60758 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

FEDERAL EMERGENCY

MANAGEMENT AGENCY

44 CFR Parts 59 and 61

RIN 3067–AD01

National Flood Insurance Program

(NFIP); Insurance Coverage and Rates

AGENCY: Federal Emergency

Management Agency (FEMA).

ACTION: Final Rule.

SUMMARY: We (the Federal Insurance

Administration of FEMA) are changing

the Standard Flood Insurance Policy

(SFIP). The revisions include rendering

the SFIP in ‘‘plain language’’ and

restructuring its format to resemble the

homeowners policy. We are also making

some changes in the policy’s coverage.

EFFECTIVE DATE: December 31, 2000.

FOR FURTHER INFORMATION CONTACT:

James S. P. Shortley, Federal Emergency

Management Agency, Federal Insurance

Administration, 500 C Street SW.,

Washington, DC 20472, 202–646–3418,

(facsimile) 202–646–4327, (email)

James.Shortley@fema.gov.

SUPPLEMENTARY INFORMATION

Proposed Revisions to the Standard

Flood Insurance Policy and Public

Comments

On May 31, 2000, we published a

proposed rule at 65 FR 34823 that

would revise the Standard Flood

Insurance Policy (SFIP) so that it

conforms with ‘‘plain language’’

standards. The rule also proposed

changes that would bring the three

forms of the SFIP more in line with the

format of the insurance industry’s

homeowners policy. We also proposed a

number of changes in coverage.

We received 22 letters and email

messages about the proposed rule. Many

of these contained multiple comments,

and, in a number of cases, the

submissions raised similar issues and

concerns. One organization submitted

two separate sets of comments.

The following submitted comments

on the proposed rule:

• Three national trade associations

for lenders,

• Three individual lending

institutions,

• Six private insurance companies

writing flood insurance under the Write

Your Own program,

• One claims adjuster,

• Three vendors that provide

specialized insurance services,

• Two insurance agents,

• Two private citizens, and

• One private business consulting

firm.

Each of the following sections treats

an issue raised by the public during the

comment period and explains our

reasons for adopting, rejecting, or

modifying a given recommendation.

General Comments. One of the private

insurance companies that write flood

insurance under the Write Your Own

program commended the proposed

plain language revision of the SFIP in

this way:

‘‘The proposed language changes in

the flood policy are excellent. The

coverage additions and deletions are

acceptable, and the changes in wording

to ‘plain language’ make the policy more

readable and understandable.’’

This company also recommended that

we ‘‘prepare a document * * * to flood

policyholders and agents to explain all

coverage changes.’’ This is a good

suggestion. In fact, this is a practice that

we follow whenever we make any major

change in coverage under the National

Flood Insurance Program (NFIP). We

will continue that practice and put a

summary of changes in the revised

policy document that the policyholder

receives. This will help policyholders

and agents understand the most

significant changes in coverage that

result from this final rule. We also plan

to include a summary of significant

coverage changes in the updated claims

manual we are preparing for adjusters to

implement the new policy.

Several national associations

representing the interests of lending

institutions, however, expressed

disappointment that we had failed in

the preamble of the proposed rule to

mention lenders in the paragraph titled

‘‘External Customers.’’ The associations

also expressed concern that

representatives of the lending

community did not sit on the work

group that rewrote the SFIP.

The express purpose of the proposed

rule was to make the SFIP easier to read

for policyholders and easier to use by

the producers and agents that sell and

service flood insurance policies. The

focus of our revision of the SFIP, as

expressed in the preamble to the

proposed rule, was to address the needs

of the ‘‘two largest external groups that

use the SFIP.’’ That statement was not

meant to be a complete list of our

customers but rather to define the

specific purposes of the revision: to

render the policy in plain language and

conform the SFIP with the homeowners

policy. In spite of our not mentioning

lenders as a constituent group in the

preamble of the proposed rule, we felt

that we had preserved the protections

and interests of lenders by modeling the

proposed revision of the SFIP’s

‘‘Mortgage Clause’’ on the mortgage

clause of the homeowners policy.

However, after reviewing lenders’

specific comments and

recommendations, we understand their

concerns and have made a number of

adjustments that address those

concerns.

Several of the lenders’

recommendations that we did not

accept would have involved duplicating

coverage already available in the private

market or changing long-standing

practices, such as changing the length of

time flood insurance coverage continues

for the benefit of the mortgagee after

cancellation or non-renewal. We plan to

invite representatives of the lending

industry to join us in a series of

meetings to discuss these and other

issues.

Mortgagee as a Named Insured. We

received five comments that objected to

our description of the named insured

under the proposed changes in

‘‘Definitions.’’ In the proposed rule we

said, ‘‘In this policy, ‘you’ and ‘your’

refer to the insured(s) shown on the

Declarations Page of this policy.’’ The

five respondents expressed concern that

our revision did not specifically

mention the mortgagee as a named

insured and potentially jeopardized the

mortgagee’s financial interest. The

respondents requested that we reinsert

in the description of the named

insured(s) language that specifically

mentions the mortgagee. Several

respondents also pointed out that we

had not included in the Dwelling Form

any mention of the ‘‘spouse,’’ if a

member of the same household, as a

named insured.

We have reinserted language similar

to that in the current policy identifying

mortgagees as a named insured and

added a reference to the named

insured’s spouse. The final version of

the Dwelling Form reads: ‘‘In this

policy, ‘you’ and ‘your’ refer to the

insured(s) shown on the Declarations

Page of this policy and your spouse, if

a resident of the same household.

Insured(s) includes: Any mortgagee and

loss payee named in the Application

and Declarations Page, as well as any

other mortgagee or loss payee

determined to exist at the time of loss

in the order of precedence.’’

The final versions of the General

Property Form and the Residential

Condominium Building Association

Policy have similar language

mentioning the mortgagee as a named

insured. Absent from the description of

the named insured in these two forms,

however, is a reference to ‘‘your spouse,

if a resident of the same household.’’

Mortgagees as Loss Payees. Five

representatives from the lending

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60759

industry also expressed concern that the

proposed change to the ‘‘Mortgage

Clause’’ limited protection only to

mortgagees of whom we had actual

notice. They interpreted ‘‘mortgagees of

whom we had actual notice’’ to mean

only those on the Declarations Page,

rather than to any other mortgagee or

loss payee determined to exist at the

time of loss. The commenters urged that

we add language in the final rule that

explicitly protects the rights of any

mortgagee or trustee determined to exist

at the time of loss.

That was our intent, and we agree to

clarify this. We have modified a

provision of the ‘‘Mortgage Clause’’ of

the three policy forms to read as

follows:

‘‘The word ‘mortgagee’ includes

trustee. Any loss payable under

Coverage A—Building Property will be

paid to any mortgagee of whom we have

actual notice as well as any other

mortgagee or loss payee determined to

exist at the time of loss, and you, as

interests appear. If more than one

mortgagee is named, the order of

payment will be the same as the order

of precedence of the mortgages.’’

We believe that the addition of this

language in the ‘‘Mortgage Clause’’ as

well as the added language in the

‘‘Definitions’’ section described above

addresses the lending community’s

major concerns, adopts their

recommendations, and preserves the

rights and interests of the mortgagee.

Mortgage Clause and Foreclosure.

Two representatives from the lending

community expressed concern that the

proposed revision was silent about the

rights of the mortgagee as a loss payee

after a flood loss when the lender has

started foreclosure on the building.

We believed we were simplifying the

policy without affecting the mortgagee’s

rights. However, we understand this

concern, and we have added the

following language to the ‘‘Mortgage

Clause’’ of the final version of the SFIP:

‘‘The mortgagee has the right to

receive loss payment even if the

mortgagee has started foreclosure or

similar action on the building or

structure.’’

Transfer of Mortgage Note to the

Insurer. Two respondents commented

that we had removed language from the

existing policy’s ‘‘Mortgage Clause’’ that

gives us the option to pay the whole

principal due and to receive transfer of

the mortgage under certain conditions

and recommended that we reinsert

similar language in the final rule.

We disagree. This provision is an

option for us. We have never in the

program’s history exercised this option

nor do we intend to do so in the future

because we do not wish to become a

mortgagee. As a result, we have left any

reference to our option to receive

transfer of the mortgage out of the final

revision of the SFIP.

Continuation of coverage for after

non-renewal for the mortgagee’s benefit.

Three respondents objected that 30

days—the length of time we continue

coverage for the benefit of the mortgagee

after non-renewal—is not enough time

and recommended that we increase that

benefit to 45 days. The commenters

pointed out that the National Flood

Insurance Reform Act of 1994 gives a

borrower 45 days to cure a deficiency

regarding flood insurance before the

lender may force-place coverage. The

commenters argued that we should

increase the benefit of continued

coverage for the lender to 45 days to be

consistent with the statute.

First, the proposed rule does not

change what is currently in the policy.

Our continuation of coverage under the

current SFIP for the benefit of the

mortgagee is 30 days, and 30 days has

been the continuation of coverage

benefit for years. So in the proposed

rule we were not reducing a benefit for

lenders. Second, there is ‘‘gap’’

insurance coverage in the private sector

available for lenders to address such

contingencies, and it is our

understanding that most lenders have

such coverage for all perils to protect

their interests in the event a borrower

fails to renew required property

insurance protection. While we believe

it is appropriate for us to provide some

cushion for lenders, such as our 30-day

benefit, providing 45 days to match the

statute is unnecessary since gap

coverage is available in the private

market. It is not, in our view,

appropriate public policy to duplicate

under the NFIP coverage that is readily

available in the private sector. Third,

during the six years since the enactment

of the National Flood Insurance Reform

Act of 1994, lenders have not reported

any difficulties with our long-standing

practice of providing 30 days

continuation of coverage for their

benefit when a borrower fails to renew

required property insurance coverage.

We do not believe we need to change

our current practice. In our continuing

dialogue and planned meetings with the

lending community on flood insurance,

we will make certain that we carefully

monitor this issue.

Policy Cancellation. Five commenters

expressed concern that our proposed

revision of the ‘‘Cancellation of the

Policy by You’’ provision in the

‘‘General Conditions’’ section makes it

appear that a policyholder may

unilaterally cancel the flood policy

regardless of whether there is an

existing mortgage obligation. Our

intention was to remove, from the

cancellation provision, language that

had weighed down the policy with a

number of examples of when the

policyholder may be eligible for a

premium refund. We did not intend in

our proposed revision to undermine the

mortgagee’s interest, and we considered

our applicable rules and regulations that

the insurance agent must follow before

we allow cancellation of any flood

insurance policy to be sufficient to

safeguard the lender’s interest, i.e.,

when the lender has required flood

insurance as a condition for the

mortgage loan. Those rules and

regulations remain unchanged.

We understand the concern expressed

by the commenters. To make it clearer

that we do not permit a unilateral

cancellation of flood insurance by the

policyholder, we have in this final rule

changed the wording in the

‘‘Cancellation of the Policy by You’’

clause to read, ‘‘you may cancel this

policy in accordance with the

applicable rules and regulations of the

NFIP.’’

First of all, it is not in the interests of

the program to allow cancellation of

policies without good reasons or

adequate safeguards in our processing

system. In that connection, we publish

in the Flood Insurance Manual that

Write Your Own companies and agents

must follow when canceling an NFIP

policy. Under the terms of the current

‘‘Cancellation Section,’’ in this manual,

the agent must submit a Cancellation/

Nullification request to the insurer

citing one of the approved reasons cited

in the manual for a policy cancellation.

Without documentation that the

cancellation request meets approved

criteria the policy does not get

cancelled.

In the cases where there is a mortgage

loan on the property, the manual says

that the NFIP permits cancellation

when, through a map revision, the

property is no longer in a special flood

hazard area and ‘‘the lender no longer

requires the flood insurance policy.’’

The mortgagee must confirm this in

writing to the NFIP insurer. The

applicable rules and regulations for

agents also permit cancellation when

the borrower has paid off the mortgage;

however, before we allow a cancellation

the agent must submit a ‘‘statement from

the mortgagee stating that the mortgage

has been paid off and that flood

insurance was required as part of the

mortgage must be attached to the

Cancellation/Nullification Request

Form.’’

60760 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

In both cases, the agent must furnish

documentation from the lender. In

short, there are safeguards built into the

program’s processing and reporting

system that we will continue to require

before we will permit cancellation of a

policy.

Our revision of the ‘‘Cancellation of

the Policy by You’’ in the final rule then

does two things: It removes from the

policy unnecessary examples of

situations when we will refund

premiums while preventing any

unilateral cancellation of the policy by

the policyholder. We achieve the latter

purpose by cross-referencing the

applicable rules and regulations that the

agent and the NFIP insurer must follow

before the insurer can honor a request

to cancel a policy.

Policy Reformation. We received one

comment that we were using the word

‘‘restoration’’ incorrectly in the ‘‘General

Conditions’’ section of the three policy

forms and that we should substitute

‘‘reformation’’ instead. We agree with

this comment and have changed the

heading in the ‘‘General Conditions’’

section of each of the policy forms to

read, ‘‘Reduction and Reformation of

Coverage.’’ We have also modified the

wording in this clause to be consistent

with the more precise title.

Another person expressed concern

that the ‘‘Reduction and Reformation of

Coverage’’ clause gives the insured and

the mortgagee only 30 days from the

date of our notification that there is

insufficient premium for the requested

coverage to submit the shortfall in

premium. The commenter

recommended that we increase the grace

period to 45 days to conform with the

National Flood Insurance Reform Act of

1994 which gives an insured that

amount of time to make premium

payment before the lender may forceplace coverage.

As we mentioned in our discussion of

continuation of coverage for the benefit

of the mortgagee above, we do not

believe we need to change our current

practice. In our continuing dialogue and

planned meetings with the lending

community on flood insurance, we will

make certain that we carefully monitor

this issue as well.

Duplicate policies. Five respondents

objected to the ‘‘Duplicate Policies Not

Allowed’’ provision in ‘‘General

Conditions’’ and argued that our

allowing duplicate policies would

ensure that there would be no gap

between the limit of an existing SFIP

and the amount required by law. The

commenters cited situations involving

multiple mortgagees where allowing

duplicate policies would preserve every

lender’s interest at the time of loss. One

of the commenters suggested we

develop a product like the

‘‘Contributing Insurance Endorsement’’

which permits multiple insurance

carriers.

We considered this recommendation

but believe that any perceived benefit

does not outweigh our overriding

concern over the problems that multiple

policies present for us to assure that the

statutory limits of coverage not be

exceeded on any property. Duplicate

policies also allow an opportunity for

abuse and fraud at claim time.

The changes to those sections in the

final rule, which we have already

discussed, have addressed those

concerns, and there is no need to alter

our long-standing practice to prohibit

duplicate policies under the NFIP. We

have therefore not adopted this

recommendation to allow duplicate

policies.

Definitions: Flood. We received one

comment asking us to revise our

definition of ‘‘flood’’ that refers to the

inundation of ‘‘two or more properties

(one of which is your property) * * *.’’

The respondent recommended that we

replace the term ‘‘property’’ with

‘‘premises.’’

We considered the comment but

believe adopting the suggestion would

hurt the policyholder by making our

definition of ‘‘flood’’ more restrictive

than we intend. ‘‘Properties’’ is general

enough for us to consider not only an

insured property but also some other

property such as a public road. This

wording is particularly appropriate for

rural or low density development areas.

We have therefore retained the word

‘‘properties’’ in the definition of ‘‘flood’’

in the final rule.

The respondent also pointed out that

‘‘premises’’ would be more accurate in

our treatment of debris removal under

‘‘Coverage C—Other Coverages.’’ We

disagree, but we have addressed this

concern by simplifying the debris

removal provision.

Definition: Manufactured home. We

received one comment that the

qualifiers (‘‘built on a permanent

chassis,’’ ‘‘affixed to a permanent

foundation’’ and ‘‘transported to its site

in one or more sections’’) in the

definition of ‘‘manufactured home’’

seem misplaced in the proposed rule

and that we should modify the

definition. The correspondent also

suggested that we did not need the

criterion of affixing the manufactured

home to a permanent foundation

because we have the requirement that

manufactured homes be tied down.

We agree that we need to change the

order of the qualifiers for the definition.

This is how the revised definition reads

in the final rule: ‘‘b. A manufactured

home (‘a manufactured home,’ also

known as a mobile home, is a structure:

built on a permanent chassis,

transported to its site in one or more

sections, and affixed to a permanent

foundation).’’ We feel however we need

to continue our requirements that all

manufactured homes be affixed to a

permanent foundation and those in

special flood hazard areas be tied down

to be consistent with the NFIP’s

floodplain management requirement.

Land subsidence. We received one

comment that the exclusion of ‘‘land

subsidence’’ in the proposed rule is

confusing since we do pay for land

subsidence losses whose cause is from

the kind of erosion described in the

definition of ‘‘flood.’’

We agree with this comment and have

modified the language in the policy’s

‘‘Exclusions’’ section to clarify the

difference between land subsidence not

caused by this kind of erosion in

contrast with subsidence caused by this

kind of erosion. The final policy

clarifies that we cover land subsidence

caused by erosion covered under the

definition of ‘‘flood.’’

Sewer back-up. Three people

expressed concern that we had added a

new criterion for honoring claims for

losses from sewer back-up, namely, that

flood waters had to damage, i.e., touch,

the building before we would pay for

sewer back-up losses. (We added this

criterion because we believed it was a

more objective standard than just having

a flood in the general area.) The

argument of those objecting to the

proposed criterion ran this way: for us

to require that the water ‘‘touch’’ the

building could actually prove a

disincentive for policyholders to take

loss avoidance measures, such as

sandbagging, to hold losses to a

minimum. Such a requirement, the

respondents wrote, also fails to take into

account consumer expectations that

have built up during the program’s

history for such coverage since we have

historically covered sewer back-up and

marketed flood insurance without such

a criterion. Their arguments were

convincing.

Since our proposal was a major

departure in flood insurance coverage

for consumers from the current policy,

we have removed the proposed criterion

that flood waters touch the insured

building in order for us to honor sewer

back-up losses, and we have restored

the criterion that the proximate cause of

the sewer back-up damage must be from

general and temporary condition of

flooding in the area.

Still, we believe this issue warrants

further study and monitoring, and we

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60761

plan to look into future loss experience

to see whether we need to adjust

coverage or the criteria for coverage in

the future regarding sewer back-up.

References to Adjusters. We received

one comment on the use of the term

‘‘our adjuster’’ in ‘‘J. Requirements in

Case of Loss’’ in the ‘‘General

Conditions’’ section of the policy forms.

The commenter pointed out that

because the adjuster is an independent

contractor we should therefore change

the term to ‘‘the adjuster.’’

We agree with this comment and have

made the change in the policy forms

since we say later that ‘‘we have not

authorized the adjuster to approve or

disapprove claims’’ to describe the

independent stature of the adjuster.

The same person also made this point

about the use of the indefinite article

when we say ‘‘at our option, we may

accept an adjuster’s report’’ in the same

section of the policy forms. We have

changed the wording to read ‘‘at our

option, we may accept the adjuster’s

report.’’

Manuscripts. Two people pointed out

that there are discrepancies in the

proposed rule between the exclusion of

coverage for manuscripts in ‘‘Property

Not Covered’’ and the coverage in

‘‘Coverage B—Personal Property’’ for

manuscripts in a list of covered property

subject to a $2,500 limit.

We have remedied the discrepancy by

removing manuscripts from the list of

covered property subject to the $2,500

limit under ‘‘Coverage B—Personal

Property.’’ There is available in the

private market special limits coverage

for items, such as manuscripts, against

all perils including flood. Since the

private market provides such coverage,

we will not duplicate it in our policy.

Functional Value for Antiques. One

person questioned why the revised

policy would pay only the ‘‘functional

value’’ for flood losses to antiques rather

than actual cash value (ACV)—the

conventional approach in the property

insurance industry. The current SFIP

excludes antique value to the property.

The use of the phrase ‘‘functional

value’’ is meant to be a clarification of

but not a change to our current policy.

Detached garages. We received one

comment on detached garages. The

writer pointed out that the phrase ‘‘used

as such’’ in the ‘‘III. Property Covered,

A.3’’ for detached garages is ‘‘indistinct’’

since many homeowners use garages for

a variety of purposes such as workshops

or business storage.

We agree with this point and have

modified the language related to

detached garages in the final rule to

make clearer the conditions under

which we cover a detached garage. We

have removed the phrase ‘‘used as

such’’ from ‘‘III. Property Covered, A.3.’’

We have also included in ‘‘III. Property

Covered, A.3.’’ language to make it clear

when certain uses render a detached

garage ineligible for coverage. This is

what we say in the final rule about the

restrictions on coverage for detached

garages: ‘‘We do not cover any detached

garage used or held for use for

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

farming purposes.’’ Our modification in

the final rule addresses the comment.

Personal property in basements. One

person recommended that we add

refrigerators to the list of items we will

cover in basements since we provide

coverage for freezers.

We do not see any justification in

adding flood coverage for more items in

basements, which are at higher flood

risk than other parts of a building. We

developed the current list of items we

will cover in basements based on

several factors. First, we wanted to

cover items essential for the operation

and maintenance of the building itself,

such as machinery and mechanical

equipment. Second, there are certain

items such as freezers that seem to be

better suited for basements than in other

parts of a dwelling since there are few

alternative locations for freezers. Third,

we have resisted, appropriately, offering

coverage for items such as beds, sofas,

recreational items, normal kitchen

equipment such as stoves and

refrigerators in basements since flood

insurance coverage for such items might

be at odds with the NFIP’s floodplain

management efforts: The NFIP would on

the one hand be trying to guide

development and occupancy away from

the riskier flood-prone areas while

inviting such uses with its coverage. We

have decided not to add refrigerators to

the list of what we cover in basements.

Swimming pools, hot tubs, equipment,

and machinery. Two people expressed

concern about our exclusions of

coverage in the proposed rule for

swimming pools, hot tubs, and spas.

The proposed rule under ‘‘Property Not

Covered’’ excludes coverage for

‘‘swimming pools, hot tubs and spas,

and their equipment such as, but not

limited to, heaters, filters, pumps, and

pipes, wherever located * * *.’’ One

correspondent said, ‘‘These items are

* * * often bathroom fixtures,

especially hot tubs.’’

We agree with the latter point, and we

provide in the final rule coverage for hot

tubs and spas and their equipment, if

they are bathroom fixtures. We still

believe that it is not in the public’s

interest to provide flood insurance

coverage for hot tubs or spas which are

not part of bathrooms or for swimming

pools because of their inherent exposure

to flood risk. Also, the difficulties in

underwriting just the machinery and

equipment of swimming pools outweigh

any conceivable benefit.

Condominium loss assessments. One

person recommended that we allow up

to $1,000 coverage for loss assessment

for a condominium unit owner. This

would, the writer believes, track more

closely with loss assessment coverage in

private commercial policies for other

perils and would cover the deductible

under the association’s coverage which

may be passed on to the unit owner.

We currently have no restriction on

how much building coverage, within

policy limits, the unit owner may apply

to an assessment from the condominium

association. To limit the benefit for loss

assessments to $1,000 is a considerable

reduction in coverage. We have decided

not to put such a restriction in the

revised policy. We will not, on the other

hand, pay for another policy’s

deductible, such as the deductible of the

Residential Condominium Building

Association Policy. We have therefore

decided to retain the language in this

final rule regarding loss assessment

coverage for individual condominium

unit owners.

Replacement cost coverage for multifamily structures. Four people

recommended that we provide

replacement cost coverage for multifamily structures since we provide this

coverage for owner-occupied single

family dwellings if the policyholder

insures the building to value.

We decided not to accept this

recommendation since adopting it

would raise rates and would run

counter to our efforts to reduce costs for

the NFIP. We believe this issue bears

looking into further, and we will study

the economic impacts of providing

replacement cost coverage for multifamily dwellings and examine the costs

and benefits of such an approach.

Pollution-pollutants. Six respondents

expressed concern about the proposed

rule’s exclusion of pollution. (Under the

current policy, an insured may receive,

up to policy limits, payment to repair

damage to the building from flood-borne

pollutants. The pollution exclusion in

the current policy, which applies to

Increased Cost of Compliance coverage,

will remain.)

The following two comments are

representative of this concern:

(1) ‘‘A flood by its very nature

contains pollutants. This definition

would exclude virtually all flooding

events since flood by its very nature

would always contain contaminants,

especially waste.’’

60762 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

(2) ‘‘A property owner will be unable

to secure coverage elsewhere for

pollution caused by flooding. Since the

loss settlement will still be restricted to

policy limits, pollution caused by

flooding should be made available.’’

Several who submitted comments on

this issue recommended that we use

language similar to that in the Insurance

Services Organization (ISO)’s

homeowners policy treating the subject

of pollution. They recommended the

following language:

‘‘We do not insure any of the

following: discharge, dispersal, seepage,

migration, release or escape of

pollutants unless the discharge,

dispersal, seepage, migration, release or

escape is itself caused by a peril insured

against.’’

Several other commenters cited the

pollution benefit of $10,000 in the ISO

commercial property insurance form

and recommended we use that as an

available coverage benefit for pollution

caused by flood.

We considered the comments

objecting to our proposed exclusion of

losses from pollution. The arguments

were convincing, and we have decided

to remove the exclusion for pollution

from the final revisions for the Dwelling

Form and the Residential Condominium

Building Association Policy and permit

these policyholders, as they are able to

do under the current policy, to apply up

to their policy limits under Coverage A

to pay for damage from pollution caused

by flood. We believe it is appropriate to

continue the benefit we have

traditionally offered for the owners of

single family dwellings and for the

owners of units within a residential

condominium since property owners

have no other recourse in the private

market to protect themselves from losses

from pollution caused by flood. We

exclude, however, from the Dwelling

Form and the Residential Condominium

Building Association Policy, any

payment for the testing for or

monitoring pollutants unless a law or

ordinance requires the testing or the

monitoring.

We believe some limitation on

pollution for commercial properties is

appropriate, and we have adopted one

commenter’s recommendation that we

model limited coverage for pollution

from the ISO private commercial policy.

We are therefore limiting the amount we

will pay under the General Property

Form to $10,000 for each occurrence,

but this amount, when combined with

other benefits under the policy, cannot

exceed the policy limits or the

replacement cost or actual cash value of

the covered property, whichever

settlement amount is appropriate. As a

result of our revision, we will pay for

the removal and clean-up of such

pollutants from covered property after a

flood loss, but, as we have for the

Dwelling Form and the Residential

Condominium Building Association

Policy, we exclude the cost of testing for

or monitoring pollutants unless law or

ordinance requires the testing or the

monitoring.

Property removed to safety. In the

proposed revision of the SFIP, we

increased from $750 to $1,000 to help

defray the costs of moving property out

an endangered flood area. One person

expressed concern that this benefit was

not enough to cover the costs of moving

personal property such as business

inventories and that the benefit would

not cover the deductible.

We believe that the increase in

benefits over what we have offered in

the past is a relatively sizable one. We

do not believe we can justify a higher

increase in the face of our need to make

the program actuarially sound, but we

will monitor the issue to see if future

increases may be justifiable from our

loss experience.

Self-propelled vehicles. One person

commented that the reference to selfpropelled vehicles in the ‘‘Property Not

Covered’’ section was unclear since the

qualification ‘‘while the vehicles are

inside a building at the desired

location’’ seems to apply only to

vehicles for the handicapped and

should apply both to vehicles for the

handicapped and to vehicles ‘‘used

mainly to service the described

location.’’

This is a good point. The qualification

applies to both types of vehicles, and we

will format the policy to make this clear.

Interpretation of ‘‘common wall’’ and

additions and extensions. Two people

commented on references to additions

and extensions under ‘‘Property

Covered, A. Coverage A—Building

Property.’’ One respondent limited

comments to the errors and omissions

that might arise from giving the insured

the option of insuring an addition or

extension (explained below) either as a

separate building or consider it part of

the insured building. The second

commenter raised three issues related to

‘‘additions and extensions’’: Clarity over

what is meant by a common wall,

competitive pricing, and the concern

about errors and omissions. This

commenter said:

‘‘It has been our experience that a

solid, load-bearing interior wall and a

common wall are the same definition. In

theory, we agree that the common wall

issue needs to be changed but this draft

still leaves unresolved issues by not

specifically listing these definitions (i.e.,

solid, load-bearing wall, common

interior wall). Additionally, by allowing

the option of issuing a separate policy

we then fall into a competitive pricing

issue. The insured may be offered two

policies with one carrier therefore

paying the expense/policy service fee

twice or shop around and find another

carrier that can issue one policy for his

additions and extensions. Lastly, if we

are required to offer two policies then

will we be required to re-underwrite our

current policies?’’

