[Federal Register Volume 61, Number 95 (Wednesday, May 15, 1996)]
[Rules and Regulations]
[Pages 24461-24464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12019]



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[[Page 24462]]

FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 62

RIN 3067-AC47


National Flood Insurance Program; Allocated Loss Adjustment 
Expense

AGENCY: Federal Insurance Administration (FEMA).

ACTION: Interim Final Rule.

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SUMMARY: This interim final rule modifies the existing allocated loss 
adjustment expense fee schedule of the National Flood Insurance Program 
(NFIP) 1994 Write Your Own (WYO) Program under the Financial 
Assistance/Subsidy Arrangement (the Arrangement). The rule changes the 
fee schedule to add new, refined loss ranges and to revise the fees for 
adjusting higher ranges of covered losses under the NFIP.

DATES: This interim final rule is effective on May 15, 1996. Please 
submit any comments in writing by July 1, 1996.

ADDRESSES: We request comments on this interim final rule. Please 
submit any comments to the Rules Docket Clerk, Office of the General 
Counsel, Federal Emergency Management Agency, 500 C Street SW., room 
840, Washington, DC 20472, (facsimile) (202)646-4536.

FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal 
Emergency Management Agency, Federal Insurance Administration, 500 C 
Street SW., Washington, DC 20472, (202) 646-3422.

SUPPLEMENTARY INFORMATION: The Financial Assistance/Subsidy Arrangement 
(``the Arrangement'') between the Federal Insurance Administrator and 
licensed property/casualty insurers participating in the WYO program 
was last modified effective October 1, 1994. The Arrangement specifies 
allowable costs and fees to be reimbursed to member WYO companies for 
adjusting losses under this segment of the National Flood Insurance 
Program (NFIP). For allocated loss adjustments, participating WYO 
companies are reimbursed pursuant to a fee schedule, which is 
Attachment A to Appendix A of the Arrangement. The current fee schedule 
provides for allowable fees for ranges of losses, the last range being 
``$200,000 to limits.''
    Since the publication of the Arrangement, however, the limits of 
flood insurance coverage available under the National Flood Insurance 
Program (NFIP) increased significantly under the National Flood 
Insurance Reform Act of 1994 (P.L. 103-325). The higher limits of 
coverage and correspondingly higher amounts of recovery for insured 
property owners became effective March 1, 1995. Also, a new condominium 
policy, effective October 1, 1994, has resulted in much higher limits 
of coverage for condominiums.
    Recent analysis of loss experience during the last year, especially 
in connection with Hurricane Opal (October 1995), shows that there have 
been significantly more losses at higher damage thresholds, 
particularly for condominiums. The current fee schedule, which has not 
been revised for nearly five years, needs to be adjusted to reflect 
these factors as well as the increased workload to adjust claims for 
condominium losses and the increased costs of labor, overhead, 
materials, and transportation since the last fee schedule change.
    In light of these factors and in anticipation of this year's 
hurricane season, there is an urgent need to revise the current 
adjuster fee schedule and make it effective upon publication of this 
interim final rule. FEMA finds that there is a compelling need and good 
cause to waive the 30-day effective date requirements of the 
Administrative Procedure Act, 5 U.S.C. 553(d). This interim final rule 
is effective on the date of publication in the Federal Register. 
Currently, the fee schedule under the Arrangement is as follows:

                        Exhibit A.--Fee Schedule                        
------------------------------------------------------------------------
                  Range (by covered loss)                        Fee    
------------------------------------------------------------------------
Erroneous Assignment.......................................       $40.00
Closed Without Payment.....................................       125.00
Minimum for Upton-Jones Claims.............................       800.00
$0.01 to $600.00...........................................       150.00
$600.01 to $1,000.00.......................................       175.00
$1,000.01 to $2,000.00.....................................       225.00
$2,000.01 to $3,500.00.....................................       275.00
$3,500.01 to $5,000.00.....................................       350.00
$5,000.01 to $7,000.00.....................................       425.00
$7,000.01 to $10,000.00....................................       500.00
$10,000.01 to $15,000.00...................................       550.00
$15,000.01 to $25,000.00...................................       600.00
$25,000.01 to $35,000.00...................................       675.00
$35,000.01 to $50,000.00...................................       750.00
$50,000.01 to $100,000.00..................................     1,000.00
$100,000.01 to $150,000.00.................................     1,300.00
$150,000.01 to $200,000.00.................................     1,600.00
$200,000.01 to limits......................................    2,000.00 
------------------------------------------------------------------------
[Note: Allocated fee schedule entry value is covered loss under the     
  policy asked on the standard deductibles ($500 and $500) and limited  
  to the amount of insurance purchased.]                                

