[Federal Register Volume 59, Number 100 (Wednesday, May 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12627]
[[Page Unknown]]
[Federal Register: May 25, 1994]
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FEDERAL EMERGENCY MANAGEMENT AGENCY
44 CFR Part 62
RIN 3067-AC25
National Flood Insurance Program; Assistance to Private Sector
Property Insurers
AGENCY: Federal Insurance Administration, FEMA.
ACTION: Interim rule.
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SUMMARY: This interim rule amends the National Flood Insurance Program
(NFIP) regulations for the ``Write Your Own'' (WYO) Program relating to
the marketing of flood insurance policies. This interim rule modifies
the Arrangement to encourage increases in the policyholder base and to
increase the financial stability of the NFIP.
DATES: Effective date: This interim rule and the offer are effective
May 25, 1994. The Financial Assistance/Subsidy Arrangement is
applicable with respect to flood insurance policies written under the
Arrangement with an effective date of October 1, 1994, and later.
Comment Date: July 25, 1994.
ADDRESSES: Comments are requested and should be sent to the Rules
Docket Clerk, Office of the General Counsel, Federal Emergency
Management Agency, 500 C Street, SW., room 840, Washington, DC 20472,
(fax) (202) 646-4536.
FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal
Emergency Management Agency, Federal Insurance Administration, 500 C
Street, SW., Washington, DC 20742, (202) 646-3422.
SUPPLEMENTARY INFORMATION: The Write-Your-Own (WYO) Program
(established in 1983) was authorized pursuant to Subpart C, part 62 of
the National Flood Insurance Program (NFIP) regulations and section
1345 of the National Flood Insurance Act of 1968, as amended (Pub. L.
90-448, 42 U.S.C. 4001, et seq.).
Under the WYO Program, the Standard Flood Insurance Policy (the
form and substance of which is approved by the Federal Insurance
Administrator (the Administrator)) may be issued in their own names by
insurers signatory to Financial Assistance/Subsidy Arrangements.
Insurers then are responsible for all aspects of service, including
policy issuance to new policyholders and to policyholders insured by
them under other lines of property insurance; endorsement and renewal
of policies; and the adjustment of claims brought under the policies.
The insurers retain a specified amount of the premium for their
expenses, including the commissions of agents. Under the Arrangement,
the Government provides such additional funds as may be required, over
and above the net premium income, for the payment of claims.
Once the Arrangement is signed by the authorized official of the
private insurer and the Government, it is effective at the beginning of
the Government's Fiscal Year on October 1 and runs through the
following September 30. Also, in accordance with Article V--
Commencement and Termination of the Arrangement, the Federal Insurance
Administration (FIA) is required, by June 1 of each year, to publish in
the Federal Register the terms for the re-subscription of the
Arrangement for the next Arrangement Year.
This interim rule amends the National Flood Insurance Program
(NFIP) regulations dealing with the marketing of flood insurance
policies, at Article II--Undertakings of the Company, paragraph G. of
the Arrangement, by requiring the WYO Company to follow marketing
guidelines established by the Federal Insurance Administration (FIA).
FIA is currently developing marketing guidelines which will then be
established in consultation with representatives of the WYO Companies.
As a result of the heavy flood losses which occurred in recent
years (i.e., Hurricanes Andrew and Iniki in August and September 1992,
the Northeaster storm in December 1992, the blizzard of March 1993, and
the Midwest flooding in the summer of 1993), FEMA recently had to
exercise its borrowing authority for the first time in eight years.
While the Program has been growing modestly, greater increases in the
policyholder base are needed to provide additional premium dollars to
build up the reserves to meet future catastrophic flooding events.
Further, large numbers of the victims of recent flood disasters were
not protected by flood insurance. Therefore, FEMA has determined that
sufficient cause exists for making this rule effective immediately so
the revised Arrangement can be the basis of the Offer required by June
1 and that delaying the effective date until after a comment period
would be impracticable and contrary to the public interest. However,
comments are requested and will be considered before further
regulations are issued.
Publication of the Arrangement in this interim rule also
constitutes, for the WYO Program Arrangement year of October 1, 1994--
September 30, 1995, the Administrator's ``Offer to Assist Insurers in
Underwriting Flood Insurance Using the Standard Flood Insurance
Policy.''