The difference between a common

interior wall that is not a solid, loadbearing wall and an interior wall that is

load-bearing, we believe, is clear

enough, and there is no need to revise

the language in the policy on additions

and extensions. On the issue of

competition, one of the advantages of

the Write Your Own program—with

currently about 90 participating

insurance companies—is that the

consumer has a choice based on service

since the same rates and rules apply to

all companies selling flood insurance.

The policyholder has the advantage

under the cited provision to insure

additions and extensions connected by

a rigid exterior wall, a solid load-bearing

interior wall, a stairway, elevated

walkway, or a roof, as a separate

building or consider the addition as part

of the insured building. This, we

believe, is an advantage for the

policyholder. It is incumbent on the

agent and the insurance company to

explain those options to the property

owner to avoid any concern over errors

and omissions while giving the property

owner information to make an informed

choice about coverage. Regarding the

commenter’s inquiry about the need to

‘‘re-underwrite’’ every policy, as with

any change in coverage, companies need

to reexamine their existing book of

business, as appropriate.

Minor word changes (Loss Avoidance

Measures vs. Avoidance and

Mitigation). One person suggested that

we change the heading ‘‘Loss Avoidance

Measures’’ to ‘‘Avoidance and

Mitigation.’’ We considered the

suggested title change and believe the

wording as proposed is preferable, and

we are keeping the wording from the

proposed rule in the final version of the

policy.

Expense for Sandbags. Two people

agreed with our proposed increase of

how much we will reimburse the

insured for the expense of sandbags as

a loss avoidance measure. One

commenter wondered why, however,

we could not pay more for the expense

of sandbags.

We increased from $750 to $1,000 the

amount we will pay for sandbags to

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60763

avoid losses. Again, we believe that the

increase in benefits over what we have

offered in the past is a relatively sizable

one. We do not believe we can justify

a higher increase in the face of our need

to make the program actuarially sound,

but we will monitor the issue to see if

future increases may be justifiable from

our loss experience.

Payment for floodproofing. We

received one suggestion that we pay for

floodproofing of buildings without

basements. The person argued that since

we pay under Increased Cost of

Compliance coverage (Coverage D) for

floodproofing of basements of

residential structures, we should also

pay for permanent floodproofing of

residential structures without

basements. The writer also argued that

since we pay for temporary protective

measures when there is the threat of

flooding, we should pay for permanent

floodproofing. The writer also

contended that the installation of a

permanent device, such as a flood

shield, would pay for itself over time in

prevented flood losses and fewer flood

claims. And because of those potential

savings in flood claims, we should pay

for such a device.

First of all, we only pay for the

floodproofing of basements under

Increased Cost of Compliance coverage

(Coverage D) under very limited

circumstances. The property must have

suffered substantial damage by flood or

repetitive flood losses, and the

community must be requiring the repair

or other mitigation measure to bring the

building into compliance with a local or

State floodplain management ordinance

or law. Also, for us to pay under

Coverage D to bring a basement into

compliance with a local floodplain

management law or ordinance, the

community must meet rigorous

standards for floodproofing residential

basements approved by FEMA. Only 53

communities out of 19,000 participating

communities have been approved for

this option. We would also point out an

essential difference between the

standards for floodproofing residential

basements in approved communities

and the flood shield that the commenter

recommends: a basement once

floodproofed requires no further

intervention on the part of the occupant

for the floodproofing to be effective. The

flood shield on the other hand requires

human intervention just before a flood

for the device to be effective.

Finally, certain devices and

equipment clearly make buildings safer

and reduce the risk to certain perils. The

installation of sprinklers in residential

dwellings is a good example of a loss

mitigation measure that adds protection,

increases safety, and reduces the

building’s exposure to fire loss;

however, property insurance companies

will not and should not pay for the

permanent installation of such devices

that reduce the risk. Such devices if

worthwhile will sell themselves or be

required by code. They are not eligible

for nor should they become eligible for

payment as a covered loss in the

insurance sense.

For these reasons, we have therefore

rejected the recommendation for the

SFIP to pay for the installation of loss

mitigation measures as a preventive

step.

Miscellaneous Questions. We received

several sets of comments asking us to

clarify whether coverage for certain

items or under certain conditions had

changed in the revised policy. We will

restate the each question and follow

with our answer.

Question. Can two properties be a

house and the street in front of the

house or does it have to be two houses?

NFIP has taken the position in the past

that two properties can be the insured

house and the street in front of the

house; however, we want to verify that

this has not changed with the new

policy.

Answer. Our position has not

changed. ‘‘Two properties’’ can still

mean under the new policy the insured

house and the street in front of the

building.

Question. Under Coverage C—Other

Coverages, Contents Removal, it states

that any property removed must be

placed aboveground level or outside the

special flood hazard area. This appears

to mean that we can still cover personal

property that is moved to a special flood

hazard area if it is above ground level

and in a fully enclosed building. This

doesn’t sound logical since the point is

to move it outside of the special flood

hazard area.

Answer. Coverage C—Contents

Removal under the new policy requires

that the contents must be removed

above ground or outside a special flood

hazard area. This is not inconsistent.

There are situations where moving

property to a safer location within a

floodplain, e.g., within a broad

floodplain or in a coastal area, is the

best available mitigation option

available to a policyholder. Moving

property inland away from an

approaching hurricane to a location that

may still be within a special flood

hazard area, may be enough to move

property out of harm’s way.

Question. The policy is silent on who

makes substantial improvements. Does

the responsibility of determining

substantial improvement still rest with

the community officials? This is

important because we are talking about

the denial of coverage for post-FIRM

enclosures.

Answer. The responsibility for making

a determination whether a building has

suffered substantial damage and must

meet the substantial improvement

requirement still rests with the

community official.

Question. The policy mentions

special coverage for handicapped

persons, but does not define

‘‘handicapped’’ in the definition

section. Is it intended that

‘‘handicapped’’ means only people

protected by Federal law, or can it mean

someone with a broken leg, etc. This

could become an issue if not properly

defined.

Answer. A temporary handicap, such

as a broken leg, would qualify for

special coverage for handicapped

persons under the new policy.

Question. There is an exclusion for

decks outside the perimeter walls of the

dwelling. NFIP has taken the position in

the past that we could pay for sixteen

square feet of decking outside the

perimeter walls of the dwelling, which

is not spelled out in the policy. Are we

still allowing the sixteen square feet or

do we totally exclude decking outside

the perimeter walls of the dwelling.

Answer. Our interpretation under the

new policy has not changed. We will

still pay, as we currently do, for sixteen

square feet of space that permits

entrance and exit to a building.

Question. We insure against direct

physical loss by or from flood for

‘‘clean-up.’’ But what does ‘‘clean-up’’

include?

Answer. ‘‘Clean-up’’ includes the

removal of muck from the interior of the

insured building, cleaning the floodsoiled surfaces of the insured building,

and the removal of debris from the

boundaries of the insured property.

Question. How can this policy state

that it will not insure for direct physical

loss caused directly or indirectly by

rain? Rain is one of the major reasons

for flooding. This seems contradictory.

Answer. Rain without surface flooding

is not covered under the SFIP. This is

not a new interpretation or a change

from previous version of the SFIP.

Conversely, damage from rain alone can

be covered under the homeowners

policy.

Question. Does the NFIP intend to

settle losses for manufactured homes

with materials on a replacement cost

basis but never more than 1.5 times the

actual cash value apply to repairs as

well as total losses?

Answer. Under VII General

Conditions, V. Loss Settlement, 3.a. and

60764 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

3.b., we explain how losses will be

adjusted under the policy for

manufactured homes: Under 3.a., we

will pay for total losses on a

replacement cost basis or 1.5 times the

actual cash value, whichever is less;

under 3.b., we will pay for repairs on a

replacement cost basis.

Question. How will an adjuster know,

i.e., for sewer back-up claims, if the

flood waters actually touch the structure

if it does not leave a visible water line

or debris? (Flood waters may briefly

touch the structure but leave no visible

water line.)

Answer. This is no longer an issue

since we have removed the criterion

that water touch a building in order for

us to pay for damages from sewer backup. (See our earlier discussion of sewer

back-up.)

Question. What is ‘‘loss in progress’’?

Is it the threat of flooding? When water

touches the building? What about when

water touches the detached garage?

Answer. ‘‘Loss in progress’’ does not

merely mean the threat of flooding.

‘‘Loss in progress’’ means when water

touches the insured building. If the

policyholder has elected to apply up to

10% of the building’s coverage on the

dwelling and flood waters touch the

detached garage, the loss would be a

loss in progress. If the policyholder has

elected to insure the detached garage

separately from the dwelling, the flood

waters touching the detached garage

would involve a loss in progress for the

detached garage, insured separately, but

not the separately insured dwelling.

Question. When does a carport

become a garage?

Answer. If a structure has two walls

and a roof it is a building that is eligible

for coverage under the NFIP. Normally,

carports do not meet the definition of a

building. We do not agree that we need

to add a definition for ‘‘carport’’ which

the questioner implied since our

definition of building is in our view

clear enough.

Decision to Retain Scheduled

Building Policies. During the comment

period, we received no comments on the

deletion in the proposed rule of the

provision for scheduled building

policies. We have decided, however, to

retain in the final rule the provision in

the definition of ‘‘policy’’ that permits

us to offer scheduled buildings policies,

i.e., one policy that provides coverage

for several buildings. We are retaining

this product option since we have

become aware of recent interest in and

a potential need for scheduled building

policies for municipal buildings.

Closed Basin Lake Endorsement

Interim Final Rule. On August 2,

1999, we published at 64 FR 41825 an

interim final rule, with a request for

comments. That rule added an

endorsement to the Standard Flood

Insurance Policy (SFIP) that provides a

permanent procedure for honoring

claims for buildings damaged by

continuous lake flooding from closed

basin lakes or under imminent threat of

flood damage from those lakes.

During the comment period, we

received seven sets of comments. After

reviewing those comments, we have

adopted several recommendations for

making textual changes to the policy.

For the other recommendations, which

we decided not to adopt, we explain our

decisions in each of the following

sections.

Size Standard for Closed Basin Lakes.

We received one comment that we

should use a standard less than one

square mile as the basis for our

definition of a closed basin lake. We

have selected the one square mile

standard to agree with the scope of our

flood insurance studies found in ‘‘Flood

Insurance Study: Guidelines and

Specifications’’ (FEMA 37, January

1995). The guidelines state that our

flood insurance studies should be

terminated where the 100-year

floodplain narrows to a width of 200

feet or less, or ‘‘where the drainage area

of the flooding source is less than one

square mile.’’ We felt that some

measurable cut-off was reasonable for

our definition of closed basin lakes in

the SFIP so we used one square mile as

the limit to conform with our published

standard for flood insurance studies. For

that reason, we have retained that one

square mile standard in the revised

closed basin lake section of the SFIP.

Physical Damage or Imminent Threat.

One person argued that the closed basin

lake endorsement should not require

that flooding from a closed basin lake

‘‘touch’’ the structure in order for us to

pay a claim under the closed basin lake

endorsement. The endorsement does not

impose such a requirement. The

endorsement says, ‘‘we will pay your

claim as if the building is a total loss

even though it has not been

continuously inundated for 90 days,

subject to the following conditions: 1.

Lake waters must damage or 2.

imminently threaten your building.’’ We

review closed basin lake claims filed

under the SFIP on a case-by-case basis

to determine whether a structure—not

physically damaged by flooding—is

‘‘imminently threatened’’ by flood

waters from a closed basin lake.

Imminent Threat. Three people

objected to the concept of ‘‘imminent

threat’’ and wanted us to base eligibility

for claim payments on predictions by

the National Weather Service (NWS)

that conditions from a designated closed

basin lake will inundate certain areas.

Our policy for the payment of claims

from closed basin lakes has evolved.

Initially, we based eligibility for claims

on NWS predictions of inundation for

broad areas. Program experience has

prompted us to change this policy. Now,

we apply the concept of ‘‘imminent

threat’’ which we can apply on a caseby-case basis to claims. The reason for

this shift is that, by using prediction as

the standard for claim payment, the

NFIP could be liable for claims on

buildings neither damaged by flooding

nor imminently threatened by flooding.

Rather, the building’s location in a

general area exposed to closed basin

lake flooding would make it eligible for

claim payment. Using ‘‘imminent

threat’’ as the basis for paying claims in

closed basin lake areas however is much

more defensible for several reasons.

First ‘‘imminent threat’’ means that it is

reasonably certain that surface water

will damage an insured structure due to

existing conditions in the Area of

Special Consideration (ASC). Second,

using ‘‘imminent threat’’ allows us to

evaluate claims on a case-by-case basis.

Buildings with Basements. Several

people raised concerns that the concept

of ‘‘imminent threat’’ did not expressly

apply to basements as well. We have

responded to those concerns by

interpreting the concept of ‘‘imminent

threat,’’ as it applies to buildings with

basements, as follows: In the event a

building located in the ASC has water

in the basement, we will consider the

building to be ‘‘imminently’’ threatened

by damage from closed basin lake

flooding when:

•The building is in such close

proximity to the closed basin lake that

it is probable that the lake flooding is

the cause of the basement flooding;

•The lake level is higher than the

basement floor level; and

• Either: (1) the owner is currently

taking reasonable preventive measures

to manage the flow of lake water into

the building and has done so for at least

the last 30 days or (2) lake water has

been in the basement for the last 30

days.

The adjuster may base the evidence of

both reasonable preventive measures

and the presence of lake water in the

basement for the specified period on

any documented source.

Date Coverage Must be in Effect. We

received three comments urging that the

date by which continuous flood

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60765

insurance coverage must be in effect, in

order for the policyholder to be eligible

for coverage, should be later than

October 31, 1999. The rule is silent

about a specific date. The endorsement

says, ‘‘You (the policyholder) must have

NFIP flood insurance coverage

continuously in effect from a date

established by FEMA until you file a

claim under this endorsement.’’ FEMA

had set October 31, 1999, as the

continuous coverage date for the Devils

Lake area of North Dakota and

communicated that to public officials.

To give local property owners

additional time to buy flood insurance

and meet the requirements of the

endorsement, however, FEMA changed

that date to November 30, 1999.

One person argued that the

continuous flood insurance coverage

date for the Devils Lake area should be

postponed until after the Flood

Insurance Rate Map (FIRM) showing the

Area of Special Consideration (ASC) has

become effective. He said:

‘‘All hazards illustrated by the NFIP

on a FIRM must be identified on a

scientific and technical basis, even the

ASC which approximates the 500-year

flood hazard surrounding Devils Lake.

As such, the ASC is subject to the

review and the appeal process (44 CFR

part 67) simply because it is on a

revised preliminary FIRM which lists

the proposed flood elevation

determinations for the lake.’’

The endorsement states that we will

‘‘identify on a map an area or areas of

special consideration (ASC) in which

there is a potential for flood damage

from continuous lake flooding.’’ The

endorsement does not require that the

map be a Flood Insurance Rate Map

(FIRM). However, because we were in

the process of either revising existing

maps or producing new maps for the

communities around Devils Lake in

connection with an ongoing Flood

Insurance Study, we decided to show

the ASC on the preliminary FIRMs. We

established the ASC for advisory

purposes; the advisory ASC is

considered final and is not subject to the

statutory and regulatory appeal period

as base flood elevations are.

Additionally, the statutory and

regulatory intent of the appeals process

is to give individuals and communities

every opportunity to appeal, with

scientific and technical data, the

elevations we derive from our studies

since the base flood elevations trigger

full risk premiums and building

standards for new construction. On the

other hand, the ASC, which we

delineated in close coordination with

State and local governments, is an area

that identifies the areas eligible for the

benefits under the closed basin lake

endorsement. The ASC in itself does not

impose a statutory requirement for flood

coverage. We did not therefore adopt

this recommendation.

Tracking Continuous Coverage

Requirement. We received one comment

expressing concern that FEMA would

have difficulty in tracking the

continuous coverage requirement when

one owner sells the property. The

endorsement addresses the issue of

continuous coverage when a property

owner sells a property affected by a

closed basin lake in this way:

‘‘You must have NFIP flood insurance

coverage continuously in effect from a

date established by FEMA until you file

a claim under this endorsement. If a

subsequent owner buys NFIP insurance

that goes in effect within 60 days of the

date of transfer of title, any gap in

coverage during that 60-day period will

not be a violation of this continuous

coverage requirement.’’

FEMA’s tracking the ownership of an

insured property is not an issue since

the burden of proof of continuous flood

insurance coverage will be on the

property buyer. In this regard, we have

been working with and will continue to

work with State and local officials to

make sure that the affected members of

the public know their responsibilities

under the endorsement and are able to

take full advantage of the endorsement’s

benefit. We believe our current efforts

address this concern.

Textual Comments. We also received

recommendations to revise the wording

of the endorsement in two places.

Specifically, one person recommended

we change ‘‘floodplain management

permit’’ (see criterion number 4 in the

endorsement) to ‘‘floodplain

development permit.’’ We adopted this

recommendation.

The same person also pointed out that

the wording ‘‘grant the conservation

easement to be recorded on the deed of

the property’’ was imprecise since an

easement ‘‘runs with the land’’ and

cannot be recorded ‘‘on the deed.’’ We

agree with this recommendation too. We

believe the following change in the

policy language achieves greater

precision: ‘‘Grant a conservation

easement * * * to be recorded in the

office of the local recorder of deeds.’’

Clarification of Coverage

Requirement. The interim final rule was

silent about how much coverage had to

be continuously in force for benefits

under the closed basin lake coverage.

Under the interim final rule,

policyholders had to have ‘‘NFIP flood

insurance continuously in effect from a

date established by FEMA until’’ the

policyholder filed a claim. This meant

that a policyholder could technically

meet this criterion for continuous

coverage by buying a minimal amount

of flood coverage initially, keeping the

minimal amount of coverage in effect,

and then increasing the face amount of

the policy when the structure is eligible

for relocation. This final rule now

requires that policyholders have the

same amount of insurance in effect

continuously from the date set by FEMA

until the policyholder files a claim. This

change still allows the policyholder to

buy recommended increases in coverage

at policy renewal to keep pace with

inflation.

Incorporation in the Revised SFIP. As

an aid for readers, we have incorporated

language on the policyholder’s

requirements and benefits regarding

closed basin lake flooding under

‘‘Continuous Lake Flooding’’ in the text

itself of the ‘‘OTHER PROVISIONS’’

section of the revised policy. We feel

this is a more logical place for

information on closed basin lake

coverage and will be easier for affected

policyholders to access rather than in a

separate endorsement.

Definition of ‘‘Structure’’

This final rule changes several key

definitions including the definition for

‘‘building.’’ Our revised definition of

‘‘building’’ cross-references the term

‘‘structure’’ found in the ‘‘Definitions’’

section of the program’s regulations at

44 CFR 59.1. Therefore, we have revised

the definition of ‘‘structure’’ to be

consistent with our new definition of

‘‘building.’’ This change does not affect

the definition of ‘‘structure’’ for

floodplain management purposes, only

for insurance purposes.

Group Flood Insurance Policy

Changing the Dwelling Form requires

us to change in this final rule several

cross-references to the Dwelling Form in

§ 61.17, which establishes the Group

Flood Insurance Policy. We have made

those reference changes in this final

rule.

Coverage Changes

We have made several changes in

coverage for the three policy forms. The

following tables compare the previous

coverage under the SFIP with the new

changes established by this rule:

60766 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

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

New changes in SFIP coverage Former coverage under the SFIP

The new changes will not affect the coverage for losses from ‘‘subsidence of land’’ along the shore of a lake or other body of water as a

result of flood-related erosion.

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

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

We will not pay for any losses from other land subsidence .................... Pay for losses from other land subsidence under certain circumstances.

We will pay for losses from sewer back-up if there is a general condition of flooding in the general area.Pay for losses from sewer-back-up and seepage:

We are removing the current requirement for replacement cost coverage on the building.If there is a general condition of flooding in the general area;

We are removing the criterion that the loss must occur within 72 hours

after the flood has receded.

If the building has replacement cost coverage; and

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

We will not apply a separate deductible to claims for sewer back-up

and seepage.

Apply a separate deductible to claims for these losses.

As noted in the preceding table, we

will pay for losses from sewer backup if

flooding is ‘‘in the area.’’ Also, as the

preceding table shows, there are two

references to the subsidence of land in

the current policy. The first is in our

definition of ‘‘flood.’’ Section 1370 of

the National Flood Insurance Act of

1968 mandates that the term ‘‘flood’’

shall also include ‘‘the collapse or

subsidence of land along the shore of a

lake or other body of water as a result

of erosion or undermining caused by

waves or currents of water exceeding

anticipated cyclical levels.’’ The second

reference to land subsidence is in the

Dwelling Form: currently we pay for

losses from land subsidence when

certain criteria are met such as amount

of insurance coverage in force on the

dwelling, the duration of flooding (‘‘no

later than 72 hours after the flood has

receded’’), and the proximity of the

flood (‘‘in the area’’). The changes do

not include any revision to the statutory

reference to ‘‘subsidence of land’’ in the

policy’s definition of ‘‘flood.’’ The

revisions however eliminate coverage

for land subsidence in any other

situation.

TABLE 2.—LOSS MITIGATION MEASURES AND LOSS ASSESSMENTS

New changes in SFIP coverage Former coverage under the SFIP

We are increasing the amount we pay for the labor and materials of

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

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

We are increasing to $1,000 the amount we will pay for removal of personal property from a flood-threatened building.We currently pay up to $500 for the removal of personal property in

anticipation of the flood.

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

New changes in SFIP coverage Former Coverage under the SFIP

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

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

improvements by the renter to the building.

No coverage under the Dwelling Form.

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

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

Dwelling Form.

No coverage.

We will increase to $2,500 what we will pay for flood losses to collectibles, artwork, furs, etc., and we will add these items to the list business contents.We now pay only up to $250 for eligible flood losses to collectibles, artwork, furs, etc.

We will pay for losses to self-propelled vehicles that service the premises and assist handicapped persons provided the vehicles are in a

building on the premises.

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

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

New changes in SFIP coverage Former coverage under the SFIP

We are changing how we settle losses for double-wide manufactured

homes. We will settle total losses for these structures with materials

on a replacement cost basis but never more than 1.5 times the actual cash value.

Replacement cost interpreted for total losses as the value shown in

NADA guide for mobile homes.

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60767

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

New changes in SFIP coverage Former coverage under the SFIP

We treat as part of the building additions or extensions attached by a

rigid exterior wall, a solid load-bearing interior wall, a stairway, an

elevated walkway, or a roof. At the insured’s option, these additions

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

a separate building.

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

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

TABLE 5.—REDUCTION AND REFORMATION OF COVERAGE LIMITS

New changes in SFIP coverage Former coverage under the SFIP

We are adding a policy reformation provision for situations when an application or endorsement is received without all the necessary information. We are requiring the applicant to submit the missing information within 60 days. If the missing information is not received within

60 days, and a loss occurs, the maximum amount of insurance available is limited to the lesser of: the amount originally requested or the

amount of coverage the original premium paid would buy, using the

correct rating information.

No such provision.

We are also adding coverage in

basements and in enclosures of elevated

buildings for water softeners and the

chemicals in them, water filters and

faucets. In addition, we are adding

coverage for damage from the pressure

or weight of water against the structure

with the requirements that there be

surface flooding in the area and that the

flooding be the cause of the damage. On

the other hand, we are excluding from

coverage scrip and stored value cards.

The revisions to the policy also exclude

any losses caused by the policyholder’s

failure to inspect and maintain the

property after the flood recedes.

We are retaining coverage for

detached garages, but we are eliminating

coverage for detached carports since

they do not have two walls—one of the

criteria under the definition of building.

We are also eliminating the requirement

for a minimum premium. The final rule

adds to the definition of ‘‘flood’’ criteria

previously found elsewhere in the

policy. Those criteria require that a

qualifying flood event under the policy

must inundate two properties or two

acres. The consolidation of the criteria

into the definition of ‘‘flood’’ is much

more useful for the policyholder to

understand the scope of coverage under

the policy.

In addition to these coverage changes,

we are changing how we define loss in

progress to make our intent clearer on

when coverage begins in connection

with loan closings.

Inspection Procedure of Insured

Structures

On June 27, 2000, FEMA published a

final rule establishing an inspection

procedure on a pilot project basis for

Monore County, Florida and the Village

of Islamorada, which is located in

Monroe County. The rule also added

endorsements to the SFIP making the

renewal of certain flood insurance

policies for certain properties in these

communities contingent on the property

owner’s submission of a completed

community inspection report by local

officials. These optional endorsements

affect some 30,000 policies in these two

pilot project communities.

We revised these endorsements in this

final rule to match the new policy

format. Also, in our efforts to simplify

the Standard Flood Insurance Policy, we

have shortened the endorsements to

each of the policy forms in this final

rule. We have retained the language

regarding the inspection report and the

policy renewal, but we have removed a

number of redundancies from the policy

language.

Exclusive Federal Jurisdiction and

Applicable Law

Standard Flood Insurance Policies are

sold by a number of private Write Your

Own (WYO) insurance companies and

directly to the public by the Federal

Insurance Administration. Because the

National Flood Insurance Program is

national in scope and accomplishes a

number of programmatic missions in

addition to making affordable flood

insurance generally available to the

public, the SFIP provides that its terms

cannot be altered, varied or waived

except by the written authority of the

Federal Insurance Administrator. The

Administrator intends that the same

benefits should be available to insureds

wherever the insured property is

located, or whether the policy is

purchased from a WYO insurance

company or from the Federal

government. Thus, there is a need for

uniformity in the interpretation of and

standards applicable to the policies and

their administration. Therefore, we have

clarified the policy language pertaining

to jurisdiction, venue and applicable

law to emphasize that matters

pertaining to the Standard Flood

Insurance Policy, including issues

relating to and arising out of claims

handling, must be heard in Federal

court and are governed exclusively by

Federal law.

National Environmental Policy Act

This final rule falls within the

exclusion category 44 CFR part

10.8(d)(2)(ii), which addresses the

preparation, revision, and adoption of

regulations, directives, and other

guidance documents related to actions

that qualify for categorical exclusions.

Qualifying for this exclusion and

because no other extraordinary

circumstances have been identified, this

final rule will not require the

preparation of either an environmental

assessment or environmental impact

statement as defined by the National

Environmental Policy Act.

Executive Order 12866, Regulatory

Planning and Review

We have prepared and reviewed this

final rule under the provisions of E.O.

12866, Regulatory Planning and Review.

Under Executive Order 12866, 58 FR

51735, October 4, 1993, a significant

regulatory action is subject to OMB

review and the requirements of the

Executive Order. The Executive Order

60768 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

defines ‘‘significant regulatory action’’

as one that is likely to result in a rule

that may:

(1) have an annual effect on the

economy of $100 million or more or

adversely affect in a material way the

economy, a sector of the economy,

productivity, competition, jobs, the

environment, public health or safety, or

State, local, or tribal governments or

communities;

(2) create a serious inconsistency or

otherwise interfere with an action taken

or planned by another agency;

(3) materially alter the budgetary

impact of entitlements, grants, user fees,

or loan programs or the rights and

obligations of recipients thereof; or

(4) raise novel legal or policy issues

arising out of legal mandates, the

President’s priorities, or the principles

set forth in the Executive Order.

For the reasons that follow we have

concluded that the rule is neither an

economically significant nor a

significant regulatory action under the

Executive Order.

The rule accomplishes three principal

changes: (1) it renders the SFIP in

‘‘plain English’’; (2) it restructures the

format to resemble the basic

homeowners policy; and (3) it makes

several changes in the policy’s coverage.

In all other substantive aspects the SFIP

is unchanged from its past version.

