he or she had 

at the time of loss with new like and kind quality. 

Actual cash value allows FEMA to pay a 

policyholder to replace what he or she had at the 

time of loss while considering the quality of the 

item and applying depreciation. For example, if a 

floor is damaged by a flood, under replacement cost 

value, the policyholder would receive payment for 

the type of flooring at the same quality at current 

prices. Under actual cash value, the policyholder 

would receive payment for the type of flooring at 

the same quality less depreciation (wear and tear, 

etc.), resulting in a reduced payment. 

payment that exceeds the covered loss, 

the insurer would send written notice of 

the overpayment, and the homeowner 

policyholder must repay the excess 

amount or dispute the validity of the 

overpayment within 30 calendar days. It 

would further provide that failure to 

repay any overpayment may result in a 

debt collection by the Federal 

Government. Current guidance requires 

the insurer to contact the homeowner 

policyholder with a description of the 

remedies available to the NFIP upon 

failure to repay the amount due by the 

deadline.68 Providing this information 

in the policy would ensure the 

homeowner policyholder is aware of 

this option in advance. FEMA proposes 

this section to increase flexibility for 

insurers and transparency for the 

homeowner policyholder, as giving 

insurers the option to issue advance 

payments comports with industry 

practice. The language in VI.C.3.a 

permitting up to 5 percent of the 

Coverage A limit of liability as an 

advance payment would allow the 

insurer to issue a de minimis amount of 

payment to an insured without having 

to include a mortgagee on the check. 

Lastly, proposed section VI.C.3.c 

explains that an advance payment 

cannot provide for a beneficial loss as 

this is an indemnity policy. Indemnity 

insurance is a contractual agreement in 

which the insurer guarantees 

compensation for actual losses or 

damages sustained and thus, the 

homeowner policyholder must repay 

any excess amount issued. 

d. Deductible 

The Dwelling Form addresses 

deductibles in a standalone article (‘‘VI. 

Deductibles’’). For the Homeowner 

Flood Form, however, FEMA proposes 

to place the deductible section within 

section VI, ‘‘Procedures and Duties 

When a Loss Occurs,’’ as treating it 

within the loss context is more logical. 

FEMA also proposes to present the 

deductible as a single deductible instead 

of several deductibles for simplicity. 

Proposed section VI.D.1 would retain 

language in the Dwelling Form at VI.A, 

providing that when a loss is covered 

under the policy, the insured would pay 

only that part of the loss that exceeds 

the homeowner policyholder’s 

deductible amount (subject to the 

applicable coverage limit), and that the 

deductible amount is shown on the 

declarations page. This section would 

not retain the additional language in the 

Dwelling Form at VI.A regarding 

buildings under construction, as the 

Homeowner Flood Form would treat 

buildings under construction in a 

separate endorsement. Proposed section 

VI.D.2 would provide that in each loss 

from flood, a single deductible applies 

to losses to the dwelling and all other 

insured property. Proposed section 

VI.D.3 would clarify that the deductible 

does not apply to any loss avoidance 

measures specified in proposed sections 

III.D.2 or III.D.3. Although offering 

separate deductibles for building and 

personal property coverage are longtime conditions of the flood insurance 

policy,69 it is FEMA’s position that 

offering a single deductible for property 

and contents aligns with industry 

standards and customer expectations. A 

single deductible is also permissible 

under the NFIP’s statutory authority, as 

the NFIA sets the minimum deductible 

for buildings,70 but no minimum 

deductible for personal property. Most 

claims for personal property loss also 

contain a building loss claim because 

personal property must be inside a 

building for coverage and it is unlikely 

that personal property would be 

damaged without corresponding 

building losses. The Biggert-Waters 

Flood Insurance Reform Act of 2012 

(BW–12) 71 requires policyholders be 

paid only for damage to property 

covered under their policy and a single 

deductible applying to losses from the 

dwelling and all other property insured 

by the policy comports with this. In 

proposed section VI.D.3, FEMA retains 

the reference to loss avoidance 

measures, but does not retain references 

to condominium loss assessments or 

Increased Cost of Compliance. As 

mentioned previously, the Homeowner 

Flood Form would not cover 

condominium units, and would include 

ICC coverage through an endorsement. 

e. Loss Settlement 

FEMA proposes in section VI.E, ‘‘Loss 

Settlement,’’ to simplify the provisions 

regarding loss settlement compared to 

the Dwelling Form’s section on the same 

(see section VII.R). This section would 

make it clear that replacement cost 

value—the method of valuation using 

the amount that it would cost to replace 

an asset—rather than actual cash value, 

would be the default loss settlement. 

(As noted previously, a homeowner 

policyholder seeking coverage at actual 

cash value may do so by endorsement.) 

Section VI.E.1 would explicitly state 

that the policy provides both 

replacement cost value and actual cash 

value as possible methods of settling 

losses based on whether property is 

insured to value. (1) Section VI.E.1.a 

would apply replacement cost value to 

the dwelling, if at the time of loss, the 

coverage limit that applies to the 

dwelling is 80 percent or more of full 

replacement cost immediately before the 

loss or is the maximum coverage limit 

available under the NFIP. It would also 

apply replacement cost value to claims 

arising under Coverage B or C of the 

policy. Extending replacement cost 

value loss settlement beyond Coverage 

A to Coverage B and C aligns the Form 

with customer expectations and 

comports with other proposed changes 

for consistency across coverages. (2) 

Section VI.E.1.b would apply actual 

cash value if the dwelling is not eligible 

for replacement cost value because it 

does not meet the conditions of VI.E.1.a, 

(insured to value) or if actual cash value 

is specified in an endorsement (allowing 

homeowner policyholders to elect 

actual cash value loss settlement at the 

time of policy inception, with an 

appropriately adjusted premium 

requirement reflecting the lowered 

expected loss).72 Proposed section 

VI.E.1 would not retain special loss 

settlement, as it is only applicable to 


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73Any payment for mitigation efforts must be 

within statutory limits and within the context of 

repairs of damaged items where applicable. 

74See 42 U.S.C. 4001 et seq generally. Note that 

42 U.S.C. 4001 addresses the intent of Congress to 

create a program that is not strictly a flood 

insurance program; 42 U.S.C. 4014(a) authorizes the 

agency to conduct studies and investigation for 

premium rate estimation; 42 U.S.C. 4101b 

authorizes the agency to map flood risk; 42 U.S.C. 

4102 authorizes the agency to conduct studies and 

investigations for land management, floodplain 

management, and zoning; 42 U.S.C. 4122 authorizes 

the agency to study perils other than flood; and 42 

U.S.C. 4127(c) authorizes the agency to utilize 

appropriations for studies. 

75E.g., many insurers offer defensive driving 

discounts for automobile policies, premium credits 

if a policyholder installs a security system in his or 

her home, a reduction in premium for a commercial 

liability policy if the business has sprinkler systems 

installed throughout, etc. In essence, these efforts 

‘‘pay’’ for actions pre-loss through reductions in 

premium collected. 

76See Bulletin W–13029, ‘‘Proper Invocation and 

Usage of the Appraisal Clause Provisions in the 

Standard Flood Insurance Policy’’ (May 15, 2013), 

found at https://nfipservices.floodsmart.gov/sites/ 

default/files/w-13029.pdf (last accessed Aug. 28, 

2023). 

77 In traditional claims handling, one first 

addresses eligibility (i.e., is there a valid policy, 

insurable interest, etc.?), then coverage (i.e., is there 

a loss caused by flood?), then the scope of the loss 

(i.e., how much damage did floodwater cause?), 

then finally pricing (i.e., the value of the loss items). 

For the NFIP, appraisal only comes into play when 

there is a dispute regarding pricing (i.e., the insurer 

and policyholder agree on eligibility, coverage, and 

scope, just not on price). Many states, by contrast, 

use appraisal in a variety of other ways, such as 

determining causation (especially when there are 

multiple perils) or other aspects of the claim. 

Because each state has specific insurance laws that 

govern in the absence of a Federal law on point, 

appraisal often serves as a ‘‘catch-all’’ for a range 

of dispute resolution programs that exist for 

insurance which vary from state-to-state. 

certain mobile homes (which would not 

be covered under the Form). 

Proposed section VI.E.2, 

‘‘Replacement Cost Value Settlement,’’ 

would provide that if the loss is subject 

to replacement cost value under 

VI.E.1.a, the insurer would pay to repair 

or replace the damaged dwelling or 

other buildings at the described location 

or covered personal property, but not 

more than the lesser of (1) the coverage 

limit applicable to the loss as shown on 

the declarations page; (2) the 

replacement cost of the damaged part of 

the dwelling using materials of like kind 

and quality and for like use; or (3) the 

amount necessary to repair or replace 

the damaged part of the dwelling for 

like use. Proposed section VI.E.2 would 

also provide that where the loss is 

subject to replacement cost value and 

the dwelling is rebuilt at a new location, 

the insurer would pay only the cost that 

would have been incurred if the 

dwelling had been rebuilt at its former 

location. Proposed section VI.E.3, 

‘‘Actual Cash Value,’’ would provide 

that if actual cash value loss settlement 

applies, the insurer would pay the lesser 

of the actual cash value of the covered 

property, or the policy limits stated on 

the declarations page. Compared to the 

Dwelling Form, these sections contain 

conforming edits (such as not retaining 

the distinction between primary and 

nonprimary residences), and 

nonsubstantive edits for readability. 

These sections would also not retain the 

special situations listed in the Dwelling 

Form where only actual cash value 

applies, consistent with other proposed 

changes. 

FEMA proposes a new section VI.E.4, 

‘‘Flood Mitigation Expenses,’’ to give 

customers and those who have suffered 

loss additional options to receive 

payment for modest mitigation efforts.73

Section VI.E.4.a would provide that the 

insurer would reimburse for post-loss 

expenses that mitigate against future 

flood events as long as post-loss 

expenses do not exceed the policy 

limits. Section VI.E.4.b would allow the 

homeowner policyholder to choose to 

replace any damage under Coverage A 

or B with Flood Damage Resistant 

Materials; after completing installation 

of these materials, the homeowner 

policyholder may request 

reimbursement. Section VI.E.4.c would 

allow the homeowner policyholder to 

choose to elevate his or her machinery 

and equipment above a basement or 

enclosure. Such elevated machinery or 

equipment must be elevated to a height 

reasonably expected to avoid future 

direct physical loss by or from flood. 

After elevating machinery and 

equipment, the homeowner 

policyholder may request 

reimbursement. The NFIP is not strictly 

an insurance program, but rather a 

program that combines studying flood 

risk, mapping it, creating national 

minimum floodplain management 

standards, and transferring flood risk.74

Under these revisions, FEMA would not 

only pay to repair damaged property to 

the status quo ante, it would pay for the 

additional higher costs of flood damage 

resistant materials or additional labor to 

move machinery and equipment. In the 

same way that many insurers currently 

take efforts to reduce the likelihood or 

size of future claim payments pre-loss,75

these revisions would allow FEMA to 

pay for similar actions, just after the 

loss. Ultimately, the coverage is there to 

help the homeowner policyholder 

recover; FEMA anticipates that the 

premiums tied to the coverage choices 

would signal the underlying risk and 

promote mitigation efforts. 

Lastly, proposed section VI.E.5 would 

provide that the Form is not a valued 

policy and would explain that a valued 

policy is a policy in which the payable 

amount in the event of a total loss is 

agreed upon by the insured and insurer. 

This reference puts the homeowner 

policyholder on notice that, in the event 

of a total loss, the homeowner 

policyholder would not automatically 

receive the policy limits. Although the 

Dwelling Form also states that it is not 

a valued policy, it contains this 

statement in the Definitions section. 

FEMA proposes to place this in the 

Form’s Loss Settlement section (1) 

because this is the only location where 

it uses the term, and (2) to acknowledge 

the frequency with which insurers cite 

to the term in denial letters, so that 

homeowner policyholders would better 

understand the policy’s loss parameters. 

f. Appraisal 

In section VI.F, ‘‘Appraisal,’’ FEMA 

proposes to revise provisions regarding 

appraisal to more closely mirror the 

NFIP’s guidance issued by bulletin,76 as 

appraisal carries a different meaning for 

the NFIP than it does for property 

insurance under some state laws.77

Under section VI.F, if the homeowner 

policyholder and the insurer fail to 

agree on the replacement cost value, or 

if applicable, actual cash value, and are 

thus unable to settle the amount of loss, 

either party may demand an appraisal of 

the loss. Section VI.F.1 outlines the 

conditions before a homeowner 

policyholder can request an appraisal. 

Before requesting an appraisal, the 

homeowner policyholder must agree 

with the insurer on a list of damaged 

items to be appraised (VI.F.1.a) and 

must have complied with proof of loss 

requirements (VI.F.1.b). (If the 

homeowner policyholder is uncertain 

about their loss and has not finalized a 

proof of loss claim, the appraisal 

process is not appropriate). Section 

VI.F.1.c would provide that appraisal is 

only available when the dispute 

involves the price to be paid for the 

covered property. Other disputes, such 

as disputes regarding coverage or 

causation, or the extent of the loss, 

would not be able to be resolved 

through the appraisal process. Section 

VI.F.2, ‘‘Appraisal Process,’’ retains the 

language from section VII.M of the 

Dwelling Form with minor conforming 

changes regarding actual cash value and 

replacement cost value, and clarifying 

that the timeframes are in calendar days, 

consistent with other proposed changes 

in the form. In proposed section VI.F.3, 

FEMA seeks to more closely mirror the 

guidance set out by previous bulletins to 

confirm that appraisals can only be used 

when it would result in complete 

resolution of the entire claim and 


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78FEMA notes that while the Agency does permit 

assignment of ICC benefits to a community in the 

context of grants, the extent to which the FEMA 

will continue to permit assignment of ICC benefits 

would be addressed in the ICC Endorsement. 

79For instance, a homeowner policyholder may 

want actual cash value while an assignee might 

want replacement cost value coverage, a 

homeowner policyholder may want additional 

living expenses while an assignee might not, or a 

policyholder may not want to cover other buildings 

under Coverage B, while an assignee might want to 

cover one or more. In addition, to the extent that 

FEMA permits different values for sublimits (e.g., 

loss avoidance, etc.), this is another choice that may 

differ between homeowner policyholders and 

assignees. 

cannot be used to resolve only part of 

the claim or to determine the value of 

some items and not others. 

8. Section VII: General Conditions 

Proposed section VII, ‘‘General 

Conditions,’’ would contain items of 

general applicability to the policy. 

While article VII of the Dwelling Form 

contains most of these provisions, the 

Homeowner Flood Form would 

reorganize them alphabetically to make 

it easier for the policyholder to find 

relevant information. It would also add 

three new provisions (‘‘Death,’’ 

‘‘Headings and Captions,’’ and ‘‘Your 

Options After Our Denial’’) discussed in 

further detail below. 

In proposed section VII.A, 

‘‘Abandonment,’’ FEMA proposes to 

add the word ‘‘unilaterally’’ so that the 

provision would read that the 

policyholder may not unilaterally 

abandon to the insurer, damaged or 

undamaged property insured under the 

policy. This is to ensure an agreement 

for salvage, as the policyholder cannot 

invoke salvage for the insurer. Proposed 

section VII.B, ‘‘Amendments, Waivers, 

and Assignment,’’ would break out the 

first two sentences of section VII.C of 

the Dwelling Form into separate clauses 

for readability, and would change the 

reference to ‘‘Federal Insurance 

Administrator’’ to ‘‘Administrator’’ to 

conform with the policy’s proposed 

terminology. Although the current 

Dwelling Form provides conditions 

under which the policyholder may 

assign the policy, proposed section 

VII.B.3 would prohibit the assignment 

of the policy or claim to any other party 

in order to avoid claims-related issues 

in states that allow assignment of 

benefits.78 Because the increased choice 

and flexibility of the Homeowner Flood 

Form allows homeowner policyholders 

to tailor it to their needs, it is FEMA’s 

position that it would not be necessary 

or desirable for a homeowner 

policyholder to assign the policy to 

another party.79 This is because the 

policy, as tailored by the original 

homeowner policyholder, would not 

necessarily provide adequate insurance 

coverage for the assignee. Eliminating 

the option to assign should result in 

more fulsome discussions between 

agents and homeowner policyholders 

regarding available options and would 

allow each homeowner policyholder to 

choose the options that are right for 

them, rather than having to accept a 

policy tailored to another individual’s 

choices. 

Proposed section VII.C, ‘‘Death,’’ 

would be a new provision and would 

provide that in the event of the 

homeowner policyholder’s death during 

the policy term, the coverage under the 

policy would continue automatically for 

any other insured(s). If no other insured 

exists, the policy would insure the 

administrator, executor, or other legal 

representative of the homeowner 

policyholder’s estate as previously 

determined by the homeowner 

policyholder or the intestacy laws of the 

state where the described location is 

located, but only for the dwelling, 

building(s), and personal property of the 

deceased at the time of death. Issues 

involving the death of a homeowner 

policyholder arise with frequency. 