Method of Acceptance of Offer
1. Acceptance of this offer shall be by mailed notice of acceptance
or signed Arrangement to the Administrator `prior to midnight EDT
September 30, 1994. The notice may be preceded by facsimile
transmission (202) 646-3445 which must be received by midnight EDT
September 30, 1994.
2. The facsimile transmission or mailed notice of acceptance to the
Administrator must be authorized by an official of the insurance
company who has the authority to enter into such arrangements.
3. A duly signed original copy of the Notice of Acceptance (see No.
6 below) must be on file with the Administrator by November 16, 1994.
4. If 1., 2., or 3. above are not satisfied, the acceptance will be
considered by the Administrator as conditional and the commitment of
NFIP resources to fulfill the ``Undertaking of the Government'' under
Article IV of the Arrangement will take a lower priority than those
needed to fulfill the requirement of the other participating insurance
companies.
5. Send all acceptances of this offer to: Federal Emergency
Management Agency, Attn: Federal Insurance Administrator, WYO Program,
Washington, DC 20472.
6. In accepting this offer, use the Notice of Acceptance Form set
forth below:
Notice of Acceptance Form 1994-1995; Federal Emergency Management
Agency; Federal Insurance Administration; Financial Assistance/Subsidy
Arrangement (Arrangement)
Whereas, in 1994, there was published a Notice of Offer by the
Federal Emergency Management Agency to enter into a Financial
Assistance/Subsidy Arrangement (hereafter the Arrangement).
Whereas, the above cited Arrangement, as published in and reprinted
from the Federal Register, does not provide sufficient space to type in
the name of the Company.
Whereas, the Arrangement may include several individual companies
within a Company Group and the Arrangement as published in and
reprinted from the Federal Register does not provide sufficient space
to type in a list of companies.
Therefore, the parties hereby agree that this Notice of Acceptance
form is incorporated into and is an integral part of the entire
Arrangement and is substituted in place of the signature block
contained in the Federal Register under Article XVI of the Arrangement.
The above mentioned Arrangement is effective in the States in which the
insurance company (ies) listed below is (are) duly licensed to engage
in the business of property insurance:
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In witness whereof, the parties hereto have accepted this
Arrangement on this__________ day of__________, ______.
By:__________________
Title:________________
The United States of America
Federal Emergency Management Agency
By:__________________
Title: Federal Insurance Administrator
National Environmental Policy Act
This rule is categorically excluded from the requirements of 44 CFR
part 10, Environmental Consideration. No environmental impact
assessment has been prepared.
Executive Order 12898, Environmental Justice
The socioeconomic conditions relating to this interim rule have
been reviewed and it has been found that no disproportionately high and
adverse effect on minority or low income populations result from this
interim rule.
Executive Order 12866, Regulatory Planning and Review
This interim rule is not a significant regulatory action within the
meaning of section 2(f) of E.O. 12866 of September 30, 1993, 58 FR
51735. Nevertheless, this interim rule adheres to the regulatory
principles set forth in E.O. 12866.
Paperwork Reduction Act
This rule does not contain a collection of information requirement
as described in section 3504(h) of the Paperwork Reduction Act.
Executive Order 12612, Federalism.
This rule involves no policies that have federalism implications
under Executive Order 12612, Federalism, dated October 26, 1987.
Executive Order 12778, Civil Justice Reform
This rule meets the applicable standards of section 2(b)(2) of
Executive Order 12778.
List of Subjects in 44 CFR Part 62
Flood insurance.
Accordingly, 44 CFR part 62 is amended as follows:
PART 62--SALE OF INSURANCE AND ADJUSTMENT OF CLAIMS
Subpart C--Write Your Own (WYO) Companies
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. Appendix A is revised to read as follows:
Appendix A to Part 62
Federal Emergency Management Agency, Federal Insurance
Administration, Financial Assistance/Subsidy Arrangement.
Purpose: To assist the company in underwriting flood insurance
using the Standard Flood Insurance Policy.
Accounting Data: Pursuant to Section 1310 of the Act, a Letter
of Credit shall be issued for payment as provided for herein from
the National Flood Insurance Fund.