    This interim final rule revises the adjuster fee schedule as 
follows to reflect the higher limits of coverage available for 
condominiums and the amount of technical effort required to adjust 
losses for condominiums:

[[Page 24463]]



                                            Exhibit A.--Fee Schedule                                            
----------------------------------------------------------------------------------------------------------------
                Range (by covered loss)                                            Fee                          
----------------------------------------------------------------------------------------------------------------
Erroneous Assignment...................................  $40.00.                                                
Closed Without Payment.................................  125.00.                                                
Minimum for Upton-Jones Claims.........................  800.00.                                                
$0.01 to $600.00.......................................  150.00.                                                
$600.01 to $1,000.00...................................  175.00.                                                
$1,000.01 to $2,000.00.................................  225.00.                                                
$2,000.01 to $3,500.00.................................  275.00.                                                
$3,500.01 to $5,000.00.................................  350.00.                                                
$5,000.01 to $7,000.00.................................  425.00.                                                
$7,000.01 to $10,000.00................................  500.00.                                                
$10,000.01 to $15,000.00...............................  550.00.                                                
$15,000.01 to $25,000.00...............................  600.00.                                                
$25,000.01 to $35,000.00...............................  675.00.                                                
$35,000.01 to $50,000.00...............................  750.00.                                                
$50,000.01 to $100,000.00..............................  3.0%.                                                  
$100,000.01 to $250,000.00.............................  2.3% but not less than $3,000.                         
$250,000.01 and up.....................................  2.1% but not less than $5,750.                         
----------------------------------------------------------------------------------------------------------------
Note: Based on Gross Loss.                                                                                      
(1) ``Gross loss'' shall mean the agreed cost to repair or replace before application of depreciation,          
  deductible, or other limiting clauses or condition.                                                           
(2) For the purpose of this schedule, should the loss exceed the available coverage, ``gross loss'' shall mean  
  the total amount of coverage.                                                                                 
(3) If the claim involves a salvage ``buy-back,'' ``gross loss'' shall mean the amount of the claim before the  
  salvage value is deducted.                                                                                    
(4) If the insured qualifies for replacement cost coverage, ``gross loss'' is determined on the basis of the    
  entire replacement cost claim (including depreciation holdback).                                              

National Environmental Policy Act

    This interim final rule is categorically excluded from the 
requirements of 44 CFR Part 10, Environmental Consideration. No 
environmental impact assessment has been prepared.

Executive Order 12866, Regulatory Planning and Review

    This interim final rule is not a significant regulatory action as 
defined under Executive Order 12866 of September 30, 1993, Regulatory 
Planning and Review, 58 FR 51735, October 4, 1993. To the extent 
possible, this interim final rule adheres to the principles of 
regulation set forth in Executive Order 12866. This interim final rule 
has not been reviewed by the Office of Management and Budget under the 
provisions of Executive Order 12866.

Paperwork Reduction Act

    This interim final rule does not contain a collection of 
information and is therefore not subject to the provisions of the 
Paperwork Reduction Act of 1995.

Executive Order 12612, Federalism

    This interim final rule involves no policies that have federalism 
implications under Executive Order 12612, Federalism, dated October 26, 
1987.

Executive Order 12778, Civil Justice Reform

    This interim final rule meets the applicable standards of section 
2(b)(2) of Executive Order 12778.

List of Subjects in 44 CFR Part 62

    Claims, Flood Insurance.

    Accordingly, 44 CFR part 62, Exhibit A, is amended as follows:

PART 62--SALE OF INSURANCE AND ADJUSTMENT OF CLAIMS

    1. The authority citation for Part 62 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.

    2. Exhibit A of Appendix A to part 62 is revised to read as 
follows:

Appendix A to Part 62--Federal Emergency Management Agency, Federal 
Insurance Administration, Financial Assistance/Subsidy Arrangement

* * * * *

                                            Exhibit A.--Fee Schedule                                            
----------------------------------------------------------------------------------------------------------------
                Range (by covered loss)                                            Fee                          
----------------------------------------------------------------------------------------------------------------
Erroneous Assignment...................................  $40.00.                                                
Closed Without Payment.................................  125.00.                                                
Minimum for Upton-Jones Claims.........................  800.00.                                                
$0.01 to $600.00.......................................  150.00.                                                
$600.01 to $1,000.00...................................  175.00.                                                
$1,000.01 to $2,000.00.................................  225.00.                                                
$2,000.01 to $3,500.00.................................  275.00.                                                
$3,500.01 to $5,000.00.................................  350.00.                                                
$5,000.01 to $7,000.00.................................  425.00.                                                
$7,000.01 to $10,000.00................................  500.00.                                                
$10,000.01 to $15,000.00...............................  550.00.                                                
$15,000.01 to $25,000.00...............................  600.00.                                                
$25,000.01 to $35,000.00...............................  675.00.                                                
$35,000.01 to $50,000.00...............................  750.00.                                                
$50,000.01 to $100,000.00..............................  3.0%.                                                  
$100,000.01 to $250,000.00.............................  2.3% but not less than $3,000.                         

[[Page 24464]]

                                                                                                                
$250,000.01 and up.....................................  2.1% but not less than $5,750.                         
----------------------------------------------------------------------------------------------------------------
Note: Based on Gross Loss.                                                                                      
(1) ``Gross loss'' shall mean the agreed cost to repair or replace before application of depreciation,          
  deductible, or other limiting clauses or condition.                                                           
(2) For the purpose of this schedule, should the loss exceed the available coverage, ``gross loss'' shall mean  
  the total amount of coverage.                                                                                 
(3) If the claim involves a salvage ``buy-back,'' ``gross loss'' shall mean the amount of the claim before the  
  salvage value is deducted.                                                                                    
(4) If the insured qualifies for replacement cost coverage, ``gross loss'' is determined on the basis of the    
  entire replacement cost claim (including depreciation holdback).                                              


(Catalog of Federal Domestic Assistance No. 83.100, ``Flood 
Insurance'')

    Dated: May 8, 1996.
Elaine A. McReynolds,
Administrator.
[FR Doc. 96-12019 Filed 5-14-96; 8:45 am]
BILLING CODE 6718-03-P