These can include situations where 

insurers deny claims by invoking the 

assignment clause, questions arise over 

whether the spouse was a resident of the 

same household, or more simply, 

remaining family who are still grieving 

the loss become frustrated with the 

insurance process. Addressing this 

scenario in the policy would align it 

with industry practice, as homeowners’ 

policies include a death clause, and 

would reduce complexity for the 

remaining insured(s) and/or family of 

the deceased. 

Proposed section VII.D, ‘‘Duplicate 

Policies Not Allowed,’’ would provide 

that FEMA would not insure personal 

property at the described location under 

more than one NFIP policy. It would 

further provide that if there is more than 

one NFIP policy for buildings at the 

described location, FEMA would apply 

the NFIP rules concerning duplicate 

policies and cancel or nullify one of the 

policies, whichever is applicable, which 

may result in a refund. Compared to the 

Dwelling Form (see sections I.F and 

VIII.D.3), the proposed language here 

contains updates to capture the ability 

to have other insurance from a private 

carrier (but not multiple NFIP policies), 

to reflect 44 CFR 62.5(e), ‘‘Cancelation 

or Nullification of Duplicate NFIP 

Policies,’’ as well as other minor and 

conforming updates for clarity and 

readability. 

Proposed section VII.E, ‘‘Headings 

and Captions,’’ would be a new 

provision and would provide that the 

headings and captions used in the 

policy are for convenience of reference 

only and shall not affect or control the 

meaning or interpretation of any of the 

terms, conditions, or provisions of the 

policy. FEMA proposes this provision 

for clarity and to prevent dependence 

on meta-textual information. 

In sections VII.F, ‘‘Mortgage Clause,’’ 

VII.G, ‘‘No Benefit to Bailee,’’ VII.H, 

‘‘Other Insurance,’’ and VII.I, ‘‘Pair and 

Set Clause,’’ FEMA proposes to retain 

the language from the Dwelling Form 

with minor edits. Proposed section 

VII.F, ‘‘Mortgage Clause,’’ would retain 

the language in the Dwelling Form at 

VII.N and make minor conforming and 

clarifying changes. For example, FEMA 

proposes conforming edits to proposed 

VII.F.1 to describe coverages of 

buildings, and edits to proposed VII.F.4 

to extend to mortgagees the same right 

to access claim files as that available to 

the named insured as they both have 

equity in the property and both are 

already entitled to receive loss payment. 

Proposed section VII.G., ‘‘No Benefit to 

Bailee,’’ would retain the language from 

the Dwelling Form at section VII.I as 

this language is industry standard, with 

minor grammatical edits. FEMA 

proposes minor conforming edits to 

proposed section VII.H, ‘‘Other 

Insurance,’’ (such as updating cross 

references and not retaining the 

language in the Dwelling Form at 

section VII.B.2 regarding insurance for 

condominium associations, as the 

Homeowner Flood Form would only 

cover homeowners). Proposed section 

VII.I, ‘‘Pair and Set Clause,’’ would 

include language from the Dwelling 

Form at section VII.A with grammatical 

changes, except that it would not retain 

the language regarding depreciation as 

the loss settlement provision would be 

at replacement cost value, not actual 

cash value. 

Proposed section VII.J, ‘‘Salvage,’’ 

would retain the language from section 

VII.L of the Dwelling Form at proposed 

VII.J.2, but would include a new 

provision at VII.J.1 stating that after 

providing written notice, the insured 

may take all or any part of the damaged 

property at the value that the parties 

agree upon or its appraised value. (This 

provision is currently in the Dwelling 

Form at VII.H.3.b, ‘‘Our Options After A 

Loss’’ [proposed VI.B of the Homeowner 

Flood Form], and FEMA proposes to 

include this language in proposed 

section VII.J instead because it relates to 

salvage). 

In proposed section VII.K, 

‘‘Subrogation,’’ FEMA proposes to 

rewrite the provision on subrogation 

because the language in the Dwelling 

Form at VII.P has been a source of 


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80Flood Insurance Reform Act of 2004, Public 

Law 108–264 (2004). 

81 42 U.S.C. 4129 

confusion to homeowner policyholders. 

Section VII.K would define 

‘‘subrogation’’ upfront to mean that the 

homeowner policyholder’s right to 

recover for a loss that was partly or 

totally caused by someone else is 

automatically transferred to the insurer, 

to the extent the insurer has paid for the 

loss. It would state that the insurer may 

require the homeowner policyholder to 

acknowledge the transfer in writing. The 

provision would continue by explaining 

the subrogation process in more detail, 

providing that whenever the insurer 

pays for a loss under the policy, the 

insurer is subrogated to the homeowner 

policyholder’s right to recover for that 

loss from any other person. After the 

loss, the homeowner policyholder must 

deliver all related papers to the insurer, 

must cooperate with the insurer, and 

may not interfere with or do anything 

that would prevent the insurer’s right to 

recover this money. If the insurer pays 

for a loss under this policy and the 

homeowner policyholder: (1) makes a 

claim against any person who caused 

the loss; and (2) recovers any money 

from that person, the homeowner 

policyholder must return the insurer’s 

payment before keeping the recovered 

funds, without regard to any noncovered losses occurring at the 

described location. 

Finally, FEMA proposes a new 

section VII.L, ‘‘Your Options After Our 

Denial,’’ to place the options that a 

homeowner policyholder has after 

denial in a single location within the 

General Conditions section. Proposed 

section VII.L.1, ‘‘Request Additional 

Payment,’’ would provide that the 

homeowner policyholder may request 

additional payment and amend the 

initial proof of loss, and must submit 

this request of amended proof of loss as 

set forth in proposed VI.A. It would 

further provide that a denial letter does 

not extend the deadline in proposed 

VI.A.3 to submit a proof of loss. This 

section would reaffirm to homeowner 

policyholders that there are additional 

administrative options through which 

they can come to a resolution with the 

insurer on a claim. Giving homeowner 

policyholders options to work with 

insurers in order to reach a satisfactory 

agreement aligns with industry practice 

and should result in fewer appeals or 

lawsuits. Proposed section VII.L.2, 

‘‘Appeal,’’ would provide that if the 

insurer denies a claim, in whole or in 

part, the insurer would send the 

homeowner policyholder a denial letter. 

If the homeowner policyholder wishes 

to appeal the denial, he or she must 

send an appeal letter explaining his or 

her position and a copy of the denial 

letter to FEMA within 60 calendar days 

of the date of the insurer’s letter. It 

would further provide that filing an 

appeal to FEMA does not limit or affect 

the homeowner policyholder’s ability to 

file suit, or to seek an additional 

payment or file an amended proof of 

loss with the insurer. Proposed section 

VII.L.2 incorporates requirements from 

the Flood Insurance Reform Act of 

2004 80 on the appeals process and other 

conforming changes (i.e., specifying 

‘‘calendar’’ days). Proposed section 

VII.L.3, ‘‘File a Lawsuit Against Us,’’ 

would retain the language currently in 

the Dwelling Form at VII.F, ‘‘Suit 

Against Us,’’ with minor grammatical 

changes. 

Finally, in the signature section, 

FEMA proposes to update the signee 

from ‘‘Administrator, Federal Insurance 

Administration,’’ toFederal Insurance 

Adminstrator, a position set in statute.81

D. Appendix A(101): Increased Cost of 

Compliance Coverage Endorsement 

As mentioned above, in addition to 

the Homeowner Flood Form, FEMA also 

proposes to offer five endorsements to 

expand or exclude coverage for various 

risks. The first of these endorsements is 

for Increased Cost of Compliance (ICC) 

coverage. Under section III.D of the 

Dwelling Form, when an insured 

building sustains a flood loss and the 

community declares the building 

substantially or repetitively damaged, 

ICC coverage will pay up to $30,000 for 

the cost to elevate, demolish, or relocate 

the building. FEMA proposes to offer 

this additional coverage for the cost to 

comply with State or community 

floodplain management laws or 

ordinances after a direct loss from flood 

not within the Homeowner Flood Form 

itself, but as an endorsement to the new 

Form. 

The ICC Endorsement would modify 

the Homeowner Flood Form in six 

locations. First, it would add to section 

II of the Form definitions for 

‘‘Community Official’’ and ‘‘Compliance 

Activities.’’ ‘‘Community Official’’ 

would mean the non-Federal official 

enforcing floodplain management 

ordinances that meet or exceed the 

minimum standards of the NFIP on a 

damaged building. ‘‘Compliance 

Activities’’ would mean legally required 

mitigation activities approved by the 

Administrator that reduce or remove the 

risk of future flood damage to a building 

at the described location. Second, it 

would add to section III, ‘‘What We 

Cover,’’ a new section E, ‘‘Increased 

Cost of Compliance.’’ Section E would 

provide that FEMA would pay up to the 

ICC limit for the cost of compliance 

activities actually incurred when 

required by a community official. It 

would specify that use of this coverage 

is at the homeowner policyholder’s 

option, but the combined payments 

from FEMA under Coverage A, Coverage 

B, and Coverage E may not exceed the 

maximum amount of coverage permitted 

by the NFIA. It would also require that 

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. It would also explicitly state that 

the Homeowner Flood Form, as 

modified by the ICC Endorsement, 

would not cover (1) anything already 

excluded anywhere in the policy, (2) 

costs of compliance activities for either 

flood loss pre-dating the current loss, or 

for additions or improvements to the 

dwelling made after the loss occurred, 

and (3) any standard that does not meet 

the minimum requirements of the NFIP. 

Third, the ICC Endorsement would add 

to section IV, ‘‘Exclusions,’’ a sentence 

to paragraph IV.A.2. to specify that the 

economic loss exclusion would not 

apply to any eligible activities described 

in added Coverage E. Fourth, it would 

amend section V, ‘‘Policy Conditions,’’ 

by adding to paragraph E.1 that in the 

event of a flood associated with a 

Presidentially-declared disaster or 

emergency, the Administrator may 

extend the timeframe for requesting ICC 

for a period not to exceed 6 years from 

the date of loss. Fifth, it would amend 

section VI, ‘‘Procedures and Duties 

When A Loss Occurs,’’ by expanding 

paragraph D.3 to specify that the 

deductible would not apply to ICC 

coverage, and adding to paragraph E, 

‘‘Loss Settlement,’’ a sixth subparagraph 

to specify that FEMA would pay a 

homeowner policyholder for eligible 

ICC costs when (s)he has completed his 

or her compliance activities as soon as 

reasonably possible after the loss, not to 

exceed 2 years. Finally, the ICC 

Endorsement would modify section VII, 

‘‘General Conditions,’’ to provide an 

exception to the prohibition against 

assigning the policy in paragraph B.3 to 

allow a homeowner policyholder to 

assign a claim under Coverage E to a 

state or local government or nonprofit 

organization to apply toward the nonFederal cost share of a Federal grant. 

FEMA proposes offering ICC coverage 

as an endorsement to the new Form 

rather than providing it within the Form 

(as the Dwelling Form does) to 

streamline its implementation. Its 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8308 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

82 42 U.S.C. 4011(b). 

83See section VII.R.1.c. The Dwelling Form uses 

actual cash value as the default in the following 

contexts: when the dwelling is underinsured 

(coverage purchased is <80% of replacement cost 

value and less than the maximum amount available 

under the NFIP); two-to-four family dwellings; units 

not used exclusively as single-family dwellings; 

detached garages; personal property; appliances, 

carpets, carpet pads; outdoor awnings, outdoor 

antennas/aerials, or other outdoor equipment; postloss abandoned property that remains at the 

described location; and any residence that is not a 

principal residence. Art. VII.R.4. 

84This endorsement would not cover expenses 

beyond those directly related to an inhabitable 

dwelling, such as tolls for an increased commute or 

childcare costs. 

placement within the text of the current 

Dwelling Form has created transactional 

difficulties as ICC involves more 

stakeholders than the rest of the 

insurance contract. While the Dwelling 

Form generally involves just the 

policyholder and the WYO, ICC 

involves the homeowner policyholder, 

WYO, and local officials. Moreover, 

while the timelines for processing 

claims under Coverages A, B, and C 

occur relatively quickly under current 

practices, the timelines for processing 

ICC claims can extend for years. This is 

largely because homeowner 

policyholders must receive a letter from 

the relevant community official, 

permits, claims for partial and complete 

payments, certificates of occupancy, etc. 

Because ICC is a different coverage with 

a different process, offering it as an 

endorsement would help create a break 

between the two tracks and enable the 

NFIP to more easily monitor and 

analyze information concerning ICC 

coverage. For any homeowner 

policyholder who could receive ICC 

benefits, FEMA would automatically 

add the ICC Endorsement to the policy. 

(This endorsement is the only one out 

of the five proposed endorsements that 

would be ‘‘mandatory’’ in this 

respect).82 In almost every possible 

situation for the Homeowner Flood 

Form, the homeowner policyholder will 

have ICC coverage but FEMA is still 

proposing that ICC coverage be available 

through an endorsement to allow for 

more flexibility in future flood policy 

form revisions. 

E. Appendix A(102): Actual Cash Value 

Loss Settlement Endorsement 

The Dwelling Form uses actual cash 

value rather than replacement cost value 

as the general default loss settlement.83

Most property owners, however, intend 

to insure buildings for replacement cost 

or up to the statutory limit of $250,000 

for a single-family building in order to 

come as close as possible to being made 

whole. It is for this reason that FEMA 

proposes to offer replacement cost value 

as the Homeowner Flood Form’s default 

loss settlement. Nevertheless, FEMA 

proposes to offer homeowner 

policyholders the choice of insuring 

their building for actual cash value for 

a reduced premium. 

The Actual Cash Value Loss 

Settlement Endorsement would modify 

the Homeowner Flood Form to provide 

actual cash value as the only available 

valuation for settling covered losses. It 

would amend subparagraph E.1 (‘‘Loss 

Settlement’’) in section VI to provide 

that the policy offers actual cash value 

loss settlement, and remove from the 

Homeowner Flood Form subparagraph 

E.2, ‘‘Replacement Cost Value Loss 

Settlement.’’ 

F. Appendix A(103): Temporary 

Housing Expense Endorsement 

The Dwelling Form expressly 

excludes coverage for additional living 

expenses incurred while the insured 

building is being repaired or is unable 

to be occupied for any reason. (See 

section V.A.5). The insurance industry, 

however, generally offers coverage for 

additional living expenses. Accordingly, 

FEMA proposes to offer homeowner 

policyholders the option of purchasing 

additional coverage to receive 

compensation in the event they are 

displaced from their insured property 

due to flood while their home is 

undergoing repair. This optional 

coverage would align with the NFIA’s 

directive to provide coverage ‘‘against 

loss resulting from physical damage to 

or loss of real property or personal 

property,’’ 42 U.S.C. 4011(a), because it 

would protect homeowner 

policyholders from certain economic 

harms directly resulting from physical 

damage to their home. Making this 

optional coverage available would also 

decrease the need for post-disaster 

housing assistance through FEMA’s 

Individuals and Households Program. 

The Temporary Housing Expense 

Endorsement would cover temporary 

housing expenses actually incurred by 

homeowner policyholders up to the 

coverage sublimit for an additional 

premium when the dwelling is 

uninhabitable or the homeowner 

policyholder is ordered to evacuate.84

The endorsement would modify 

Homeowner Flood Form section III, 

paragraph A.4.a to state that the policy 

does not cover loss of use of the 

described location while the dwelling is 

inaccessible, being repaired, or is 

uninhabitable for any reason except as 

provided in III.D.4 as modified by 

endorsement. The endorsement would 

also modify section III by redesignating 

paragraph D.4 as D.5, and adding a new 

subparagraph D.4, ‘‘Temporary Housing 

Expense.’’ This subparagraph would 

provide two scenarios where FEMA 

would cover temporary housing 

expenses actually incurred by the 

homeowner policyholder up to the 

coverage sublimit for an additional 

premium received. First, FEMA would 

provide coverage when the dwelling at 

the described location is uninhabitable 

due to direct physical loss by or from 

flood. Payment in this scenario would 

be for the shortest amount of time 

required to repair or replace the damage 

or, if the homeowner policyholder 

permanently relocates, the shortest time 

required for his or her household to 

settle elsewhere. Second, FEMA would 

provide coverage when a legally 

authorized official has issued an 

evacuation or civil order for the 

community in which the dwelling is 

located calling for measures to preserve 

life and property from the peril of flood. 

Payment in this scenario would be for 

the shortest time period covered by the 

order. This subparagraph would also 

provide that the time period for 

temporary housing expense coverage is 

not limited by the expiration of the 

policy term specified in I.D, but in any 

case, would not exceed 24 consecutive 

months from the date of the covered 

flood loss. 

G. Appendix A(104): Basement 

Coverage Endorsement Approaches 

The current Dwelling Form restricts 

coverage in a basement. Under the 

Dwelling Form, FEMA limits basement 

coverage to drywall for walls and 

ceilings and the cost to nail it, 

unfinished and unfloated and not taped, 

to the framing (section III.A.8.a(3)); 

nonflammable insulation (section 

III.A.8.a(10)); foundation elements; 

stairways; and certain kinds of 

machinery and equipment. In addition, 

the Dwelling Form limits personal 

property coverage in a basement to 

portable or window type air 

conditioning units, clothes washers and 

dryers, and non-walk-in food freezers 

and food in any freezer as long as these 

are installed in their functioning 

locations and, if necessary for operation, 

connected to a power source (section 

III.B.3). 