Effective Date: October 1, 1994.
Issued By: Federal Emergency Management Agency, Federal
Insurance Administration, Washington, DC 20472.
Article I--Findings, Purpose, and Authority
Whereas, the Congress in its ``Finding and Declaration of
Purpose'' in the National Flood Insurance Act of 1968, as amended,
(``the Act'') recognized the benefit of having the National Flood
Insurance Program (the Program) ``carried out to the maximum extent
practicable by the private insurance industry''; and
Whereas, the Federal Insurance Administration (FIA) recognizes
this Arrangement as coming under the provisions of Section 1345 of
the Act; and
Whereas, the goal of the FIA is to develop a program with the
insurance industry where, over time, some risk-bearing role for the
industry will evolve as intended by the Congress (Section 1304 of
the Act); and
Whereas, the Program, as presently constituted and implemented,
is subsidized, and the insurer (hereinafter the ``Company'') under
this Arrangement shall charge rates established by the FIA; and
Whereas, this Arrangement will subsidize all flood policy losses
by the Company; and
Whereas, this Financial Assistance/Subsidy Arrangement has been
developed to involve individual Companies in the Program, the
initial step of which is to explore ways in which any interested
insurer may be able to write flood insurance under its own name; and
Whereas, one of the primary objectives of the Program is to
provide coverage to the maximum number of structures at risk and
because the insurance industry has marketing access through its
existing facilities not directly available to the FIA, it has been
concluded that coverage will be extended to those who would not
otherwise be insured under the Program; and
Whereas, flood insurance policies issued subject to this
Arrangement shall be only that insurance written by the Company in
its own name pursuant to the Act; and
Whereas, over time, the Program is designed to increase industry
participation, and, accordingly, reduce or eliminate Government as
the principal vehicle for delivering flood insurance to the public;
and
Whereas, the direct beneficiaries of this Arrangement will be
those Company policyholders and applicants for flood insurance who
otherwise would not be covered against the peril of flood.
Now, therefore, the parties hereto mutually undertake the
following:
Article II--Undertakings of the Company
A. In order to be eligible for assistance under this Arrangement
the Company shall be responsible for:
1.0 Policy Administration, including
1.1 Community Eligibility/Rating Criteria
1.2 Policyholder Eligibility Determination
1.3 Policy Issuance
1.4 Policy Endorsements
1.5 Policy Cancellations
1.6 Policy Correspondence
1.7 Payment of Agents Commissions
The receipt, recording, control, timely deposit and disbursement
of funds in connection with all the foregoing, and correspondence
relating to the above in accordance with the Financial Control Plan
requirements.
2.0 Claims processing in accordance with general Company
standards and the Financial Control Plan. The Write Your Own Claims
Manual, the Federal Emergency Management Agency Adjuster Manual, the
FIA National Flood Insurance Program Policy Issuance Handbook, the
Write Your Own Operational Overview, and other instructional
material also provide guidance to the Company.
3.0 Reports
3.1 Monthly Financial Reporting and Statistical Transaction
Reporting shall be in accordance with the requirements of National
Flood Insurance Program Transaction Record Reporting and Processing
Plan for the Write Your Own (WYO) Program and the Financial Control
Plan for business written under the WYO Program. These data shall be
validated/ edited/audited in detail and shall be compared and
balanced against Company financial reports.
3.2 Monthly financial reporting shall be prepared in accordance
with the WYO Accounting Procedures.
3.3 The Company shall establish a program of self audit
acceptable to the FIA or comply with the self audit program
contained in the Financial Control Plan for business written under
the WYO Program. The Company shall report the results of this self-
audit to the FIA annually.
B. The Company shall use the following time standards of
performance as a guide:
1.0 Application Processing--15 days (Note: If the policy cannot
be mailed due to insufficient or erroneous information or
insufficient funds, a request for correction or added monies shall
be mailed within 10 days);
1.1 Renewal Processing--7 days;
1.2 Endorsement Processing--7 days;
1.3 Cancellation Processing--15 days;
1.4 Correspondence, Simple and/or Status Inquiries--7 days;
1.5 Correspondence, Complex Inquiries--20 days;
1.6 Supply, Materials, and Manual Requests--7 days;
1.7 Claims Draft Processing--7 days from completion of file
examination;
1.8 Claims Adjustment--45 days average from receipt of Notice of
Loss (or equivalent) through completion of examination.
