[Federal Register Volume 61, Number 185 (Monday, September 23, 1996)]
[Proposed Rules]
[Pages 49717-49723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24319]
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FEDERAL EMERGENCY MANAGEMENT AGENCY
44 CFR Part 61
RIN 3067-AC54
National Flood Insurance Program; Standard Flood Insurance Policy
AGENCY: Federal Insurance Administration (FEMA).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend the National Flood Insurance
Program (NFIP) regulations to add coverage under the Standard Flood
Insurance Policy to pay for the increased cost to rebuild or otherwise
alter flood-damaged structures to conform with State or local
floodplain management ordinances or laws consistent with the
requirements and guidance of the NFIP.
DATES: Comments are requested and must be received by November 7, 1996.
ADDRESSES: Comments 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
Insurance Administration, 500 C Street SW., Washington, DC 20472, (202)
646-3422.
SUPPLEMENTARY INFORMATION: The National Flood Insurance Program (NFIP)
was authorized by Congress (42 U.S.C. 4001 et seq.) to reduce the
mounting losses of life and property from floods through sound land use
and control practices in the Nation's floodplains and through the
availability of flood insurance. As a condition for the availability of
flood insurance,
[[Page 49718]]
States and local communities must adopt and enforce laws and ordinances
that meet or exceed the minimum requirements of the NFIP's floodplain
management regulations at 44 CFR 60.3. In fulfilling the statutory
requirements to identify the Nation's floodprone areas and establish
flood risk zones, the Federal Emergency Management Agency (FEMA) has
produced various forms of flood risk maps and data for each of the
Nation's floodprone communities. The NFIP's floodplain management
regulations for buildings and development in special flood hazard areas
require that new or substantially improved residential buildings be
elevated so that the lowest floor is at or above the Base Flood
Elevation (BFE). A substantial improvement is an improvement to a
building, such as an addition or rehabilitation, the cost of which
equals or exceeds 50 percent of market value. Owners of new or
substantially improved buildings have the option of elevating the
lowest floor to or above the BFE or dry floodproofing--non-residential
structures only have this option--to the base flood level. The base
flood or 100-year flood is a flood having a one percent chance of being
equaled or exceeded in any given year.
Most floodprone buildings that predate the existence of the NFIP
were built in the floodplains by individuals who did not have
sufficient knowledge of the hazard to make informed decisions. Because
of their exposure to and risk of flooding, many of these existing
buildings will likely be repetitively or substantially damaged during
their lifetime. Claims paid for buildings that are repetitively or
substantially damaged account for a significant portion of the NFIP's
claim payments. Mitigation actions taken to protect these buildings can
significantly reduce future claim payments and strengthen the financial
condition of the National Flood Insurance Fund. The NFIP's minimum
floodplain management regulations require that a repaired or rebuilt
substantially damaged building located in a special flood hazard area
be treated as a substantial improvement. This means that if a building
is determined to be substantially damaged, the lowest floor, including
basement, must be elevated or dry floodproofed--non-residential
structures only have this option--to the BFE prior to occupancy of the
structure. ``Substantial damage'' means damage sustained by a structure
``whereby the cost of restoring the structure to its before damaged
condition would equal or exceed 50 percent of the market value of the
structure before the damage occurred'' (44 CFR 59.1).
Under the terms and conditions of the Standard Flood Insurance
Policy (SFIP), property owners are reimbursed for the costs to repair
actual physical damages from flood, but not for additional
``consequential'' costs to comply with a State or local floodplain
management ordinance or law requiring that the damaged structure be
elevated or floodproofed to the BFE. These requirements during
reconstruction to mitigate flood hazards have often created financial
hardships for property owners. This prompted Congress to authorize a
new benefit under the SFIP to provide assistance to such property
owners.