As FEMA describes above in sections 

III.A.3.a and III.A.3.c of this preamble, 

FEMA includes in the proposed 

Homeowner Flood Form limited, 

simplified coverage for basements. 

FEMA recognizes, however, that 

homeowners may value their basements, 

and contents within, more than the 

amount covered by the policy. FEMA 

has offered this restrictive coverage for 


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four decades and the proposed new 

Homeowner Flood Form would not 

change that coverage absent an 

endorsement. FEMA believes the 

limited basement coverage creates 

challenges in the flood insurance sales 

context for homeowner policyholders 

who want more coverage than the 

current Dwelling Form allows and in 

the recovery context for homeowner 

policyholders who need it to more fully 

recover from a flood event. 

FEMA further believes that expanded 

basement coverage would not 

significantly impact the financial 

soundness of the NFIP. Basements are 

not typical in many of the areas that 

experience a higher frequency of 

hurricanes and catastrophic flooding, 

e.g., Florida and Louisiana. In its efforts 

to develop this coverage, FEMA 

undertook an analysis of the impact of 

expanded basement coverage on the 

financial soundness of the NFIP. Using 

Superstorm Sandy (2012) as a proxy for 

catastrophic flooding in an area with a 

higher incidence of basements, FEMA 

determined that it would have paid an 

additional 6 percent in loss payments 

(over $500,000,000 in expenses) if every 

claim involving a basement opted for 

expanded coverage. FEMA notes that it 

would have brought in additional 

premium to offset this amount, though 

it had no means to determine the 

specific amounts of premium across all 

policies. The relatively low percentage 

for the overall cost reflects that NFIP 

coverage already pays for multiple highcost items typically located in 

basements (e.g., HVAC, water heaters, 

etc.). While a low percentage, there is a 

corresponding benefit to policyholders 

who would no longer have to make up 

that difference as they recovered from 

the flood event. FEMA believes that 

offering better coverage may attract 

policyholders in other regions of the 

country that do not typically face 

catastrophic hurricane risk but where 

basements are more prevalent; however 

FEMA seeks comment on whether 

offering additional basement coverage 

would attract policyholders. 

Given these factors, FEMA considered 

three approaches to basement coverage: 

(1) the current approach of retaining the 

current restricted coverage, with a focus 

on training agents selling flood 

insurance to further discuss what 

constitutes a basement under the 

Homeowner Flood Form and the 

restrictions on coverage at the point of 

sale to better inform homeowner 

policyholders and those seeking to 

purchase new homeowner flood 

insurance of the coverage restrictions; 

(2) FEMA’s preferred approach of 

offering an endorsement to the proposed 

Homeowner Flood Form that would 

allow homeowner policyholders to 

remove the restrictions currently on 

basement coverage for an additional 

premium (‘‘Basement Coverage 

Endorsement’’); and (3) a third approach 

of offering an endorsement (a) to allow 

homeowners with split-level homes or 

sunken room(s) to remove the 

restrictions for additional premium, 

while also allowing limited building 

coverage, for additional premium, and 

(b) to homeowner policyholders who 

need to occupy (occupancy) part of their 

basement to remove the restrictions to 

allow limited coverage, for additional 

premium. Occupancy would focus 

additional coverage on rooms in the 

basement such as bedrooms, bathrooms, 

and kitchens/kitchettes. Maintaining 

current basement coverage restrictions 

and providing additional training to 

agents under the first approach could 

better equip agents to explain the 

coverage and identify basements at the 

time of application. The potential 

benefit of this approach could increase 

basement coverage understanding for 

insurance agents that could be conveyed 

to homeowners during the time of 

application. FEMA rejected this 

basement coverage alternative approach 

because the current restricted basement 

coverage fails to adequately meet the 

insurance needs of the American 

people. FEMA does not expect 

additional insurance agent training to 

greatly improve homeowner 

policyholder coverage understanding 

because homeowners only have one 

standard flood insurance policy for 

selection. This lack of consumer choice 

limits policyholder engagement of 

coverage details and discussions with 

agents at the time of application. 

FEMA’s preferred approach is the 

approach (approach two) to remove 

restrictions, as it would offer 

homeowner policyholders a Basement 

Coverage Endorsement where they can 

purchase coverage up to specified 

sublimits for an additional premium. 

For approach two, FEMA proposes that 

the endorsement to remove restrictions 

currently on basement coverage for an 

additional premium. (‘‘Basement 

Coverage Endorsement’’) would replace 

section III.A.2 (‘‘Limited Coverage for 

Basements and Enclosures’’) with a new 

subparagraph A.2, ‘‘Coverage for 

Basements.’’ This subparagraph would 

state that for an additional premium 

received, FEMA insures up to the 

selected Coverage A sublimit against 

direct physical loss by or from flood to 

the basement. FEMA further proposes 

that the endorsement for approach two 

would also replace III.C.3.a 

(‘‘Limitations on Property in a Basement 

or in an Enclosure’’) with a new 

subparagraph C.3.a providing that (1) for 

an additional premium, FEMA would 

insure up to the selected Coverage C 

limit against direct physical loss by or 

from flood to personal property in a 

basement; and (2) in an enclosure, the 

policy would only cover appliances 

installed in their functioning locations 

and, if necessary for operation, 

connected to a power source. The 

proposed Homeowner Flood Form 

enhanced basement coverage (approach 

two) addresses several deficits currently 

present in the Dwelling Form and 

enhances available coverage for 

homeowners. It is aligned with common 

industry practice, which standardizes 

available coverage to homeowners with 

basements, and coverage is clear to the 

homeowner policyholder, reducing 

asymmetric information. The levels of 

coverage and risk of damage would be 

appropriately reflected in the premiums, 

directly signaling to homeowner 

policyholders their level of risk. For 

these reasons, FEMA selected the 

Homeowner Flood Form (approach 2) 

for this proposed rule. 

Approach three includes two 

potential endorsements (approaches 3.1 

and 3.2). First, approach 3.1 would 

include an endorsement option for splitlevel and sunken rooms that would 

replace the definition of ‘‘Basement’’ in 

proposed paragraph C.2 of section II to 

define a basement as any area of a 

building having its floor level below 

ground level on all sides, regardless of 

design or use and further clarify that an 

area of a building is below ground level 

when the land directly touching the 

exterior of the building is above its floor 

level; and that an area of a building is 

presumed to be below ground level 

when it is necessary to walk up steps or 

a slope to reach the land surrounding 

the building. A professional land survey 

or report may rebut this presumption. 

Further, the ‘‘Basement’’ definition 

under approach three would clarify that 

a sunken or recessed portion of a room 

or area that is otherwise above ground 

level is not a basement and that the first 

level below the main entrance to the 

dwelling, commonly referred to as a 

split-level home, is not a basement. 

Approach 3.2 would offer an additional 

endorsement option for basement 

occupancy. This additional 

endorsement would amend the 

proposed Homeowner Flood Form to 

replace paragrah A.2 of section III, 

specific to building coverage, on what 

FEMA covers with the following 

language: ‘‘Basement occupancy. For 

additional premium received, we insure 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8310 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

a bedroom, bathroom, or kitchen in a 

basement when required for the 

occupancy of the dwelling, where no 

other room in another part of the 

dwelling meets this need.’’ 

The Design and Occupancy 

approaches (approaches 3.1 and 3.2) 

address specific deficits currently 

present in the Dwelling Form and 

enhances available coverage for certain 

homeowners. These approaches 

introduces choice and expands coverage 

options for homeowners that meet the 

Design or Occupancy eligibility. FEMA 

considers the Design and Occupancy 

alternative approaches a partial 

improvement but did not select this 

alternative because of the limited 

portion of eligible homeowner 

policyholders and the complexity of the 

approach for FEMA, homeowner 

policyholders, and insurance agents. 

FEMA seeks comment on the agency’s 

current restricted coverage (approach 

one), the agency’s preferred approach of 

removing the restrictions on current 

coverage (approach two) and the 

additional approach to basement 

coverage considered (approaches 3.1 

and 3.2). Specifically, FEMA seeks 

comment on whether the Homeowner 

Flood Form should either (1) retain the 

current restricted coverage, with a focus 

on training agents selling flood 

insurance to further discuss what 

constitutes a basement under the 

Homeowner Flood Form and the 

restrictions on coverage at the point of 

sale to better inform homeowner 

policyholders and those seeking to 

purchase new homeowner flood 

insurance of the coverage restrictions; 

(2) offer an endorsement to the proposed 

Homeowner Flood Form that would 

allow homeowner policyholders to 

remove the restrictions currently on 

basement coverage for an additional 

premium (‘‘Basement Coverage 

Endorsement’’); or (3) offer an 

endorsement to allow homeowners with 

split-level homes or sunken room(s) or 

for basement occupancy to remove the 

restrictions for additional premium, 

while also allowing limited building 

coverage, for additional premium. 

In drafting this rule, FEMA undertook 

a preliminary analysis of its policies in 

force for properties with a basement (as 

of September 30, 2022) to see how 

basement coverage would impact the 

cost of insurance for policyholders. The 

cost of insurance includes annual 

premiums, fees, assessments, and 

surcharges. Assuming all other rating 

factors remain the same, the analysis of 

the proposed rule across all policies 

with the default basement coverage, i.e., 

restricted, would result in a total annual 

average cost of insurance of $1,827. 

Fully expanded basement coverage, 

proposed by FEMA as an endorsement, 

would result in a total annual average 

cost of insurance of $2,756. The 

alternative, limited expansion of 

basement coverage, would result in a 

total annual average cost of insurance of 

$2,518. 

In total, for all NFIP policyholders 

with a basement as of September 30, 

2022, those paying a total annual cost of 

insurance of $1,000 or less would pay 

an average of $648 annually with 

restricted basement coverage, $952 

annually with fully expanded basement 

coverage, and $870 annually with a 

limited expansion of basement coverage. 

Policyholders who currently pay 

between $1,000 to $2,000 annually 

would see the total annual cost of 

insurance at $1,426, $2,140, and $1,970, 

respectively. For policyholders who 

currently pay between $2,000 to $3,000 

annually, the total annual cost of 

insurance would be $2,451, $3,706, and 

$3,416, respectively. This is shown 

more fully in the chart directly below, 

which appears in FEMA’s Regulatory 

Impact Analysis (located in the docket) 

under the heading ‘‘Table 9.21: Cost of 

Insurance Scenarios for Single Family 

Home with Basements, 2022$’’: 

TABLE 1—COST OF INSURANCE SCENARIOS FOR SINGLE FAMILY HOME WITH BASEMENTS

[2022$] 

Current range of cost of insurance 

Policyholders 

in Force (PIF) 

distribution 

(%) 

Average 

Replacement 

Cost Value 

(RCV) 

($) 

Average 

risk-based 

cost of 

insurance 

with current 

basement 

coverage 

($) 

Hypothetical average 

risk-based cost of insurance 

($) 

Fully 

expanded 

basement 

coverage 

($) 

Limited 

expansion of 

basement 

coverage 

($) 

Note 1 Note 2 Note 3 Note 4 

2022$ 2022$ 2022$ 2022$ 

$0–$1,000 ........................................................................ 41 $596,319 $648 $952 $870 

$1,000–$2,000 ................................................................. 29 562,203 1,426 2,140 1,970 

$2,000–$3,000 ................................................................. 14 567,245 2,451 3,706 3,416 

$3,000–$4,000 ................................................................. 7 601,448 3,447 5,229 4,793 

$4,000–$5,000 ................................................................. 4 638,888 4,456 6,772 6,180 

$5,000–$6,000 ................................................................. 2 657,637 5,444 8,290 7,488 

$6,000–$7,000 ................................................................. 2 675,366 6,453 9,841 8,837 

$7,000–$8,000 ................................................................. <1 755,335 7,451 11,377 10,198 

$8,000–$9,000 ................................................................. <1 827,914 8,452 12,917 11,545 

$9,000–$10,000 ............................................................... <1 979,791 9,439 14,435 12,894 

$10,000–$11,000 ............................................................. <1 1,082,634 10,462 16,008 14,310 

$11,000–$12,000 ............................................................. <1 1,356,362 11,508 17,618 15,815 

$12,000–$13,000 ............................................................. <1 914,762 12,388 18,972 17,075 

$13,000 ............................................................................ <1 3,671,109 13,209 20,235 18,123 

Average ..................................................................... ........................ 592,982 1,827 2,756 2,518 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8311 

H. Appendix A(105): Builder’s Risk 

Endorsement 

FEMA has witnessed issues arise for 

homeowner policyholders who are 

constructing a building, but who do not 

have a building (as defined by the SFIP) 

at the time of loss. The Dwelling Form 

covers buildings under construction at 

section III.A.5. When FEMA provides 

coverage for a building under 

construction, it typically issues the 

policy in the builder’s name. If the 

builder fails to assign the policy to the 

property owner prior to loss, however, 

both the property owner and the builder 

would be left without coverage. (The 

property owner would lack coverage 

because he or she was not listed on the 

policy, and the builder would lack 

coverage because it would no longer 

have an insurable interest in the 

property). In some cases, FEMA issues 

the policy jointly to the builder and 

property owner. If the parties do not 

revise the policy to remove the builder’s 

name after completion, however, this 

could cause considerable delays because 

FEMA would have to stop and void the 

claim payment, then reissue the 

payment once the builder’s name is 

removed. To simplify coverage, align 

with property and casualty practices, 

and eliminate insurable interest issues, 

the Homeowner Flood Form would 

require that the building has been 

constructed, while the Builder’s Risk 

Endorsement would cover buildings 

under construction. 

The Builder’s Risk Endorsement 

would name the builder as an additional 

insured party and provide business 

rules within the endorsement to avoid 

automatic renewal billing of the policy 

for the builder. Section I of the 

endorsement would replace section I.D 

of the Homeowner Flood Form with 

language that confirms the builder’s 

coverage expires on the date the 

dwelling is completed and occupied, 

the date the endorsement is deleted by 

the insurer, and the Homeowner Flood 

Form becomes effective in its entirety; 

or at 12:01 a.m. on the last day of the 

policy term stated on the declarations 

page. This change ensures the builder is 

not a named party to the policy 

following completion of construction. In 

addition, this endorsement would 

define ‘‘Construction’’ as any new 

development of land at the described 

location resulting in a building or 

alteration or repair of a building, 

including a dwelling at the described 

location. This endorsement would also 

replace section III of the Form in its 

entirety. While generally mirroring the 

Form’s language in section III, the 

endorsement would offer changes to 

clarify the coverage for the builder. 

Proposed section III.A.1.a of the 

endorsement would clarify that 

coverage is for the dwelling under 

construction at the described location. It 

would further specify that if the 

dwelling is not yet walled or roofed as 

described in the definition of 

‘‘building,’’ then coverage applies (1) 

only while construction is in progress, 

or (2) if construction is halted only for 

a period of 90 consecutive days 

thereafter. This is to limit the use of this 

endorsement to a building actively 

under construction, as FEMA would not 

offer coverage for an incomplete 

building that has been sitting for several 

months. Proposed section III.A.1.b of 

the endorsement would remove the 

words ‘‘alteration, or repair’’ from the 

phrase ‘‘materials and supplies to be 

used for construction’’ because these 

words are superfluous given that they 

are included in this endorsement’s 

definition of ‘‘Construction.’’ Proposed 

section III.A.2 would make a minor 

organizational change. Proposed section 

III.C would clarify that unlike the 

proposed Homeowner Flood Form, 

personal property would not be covered 

until the dwelling is completed and 

occupied, the endorsement is deleted by 

the insurer, and the Homeowner Flood 

Form becomes effective in its entirety. 

The endorsement would also revise 

section V of the Form by adding a 

section to V.B to allow only one renewal 

for a policy with a Builder’s Risk 

Endorsement attached to it. Finally, the 

endorsement would add language in 

section VII.F of the Form regarding 

mortgagees to clarify that a holder of a 

construction loan upon which draws 

have been paid shall be considered the 

‘‘mortgagee’’ under the policy. 

V. Regulatory and Economic Analysis 

A. Executive Order 12866, Regulatory 

Planning and Review, as Amended, and 

Executive Order 13563, Improving 

Regulation and Regulatory Review 

Executive Orders 12866 (‘‘Regulatory 

Planning and Review’’), as amended by 

Executive Order 14094 (‘‘Modernizing 

Regulatory Review’’) and 13563 

(‘‘Improving Regulation and Regulatory 

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. 

This proposed rule is designated as a 

significant regulatory action that is 

economically significant under section 

3(f)(1) of Executive Order 12866. 

Accordingly, OMB has reviewed it. This 

Regulatory Impact Analysis (RIA) 

provides an assessment of the potential 

costs, benefits, and transfer payments 

resulting from the National Flood 

Insurance Program: Standard Flood 

Insurance Policy, Homeowner Flood 

Form under the criteria of Executive 

Orders 12866 and 13563. 