1.9 For the elements of work enumerated above, the elapsed time
shown is from date of receipt through date of mail out. Days means
working, not calendar days.
In addition to the standards for timely performance set forth
above, all functions performed by the Company shall be in accordance
with the highest reasonably attainable quality standards generally
utilized in the insurance and data processing industries.
These standards are for guidance. Although no immediate remedy
for failure to meet them is provided under this Arrangement,
nevertheless, performance under these standards can be a factor
considered by the Federal Insurance Administrator (the
Administrator) in determining the continuing participation of the
Company in the Program or other action, e.g., limiting the Company's
authority to write new business.
C. The Company shall coordinate activities and provide
information to the FIA or its designee on those occasions when a
Flood Insurance Catastrophe Office is established.
D. Policy Issuance
1.0 The flood insurance subject to this Arrangement shall be
only that insurance written by the Company in its own name pursuant
to the Act.
2.0 The Company shall issue policies under the regulations
prescribed by the Administrator in accordance with the Act;
3.0 All such policies of insurance shall conform to the
regulations prescribed by the Administrator pursuant to the Act, and
be issued on a form approved by the Administrator;
4.0 All policies shall be issued in consideration of such
premiums and upon such terms and conditions and in such States or
areas or subdivisions thereof as may be designated by the
Administrator and only where the Company is licensed by State law to
engage in the property insurance business;
5.0 The Administrator may require the Company to immediately
discontinue issuing policies subject to this Arrangement in the
event Congressional authorization or appropriation for the National
Flood Insurance Program is withdrawn.
E. The Company shall establish a bank account, separate and
apart from all other Company accounts, at a bank of its choosing for
the collection, retention and disbursement of funds relating to its
obligation under this Arrangement, less the Company's expenses as
set forth in Article III, and the operation of the Letter of Credit
established pursuant to Article IV. All funds not required to meet
current expenditures shall be remitted to the United States
Treasury, in accordance with the provisions of the WYO Accounting
Procedures Manual.
F. The Company shall investigate, adjust, settle and defend all
claims or losses arising from policies issued under this
Arrangement. Payment of flood insurance claims by the Company shall
be binding upon the FIA.
G. The Company shall market flood insurance policies in a manner
consistent with the marketing guidelines established by the Federal
Insurance Administration.
Article III--Loss Costs, Expenses, Expense Reimbursement, and
Premium Refunds
A. The Company shall be liable for operating, administrative and
production expenses, including any taxes, dividends, agent's
commissions or any board, exchange or bureau assessments, or any
other expense of whatever nature incurred by the Company in the
performance of its obligations under this Arrangement.
B. The Company shall be entitled to withhold as operating and
administrative expenses, other than agents or brokers commissions,
an amount from the Company's written premium on the policies covered
by this Arrangement in reimbursement of all of the Company's
marketing, operating and administrative expenses, except for
allocated and unallocated loss adjustment expenses described in C.
of this Article, which amount shall equal the average of industry
expense ratios for ``Other Acq.'' ``Gen. Exp.'' and ``Taxes'' as
published in the latest available (as of March 15 of the prior
Arrangement year) ``Best's'' Aggregates and Averages Property
Casualty, Industry Underwriting--by Lines for Fire, Allied Lines,
Farmowners Multiple Peril, Homeowners Multiple Peril, and Commercial
Multiple Peril combined (weighted average using premiums earned as
weights) calculated and promulgated by the Administrator. Premium
income net of reimbursement (net premium income) shall be deposited
in a special account for the payment of losses and loss adjustment
expenses (see Article II, Section E).
The Company shall be entitled to 15% of the Company's written
premium on the policies covered by this Arrangement as the
commission allowance to meet commissions and/or salaries of their
insurance agents, brokers, or other entities producing qualified
flood insurance applications and other related expenses.