Of 18 changes that affect coverage, we

summarize 11 in Tables 1 through 5 of

this preamble. We summarize the

remaining 7 changes in the paragraphs

that immediately follow the tables. The

18 proposed changes are evenly divided

between changes that add or increase

coverage and changes that reduce or

remove coverage or require certain

coverage from a date certain to the time

a claim is filed for ‘‘closed basin lake’’

claims.

For each revised policy provision, we

made two estimates: the first was the

percentage of claims that would be

impacted by the revised provision; the

second estimate was the dollar impact

that provision would have on each

affected claim. We multiplied these two

amounts to develop the dollar impact of

each change spread over all program

claims. We then summed those dollar

amounts to arrive at an estimated

increase of $62.88 in the average paid

claim under these revised policy

provisions. We estimate that during the

first fiscal year after enactment the NFIP

would have about 4.3 million

policyholders and about 55,900 total

flood losses. If so, that would result in

an annual cost to the Program of

approximately $3.5 million resulting

from the proposed changes to the

policy.

The Office of Management and Budget

has reviewed this rule under the

principles of Executive Order 12866.

Paperwork Reduction Act

This rule requires the collection of

information. Under the Paperwork

Reduction Act (Act) we must consider

the impact of paperwork and other

information collection burdens imposed

on the public. The Act mandates

specific reductions in the amount of

paperwork requirements imposed by

agencies. It requires specific approval by

the Office of Management and Budget

(OMB) of any new requirements for

collection of information imposed on

ten or more persons by an agency;

without such approval, the agency lacks

the authority to enforce any such

requirement. The Act also requires us to

inform respondents that a response is

not required unless the collection of

information displays a valid OMB

control number.

OMB has previously approved the

following information collection

requirements covered by this final rule

under the provisions of the Paperwork

Reduction Act, as amended:

OMB control No. Title

3067–0021 National Flood Insurance Claims

Forms.

3067–0022 National Flood Insurance Policy

Forms.

3067–0077 Post Construction Elevation Certificate/Floodproofing Certificate.

3067–0195 Community Rating System

(CRS) Program, Application

Worksheets and Commentary.

3067–0235 Residential Basement

Floodproofing Certificate.

3067–0275 Inspection of Insured Structures

by Communities.

In addition, FEMA has submitted for

OMB clearance and approval one other

information collection package: Closed

Basin Lake Endorsement. When

approved by OMB we will publish a

separate notice of this collection of

information and its expiration date. Any

person who is to respond to this

collection of information is not required

to respond unless the collection of

information displays a currently valid

OMB control number.

Executive Order 13132, Federalism

Executive Order 13132, Federalism,

dated August 4, 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, 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.

We have reviewed this final rule

under E.O. 13132 and have concluded

that the rule does not have federalism

implications as defined by the Executive

Order. The rule is a plain language

revision of the Standard Flood

Insurance Policy. Inasmuch as the

insurance benefits and requirements

derive from a Federal statute and

program exclusively administered by

the Federal Government for the benefit

of State, local and tribal governments,

individuals, and not-for-profit

organizations, the rule neither limits nor

preempts any policymaking discretion

of the State that the State might

otherwise have.

The Office of Management and Budget

has reviewed this rule under the

provisions of Executive Order 13132.

Congressional Review of Agency

Rulemaking

We have sent this final rule to the

Congress and to the General Accounting

Office under the Congressional Review

of Agency Rulemaking Act, Public Law

104–121. The rule is not a ‘‘major rule’’

within the meaning of that Act. It is a

‘‘plain English’’ revision of the existing

Standard Flood Insurance Policy and

any substantive changes in the rule will

not result in an annual effect on the

economy of $100,000,000 or more. We

do not expect that it will result in a

major increase in costs or prices for

consumers, individual industries,

Federal, State, or local government

agencies, or geographic regions. Nor do

we expect that it will have ‘‘significant

adverse effects’’ on competition,

employment, investment, productivity,

innovation, or on the ability of United

States-based enterprises to compete

with foreign-based enterprises.

List of Subjects in 44 CFR Parts 59 and

61

Flood insurance.

Accordingly, we amend 44 CFR Parts

59 and 61 as follows:

PART 59—GENERAL PROVISIONS

1. The authority citation for Part 59

continues to read as follows:

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

Reorganization Plan No. 3 of 1978, 43 FR

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

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60769

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

1979 Comp., p. 376.

2. We revise the definition of

‘‘Structure’’ found in § 59.1 Definitions

to read as follows:

§ 59.1 Definitions.

* * * * *

‘‘Structure’’ means, for floodplain

management purposes, a walled and

roofed building, including a gas or

liquid storage tank, that is principally

above ground, as well as a manufactured

home. ‘‘Structure,’’ for insurance

purposes, means:

(1) A building with two or more

outside rigid walls and a fully secured

roof, that is affixed to a permanent site;

(2) A manufactured home (‘‘a

manufactured home,’’ also known as a

mobile home, is a structure: built on a

permanent chassis, transported to its

site in one or more sections, and affixed

to a permanent foundation); or

(3) A travel trailer without wheels,

built on a chassis and affixed to a

permanent foundation, that is regulated

under the community’s floodplain

management and building ordinances or

laws.

For the latter purpose, ‘‘structure’’

does not mean a recreational vehicle or

a park trailer or other similar vehicle,

except as described in paragraph (3) of

this definition, or a gas or liquid storage

tank.

* * * * *

PART 61—INSURANCE COVERAGE

AND RATES

3. The authority citation for part 61

continues to read as follows:

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

Reorganization Plan No. 3 of 1978, 43 FR

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

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

1979 Comp., p. 376.

§ 61.10 [Removed]

4. We remove § 61.10.

5. We revise § 61.17 to read as

follows:

§ 61.17 Group Flood Insurance Policy.

(a) A Group Flood Insurance Policy

(GFIP) is a policy covering all

individuals named by a State as

recipients under section 411 of the

Stafford Act (42 U.S.C. 5178) of an

Individual and Family Grant (IFG)

program award for flood damage as a

result of a major disaster declaration by

the President.

(b) The premium for the GFIP is a flat

fee of $200 per policyholder. We may

adjust the premium to reflect NFIP loss

experience and any adjustment of

benefits under the IFG program.

(c) The amount of coverage is

equivalent to the maximum grant

amount established under section 411 of

the Stafford Act (42 U.S.C. 5178).

(d) The term of the GFIP is for 37

months and begins 60 days after the

date of the disaster declaration.

(e) Coverage for individual grantees

begins on the thirtieth day after the

NFIP receives the required data for

individual grantees and their premium

payments.

(f) We will send a Certificate of Flood

Insurance to each individual insured

under the GFIP.

(g) The GFIP is the Standard Flood

Insurance Policy Dwelling Form (a copy

of which is included in Appendix A(1)

of this part), except that:

(1) VI. DEDUCTIBLES does not apply

to the GFIP. A special deductible of

$200 (applicable separately to any

building loss and any contents loss)

applies to insured flood-damage losses

sustained by the insured property in the

course of any subsequent flooding event

during the term of the GFIP. The

deductible does not apply to:

(i) III.C.2. Loss Avoidance Measures;

or

(ii) III. C.3. Condominium Loss

Assessments coverage.

(2) VII. GENERAL CONDITIONS, E.

Cancellation of Policy by You, does not

apply to the GFIP.

(3) VII. GENERAL CONDITIONS, H.

Policy Renewal, does not apply to the

GFIP.

(h) We will send a notice to the GFIP

certificate holders approximately 60

days before the end of the thirty-seven

month term of the GFIP. The notice will

encourage them to contact a local

insurance agent or producer or a private

insurance company selling NFIP

policies under the Write Your Own

program of the NFIP to apply for a

conventional NFIP Standard Flood

Insurance Policy, and advise them as to

the amount of coverage they must

maintain in order not to jeopardize their

eligibility for future disaster assistance.

The IFG program will provide the NFIP

the amount of flood insurance coverage

to be maintained by certificate holders.

6. We revise Appendix A(1) to Part

61, Dwelling Form, to read as follows:

APPENDIX A(1) TO PART 61

Federal Emergency Management Agency,

Federal Insurance Administration

Standard Flood Insurance Policy

DWELLING FORM

Please read the policy carefully. The flood

insurance provided is subject to limitations,

restrictions, and exclusions. This policy

covers only:

1. A non-condominium residential

building designed for principal use as a

dwelling place of one to four families, or

2. A single family dwelling unit in a

condominium building.

I. Agreement

The Federal Emergency Management

Agency (FEMA) provides flood insurance

under the terms of the National Flood

Insurance Act of 1968 and its Amendments,

and Title 44 of the Code of Federal

Regulations.

We will pay you for direct physical loss by

or from flood to your insured property if you:

1. Have paid the correct premium;

2. Comply with all terms and conditions of

this policy; and

3. Have furnished accurate information and

statements.

We have the right to review the

information you give us at any time and to

revise your policy based on our review.

II. Definitions

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

to the insured(s) shown on the Declarations

Page of this policy and your spouse, if a

resident of the same household. Insured(s)

includes: Any mortgagee and loss payee

named in the Application and Declarations

Page, as well as any other mortgagee or loss

payee determined to exist at the time of loss

in the order of precedence. ‘‘We,’’ ‘‘us,’’ and

‘‘our’’ refer to the insurer.

Some definitions are complex because they

are provided as they appear in the law or

regulations, or result from court cases. The

precise definitions are intended to protect

you.

Flood, as used in this flood insurance

policy, means:

1. A general and temporary condition of

partial or complete inundation of two or

more acres of normally dry land area or of

two or more properties (one of which is your

property) from:

a. Overflow of inland or tidal waters,

b. Unusual and rapid accumulation or

runoff of surface waters from any source,

c. Mudflow.

2. Collapse or subsidence of land along the

shore of a lake or similar body of water as

a result of erosion or undermining caused by

waves or currents of water exceeding

anticipated cyclical levels that result in a

flood as defined in A.1.a. above.

B. The following are the other key

definitions we use in this policy:

1. Act. The National Flood Insurance Act

of 1968 and any amendments to it.

2. Actual Cash Value. The cost to replace

an insured item of property at the time of

loss, less the value of its physical

depreciation.

3. Application. The statement made and

signed by you or your agent in applying for

this policy. The application gives

information we use to determine the

eligibility of the risk, the kind of policy to be

issued, and the correct premium payment.

The application is part of this flood

insurance policy. For us to issue you a

policy, the correct premium payment must

accompany the application.

60770 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

4. Base Flood. A flood having a one percent

chance of being equaled or exceeded in any

given year.

5. Basement. Any area of the building,

including any sunken room or sunken

portion of a room, having its floor below

ground level (subgrade) on all sides.

6. Building.

a. A structure with two or more outside

rigid walls and a fully secured roof, that is

affixed to a permanent site;

b. A manufactured home (a ‘‘manufactured

home,’’ also known as a mobile home, is a

structure: built on a permanent chassis,

transported to its site in one or more sections,

and affixed to a permanent foundation); or

c. A travel trailer without wheels, built on

a chassis and affixed to a permanent

foundation, that is regulated under the

community’s floodplain management and

building ordinances or laws.

Building does not mean a gas or liquid

storage tank or a recreational vehicle, park

trailer or other similar vehicle, except as

described in B.6.c. above.

7. Cancellation. The ending of the

insurance coverage provided by this policy

before the expiration date.

8. Condominium. That form of ownership

of real property in which each unit owner

has an undivided interest in common

elements.

9. Condominium Association. The entity

made up of the unit owners responsible for

the maintenance and operation of:

a. Common elements owned in undivided

shares by unit owners; and

b. Other real property in which the unit

owners have use rights; where membership

in the entity is a required condition of unit

ownership.

10. Declarations Page. A computergenerated summary of information you

provided in the application for insurance.

The Declarations Page also describes the term

of the policy, limits of coverage, and displays

the premium and our name. The Declarations

Page is a part of this flood insurance policy.

11. Described Location. The location where

the insured building(s) or personal property

are found. The described location is shown

on the Declarations Page.

12. Direct Physical Loss By or From Flood.

Loss or damage to insured property, directly

caused by a flood. There must be evidence

of physical changes to the property.

13. Dwelling. A building designed for use

as a residence for no more than four families

or a single-family unit in a building under a

condominium form of ownership.

14. Elevated Building. A building that has

no basement and that has its lowest elevated

floor raised above ground level by foundation

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

columns.

15. Emergency Program. The initial phase

of a community’s participation in the

National Flood Insurance Program. During

this phase, only limited amounts of

insurance are available under the Act.

16. Expense Constant. A flat charge you

must pay on each new or renewal policy to

defray the expenses of the Federal

Government related to flood insurance.

17. Federal Policy Fee. A flat charge you

must pay on each new or renewal policy to

defray certain administrative expenses

incurred in carrying out the National Flood

Insurance Program. This fee covers expenses

not covered by the Expense Constant.

18. Improvements. Fixtures, alterations,

installations, or additions comprising a part

of the insured dwelling or the apartment in

which you reside.

19. Mudflow. A river of liquid and flowing

mud on the surface of normally dry land

areas, as when earth is carried by a current

of water. Other earth movements, such as

landslide, slope failure, or a saturated soil

mass moving by liquidity down a slope, are

not mudflows.

20. National Flood Insurance Program

(NFIP). The program of flood insurance

coverage and floodplain management

administered under the Act and applicable

Federal regulations in Title 44 of the Code of

Federal Regulations, Subchapter B.

21. Policy. The entire written contract

between you and us. It includes:

a. This printed form;

b. The application and Declarations Page;

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

and

d. Any renewal certificate indicating that

coverage has been instituted for a new policy

and new policy term.

Only one dwelling, which you specifically

described in the application, may be insured

under this policy.

22. Pollutants. Substances that include, but

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

or thermal irritant or contaminant, including

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

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

is not limited to, materials to be recycled,

reconditioned, or reclaimed.

23. Post-FIRM Building. A building for

which construction or substantial

improvement occurred after December 31,

1974, or on or after the effective date of an

initial Flood Insurance Rate Map (FIRM),

whichever is later.

24. Probation Premium. A flat charge you

must pay on each new or renewal policy

issued covering property in a community the

NFIP has placed on probation under the

provisions of 44 CFR 59.24.

25. Regular Program. The final phase of a

community’s participation in the National

Flood Insurance Program. In this phase, a

Flood Insurance Rate Map is in effect and full

limits of coverage are available under the

Act.

26. Special Flood Hazard Area. An area

having special flood or mudflow, and/or

flood-related erosion hazards, and shown on

a Flood Hazard Boundary Map or Flood

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

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

AR/AO, AR/A1–A30, V1–V30, VE, or V.

27. Unit. A single-family unit you own in

a condominium building.

28. Valued Policy. A policy in which the

insured and the insurer agree on the value of

the property insured, that value being

payable in the event of a total loss. The

Standard Flood Insurance Policy is not a

valued policy.

III. Property Covered

A. Coverage A—Building Property

We insure against direct physical loss by

or from flood to:

1. The dwelling at the described location,

or for a period of 45 days at another location

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

Safety.

2. Additions and extensions attached to

and in contact with the dwelling by means

of a rigid exterior wall, a solid load-bearing

interior wall, a stairway, an elevated

walkway, or a roof. At your option, additions

and extensions connected by any of these

methods may be separately insured.

Additions and extensions attached to and in

contact with the building by means of a

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

the dwelling and cannot be separately

insured.

3. A detached garage at the described

location. Coverage is limited to no more than

10% of the limit of liability on the dwelling.

Use of this insurance is at your option but

reduces the building limit of liability. We do

not cover any detached garage used or held

for use for residential (i.e., dwelling),

business, or farming purposes.

4. Materials and supplies to be used for

construction, alteration, or repair of the

dwelling or a detached garage while the

materials and supplies are stored in a fully

enclosed building at the described location or

on an adjacent property.

5. A building under construction,

alteration, or repair at the described location.

a. If the structure is not yet walled or

roofed as described in the definition for

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

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

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

of up to 90 continuous days thereafter.

b. However, coverage does not apply until

the building is walled and roofed if the

lowest floor, including the basement floor, of

a non-elevated building or the lowest

elevated floor of an elevated building is:

(1) Below the base flood elevation in Zones

AH, AE, A1–A30, AR, AR/AE, AR/AH, AR/

A1–A30, AR/A, AR/AO; or

(2) Below the base flood elevation adjusted

to include the effect of wave action in Zones

VE or V1–V30.

The lowest floor levels are based on the

bottom of the lowest horizontal structural

member of the floor in Zones VE or V1–V30

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

A1–A30, AR, AR/AE, AR/AH, AR/A1–A30,

AR/A, AR/AO.

6. A manufactured home or a travel trailer

as described in the Definitions section (see

II.B.6.b. and II.B.6.c.).

If the manufactured home or travel trailer

is in a special flood hazard area, it must be

anchored in the following manner at the time

of the loss:

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

anchors; or

b. In accordance with the manufacturer’s

specifications; or

c. In compliance with the community’s

floodplain management requirements unless

it has been continuously insured by the NFIP

at the same described location since

September 30, 1982.

7. The following items of property which

are covered under Coverage A only:

a. Awnings and canopies;

b. Blinds;

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60771

c. Built-in dishwashers;

d. Built-in microwave ovens;

e. Carpet permanently installed over

unfinished flooring;

f. Central air conditioners;

g. Elevator equipment;

h. Fire sprinkler systems;

i. Walk-in freezers;

j. Furnaces and radiators;

k. Garbage disposal units;

l. Hot water heaters, including solar water

heaters;

m. Light fixtures;

n. Outdoor antennas and aerials fastened to

buildings;

o. Permanently installed cupboards,

bookcases, cabinets, paneling, and wallpaper;

p. Plumbing fixtures;

q. Pumps and machinery for operating

pumps;

r. Ranges, cooking stoves, and ovens;

s. Refrigerators; and

t. Wall mirrors, permanently installed.

8. Items of property in a building enclosure

below the lowest elevated floor of an elevated

post-FIRM building located in Zones A1–

A30, AE, AH, AR, AR/A, AR/AE, AR/AH,

AR/A1–A30, V1–V30, or VE, or in a

basement, regardless of the zone. Coverage is

limited to the following:

a. Any of the following items, if installed

in their functioning locations and, if

necessary for operation, connected to a

power source:

(1) Central air conditioners;

(2) Cisterns and the water in them;

(3) Drywall for walls and ceilings in a

basement and the cost of labor to nail it,

unfinished and unfloated and not taped, to

the framing;

(4) Electrical junction and circuit breaker

boxes;

(5) Electrical outlets and switches;

(6) Elevators, dumbwaiters and related

equipment, except for related equipment

installed below the base flood elevation after

September 30, 1987;

(7) Fuel tanks and the fuel in them;

(8) Furnaces and hot water heaters;

(9) Heat pumps;

(10) Nonflammable insulation in a

basement;

(11) Pumps and tanks used in solar energy

systems;

(12) Stairways and staircases attached to

the building, not separated from it by

elevated walkways;

(13) Sump pumps;

(14) Water softeners and the chemicals in

them, water filters, and faucets installed as

an integral part of the plumbing system;

(15) Well water tanks and pumps;

(16) Required utility connections for any

item in this list; and

(17) Footings, foundations, posts, pilings,

piers, or other foundation walls and

anchorage systems required to support a

building.

b. Clean-up.

B. Coverage B—Personal Property

1. If you have purchased personal property

coverage, we insure against direct physical

loss by or from flood to personal property

inside a building at the described location, if:

a. The property is owned by you or your

household family members; and

b. At your option, the property is owned

by guests or servants.

Personal property is also covered for a

period of 45 days at another location as set

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

Safety.

Personal property in a building that is not

fully enclosed must be secured to prevent

flotation out of the building. If the personal

property does float out during a flood, it will

be conclusively presumed that it was not

reasonably secured. In that case there is no

coverage for such property.

2. Coverage for personal property includes

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

which is covered under Coverage B only:

a. Air conditioning units, portable or

window type;

b. Carpets, not permanently installed, over

unfinished flooring;

c. Carpets over finished flooring;

d. Clothes washers and dryers;

e. ‘‘Cook-out’’ grills;

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

food in any freezer; and

g. Portable microwave ovens and portable

dishwashers.

3. Coverage for items of property in a

building enclosure below the lowest elevated

floor of an elevated post-FIRM building

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

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

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

is limited to the following items, if installed

in their functioning locations and, if

necessary for operation, connected to a

power source:

a. Air conditioning units, portable or

window type;

b. Clothes washers and dryers; and

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

food in any freezer.

4. If you are a tenant and have insured

personal property under Coverage B in this

policy, we will cover such property,

including your cooking stove or range and

refrigerator. The policy will also cover

improvements made or acquired solely at

your expense in the dwelling or apartment in

which you reside, but for not more than 10%

of the limit of liability shown for personal

property on the Declarations Page. Use of this

insurance is at your option but reduces the

personal property limit of liability.

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

insured personal property under Coverage B

in this policy, we will also cover your

interior walls, floor, and ceiling (not

otherwise covered under a flood insurance

policy purchased by your condominium

association) for not more than 10% of the

limit of liability shown for personal property

on the Declarations Page. Use of this

insurance is at your option but reduces the

personal property limit of liability.

6. Special Limits. We will pay no more

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

of the following kinds of personal property:

a. Artwork, photographs, collectibles, or

memorabilia, including but not limited to,

porcelain or other figures, and sports cards;

b. Rare books or autographed items;

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

platinum;

d. Furs or any article containing fur which

represents its principal value; or

e. Personal property used in any business.

7. We will pay only for the functional

value of antiques.

C. Coverage C—Other Coverages

1. Debris Removal.

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

property and debris of insured property

anywhere.

b. If you or a member of your household

perform the removal work, the value of your

work will be based on the Federal minimum

wage.

c. This coverage does not increase the

Coverage A or Coverage B Limit of Liability.

2. Loss Avoidance Measures

a. Sandbags, Supplies, and Labor

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

incur to protect the insured building from a

flood or imminent danger of flood, for the

following:

(a) Your reasonable expenses to buy:

(i) Sandbags, including sand to fill them;

(ii) Fill for temporary levees;

(iii) Pumps; and

(iv) Plastic sheeting and lumber used in

connection with these items.

(b) The value of work, at the Federal

minimum wage, that you or a member of

your household perform.

(2) This coverage for Sandbags, Supplies

and Labor only applies if damage to insured

property by or from flood is imminent and

the threat of flood damage is apparent

enough to lead a person of common prudence

to anticipate flood damage. One of the

following must also occur:

(a) A general and temporary condition of

flooding in the area near the described

location must occur, even if the flood does

not reach the building; or

(b) A legally authorized official must issue

an evacuation order or other civil order for

the community in which the building is

located calling for measures to preserve life

and property from the peril of flood.

This coverage does not increase the

Coverage A or Coverage B Limit of Liability.

b. Property Removed to Safety

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

reasonable expenses you incur to move

insured property to a place other than the

described location that contains the property

in order to protect it from flood or the

imminent danger of flood.

Reasonable expenses include the value of

work, at the Federal minimum wage, you or

a member of your household perform.

(2) If you move insured property to a

location other than the described location

that contains the property, in order to protect

it from flood or the imminent danger of flood,

we will cover such property while at that

location for a period of 45 consecutive days

from the date you begin to move it there. The

personal property that is moved must be

placed in a fully enclosed building or

otherwise reasonably protected from the

elements.

Any property removed, including a

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

must be placed above ground level or outside

of the special flood hazard area.

This coverage does not increase the

Coverage A or Coverage B Limit of Liability.

60772 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

3. Condominium Loss Assessments.

a. If this policy insures a unit, we will pay,

up to the Coverage A limit of liability, your

share of loss assessments charged against you

by the condominium association in

accordance with the condominium

association’s articles of association,

declarations and your deed.

The assessment must be made as a result

of direct physical loss by or from flood

during the policy term, to the building’s

common elements.

b. We will not pay any loss assessment

charged against you:

(1) And the condominium association by

any governmental body;

(2) That results from a deductible under

the insurance purchased by the

condominium association insuring common

elements;

(3) That results from a loss to personal

property, including contents of a

condominium building;

(4) That results from a loss sustained by the

condominium association that was not

reimbursed under a flood insurance policy

written in the name of the association under

the Act because the building was not, at the

time of loss, insured for an amount equal to

the lesser of:

(a) 80% or more of its full replacement

cost; or

(b) The maximum amount of insurance

permitted under the Act;

(5) To the extent that payment under this

policy for a condominium building loss, in

combination with payments under any other

NFIP policies for the same building loss,

exceeds the maximum amount of insurance

permitted under the Act for that kind of

building; or

(6) To the extent that payment under this

policy for a condominium building loss, in

combination with any recovery available to

you as a tenant in common under any NFIP

condominium association policies for the

same building loss, exceeds the amount of

insurance permitted under the Act for a

single-family dwelling.

Loss assessment coverage does not increase

the Coverage A Limit of Liability.

D. Coverage D—Increased Cost of

Compliance

1. General.

This policy pays you to comply with a

State or local floodplain management law or

ordinance affecting repair or reconstruction

of a structure suffering flood damage.

Compliance activities eligible for payment

are: elevation, floodproofing, relocation, or

demolition (or any combination of these

activities) of your structure. Eligible

floodproofing activities are limited to:

a. Non-residential structures.

b. Residential structures with basements

that satisfy FEMA’s standards published in

the Code of Federal Regulations [44 CFR 60.6

(b) or (c)].

2. Limit of Liability.

We will pay you up to $20,000 under this

Coverage D—Increased Cost of Compliance,

which only applies to policies with building

coverage (Coverage A). Our payment of

claims under Coverage D is in addition to the

amount of coverage which you selected on

the application and which appears on the

Declarations Page. But the maximum you can

collect under this policy for both Coverage

A—Building Property and Coverage D—

Increased Cost of Compliance cannot exceed

the maximum permitted under the Act. We

do not charge a separate deductible for a

claim under Coverage D.

3. Eligibility

a. A structure covered under Coverage A—

Building Property sustaining a loss caused by

a flood as defined by this policy must:

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

repetitive loss structure is one that meets the

following conditions:

(a) The structure is covered by a contract

of flood insurance issued under the NFIP.

(b) The structure has suffered flood damage

on two occasions during a 10-year period

which ends on the date of the second loss.

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

average, equaled or exceeded 25% of the

market value of the structure at the time of

each flood loss.

(d) In addition to the current claim, the

NFIP must have paid the previous qualifying

claim, and the State or community must have

a cumulative, substantial damage provision

or repetitive loss provision in its floodplain

management law or ordinance being enforced

against the structure; or

(2) Be a structure that has had flood

damage in which the cost to repair equals or

exceeds 50% of the market value of the

structure at the time of the flood. The State

or community must have a substantial

damage provision in its floodplain

management law or ordinance being enforced

against the structure.

b. This Coverage D pays you to comply

with State or local floodplain management

laws or ordinances that meet the minimum

standards of the National Flood Insurance

Program found in the Code of Federal

Regulations at 44 CFR 60.3. We pay for

compliance activities that exceed those

standards under these conditions:

(1) 3.a.(1) above.

(2) Elevation or floodproofing in any risk

zone to preliminary or advisory base flood

elevations provided by FEMA which the

State or local government has adopted and is

enforcing for flood-damaged structures in

such areas. (This includes compliance

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

being changed to zones with base flood

elevations. This also includes compliance

activities in zones where base flood

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

higher advisory base flood elevation.)

Increased Cost of Compliance coverage does

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

where the community has derived its own

elevations and is enforcing elevation or

floodproofing requirements for flooddamaged structures to elevations derived

solely by the community.

(3) Elevation or floodproofing above the

base flood elevation to meet State or local

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

structure must be elevated above the base

flood elevation.

c. Under the minimum NFIP criteria at 44

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

require the elevation or floodproofing of

structures in unnumbered A zones to the

base flood elevation where elevation data is

obtained from a Federal, State, or other

source. Such compliance activities are also

eligible for Coverage D.

d. This coverage will also pay for the

incremental cost, after demolition or

relocation, of elevating or floodproofing a

structure during its rebuilding at the same or

another site to meet State or local floodplain

management laws or ordinances, subject to

Exclusion D.5.g. below.

e. This coverage will also pay to bring a

flood-damaged structure into compliance

with state or local floodplain management

laws or ordinances even if the structure had

received a variance before the present loss

from the applicable floodplain management

requirements.