FEMA proposes to amend the 

Standard Flood Insurance Policy (SFIP) 

at 44 CFR part 61, Appendix A. The 

existing Dwelling Form, found at 44 

CFR part 61, Appendix A(1), and 

proposed Homeowner Flood Form 

(Appendix A(4)) are the subjects of this 

RIA. Specifically, the proposed 

Homeowner Flood Form would replace 

the current Dwelling Form for one-tofour family residences, excluding 

mobile homes, trailers, condominiums, 

and rental properties, which would 

continue to use the Dwelling Form. The 

Homeowner Flood Form would include 

language altering the availability and 

limits of flood insurance coverage in 

numerous ways. The most substantial of 

these are in the areas of coverage for 

basements, enclosures, secondary 

buildings that are not detached garages, 

and replacing Actual Cash Value (ACV) 

with Replacement Cost Value (RCV) as 

the valuation method for structural 

property and contents. 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8312 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

85See, e.g., The Institutes’ Handbook of Insurance 

Policies, American Institute for Chartered Property 

Casualty Underwriters, 12th ed. (2018) (containing 

copies of modern property casualty forms). The 

Insurance Services Office’s template homeowners 

form (‘‘HO–3’’ form) appears on page 5 and 

demonstrates the simplicity of this policy compared 

to the SFIP. The NFIP has a high volume of 

inquiries on the SFIP, further demonstrating the 

challenges in reading and interpreting the SFIP. 

Policy inquiries generally make up 43 percent of the 

total inquiries received by FEMA’s ‘‘Ask the 

Experts’’ tracking system between 2019 and May 

2021. 

86NFIP has experienced significant challenges 

because FEMA is tasked with two competing 

goals—keeping flood insurance affordable and 

keeping the program fiscally solvent. Emphasizing 

affordability has led to premium rates that in many 

cases do not reflect the full risk of loss and produce 

insufficient premiums to pay for claims. In turn, 

this has transferred some of the financial burden of 

flood risk from individual property owners to the 

public at large. https://files.gao.gov/reports/GAO21-119SP/index.html See ‘‘HIGH-RISK Series: 

Dedicated Leadership Needed to Address Limited 

Progress in Most High-Risk Areas,’’ found at https:// 

www.gao.gov/assets/gao-21-383t.pdf#:∼:text=

Dedicated%20agency%20leadership%20is%20

essential%20to%20address%

20the,have%20made%20to%20reduce%20the

%20government%E2%80%99s%20highrisk%20challenges (last accessed Aug. 28, 2023). 

87FEMA used data from the NFIP’s PIVOT 

database to determine the number of policies that 

TABLE 2—SUMMARY OF THE IMPACTS OF THE PROPOSED RULE

[2019$] 

Category Summary

Proposed Changes ...... Basement Endorsement: Allows homeowner policyholder to enhanced coverage, introducing choice regarding the level 

of coverage. 

Enclosures: Reference to flood zone and FIRM status would be removed, which would extend coverage restrictions 

currently applicable to post-FIRM buildings in SFHAs to all enclosures, regardless of FIRM status or location. 

Other Buildings: Expands the definition of ‘‘other buildings’’ beyond just detached garages to all other buildings at the 

insured property. 

Property Valuation Method: Formally defines ‘‘replacement cost value’’ and makes it the default method of property 

valuation for both structural property and contents, thereby replacing the ‘‘actual cash value’’ valuation method in 

most instances. 

Loss Mitigation: Covering Flood Damage Resistant Materials; adjusting the limits to imminent loss protection. 

Personal Property: Also referred to as ‘‘contents.’’ Availability of coverage changes in basements, enclosures, other 

buildings, other locations. Limits on certain items changed. 

Death of Homeowner Policyholder: Upon the death of the homeowner policyholder, automatically continues coverage 

provided under the policy for any other insured, or for a legal representative of the estate if another insured does not 

exist. 

Temporary Housing Expense Endorsement: Offers homeowner policyholders the option of purchasing additional coverage to receive compensation in the event they are displaced from their insured property due to flood. 

Other: All changes are addressed in the Marginal Analysis Table in Appendix A. 

Affected Population ...... Property owners of one-to-four family residences within the over 22,500 communities participating in NFIP. A total of 

2,806,642 distinct policies as of 2019. 

Cost Savings ................ Qualitative cost savings by reductions in litigation costs, reductions of fraudulent claims, and time savings. 

Costs (qualitative) ........ None. 

Costs (quantitative) ...... Annualized implementation and familiarization costs of $706,477 and $651,896 discounted at 3 and 7 percent respectively. 

Benefits (qualitative) .... Premiums more reflective of actual risk. 

Environmental benefits from loss mitigation. 

Extending coverage beyond death of homeowner policyholder improves fairness and human dignity. 

Reduces the need for Federal disaster aid. 

More closely aligns with property insurance industry standards. 

Benefits (quantitative) .. None. 

Transfers ...................... Transfer payments between FEMA and the homeowner policyholder are generally through premiums, claims, and fees 

and overhead. FEMA estimates this rule would result in annualized transfer payments of $253,321,497 and 

$252,835,214 from homeowner policyholders to FEMA in the form of additional premiums, discounted at 3 percent 

and 7 percent respectively; $166,221,455 and $165,902,372 from FEMA to policy holders in the form of claims payments, discounted at 3 and 7 percent; and, $87,100,042 and $86,932,843 from homeowner policyholders to States, 

FEMA, and insurance companies in the form of fees and overhead, discounted at 3 and 7 percent respectively. 

Need for Regulation 

The National Flood Insurance Act of 

1968 (NFIA) requires FEMA to provide 

by regulation the ‘‘general terms and 

conditions of insurability . . . 

applicable to properties eligible for 

flood insurance coverage.’’ 42 U.S.C. 

4013(a). To comply with this 

requirement, FEMA adopts the Standard 

Flood Insurance Policy (SFIP) in 

regulation, which sets out the terms and 

conditions of insurance. See 44 CFR 

part 61, Appendix A. FEMA must use 

the SFIP for all flood insurance policies 

sold through the NFIP. See 44 CFR 

61.13. The SFIP is a single-peril (flood) 

policy that pays for direct physical 

damage to insured property. There are 

currently three forms of the SFIP: the 

Dwelling Form, the General Property 

Form, and the Residential 

Condominium Building Association 

Policy (RCBAP) Form. 

The current Dwelling Form is out of 

date and no longer aligned with 

insurance industry standards for 

homeowners of one-to-four family 

residences. It is difficult to understand 

and cumbersome for policyholders and 

insurance agents alike.85 Keeping the 

SFIP modern, unburdensome, and 

improving flexibility are key elements to 

cultivating and administering an 

effective flood insurance program. This 

enables FEMA to better meet the needs 

of the American people and close the 

insurance gap.86 Revising the 

regulations is necessary to implement 

these changes to the SFIP for 

homeowners. 

Affected Population 

The population of affected 

homeowner policyholders would be 

property owners of one-to-four family 

residences who were previously covered 

by the Dwelling Form and would now 

be covered by the Homeowner Flood 

Form. As of 2019, there were 3,174,934 

residential policies covered using the 

Dwelling Form. Of that number, FEMA 

estimates that 88.4%, or 2,806,642 

policyholders, were property owners 

residing in the insured one-to-four 

family residence.87 FEMA would 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8313 

would be affected by this proposed rule. PIVOT is 

a web-based system designed to help facilitate and 

consolidate in one system the NFIP’s core business 

processes including, but not limited to: validation 

of insurance policies, claims, and data; complex 

modeling; website hosting (including 

floodsmart.gov); claims administration; policy 

management; claims review; approvals; and status 

inquiries. FEMA’s PIVOT database can be found at 

https://www.dhs.gov/publication/dhsfemapia-050- 

national-flood-insurance-program-nfip-pivot-system 

(last accessed Aug. 28, 2023). 

88Historical Consumer Price Index for All Urban 

Consumers (CPI–U): U.S. city average, all items, 

index averages. Accessed November 2022. https:// 

www.bls.gov/cpi/tables/supplemental-files/ 

historical-cpi-u-202106.pdf. 

continue to use the Dwelling Form to 

insure landlords, renters, and owners of 

mobile homes, travel trailers, and 

condominium units. 

The population of affected Write Your 

Own (WYO) companies includes 61 

companies as of 2019. Of the 61 

companies, 2 had fewer than 10 

policies, 15 companies had between 11 

and 500 policies, 11 companies had 

between 501 and 5,000 policies, 22 

companies had between 5,001 and 

50,000 policies, 8 companies had 

between 50,001 and 250,000 policies, 2 

companies had between 250,001 and 

500,000 policies, and 1 company had 

553,187 policies. 

Baseline 

Pursuant to OMB Circular A–4, FEMA 

assessed the impacts of this proposed 

rule against a baseline. The baseline 

used for this analysis is the ‘‘no action’’ 

baseline, or what the world would be 

like absent the proposed changes. The 

no action baseline is the scenario where 

no changes are made to the existing 

Dwelling Form and the projections over 

the next 10 years assuming the same 

climate conditions that exist today, and 

accounts for projected housing growth. 

It includes the value of claims payments 

and premiums estimated over the next 

10 years if the current Dwelling Form 

were to continue to be used for property 

owners of one-to-four family residences. 

FEMA recognizes that it cannot 

precisely predict or forecast future flood 

events over a 10-year period, given their 

unpredictable nature and therefore a 

future 10-year period of flood insurance 

claims could vary drastically from the 

2010–2019 period analyzed; however, 

these are the best data available to 

derive the estimates. 

Costs 

The policy change would have 

implementation and familiarization 

costs. FEMA expects that States, WYOs, 

and, at the time of renewal, 

policyholders would spend time 

familiairizing themselves with this rule. 

In addition, FEMA anticipates adding 

additional training over three years for 

SFIP updates to the standard annual 

training package provided to insurers. 

The cost of the training is borne by 

FEMA who is responsible for 

developing the content. The annual 

training is one that insurance agents are 

required to attend each year, with the 

training content changing year to year 

but the number of training hours 

required remaining the same. Since the 

training hours required for insurers is 

not impacted by the rule, FEMA 

assumes companies would neither 

expand the number of hours of training 

given to agents in response to the policy 

changes proposed here and training 

costs for agents would not be different 

from the baseline. The familiarization 

and training cost estimateshave been 

adjusted for inflation using Consumer 

Price Index (CPI–U) data and reported 

in the table below in year 2019 

dollars.88 The familiarization cost and 

new training content is expected to total 

$6.4 million, or $705,963 and $791,133 

annualized using a 3 percent and 7 

percent discount rate, respectively. 

FEMA does not anticipate new costs 

for existing homeowner policyholders. 

At the time of renewal, existing 

homeowner policyholders would have 

the choice to engage their agent or not 

engage their agent. The policy defaults 

will provide similar coverage to what 

they currently receive if the homeowner 

policyholder chooses to do nothing. 

NFIP outreach, whether directly by 

FEMA or through the WYOs, would 

highlight the availability of choices and 

opportunities to customize coverage. 

However, agents could also quote new 

options at renewal time and give 

homeowner policyholders options there, 

akin to how agents currently may 

suggest additional coverage amounts 

when not currently insuring to statutory 

limits. 

TABLE 3—ESTIMATED COSTS OVER A 10 YEAR PERIOD

[2019$] 

Year FEMA 

training costs 

State and WYO 

familiarization 

costs 

Total costs Discounted 

at 3% 

Discounted 

at 7% 

1 ............................................................. $1,800,000 $51,483 $1,851,483 $1,797,556 $1,730,358 

2 ............................................................. 1,778,064 0 1,778,064 1,675,996 1,553,030 

3 ............................................................. 2,784,767 0 2,784,767 2,548,457 2,273,200 

4 ............................................................. 0 0 0 0 0 

5 ............................................................. 0 0 0 0 0 

6 ............................................................. 0 0 0 0 0 

7 ............................................................. 0 0 0 0 0 

8 ............................................................. 0 0 0 0 0 

9 ............................................................. 0 0 0 0 0 

10 ........................................................... 0 0 0 0 0 

Total ................................................ 6,362,831 51,483 6,414,315 6,026,394 5,556,588 

Annualized ............................... .............................. .............................. .............................. 705,963 791,133 

Benefits 

FEMA was unable to quantify the 

benefits of this proposed rule because 

data does not explicitly exist for the 

types of benefits that would be incurred. 

The benefits of this rule would include 

a more accurate signaling of risk to 

homeowner policyholders through 

additional coverage choices and 

associated premium increases, thus 

incentivizing them to reduce their risks, 

environmental benefits of loss 

mitigation, reducing moral hazard, 

qualitative benefits of extending 

coverage beyond the death of a 

homeowner policyholder, reducing the 

need for Federal assistance, and 

collaborating with industry stakeholders 

to create a policy that meets the needs 

of those involved. 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8314 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

89For additional context about potential 

policyholder costs, FEMA calculated hypothetical 

insurance cost scenarios for homeowners with 

basements under the proposed endorsement 

coverage option located in the RIA document Table 

6.16 of this rule. 

The benefits of this rule would also 

include increasing fairness through 

clearer communication of flood risk, 

additional flexibility and choice for 

homeowner policyholders, and claims 

payments that cover a greater portion of 

loss. Additionally, this rule would allow 

claims payments when the original 

homeowner policyholder is deceased, 

causing less stress for surviving family 

members. 

Transfers 

The impacts the proposed rule would 

have on transfer payments are reflected 

in premiums and associated claims 

payments resulting from the proposed 

changes in coverage. As these changes 

to premiums and claims payments are 

monetary payments from homeowner 

policyholders to FEMA or FEMA to 

homeowner policyholders that do not 

affect total resources available to 

society, these effects are not a cost but 

rather a transfer payment. The main 

areas of these proposed changes to 

coverage are in basements, enclosures, 

other buildings, and property valuation 

method. Several additional changes are 

less substantial but collectively 

impactful and also result in transfer 

payments. 

The policy changes would generally 

result in additional coverage, and 

therefore higher expected claims 

payments for homeowner policyholders 

in aggregate. These higher expected 

claims payments would be matched by 

higher premiums. Premiums are 

calculated by actuarial formulas which 

take into account the expected claims 

payments and the fees and overhead 

associated with administering flood 

insurance.89 FEMA estimates this 

proposed rule would result in 

annualized transfer payments of 

$253,321,497 and $252,835,214 from 

policyholders to FEMA in the form of 

additional premiums, discounted at 3 

percent and 7 percent respectively; 

$166,221,455 and $165,902,372 from 

FEMA to policyholders in the form of 

claims payments, discounted at 3 and 7 

percent; and $87,100,042 and 

$86,932,843 from policyholders to 

States, FEMA, and insurance companies 

in the form of fees and overhead, 

discounted at 3 and 7 percent. 

TABLE 4—ESTIMATED TRANSFER PAYMENTS OVER A 10-YEAR PERIOD

[2019$] 

Year 

A. 

Premiums/transfers 

from policyholders 

to FEMA 

B. 

Expected losses/ 

transfers from FEMA 

to policyholders 

C. 

Fees and overhead/ 

transfers from 

policyholders to 

FEMA, insurance 

companies, and states 

1 ................................................................................................... $246,705,082 $161,879,976 $84,825,106 

2 ................................................................................................... 248,234,654 162,883,631 85,351,023 

3 ................................................................................................... 249,773,708 163,893,510 85,880,199 

4 ................................................................................................... 251,322,305 164,909,649 86,412,656 

5 ................................................................................................... 252,880,503 165,932,089 86,948,415 

6 ................................................................................................... 254,448,362 166,960,868 87,487,495 

7 ................................................................................................... 256,025,942 167,996,026 88,029,918 

8 ................................................................................................... 257,613,303 169,037,601 88,575,703 

9 ................................................................................................... 259,210,506 170,085,634 89,124,872 

10 ................................................................................................. 260,817,611 171,140,164 89,677,447 

Total ...................................................................................... 2,537,031,979 1,664,719,146 872,312,832 

Year 

Premiums/transfers 

from policyholders 

to FEMA 

3% Discount rate 7% Discount rate 

1 ................................................................................................... $246,705,082 $239,519,497 $230,565,497 

2 ................................................................................................... 248,234,654 233,984,969 216,817,761 

3 ................................................................................................... 249,773,708 228,578,326 203,889,748 

4 ................................................................................................... 251,322,305 223,296,613 191,732,583 

5 ................................................................................................... 252,880,503 218,136,943 180,300,304 

6 ................................................................................................... 254,448,362 213,096,497 169,549,687 

7 ................................................................................................... 256,025,942 208,172,520 159,440,089 

8 ................................................................................................... 257,613,303 203,362,320 149,933,288 

9 ................................................................................................... 259,210,506 198,663,269 140,993,341 

10 ................................................................................................. 260,817,611 194,072,797 132,586,448 

Total ...................................................................................... 2,537,031,976 2,160,883,752 1,775,808,745 

Annualized ..................................................................... ........................................ 253,321,497 252,835,214 

Year 

Expected losses/ 

transfers from FEMA 

to policyholders 

3% Discount rate 7% Discount rate 

1 ................................................................................................... $161,879,976 $157,165,025 $151,289,697 

2 ................................................................................................... 162,883,631 153,533,444 142,268,872 

3 ................................................................................................... 163,893,510 149,985,779 133,785,924 

4 ................................................................................................... 164,909,649 146,520,087 125,808,782 

5 ................................................................................................... 165,932,089 143,134,478 118,307,286 

6 ................................................................................................... 166,960,868 139,827,098 111,253,076 


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Year 

Expected losses/ 

transfers from FEMA 

to policyholders 

3% Discount rate 7% Discount rate 

7 ................................................................................................... 167,996,026 136,596,143 104,619,482 

8 ................................................................................................... 169,037,601 133,439,843 98,381,423 

9 ................................................................................................... 170,085,634 130,356,476 92,515,315 

10 ................................................................................................. 171,140,164 127,344,355 86,998,981 

Total ...................................................................................... 1,664,719,148 1,417,902,728 1,165,228,838 

Annualized ..................................................................... ........................................ 166,221,455 165,902,372 

Year 

Fees and overhead/ 

transfers from 

policyholders to FEMA, 

insurance companies, 

and states 

3% Discount rate 7% Discount rate 

1 ................................................................................................... $84,825,106 $82,354,472 $79,275,800 

2 ................................................................................................... 85,351,023 80,451,525 74,548,889 

3 ................................................................................................... 85,880,199 78,592,548 70,103,824 

4 ................................................................................................... 86,412,656 76,776,526 65,923,802 

5 ................................................................................................... 86,948,415 75,002,467 61,993,018 

6 ................................................................................................... 87,487,495 73,269,400 58,296,612 

7 ................................................................................................... 88,029,918 71,576,379 54,820,609 

8 ................................................................................................... 88,575,703 69,922,478 51,551,866 

9 ................................................................................................... 89,124,872 68,306,793 48,478,025 

10 ................................................................................................. 89,677,447 66,728,443 45,587,467 

Total ...................................................................................... 872,312,834 742,981,029 610,579,911 

Annualized ..................................................................... ........................................ 87,100,042 86,932,843 

TABLE 5—CIRCULAR A–4 ACCOUNTING STATEMENT, YEARS 1–10 

[2019$] 

Category 3 Percent 

discount rate 

7 Percent 

discount rate Source 

Benefits 

Annualized Monetized ............................................................... N/A N/A RIA Section 8. 