The Company, with the consent of the Administrator as to terms
and costs, shall be entitled to utilize the services of a national
rating organization, licensed under state law, to assist the FIA in
undertaking and carrying out such studies and investigations on a
community or individual risk basis, and in determining more
equitable and accurate estimates of flood insurance risk premium
rates as authorized under the National Flood Insurance Act of 1968,
as amended. The Company shall be reimbursed in accordance with the
provisions of the WYO Accounting Procedures Manual for the charges
or fees for such services.
C. Loss Adjustment Expenses shall be reimbursed as follows:
1. Unallocated loss adjustment shall be an expense reimbursement
of 3.3% of the incurred loss (except that it does not include
``incurred but not reported'').
2. Allocated loss adjustment expense shall be reimbursed to the
Company pursuant to Exhibit A, entitled ``Fee Schedule.''
3. Special allocated loss expenses shall be reimbursed to the
Company for only those expenses the Company has obtained prior
approval of the Administrator to incur.
D.1. Loss payments under policies of flood insurance shall be
made by the Company from funds retained in the bank account
established under Article II, Section E and, if such funds are
depleted, from funds derived by drawing against the Letter of Credit
established pursuant to Article IV.
2. Loss payments will include payments as a result of awards or
judgments for damages arising under the scope of this Arrangement,
policies of flood insurance issued pursuant to this Arrangement, and
the claims processing standards and guides set forth at Article II,
Section A, 2.0 of this Arrangement. Prompt notice of any claim for
damages as to claims processing or other matters arising outside the
scope of this section (D)(2) shall be sent to the Assistant
Administrator of the FIA's Office of Insurance Policy Analysis and
Technical Services (OIPATS), along with a copy of any material
pertinent to the claim for damages arising outside of the scope of
the matters set forth in this section (D)(2).
Following receipt of notice of such claim, the General Counsel
(OGC), FEMA, shall review the cause and make a recommendation to FIA
as to whether the claim is grounded in actions by the Company which
are significantly outside the provisions of this section (D)(2).
After reviewing the General Counsel's recommendation, the
Administrator will make her decision and the Company will be
notified, in writing, within thirty (30) days of the General
Counsel's recommendation, if the decision is that any award or
judgment for damages arising out of such actions will not be
recognized under Article III of this Arrangement as a reimbursable
loss cost, expense or expense reimbursement. In the event that the
Company wishes to petition for reconsideration of the notification
that it will not be reimbursed for the award or judgment made under
the above circumstances, it may do so by mailing, within thirty days
of the notice declining to recognize any such award or judgment as
reimbursable under Article III, a written petition to the Chairman
of the WYO Standards Committee established under the Financial
Control Plan. The WYO Standards Committee will, then, consider the
petition at its next regularly scheduled meeting or at a special
meeting called for that purpose by the Chairman and issue a written
recommendation to the Administrator, within thirty days of the
meeting. The Administrator's final determination will be made, in
writing, to the Company within thirty days of the recommendation
made by the WYO Standards Committee.
E. Premium refunds to applicants and policyholders required
pursuant to rules contained in the National Flood Insurance Program
(NFIP) ``Flood Insurance Manual'' shall be made by the Company from
funds retained in the bank account established under Article II,
Section E and, if such funds are depleted, from funds derived by
drawing against the Letter of Credit established pursuant to Article
IV.
Article IV--Undertakings of the Government
A. Letter(s) of Credit shall be established by the Federal
Emergency Management Agency (FEMA) against which the Company may
withdraw funds daily, if needed, pursuant to prescribed procedures
as implemented by FEMA. The amounts of the authorizations will be
increased as necessary to meet the obligations of the Company under
Article III, Sections (C), (D), and (E). Request for funds shall be
made only when net premium income has been depleted. The timing and
amount of cash advances shall be as close as is administratively
feasible to the actual disbursements by the recipient organization
for allowable Letter of Credit expenses.
Request for payment on Letters of Credit shall not ordinarily be
drawn more frequently than daily nor in amounts less than $5,000,
and in no case more than $5,000,000 unless so stated on the Letter
of Credit. This Letter of Credit may be drawn by the Company for any
of the following reasons:
1. Payment of claim as described in Article III, Section D; and
2. Refunds to applicants and policyholders for insurance premium
overpayment, or if the application for insurance is rejected or when
cancellation or endorsement of a policy results in a premium refund
as described in Article III, Section E; and
3. Allocated and unallocated Loss Adjustment Expenses as
described in Article III, Section C.