4. Conditions.

a. When a structure covered under

Coverage A—Building Property sustains a

loss caused by a flood, our payment for the

loss under this Coverage D will be for the

increased cost to elevate, floodproof, relocate,

or demolish (or any combination of these

activities) caused by the enforcement of

current State or local floodplain management

ordinances or laws. Our payment for eligible

demolition activities will be for the cost to

demolish and clear the site of the building

debris or a portion thereof caused by the

enforcement of current State or local

floodplain management ordinances or laws.

Eligible activities for the cost of clearing the

site will include those necessary to

discontinue utility service to the site and

ensure proper abandonment of on-site

utilities.

b. When the building is repaired or rebuilt,

it must be intended for the same occupancy

as the present building unless otherwise

required by current floodplain management

ordinances or laws.

5. Exclusions.

Under this Coverage D (Increased Cost of

Compliance) we will not pay for:

a. The cost to comply with any floodplain

management law or ordinance in

communities participating in the Emergency

Program.

b. The cost associated with enforcement of

any ordinance or law that requires any

insured or others to test for, monitor, clean

up, remove, contain, treat, detoxify or

neutralize, or in any way respond to, or

assess the effects of pollutants.

c. The loss in value to any insured building

or other structure due to the requirements of

any ordinance or law.

d. The loss in residual value of the

undamaged portion of a building demolished

as a consequence of enforcement of any State

or local floodplain management law or

ordinance.

e. Any Increased Cost of Compliance under

this Coverage D:

(1) Until the building is elevated,

floodproofed, demolished, or relocated on

the same or to another premises; and

(2) Unless the building is elevated,

floodproofed, demolished, or relocated as

soon as reasonably possible after the loss, not

to exceed two years.

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

plumbing or electrical wiring, not

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60773

specifically related to the State or local

floodplain management law or ordinance.

g. Any compliance activities needed to

bring additions or improvements made after

the loss occurred into compliance with State

or local floodplain management laws or

ordinances.

h. Loss due to any ordinance or law that

you were required to comply with before the

current loss.

i. Any rebuilding activity to standards that

do not meet the NFIP’s minimum

requirements. This includes any situation

where the insured has received from the

State or community a variance in connection

with the current flood loss to rebuild the

property to an elevation below the base flood

elevation.

j. Increased Cost of Compliance for a garage

or carport.

k. Any structure insured under an NFIP

Group Flood Insurance Policy.

l. Assessments made by a condominium

association on individual condominium unit

owners to pay increased costs of repairing

commonly owned buildings after a flood in

compliance with State or local floodplain

management ordinances or laws.

6. Other Provisions.

a. Increased Cost of Compliance coverage

will not be included in the calculation to

determine whether coverage meets the 80%

insurance-to-value requirement for

replacement cost coverage as set forth in VII.

General Conditions, V. Loss Settlement.

b. All other conditions and provisions of

the policy apply.

IV. Property Not Covered

We do not cover any of the following:

1. Personal property not inside a building;

2. A building, and personal property in it,

located entirely in, on, or over water or

seaward of mean high tide if it was

constructed or substantially improved after

September 30, 1982;

3. Open structures, including a building

used as a boathouse or any structure or

building into which boats are floated, and

personal property located in, on, or over

water;

4. Recreational vehicles other than travel

trailers described in the Definitions section

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

foundation or on wheels;

5. Self-propelled vehicles or machines,

including their parts and equipment.

However, we do cover self-propelled vehicles

or machines not licensed for use on public

roads that are:

a. Used mainly to service the described

location or

b. Designed and used to assist handicapped

persons, while the vehicles or machines are

inside a building at the described location;

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

plants, growing crops, or animals;

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

evidences of debt, medals, money, scrip,

stored value cards, postage stamps,

securities, bullion, manuscripts, or other

valuable papers;

8. Underground structures and equipment,

including wells, septic tanks, and septic

systems;

9. Those portions of walks, walkways,

decks, driveways, patios and other surfaces,

all whether protected by a roof or not, located

outside the perimeter, exterior walls of the

insured building or the building in which the

insured unit is located;

10. Containers, including related

equipment, such as, but not limited to, tanks

containing gases or liquids;

11. Buildings or units and all their contents

if more than 49% of the actual cash value of

the building is below ground, unless the

lowest level is at or above the base flood

elevation and is below ground by reason of

earth having been used as insulation material

in conjunction with energy efficient building

techniques;

12. Fences, retaining walls, seawalls,

bulkheads, wharves, piers, bridges, and

docks;

13. Aircraft or watercraft, or their

furnishings and equipment;

14. Hot tubs and spas that are not bathroom

fixtures, and swimming pools, and their

equipment, such as, but not limited to,

heaters, filters, pumps, and pipes, wherever

located;

15. Property not eligible for flood

insurance pursuant to the provisions of the

Coastal Barrier Resources Act and the Coastal

Barrier Improvement Act and amendments to

these Acts;

16. Personal property you own in common

with other unit owners comprising the

membership of a condominium association.

V. Exclusions

A. We only pay for direct physical loss by

or from flood, which means that we do not

pay you for:

1. Loss of revenue or profits;

2. Loss of access to the insured property or

described location;

3. Loss of use of the insured property or

described location;

4. Loss from interruption of business or

production;

5. Any additional living expenses incurred

while the insured building is being repaired

or is unable to be occupied for any reason;

6. The cost of complying with any

ordinance or law requiring or regulating the

construction, demolition, remodeling,

renovation, or repair of property, including

removal of any resulting debris. This

exclusion does not apply to any eligible

activities we describe in Coverage D—

Increased Cost of Compliance; or

7. Any other economic loss you suffer.

B. We do not insure a loss directly or

indirectly caused by a flood that is already

in progress at the time and date:

1. The policy term begins; or

2. Coverage is added at your request.

C. We do not insure for loss to property

caused directly by earth movement even if

the earth movement is caused by flood. Some

examples of earth movement that we do not

cover are:

1. Earthquake;

2. Landslide;

3. Land subsidence;

4. Sinkholes;

5. Destabilization or movement of land that

results from accumulation of water in

subsurface land area; or

6. Gradual erosion.

We do, however, pay for losses from

mudflow and land subsidence as a result of

erosion that are specifically covered under

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

II.A.2.).

D. We do not insure for direct physical loss

caused directly or indirectly by any of the

following:

1. The pressure or weight of ice;

2. Freezing or thawing;

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

4. Water, moisture, mildew, or mold

damage that results primarily from any

condition:

a. Substantially confined to the dwelling;

or

b. That is within your control, including

but not limited to:

(1) Design, structural, or mechanical

defects;

(2) Failure, stoppage, or breakage of water

or sewer lines, drains, pumps, fixtures, or

equipment; or

(3) Failure to inspect and maintain the

property after a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

b. Discharges or overflows from a sump,

sump pump or related equipment; or

c. Seeps or leaks on or through the covered

property;

unless there is a flood in the area and the

flood is the proximate cause of the sewer or

drain backup, sump pump discharge or

overflow, or the seepage of water;

6. The pressure or weight of water unless

there is a flood in the area and the flood is

the proximate cause of the damage from the

pressure or weight of water;

7. Power, heating, or cooling failure unless

the failure results from direct physical loss

by or from flood to power, heating, or cooling

equipment on the described location;

8. Theft, fire, explosion, wind, or

windstorm;

9. Anything you or any member of your

household do or conspires to do to

deliberately cause loss by flood; or

10. Alteration of the insured property that

significantly increases the risk of flooding.

E. We do not insure for loss to any building

or personal property located on land leased

from the Federal Government, arising from or

incident to the flooding of the land by the

Federal Government, where the lease

expressly holds the Federal Government

harmless under flood insurance issued under

any Federal Government program.

F. We do not pay for the testing for or

monitoring of pollutants unless required by

law or ordinance.

VI. Deductibles

A. When a loss is covered under this

policy, we will pay only that part of the loss

that exceeds your deductible amount, subject

to the limit of liability that applies. The

deductible amount is shown on the

Declarations Page.

However, when a building under

construction, alteration, or repair does not

have at least two rigid exterior walls and a

fully secured roof at the time of loss, your

deductible amount will be two times the

deductible that would otherwise apply to a

completed building.

B. In each loss from flood, separate

deductibles apply to the building and

personal property insured by this policy.

60774 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

C. The deductible does NOT apply to:

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

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

or

3. III.D. Increased Cost of Compliance.

VII. General Conditions

A. Pair and Set Clause

In case of loss to an article that is part of

a pair or set, we will have the option of

paying you:

1. An amount equal to the cost of replacing

the lost, damaged, or destroyed article, minus

its depreciation, or

2. The amount that represents the fair

proportion of the total value of the pair or set

that the lost, damaged, or destroyed article

bears to the pair or set.

B. Concealment or Fraud and Policy

Voidance

1. With respect to all insureds under this

policy, this policy:

a. Is void;

b. Has no legal force or effect;

c. Cannot be renewed; and

d. Cannot be replaced by a new NFIP

policy, if, before or after a loss, you or any

other insured or your agent have at any time:

(1) Intentionally concealed or

misrepresented any material fact or

circumstance;

(2) Engaged in fraudulent conduct; or

(3) Made false statements; relating to this

policy or any other NFIP insurance.

2. This policy will be void as of the date

wrongful acts described in B.1.above were

committed.

3. Fines, civil penalties, and imprisonment

under applicable Federal laws may also

apply to the acts of fraud or concealment

described above.

4. This policy is also void for reasons other

than fraud, misrepresentation, or wrongful

act. This policy is void from its inception and

has no legal force under the following

conditions:

a. If the property is located in a community

that was not participating in the NFIP on the

policy’s inception date and did not join or

reenter the program during the policy term

and before the loss occurred; or

b. If the property listed on the application

is otherwise not eligible for coverage under

the NFIP.

C. Other Insurance

1. If a loss covered by this policy is also

covered by other insurance that includes

flood coverage not issued under the Act, we

will not pay more than the amount of

insurance you are entitled to for lost,

damaged, or destroyed property insured

under this policy subject to the following:

a. We will pay only the proportion of the

loss that the amount of insurance that applies

under this policy bears to the total amount

of insurance covering the loss, unless C.1.b.

or c. immediately below applies.

b. If the other policy has a provision stating

that it is excess insurance, this policy will be

primary.

c. This policy will be primary (but subject

to its own deductible) up to the deductible

in the other flood policy (except another

policy as described in C.1.b. above). When

the other deductible amount is reached, this

policy will participate in the same proportion

that the amount of insurance under this

policy bears to the total amount of both

policies, for the remainder of the loss.

2. If there is other insurance in the name

of your condominium association covering

the same property covered by this policy,

then this policy will be in excess over the

other insurance.

D. Amendments, Waivers, Assignment

This policy cannot be changed nor can any

of its provisions be waived without the

express written consent of the Federal

Insurance Administrator. No action we take

under the terms of this policy constitutes a

waiver of any of our rights. You may assign

this policy in writing when you transfer title

of your property to someone else except

under these conditions:

1. When this policy covers only personal

property; or

2. When this policy covers a structure

during the course of construction.

E. Cancellation of the Policy by You

1. You may cancel this policy in

accordance with the applicable rules and

regulations of the NFIP.

2. If you cancel this policy, you may be

entitled to a full or partial refund of premium

also under the applicable rules and

regulations of the NFIP.

F. Non-Renewal of the Policy by Us

Your policy will not be renewed:

1. If the community where your covered

property is located stops participating in the

NFIP, or

2. If your building has been declared

ineligible under section 1316 of the Act.

G. Reduction and Reformation of Coverage

1. If the premium we received from you

was not enough to buy the kind and amount

of coverage you requested, we will provide

only the amount of coverage that can be

purchased for the premium payment we

received.

2. The policy can be reformed to increase

the amount of coverage resulting from the

reduction described in G.1. above to the

amount you requested as follows:

a. Discovery of Insufficient Premium or

Incomplete Rating Information Before a Loss:

(1) If we discover before you have a flood

loss that your premium payment was not

enough to buy the requested amount of

coverage, we will send you and any

mortgagee or trustee known to us a bill for

the required additional premium for the

current policy term (or that portion of the

current policy term following any

endorsement changing the amount of

coverage). If you or the mortgagee or trustee

pay the additional premium within 30 days

from the date of our bill, we will reform the

policy to increase the amount of coverage to

the originally requested amount effective to

the beginning of the current policy term (or

subsequent date of any endorsement

changing the amount of coverage).

(2) If we determine before you have a flood

loss that the rating information we have is

incomplete and prevents us from calculating

the additional premium, we will ask you to

send the required information. You must

submit the information within 60 days of our

request. Once we determine the amount of

additional premium for the current policy

term, we will follow the procedure in

G.2.a.(1) above.

(3) If we do not receive the additional

premium (or additional information) by the

date it is due, the amount of coverage can

only be increased by endorsement subject to

any appropriate waiting period.

b. Discovery of Insufficient Premium or

Incomplete Rating Information After a Loss:

(1) If we discover after you have a flood

loss that your premium payment was not

enough to buy the requested amount of

coverage, we will send you and any

mortgagee or trustee known to us a bill for

the required additional premium for the

current and the prior policy terms. If you or

the mortgagee or trustee pay the additional

premium within 30 days of the date of our

bill, we will reform the policy to increase the

amount of coverage to the originally

requested amount effective to the beginning

of the prior policy term.

(2) If we discover after you have a flood

loss that the rating information we have is

incomplete and prevents us from calculating

the additional premium, we will ask you to

send the required information. You must

submit the information before your claim can

be paid. Once we determine the amount of

additional premium for the current and prior

policy terms, we will follow the procedure in

G.2.b.(1) above.

(3) If we do not receive the additional

premium by the date it is due, your flood

insurance claim will be settled based on the

reduced amount of coverage. The amount of

coverage can only be increased by

endorsement subject to any appropriate

waiting period.

3. However, if we find that you or your

agent intentionally did not tell us, or

falsified, any important fact or circumstance

or did anything fraudulent relating to this

insurance, the provisions of Condition B.

Concealment or Fraud and Policy Voidance

apply.

H. Policy Renewal

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

the last day of the policy term.

2. We must receive the payment of the

appropriate renewal premium within 30 days

of the expiration date.

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

place your renewal notice into the U.S. Postal

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

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

incomplete, or illegible address, which

delayed its delivery to you before the due

date for the renewal premium, then we will

follow these procedures:

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

than one year after the date on which the

payment of the renewal premium was due, of

non-receipt of a renewal notice before the

due date for the renewal premium, and we

determine that the circumstances in the

preceding paragraph apply, we will mail a

second bill providing a revised due date,

which will be 30 days after the date on which

the bill is mailed.

b. If we do not receive the premium

requested in the second bill by the revised

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60775

due date, then we will not renew the policy.

In that case, the policy will remain an

expired policy as of the expiration date

shown on the Declarations Page.

4. In connection with the renewal of this

policy, we may ask you during the policy

term to recertify, on a Recertification

Questionnaire we will provide to you, the

rating information used to rate your most

recent application for or renewal of

insurance.

I. Conditions Suspending or Restricting

Insurance

We are not liable for loss that occurs while

there is a hazard that is increased by any

means within your control or knowledge.

J. Requirements in Case of Loss

In case of a flood loss to insured property,

you must:

1. Give prompt written notice to us;

2. As soon as reasonably possible, separate

the damaged and undamaged property,

putting it in the best possible order so that

we may examine it;

3. Prepare an inventory of damaged

property showing the quantity, description,

actual cash value, and amount of loss. Attach

all bills, receipts, and related documents;

4. Within 60 days after the loss, send us

a proof of loss, which is your statement of the

amount you are claiming under the policy

signed and sworn to by you, and which

furnishes us with the following information:

a. The date and time of loss;

b. A brief explanation of how the loss

happened;

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

the interest, if any, of others in the damaged

property;

d. Details of any other insurance that may

cover the loss;

e. Changes in title or occupancy of the

covered property during the term of the

policy;

f. Specifications of damaged buildings and

detailed repair estimates;

g. Names of mortgagees or anyone else

having a lien, charge, or claim against the

insured property;

h. Details about who occupied any insured

building at the time of loss and for what

purpose; and

i. The inventory of damaged personal

property described in J.3. above.

5. In completing the proof of loss, you must

use your own judgment concerning the

amount of loss and justify that amount.

6. You must cooperate with the adjuster or

representative in the investigation of the

claim.

7. The insurance adjuster whom we hire to

investigate your claim may furnish you with

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

you complete it. However, this is a matter of

courtesy only, and you must still send us a

proof of loss within 60 days after the loss

even if the adjuster does not furnish the form

or help you complete it.

8. We have not authorized the adjuster to

approve or disapprove claims or to tell you

whether we will approve your claim.

9. At our option, we may accept the

adjuster’s report of the loss instead of your

proof of loss. The adjuster’s report will

include information about your loss and the

damages you sustained. You must sign the

adjuster’s report. At our option, we may

require you to swear to the report.

K. Our Options After a Loss

Options we may, in our sole discretion,

exercise after loss include the following:

1. At such reasonable times and places that

we may designate, you must:

a. Show us or our representative the

damaged property;

b. Submit to examination under oath,

while not in the presence of another insured,

and sign the same; and

c. Permit us to examine and make extracts

and copies of:

(1) Any policies of property insurance

insuring you against loss and the deed

establishing your ownership of the insured

real property;

(2) Condominium association documents

including the Declarations of the

condominium, its Articles of Association or

Incorporation, Bylaws, rules and regulations,

and other relevant documents if you are a

unit owner in a condominium building; and

(3) All books of accounts, bills, invoices

and other vouchers, or certified copies

pertaining to the damaged property if the

originals are lost.

2. We may request, in writing, that you

furnish us with a complete inventory of the

lost, damaged or destroyed property,

including:

a. Quantities and costs;

b. Actual cash values or replacement cost

(whichever is appropriate);

c. Amounts of loss claimed;

d. Any written plans and specifications for

repair of the damaged property that you can

reasonably make available to us; and

e. Evidence that prior flood damage has

been repaired.

3. If we give you written notice within 30

days after we receive your signed, sworn

proof of loss, we may:

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

lost, damaged, or destroyed property with

material or property of like kind and quality

or its functional equivalent; and

b. Take all or any part of the damaged

property at the value that we agree upon or

its appraised value.

L. No Benefit to Bailee

No person or organization, other than you,

having custody of covered property will

benefit from this insurance.

M. Loss Payment

1. We will adjust all losses with you. We

will pay you unless some other person or

entity is named in the policy or is legally

entitled to receive payment. Loss will be

payable 60 days after we receive your proof

of loss (or within 90 days after the insurance

adjuster files the adjuster’s report signed and

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

and:

a. We reach an agreement with you;

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

c. There is a filing of an appraisal award

with us, as provided in VII. P.

2. If we reject your proof of loss in whole

or in part you may:

a. Accept our denial of your claim;

b. Exercise your rights under this policy; or

c. File an amended proof of loss as long as

it is filed within 60 days of the date of the

loss.

N. Abandonment

You may not abandon to us damaged or

undamaged property insured under this

policy.

O. Salvage

We may permit you to keep damaged

property insured under this policy after a

loss, and we will reduce the amount of the

loss proceeds payable to you under the

policy by the value of the salvage.

P. Appraisal

If you and we fail to agree on the actual

cash value or, if applicable, replacement cost

of your damaged property to settle upon the

amount of loss, then either may demand an

appraisal of the loss. In this event, you and

we will each choose a competent and

impartial appraiser within 20 days after

receiving a written request from the other.

The two appraisers will choose an umpire. If

they cannot agree upon an umpire within 15

days, you or we may request that the choice

be made by a judge of a court of record in

the state where the covered property is

located. The appraisers will separately state

the actual cash value, the replacement cost,

and the amount of loss to each item. If the

appraisers submit a written report of an

agreement to us, the amount agreed upon

will be the amount of loss. If they fail to

agree, they will submit their differences to

the umpire. A decision agreed to by any two

will set the amount of actual cash value and

loss, or if it applies, the replacement cost and

loss.

Each party will:

1. Pay its own appraiser; and

2. Bear the other expenses of the appraisal

and umpire equally.

Q. Mortgage Clause

The word ‘‘mortgagee’’ includes trustee.

Any loss payable under Coverage A—

Building Property will be paid to any

mortgagee of whom we have actual notice, as

well as any other mortgagee or loss payee

determined to exist at the time of loss, and

you, as interests appear. If more than one

mortgagee is named, the order of payment

will be the same as the order of precedence

of the mortgages.

If we deny your claim, that denial will not

apply to a valid claim of the mortgagee, if the

mortgagee:

1. Notifies us of any change in the

ownership or occupancy, or substantial

change in risk of which the mortgagee is

aware;

2. Pays any premium due under this policy

on demand if you have neglected to pay the

premium; and

3. Submits a signed, sworn proof of loss

within 60 days after receiving notice from us

of your failure to do so.

All of the terms of this policy apply to the

mortgagee.

The mortgagee has the right to receive loss

payment even if the mortgagee has started

foreclosure or similar action on the building.

60776 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

If we decide to cancel or not renew this

policy, it will continue in effect for the

benefit of the mortgagee only for 30 days after

we notify the mortgagee of the cancellation

or non-renewal.

If we pay the mortgagee for any loss and

deny payment to you, we are subrogated to

all the rights of the mortgagee granted under

the mortgage on the property. Subrogation

will not impair the right of the mortgagee to

recover the full amount of the mortgagee’s

claim.

R. Suit Against Us

You may not sue us to recover money

under this policy unless you have complied

with all the requirements of the policy. If you

do sue, you must start the suit within one

year after the date of the written denial of all

or part of the claim, and you must file the

suit in the United States District Court of the

district in which the covered property was

located at the time of loss. This requirement

applies to any claim that you may have under

this policy and to any dispute that you may

have arising out of the handling of any claim

under the policy.

S. Subrogation

Whenever we make a payment for a loss

under this policy, we are subrogated to your

right to recover for that loss from any other

person. That means that your right to recover

for a loss that was partly or totally caused by

someone else is automatically transferred to

us, to the extent that we have paid you for

the loss. We may require you to acknowledge

this transfer in writing. After the loss, you

may not give up our right to recover this

money or do anything that would prevent us

from recovering it. If you make any claim

against any person who caused your loss and

recover any money, you must pay us back

first before you may keep any of that money.

T. Continuous Lake Flooding

1. If an insured building has been flooded

by rising lake waters continuously for 90

days or more and it appears reasonably

certain that a continuation of this flooding

will result in a covered loss to the insured

building equal to or greater than the building

policy limits plus the deductible or the

maximum payable under the policy for any

one building loss, we will pay you the lesser

of these two amounts without waiting for the

further damage to occur if you sign a release

agreeing:

a. To make no further claim under this

policy;

b. Not to seek renewal of this policy;

c. Not to apply for any flood insurance

under the Act for property at the described

location; and

d. Not to seek a premium refund for

current or prior terms.

If the policy term ends before the insured

building has been flooded continuously for

90 days, the provisions of this paragraph T.1.

will apply when the insured building suffers

a covered loss before the policy term ends.

2. If your insured building is subject to

continuous lake flooding from a closed basin

lake, you may elect to file a claim under

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

basin lake’’ is a natural lake from which

water leaves primarily through evaporation

and whose surface area now exceeds or has

exceeded one square mile at any time in the

recorded past. Most of the nation’s closed

basin lakes are in the western half of the

United States where annual evaporation

exceeds annual precipitation and where lake

levels and surface areas are subject to

considerable fluctuation due to wide

variations in the climate. These lakes may

overtop their basins on rare occasions.)

Under this paragraph T.2., we will pay your

claim as if the building is a total loss even

though it has not been continuously

inundated for 90 days, subject to the

following conditions:

a. Lake flood waters must damage or

imminently threaten to damage your

building.

b. Before approval of your claim, you must:

(1) Agree to a claim payment that reflects

your buying back the salvage on a negotiated

basis; and

(2) Grant the conservation easement

described in FEMA’s ‘‘Policy Guidance for

Closed Basin Lakes’’ to be recorded in the

office of the local recorder of deeds. FEMA,

in consultation with the community in which

the property is located, will identify on a

map an area or areas of special consideration

(ASC) in which there is a potential for flood

damage from continuous lake flooding.

FEMA will give the community the agreedupon map showing the ASC. This easement

will only apply to that portion of the

property in the ASC. It will allow certain

agricultural and recreational uses of the land.

The only structures it will allow on any

portion of the property within the ASC are

certain simple agricultural and recreational

structures. If any of these allowable

structures are insurable buildings under the

NFIP and are insured under the NFIP, they

will not be eligible for the benefits of this

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

Engineers certified flood control project or

otherwise certified flood control project later

protects the property, FEMA will, upon

request, amend the ASC to remove areas

protected by those projects. The restrictions

of the easement will then no longer apply to

any portion of the property removed from the

ASC; and

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

T.1.d. above.

c. Within 90 days of approval of your

claim, you must move your building to a new

location outside the ASC. FEMA will give

you an additional 30 days to move if you

show there is sufficient reason to extend the

time.

d. Before the final payment of your claim,

you must acquire an elevation certificate and

a floodplain development permit from the

local floodplain administrator for the new

location of your building.

e. Before the approval of your claim, the

community having jurisdiction over your

building must:

(1) Adopt a permanent land use ordinance,

or a temporary moratorium for a period not

to exceed 6 months to be followed

immediately by a permanent land use

ordinance, that is consistent with the

provisions specified in the easement required

in paragraph T.2.b. above.

(2) Agree to declare and report any

violations of this ordinance to FEMA so that

under Section 1316 of the National Flood

Insurance Act of 1968, as amended, flood

insurance to the building can be denied; and

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

purposes compatible with open space or

agricultural or recreational use only, any

affected property the community acquires an

interest in. These deed restrictions must be

consistent with the provisions of paragraph

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

project protects the property, the land use

restrictions continue to apply if the property

was acquired under the Hazard Mitigation

Grant Program or the Flood Mitigation

Assistance Program. If a non-profit land trust

organization receives the property as a

donation, that organization must maintain

the property as deed-restricted, consistent

with the provisions of paragraph T.2.b.

above.

f. Before the approval of your claim, the

affected State must take all action set forth

in FEMA’s ‘‘Policy Guidance for Closed

Basin Lakes.’’

g. You must have NFIP flood insurance

coverage continuously in effect from a date

established by FEMA until you file a claim

under paragraph T.2. If a subsequent owner

buys NFIP insurance that goes into effect

within 60 days of the date of transfer of title,

any gap in coverage during that 60-day

period will not be a violation of this

continuous coverage requirement. For the

purpose of honoring a claim under this

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

effect any increased coverage that became

effective after the date established by FEMA.

The exception to this is any increased

coverage in the amount suggested by your

insurer as an inflation adjustment.

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

a community when the FEMA Regional

Director for the affected region provides to

the community, in writing, the following:

(1) Confirmation that the community and

the State are in compliance with the

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

above, and

(2) The date by which you must have flood

insurance in effect.

U. Duplicate Policies Not Allowed

1. We will not insure your property under

more than one NFIP policy.

If we find that the duplication was not

knowingly created, we will give you written

notice. The notice will advise you that you

may choose one of several options under the

following procedures:

a. If you choose to keep in effect the policy

with the earlier effective date, you may also

choose to add the coverage limits of the later

policy to the limits of the earlier policy. The

change will become effective as of the

effective date of the later policy.

b. If you choose to keep in effect the policy

with the later effective date, you may also

choose to add the coverage limits of the

earlier policy to the limits of the later policy.

The change will be effective as of the

effective date of the later policy.

In either case, you must pay the pro rata

premium for the increased coverage limits

within 30 days of the written notice. In no

event will the resulting coverage limits

exceed the permissible limits of coverage

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60777

under the Act or your insurable interest,

whichever is less. We will make a refund to

you, according to applicable NFIP rules, of

the premium for the policy not being kept in

effect.

2. Your option under Condition U.

Duplicate Policies Not Allowed to elect

which NFIP policy to keep in effect does not

apply when duplicates have been knowingly

created. Losses occurring under such

circumstances will be adjusted according to

the terms and conditions of the earlier policy.