Annualized quantified, but unmonetized benefits ...................... N/A N/A 

Qualitative (unquantified) benefits ............................................. • Signaling of risk through premiums reflective 

of risk. 

• Environmental benefits from loss mitigation. 

• Social benefit of extending coverage beyond 

death of homeowner policyholder. 

• Reduces need for Federal assistance. 

• Collaborative with industry; unilaterally 

addresses needs. 

• Increased fairness through clearer 

communication of flood risk; additional 

flexibility and choices for homeowner 

policyholders, and increased claims payments 

Costs 

Total annualized costs ............................................................... $705,963 $791,133 RIA Section 8. 

Transfers 

Annualized Monetized from FEMA to policyholders for claims 

payments (claims payments).

166,221,455 165,902,372 RIA Section 8. 

Annualized Monetized from policyholders to FEMA and Insurance Companies and States for the expected loss portion 

of premiums and the fees, taxes, and overhead portion of 

premiums (expected loss, fees and overhead).

253,321,497 252,835,215 RIA Section 8. 

Category Effects Source 

Effects on State, local, and/or Tribal governments ................... $24,006 in year-1 familiarization costs for 56 

States and Territories. $4,827,686 in total 

additional annual tax revenue across all States 

and Territories due to higher premiums. 

RIA Sections 5, 8. 


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I 
8316 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

90The PIVOT database shows 61 WYOs with 

policies within scope of this analysis in 2019. 

91Small Business Administration Size Standards 

Matched to North American Industry Classification 

System Codes, effective May 2, 2022, found at 

https://www.sba.gov/document/support-table-sizestandards (last accessed Aug. 28, 2023). 

92 Data retrieved from the PIVOT database. 

93For more information about 52.4 percent, see 

Section 5.6 of the Regulatory Impact Analysis, 

located in the docket. 

94See RIA Table 5.3: Premium Breakout. 

Category Effects Source

Effects on small businesses ...................................................... Additional revenue to 12 small WYO 

companies. Total annualized revenue: 

$1,151,914 discounted at 3 percent and 

$1,149,703 discounted at 7 percent. $451 in 

year-1 familiarization costs. 

Regulatory Flexibility Act Analysis (NPRM). 

Effects on wages ....................................................................... None N/A. 

Effects on growth ....................................................................... None N/A. 

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 promulgates a notice of 

proposed rulemaking under 5 U.S.C. 

553, the agency must prepare an Initial 

Regulatory Flexibility Analysis (IRFA) 

unless it determines and certifies 

pursuant to 5 U.S.C. 605(b) that a rule, 

if promulgated, will not have a 

significant impact on a substantial 

number of small entities. FEMA believes 

this rule does not have a significant 

economic impact on a substantial 

number of small entities. In accordance 

with the Regulatory Flexibility Act of 

1980 (RFA), 5 U.S.C. 601 et seq., as 

amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (Pub. L. 104–121, 110 Stat. 857), 

FEMA examined the effects of the 

proposed changes to the SFIP 

Homeowner Form on small entities. A 

small entity may be: A small 

independent business, defined as 

independently owned and operated, is 

organized for profit, and is not 

dominant in its field per the Small 

Business Act (5 U.S.C. 632); a small 

organization, defined as any not-forprofit enterprise which is independently 

owned and operated and is not 

dominant in its field (5 U.S.C. 601); or 

a small governmental jurisdiction 

(locality with fewer than 50,000 people) 

per 5 U.S.C. 601. 

This proposed rule would primarily 

impact individuals and households, 

which are not considered small entities 

under the RFA. However, it would 

impact WYO companies, some of which 

could be small entities. In 2019, there 

were 61 unique WYO companies. WYO 

companies serviced 83.6 percent of 

policies, while 16.4 percent were 

serviced directly by the NFIP. Of the 61 

companies, 2 had fewer than 10 

policies, 15 companies had between 11 

and 500 policies, 11 companies had 

between 501 and 5,000 policies, 22 

companies had between 5,001 and 

50,000 policies, 8 companies had 

between 50,001 and 250,000 policies, 2 

companies had between 250,001 and 

500,000 policies, and 1 company had 

553,187 policies. Most company names 

imply multiple lines of coverage (fire, 

casualty, auto, property, mutual). Of the 

61 unique WYO companies,90 12 meet 

the SBA size standard for a small entity 

(less than $16.5 million in revenue for 

Other Direct Insurance (except Life, 

Health, and Medical) Carriers, NAICS 

524298),91 and 49 of them are large 

companies with greater than $16.5 

million in revenue. These 12 companies 

hold an estimated 1.4 percent of total 

flood insurance premiums, or 1.7 

percent of premiums held by WYO 

companies.92

FEMA estimates that the changes 

proposed through the Homeowner 

Flood Form would, on net, expand 

coverage. This expansion would lead to 

increased or higher claims payment in 

the aggregate. These higher claims 

payments would be matched by higher 

premiums. Premiums are calculated by 

actuarial formulas which take into 

account the expected claims payments 

and the fees and overhead associated 

with administering flood insurance. 

In the RIA, FEMA estimated the fees 

and overhead as a percentage of 

expected losses (i.e., claims payments): 

52.4 percent.93 Of that, 2.9 percentage 

points are for State premium taxes.94

Accordingly, FEMA estimates that the 

fees and overhead expenses that would 

be paid to WYOs as a result of this rule 

are 49.5% of the estimated increase in 

claims payments. 

FEMA estimated the impact of this 

proposed rule on small entities by 

multiplying the total percentage of 

premiums held by the 12 WYO 

companies (1.4 percent) by the total 

estimated increase in Fees and 

Overhead expenses paid to WYOs as a 

result of this proposed rule (i.e., 49.5 

percent of the estimated increase in 

claims payments). 

TABLE 6—ADDITIONAL FEES AND OVERHEAD EXPENSES TO INSURANCE COMPANIES 95

Year 

Increase in 

fees and 

overhead 

expenses for 

all insurance 

companies 

Increase in 

fees and 

overhead for 

small 

companies 

Increase for 

small 

companies 

(discounted 

3%) 

Increase for 

small 

companies 

(discounted 

7%) 

1 ..................................................................................................................... $80,130,587 $1,121,828 $1,089,153 $1,048,437 

2 ..................................................................................................................... 80,627,398 1,128,784 1,063,987 985,924

3 ..................................................................................................................... 81,127,287 1,135,782 1,039,401 927,136

4 ..................................................................................................................... 81,630,276 1,142,824 1,015,384 871,855

5 ..................................................................................................................... 82,136,384 1,149,909 991,922 819,869

6 ..................................................................................................................... 82,645,630 1,157,039 969,002 770,984

7 ..................................................................................................................... 83,158,033 1,164,212 946,611 725,013

8 ..................................................................................................................... 83,673,613 1,171,431 924,738 681,784


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95See RIA Table 8.5: 10-year Transfers 

Discounted at 3 and 7 percent. 

96See RIA section 8.3.2. 

TABLE 6—ADDITIONAL FEES AND OVERHEAD EXPENSES TO INSURANCE COMPANIES 95—Continued 

Year 

Increase in 

fees and 

overhead 

expenses for 

all insurance 

companies 

Increase in 

fees and 

overhead for 

small 

companies 

Increase for 

small 

companies 

(discounted 

3%) 

Increase for 

small 

companies 

(discounted 

7%) 

9 ..................................................................................................................... 84,192,389 1,178,693 903,370 641,131 

10 ................................................................................................................... 84,714,382 1,186,001 882,496 602,903 

Total ........................................................................................................ 824,035,979 11,536,503 9,826,064 8,075,036 

Annualized ....................................................................................... .......................... ........................ 1,151,914 1,149,703 

Applying the 1.4 percent share for 

small WYO companies, FEMA 

estimated an impact to small entities of 

$1,151,914 of additional annualized 

revenue to the small WYO companies 

discounted at 3 percent or $1,149,703 

discounted at 7 percent. The 12 small 

WYOs had a total revenue of 

$949,140,309 in 2019. Applying the 

annual increase in transfers for fees and 

overhead to these WYOs, FEMA 

estimated an increase of 0.12 percent in 

payments to WYOs due to the proposed 

changes to the SFIP Homeowner Form. 

Because these payments are included in 

the premiums paid by policyholders to 

the WYOs to cover the cost of providing 

insurance, FEMA estimates no net 

impact to WYOs as a result of the 

proposed changes. As previously stated, 

the policyholders are not considered 

small entities under the RFA. 

Additionally, FEMA estimated a onetime familiarization cost of $451 per 

company to read and understand the 

changes from this proposed rule.96

FEMA believes that this proposed rule 

would not place these small entities at 

a significant competitive disadvantage, 

cause inefficiency, or lead to 

insolvency. All companies participating 

in the WYO program would be similarly 

affected by this proposed rule. 

Additionally, WYO companies are 

compensated for their participation in 

the program. WYOs may also choose to 

exit the program and transfer their book 

of business citing terms and conditions 

in the WYO Arrangement. 

Pursuant to 5 U.S.C. 605(b), FEMA 

certifies this proposed regulation would 

not have a significant economic impact 

on a substantial number of small 

entities. FEMA invites comments on the 

impact this rule would have on small 

entities. 

C. Unfunded Mandates Reform Act of 

1995 

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. 

D. 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 would 

call for no new collections of 

information under the PRA. This 

proposed rule includes information 

currently collected by FEMA and 

approved in OMB information 

collection 1660–0006 (National Flood 

Insurance Policy Forms). With respect 

to this collection, this proposed 

rulemaking would not impose any 

additional burden and would not 

require a change to the forms, the 

substance of the forms, or the number of 

recipients who would submit the forms 

to FEMA. 

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 


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8318 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

rulemaking does not affect the 1660– 

0006 OMB Control Number’s current 

compliance with the E-Government Act 

of 2002 or the Privacy Act of 1974, as 

amended. DHS/FEMA has concluded 

that the 1660–0006 OMB Control 

Number is already covered by the 

following Privacy Impact Assessments 

(PIA): DHS/FEMA/PIA–050 National 

Flood Insurance Program PIVOT 

System—March 2018. Additionally, 

DHS/FEMA has decided that the 1660– 

0006 OMB Control Number is already 

covered by the DHS/FEMA–003 

National Flood Insurance Program Files, 

79 FR 28747, May 19, 2014, System of 

Records Notice (SORN). 

F. Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175, ‘‘Consultation 

and Coordination with Indian Tribal 

Governments,’’ 65 FR 67249, November 

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 or the Tribe in complying 

with the regulation are provided by the 

Federal Government, or the agency 

consults with Tribal officials. 

FEMA has reviewed this proposed 

rule under Executive Order 13175 and 

has determined that it would not have 

a substantial direct effect 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. 

G. Executive Order 13132, Federalism 

Executive Order 13132, ‘‘Federalism,’’ 

64 FR 43255, August 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.’’ Federal 

agencies must closely examine the 

statutory authority supporting any 

action that would limit the 

policymaking discretion of the States, 

and to the extent practicable, must 

consult with State and local officials 

before implementing any such action. 

FEMA has determined that this 

proposed rule would not have a 

substantial direct effect 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. 

H. National Environmental Policy Act of 

1969 (NEPA) 

Under the National Environmental 

Policy Act of 1969 (NEPA), as amended, 

42 U.S.C. 4321 et seq., an agency must 

consider impacts of its actions on the 

environment and prepare an 

environmental assessment or 

environmental impact statement for any 

rulemaking that has potential to 

significantly affect the quality of the 

human environment. A categorical 

exclusion (CATEX) is a form of NEPA 

compliance that applies to actions that 

do not need to undergo detailed 

environmental analysis because it has 

been determined through experience 

that they typically do not have a 

significant impact on the human 

environment. An agency may apply a 

CATEX if the project fits within the 

identified criteria of the CATEX. 

Rulemaking is a major Federal action 

subject to NEPA. CATEX M1(d) 

included in the list of exclusion 

categories in the Department of 

Homeland Security Instruction Manual 

023–01–001–01, Revision 01, 

Implementation of the National 

Environmental Policy Act, Appendix A, 

issued November 6, 2014, covers 

activities in support of FEMA’s 

administration of the National Flood 

Insurance Program, including revisions 

to the Standard Flood Insurance Policy. 

This proposed rule for the NFIP meets 

CATEX M1(d) and does not require 

further analysis under NEPA. 

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 the agency’s 

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 revise the SFIP by adding a new 

Homeowner Flood Form, which would 

replace the current Dwelling Form as a 

source of coverage for one-to-four family 

residences and provide increased 

options and coverage. In accordance 

with 44 CFR part 9, ‘‘Floodplain 

Management and Protection of 

Wetlands,’’ FEMA determines that the 

changes proposed in this rule would not 

have an effect on floodplains. 

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, 


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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 revise the SFIP by 

adding a new Homeowner Flood Form, 

which would replace the current 

Dwelling Form as a source of coverage 

for one-to-four family residences and 

provide increased options and coverage. 

In accordance with 44 CFR part 9, 

‘‘Floodplain Management and 

Protection of Wetlands,’’ FEMA 

determines that the changes proposed in 

this rule would not have an effect on 

wetlands. 

K. Executive Order 12898 and 14096 

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 

persons the benefits of programs, or 

subjecting persons to discrimination 

because of race, color, or national origin. 

Further, Executive Order 14096, 

‘‘Revitalizing Our Nation’s Commitment 

to Environmental Justice for All,’’ 88 FR 

25251 (Apr. 26, 2023), charges Federal 

agencies to make achieving 

environmental justice part of their 

missions, consistent with statutory 

authority, by identifying, analyzing, and 

addressing the disproportionate and 

adverse human health and 

environmental effects and hazards of 

Federal activities, including those 

related to climate change and 

cumulative impacts of environmental 

and other burdens on communities with 

environmental justice concerns. 

This rulemaking would not have a 

disproportionately high or adverse effect 

on human health or the environment, 

nor would 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, and other information. 

A ‘‘major’’ rule is one that has an 

annual effect on the economy of 

$100,000,000 or more; results in a major 

increase in costs or prices for 

consumers, individual industries, 

Federal, State, or local government 

agencies, or geographic regions; or has 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic and 

export markets. Pursuant to the CRA, 

the Office of Information and Regulatory 

Affairs has designated this rule as 

‘‘major’’ within the meaning of the CRA 

as defined by 5 U.S.C. 804(2), as the 

annual effect on the economy will be 

over $100,000,000. As such, FEMA will 

send this rule to the Congress and to 

GAO pursuant to the CRA at least 60 

days before the effective date of any 

final rule. 

List of Subjects in 44 CFR 61 

Flood insurance, Reporting and 

recordkeeping requirements. 

For the reasons discussed in the 

preamble, FEMA proposes to amend 44 

CFR part 61 as follows: 

PART 61—INSURANCE COVERAGE 

AND RATES 

■ 1. The authority citation for part 61 

continues to read as follows: 

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

101 et seq. 

■ 2. Revise § 61.2 to read as follows: 

§ 61.2 Definitions 

The definitions set forth in part 59 of 

this subchapter apply to this part, 

including the appendices. If an 

appendix defines a term differently, that 

definition controls for the purposes of 

that appendix. 