B. The FIA shall provide technical assistance to the Company as
follows:
1. The FIA's policy and history concerning underwriting and
claims handling.
2. A mechanism to assist in clarification of coverage and claims
questions.
3. Other assistance as needed.
Article V--Commencement and Termination
A. Upon signature of authorized officials for both the Company
and the FIA, this Arrangement shall be effective for the period
October 1 through September 30. The FIA shall provide financial
assistance only for policy applications and endorsements accepted by
the Company during this period pursuant to the Program's effective
date, underwriting and eligibility rules.
B. By June 1, of each year, the FIA shall publish in the Federal
Register and make available to the Company the terms for the re-
subscription of this Financial Assistance/Subsidy Arrangement. In
the event the Company chooses not to re-subscribe, it shall notify
the FIA to that effect by the following July 1.
C. In the event the Company elects not to participate in the
Program in any subsequent fiscal year, or the FIA chooses not to
renew the Company's participation, the FIA, at its option, may
require (1) the continued performance of this entire Arrangement for
one (1) year following the effective expiration date only for those
policies issued during the original term of this Arrangement, or any
renewal thereof, or (2) the transfer to the FIA of:
a. All data received, produced, and maintained through the life
of the Company's participation in the Program, including certain
data, as determined by FIA, in a standard format and medium; and
b. A plan for the orderly transfer to the FIA of any continuing
responsibilities in administering the policies issued by the Company
under the Program including provisions for coordination assistance;
and
c. All claims and policy files, including those pertaining to
receipts and disbursements which have occurred during the life of
each policy. In the event of a transfer of the services provided,
the Company shall provide the FIA with a report showing, on a policy
basis, any amounts due from or payable to insureds, agents, brokers,
and others as of the transition date.
D. Financial assistance under this Arrangement may be cancelled
by the FIA in its entirety upon 30 days written notice to the
Company by certified mail stating one of the following reasons for
such cancellation: (1) Fraud or misrepresentation by the Company
subsequent to the inception of the contract, or (2) nonpayment to
the FIA of any amount due the FIA. Under these very specific
conditions, the FIA may require the transfer of data as shown in
Section C., above. If transfer is required, the unearned expenses
retained by the Company shall be remitted to the FIA.
E. In the event the Act is amended, or repealed, or expires, or
if the FIA is otherwise without authority to continue the Program,
financial assistance under this Arrangement may be cancelled for any
new or renewal business, but the Arrangement shall continue for
policies in force which shall be allowed to run their term under the
Arrangement.
F. In the event that the Company is unable to, or otherwise
fails to, carry out its obligations under this Arrangement by reason
of any order or directive duly issued by the Department of Insurance
of any Jurisdiction to which the Company is subject, the Company
agrees to transfer, and the Government will accept, any and all WYO
policies issued by the Company and in force as of the date of such
inability or failure to perform. In such event the Government will
assume all obligations and liabilities owed to policyholders under
such policies arising before and after the date of transfer and the
Company will immediately transfer to the Government all funds in its
possession with respect to all such policies transferred and the
unearned portion of the Company expenses for operating,
administrative and loss adjustment on all such policies.
Article VI--Information and Annual Statements
The Company shall furnish to the FIA such summaries and analyses
of information in its records as may be necessary to carry out the
purposes of the National Flood Insurance Act of 1968, as amended, in
such form as the FIA, in cooperation with the Company, shall
prescribe. The Company shall be a property/casualty insurer
domiciled in a State or territory of the United States. Upon
request, the Company shall file with the FIA a true and correct copy
of the Company's Fire and Casualty Annual Statement, and Insurance
Expense Exhibit or amendments thereof, as filed with the State
Insurance Authority of the Company's domiciliary State.
Article VII--Cash Management and Accounting
A. FEMA shall make available to the Company during the entire
term of this Arrangement and any continuation period required by FIA
pursuant to Article V, Section C., the Letter of Credit provided for
in Article IV drawn on a repository bank within the Federal Reserve
System upon which the Company may draw for reimbursement of its
expenses as set forth in Article IV which exceed net written
premiums collected by the Company from the effective date of this
Arrangement or continuation period to the date of the draw.