The policy with the later effective date must

be canceled.

V. Loss Settlement

1. Introduction

This policy provides three methods of

settling losses: Replacement Cost, Special

Loss Settlement, and Actual Cash Value.

Each method is used for a different type of

property, as explained in a-c. below.

a. Replacement Cost Loss Settlement,

described in V.2. below, applies to a singlefamily dwelling provided:

(1) It is your principal residence, which

means that, at the time of loss, you or your

spouse lived there for 80% of:

(a) The 365 days immediately preceding

the loss; or

(b) The period of your ownership, if you

owned the dwelling for less than 365 days;

and

(2) At the time of loss, the amount of

insurance in this policy that applies to the

dwelling is 80% or more of its full

replacement cost immediately before the loss,

or is the maximum amount of insurance

available under the NFIP.

b. Special Loss Settlement, described in

V.3. below, applies to a single-family

dwelling that is a manufactured or mobile

home or a travel trailer.

c. Actual Cash Value loss settlement

applies to a single-family dwelling not

subject to replacement cost or special loss

settlement, and to the property listed in V.4.

below.

2. Replacement Cost Loss Settlement

The following loss settlement conditions

apply to a single-family dwelling described

in V.1.a. above:

a. We will pay to repair or replace the

damaged dwelling after application of the

deductible and without deduction for

depreciation, but not more than the least of

the following amounts:

(1) The building limit of liability shown on

your Declarations Page;

(2) The replacement cost of that part of the

dwelling damaged, with materials of like

kind and quality and for like use; or

(3) The necessary amount actually spent to

repair or replace the damaged part of the

dwelling for like use.

b. If the dwelling is rebuilt at a new

location, the cost described above is limited

to the cost that would have been incurred if

the dwelling had been rebuilt at its former

location.

c. When the full cost of repair or

replacement is more than $1,000, or more

than 5% of the whole amount of insurance

that applies to the dwelling, we will not be

liable for any loss under V.2.a. above or

V.4.a.(2) below unless and until actual repair

or replacement is completed.

d. You may disregard the replacement cost

conditions above and make claim under this

policy for loss to dwellings on an actual cash

value basis. You may then make claim for

any additional liability according to V.2.a.,

b., and c. above, provided you notify us of

your intent to do so within 180 days after the

date of loss.

e. If the community in which your

dwelling is located has been converted from

the Emergency Program to the Regular

Program during the current policy term, then

we will consider the maximum amount of

available NFIP insurance to be the amount

that was available at the beginning of the

current policy term.

3. Special Loss Settlement

a. The following loss settlement conditions

apply to a single-family dwelling that:

(1) is a manufactured or mobile home or a

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

(2) is at least 16 feet wide when fully

assembled and has an area of at least 600

square feet within its perimeter walls when

fully assembled, and

(3) is your principal residence as specified

in V.1.a.(1) above.

b. If such a dwelling is totally destroyed or

damaged to such an extent that, in our

judgment, it is not economically feasible to

repair, at least to its pre-damage condition,

we will, at our discretion pay the least of the

following amounts:

(1) The lesser of the replacement cost of the

dwelling or 1.5 times the actual cash value,

or

(2) The building limit of liability shown on

your Declarations Page.

c. If such a dwelling is partially damaged

and, in our judgment, it is economically

feasible to repair it to its pre-damage

condition, we will settle the loss according

to the Replacement Cost conditions in

V.2.above.

4. Actual Cash Value Loss Settlement

The types of property noted below are

subject to actual cash value (or in the case

of V.4.a.(2), below, proportional) loss

settlement.

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

amount of insurance on the dwelling is both

less than 80% of its full replacement cost

immediately before the loss and less than the

maximum amount of insurance available

under the NFIP. In that case, we will pay the

greater of the following amounts, but not

more than the amount of insurance that

applies to that dwelling:

(1) The actual cash value, as defined in

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

or

(2) A proportion of the cost to repair or

replace the damaged part of the dwelling,

without deduction for physical depreciation

and after application of the deductible.

This proportion is determined as follows:

If 80% of the full replacement cost of the

dwelling is less than the maximum amount

of insurance available under the NFIP, then

the proportion is determined by dividing the

actual amount of insurance on the dwelling

by the amount of insurance that represents

80% of its full replacement cost. But if 80%

of the full replacement cost of the dwelling

is greater than the maximum amount of

insurance available under the NFIP, then the

proportion is determined by dividing the

actual amount of insurance on the dwelling

by the maximum amount of insurance

available under the NFIP.

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

c. A unit that is not used exclusively for

single-family dwelling purposes.

d. Detached garages.

e. Personal property.

f. Appliances, carpets, and carpet pads.

g. Outdoor awnings, outdoor antennas or

aerials of any type, and other outdoor

equipment.

h. Any property covered under this policy

that is abandoned after a loss and remains as

debris anywhere on the described location.

i. A dwelling that is not your principal

residence.

5. Amount of Insurance Required

To determine the amount of insurance

required for a dwelling immediately before

the loss, we do not include the value of:

a. Footings, foundations, piers, or any other

structures or devices that are below the

undersurface of the lowest basement floor

and support all or part of the dwelling;

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

that are below the surface of the ground

inside the foundation walls if there is no

basement; and

c. Excavations and underground flues,

pipes, wiring, and drains.

Note: The Coverage D—Increased Cost of

Compliance limit of liability is not included

in the determination of the amount of

insurance required.

VIII. Liberalization Clause

If we make a change that broadens your

coverage under this edition of our policy, but

does not require any additional premium,

then that change will automatically apply to

your insurance as of the date we implement

the change, provided that this

implementation date falls within 60 days

before or during the policy term stated on the

Declarations Page.

IX. What Law Governs

This policy and all disputes arising from

the handling of any claim under the policy

are governed exclusively by the flood

insurance regulations issued by FEMA, the

National Flood Insurance Act of 1968, as

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

Federal common law.

In Witness Whereof, we have signed this

policy below and hereby enter into this

Insurance Agreement.

Jo Ann Howard,

Administrator, Federal Insurance

Administration.

7. We revise Appendix A(2) to Part

61, General Property Form, to read as

follows:

60778 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

APPENDIX A(2) TO PART 61

Federal Emergency Management Agency,

Federal Insurance Administration

Standard Flood Insurance Policy

GENERAL PROPERTY FORM

Please read the policy carefully. The flood

insurance coverage provided is subject to

limitations, restrictions, and exclusions.

This policy provides no coverage:

1. In a regular program community, for a

residential condominium building, as

defined in this policy; and

2. Except for personal property coverage,

for a unit in a condominium building.

I. Agreement

The Federal Emergency Management

Agency (FEMA) provides flood insurance

under the terms of the National Flood

Insurance Act of 1968 and its Amendments,

and Title 44 of the Code of Federal

Regulations.

We will pay you for direct physical loss by

or from flood to your insured property if you:

1. Have paid the correct premium;

2. Comply with all terms and conditions of

this policy; and

3. Have furnished accurate information and

statements.

We have the right to review the

information you give us at any time and to

revise your policy based on our review.

II. Definitions

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

to the insured(s) shown on the Declarations

Page of this policy. Insured(s) includes: Any

mortgagee and loss payee named in the

Application and Declarations page, as well as

any other mortgagee or loss payee

determined to exist at the time of loss in the

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

refer to the insurer.

Some definitions are complex because they

are provided as they appear in the law or

regulations, or result from court cases. The

precise definitions are intended to protect

you.

Flood, as used in this flood insurance

policy, means:

1. A general and temporary condition of

partial or complete inundation of two or

more acres of normally dry land area or of

two or more properties (one of which is your

property) from:

a. Overflow of inland or tidal waters;

b. Unusual and rapid accumulation or

runoff of surface waters from any source;

c. Mudflow.

2. The collapse or subsidence of land along

the shore of a lake or similar body of water

as a result of erosion or undermining caused

by waves or currents of water exceeding

anticipated cyclical levels which result in a

flood as defined in A.1.a. above.

B. The following are the other key

definitions we use in this policy:

1. Act. The National Flood Insurance Act

of 1968 and any amendments to it.

2. Actual Cash Value. The cost to replace

an insured item of property at the time of

loss, less the value of its physical

depreciation.

3. Application. The statement made and

signed by you or your agent in applying for

this policy. The application gives

information we use to determine the

eligibility of the risk, the kind of policy to be

issued, and the correct premium payment.

The application is part of this flood

insurance policy. For us to issue you a

policy, the correct premium payment must

accompany the application.

4. Base Flood. A flood having a one percent

chance of being equaled or exceeded in any

given year.

5. Basement. Any area of the building,

including any sunken room or sunken

portion of a room, having its floor below

ground level (subgrade) on all sides.

6. Building.

a. A structure with two or more outside

rigid walls and a fully secured roof, that is

affixed to a permanent site;

b. A manufactured home (‘‘a manufactured

home,’’ also known as a mobile home, is a

structure: built on a permanent chassis,

transported to its site in one or more sections,

and affixed to a permanent foundation); or

c. A travel trailer without wheels, built on

a chassis and affixed to a permanent

foundation, that is regulated under the

community’s floodplain management and

building ordinances or laws.

Building does not mean a gas or liquid

storage tank or a recreational vehicle, park

trailer, or other similar vehicle, except as

described in B.6.c., above.

7. Cancellation. The ending of the

insurance coverage provided by this policy

before the expiration date.

8. Condominium. That form of ownership

of real property in which each unit owner

has an undivided interest in common

elements.

9. Condominium Association. The entity,

formed by the unit owners, responsible for

the maintenance and operation of:

a. Common elements owned in undivided

shares by unit owners; and

b. Other real property in which the unit

owners have use rights where membership in

the entity is a required condition of unit

ownership.

10. Declarations Page. A computergenerated summary of information you

provided in the application for insurance.

The Declarations Page also describes the term

of the policy, limits of coverage, and displays

the premium and our name. The Declarations

Page is a part of this flood insurance policy.

11. Described Location. The location where

the insured building or personal property is

found. The described location is shown on

the Declarations Page.

12. Direct Physical Loss By or From Flood.

Loss or damage to insured property, directly

caused by a flood. There must be evidence

of physical changes to the property.

13. Elevated Building. A building that has

no basement and that has its lowest elevated

floor raised above ground level by foundation

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

columns.

14. Emergency Program. The initial phase

of a community’s participation in the

National Flood Insurance Program. During

this phase, only limited amounts of

insurance are available under the Act.

15. Expense Constant. A flat charge you

must pay on each new or renewal policy to

defray the expenses of the Federal

Government related to flood insurance.

16. Federal Policy Fee. A flat charge you

must pay on each new or renewal policy to

defray certain administrative expenses

incurred in carrying out the National Flood

Insurance Program. This fee covers expenses

not covered by the expense constant.

17. Improvements. Fixtures, alterations,

installations, or additions comprising a part

of the insured building.

18. Mudflow. A river of liquid and flowing

mud on the surfaces of normally dry land

areas, as when earth is carried by a current

of water. Other earth movements, such as

landslide, slope failure, or a saturated soil

mass moving by liquidity down a slope, are

not mudflows.

19. National Flood Insurance Program

(NFIP). The program of flood insurance

coverage and floodplain management

administered under the Act and applicable

Federal regulations in Title 44 of the Code of

Federal Regulations, Subchapter B.

20. Policy. The entire written contract

between you and us. It includes:

a. This printed form;

b. The application and Declarations Page;

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

and,

d. Any renewal certificate indicating that

coverage has been instituted for a new policy

and new policy term.

Only one building, which you specifically

described in the application, may be insured

under this policy.

21. Pollutants. Substances that include, but

that 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.

22. Post-FIRM Building. A building for

which construction or substantial

improvement occurred after December 31,

1974, or on or after the effective date of an

initial Flood Insurance Rate Map (FIRM),

whichever is later.

23. Probation Premium. A flat charge you

must pay on each new or renewal policy

issued covering property in a community that

has been placed on probation under the

provisions of 44 CFR 59.24.

24. Regular Program. The final phase of a

community’s participation in the National

Flood Insurance Program. In this phase, a

Flood Insurance Rate Map is in effect and full

limits of coverage are available under the

Act.

25. Residential Condominium Building. A

building, owned and administered as a

condominium, containing one or more family

units and in which at least 75% of the floor

area is residential.

26. Special Flood Hazard Area. An area

having special flood or mudflow, and/or

flood-related erosion hazards, and shown on

a Flood Hazard Boundary Map or Flood

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

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

AR/AO, AR/A1–A30, V1–V30, VE, V.

27. Stock means merchandise held in

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

used in their packing or shipping.

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Stock does not include any property not

covered under Section IV. Property Not

Covered, except the following:

a. Parts and equipment for self-propelled

vehicles;

b. Furnishings and equipment for

watercraft;

c. Spas and hot-tubs, including their

equipment; and

d. Swimming pool equipment.

28. Unit. A unit in a condominium

building.

29. Valued Policy. A policy in which the

insured and the insurer agree on the value of

the property insured, that value being

payable in the event of a total loss. The

Standard Flood Insurance Policy is not a

valued policy.

III. Property Covered

A. Coverage A—Building Property

We insure against direct physical loss by

or from flood to:

1. The building described on the

Declarations Page at the described location.

If the building is a condominium building

and the named insured is the condominium

association, Coverage A includes all units

within the building and the improvements

within the units, provided the units are

owned in common by all unit owners.

2. We also insure building property for a

period of 45 days at another location, as set

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

Safety.

3. Additions and extensions attached to

and in contact with the building by means of

a rigid exterior wall, a solid load-bearing

interior wall, a stairway, an elevated

walkway, or a roof. At your option, additions

and extensions connected by any of these

methods may be separately insured.

Additions and extensions attached to and in

contact with the building by means of a

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

the building and cannot be separately

insured.

4. The following fixtures, machinery, and

equipment, which are covered under

Coverage A only:

a. Awnings and canopies;

b. Blinds;

c. Carpet permanently installed over

unfinished flooring;

d. Central air conditioners;

e. Elevator equipment;

f. Fire extinguishing apparatus;

g. Fire sprinkler systems;

h. Walk-in freezers;

i. Furnaces;

j. Light fixtures;

k. Outdoor antennas and aerials attached to

buildings;

l. Permanently installed cupboards,

bookcases, paneling, and wallpaper;

m. Pumps and machinery for operating

pumps;

n. Ventilating equipment; and

o. Wall mirrors, permanently installed;

p. In the units within the building,

installed:

(1) Built-in dishwashers;

(2) Built-in microwave ovens;

(3) Garbage disposal units;

(4) Hot water heaters, including solar water

heaters;

(5) Kitchen cabinets;

(6) Plumbing fixtures;

(7) Radiators;

(8) Ranges;

(9) Refrigerators; and

(10) Stoves.

5. Materials and supplies to be used for

construction, alteration, or repair of the

insured building while the materials and

supplies are stored in a fully enclosed

building at the described location or on an

adjacent property.

6. A building under construction,

alteration, or repair at the described location.

a. If the structure is not yet walled or

roofed as described in the definition for

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

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

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

of up to 90 continuous days thereafter.

b. However, coverage does not apply until

the building is walled and roofed if the

lowest floor, including the basement floor, of

a non-elevated building or the lowest

elevated floor of an elevated building is:

(1) Below the base flood elevation in Zones

AH, AE, A1–A30, AR, AR/AE, AR/AH, AR/

A1–A30, AR/A, AR/AO; or

(2) Below the base flood elevation adjusted

to include the effect of wave action in Zones

VE or V1–V30.

The lowest floor levels are based on the

bottom of the lowest horizontal structural

member of the floor in Zones VE or V1–V30

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

A1–A30, AR, AR/AE, AR/AH, AR/A1–A30,

AR/A, AR/AO.

7. A manufactured home or a travel trailer

as described in the Definitions

Section (see II.B.6.b.and II.B.6.c.).

If the manufactured home or travel trailer

is in a special flood hazard area, it must be

anchored in the following manner at the time

of the loss:

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

anchors; or

b. In accordance with the manufacturer’s

specifications; or

c. In compliance with the community’s

floodplain management requirements unless

it has been continuously insured by the NFIP

at the same described location since

September 30, 1982.

8. Items of property in a building enclosure

below the lowest elevated floor of an elevated

post-FIRM building located in zones A1–

A30, AE, AH, AR, AR/A, AR/AE, AR/AH,

AR/A1–A30, V1–V30, or VE, or in a

basement, regardless of the zone. Coverage is

limited to the following:

a. Any of the following items, if installed

in their functioning locations and, if

necessary for operation, connected to a

power source:

(1) Central air conditioners;

(2) Cisterns and the water in them;

(3) Drywall for walls and ceilings in a

basement and the cost of labor to nail it,

unfinished and unfloated and not taped, to

the framing;

(4) Electrical junction and circuit breaker

boxes;

(5) Electrical outlets and switches;

(6) Elevators, dumbwaiters, and related

equipment, except for related equipment

installed below the base flood elevation after

September 30, 1987;

(7) Fuel tanks and the fuel in them;

(8) Furnaces and hot water heaters;

(9) Heat pumps;

(10) Nonflammable insulation in a

basement;

(11) Pumps and tanks used in solar energy

systems;

(12) Stairways and staircases attached to

the building, not separated from it by

elevated walkways;

(13) Sump pumps;

(14) Water softeners and the chemicals in

them, water filters, and faucets installed as

an integral part of the plumbing system;

(15) Well water tanks and pumps;

(16) Required utility connections for any

item in this list; and

(17) Footings, foundations, posts, pilings,

piers, or other foundation walls and

anchorage systems required to support a

building.

b. Clean-up.

B. Coverage B—Personal Property

1. If you have purchased personal property

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

4. below, against direct physical loss by or

from flood to personal property inside the

fully enclosed insured building:

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

a condominium, owned solely by the

condominium association and used

exclusively in the conduct of the business

affairs of the condominium association; or

b. Owned in common by the unit owners

of the condominium association.

We also insure such personal property for

45 days while stored at a temporary location,

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

Safety.

2. When this policy covers personal

property, coverage will be either for

household personal property or other than

household personal property, while within

the insured building, but not both.

a. If this policy covers household personal

property, it will insure household personal

property usual to a living quarters, that:

(1) Belongs to you, or a member of your

household, or at your option:

(a) Your domestic worker;

(b) Your guest; or

(2) You may be legally liable for.

b. If this policy covers other than

household personal property, it will insure

your:

(1) Furniture and fixtures;

(2) Machinery and equipment;

(3) Stock; and

(4) Other personal property owned by you

and used in your business, subject to IV.

Property Not Covered.

3. Coverage for personal property includes

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

B.1.b. above, which is covered under

Coverage B. only:

a. Air conditioning units installed in the

building;

b. Carpet, not permanently installed, over

unfinished flooring;

c. Carpets over finished flooring;

d. Clothes washers and dryers;

e. ‘‘Cook-out’’ grills;

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

the food in any freezer;

g. Outdoor equipment and furniture stored

inside the insured building;

60780 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

h. Ovens and the like; and

i. Portable microwave ovens and portable

dishwashers.

4. Items of property in a building enclosure

below the lowest elevated floor of an elevated

post-FIRM building located in zones A1–

A30, AE, AH, AR, AR/A, AR/AE, AR/AH,

AR/A1–A30, V1–V30, or VE, or in a

basement, regardless of the zone, is limited

to the following items, if installed in their

functioning locations and, if necessary for

operation, connected to a power source:

a. Air conditioning units—portable or

window type;

b. Clothes washers and dryers; and

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

food in any freezer.

5. Special Limits. We will pay no more

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

the following kinds of personal property:

a. Artwork, photographs, collectibles, or

memorabilia, including but not limited to,

porcelain or other figures, and sports cards;

b. Rare books or autographed items;

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

platinum;

d. Furs or any article containing fur which

represents its principal value; or

6. We will pay only for the functional

value of antiques.

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

to 10% of the Coverage B limit to

improvements:

a. Made a part of the building you occupy;

and

b. You acquired, or made at your expense,

even though you cannot legally remove.

This coverage does not increase the

amount of insurance that applies to insured

personal property.

8. If you are a condominium unit owner,

you may apply up to 10% of the Coverage B

limit to cover loss to interior:

a. walls,

b. floors, and

c. ceilings,

that are not covered under a policy issued to

the condominium association insuring the

condominium building.

This coverage does not increase the

amount of insurance that applies to insured

personal property.

9. If you are a tenant, personal property

must be inside the fully enclosed building.

C. Coverage C—Other Coverages

1. Debris Removal.

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

property and debris of insured property

anywhere.

b. If you or a member of your household

perform the removal work, the value of your

work will be based on the Federal minimum

wage.

c. This coverage does not increase the

Coverage A or Coverage B limit of liability.

2. Loss Avoidance Measures.

a. Sandbags, Supplies, and Labor

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

you incur to protect the insured building

from a flood or imminent danger of flood, for

the following:

(a) Your reasonable expenses to buy:

(i) Sandbags, including sand to fill them;

(ii) Fill for temporary levees;

(iii) Pumps; and

(iv) Plastic sheeting and lumber used in

connection with these items; and

(b) The value of work, at the Federal

minimum wage, that you perform.

(2) This coverage for Sandbags, Supplies,

and Labor only applies if damage to insured

property by or from flood is imminent and

the threat of flood damage is apparent

enough to lead a person of common prudence

to anticipate flood damage. One of the

following must also occur:

(a) A general and temporary condition of

flooding in the area near the described

location must occur, even if the flood does

not reach the insured building; or

(b) A legally authorized official must issue

an evacuation order or other civil order for

the community in which the insured

building is located calling for measures to

preserve life and property from the peril of

flood.

This coverage does not increase the

Coverage A or Coverage B limit of liability.

b. Property Removed to Safety

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

reasonable expenses you incur to move

insured property to a place other than the

described location that contains the property

in order to protect it from flood or the

imminent danger of flood.

Reasonable expenses include the value of

work, at the Federal minimum wage, that you

perform.

(2) If you move insured property to a place

other than the described location that

contains the property, in order to protect it

from flood or the imminent danger of flood,

we will cover such property while at that

location for a period of 45 consecutive days

from the date you begin to move it there. The

personal property that is moved must be

placed in a fully enclosed building, or

otherwise reasonably protected from the

elements.

Any property removed, including a

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

must be placed above ground level or outside

of the special flood hazard area.

This coverage does not increase the

Coverage A or Coverage B limit of liability.

3. Pollution Damage.

We will pay for damage caused by

pollutants to covered property if the

discharge, seepage, migration, release, or

escape of the pollutants is caused by or

results from flood. The most we will pay

under this coverage is $10,000. This coverage

does not increase the Coverage A or Coverage

B limits of liability. Any payment under this

provision when combined with all other

payments for the same loss cannot exceed the

replacement cost or actual cash value, as

appropriate, of the covered property. This

coverage does not include the testing for or

monitoring of pollutants unless required by

law or ordinance.

D. Coverage D—Increased Cost of

Compliance

1. General.

This policy pays you to comply with a

State or local floodplain management law or

ordinance affecting repair or reconstruction

of a structure suffering flood damage.

Compliance activities eligible for payment

are: elevation, floodproofing, relocation, or

demolition (or any combination of these

activities) of your structure. Eligible

floodproofing activities are limited to:

a. Non-residential structures. b. Residential

structures with basements that satisfy

FEMA’s standards published in the Code of

Federal Regulations [44 CFR 60.6 (b) or (c)].

2. Limit of Liability.

We will pay you up to $20,000 under this

Coverage D (Increased Cost of Compliance),

which only applies to policies with building

coverage (Coverage A). Our payment of

claims under Coverage D is in addition to the

amount of coverage which you selected on

the application and which appears on the

Declarations Page. But the maximum you can

collect under this policy for both Coverage A

(Building Property) and Coverage D

(Increased Cost of Compliance) cannot

exceed the maximum permitted under the

Act. We do NOT charge a separate deductible

for a claim under Coverage D.

3. Eligibility.

a. A structure covered under Coverage A—

Building Property sustaining a loss caused by

a flood as defined by this policy must:

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

‘‘repetitive loss structure’’ is one that meets

the following conditions:

(a) The structure is covered by a contract

of flood insurance issued under the NFIP.

(b) The structure has suffered flood damage

on 2 occasions during a 10-year period which

ends on the date of the second loss.

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

average, equaled or exceeded 25% of the

market value of the structure at the time of

each flood loss.

(d) In addition to the current claim, the

NFIP must have paid the previous qualifying

claim, and the State or community must have

a cumulative, substantial damage provision

or repetitive loss provision in its floodplain

management law or ordinance being enforced

against the structure; or

(2) Be a structure that has had flood

damage in which the cost to repair equals or

exceeds 50% of the market value of the

structure at the time of the flood. The State

or community must have a substantial

damage provision in its floodplain

management law or ordinance being enforced

against the structure.

b. This Coverage D pays you to comply

with State or local floodplain management

laws or ordinances that meet the minimum

standards of the National Flood Insurance

Program found in the Code of Federal

Regulations at 44 CFR 60.3. We pay for

compliance activities that exceed those

standards under these conditions:

(1) 3.a.(1) above.

(2) Elevation or floodproofing in any risk

zone to preliminary or advisory base flood

elevations provided by FEMA which the

State or local government has adopted and is

enforcing for flood-damaged structures in

such areas. (This includes compliance

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

being changed to zones with base flood

elevations. This also includes compliance

activities in zones where base flood

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

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60781

higher advisory base flood elevation.)

Increased Cost of Compliance coverage does

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

where the community has derived its own

elevations and is enforcing elevation or

floodproofing requirements for flooddamaged structures to elevations derived

solely by the community.

(3) Elevation or floodproofing above the

base flood elevation to meet State or local

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

structure must be elevated above the base

flood elevation.

c. Under the minimum NFIP criteria at 44

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

require the elevation or floodproofing of

structures in unnumbered A zones to the

base flood elevation where elevation data is

obtained from a Federal, State, or other

source. Such compliance activities are also

eligible for Coverage D.

d. This coverage will also pay for the

incremental cost, after demolition or

relocation, of elevating or floodproofing a

structure during its rebuilding at the same or

another site to meet State or local floodplain

management laws or ordinances, subject to

Exclusion D.5.g. below.

e. This coverage will also pay to bring a

flood-damaged structure into compliance

with State or local floodplain management

laws or ordinances even if the structure had

received a variance before the present loss

from the applicable floodplain management

requirements.

4. Conditions.

a. When a structure covered under

Coverage A—Building Property sustains a

loss caused by a flood, our payment for the

loss under this Coverage D will be for the

increased cost to elevate, floodproof, relocate,

or demolish (or any combination of these

activities) caused by the enforcement of

current State or local floodplain management

ordinances or laws. Our payment for eligible

demolition activities will be for the cost to

demolish and clear the site of the building

debris or a portion thereof caused by the

enforcement of current State or local

floodplain management ordinances or laws.

Eligible activities for the cost of clearing the

site will include those necessary to

discontinue utility service to the site and

ensure proper abandonment of on-site

utilities.

b. When the building is repaired or rebuilt,

it must be intended for the same occupancy

as the present building unless otherwise

required by current floodplain management

ordinances or laws.

5. Exclusions.

Under this Coverage D—Increased Cost of

Compliance, we will not pay for:

a. The cost to comply with any floodplain

management law or ordinance in

communities participating in the Emergency

Program.

b. The cost associated with enforcement of

any ordinance or law that requires any

insured or others to test for, monitor, clean

up, remove, contain, treat, detoxify or

neutralize, or in any way respond to, or

assess the effects of pollutants.

c. The loss in value to any insured building

or other structure due to the requirements of

any ordinance or law.

d. The loss in residual value of the

undamaged portion of a building demolished

as a consequence of enforcement of any State

or local floodplain management law or

ordinance.

e. Any Increased Cost of Compliance under

this Coverage D:

(1) Until the building is elevated,

floodproofed, demolished, or relocated on

the same or to another premises; and

(2) Unless the building is elevated,

floodproofed, demolished, or relocated as

soon as reasonably possible after the loss, not

to exceed two years.