■ 3. Amend § 61.13 by revising 

paragraph (a) to read as follows: 

§ 61.13 Standard Flood Insurance Policy 

(a) Incorporation of forms. Each of the 

Standard Flood Insurance Policy forms 

included in appendix ‘‘A’’ hereto and by 

reference incorporated herein shall be 

incorporated into the Standard Flood 

Insurance Policy. 

* * * * * 

■ 4. Add Appendix A(4) to Part 61 to 

read as follows: 

Appendix A(4) to Part 61 

Federal Emergency Management Agency, 

Federal Insurance and Mitigation 

Administration, Standard Flood Insurance 

Policy 

Homeowner Flood Form 

Please read this policy carefully. The flood 

insurance provided under this policy is 

subject to limitations, conditions, and 

exclusions. This policy insures only one 

dwelling that is specified on the declarations 

page. 

Section I: Insuring Agreement 

A. Governing Law. The Federal Emergency 

Management Agency (‘‘FEMA’’) provides this 

flood insurance policy under the terms of the 

National Flood Insurance Act of 1968, as 

amended (‘‘Act’’), and title 44 of the Code of 

Federal Regulations. The Act, applicable 

regulations, and federal common law 

exclusively govern this policy and all 

disputes involving this policy. 

B. Conflict With Federal Law. This policy 

does not insure any real or personal property 

that is not eligible for flood insurance 

pursuant to federal law. 

C. Agreement. We will pay you for direct 

physical loss by or from flood to your insured 

property up to the limits stated on the 

declarations page if you: 

1. Paid the full amount due (including 

applicable premiums, surcharges, and fees); 


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2. Complied with all terms and conditions 

of this policy; and 

3. Furnished complete and accurate 

information and statements to us. 

D. Policy Term. This policy will expire at 

12:01 a.m. on the last day of the policy term 

stated on the declarations page. 

E. Liberalization. If we make a change that 

broadens coverage under this edition of our 

policy and that does not require an additional 

premium charge, that change will 

automatically apply to your insurance as of 

the date we implement the change, provided 

that this implementation date falls within 60 

calendar days prior to or during the policy 

term stated in the declarations page. 

F. Our Right of Review. We may at any time 

review the information you give us and 

request additional information from you. We 

may revise your policy based on such review 

or additional information, including revising 

the amounts due from you. 

Section II: Definitions 

A. Use of Pronouns. In this policy: 

1. ‘‘You’’ and ‘‘your’’ refer to the insured(s) 

shown on the declarations page of this 

policy. 

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

insurer providing coverage under this policy. 

B. Flood. In this policy, flood means: 

1. A general and temporary condition of 

partial or complete inundation of normally 

dry land from any of the following: 

a. Overflow of inland or tidal waters; 

b. Unusual and rapid accumulation or 

runoff of surface waters from any source; 

c. Mudflow, which is a river of liquid and 

flowing mud on the surface of normally dry 

land, as when earth is carried by a current 

of water; or 

d. Sudden erosion or undermining of land 

along the shore of a lake or similar body of 

water caused by waves or currents of water 

exceeding anticipated cyclical levels that 

causes collapse or subsidence of land 

resulting in a flood. 

C. Buildings. In this policy, the following 

definitions apply: 

1. Building. A structure, the construction of 

which has been completed, that has a fully 

secured roof and solid, vertical, load-bearing 

walls, and is affixed to a permanent site. 

2. Basement. Any area of a building having 

its floor level below ground level on all sides, 

regardless of design or use. 

a. An area of a building is below ground 

level when the land touching the exterior of 

the building is above its floor level. 

b. An area of a building is presumed to be 

below ground level when it is necessary to 

walk up steps or a slope to reach the land 

surrounding the building. A professional 

land survey or report may rebut this 

presumption. 

3. Enclosure. An area that exists below the 

dwelling and is used in accordance with local 

floodplain management ordinances or law for 

the parking of vehicles, building access, or 

storage. The enclosure is shown on the 

declarations page. 

D. Other Defined Terms. 

1. Act. The National Flood Insurance Act 

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

2. Actual Cash Value. The cost to replace 

an insured item of property at the time of 

loss, less depreciation based on its age and 

condition. 

3. Administrator. The Administrator of the 

Federal Emergency Management Agency or 

designee. 

4. Claim. Your assertion that you are 

entitled to payment for a covered loss under 

the terms and conditions of this policy. There 

is only one claim per flood event. 

5. Declarations Page. A document we 

provide to you based on information that you 

provided to us that summarizes the coverage 

limit(s), premium, insured(s), and other 

information about your policy. The 

declarations page is a part of this policy. 

6. Described Location. The location of the 

insured building. The described location is 

shown on the declarations page. 

7. Direct Physical Loss By or From Flood. 

Actual physical loss or damage to the insured 

property directly caused by a flood. 

8. Dwelling. A building in use as a one-tofour family residence. A dwelling is not a 

mobile home, travel trailer, or a 

condominium unit. 

9. Flood Damage Resistant Materials. 

Building materials identified by the 

Administrator as resistant to flood damage. 

10. Insured(s). Includes you and: 

a. any additional persons identified on the 

declarations page; 

b. any mortgagee or loss payee named in 

your application for insurance, as well as any 

other mortgagee or loss payee determined to 

exist at the time of loss; and 

c. your spouse, if a resident of the same 

household. 

11. Machinery and Equipment. Machinery 

and equipment includes, only when 

contained within a building at the described 

location, functional electrical, plumbing, 

heating, cooling, and safety elements 

necessary for the operation of a building, and 

elevators. Outside of a building, machinery 

and equipment only includes the condenser 

unit for a central air conditioning system, 

heat pump unit for heating and air 

conditioning systems, solar panels, and 

permanently installed whole house standby 

generators when such units are connected to 

and servicing a building at the described 

location. 

12. National Flood Insurance Program 

(NFIP). The program of flood insurance 

coverage and floodplain management 

administered under the Act. 

13. Policy. The entire written contract 

between you and us. It includes: 

a. this Homeowner Flood Form; 

b. the completed application for insurance; 

c. the declarations page; 

d. any endorsement(s) issued to you by us; 

and 

e. any addenda attached to this form by us 

at the time of application or renewal. 

14. Proof of Loss. The proof of loss is a 

signed and sworn statement by you 

containing documentary evidence in support 

of your loss and the amount you are 

claiming. 

15. Replacement Cost Value. The necessary 

cost, without deduction of depreciation, to 

repair or replace an item of property at the 

time of loss with an item of like kind and 

quality. 

Section III: What We Cover 

A. Coverage A—Dwelling 

1. We insure up to the coverage limit on 

the declarations page at the described 

location against direct physical loss by or 

from flood to: 

a. The dwelling. 

b. Materials and supplies to be used for 

construction, alteration, or repair of the 

dwelling or any other building(s) scheduled 

under Coverage B at the described location. 

The materials and supplies must be stored in 

a building at the time of loss. 

2. Limited Coverage for Basements and 

Enclosures. We only cover direct physical 

loss by or from flood to the interior of all 

basements and enclosures as follows: 

a. Machinery and equipment installed and, 

if necessary for operation, connected to a 

power source. 

b. Footings, foundations, posts, pilings, 

piers, or other foundation walls and 

anchorage systems required to support a 

dwelling. 

c. Stairways and staircases directly 

attached to the dwelling. 

d. Unfinished drywall and nonflammable 

insulation. 

3. Dwelling Limitations. 

a. Limitations on mold and mildew. We 

cover damage to the dwelling due to mold or 

mildew caused by a flood only when it is not 

within your control to inspect and maintain 

the property after a flood recedes. 

b. Limitations on power, heating, or 

cooling failure. We cover damage caused by 

a power, heating, or cooling failure that is the 

result of direct physical loss by or from flood 

to covered power, heating, or cooling 

equipment at the described location. 

c. Limitations on flood in the area. We 

cover damage to the dwelling when there is 

a flood in the area and the flood causes: 

(1) water or waterborne material to back up 

through sewers or drains; to discharge or 

overflow from a sump, sump pump, or 

related equipment; or to seep or leak on or 

through the dwelling; or 

(2) losses to the dwelling by or from the 

pressure or weight of standing or resting 

water on or below the surface of the land. 

d. Limitations on pollutants. We pay for 

the testing or monitoring of pollutants after 

a flood only when required by law or 

ordinance. ‘‘Pollutants’’ refers to any 

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. 

4. This policy does not cover: 

a. Loss of use of the described location 

including any living expenses incurred while 

the dwelling is inaccessible, being repaired, 

or is uninhabitable for any reason; 

b. Land and land values; 

c. Lawns, trees, shrubs, plants, growing 

crops, and landscaping; 

d. Any open structures, including but not 

limited to a building used as a boathouse, 

when located entirely in, on, or over water. 

e. Buildings constructed or substantially 

improved after September 30, 1982, when (1) 


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they are located entirely in, on, or over water 

or (2) if they are seaward of mean high tide; 

f. Underground structures and equipment 

that are not located within the dwelling, such 

as wells, septic, sewer, plumbing supply, 

waste lines, gas supply lines, and electrical 

and HVAC system components; 

g. 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; 

h. Containers and related equipment, such 

as tanks containing gases or liquids; 

i. Fences, retaining walls, seawalls, 

bulkheads, wharves, piers, bridges, and 

docks; and 

j. Hot tubs and spas that are not bathroom 

fixtures, and swimming pools, and their 

equipment, such as heaters, filters, pumps, 

and pipes, wherever located. 

B. Coverage B—Other Buildings 

1. We apply the terms of Coverage A to 

other buildings at the described location 

except as modified in III.B.2. 

a. For this Coverage B to apply, the other 

buildings must appear on the declarations 

page. 

b. Use of this coverage is at your option, 

but reduces the dwelling coverage limit 

provided under Coverage A. The maximum 

available coverage limit for other buildings is 

10% of Coverage A limits, regardless of how 

many buildings are scheduled on the 

declarations page. 

2. We do not cover: 

a. Anything already excluded under the 

terms of Coverage A. 

b. Basements or enclosures for any building 

that is not the dwelling. 

c. Any building used or held for use for 

commercial purposes, such as agricultural 

and business use. 

d. Any building(s) at the described location 

that is not owned by the insured, such as a 

building owned by a homeowners 

association. 

C. Coverage C—Personal Property 

1. We insure up to the coverage limit stated 

on the declarations page against direct 

physical loss by or from flood to personal 

property inside a building at the described 

location when: 

a. The property is owned by you or your 

household family members; or 

b. The property is at the described location 

and is owned by non-paying guests or 

laborers. 

2. We insure your personal property 

against direct physical loss by or from flood 

anywhere in the United States as follows: 

a. We will pay no more than 10% of 

Coverage C limits for: 

(1) Personal property located in a building 

at a location other than the described 

location; or 

(2) Personal property located in a storage 

facility building. 

b. The 10% coverage limit in III.C.2.a. will 

not apply if you have moved the personal 

property to a building reasonably safe from 

flood and not in a basement or enclosure due 

to: 

(1) A general and temporary condition of 

flooding in the area near the described 

location, even if the flood does not reach the 

described location; 

(2) An evacuation order or other civil order 

from an authorized local official; or 

(3) Repairs, renovations, or reconstruction 

or other conditions that make the described 

location uninhabitable or unsuitable for the 

storage of property. 

3. Personal Property Limitations. 

a. Limitations on Property in a Basement 

or in an Enclosure. In a basement or an 

enclosure, this policy will only cover 

appliances installed in their functioning 

locations and, if necessary for operation, 

connected to a power source. 

b. Limitations on Property in a Building 

Without Walls on All Sides. This policy will 

only cover personal property in any portion 

of a building that is not fully enclosed when 

it is secured to prevent flotation out of the 

building. 

4. Special Limits. We will pay no more 

than the coverage sublimit specified on the 

declarations page for any claim 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 for 

which the fur represents its principal value; 

e. Portable electronic devices, including 

cell phones, smart phones, video game 

devices, electronic tablets, and laptop 

computers; or 

f. Personal property primarily used for any 

commercial purposes. 

g. No more than 10% of the special limit 

shown on the declarations page may be 

applied to valued paper, metals, or other 

similarly valued objects such as accounts, 

bills, coins, currency, deeds, evidences of 

debt, medals, money, scrip, stored value 

cards, postage stamps, securities, bullion, or 

manuscripts. 

5. We will only pay for the functional 

value of antiques. 

6. We do not cover: 

a. Anything already excluded under 

Coverages A and B; 

b. Loss of use of any personal property at 

the described location; 

c. Personal property not inside a building; 

d. Items of personal property in a basement 

or an enclosure, except as stated in III.C.3; 

e. Personal property in a building 

constructed or substantially improved after 

September 30, 1982 when the building is (1) 

located entirely in, on, or over water or (2) 

seaward of mean high tide; 

f. Personal property located in an open 

structure located in, on, or over water; 

g. Losses to items stored in a digital or 

other intangible format, whether created, 

owned, licensed, or otherwise in your 

possession; 

h. Items held in violation of state or federal 

law; 

i. Living things; and 

j. Any self-propelled vehicle or machine 

capable of transporting a person(s) or cargo, 

by land, water, or by air, including any of its 

equipment and parts. However, this 

limitation does not apply to personal 

property inside a building at the described 

location that is not registered for use on 

public roads, and: 

(1) Used solely to service the described 

location; or 

(2) Designed and used to assist people with 

disabilities. 

D. Coverage D—Other Coverages 

1. Debris Removal 

a. Covered Debris. 

(1) We will pay the labor and expense to 

remove: 

(a) debris from anywhere that comes onto 

or into the insured dwelling or other insured 

buildings at the described location; and 

(b) debris of insured property anywhere. 

(2) If you or a member of your household 

perform the debris removal work, we will 

pay you for the value of this work using the 

federal minimum wage. This coverage does 

not increase any coverage limit stated on the 

declarations page. 

b. Debris Not Covered. This policy does not 

cover the cost to remove: 

(1) debris from other locations on the land 

surrounding the dwelling or other building(s) 

at the described location, or 

(2) any non-covered items of property from 

the dwelling or building(s), even if the 

removal facilitates covered cleanup or 

repairs. 

2. Loss Prevention 

a. Materials and Labor. We will pay up to 

the coverage sublimit specified on the 

declarations page for the expenses you incur 

to protect your insured property from a flood 

or imminent danger of flood. Such expenses 

are limited to the following: 

(1) Your reasonable expenses to buy 

materials reasonably understood to be, or 

commonly used as, temporary measures to 

avoid or reduce the harm from an imminent 

flood, including sandbags, fill for temporary 

levees, and pumps; and 

(2) The value of work, at the federal 

minimum wage, that you or a member of 

your household perform to protect your 

property. 

b. This coverage for materials and labor 

only applies if: 

(1) Damage to the insured property by or 

from flood is imminent; and 

(2) The threat of flood damage is apparent 

enough to lead a reasonably prudent person 

to anticipate flood damage. 

(3) In addition, one of the following must 

occur: 

(i) 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 

(ii) A legally authorized official has issued 

an evacuation order or other civil order for 

the community in which your insured 

property is located calling for measures to 

preserve life and property from the peril of 

flood. 

3. Property Removed to Safety. We will pay 

up to the coverage sublimit specified on the 

declarations page for the reasonable expenses 

you incur to move insured property to a 

secure location other than the described 

location to protect it from flood or the 

imminent danger of flood. Reasonable 


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expenses include the value of work, at the 

federal minimum wage, performed by you or 

a member of your household. 

4. This coverage does not increase the 

Coverage A, Coverage B, or Coverage C limits. 

Section IV: Exclusions 

A. Excluded Losses. We do not pay you for 

damage from: 

1. Other perils; 

2. Economic losses, even if caused by 

flood, whether direct or indirect, including 

losses from a disruption of business, or 

complying with any ordinance or law. 

3. Earth movement, even if the earth 

movement is caused by flood, as follows: 

a. Earth movement includes: 

(1) Earthquake; 

(2) Landslide; 

(3) Subsidence; 

(4) Sinkholes; 

(5) Destabilization; or 

(6) Any other movement such as sinking, 

rising, shifting, expanding, or contracting of 

the earth. 

b. This earth movement coverage exclusion 

does not include: 

(1) Hydrostatic pressure or hydrodynamic 

forces; 

(2) Buoyancy; or 

(3) Frictional force from floodwater moving 

along the surface of the ground. 

4. Gradual erosion caused by the normal 

water action that wears an area of land away 

over time. 

5. Other excluded causes of damage. We do 

not insure for damage caused directly or 

indirectly by any of the following: 

a. The pressure, weight, freezing, or 

thawing of ice; 

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

c. The exposure to water of any form other 

than flood, including failure, stoppage, or 

breakage of water or sewer lines, drains, 

pumps, fixtures, or equipment; 

d. Design, structural, or mechanical 

defect(s); deterioration, rot, or corrosion; or 

insect or rodent infestation; and 

e. Anything you or any member of your 

household does or conspire(s) to do to 

deliberately cause direct physical loss by or 

from flood. 

6. Increase in hazard. We will not cover 

any loss that occurs due to any hazard that 

is increased by you, by any means within 

your control, or with your knowledge. 

B. Flood in Progress. 

1. A flood is in progress when one of the 

following is true: 

a. There is a near certainty of a flood loss 

at the described location from a flood control 

effort such as: 

(1) Opening of a spillway, 

(2) Breaching of a levee, or 

(3) Releasing of water from a dam. 

b. There is a flood at the described 

location. 