B. The Company shall remit all funds not required to meet
current expenditures to the United States Treasury, in accordance
with the provisions of the WYO Accounting Procedures Manual.
C. In the event the Company elects not to participate in the
Program in any subsequent fiscal year, the Company and FIA shall
make a provisional settlement of all amounts due or owing within
three months of the termination of this Arrangement. This settlement
shall include net premiums collected, funds drawn on the Letter of
Credit, and reserves for outstanding claims. The Company and FIA
agree to make a final settlement of accounts for all obligations
arising from this Arrangement within 18 months of its expiration or
termination, except for contingent liabilities which shall be listed
by the Company. At the time of final settlement, the balance, if
any, due the FIA or the Company shall be remitted by the other
immediately and the operating year under this Arrangement shall be
closed.
Article VIII--Arbitration
A. If any misunderstanding or dispute arises between the Company
and the FIA with reference to any factual issue under any provisions
of this Arrangement or with respect to the FIA's non-renewal of the
Company's participation, other than as to legal liability under or
interpretation of the standard flood insurance policy, such
misunderstanding or dispute may be submitted to arbitration for a
determination which shall be binding upon approval by the FIA. The
Company and the FIA may agree on and appoint an arbitrator who shall
investigate the subject of the misunderstanding or dispute and make
a determination. If the Company and the FIA cannot agree on the
appointment of an arbitrator, than two arbitrators shall be
appointed, one to be chosen by the Company and one by the FIA.
The two arbitrators so chosen, if they are unable to reach an
agreement, shall select a third arbitrator who shall act as umpire,
and such umpire's determination shall become final only upon
approval by the FIA.
The Company and the FIA shall bear in equal shares all expenses
of the arbitration. Findings, proposed awards, and determinations
resulting from arbitration proceedings carried out under this
section, upon objection by FIA or the Company, shall be inadmissible
as evidence in any subsequent proceedings in any court of competent
jurisdiction.
This Article shall indefinitely succeed the term of this
Arrangement.
Article IX--Errors and Omissions
The parties shall not be liable to each other for damages caused
by ordinary negligence arising out of any transaction or other
performance under this Arrangement, nor for any inadvertent delay,
error, or omission made in connection with any transaction under
this Arrangement, provided that such delay, error, or omission is
rectified by the responsible party as soon as possible after
discovery.
However, in the event that the Company has made a claim payment
to an insured without including a mortgagee (or trustee) of which
the Company had actual notice prior to making payment, and
subsequently determines that the mortgagee (or trustee) is also
entitled to any part of said claim payment, any additional payment
shall not be paid by the Company from any portion of the premium and
any funds derived from any Federal Letter of Credit deposited in the
bank account described in Article II, section E. In addition, the
Company agrees to hold the Federal Government harmless against any
claim asserted against the Federal Government by any such mortgagee
(or trustee), as described in the preceding sentence, by reason of
any claim payment made to any insured under the circumstances
described above.
Article X--Officials Not to Benefit
No Member or Delegate to Congress, or Resident Commissioner,
shall be admitted to any share or part of this Arrangement, or to
any benefit that may arise therefrom; but this provision shall not
be construed to extend to this Arrangement if made with a
corporation for its general benefit.
Article XI--Offset
At the settlement of accounts the Company and the FIA shall
have, and may exercise, the right to offset any balance or balances,
whether on account of premiums, commissions, losses, loss adjustment
expenses, salvage, or otherwise due one party to the other, its
successors or assigns, hereunder or under any other Arrangements
heretofore or hereafter entered into between the Company and the
FIA. This right of offset shall not be affected or diminished
because of insolvency of the Company.
All debts or credits of the same class, whether liquidated or
unliquidated, in favor of or against either party to this
Arrangement on the date of entry, or any order of conservation,
receivership, or liquidation, shall be deemed to be mutual debts and
credits and shall be offset with the balance only to be allowed or
paid. No offset shall be allowed where a conservator, receiver, or
liquidator has been appointed and where an obligation was purchased
by or transferred to a party hereunder to be used as an offset.
Although a claim on the part of either party against the other may
be unliquidated or undetermined in amount on the date of the entry
of the order, such claim will be regarded as being in existence as
of the date of such order and any credits or claims of the same
class then in existence and held by the other party may be offset
against it.