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

plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or ordinance.

g. Any compliance activities needed to

bring additions or improvements made after

the loss occurred into compliance with State

or local floodplain management laws or

ordinances.

h. Loss due to any ordinance or law that

you were required to comply with before the

current loss.

i. Any rebuilding activity to standards that

do not meet the NFIP’s minimum

requirements. This includes any situation

where the insured has received from the

State or community a variance in connection

with the current flood loss to rebuild the

property to an elevation below the base flood

elevation.

j. Increased Cost of Compliance for a garage

or carport.

k. Any structure insured under an NFIP

Group Flood Insurance Policy.

l. Assessments made by a condominium

association on individual condominium unit

owners to pay increased costs of repairing

commonly owned buildings after a flood in

compliance with State or local floodplain

management ordinances or laws.

6. Other Provisions.

All other conditions and provisions of the

policy apply.

IV. Property Not Covered

A. We do not cover any of the following

property:

1. Personal property not inside the fully

enclosed building;

2. A building, and personal property in it,

located entirely in, on, or over water or

seaward of mean high tide, if it was

constructed or substantially improved after

September 30, 1982;

3. Open structures, including a building

used as a boathouse or any structure or

building into which boats are floated, and

personal property located in, on, or over

water;

4. Recreational vehicles other than travel

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

affixed to a permanent foundation or on

wheels;

5. Self-propelled vehicles or machines,

including their parts and equipment.

However, we do cover self-propelled vehicles

or machines, provided they are not licensed

for use on public roads and are:

a. Used mainly to service the described

location; or

b. Designed and used to assist handicapped

persons, while the vehicles or machines are

inside a building at the described location;

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

plants, growing crops, or animals;

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

evidences of debt, medals, money, scrip,

stored value cards, postage stamps,

securities, bullion, manuscripts, or other

valuable papers;

8. Underground structures and equipment,

including wells, septic tanks, and septic

systems;

9. Those portions of walks, walkways,

decks, driveways, patios, and other surfaces,

all whether protected by a roof or not, located

outside the perimeter, exterior walls of the

insured building;

10. Containers including related

equipment, such as, but not limited to, tanks

containing gases or liquids;

11. Buildings or units and all their contents

if more than 49% of the actual cash value of

the building or unit is below ground, unless

the lowest level is at or above the base flood

elevation and is below ground by reason of

earth having been used as insulation material

in conjunction with energy efficient building

techniques;

12. Fences, retaining walls, seawalls,

bulkheads, wharves, piers, bridges, and

docks;

13. Aircraft or watercraft, or their

furnishings and equipment;

14. Hot tubs and spas that are not bathroom

fixtures, and swimming pools, and their

equipment such as, but not limited to,

heaters, filters, pumps, and pipes, wherever

located;

15. Property not eligible for flood

insurance pursuant to the provisions of the

Coastal Barrier Resources Act and the Coastal

Barrier Improvement Act of 1990 and

amendments to these Acts;

16. Personal property owned by or in the

care, custody or control of a unit owner,

except for property of the type and under the

circumstances set forth under III. Coverage

B—Personal Property of this policy;

17. A residential condominium building

located in a Regular Program community.

V. Exclusions

A. We only provide coverage for direct

physical loss by or from flood, which means

that we do not pay you for:

1. Loss of revenue or profits;

2. Loss of access to the insured property or

described location;

3. Loss of use of the insured property or

described location;

4. Loss from interruption of business or

production;

5. Any additional expenses incurred while

the insured building is being repaired or is

unable to be occupied for any reason;

6. The cost of complying with any

ordinance or law requiring or regulating the

construction, demolition, remodeling,

renovation or repair of property, including

removal of any resulting debris. This

exclusion does not apply to any eligible

activities that we describe in Coverage D—

Increased Cost of Compliance; or

7. Any other economic loss you suffer.

B. We do not insure a loss directly or

indirectly caused by a flood that is already

in progress at the time and date:

1. The policy term begins; or

60782 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

2. Coverage is added at your request.

C. We do not insure for loss to property

caused directly by earth movement even if

the earth movement is caused by flood. Some

examples of earth movement that we do not

cover are:

1. Earthquake;

2. Landslide;

3. Land subsidence;

4. Sinkholes;

5. Destabilization or movement of land that

results from accumulation of water in

subsurface land areas; or

6. Gradual erosion.

We do, however, pay for losses from

mudflow and land subsidence as a result of

erosion that are specifically covered under

our definition of flood (see A.1.c. and II.A.2.).

D. We do not insure for direct physical loss

caused directly or indirectly by:

1. The pressure or weight of ice;

2. Freezing or thawing;

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

4. Water, moisture, mildew, or mold

damage that results primarily from any

condition:

a. Substantially confined to the insured

building; or

b. That is within your control including,

but not limited to:

(1) Design, structural, or mechanical

defects;

(2) Failures, stoppages, or breakage of

water or sewer lines, drains, pumps, fixtures,

or equipment; or

(3) Failure to inspect and maintain the

property after a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

b. Discharges or overflows from a sump,

sump pump, or related equipment; or

c. Seeps or leaks on or through the covered

property;

unless there is a flood in the area and the

flood is the proximate cause of the sewer or

drain backup, sump pump discharge or

overflow, or the seepage of water;

6. The pressure or weight of water unless

there is a flood in the area and the flood is

the proximate cause of the damage from the

pressure or weight of water;

7. Power, heating, or cooling failure unless

the failure results from direct physical loss

by or from flood to power, heating, or cooling

equipment situated on the described

location;

8. Theft, fire, explosion, wind, or

windstorm;

9. Anything that you or your agents do or

conspire to do to cause loss by flood

deliberately; or

10. Alteration of the insured property that

significantly increases the risk of flooding.

E. We do not insure for loss to any building

or personal property located on land leased

from the Federal Government, arising from or

incident to the flooding of the land by the

Federal Government, where the lease

expressly holds the Federal Government

harmless under flood insurance issued under

any Federal Government program.

VI. Deductibles

A. When a loss is covered under this

policy, we will pay only that part of the loss

that exceeds the applicable deductible

amount, subject to the limit of liability that

applies. The deductible amount is shown on

the Declarations Page.

However, when a building under

construction, alteration, or repair does not

have at least two rigid exterior walls and a

fully secured roof at the time of loss, your

deductible amount will be two times the

deductible that would otherwise apply to a

completed building.

B. In each loss from flood, separate

deductibles apply to the building and

personal property insured by this policy.

C. No deductible applies to:

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

2. III.D. Increased Cost of Compliance.

VII. General Conditions

A. Pair and Set Clause

In case of loss to an article that is part of

a pair or set, we will have the option of

paying you:

1. An amount equal to the cost of replacing

the lost, damaged, or destroyed article, less

depreciation, or

2. An amount which represents the fair

proportion of the total value of the pair or set

that the lost, damaged, or destroyed article

bears to the pair or set.

B. Concealment or Fraud and Policy

Voidance

1. With respect to all insureds under this

policy, this policy:

a. Is void,

b. Has no legal force or effect,

c. Cannot be renewed, and

d. Cannot be replaced by a new NFIP

policy, if, before or after a loss, you or any

other insured or your agent have at any time:

(1) Intentionally concealed or

misrepresented any material fact or

circumstance,

(2) Engaged in fraudulent conduct, or

(3) Made false statements relating to this

policy or any other NFIP insurance.

2. This policy will be void as of the date

wrongful acts described in B.1. above were

committed.

3. Fines, civil penalties, and imprisonment

under applicable Federal laws may also

apply to the acts of fraud or concealment

described above.

4. This policy is also void for reasons other

than fraud, misrepresentation, or wrongful

act. This policy is void from its inception and

has no legal force under the following

conditions:

a. If the property is located in a community

that was not participating in the NFIP on the

policy’s inception date and did not join or reenter the program during the policy term and

before the loss occurred; or

b. If the property listed on the application

is otherwise not eligible for coverage under

the NFIP.

C. Other Insurance

1. If a loss covered by this policy is also

covered by other insurance that includes

flood coverage not issued under the Act, we

will not pay more than the amount of

insurance that you are entitled to for lost,

damaged, or destroyed property insured

under this policy subject to the following:

a. We will pay only the proportion of the

loss that the amount of insurance that applies

under this policy bears to the total amount

of insurance covering the loss, unless C.1.b.

or c. below applies.

b. If the other policy has a provision stating

that it is excess insurance, this policy will be

primary.

c. This policy will be primary (but subject

to its own deductible) up to the deductible

in the other flood policy (except another

policy as described in C.1.b. above). When

the other deductible amount is reached, this

policy will participate in the same proportion

that the amount of insurance under this

policy bears to the total amount of both

policies, for the remainder of the loss.

2. Where this policy covers a

condominium association and there is a flood

insurance policy in the name of a unit owner

that covers the same loss as this policy, then

this policy will be primary.

D. Amendments, Waivers, Assignment

This policy cannot be changed nor can any

of its provisions be waived without the

express written consent of the Federal

Insurance Administrator. No action that we

take under the terms of this policy can

constitute a waiver of any of our rights. You

may assign this policy in writing when you

transfer title of your property to someone else

except under these conditions:

1. When this policy covers only personal

property; or

2. When this policy covers a structure

during the course of construction.

E. Cancellation of Policy by You

1. You may cancel this policy in

accordance with the applicable rules and

regulations of the NFIP.

2. If you cancel this policy, you may be

entitled to a full or partial refund of premium

also under the applicable rules and

regulations of the NFIP.

F. Non-Renewal of the Policy by Us

Your policy will not be renewed:

1. If the community where your covered

property is located stops participating in the

NFIP; or

2. If your building has been declared

ineligible under section 1316 of the Act.

G. Reduction and Reformation of Coverage

1. If the premium we received from you

was not enough to buy the kind and amount

of coverage that you requested, we will

provide only the amount of coverage that can

be purchased for the premium payment we

received.

2. The policy can be reformed to increase

the amount of coverage resulting from the

reduction described in G.1. above to the

amount you requested as follows:

a. Discovery of Insufficient Premium or

Incomplete Rating Information Before a Loss.

(1) If we discover before you have a flood

loss that your premium payment was not

enough to buy the requested amount of

coverage, we will send you and any

mortgagee or trustee known to us a bill for

the required additional premium for the

current policy term (or that portion of the

current policy term following any

endorsement changing the amount of

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60783

coverage). If you or the mortgagee or trustee

pay the additional premium within 30 days

from the date of our bill, we will reform the

policy to increase the amount of coverage to

the originally requested amount effective to

the beginning of the current policy term (or

subsequent date of any endorsement

changing the amount of coverage).

(2) If we determine before you have a flood

loss that the rating information we have is

incomplete and prevents us from calculating

the additional premium, we will ask you to

send the required information. You must

submit the information within 60 days of our

request. Once we determine the amount of

additional premium for the current policy

term, we will follow the procedure in

G.2.a.(1) above.

(3) If we do not receive the additional

premium (or additional information) by the

date it is due, the amount of coverage can

only be increased by endorsement subject to

any appropriate waiting period.

b. Discovery of Insufficient Premium or

Incomplete Rating Information After a Loss.

(1) If we discover after you have a flood

loss that your premium payment was not

enough to buy the requested amount of

coverage, we will send you and any

mortgagee or trustee known to us a bill for

the required additional premium for the

current and the prior policy terms. If you or

the mortgagee or trustee pay the additional

premium within 30 days of the date of our

bill, we will reform the policy to increase the

amount of coverage to the originally

requested amount effective to the beginning

of the prior policy term.

(2) If we discover after you have a flood

loss that the rating information we have is

incomplete and prevents us from calculating

the additional premium, we will ask you to

send the required information. You must

submit the information before your claim can

be paid. Once we determine the amount of

additional premium for the current and prior

policy terms, we will follow the procedure in

G.2.b.(1) above.

(3) If we do not receive the additional

premium by the date it is due, your flood

insurance claim will be settled based on the

reduced amount of coverage. The amount of

coverage can only be increased by

endorsement subject to any appropriate

waiting period.

3. However, if we find that you or your

agent intentionally did not tell us, or

falsified, any important fact or circumstance

or did anything fraudulent relating to this

insurance, the provisions of Condition B.

above apply.

H. Policy Renewal

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

the last day of the policy term.

2. We must receive the payment of the

appropriate renewal premium within 30 days

of the expiration date.

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

place your renewal notice into the U.S. Postal

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

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

incomplete, or illegible address, which

delayed its delivery to you before the due

date for the renewal premium, then we will

follow these procedures:

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

than one year after the date on which the

payment of the renewal premium was due, of

nonreceipt of a renewal notice before the due

date for the renewal premium, and we

determine that the circumstances in the

preceding paragraph apply, we will mail a

second bill providing a revised due date,

which will be 30 days after the date on which

the bill is mailed.

b. If we do not receive the premium

requested in the second bill by the revised

due date, then we will not renew the policy.

In that case, the policy will remain as an

expired policy as of the expiration date

shown on the Declarations Page.

4. In connection with the renewal of this

policy, we may ask you during the policy

term to re-certify, on a Recertification

Questionnaire that we will provide to you,

the rating information used to rate your most

recent application for or renewal of

insurance.

I. Conditions Suspending or Restricting

Insurance

We are not liable for loss that occurs while

there is a hazard that is increased by any

means within your control or knowledge.

J. Requirements in Case of Loss

In case of a flood loss to insured property,

you must:

1. Give prompt written notice to us;

2. As soon as reasonably possible, separate

the damaged and undamaged property,

putting it in the best possible order so that

we may examine it;

3. Prepare an inventory of damaged

property showing the quantity, description,

actual cash value, and amount of loss. Attach

all bills, receipts, and related documents;

4. Within 60 days after the loss, send us

a proof of loss, which is your statement of the

amount you are claiming under the policy

signed and sworn to by you, and which

furnishes us with the following information:

a. The date and time of loss;

b. A brief explanation of how the loss

happened;

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

the interest, if any, of others in the damaged

property;

d. Details of any other insurance that may

cover the loss;

e. Changes in title or occupancy of the

insured property during the term of the

policy;

f. Specifications of damaged buildings and

detailed repair estimates;

g. Names of mortgagees or anyone else

having a lien, charge, or claim against the

insured property;

h. Details about who occupied any insured

building at the time of loss and for what

purpose; and

i. The inventory of damaged property

described in J.3. above.

5. In completing the proof of loss, you must

use your own judgment concerning the

amount of loss and justify that amount.

6. You must cooperate with the adjuster or

representative in the investigation of the

claim.

7. The insurance adjuster whom we hire to

investigate your claim may furnish you with

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

you complete it. However, this is a matter of

courtesy only, and you must still send us a

proof of loss within sixty days after the loss

even if the adjuster does not furnish the form

or help you complete it.

8. We have not authorized the adjuster to

approve or disapprove claims or to tell you

whether we will approve your claim.

9. At our option, we may accept the

adjuster’s report of the loss instead of your

proof of loss. The adjuster’s report will

include information about your loss and the

damages you sustained. You must sign the

adjuster’s report. At our option, we may

require you to swear to the report.

K. Our Options After a Loss

Options we may, in our sole discretion,

exercise after loss include the following:

1. At such reasonable times and places that

we may designate, you must:

a. Show us or our representative the

damaged property;

b. Submit to examination under oath,

while not in the presence of another insured,

and sign the same; and

c. Permit us to examine and make extracts

and copies of:

(1) Any policies of property insurance

insuring you against loss and the deed

establishing your ownership of the insured

real property;

(2) Condominium association documents

including the Declarations of the

condominium, its Articles of Association or

Incorporation, Bylaws, and rules and

regulations; and

(3) All books of accounts, bills, invoices,

and other vouchers, or certified copies

pertaining to the damaged property if the

originals are lost.

2. We may request, in writing, that you

furnish us with a complete inventory of the

lost, damaged, or destroyed property,

including:

a. Quantities and costs;

b. Actual cash values;

c. Amounts of loss claimed;

d. Any written plans and specifications for

repair of the damaged property that you can

reasonably make available to us; and

e. Evidence that prior flood damage has

been repaired.

3. If we give you written notice within 30

days after we receive your signed, sworn

proof of loss, we may:

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

lost, damaged, or destroyed property with

material or property of like kind and quality

or its functional equivalent; and

b. Take all or any part of the damaged

property at the value that we agree upon or

its appraised value.

L. No Benefit to Bailee

No person or organization, other than you,

having custody of covered property will

benefit from this insurance.

M. Loss Payment

1. We will adjust all losses with you. We

will pay you unless some other person or

entity is named in the policy or is legally

entitled to receive payment. Loss will be

payable 60 days after we receive your proof

of loss (or within 90 days after the insurance

60784 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

adjuster files an adjuster’s report signed and

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

and:

a. We reach an agreement with you;

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

c. There is a filing of an appraisal award

with us, as provided in VII. P.

2. If we reject your proof of loss in whole

or in part you may:

a. Accept such denial of your claim;

b. Exercise your rights under this policy; or

c. File an amended proof of loss as long as

it is filed within 60 days of the date of the

loss.

N. Abandonment

You may not abandon damaged or

undamaged insured property to us.

O. Salvage

We may permit you to keep damaged

insured property after a loss, and we will

reduce the amount of the loss proceeds

payable to you under the policy by the value

of the salvage.

P. Appraisal

If you and we fail to agree on the actual

cash value of the damaged property so as to

determine the amount of loss, either may

demand an appraisal of the loss. In this

event, you and we will each choose a

competent and impartial appraiser within 20

days after receiving a written request from

the other. The two appraisers will choose an

umpire. If they cannot agree upon an umpire

within 15 days, you or we may request that

the choice be made by a judge of a court of

record in the state where the insured

property is located. The appraisers will

separately state the actual cash value and the

amount of loss to each item. If the appraisers

submit a written report of an agreement to us,

the amount agreed upon will be the amount

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

their differences to the umpire. A decision

agreed to by any two will set the amount of

actual cash value and loss.

Each party will:

1. Pay its own appraiser; and

2. Bear the other expenses of the appraisal

and umpire equally.

Q. Mortgage Clause

The word ‘‘mortgagee’’ includes trustee.

Any loss payable under Coverage A—

Building Property will be paid to any

mortgagee of whom we have actual notice, as

well as any other mortgagee or loss payee

determined to exist at the time of loss, and

you, as interests appear. If more than one

mortgagee is named, the order of payment

will be the same as the order of precedence

of the mortgages. If we deny your claim, that

denial will not apply to a valid claim of the

mortgagee, if the mortgagee:

1. Notifies us of any change in the

ownership or occupancy, or substantial

change in risk of which the mortgagee is

aware;

2. Pays any premium due under this policy

on demand if you have neglected to pay the

premium; and

3. Submits a signed, sworn proof of loss

within 60 days after receiving notice from us

of your failure to do so.

All terms of this policy apply to the

mortgagee.

The mortgagee has the right to receive loss

payment even if the mortgagee has started

foreclosure or similar action on the building.

If we decide to cancel or not renew this

policy, it will continue in effect for the

benefit of the mortgagee only for 30 days after

we notify the mortgagee of the cancellation

or non-renewal.

If we pay the mortgagee for any loss and

deny payment to you, we are subrogated to

all the rights of the mortgagee granted under

the mortgage on the property. Subrogation

will not impair the right of the mortgagee to

recover the full amount of the mortgagee’s

claim.

R. Suit Against Us

You may not sue us to recover money

under this policy unless you have complied

with all the requirements of the policy. If you

do sue, you must start the suit within one

year of the date of the written denial of all

or part of the claim, and you must file the

suit in the United States District Court of the

district in which the insured property was

located at the time of loss. This requirement

applies to any claim that you may have under

this policy and to any dispute that you may

have arising out of the handling of any claim

under the policy.

S. Subrogation

Whenever we make a payment for a loss

under this policy, we are subrogated to your

right to recover for that loss from any other

person. That means that your right to recover

for a loss that was partly or totally caused by

someone else is automatically transferred to

us, to the extent that we have paid you for

the loss. We may require you to acknowledge

this transfer in writing. After the loss, you

may not give up our right to recover this

money or do anything that would prevent us

from recovering it. If you make any claim

against any person who caused your loss and

recover any money, you must pay us back

first before you may keep any of that money.

T. Continuous Lake Flooding

1. If an insured building has been flooded

by rising lake waters continuously for 90

days or more and it appears reasonably

certain that a continuation of this flooding

will result in a covered loss to the insured

building equal to or greater than the building

policy limits plus the deductible or the

maximum payable under the policy for any

one building loss, we will pay you the lesser

of these two amounts without waiting for the

further damage to occur if you sign a release

agreeing:

a. To make no further claim under this

policy;

b. Not to seek renewal of this policy;

c. Not to apply for any flood insurance

under the Act for property at the described

location; and

d. Not to seek a premium refund for

current or prior terms.

If the policy term ends before the insured

building has been flooded continuously for

90 days, the provisions of this paragraph T.1.

will apply when as the insured building

suffers a covered loss before the policy term

ends.

2. If your insured building is subject to

continuous lake flooding from a closed basin

lake, you may elect to file a claim under

either paragraph T.1. above or this paragraph

T.2. (A ‘‘closed basin lake’’ is a natural lake

from which water leaves primarily through

evaporation and whose surface area now

exceeds or has exceeded one square mile at

any time in the recorded past. Most of the

nation’s closed basin lakes are in the western

half of the United States, where annual

evaporation exceeds annual precipitation and

where lake levels and surface areas are

subject to considerable fluctuation due to

wide variations in the climate. These lakes

may overtop their basins on rare occasions.)

Under this paragraph T.2 we will pay your

claim as if the building is a total loss even

though it has not been continuously

inundated for 90 days, subject to the

following conditions:

a. Lake flood waters must damage or

imminently threaten to damage your

building.

b. Before approval of your claim, you must:

(1) Agree to a claim payment that reflects

your buying back the salvage on a negotiated

basis; and

(2) Grant the conservation easement

described in FEMA’s ‘‘Policy Guidance for

Closed Basin Lakes,’’ to be recorded in the

office of the local recorder of deeds. FEMA,

in consultation with the community in which

the property is located, will identify on a

map an area or areas of special consideration

(ASC) in which there is a potential for flood

damage from continuous lake flooding.

FEMA will give the community the agreedupon map showing the ASC. This easement

will only apply to that portion of the

property in the ASC. It will allow certain

agricultural and recreational uses of the land.

The only structures that it will allow on any

portion of the property within the ASC are

certain, simple agricultural and recreational

structures. If any of these allowable

structures are insurable buildings under the

NFIP and are insured under the NFIP, they

will not be eligible for the benefits of this

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

Engineers certified flood control project or

otherwise certified flood control project later

protects the property, FEMA will, upon

request, amend the ASC to remove areas

protected by those projects. The restrictions

of the easement will then no longer apply to

any portion of the property removed from the

ASC; and

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

T.1.d. above.

c. Within 90 days of approval of your

claim, you must move your building to a new

location outside the ASC. FEMA will give

you an additional 30 days to move if you

show that there is sufficient reason to extend

the time.

d. Before the final payment of your claim,

you must acquire an elevation certificate and

a floodplain development permit from the

local floodplain administrator for the new

location of your building.

e. Before the approval of your claim, the

community having jurisdiction over your

building must:

(1) Adopt a permanent land use ordinance,

or a temporary moratorium for a period not

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60785

to exceed 6 months to be followed

immediately by a permanent land use

ordinance, that is consistent with the

provisions specified in the easement required

in paragraph T.2.b. above.

(2) Agree to declare and report any

violations of this ordinance to FEMA so that

under Sec. 1316 of the National Flood

Insurance Act of 1968, as amended, flood

insurance to the building can be denied; and

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

purposes compatible with open space or

agricultural or recreational use only, any

affected property the community acquires an

interest in. These deed restrictions must be

consistent with the provisions of paragraph

T.2.b. above except that even if a certified

project protects the property, the land use

restrictions continue to apply if the property

was acquired under the Hazard Mitigation

Grant Program or the Flood Mitigation

Assistance Program. If a non-profit land trust

organization receives the property as a

donation, that organization must maintain

the property as deed-restricted, consistent

with the provisions of paragraph T.2.b.

above.

f. Before the approval of your claim, the

affected State must take all action set forth

in FEMA’s ‘‘Policy Guidance for Closed

Basin Lakes.’’

g. You must have NFIP flood insurance

coverage continuously in effect from a date

established by FEMA until you file a claim

under this paragraph T.2. If a subsequent

owner buys NFIP insurance that goes into

effect within 60 days of the date of transfer

of title, any gap in coverage during that 60-

day period will not be a violation of this

continuous coverage requirement. For the

purpose of honoring a claim under this

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

effect any increased coverage that became

effective after the date established by FEMA.

The exception to this is any increased

coverage in the amount suggested by your

insurer as an inflation adjustment.

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

a community when the FEMA Regional

Director for the affected region provides to

the community, in writing, the following:

(1) Confirmation that the community and

the State are in compliance with the

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

above, and

(2) The date by which you must have flood

insurance in effect.

U. Duplicate Policies Not Allowed

1. Property may not be insured under more

than one NFIP policy.

If we find that the duplication was not

knowingly created, we will give you written

notice. The notice will advise you that you

may choose one of several options under the

following procedures:

a. If you choose to keep in effect the policy

with the earlier effective date, you may also

choose to add the coverage limits of the later

policy to the limits of the earlier policy. The

change will become effective as of the

effective date of the later policy.

b. If you choose to keep in effect the policy

with the later effective date, you may also

choose to add the coverage limits of the

earlier policy to the limits of the later policy.

The change will be effective as of the

effective date of the later policy.

In either case, you must pay the pro rata

premium for the increased coverage limits

within 30 days of the written notice. In no

event will the resulting coverage limits

exceed the permissible limits of coverage

under the Act or your insurable interest,

whichever is less. We will make a refund to

you, according to applicable NFIP rules, of

the premium for the policy not being kept in

effect.

2. Your option under this Condition U.

Duplicate Policies Not Allowed to elect

which NFIP policy to keep in effect does not

apply when duplicates have been knowingly

created. Losses occurring under such

circumstances will be adjusted according to

the terms and conditions of the earlier policy.

The policy with the later effective date must

be canceled.

V. Loss Settlement

We will pay the least of the following

amounts after application of the deductible:

1. The applicable amount of insurance

under this policy;

2. The actual cash value; or

3. The amount it would cost to repair or

replace the property with material of like

kind and quality within a reasonable time

after the loss.

VIII. Liberalization Clause

If we make a change that broadens your

coverage under this edition of our policy, but

does not require any additional premium,

then that change will automatically apply to

your insurance as of the date we implement

the change, provided that this

implementation date falls within 60 days

before or during the policy term stated on the

Declarations Page.

IX. What Law Governs

This policy and all disputes arising from

the handling of any claim under the policy

are governed exclusively by the flood

insurance regulations issued by FEMA, the

National Flood Insurance Act of 1968, as

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

Federal common law.

In Witness Whereof, we have signed this

policy below and hereby enter into this

Insurance Agreement.

Jo Ann Howard,

Administrator, Federal Insurance

Administration.

8. We revise Appendix A(3) to Part

61, Residential Condominium Building

Association Policy, to read as follows:

APPENDIX A(3) TO PART 61

Federal Emergency Management Agency

Federal Insurance Administration

Standard Flood Insurance Policy

RESIDENTIAL CONDOMINIUM BUILDING

ASSOCIATION POLICY

I. Agreement

Please read the policy carefully. The flood

insurance provided is subject to limitations,

restrictions, and exclusions.

This policy covers only a residential

condominium building in a regular program

community. If the community reverts to

emergency program status during the policy

term and remains as an emergency program

community at time of renewal, this policy

cannot be renewed.

The Federal Emergency Management

Agency (FEMA) provides flood insurance

under the terms of the National Flood

Insurance Act of 1968 and its Amendments,

and Title 44 of the Code of Federal

Regulations.

We will pay you for direct physical loss by

or from flood to your insured property if you:

1. Have paid the correct premium;

2. Comply with all terms and conditions of

this policy; and

3. Have furnished accurate information and

statements.

We have the right to review the

information you give us at any time and to

revise your policy based on our review.

II. Definitions

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

to the insured(s) shown on the Declarations

Page of this policy. Insured(s) includes: any

mortgagee and loss payee named in the

Application and Declarations Page, as well as

any other mortgagee or loss payee

determined to exist at the time of loss in the

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

refer to the insurer.