2. Loan closing. If this policy became 

effective in connection with a loan closing, 

we will not pay for a loss caused by a flood 

in progress at the time of loan closing. 

3. No loan closing. In all other 

circumstances, we will not pay for a loss 

caused by a flood in progress that existed on 

or before the day you submitted the 

application for coverage under this policy. 

C. Pre-existing Damage. We do not pay you 

for pre-existing damage. Pre-existing damage 

includes: 

1. Flood loss or damage that occurred prior 

to the date of the loss, whether direct 

physical loss or not, and whether paid or 

unpaid on a prior event; and 

2. Damage attributable to any non-flood 

peril that occurred prior to the date of loss. 

Section V: Policy Conditions 

A. Actions and Conditions That Can Void 

Your Policy. 

1. NFIP Ineligibility. This policy is void 

from its inception and has no legal force if: 

a. The described location is in a 

community that was not participating in the 

NFIP on the policy’s inception date and did 

not join or reenter the NFIP during the policy 

term and before the loss occurred; 

b. The described location or other property 

is otherwise not eligible for coverage under 

the Act or regulations of the NFIP, for reasons 

of noncompliance with local floodplain 

ordinances or otherwise; or 

c. Any other federal law prevents coverage 

of property at the described location. 

2. Concealment or Fraud. With respect to 

all insureds under this policy, 

a. This policy is void and has no legal force 

or effect, and cannot be renewed, if before or 

after a loss, you or any other insured or your 

agent have at any time: 

(1) Intentionally concealed or 

misrepresented any material fact or 

circumstance; 

(2) Engaged in fraudulent conduct relating 

to this policy; or 

(3) Knowingly made false statements 

relating to this policy or any other NFIP 

insurance when applying for coverage, when 

making a claim, or at any other time. 

b. This policy will be void as of the date 

acts described in V.A.2.a. were committed. 

B. Policy Renewal. 

1. We must receive the renewal premium 

from you within 30 calendar days of the 

expiration date of your prior policy term. 

2. We will not renew this policy if federal 

law prevents coverage of property at the 

described location. 

C. Cancellation of the Policy by You. 

1. You may cancel this policy when: 

a. You no longer have an insurable interest 

in the subject property; 

b. You are no longer required to maintain 

a flood insurance policy pursuant to federal 

law or lender requirements; or 

c. You have a duplicate NFIP policy. 

2. If you cancel this policy, you may be 

entitled to a full or partial refund of premium 

for the current policy term under the 

applicable rules and regulations of the NFIP. 

D. Reduction and Reformation of Coverage. 

1. If the premium we receive from you is 

not enough to purchase the amount(s) of 

insurance you requested, we will issue the 

policy, but only for the amount of coverage 

that the premium will purchase for a oneyear term. 

2. We will increase the reduced amount of 

coverage described in V.D.1 to the amount 

you originally requested without regard to 

whether a loss occurred, provided that: 

a. We will bill you for the additional 

premium or, if necessary to calculate the 

additional premium, request information 

from you. 

b. You respond to our request for: 

(1) Additional premium within 30 calendar 

days of the date of our bill; or 

(2) Additional information within 60 

calendar days of the date of our request. 

c. Failure to timely respond may result in 

a waiting period for additional coverage if a 

loss has not occurred within the policy term, 

or the settlement of a claim under reduced 

policy limits if a loss has occurred within the 

policy term. 

E. Disaster Conditions. In the event of a 

flood associated with a major disaster or 

emergency declared by the President under 

the Robert T. Stafford Disaster Relief and 

Emergency Assistance Act, the Administrator 

may, after written notice: 

1. Extend the stated timeframes in the 

following sections below: 

a. Proof of Loss, VI.A.3, and VI.A.7, for a 

period not to exceed 365 calendar days from 

the date of loss; and 

b. Policy Renewal, V.B.1, for a period not 

to exceed 60 calendar days from the 

expiration date. 

2. Conditionally waive the requirement in 

VI.A.3 and VI.B.2 that an insured must sign 

or swear to a proof of loss or an adjuster’s 

report. 

3. In accordance with VI.C.3, establish 

special procedures for advance payments to 

insured(s). 

4. Settle losses in accordance with any 

formula established under federal law that 

allocates covered damages amongst multiple 

perils, including flood. 

Section VI: Procedures and Duties When a 

Loss Occurs 

A. Your Duties After a Loss. If the 

described location experiences a direct 

physical loss by or from flood, you must 

comply with all of the following duties: 

1. Give prompt notice to us; 

2. As soon as possible, separate the 

damaged and undamaged property so that we 

may examine it. You must also take all 

reasonable measures to protect covered 

property from any further loss; 

3. Within 90 calendar days after the loss, 

send us a proof of loss, signed and sworn to 

by you, furnishing us with the following 

information: 

a. The date and time of loss; 

b. A brief explanation of how the loss 

happened; 

c. Details of any other insurance that may 

cover some or all of the loss; 

d. Changes in title or occupancy of the 

covered property during the term of the 

policy; 

e. Names of mortgagees or anyone else 

having a lien, charge, or claim against the 

covered property; 

f. A description of all damages to your 

dwelling and other covered buildings and 

detailed repair estimates (if estimates are 

available); and 

g. An inventory of the lost, damaged or 

destroyed property showing the 

(1) Quantity; 

(2) Description; 

(3) Replacement Cost Value or Actual Cash 

Value (whichever is applicable); 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8323 

(4) Amount of loss; 

(5) Evidence that prior flood damage has 

been repaired; 

(6) Any written plans and specifications for 

repair of the damaged property that you can 

reasonably make available to us; and 

(7) All funds actually spent by you 

recovering from the loss. You must attach to 

the inventory copies of all bills, receipts, 

invoices, written estimates, and related 

documents. 

4. In completing the proof of loss, you must 

use your own judgment concerning the 

amount of loss, justify that amount, and sign 

the proof of loss. 

5. You must cooperate with our adjuster 

and other representative(s) in the 

investigation of your claim. 

6. You must make the damaged property 

accessible for inspection. 

7. The insurance adjuster we hire to 

investigate your claim may furnish you with 

a proof of loss form and may help you 

complete it. However, this help is a matter 

of courtesy only and you must still send us 

a proof of loss within 90 calendar days after 

the loss even if the adjuster does not furnish 

the form or help you complete it. 

B. Our Options After a Loss. After a loss 

and at our sole discretion, we may exercise 

the following options: 

1. At such reasonable times and places that 

we may designate: 

a. You must provide us access to the 

damaged property; 

b. If we request, you must submit to 

examination under oath, while not in the 

presence of another insured, and sign the 

transcript from such examination; and 

c. Permit us to examine and make copies 

of all or any relevant portion of: 

(1) Any policies of property insurance 

insuring you against loss and the deed 

establishing your ownership of the insured 

real property; and 

(2) All bills, invoices, receipts and other 

records pertaining to the damaged property, 

or certified copies if the originals are lost. 

2. At our option, we may accept our 

adjuster’s report of the loss in lieu of a proof 

of loss. You must sign the adjuster’s report. 

At our option, we may also require you to 

swear to the report. 

C. Loss Payment. 

1. Adjustment of Claims. 

a. We have not authorized the adjuster to 

approve or disapprove any claim. 

b. 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 calendar days after we receive 

your proof of loss, or within 90 calendar days 

after the insurance adjuster files the 

adjuster’s report signed and, if required by 

us, sworn to by you in lieu of a proof of loss, 

and: 

(1) We reach an agreement with you; 

(2) There is an entry of a final judgment; 

or 

(3) There is a filing of an appraisal award 

with us, as provided in VI.F. of this policy. 

2. If we reject your proof of loss in whole 

or in part, you may: 

a. Accept our denial of your claim; 

b. File an amended proof of loss (see 

VII.L.1) within 90 calendar days of the date 

of the loss; 

c. Exercise your rights under this policy 

including: 

(1) Appeal (see VII.L.2) 

(2) Appraisal (see VI.F) or 

(3) Litigation (see VII.L.3). 

3. Advance Payments. 

a. At our option, we may provide you with 

an advance payment prior to the completion 

of your claim. You may request an advance 

payment after providing the notice of loss 

required in VI.A. Such advance payments 

may include amounts totaling no more than 

5% of the Coverage A coverage limit to an 

insured without regard to VII.F. 

b. We may approve or reject your request 

for an advance payment at any time. Such 

approval or rejection does not affect the final 

adjustment of your claim and does not 

change your duties or our options under this 

policy. 

c. If we provide you with an advance 

payment that exceeds your covered loss, we 

will send you notice in writing of the 

overpayment. You must repay any excess 

amount to us or dispute the validity of the 

overpayment within 30 calendar days of the 

date on our letter. Failure to repay any 

overpayment from us may result in a debt 

collection action by the Federal Government. 

D. Deductible. 

1. When a loss is covered under this policy, 

we will pay only that part of the loss that 

exceeds your deductible amount (subject to 

the applicable coverage limit). Your 

deductible amount is shown on the 

declarations page. 

2. In each loss from flood, a single 

deductible applies to losses to your dwelling 

and all other property insured by this policy. 

3. The deductible does NOT apply to any 

Loss Avoidance Measures specified in III.D.2 

or III.D.3. 

E. Loss Settlement. 

1. This policy provides two possible 

methods of settling losses: Replacement Cost 

Value and Actual Cash Value. 

a. Replacement Cost Value loss settlement, 

described in VI.E.2. applies: 

(1) To your dwelling, if at the time of loss, 

the coverage limit in this policy that applies 

to the dwelling is 80% or more of full 

replacement cost immediately before the loss 

or is the maximum coverage limit available 

under the NFIP. 

(2) To claims arising under Coverage B or 

Coverage C of this policy. 

b. Actual Cash Value loss settlement 

applies: 

(1) If your dwelling is not eligible for 

Replacement Cost Value settlement because 

it does not meet the conditions under 

VI.E.1.a.; or 

(2) If Actual Cash Value is specified in an 

endorsement. 

2. Replacement Cost Value Loss 

Settlement. If your loss is subject to 

Replacement Cost Value settlement under 

VI.E.1.a., the following conditions apply: 

a. We will pay to repair or replace the 

damaged dwelling or other building(s) at the 

described location or personal property 

covered under this policy but not more than 

the lesser of the following amounts: 

(1) The coverage limit that is applicable to 

the loss as shown on your declarations page; 

(2) The replacement cost of that part of the 

dwelling that is damaged using materials of 

like kind and quality and for like use; or 

(3) The amount necessary to repair or 

replace the damaged part of the dwelling for 

like use. 

b. If the dwelling is rebuilt at a new 

location, we will pay you only the cost that 

would have been incurred if the dwelling had 

been rebuilt at its former location. 

3. Actual Cash Value Loss Settlement. If 

actual cash value loss settlement applies, we 

will pay the lesser of the following amounts: 

a. The actual cash value of the covered 

property; or 

b. The policy limits stated on the 

declarations page. 

4. Flood Mitigation Expenses. We will 

reimburse you for post-loss expenses that 

mitigate against future flood events as 

follows: 

a. Post-loss expenses may not exceed the 

policy limits stated on the declarations page. 

b. At your option, you may choose to 

replace any damage under Coverage A or 

Coverage B with Flood Damage Resistant 

Materials. After you complete installation of 

the Flood Damage Resistant Materials, you 

may then request reimbursement. 

c. At your option, you may choose to 

elevate your machinery and equipment above 

a basement or an enclosure. Such elevated 

machinery and equipment must be elevated 

to a height reasonably expected to avoid 

future direct physical loss by or from flood. 

After you complete elevation of the 

machinery and equipment, you may then 

request reimbursement. 

5. This is not a valued policy. A valued 

policy is a policy in which the payable 

amount in the event of a total loss is agreed 

upon by the insured and the insurer. 

F. Appraisal. If you and we fail to agree on 

the Replacement Cost Value or, if applicable, 

Actual Cash Value, of your damaged 

property and are thus unable to settle the 

amount of loss, then either party may 

demand an appraisal of the loss. 

1. Conditions Before You Can Request an 

Appraisal. 

a. You must agree with us on a list of 

damaged items to be appraised. 

b. You must have complied with the 

requirements of the proof of loss (see VI.A.3). 

c. Appraisal is only available when the 

dispute between parties involves the price to 

be paid for the property covered under this 

policy. Other disputes, such as disputes 

regarding coverage or causation, or the extent 

of the loss, cannot be resolved through the 

appraisal process. 

2. Appraisal Process. If the conditions 

under VI.F.1. are satisfied and an appraisal 

is properly invoked, you and we will each 

choose a competent and impartial appraiser 

within 20 calendar days after receiving a 

written request to do so from the other. The 

two appraisers will choose an umpire. If they 

cannot agree upon an umpire within 15 

calendar days, you or we may request that 

the choice be made by a judge of a court of 

record in the State where the covered 

property is located. The appraisers will 

separately state the Actual Cash Value or the 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8324 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

Replacement Cost Value (as applicable), 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 

Value and loss. Each party will: 

a. Pay its own appraiser; and 

b. Bear the other expenses of the appraisal 

and umpire equally. 

3. Appraisal can only be used when it will 

result in complete resolution of the entire 

claim. Appraisal cannot be used to resolve 

only part of your claim or to determine the 

value of some items and not others. 

Section VII: General Conditions 

A. Abandonment. You may not unilaterally 

abandon to us damaged or undamaged 

property insured under this policy. 

B. Amendments, Waivers, Assignment. 

1. This policy cannot be changed nor can 

any of its provisions be waived without the 

express written consent of the Administrator. 

2. No action we take under the terms of 

this policy constitutes a waiver of any of our 

rights. 

3. You may not assign your policy or your 

claim to any other party. 

C. Death. In the event of your death during 

the policy term, the coverage provided under 

this policy continues automatically for any 

other insured(s). If no other insured exists, 

this policy will insure the administrator, 

executor or other legal representative of your 

estate as previously determined by you or the 

intestacy laws of the state where the 

described location is located, but only for the 

dwelling, building(s), and personal property 

of the deceased at the time of death. 

D. Duplicate Policies Not Allowed. We will 

not insure your personal property at the 

described location under more than one NFIP 

policy. If there is more than one NFIP policy 

for buildings at the described location, we 

will apply the NFIP rules concerning 

duplicate policies and cancel or nullify one 

of the policies, whichever is applicable, 

which may result in a refund. 

E. Headings and Captions. The headings 

and captions used in this policy are for 

convenience of reference only and shall not 

affect or control the meaning or 

interpretation of any of the terms, conditions 

or provisions of this policy. 

F. Mortgage Clause. The word ‘‘mortgagee’’ 

includes trustee. 

1. Any loss payable under III.A or III.B of 

this policy will be paid to any mortgagee of 

whom we have actual notice, as well as any 

other mortgagee determined to exist at the 

time of loss, including 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. 

2. If we deny your claim, that denial will 

not apply to a valid claim of the mortgagee, 

if the mortgagee: 

a. Notifies us prior to a loss 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 90 calendar days after receiving notice 

from us of your failure to do so. 

3. All of the terms of this policy apply to 

the mortgagee. 

4. The mortgagee has the right to access 

your claim file and receive loss payment 

even if the mortgagee has started foreclosure 

or similar action on the property insured 

under this policy. 

5. If we decide to cancel or not renew this 

policy, it will continue in effect only for the 

benefit of the mortgagee for 30 calendar days 

after we notify the mortgagee of the 

cancellation or non-renewal. 

6. 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. 

G. No Benefit to Bailee. No person or 

organization having custody of covered 

property other than you will benefit from this 

insurance. 

H. Other Insurance. Subject to the 

limitations and restrictions of VII.D., if a loss 

covered by this policy is also covered by 

other insurance, we will pay no more than 

the coverage limit you are entitled to for lost, 

damaged, or destroyed property insured 

under this policy, subject to the following: 

1. We will pay only the proportion of the 

loss that this policy’s coverage limit bears to 

the total coverage limit covering the loss; 

unless VII.H.2. or VII.H.3. applies. 

2. If the other policy has a provision stating 

that it is excess insurance, this policy will be 

primary; 

3. This policy will be primary up to the 

other policy’s deductible amount. After the 

other policy’s deductible amount is reached, 

this policy will participate in the same 

proportion that this policy’s amount of 

insurance bears to the total amount of both 

policies for the balance of the loss. This 

policy is subject to its own deductible. 

I. Pair and Set Clause. In case of loss to an 

item of property that is part of a pair or set, 

we will have the option to pay you either: 

1. The cost to replace only the lost, 

damaged, or destroyed item; or 

2. The amount that represents the fair 

proportion that the lost, damaged or 

destroyed item bears to the total value of the 

pair or set. 

J. Salvage. 

1. After we give you written notice, we 

may take all or any part of the damaged 

property at the value that we agree upon or 

its appraised value. 

2. We may permit you to keep damaged 

property insured under this policy after a 

loss, but we will reduce the amount of the 

loss proceeds payable to you under the policy 

by the value of the salvage. 

K. Subrogation. ‘‘Subrogation’’ 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. Whenever we pay for a loss under 

this policy, we are subrogated to your right 

to recover for that loss from any other person. 