Article XII--Equal Opportunity
The Company shall not discriminate against any applicant for
insurance because of race, color, religion, sex, age, handicap,
marital status, or national origin.
Article XIII--Restriction on Other Flood Insurance
As a condition of entering into this Arrangement, the Company
agrees that in any area in which the Administrator authorizes the
purchase of flood insurance pursuant to the Program, all flood
insurance offered and sold by the Company to persons eligible to buy
pursuant to the Program for coverages available under the Program
shall be written pursuant to this Arrangement.
However, this restriction applies solely to policies providing
only flood insurance. It does not apply to policies provided by the
Company of which flood is one of the several perils covered, or
where the flood insurance coverage amount is over and above the
limits of liability available to the insured under the Program.
Article XIV--Access to Books and Records
The FIA and the Comptroller General of The United States, or
their duly authorized representatives, for the purpose of
investigation, audit, and examination shall have access to any
books, documents, papers and records of the Company that are
pertinent to this Arrangement. The Company shall keep records which
fully disclose all matters pertinent to this Arrangement, including
premiums and claims paid or payable under policies issued pursuant
to this Arrangement. Records of accounts and records relating to
financial assistance shall be retained and available for three (3)
years after final settlement of accounts, and to financial
assistance, three (3) years after final adjustment of such claims.
The FIA shall have access to policyholder and claim records at all
times for purposes of the review, defense, examination, adjustment,
or investigation of any claim under a flood insurance policy subject
to this Arrangement.
Article XV--Compliance with Act and Regulations
This Arrangement and all policies of insurance issued pursuant
thereto shall be subject to the provisions of the National Flood
Insurance Act of 1968, as amended, the Flood Disaster Protection Act
of 1973, as amended, and Regulations issued pursuant thereto and all
Regulations affecting the work that are issued pursuant thereto,
during the term hereof.
Article XVI--Relationship Between the Parties (Federal Government
and Company) and the Insured
Inasmuch as the Federal Government is a guarantor hereunder, the
primary relationship between the Company and the Federal Government
is one of a fiduciary nature, i.e., to assure that any taxpayer
funds are accounted for and appropriately expended.
The Company is not the agent of the Federal Government. The
Company is solely responsible for its obligations to its insured
under any flood policy issued pursuant hereto.
In witness whereof, the parties hereto have accepted this
Arrangement on this __________ day of __________, 1993.
----------------------------------------------------------------------
Company
by--------------------------------------------------------------------
(Title)---------------------------------------------------------------
The United States of America
Federal Emergency Management Agency
by--------------------------------------------------------------------
(Title)---------------------------------------------------------------
Exhibit A
Fee Schedule
------------------------------------------------------------------------
Range (by covered loss) Fee
------------------------------------------------------------------------
Erroneous Assignment........................................... $40
Closed Without Payment......................................... 125
Minimum for Upton-Jones Claims................................. 800
$0.01 to $600.................................................. 150
$600.01 to $1,000.............................................. 175
$1,000.01 to $2,000............................................ 225
$2,000.01 to $3,500............................................ 275
$3,500.01 to $5,000............................................ 350
$5,000.01 to $7,000............................................ 425
$7,000.01 to $10,000........................................... 500
$10,000.01 to $15,000.......................................... 550
$15,000.01 to $25,000.......................................... 600
$25,000.01 to $35,000.......................................... 675
$35,000.01 to $50,000.......................................... 750
$50,000.01 to $100,000......................................... 1,000
$100,000.01 to $150,000........................................ 1,300
$150,000.01 to $200,000........................................ 1,600
$200,000.01 to limits.......................................... 2,000
------------------------------------------------------------------------
Allocated fee schedule entry value is the covered loss under the policy
based on the standard deductibles ($500 and $500) and limited to the
amount of insurance purchased.
(Catalog of Federal Domestic Assistance No. 83.100, ``Flood
Insurance'')
Dated: May 17, 1994.
Elaine A. McReynolds,
Administrator, Federal Insurance Administration.
[FR Doc. 94-12627 Filed 5-20-94; 8:45 am]
BILLING CODE 6718-05-P