Some definitions are complex because they

are provided as they appear in the law or

regulations, or result from court cases. The

precise definitions are intended to protect

you.

‘‘Flood’’, as used in this flood insurance

policy, means:

1. A general and temporary condition of

partial or complete inundation of two or

more acres of normally dry land area or of

two or more properties (one of which is your

property) from:

a. Overflow of inland or tidal waters;

b. Unusual and rapid accumulation or

runoff of surface waters from any source;

c. Mudflow.

2. Collapse or subsidence of land along the

shore of a lake or similar body of water as

a result of erosion or undermining caused by

waves or currents of water exceeding

anticipated cyclical levels which result in a

flood as defined in A.1.a above.

B. The following are the other key

definitions we use in this policy:

1. Act. The National Flood Insurance Act

of 1968 and any amendments to it.

2. Actual Cash Value. The cost to replace

an insured item of property at the time of

loss, less the value of its physical

depreciation.

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3. Application. The statement made and

signed by you or your agent in applying for

this policy. The application gives

information we use to determine the

eligibility of the risk, the kind of policy to be

issued, and the correct premium payment.

The application is part of this flood

insurance policy. For us to issue you a

policy, the correct premium payment must

accompany the application.

4. Base Flood. A flood having a one percent

chance of being equaled or exceeded in any

given year.

5. Basement. Any area of the building,

including any sunken room or sunken

portion of a room, having its floor below

ground level (subgrade) on all sides.

6. Building.

a. A structure with two or more outside

rigid walls and a fully secured roof, that is

affixed to a permanent site;

b. A manufactured home (‘‘a manufactured

home,’’ also known as a mobile home, is a

structure: built on a permanent chassis,

transported to its site in one or more sections,

and affixed to a permanent foundation); or

c. A travel trailer without wheels, built on

a chassis and affixed to a permanent

foundation, that is regulated under the

community’s floodplain management and

building ordinances or laws.

Building does not mean a gas or liquid

storage tank or a recreational vehicle, park

trailer or other similar vehicle, except as

described in B.6.c., above.

7. Cancellation. The ending of the

insurance coverage provided by this policy

before the expiration date.

8. Condominium. That form of ownership

of real property in which each unit owner

has an undivided interest in common

elements.

9. Condominium Association. The entity,

formed by the unit owners, responsible for

the maintenance and operation of:

a. Common elements owned in undivided

shares by unit owners; and

b. Other real property in which the unit

owners have use rights; where membership

in the entity is a required condition of unit

ownership.

10. Declarations Page. A computergenerated summary of information you

provided in the application for insurance.

The Declarations Page also describes the term

of the policy, limits of coverage, and displays

the premium and our name. The Declarations

Page is a part of this flood insurance policy.

11. Described Location. The location where

the insured building or personal property is

found. The described location is shown on

the Declarations Page.

12. Direct Physical Loss By or From Flood.

Loss or damage to insured property, directly

caused by a flood. There must be evidence

of physical changes to the property.

13. Elevated Building. A building that has

no basement and that has its lowest elevated

floor raised above ground level by foundation

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

columns.

14. Emergency Program. The initial phase

of a community’s participation in the

National Flood Insurance Program. During

this phase, only limited amounts of

insurance are available under the Act.

15. Expense Constant. A flat charge you

must pay on each new or renewal policy to

defray the expenses of the Federal

Government related to flood insurance.

16. Federal Policy Fee. A flat charge you

must pay on each new or renewal policy to

defray certain administrative expenses

incurred in carrying out the National Flood

Insurance Program. This fee covers expenses

not covered by the expense constant.

17. Improvements. Fixtures, alterations,

installations, or additions comprising a part

of the residential condominium building,

including improvements in the units.

18. Mudflow. A river of liquid and flowing

mud on the surfaces of normally dry land

areas, as when earth is carried by a current

of water. Other earth movements, such as

landslide, slope failure, or a saturated soil

mass moving by liquidity down a slope, are

not mudflows.

19. National Flood Insurance Program (NFIP).

The program of flood insurance coverage and

floodplain management administered under

the Act and applicable Federal regulations in

Title 44 of the Code of Federal Regulations,

Subchapter B.

20. Policy. The entire written contract

between you and us. It includes:

a. This printed form;

b. The application and Declarations Page;

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

and

d. Any renewal certificate indicating that

coverage has been instituted for a new policy

and new policy term.

Only one building, which you specifically

described in the application, may be insured

under this policy.

21. Pollutants. Substances that include, but

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

or thermal irritant or contaminant, including

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

chemicals, and waste. Waste includes, but is

not limited to, materials to be recycled,

reconditioned, or reclaimed.

22. Post-FIRM Building. A building for

which construction or substantial

improvement occurred after December 31,

1974, or on or after the effective date of an

initial Flood Insurance Rate Map (FIRM),

whichever is later.

23. Probation Premium. A flat charge you

must pay on each new or renewal policy

issued covering property in a community that

the NFIP has placed on probation under the

provisions of 44 CFR 59.24.

24. Regular Program. The final phase of a

community’s participation in the National

Flood Insurance Program. In this phase, a

Flood Insurance Rate Map is in effect and full

limits of coverage are available under the

Act.

25. Residential Condominium Building. A

building, owned and administered as a

condominium, containing one or more family

units and in which at least 75% of the floor

area is residential.

26. Special Flood Hazard Area. An area

having special flood or mudflow, and/or

flood-related erosion hazards, and shown on

a Flood Hazard Boundary Map or Flood

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

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

AR/AO, AR/A1–A30, V1–V30, VE, or V.

27. Unit. A single-family unit in a

residential condominium building.

28. Valued Policy. A policy in which the

insured and the insurer agree on the value of

the property insured, that value being

payable in the event of a total loss. The

Standard Flood Insurance Policy is not a

valued policy.

III. Property Covered

A. Coverage A—Building Property

We insure against direct physical loss by

or from flood to:

1. The residential condominium building

described on the Declarations Page at the

described location, including all units within

the building and the improvements within

the units.

2. We also insure such building property

for a period of 45 days at another location,

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

Safety.

3. Additions and extensions attached to

and in contact with the building by means of

a rigid exterior wall, a solid load-bearing

interior wall, a stairway, an elevated

walkway, or a roof. At your option, additions

and extensions connected by any of these

methods may be separately insured.

Additions and extensions attached to and in

contact with the building by means of a

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

the building and cannot be separately

insured.

4. The following fixtures, machinery and

equipment, including its units, which are

covered under Coverage A only:

a. Awnings and canopies;

b. Blinds;

c. Carpet permanently installed over

unfinished flooring;

d. Central air conditioners;

e. Elevator equipment;

f. Fire extinguishing apparatus;

g. Fire sprinkler systems;

h. Walk-in freezers;

i. Furnaces;

j. Light fixtures;

k. Outdoor antennas and aerials fastened to

buildings;

l. Permanently installed cupboards,

bookcases, paneling, and wallpaper;

m. Pumps and machinery for operating

pumps;

n. Ventilating equipment;

o. Wall mirrors, permanently installed; and

p. In the units within the building,

installed:

(1) Built-in dishwashers;

(2) Built-in microwave ovens;

(3) Garbage disposal units;

(4) Hot water heaters, including solar water

heaters;

(5) Kitchen cabinets;

(6) Plumbing fixtures;

(7) Radiators;

(8) Ranges;

(9) Refrigerators; and

(10) Stoves.

5. Materials and supplies to be used for

construction, alteration or repair of the

insured building while the materials and

supplies are stored in a fully enclosed

building at the described location or on an

adjacent property.

6. A building under construction,

alteration or repair at the described location.

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60787

a. If the structure is not yet walled or

roofed as described in the definition for

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

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

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

of up to 90 continuous days thereafter.

b. However, coverage does not apply until

the building is walled and roofed if the

lowest floor, including the basement floor, of

a non-elevated building or the lowest

elevated floor of an elevated building is:

(1) Below the base flood elevation in Zones

AH, AE, A1–30, AR, AR/AE, AR/AH, AR/

A1–30, AR/A, AR/AO; or

(2) Below the base flood elevation adjusted

to include the effect of wave action in Zones

VE or V1–30.

The lowest floor levels are based on the

bottom of the lowest horizontal structural

member of the floor in Zones VE or V1–V30

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

A1–A30, AR, AR/AE, AR/AH, AR/A1–A30,

AR/A, AR/AO.

7. A manufactured home or a travel trailer

as described in the Definitions Section (See

II.B.b. and c.).

If the manufactured home is in a special

flood hazard area, it must be anchored in the

following manner at the time of the loss:

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

anchors; or

b. In accordance with the manufacturer’s

specifications; or

c. In compliance with the community’s

floodplain management requirements unless

it has been continuously insured by the NFIP

at the same described location since

September 30, 1982.

8. Items of property in a building enclosure

below the lowest elevated floor of an elevated

post-FIRM building located in zones A1–

A30, AE, AH, AR, AR/A, AR/AE, AR/AH,

AR/A1–A30, V1–V30, or VE, or in a

basement, regardless of the zone. Coverage is

limited to the following:

a. Any of the following items, if installed

in their functioning locations and, if

necessary for operation, connected to a

power source:

(1) Central air conditioners;

(2) Cisterns and the water in them;

(3) Drywall for walls and ceilings in a

basement and the cost of labor to nail it,

unfinished and unfloated and not taped, to

the framing;

(4) Electrical junction and circuit breaker

boxes;

(5) Electrical outlets and switches;

(6) Elevators, dumbwaiters, and related

equipment, except for related equipment

installed below the base flood elevation after

September 30, 1987;

(7) Fuel tanks and the fuel in them;

(8) Furnaces and hot water heaters;

(9) Heat pumps;

(10) Nonflammable insulation in a

basement;

(11) Pumps and tanks used in solar energy

systems;

(12) Stairways and staircases attached to

the building, not separated from it by

elevated walkways;

(13) Sump pumps;

(14) Water softeners and the chemicals in

them, water filters and faucets installed as an

integral part of the plumbing system;

(15) Well water tanks and pumps;

(16) Required utility connections for any

item in this list; and

(17) Footings, foundations, posts, pilings,

piers, or other foundation walls and

anchorage systems required to support a

building.

b. Clean-up.

B. Coverage B—Personal Property

1. If you have purchased personal property

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

below, against direct physical loss by or from

flood to personal property that is inside the

fully enclosed insured building and is:

a. Owned by the unit owners of the

condominium association in common,

meaning property in which each unit owner

has an undivided ownership interest; or

b. Owned solely by the condominium

association and used exclusively in the

conduct of the business affairs of the

condominium association.

We also insure such personal property for

45 days while stored at a temporary location,

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

Safety.

2. Coverage for personal property includes

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

which is covered under Coverage B only:

a. Air conditioning units—portable or

window type;

b. Carpet, not permanently installed, over

unfinished flooring;

c. Carpets over finished flooring;

d. Clothes washers and dryers;

e. ‘‘Cook-out’’ grills;

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

the food in any freezer;

g. Outdoor equipment and furniture stored

inside the insured building;

h. Ovens and the like; and

i. Portable microwave ovens and portable

dishwashers.

3. Coverage for items of property in a

building enclosure below the lowest elevated

floor of an elevated post-FIRM building

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

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

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

is limited to the following items, if installed

in their functioning locations and, if

necessary for operation, connected to a

power source:

a. Air conditioning units—portable or

window type;

b. Clothes washers and dryers; and

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

food in any freezer.

4. Special Limits. We will pay no more

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

of the following kinds of personal property:

a. Artwork, photographs, collectibles, or

memorabilia, including but not limited to,

porcelain or other figures, and sports cards;

b. Rare books or autographed items;

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

platinum;

d. Furs or any article containing fur which

represents its principal value.

5. We will pay only for the functional

value of antiques.

C. Coverage C—Other Coverages

1. Debris Removal

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

property and debris of insured property

anywhere.

b. If you or a member of your household

perform the removal work, the value of your

work will be based on the Federal minimum

wage.

c. This coverage does not increase the

Coverage A or Coverage B limit of liability.

2. Loss Avoidance Measures

a. Sandbags, Supplies, and Labor

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

you incur to protect the insured building

from a flood or imminent danger of flood, for

the following:

(a) Your reasonable expenses to buy:

(i) Sandbags, including sand to fill them;

(ii) Fill for temporary levees;

(iii) Pumps; and

(iv) Plastic sheeting and lumber used in

connection with these items; and

(b) The value of work, at the Federal

minimum wage, that you perform.

(2) This coverage for Sandbags, Supplies,

and Labor applies only if damage to insured

property by or from flood is imminent and

the threat of flood damage is apparent

enough to lead a person of common prudence

to anticipate flood damage. One of the

following must also occur:

(a) A general and temporary condition of

flooding in the area near the described

location must occur, even if the flood does

not reach the insured building; or

(b) A legally authorized official must issue

an evacuation order or other civil order for

the community in which the insured

building is located calling for measures to

preserve life and property from the peril of

flood. This coverage does not increase the

Coverage A or Coverage B limit of liability.

b. Property Removed to Safety

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

reasonable expenses you incur to move

insured property to a place other than the

described location that contains the property

in order to protect it from flood or the

imminent danger of flood.

Reasonable expenses include the value of

work, at the Federal minimum wage, that you

perform.

(2) If you move insured property to a

location other than the described location

that contains the property, in order to protect

it from flood or the imminent danger of flood,

we will cover such property while at that

location for a period of 45 consecutive days

from the date you begin to move it there. The

personal property that is moved must be

placed in a fully enclosed building, or

otherwise reasonably protected from the

elements.

Any property removed, including a

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

must be placed above ground level or outside

of the special flood hazard area.

This coverage does not increase the

Coverage A or Coverage B limit of liability.

D. Coverage D—Increased Cost of

Compliance

1. General.

This policy pays you to comply with a

State or local floodplain management law or

ordinance affecting repair or reconstruction

60788 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

of a structure suffering flood damage.

Compliance activities eligible for payment

are: elevation, floodproofing, relocation, or

demolition (or any combination of these

activities) of your structure. Eligible

floodproofing activities are limited to:

a. Non-residential structures.

b. Residential structures with basements

that satisfy FEMA’s standards published in

the Code of Federal Regulations [44 CFR 60.6

(b) or (c)].

2. Limit of Liability.

We will pay you up to $20,000 under this

Coverage D—Increased Cost of Compliance,

which only applies to policies with building

coverage (Coverage A). Our payment of

claims under Coverage D is in addition to the

amount of coverage which you selected on

the application and which appears on the

Declarations Page. But the maximum you can

collect under this policy for both Coverage

A—Building Property and Coverage D—

Increased Cost of Compliance cannot exceed

the maximum permitted under the Act. We

do not charge a separate deductible for a

claim under Coverage D.

3. Eligibility.

a. A structure covered under Coverage A—

Building Property sustaining a loss caused by

a flood as defined by this policy must:

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

‘‘repetitive loss structure’’ is one that meets

the following conditions:

(a) The structure is covered by a contract

of flood insurance issued under the NFIP.

(b) The structure has suffered flood damage

on 2 occasions during a 10-year period which

ends on the date of the second loss.

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

average, equaled or exceeded 25% of the

market value of the structure at the time of

each flood loss.

(d) In addition to the current claim, the

NFIP must have paid the previous qualifying

claim, and the State or community must have

a cumulative, substantial damage provision

or repetitive loss provision in its floodplain

management law or ordinance being enforced

against the structure; or

(2) Be a structure that has had flood

damage in which the cost to repair equals or

exceeds 50% of the market value of the

structure at the time of the flood. The State

or community must have a substantial

damage provision in its floodplain

management law or ordinance being enforced

against the structure.

b. This Coverage D pays you to comply

with State or local floodplain management

laws or ordinances that meet the minimum

standards of the National Flood Insurance

Program found in the Code of Federal

Regulations at 44 CFR 60.3. We pay for

compliance activities that exceed those

standards under these conditions:

(1) 3.a.(1) above.

(2) Elevation or floodproofing in any risk

zone to preliminary or advisory base flood

elevations provided by FEMA which the

State or local government has adopted and is

enforcing for flood-damaged structures in

such areas. (This includes compliance

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

being changed to zones with base flood

elevations. This also includes compliance

activities in zones where base flood

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

higher advisory base flood elevation.)

Increased Cost of Compliance coverage does

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

where the community has derived its own

elevations and is enforcing elevation or

floodproofing requirements for flooddamaged structures to elevations derived

solely by the community.

(3) Elevation or floodproofing above the

base flood elevation to meet State or local

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

structure must be elevated above the base

flood elevation.

c. Under the minimum NFIP criteria at 44

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

require the elevation or floodproofing of

structures in unnumbered A zones to the

base flood elevation where elevation data is

obtained from a Federal, State, or other

source. Such compliance activities are also

eligible for Coverage D.

d. This coverage will also pay for the

incremental cost, after demolition or

relocation, of elevating or floodproofing a

structure during its rebuilding at the same or

another site to meet State or local floodplain

management laws or ordinances, subject to

Exclusion D.5.g.below relating to

improvements.

e. This coverage will also pay to bring a

flood-damaged structure into compliance

with State or local floodplain management

laws or ordinances even if the structure had

received a variance before the present loss

from the applicable floodplain management

requirements.

4. Conditions.

a. When a structure covered under

Coverage A—Building Property sustains a

loss caused by a flood, our payment for the

loss under this Coverage D will be for the

increased cost to elevate, floodproof, relocate,

or demolish (or any combination of these

activities) caused by the enforcement of

current State or local floodplain management

ordinances or laws. Our payment for eligible

demolition activities will be for the cost to

demolish and clear the site of the building

debris or a portion thereof caused by the

enforcement of current State or local

floodplain management ordinances or laws.

Eligible activities for the cost of clearing the

site will include those necessary to

discontinue utility service to the site and

ensure proper abandonment of on-site

utilities.

b. When the building is repaired or rebuilt,

it must be intended for the same occupancy

as the present building unless otherwise

required by current floodplain management

ordinances or laws.

5. Exclusions.

Under this Coverage D—Increased Cost of

Compliance, we will not pay for:

a. The cost to comply with any floodplain

management law or ordinance in

communities participating in the Emergency

Program.

b. The cost associated with enforcement of

any ordinance or law that requires any

insured or others to test for, monitor, clean

up, remove, contain, treat, detoxify or

neutralize, or in any way respond to, or

assess the effects of pollutants.

c. The loss in value to any insured building

or other structure due to the requirements of

any ordinance or law.

d. The loss in residual value of the

undamaged portion of a building demolished

as a consequence of enforcement of any State

or local floodplain management law or

ordinance.

e. Any Increased Cost of Compliance under

this Coverage D:

(1) Until the building is elevated,

floodproofed, demolished, or relocated on

the same or to another premises; and

(2) Unless the building is elevated,

floodproofed, demolished, or relocated as

soon as reasonably possible after the loss, not

to exceed two years.

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

plumbing or electrical wiring, not

specifically related to the State or local

floodplain management law or ordinance.

g. Any compliance activities needed to

bring additions or improvements made after

the loss occurred into compliance with State

or local floodplain management laws or

ordinances.

h. Loss due to any ordinance or law that

you were required to comply with before the

current loss.

i. Any rebuilding activity to standards that

do not meet the NFIP’s minimum

requirements. This includes any situation

where the insured has received from the

State or community a variance in connection

with the current flood loss to rebuild the

property to an elevation below the base flood

elevation.

j. Increased Cost of Compliance for a garage

or carport.

k. Any structure insured under an NFIP

Group Flood Insurance Policy.

l. Assessments made by a condominium

association on individual condominium unit

owners to pay increased costs of repairing

commonly owned buildings after a flood in

compliance with State or local floodplain

management ordinances or laws.

6. Other Provisions.

a. Increased Cost of Compliance coverage

will not be included in the calculation to

determine whether coverage meets the

coinsurance requirement for replacement

cost coverage under VIII. General Conditions,

V. Loss Settlement.

b. All other conditions and provisions of

this policy apply.

IV. Property Not Covered

We do not cover any of the following:

1. Personal property not inside the fully

enclosed building;

2. A building, and personal property in it,

located entirely in, on, or over water or

seaward of mean high tide, if constructed or

substantially improved after September 30,

1982;

3. Open structures, including a building

used as a boathouse or any structure or

building into which boats are floated, and

personal property located in, on, or over

water;

4. Recreational vehicles other than travel

trailers described in the Definitions Section

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

foundation or on wheels;

5. Self-propelled vehicles or machines,

including their parts and equipment.

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60789

However, we do cover self-propelled

vehicles or machines, provided they are not

licensed for use on public roads and are:

a. Used mainly to service the described

location, or

b. Designed and used to assist handicapped

persons, while the vehicles or machines are

inside a building at the described location;

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

plants, growing crops, or animals;

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

evidences of debt, medals, money, scrip,

stored value cards, postage stamps,

securities, bullion, manuscripts, or other

valuable papers;

8. Underground structures and equipment,

including wells, septic tanks, and septic

systems;

9. Those portions of walks, walkways,

decks, driveways, patios, and other surfaces,

all whether protected by a roof or not, located

outside the perimeter, exterior walls of the

insured building;

10. Containers, including related

equipment, such as, but not limited to, tanks

containing gases or liquids;

11. Buildings and all their contents if more

than 49% of the actual cash value of the

building is below ground, unless the lowest

level is at or above the base flood elevation

and is below ground by reason of earth

having been used as insulation material in

conjunction with energy efficient building

techniques;

12. Fences, retaining walls, seawalls,

bulkheads, wharves, piers, bridges, and

docks;

13. Aircraft or watercraft, or their

furnishings and equipment;

14. Hot tubs and spas that are not bathroom

fixtures, and swimming pools, and their

equipment such as, but not limited to,

heaters, filters, pumps, and pipes, wherever

located;

15. Property not eligible for flood

insurance pursuant to the provisions of the

Coastal Barrier Resources Act and the Coastal

Barrier Improvements Act of 1990 and

amendments to these Acts;

16. Personal property used in connection

with any incidental commercial occupancy

or use of the building.

V. Exclusions

A. We only pay for direct physical loss by

or from flood, which means that we do not

pay you for:

1. Loss of revenue or profits;

2. Loss of access to the insured property or

described location;

3. Loss of use of the insured property or

described location;

4. Loss from interruption of business or

production;

5. Any additional living expenses incurred

while the insured building is being repaired

or is unable to be occupied for any reason;

6. The cost of complying with any

ordinance or law requiring or regulating the

construction, demolition, remodeling,

renovation, or repair of property, including

removal of any resulting debris. This

exclusion does not apply to any eligible

activities that we describe in Coverage D—

Increased Cost of Compliance; or

7. Any other economic loss.

B. We do not insure a loss directly or

indirectly caused by a flood that is already

in progress at the time and date:

1. The policy term begins; or

2. Coverage is added at your request.

C. We do not insure for loss to property

caused directly by earth movement even if

the earth movement is caused by flood. Some

examples of earth movement that we do not

cover are:

1. Earthquake;

2. Landslide;

3. Land subsidence;

4. Sinkholes;

5. Destabilization or movement of land that

results from accumulation of water in

subsurface land areas; or

6. Gradual erosion.

We do, however, pay for losses from

mudflow and land subsidence as a result of

erosion that are specifically covered under

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

II.A.2.).

D. We do not insure for direct physical loss

caused directly or indirectly by:

1. The pressure or weight of ice;

2. Freezing or thawing;

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

4. Water, moisture, mildew, or mold

damage that results primarily from any

condition:

a. Substantially confined to the insured

building; or

b. That is within your control including,

but not limited to:

(1) Design, structural, or mechanical

defects;

(2) Failures, stoppages, or breakage of

water or sewer lines, drains, pumps, fixtures,

or equipment; or

(3) Failure to inspect and maintain the

property after a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

b. Discharges or overflows from a sump,

sump pump, or related equipment; or

c. Seeps or leaks on or through insured

property;

unless there is a flood in the area and the

flood is the proximate cause of the sewer,

drain, or sump pump discharge or overflow,

or the seepage of water;

6. The pressure or weight of water unless

there is a flood in the area and the flood is

the proximate cause of the damage from the

pressure or weight of water.

7. Power, heating, or cooling failure unless

the failure results from direct physical loss

by or from flood to power, heating or cooling

equipment situated on the described

location;

8. Theft, fire, explosion, wind, or

windstorm;

9. Anything you or your agents do or

conspire to do to cause loss by flood

deliberately; or

10. Alteration of the insured property that

significantly increases the risk of flooding.

E. We do not insure for loss to any building

or personal property located on land leased

from the Federal Government, arising from or

incident to the flooding of the land by the

Federal Government, where the lease

expressly holds the Federal Government

harmless under flood insurance issued under

any Federal Government program.

F. We do not pay for the testing for or

monitoring of pollutants unless required by

law or ordinance.

VI. Deductibles

A. When a loss is covered under this

policy, we will pay only that part of the loss

that exceeds the applicable deductible

amount, subject to the limit of insurance that

applies. The deductible amount is shown on

the Declarations Page.

However, when a building under

construction, alteration, or repair does not

have at least two rigid exterior walls and a

fully secured roof at the time of loss, your

deductible amount will be two times the

deductible that would otherwise apply to a

completed building.

B. In each loss from flood, separate

deductibles apply to the building and

personal property insured by this policy.

C. No deductible applies to:

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

2. III.D. Increased Cost of Compliance.

VII. Coinsurance

A. This Coinsurance Section applies only

to coverage on the building.

B. We will impose a penalty on loss

payment unless the amount of insurance

applicable to the damaged building is:

1. At least 80% of its replacement cost; or

2. The maximum amount of insurance

available for that building under the NFIP,

whichever is less.

C. If the actual amount of insurance on the

building is less than the required amount in

accordance with the terms of VII. B. above,

then loss payment is determined as follows

(subject to all other relevant conditions in

this policy, including those pertaining to

valuation, adjustment, settlement, and

payment of loss):

1. Divide the actual amount of insurance

carried on the building by the required

amount of insurance.

2. Multiply the amount of loss, before

application of the deductible, by the figure

determined in C.1. above.

3. Subtract the deductible from the figure

determined in C.2. above.

We will pay the amount determined in C.3.

above, or the amount of insurance carried,

whichever is less. The amount of insurance

carried, if in excess of the applicable

maximum amount of insurance available

under the NFIP, is reduced accordingly.

Examples

Example #1 (Inadequate Insurance)

Replacement value of the building—$250,000

Required amount of insurance—$200,000

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

Actual amount of insurance carried—

$180,000

Amount of the loss—$150,000

Deductible—$500

Step 1:180,000 ÷ 200,000 = .90

(90% of what should be carried.)

Step 2: 150,000 × .90 = 135,000

Step 3: 135,000 ¥ 500 = 134,500

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

remaining $15,500 is not covered due to the

coinsurance penalty ($15,000) and

application of the deductible ($500).

60790 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

Example #2 (Adequate Insurance)

Replacement value of the building—$500,000

Required amount of insurance—$400,000

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

Actual amount of insurance carried—

$400,000

Amount of the loss—$200,000

Deductible—$500

In this example there is no coinsurance

penalty, because the actual amount of

insurance carried meets the required amount.

We will pay no more than $199,500

($200,000 amount of loss minus the $500

deductible).

D. In calculating the full replacement cost

of a building:

1. The replacement cost value of any

covered building property will be included;

2. The replacement cost value of any

building property not covered under this

policy will not be included; and

3. Only the replacement cost value of

improvements installed by the condominium

association will be included.

VIII. General Conditions

A. Pair and Set Clause.

In case of loss to an article that is part of

a pair or set, we will have the option of

paying you:

1. An amount equal to the cost of replacing

the lost, damaged, or destroyed article, less

depreciation; or

2. An amount which represents the fair

proportion of the total value of the pair or set

that the lost, damaged, or destroyed article

bears to the pair or set.

B. Concealment or Fraud and Policy

Voidance.

1. With respect to all insureds under this

policy, this policy:

a. Is void,

b. Has no legal force or effect,

c. Cannot be renewed, and

d. Cannot be replaced by a new NFIP

policy, if, before or after a loss, you or any

other insured or your agent have at any time:

(1) Intentionally concealed or

misrepresented any material fact or

circumstance,

(2) Engaged in fraudulent conduct, or

(3) Made false statements,

relating to this policy or any other NFIP

insurance.