After the loss, you must deliver all related 

papers to us, you must cooperate with us, 

and you may not interfere with or do 

anything that would prevent our right to 

recover this money. If we pay for a loss under 

this policy and you (1) make a claim against 

any person who caused your loss and (2) 

recover any money from that person, you 

must return our payment before you may 

keep any recovered funds, without regard to 

any non-covered losses occurring at the 

described location. 

L. Your Options After Our Denial. 

1. Request Additional Payment. You may 

request additional payment and amend your 

initial proof of loss. You must submit this 

request or amended proof of loss as set forth 

in VI.A. A denial letter does not extend the 

deadline in VI.A.3 to submit a proof of loss. 

2. Appeal. If we deny your claim, in whole 

or in part, we will send you a denial letter. 

If you wish to appeal our denial, you must 

send an appeal letter explaining your 

position and a copy of our denial letter to 

FEMA within 60 calendar days of the date on 

our letter. Filing an appeal to FEMA does not 

limit or affect your ability to file suit, or to 

seek an additional payment or file an 

amended proof of loss with us. 

3. File a Lawsuit Against Us. You may not 

sue us to recover money under this policy 

unless you have complied with all of the 

requirements of the policy. If you do sue, you 

must file the suit within one year after the 

date of the written denial of all or part of 

your claim, and you must file the suit in the 

United States District Court of the district in 

which the covered property or the major part 

thereof was located at the time of loss. These 

requirements apply to any claim that you 

may have under this policy and to any 

dispute that you may have arising out of or 

resulting from the handling of any claim 

under this policy. 

In witness whereof, we have signed this 

policy below and hereby enter into this 

Insurance Agreement. 

Federal Insurance and Mitigation 

Administration 

■ 5. Add Appendix A(101) to Part 61 to 

read as follows: 

Appendix A(101) to Part 61 

Increased Cost of Compliance Coverage 

Endorsement 

The terms of the policy apply to this 

increased cost of compliance coverage unless 

modified by this endorsement. 

Definitions 

This endorsement adds the following 

definitions to Section II of the policy: 

C. Additional Defined Terms. 

1. Community Official means the nonfederal official enforcing floodplain 

management ordinances that meet or exceed 

the minimum standards of the NFIP on a 

damaged building. 

2. Compliance Activities means legally 

required mitigation activities approved by 

the Administrator that reduce or remove the 

risk of future flood damage to a building at 

the described location. 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8325 

Coverages 

This endorsement adds the following 

coverage to Section III of the policy: 

E. Increased Cost of Compliance 

1. We will pay you up to the Increased Cost 

of Compliance coverage limit indicated on 

the declarations page for the cost of 

compliance activities actually incurred when 

required by a community official. 

2. Use of this coverage is at your option, 

but the combined payments under Coverage 

A, Coverage B, and this increased cost of 

compliance coverage under Coverage E may 

not exceed the maximum amount of coverage 

permitted by the Act. 

3. Limitation. 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. 

4. This policy does not cover: 

a. Anything already excluded anywhere in 

the policy; 

b. Costs of any compliance activities: 

I. For a flood loss that pre-dates the current 

loss; or 

II. Necessary for additions or 

improvements to the dwelling made after 

such loss occurred. 

c. Any standard that does not meet the 

minimum requirements of the NFIP. 

Exclusions 

Paragraph A.2 of Section IV, Exclusions, is 

replaced with the following: 

2. Economic losses, even if caused by 

flood, whether direct or indirect, including 

losses from a disruption of business, or 

complying with any ordinance or law. This 

exclusion does not apply to any eligible 

activities we describe in Coverage E— 

Increased Cost of Compliance. 

Policy Conditions 

Paragraph E.1 of Section V, Policy 

Conditions, is amended by adding the 

following: 

c. Increased Cost of Compliance, VI.E.6, for 

a period not to exceed six years from the date 

of loss. 

Procedures and Duties When a Loss Occurs 

Paragraph D.3 of Section VI, Procedures 

and Duties When a Loss Occurs, is replaced 

with the following: 

3. The deductible does NOT apply to any 

Loss Avoidance Measures specified in III.D.2 

or III.D.3. or to III.E, Increased Cost of 

Compliance coverage. 

Paragraph E of Section VI is amended by 

adding the following: 

6. Increased Cost of Compliance Loss 

Settlement. We will pay you for your eligible 

increased Cost of Compliance costs when you 

have completed your compliance activities as 

soon as reasonably possible after the loss, not 

to exceed two years. 

General Conditions 

Paragraph B.3 of Section VII, General 

Conditions, is replaced with the following: 

3. Assignment. 

a. Except as provided in VII.B.3.b, you may 

not assign your policy or your claim to any 

other party. 

b. You may assign a claim under Coverage 

E to a state or local government or non-profit 

organization to apply towards the non-federal 

cost share of a federal grant. 

■ 6. Add Appendix A(102) to Part 61 to 

read as follows: 

Appendix A(102) to Part 61 

Actual Cash Value Loss Settlement 

Endorsement 

Read the endorsement carefully for 

changes to the policy. 

This endorsement provides Actual Cash 

Value as the only available valuation for 

settling your covered losses under the policy. 

Paragraphs E.1 through E.5 of Section VI, 

Procedures and Duties When a Loss Occurs, 

are replaced with the following: 

1. This policy provides Actual Cash Value 

loss settlement. 

2. Actual Cash Value Loss Settlement. If 

actual cash value loss settlement applies, we 

will pay the lesser of the following amounts: 

a. The actual cash value of the covered 

property; or 

b. The policy limits stated on the 

declarations page. 

3. Flood Mitigation Expenses. We will 

reimburse you for post-loss expenses that 

mitigate against future flood events as 

follows: 

a. Post-loss expenses may not exceed the 

policy limits stated on the declarations page. 

b. At your option, you may choose to 

replace any damage under Coverage A or 

Coverage B with Flood Damage Resistant 

Materials. After you complete installation of 

the Flood Damage Resistant Materials, you 

may then request reimbursement. 

c. At your option, you may choose to 

elevate your machinery and equipment above 

a basement or an enclosure. Such elevated 

machinery and equipment must be elevated 

to a height reasonably expected to avoid 

future direct physical loss by or from flood. 

After you complete elevation of the 

machinery and equipment, you may then 

request reimbursement. 

4. This is not a valued policy. A valued 

policy is a policy in which the payable 

amount in the event of a total loss is agreed 

upon by the insured and the insurer. 

■ 7. Add Appendix A(103) to Part 61 to 

read as follows: 

Appendix A(103) to Part 61 

Temporary Housing Expense Endorsement 

The terms of the policy apply to this 

temporary housing expense coverage unless 

modified by this endorsement. 

What We Cover 

Paragraph A.4.a of Section III, What We 

Cover, is replaced with the following: 

a. Except as provided in III.D.4 as modified 

by endorsement, loss of use of the described 

location while the dwelling is inaccessible, 

being repaired, or is uninhabitable for any 

reason; 

Paragraph D.4 of Section III, What We 

Cover, is replaced with the following: 

4. Temporary Housing Expense. For 

additional premium received, we will cover 

temporary housing expenses actually 

incurred by you up to the coverage sublimit 

specified on the declarations page when: 

(i) The dwelling at the described location 

is uninhabitable due to direct physical loss 

by or from flood. Payment will be for the 

shortest amount of time required to repair or 

replace the damage or, if you permanently 

relocate, the shortest time required for your 

household to settle elsewhere. 

(ii) A legally authorized official has issued 

an evacuation or civil order for the 

community in which the dwelling is located 

calling for measures to preserve life and 

property from the peril of flood. Payment 

will be for the shortest time period covered 

by the order. 

(b) The time period for temporary housing 

expense coverage is not limited by the 

expiration of the policy term specified in I.D 

but in any case will not exceed 24 

consecutive months from the date of the 

covered flood loss. 

5. This coverage does not increase the 

Coverage A, Coverage B, or Coverage C limits. 

■ 8. Add Appendix A(104) to Part 61 to 

read as follows: 

Appendix A(104) to Part 61 

Basement Coverage Endorsement 

The terms of the policy apply to this 

basement coverage endorsement unless 

modified by this endorsement. 

What We Cover 

Paragraph A.2 of Section III, What We 

Cover, is replaced with the following: 

2. Coverage for Basements. For additional 

premium received, we insure up to the 

selected Coverage A sublimit on the 

declarations page against direct physical loss 

by or from flood to the basement. 

Paragraph C.3.a of Section III, What We 

Cover, is replaced with the following: 

a. Limitations on Property in a Basement 

or in an Enclosure. 

i. For additional premium received, we 

insure up to the selected Coverage C sublimit 

on the declarations page against direct 

physical loss by or from flood to personal 

property in a basement. 

ii. In an enclosure, this policy will only 

cover appliances installed in their 

functioning locations and, if necessary for 

operation, connected to a power source. 

■ 9. Add Appendix A(105) to Part 61 to 

read as follows: 

Appendix A(105) to Part 61 

Builder’s Risk Endorsement 

This NFIP policy is amended to provide 

coverage for a building under construction as 

set forth in this endorsement. The terms of 

the policy apply to this builder’s risk 

endorsement unless modified by this 

endorsement. 

Insuring Agreement 

Paragraph D of Section I, Insuring 

Agreement, is replaced with the following: 

D. Policy term. This policy will expire at 

the earlier of the following two dates: 

1. The date your dwelling is completed and 

occupied by you, this endorsement is deleted 

by us, and the Homeowner Flood Form 

becomes effective in its entirety; or 

2. 12:01 a.m. on the last day of the policy 

term stated on the declarations page. 


ddrumheller on DSK120RN23PROD with PROPOSALS2
8326 Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 

Definitions 

This endorsement adds the following 

definitions to Section II of the policy: 

C. Additional Defined Terms. 

1. Construction. Construction as used in 

this endorsement means any new 

development of land at the described 

location resulting in a building or alteration 

or repair of a building, including a dwelling 

at the described location. 

What We Cover 

Section III, What We Cover, is replaced in 

its entirety with the following: 

Section III: What We Cover 

A. Coverage A—Dwelling 

1. We insure up to the coverage limit on 

the declarations page at the described 

location against direct physical loss by or 

from flood to: 

a. The dwelling under construction at the 

described location. If the dwelling is not yet 

walled or roofed as described in the 

definition of building, then coverage applies; 

(1) Only while construction is in progress; 

or 

(2) If construction is halted only for a 

period of 90 consecutive days thereafter. 

b. Materials and supplies to be used for 

construction of the dwelling or any other 

building(s) scheduled under Coverage B at 

the described location. The materials and 

supplies must be stored in a building at the 

time of loss. 

2. Coverage for Basements and Enclosures. 

a. Limited coverage. We only cover direct 

physical loss by or from flood to the interior 

of all basements and enclosures as follows: 

(1) Machinery and equipment installed 

and, if necessary for operation, connected to 

a power source. 

(2) Footings, foundations, posts, pilings, 

piers, or other foundation walls and 

anchorage systems required to support a 

dwelling. 

(3) Stairways and staircases directly 

attached to the dwelling. 

(4) Unfinished drywall and nonflammable 

insulation. 

3. Dwelling Limitations. 

a. Limitations on mold and mildew. We 

cover damage to the dwelling due to mold or 

mildew caused by a flood only when it is not 

within your control to inspect and maintain 

the property after a flood recedes. 

b. Limitations on power, heating, or 

cooling failure. We cover damage caused by 

a power, heating, or cooling failure that is the 

result of direct physical loss by or from flood 

to covered power, heating, or cooling 

equipment at the described location. 

c. Limitations on flood in the area. When 

there is a flood in the area and the flood 

causes: 

(1) water or waterborne material to back up 

through sewers or drains; to discharge or 

overflow from a sump, sump pump, or 

related equipment; or to seep or leak on or 

through the dwelling; or 

(2) losses to the dwelling by or from the 

pressure or weight of standing or resting 

water on or below the surface of the land. 

d. Limitations on pollutants. We pay for 

the testing or monitoring of pollutants after 

a flood only when required by law or 

ordinance. ‘‘Pollutants’’ refers to any 

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. 

4. This policy does not cover: 

a. Loss of use of the described location 

including any living expenses incurred while 

the dwelling is inaccessible, being repaired, 

or is uninhabitable for any reason; 

b. Land and land values; 

c. Lawns, trees, shrubs, plants, growing 

crops, and landscaping; 

d. Any open structures, including but not 

limited to a building used as a boathouse, 

when located entirely in, on, or over water. 

e. Buildings constructed or substantially 

improved after September 30, 1982, when (1) 

they are located entirely in, on, or over water 

or (2) if they are seaward of mean high tide; 

f. Underground structures and equipment 

that are not located within the dwelling, such 

as wells, septic, sewer, plumbing supply, 

waste lines, gas supply lines, electrical and 

HVAC system components; 

g. 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; 

h. Containers and related equipment, such 

as tanks containing gases or liquids; 

i. Fences, retaining walls, seawalls, 

bulkheads, wharves, piers, bridges, and 

docks; and 

j. Hot tubs and spas that are not bathroom 

fixtures, and swimming pools, and their 

equipment, such as heaters, filters, pumps, 

and pipes, wherever located. 

B. Coverage B—Other Buildings 

1. We apply the terms of Coverage A to 

other buildings at the described location 

except as modified in III.B.2. 

a. For this Coverage B to apply, the other 

buildings must appear on the declarations 

page. 

b. Use of this coverage is at your option, 

but reduces the dwelling coverage limit 

provided under Coverage A. The maximum 

available coverage limit for other buildings is 

10% of Coverage A limits, regardless of how 

many buildings are scheduled on the 

declarations page. 

2. We do not cover: 

a. Anything already excluded under the 

terms of Coverage A. 

b. Basements or enclosures for any building 

that is not the dwelling. 

c. Any building used or held for use for 

commercial purposes, such as agricultural 

and business use. 

d. Any building(s) at the described location 

that is not owned by the insured, including 

an entity, such as a homeowners association. 

C. Coverage C—Personal Property 

There is no personal property coverage 

under this policy until your dwelling is 

completed and occupied by you, this 

endorsement is deleted by us, and the 

Homeowner Flood Form becomes effective in 

its entirety. 

D. Coverage D—Other Coverages 

1. Debris Removal 

a. Covered Debris. 

(1) We will pay the labor and expense to 

remove: 

(a) debris from anywhere that comes onto 

or into the insured dwelling or other insured 

buildings at the described location; and 

(b) debris of insured property anywhere. 

(2) If you or a member of your household 

perform the debris removal work, we will 

pay you for the value of this work using the 

federal minimum wage. This coverage does 

not increase any coverage limit stated on the 

declarations page. 

b. Debris Not Covered. This policy does not 

cover the cost to remove: 

(1) debris from other locations on the land 

surrounding the dwelling or other building(s) 

at the described location, or 

(2) any non-covered items of property from 

the dwelling or building(s), even if the 

removal facilitates covered cleanup or 

repairs. 

2. Loss Prevention 

a. Materials and Labor 

(1) We will pay up to the coverage sublimit 

specified on the declarations page for the 

expenses you incur to protect your insured 

property from a flood or imminent danger of 

flood. Such expenses are limited to the 

following: 

(a) Your reasonable expenses to buy 

materials reasonably understood to be, or 

commonly used as, temporary measures to 

avoid or reduce the harm from an imminent 

flood; including sandbags, fill for temporary 

levees, and pumps; and 

(b) The value of work, at the federal 

minimum wage, that you or a member of 

your household perform to protect your 

property. 

b. This coverage for materials and labor 

only applies if damage to the insured 

property by or from flood is imminent and 

the threat of flood damage is apparent 

enough to lead a reasonably prudent person 

to anticipate flood damage. In addition, one 

of the following must occur: 

(1) 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 

(2) A legally authorized official has issued 

an evacuation order or other civil order for 

the community in which your insured 

property is located calling for measures to 

preserve life and property from the peril of 

flood. 

3. Property Removed to Safety. We will pay 

up to the coverage sublimit specified on the 

declarations page for the reasonable expenses 

you incur to move insured property to a 

secure location other than the described 

location to protect it from flood or the 

imminent danger of flood. Reasonable 

expenses include the value of work, at the 

federal minimum wage, performed by you or 

a member of your household. 

4. This coverage does not increase the 

Coverage A, Coverage B, or Coverage C limits. 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 25 / Tuesday, February 6, 2024 / Proposed Rules 8327 

Policy Conditions 

The following subsection is added to 

paragraph B of Section V, Policy Conditions: 

3. Builders Risk. Notwithstanding V.B.1 or 

V.B.2, any NFIP policy written with a 

builder’s risk endorsement is eligible for only 

one renewal. 

General Conditions 

The following subsection is added to the 

beginning of paragraph F of Section VII, 

General Conditions: 

A holder of a construction loan upon 

which draws have been paid shall be 

considered the ‘‘mortgagee.’’ 

Deanne B. Criswell, 

Administrator, Federal Emergency 

Management Agency. 

[FR Doc. 2024–02204 Filed 2–5–24; 8:45 am] 

BILLING CODE 9111–52–P 


ddrumheller on DSK120RN23PROD with PROPOSALS2