2. This policy will be void as of the date

the wrongful acts described in B.1. above

were committed.

3. Fines, civil penalties, and imprisonment

under applicable Federal laws may also

apply to the acts of fraud or concealment

described above.

4. This policy is also void for reasons other

than fraud, misrepresentation, or wrongful

act. This policy is void from its inception and

has no legal force under the following

conditions:

a. If the property is located in a community

that was not participating in the NFIP on the

policy’s inception date and did not join or reenter the program during the policy term and

before the loss occurred; or

b. If the property listed on the application

is not otherwise eligible for coverage under

the NFIP.

C. Other Insurance.

1. If a loss covered by this policy is also

covered by other insurance that includes

flood coverage not issued under the Act, we

will not pay more than the amount of

insurance that you are entitled to for lost,

damaged or destroyed property insured

under this policy subject to the following:

a. We will pay only the proportion of the

loss that the amount of insurance that applies

under this policy bears to the total amount

of insurance covering the loss, unless C.1.b.

or c. immediately below applies.

b. If the other policy has a provision stating

that it is excess insurance, this policy will be

primary.

c. This policy will be primary (but subject

to its own deductible) up to the deductible

in the other flood policy (except another

policy as described in C.1.b. above). When

the other deductible amount is reached, this

policy will participate in the same proportion

that the amount of insurance under this

policy bears to the total amount of both

policies, for the remainder of the loss.

2. If there is a flood insurance policy in the

name of a unit owner that covers the same

loss as this policy, then this policy will be

primary.

D. Amendments, Waivers, Assignment.

This policy cannot be changed nor can any

of its provisions be waived without the

express written consent of the Federal

Insurance Administrator. No action that we

take under the terms of this policy

constitutes a waiver of any of our rights. You

may assign this policy in writing when you

transfer title of your property to someone else

except under these conditions:

1. When this policy covers only personal

property; or

2. When this policy covers a structure

during the course of construction.

E. Cancellation of Policy by You.

1. You may cancel this policy in

accordance with the applicable rules and

regulations of the NFIP.

2. If you cancel this policy, you may be

entitled to a full or partial refund of premium

also under the applicable rules and

regulations of the NFIP.

F. Non-Renewal of the Policy by Us.

Your policy will not be renewed:

1. If the community where your covered

property is located stops participating in the

NFIP, or

2. Your building has been declared

ineligible under section 1316 of the Act.

G. Reduction and Reformation of Coverage.

1. If the premium we received from you

was not enough to buy the kind and amount

of coverage you requested, we will provide

only the amount of coverage that can be

purchased for the premium payment we

received.

2. The policy can be reformed to increase

the amount of coverage resulting from the

reduction described in G.1. above the amount

that you requested as follows:

a. Discovery of Insufficient Premium or

Incomplete Rating Information Before a Loss.

(1) If we discover before you have a flood

loss that your premium payment was not

enough to buy the requested amount of

coverage, we will send you and any

mortgagee or trustee known to us a bill for

the required additional premium for the

current policy term (or that portion of the

current policy term following any

endorsement changing the amount of

coverage). If you or the mortgagee or trustee

pay the additional premium within 30 days

from the date of our bill, we will reform the

policy to increase the amount of coverage to

the originally requested amount effective to

the beginning of the current policy term (or

subsequent date of any endorsement

changing the amount of coverage).

(2) If we determine before you have a flood

loss that the rating information we have is

incomplete and prevents us from calculating

the additional premium, we will ask you to

send the required information. You must

submit the information within 60 days of our

request. Once we determine the amount of

additional premium for the current policy

term, we will follow the procedure in

G.2.a.(1) above.

(3) If we do not receive the additional

premium (or additional information) by the

date it is due, the amount of coverage can

only be increased by endorsement subject to

any appropriate waiting period.

b. Discovery of Insufficient Premium or

Incomplete Rating Information After a Loss.

(1) If we discover after you have a flood

loss that your premium payment was not

enough to buy the requested amount of

coverage, we will send you and any

mortgagee or trustee known to us a bill for

the required additional premium for the

current and the prior policy terms. If you or

the mortgagee or trustee pay the additional

premium within 30 days of the date of our

bill, we will reform the policy to increase the

amount of coverage to the originally

requested amount effective to the beginning

of the prior policy term.

(2) If we discover after you have a flood

loss that the rating information we have is

incomplete and prevents us from calculating

the additional premium, we will ask you to

send the required information. You must

submit the information before your claim can

be paid. Once we determine the amount of

additional premium for the current and prior

policy terms, we will follow the procedure in

G.2.b.(1) above.

(3) If we do not receive the additional

premium by the date it is due, your flood

insurance claim will be settled based on the

reduced amount of coverage. The amount of

coverage can only be increased by

endorsement subject to any appropriate

waiting period.

3. However, if we find that you or your

agent intentionally did not tell us, or

falsified, any important fact or circumstance

or did anything fraudulent relating to this

insurance, the provisions of Condition B.

Concealment or Fraud and Policy Voidance

above apply.

H. Policy Renewal.

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

the last day of the policy term.

2. We must receive the payment of the

appropriate renewal premium within 30 days

of the expiration date.

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

place your renewal notice into the U.S. Postal

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

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

incomplete, or illegible address, which

delayed its delivery to you before the due

date for the renewal premium, then we will

follow these procedures:

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60791

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

than one year after the date on which the

payment of the renewal premium was due, of

nonreceipt of a renewal notice before the due

date for the renewal premium, and we

determine that the circumstances in the

preceding paragraph apply, we will mail a

second bill providing a revised due date,

which will be 30 days after the date on which

the bill is mailed.

b. If we do not receive the premium

requested in the second bill by the revised

due date, then we will not renew the policy.

In that case, the policy will remain as an

expired policy as of the expiration date

shown on the Declarations Page.

4. In connection with the renewal of this

policy, we may ask you during the policy

term to re-certify, on a Recertification

Questionnaire that we will provide you, the

rating information used to rate your most

recent application for or renewal of

insurance.

I. Conditions Suspending or Restricting

Insurance.

We are not liable for loss that occurs while

there is a hazard that is increased by any

means within your control or knowledge.

J. Requirements in Case of Loss.

In case of a flood loss to insured property,

you must:

1. Give prompt written notice to us;

2. As soon as reasonably possible, separate

the damaged and undamaged property,

putting it in the best possible order so that

we may examine it;

3. Prepare an inventory of damaged

personal property showing the quantity,

description, actual cash value, and amount of

loss. Attach all bills, receipts and related

documents;

4. Within 60 days after the loss, send us

a proof of loss, which is your statement of the

amount you are claiming under the policy

signed and sworn to by you, and which

furnishes us with the following information:

a. The date and time of loss;

b. A brief explanation of how the loss

happened;

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

the interest, if any, of others in the damaged

property;

d. Details of any other insurance that may

cover the loss;

e. Changes in title or occupancy of the

insured property during the term of the

policy;

f. Specifications of damaged insured

buildings and detailed repair estimates;

g. Names of mortgagees or anyone else

having a lien, charge, or claim against the

insured property;

h. Details about who occupied any insured

building at the time of loss and for what

purpose; and

i. The inventory of damaged personal

property described in J.3. above.

5. In completing the proof of loss, you must

use your own judgment concerning the

amount of loss and justify that amount.

6. You must cooperate with the adjuster or

representative in the investigation of the

claim.

7. The insurance adjuster whom we hire to

investigate your claim may furnish you with

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

you complete it. However, this is a matter of

courtesy only, and you must still send us a

proof of loss within sixty days after the loss

even if the adjuster does not furnish the form

or help you complete it.

8. We have not authorized the adjuster to

approve or disapprove claims or to tell you

whether we will approve your claim.

9. At our option, we may accept the

adjuster’s report of the loss instead of your

proof of loss. The adjuster’s report will

include information about your loss and the

damages you sustained. You must sign the

adjuster’s report. At our option, we may

require you to swear to the report.

K. Our Options After a Loss.

Options that we may, in our sole

discretion, exercise after loss include the

following:

1. At such reasonable times and places that

we may designate, you must:

a. Show us or our representative the

damaged property;

b. Submit to examination under oath,

while not in the presence of another insured,

and sign the same; and

c. Permit us to examine and make extracts

and copies of:

(1) Any policies of property insurance

insuring you against loss and the deed

establishing your ownership of the insured

real property;

(2) Condominium association documents

including the Declarations of the

condominium, its Articles of Association or

Incorporation, Bylaws, and rules and

regulations; and

(3) All books of accounts, bills, invoices

and other vouchers, or certified copies

pertaining to the damaged property if the

originals are lost.

2. We may request, in writing, that you

furnish us with a complete inventory of the

lost, damaged, or destroyed property,

including:

a. Quantities and costs;

b. Actual cash values or replacement cost

(whichever is appropriate);

c. Amounts of loss claimed;

d. Any written plans and specifications for

repair of the damaged property that you can

make reasonably available to us; and

e. Evidence that prior flood damage has

been repaired.

3. If we give you written notice within 30

days after we receive your signed, sworn

proof of loss, we may:

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

lost, damaged, or destroyed property with

material or property of like kind and quality

or its functional equivalent; and

b. Take all or any part of the damaged

property at the value we agree upon or its

appraised value.

L. No Benefit to Bailee.

No person or organization, other than you,

having custody of covered property will

benefit from this insurance.

M. Loss Payment.

1. We will adjust all losses with you. We

will pay you unless some other person or

entity is named in the policy or is legally

entitled to receive payment. Loss will be

payable 60 days after we receive your proof

of loss (or within 90 days after the insurance

adjuster files an adjuster’s report signed and

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

and:

a. We reach an agreement with you;

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

c. There is a filing of an appraisal award

with us, as provided in VIII. P.

2. If we reject your proof of loss in whole

or in part you may:

a. Accept such denial of your claim;

b. Exercise your rights under this policy; or

c. File an amended proof of loss as long as

it is filed within 60 days of the date of the

loss.

N. Abandonment.

You may not abandon damaged or

undamaged insured property to us.

O. Salvage.

We may permit you to keep damaged

insured property after a loss, and we will

reduce the amount of the loss proceeds

payable to you under the policy by the value

of the salvage.

P. Appraisal.

If you and we fail to agree on the actual

cash value or, if applicable, replacement cost

of the damaged property so as to determine

the amount of loss, then either may demand

an appraisal of the loss. In this event, you

and we will each choose a competent and

impartial appraiser within 20 days after

receiving a written request from the other.

The two appraisers will choose an umpire. If

they cannot agree upon an umpire within 15

days, you or we may request that the choice

be made by a judge of a court of record in

the state where the insured property is

located. The appraisers will separately state

the actual cash value, the replacement cost,

and the amount of loss to each item. If the

appraisers submit a written report of an

agreement to us, the amount agreed upon

will be the amount of loss. If they fail to

agree, they will submit their differences to

the umpire. A decision agreed to by any two

will set the amount of actual cash value and

loss, or if it applies, the replacement cost and

loss.

Each party will:

1. Pay its own appraiser; and

2. Bear the other expenses of the appraisal

and umpire equally.

Q. Mortgage Clause.

The word ‘‘mortgagee’’ includes trustee.

Any loss payable under Coverage A—

Building will be paid to any mortgagee of

whom we have actual notice, as well as any

other mortgagee or loss payee determined to

exist at the time of loss, and you, as interests

appear. If more than one mortgagee is named,

the order of payment will be the same as the

order of precedence of the mortgages.

If we deny your claim, that denial will not

apply to a valid claim of the mortgagee, if the

mortgagee:

1. Notifies us of any change in the

ownership or occupancy, or substantial

change in risk, of which the mortgagee is

aware;

2. Pays any premium due under this policy

on demand if you have neglected to pay the

premium; and

3. Submits a signed, sworn proof of loss

within 60 days after receiving notice from us

of your failure to do so.

All of the terms of this policy apply to the

mortgagee.

60792 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

The mortgagee has the right to receive loss

payment even if the mortgagee has started

foreclosure or similar action on the building.

If we decide to cancel or not renew this

policy, it will continue in effect for the

benefit of the mortgagee only for 30 days after

we notify the mortgagee of the cancellation

or non-renewal.

If we pay the mortgagee for any loss and

deny payment to you, we are subrogated to

all the rights of the mortgagee granted under

the mortgage on the property. Subrogation

will not impair the right of the mortgagee to

recover the full amount of the mortgagee’s

claim.

R. Suit Against Us.

You may not sue us to recover money

under this policy unless you have complied

with all the requirements of the policy. If you

do sue, you must start the suit within one

year of the date of the written denial of all

or part of the claim and you must file the suit

in the United States District Court of the

district in which the insured property was

located at the time of loss. This requirement

applies to any claim that you may have under

this policy and to any dispute that you may

have arising out of the handling of any claim

under the policy.

S. Subrogation.

Whenever we make a payment for a loss

under this policy, we are subrogated to your

right to recover for that loss from any other

person. That means that your right to recover

for a loss that was partly or totally caused by

someone else is automatically transferred to

us, to the extent that we have paid you for

the loss. We may require you to acknowledge

this transfer in writing. After the loss, you

may not give up our right to recover this

money or do anything that would prevent us

from recovering it. If you make any claim

against any person who caused your loss and

recover any money, you must pay us back

first before you may keep any of that money.

T. Continuous Lake Flooding.

1. If an insured building has been flooded

by rising lake waters continuously for 90

days or more and it appears reasonably

certain that a continuation of this flooding

will result in a covered loss to the insured

building equal to or greater than the building

policy limits plus the deductible or the

maximum payable under the policy for any

one building loss, we will pay you the lesser

of these two amounts without waiting for the

further damage to occur if you sign a release

agreeing:

a. To make no further claim under this

policy;

b. Not to seek renewal of this policy;

c. Not to apply for any flood insurance

under the Act for property at the described

location; and

d. Not to seek a premium refund for

current or prior terms.

If the policy term ends before the insured

building has been flooded continuously for

90 days, the provisions of this paragraph T.1.

will apply as long as the insured building

suffers a covered loss before the policy term

ends.

2. If your insured building is subject to

continuous lake flooding from a closed basin

lake, you may elect to file a claim under

either paragraph T.1. above or this paragraph

T.2. (A ‘‘closed basin lake’’ is a natural lake

from which water leaves primarily through

evaporation and whose surface area now

exceeds or has exceeded one square mile at

any time in the recorded past. Most of the

nation’s closed basin lakes are in the western

half of the United States where annual

evaporation exceeds annual precipitation and

where lake levels and surface areas are

subject to considerable fluctuation due to

wide variations in the climate. These lakes

may overtop their basins on rare occasions.)

Under this paragraph T.2, we will pay your

claim as if the building is a total loss even

though it has not been continuously

inundated for 90 days, subject to the

following conditions:

a. Lake flood waters must damage or

imminently threaten to damage your

building.

b. Before approval of your claim, you must:

(1) Agree to a claim payment that reflects

your buying back the salvage on a negotiated

basis; and

(2) Grant the conservation easement

contained in FEMA’s ‘‘Policy Guidance for

Closed Basin Lakes,’’ to be recorded in the

office of the local recorder of deeds. FEMA,

in consultation with the community in which

the property is located, will identify on a

map an area or areas of special consideration

(ASC) in which there is a potential for flood

damage from continuous lake flooding.

FEMA will give the community the agreedupon map showing the ASC. This easement

will only apply to that portion of the

property in the ASC. It will allow certain

agricultural and recreational uses of the land.

The only structures that it will allow on any

portion of the property within the ASC are

certain simple agricultural and recreational

structures. If any of these allowable

structures are insurable buildings under the

NFIP and are insured under the NFIP, they

will not be eligible for the benefits of this

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

Engineers certified flood control project or

otherwise certified flood control project later

protects the property, FEMA will, upon

request, amend the ASC to remove areas

protected by those projects. The restrictions

of the easement will then no longer apply to

any portion of the property removed from the

ASC; and

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

T.1.d. above.

c. Within 90 days of approval of your

claim, you must move your building to a new

location outside the ASC. FEMA will give

you an additional 30 days to move if you

show there is sufficient reason to extend the

time.

d. Before the final payment of your claim,

you must acquire an elevation certificate and

a floodplain development permit from the

local floodplain administrator for the new

location of your building.

e. Before the approval of your claim, the

community having jurisdiction over your

building must:

(1) Adopt a permanent land use ordinance,

or a temporary moratorium for a period not

to exceed 6 months to be followed

immediately by a permanent land use

ordinance, that is consistent with the

provisions specified in the easement required

in paragraph T.2.b. above;

(2) Agree to declare and report any

violations of this ordinance to FEMA so that

under Sec. 1316 of the National Flood

Insurance Act of 1968, as amended, flood

insurance to the building can be denied; and

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

purposes compatible with open space or

agricultural or recreational use only, any

affected property the community acquires an

interest in. These deed restrictions must be

consistent with the provisions of paragraph

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

project protects the property, the land use

restrictions continue to apply if the property

was acquired under the Hazard Mitigation

Grant Program or the Flood Mitigation

Assistance Program. If a non-profit land trust

organization receives the property as a

donation, that organization must maintain

the property as deed-restricted, consistent

with the provisions of paragraph T.2.b.

above.

f. Before the approval of your claim, the

affected State must take all action set forth

in FEMA’s ‘‘Policy Guidance for Closed

Basin Lakes.’’

g. You must have NFIP flood insurance

coverage continuously in effect from a date

established by FEMA until you file a claim

under this paragraph T.2. If a subsequent

owner buys NFIP insurance that goes into

effect within 60 days of the date of transfer

of title, any gap in coverage during that 60-

day period will not be a violation of this

continuous coverage requirement. For the

purpose of honoring a claim under this

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

effect any increased coverage that became

effective after the date established by FEMA.

The exception to this is any increased

coverage in the amount suggested by your

insurer as an inflation adjustment.

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

a community when the FEMA Regional

Director for the affected region provides to

the community, in writing, the following:

(1) Confirmation that the community and

the State are in compliance with the

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

above, and

(2) The date by which you must have flood

insurance in effect.

U. Duplicate Policies Not Allowed.

1. We will not insure your property under

more than one NFIP policy.

If we find that the duplication was not

knowingly created, we will give you written

notice. The notice will advise you that you

may choose one of several options under the

following procedures:

a. If you choose to keep in effect the policy

with the earlier effective date, you may also

choose to add the coverage limits of the later

policy to the limits of the earlier policy. The

change will become effective as of the

effective date of the later policy.

b. If you choose to keep in effect the policy

with the later effective date, you may also

choose to add the coverage limits of the

earlier policy to the limits of the later policy.

The change will be effective as of the

effective date of the later policy.

In either case, you must pay the pro rata

premium for the increased coverage limits

within 30 days of the written notice. In no

event will the resulting coverage limits

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations 60793

exceed the permissible limits of coverage

under the Act or your insurable interest,

whichever is less. We will make a refund to

you, according to applicable NFIP rules, of

the premium for the policy not being kept in

effect.

2. The insured’s option under this

condition U. Duplicate Policies Not Allowed

to elect which NFIP policy to keep in effect

does not apply when duplicates have been

knowingly created. Losses occurring under

such circumstances will be adjusted

according to the terms and conditions of the

earlier policy. The policy with the later

effective date must be canceled.

V. Loss Settlement.

1. Introduction

This policy provides three methods of

settling losses: Replacement Cost, Special

Loss Settlement, and Actual Cash Value.

Each method is used for a different type of

property, as explained in a.-c. below.

a. Replacement Cost Loss Settlement

described in V.2. below applies to buildings

other than manufactured homes or travel

trailers.

b. Special Loss Settlement described in

V.3. below applies to a residential

condominium building that is a travel trailer

or a manufactured home.

c. Actual Cash Value loss settlement

applies to all other property covered under

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

2. Replacement Cost Loss Settlement

a. We will pay to repair or replace a

damaged or destroyed building, after

application of the deductible and without

deduction for depreciation, but not more

than the least of the following amounts:

(1) The amount of insurance in this policy

that applies to the building;

(2) The replacement cost of that part of the

building damaged, with materials of like kind

and quality, and for like occupancy and use;

or

(3) The necessary amount actually spent to

repair or replace the damaged part of the

building for like occupancy and use.

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

Replacement Cost Coverage basis unless and

until actual repair or replacement of the

damaged building or parts thereof, is

completed.

c. If a building is rebuilt at a location other

than the described location, we will pay no

more than it would have cost to repair or

rebuild at the described location, subject to

all other terms of Replacement Cost Loss

Settlement.

3. Special Loss Settlement

a. The following loss settlement conditions

apply to a residential condominium building

that is: (1) a manufactured home or travel

trailer, as defined in II.B.6.b. and c., and (2)

at least 16 feet wide when fully assembled

and has at least 600 square feet within its

perimeter walls when fully assembled.

b. If such a building is totally destroyed or

damaged to such an extent that, in our

judgment, it is not economically feasible to

repair, at least to its pre-damaged condition,

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

following amounts:

(1) The lesser of the replacement cost of the

manufactured home or travel trailer or 1.5

times the actual cash value; or

(2) The Building Limit of liability shown

on your Declarations Page.

c. If such a manufactured home or travel

trailer is partially damaged and, in our

judgment, it is economically feasible to repair

it to its pre-damaged condition, we will settle

the loss according to the Replacement Cost

Loss Settlement conditions in V.2. above.

4. Actual Cash Value Loss Settlement

a. The types of property noted below are

subject to actual cash value loss settlement:

(1) Personal property;

(2) Insured property abandoned after a loss

and that remains as debris at the described

location;

(3) Outside antennas and aerials, awning,

and other outdoor equipment;

(4) Carpeting and pads;

(5) Appliances; and

(6) A manufactured home or mobile home

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

that does not meet the conditions for special

loss settlement in V.3. above.

b. We will pay the least of the following

amounts:

(1) The applicable amount of insurance

under this policy;

(2) The actual cash value (as defined in

II.B.2.); or

(3) The amount it would cost to repair or

replace the property with material of like

kind and quality within a reasonable time

after the loss.

IX. Liberalization Clause

If we make a change that broadens your

coverage under this edition of our policy, but

does not require any additional premium,

then that change will automatically apply to

your insurance as of the date we implement

the change, provided that this

implementation date falls within 60 days

before or during the policy term stated on the

Declarations Page.

X. What Law Governs

This policy and all disputes arising from

the handling of any claim under the policy

are governed exclusively by the flood

insurance regulations issued by FEMA, the

National Flood Insurance Act of 1968, as

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

Federal common law.

In Witness Whereof, we have signed this

policy below and hereby enter into this

Insurance Agreement.

Jo Ann Howard,

Administrator, Federal Insurance

Administration.

9. We revise Appendix A (4) to Part

61 to read as follows:

APPENDIX A (4) TO PART 61

Federal Emergency Management Agency,

Federal Insurance Administration

Standard Flood Insurance Policy

ENDORSEMENT TO DWELLING FORM

POLICY

This endorsement replaces the provisions

of VII.B.4 and VII.H.2, and also adds a new

paragraph, VII.H.5. This endorsement applies

only in Monroe County and the Village of

Islamorada, Florida.

VII.B.4. This policy is also void for reasons

other than fraud, misrepresentation, or

wrongful act. This policy is void from its

inception and has no legal force under the

following conditions:

a. If the property is located in a community

that was not participating in the NFIP on the

policy’s inception date and did not join or reenter the program during the policy term and

before the loss occurred.

b. If you have not submitted a community

inspection report, referred to in ‘‘H. Policy

Renewal’’ below, that was required in a

notice sent to you in conjunction with the

community inspection procedure established

under 44 CFR 59.30.

c. If the property listed on the application

is not otherwise eligible for coverage under

the NFIP

VII.H.2. We must receive the payment of

the appropriate renewal premium and when

applicable, the community inspection report

referred to in H.5 below within 30 days of the

expiration date.

VII.H.5. Your community has been

approved by the Federal Emergency

Management Agency to participate in an

inspection procedure set forth in National

Flood Insurance Program Regulations (44

CFR 59.30). During the several years that this

inspection procedure will be in place, you

may be required to obtain and submit an

inspection report from your community

certifying whether or not your insured

property is in compliance with the

community’s floodplain management

ordinance before you can renew your policy.

You will be notified in writing of this

requirement approximately 6 months before

a renewal date and again at the time your

renewal bill is sent.

10. We revise Appendix A (5) to Part

61 to read as follows:

APPENDIX A(5) TO PART 61

Federal Emergency Management Agency,

Federal Insurance Administration

Standard Flood Insurance Policy

ENDORSEMENT TO GENERAL PROPERTY

FORM

This endorsement replaces the provisions

of VII.B.4 and VII.H.2, and also adds a new

paragraph, VII.H.5. This endorsement applies

only in Monroe County and the Village of

Islamorada, Florida.

VII.B.4. This policy is also void for reasons

other than fraud, misrepresentation, or

wrongful act. This policy is void from its

inception and has no legal force under the

following conditions:

60794 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Rules and Regulations

a. If the property is located in a community

that was not participating in the NFIP on the

policy’s inception date and did not join or reenter the program during the policy term and

before the loss occurred.

b. If you have not submitted a community

inspection report, referred to in ‘‘H. Policy

Renewal’’ below, that was required in a

notice sent to you in conjunction with the

community inspection procedure established

under 44 CFR 59.30.

c. If the property listed on the application

is not otherwise eligible for coverage under

the NFIP

VII.H.2. We must receive the payment of

the appropriate renewal premium and when

applicable, the community inspection report

referred to in H.5 below within 30 days of the

expiration date.

VII.H.5. Your community has been

approved by the Federal Emergency

Management Agency to participate in an

inspection procedure set forth in National

Flood Insurance Program Regulations (44

CFR 59.30). During the several years that this

inspection procedure will be in place, you

may be required to obtain and submit an

inspection report from your community

certifying whether or not your insured

property is in compliance with the

community’s floodplain management

ordinance before you can renew your policy.

You will be notified in writing of this

requirement approximately 6 months before

a renewal date and again at the time your

renewal bill is sent.

11. We revise Appendix A (6) to Part

61 to read as follows:

APPENDIX A(6) TO PART 61

Federal Emergency Management Agency,

Federal Insurance Administration

Standard Flood Insurance Policy

ENDORSEMENT to RESIDENTIAL

CONDOMINIUM BUILDING ASSOCIATION

POLICY

This endorsement replaces the provisions

of VIII.B.4. and VIII.H.2, and also adds a new

paragraph, VIII.H.5. This endorsement

applies only in Monroe County and the

Village of Islamorada, Florida.

VIII.B.4. This policy is also void for

reasons other than fraud, misrepresentation,

or wrongful act. This policy is void from its

inception and has no legal force under the

following conditions:

a. If the property is located in a community

that was not participating in the NFIP on the

policy’s inception date and did not join or reenter the program during the policy term and

before the loss occurred.

b. If you have not submitted a community

inspection report, referred to in ‘‘H. Policy

Renewal’’ below, that was required in a

notice sent to you in conjunction with the

community inspection procedure established

under 44 CFR 59.30.

c. If the property listed on the application

is not otherwise eligible for coverage under

the NFIP

VIII.H.2. We must receive the payment of

the appropriate renewal premium and when

applicable, the community inspection report

referred to in H.5 below within 30 days of the

expiration date.

VIII.H.5. Your community has been

approved by the Federal Emergency

Management Agency to participate in an

inspection procedure set forth in National

Flood Insurance Program Regulations (44

CFR 59.30). During the several years that this

inspection procedure will be in place, you

may be required to obtain and submit an

inspection report from your community

certifying whether or not your insured

property is in compliance with the

community’s floodplain management

ordinance before you can renew your policy.

You will be notified in writing of this

requirement approximately 6 months before

a renewal date and again at the time your

renewal bill is sent.

(Catalog of Federal Domestic Assistance No.

83.100, ‘‘Flood Insurance’’).

Dated: October 2, 2000.

Jo Ann Howard,

Administrator, Federal Insurance

Administration.

[FR Doc. 00–25833 Filed 10–11–00; 8:45 am]

BILLING CODE 6718–03–P