Specifically, section 555 of the National Flood Insurance Reform
Act of 1994, Title V of the Riegle Community Development and Investment
Act of 1994 (Public Law 103-325), requires the NFIP to provide coverage
under the SFIP for the increased costs of complying with the land use
and control measures established under section 1361 of the National
Flood Insurance Act of 1968, as amended. (Hereinafter this mandated
coverage will be referred to as ``increased cost of construction''
(ICC) coverage.)
To implement the mandated change in flood insurance coverage, FEMA
formed a task force in 1995 consisting of the agency's insurance and
mitigation experts to determine the appropriate terms and conditions of
ICC coverage, the limits of its liability, and the amount of the
premium surcharges for the coverage consistent with statutory intent
and limitations. The FEMA task force also solicited comments from two
of the NFIP's major constituent organizations--the Association of State
Flood Plain Managers and the Insurance Institute for Property Loss
Reduction. FEMA convened a meeting with representatives of these two
organizations on January 17, 1996, and the contributions from that
meeting helped shape the conceptual and technical framework for this
proposed rule.
In proposing this rule for ICC coverage under the SFIP, FEMA had to
consider: (1) How the implementation of ICC coverage would conform with
the floodplain management laws and ordinances administered by States
and local communities participating in the NFIP; (2) how repetitive
losses, which are not specifically included in the NFIP's land use and
control measures, would be addressed; (3) what features of the
insurance industry's building law and ordinance coverage under
conventional property insurance contracts should be included under ICC
coverage; (4) what the appropriate limits for ICC coverage would be in
the light of the current status of the National Flood Insurance Fund
and the $75 limit placed by Congress on the premium surcharge that the
NFIP may add to flood insurance policies for ICC coverage (42 U.S.C.
4011 (b)); (5) how ICC coverage would be applied to condominiums; and
(6) how ICC coverage should be incorporated into the SFIP and the
operations of the NFIP.
FEMA considered how the three categories of structures eligible for
ICC coverage should be treated in light of the NFIP's current land use
and control standards which more than 18,450 local governments have
adopted and are enforcing as a condition for participation in the
program. The statute authorizes ICC coverage for three categories of
structures: (1) Structures that have flood damage in which the cost of
repairs equals or exceeds 50 percent of the value of the of the
structure at the time of the flood event; (2) repetitive loss
structures (as defined by the statute); and (3) other structures
damaged by flood on multiple occasions where the FEMA Director has
determined it is in the best interests of the National Flood Insurance
Fund to require compliance with land use and control measures (42
U.S.C. 4011(b)(1),(2), and (3)).
The NFIP defines ``substantial damage,'' which applies to the first
category of structures eligible by statute for ICC coverage, as
``damage from any origin sustained by a structure whereby the cost of
restoring the structure to its before damage condition would equal or
exceed 50 percent of the market value of the structure before the
damage occurred'' (44 CFR 59.1). The proposed rule is consistent with
the existing NFIP floodplain management requirements that States and
localities use ``market value'' as the basis for determining whether a
structure has been substantially damaged. (Non-residential structures
have the option of being elevated or floodproofed in order to meet the
NFIP's requirements. Residential structures however may only be
elevated to meet the requirement.)
The proposed rule would limit ICC coverage to situations where the
structure has been damaged by ``flood'' as defined in the SFIP. The
proposed ICC coverage would not pay for the increased cost of repairing
or altering structures substantially damaged by wind, fire, or other
perils. This, however, is required by the statute which restricts ICC
coverage to flood-damaged structures.
[[Page 49719]]
The second category of structures eligible for ICC coverage is
repetitive loss structures. In considering how the NFIP would treat ICC
coverage for repetitive loss structures within the context of the
program's authorities, FEMA concluded that: (1) ICC coverage is
intended to respond to State or local ordinances or laws requiring
damaged buildings to be rebuilt to more stringent flood protection
measures, (2) State or local ordinances or laws must be applied
consistently and cannot be applied selectively, i.e., independently of
whether or not a property owner is to receive insurance payments, and
(3) land use and building requirements are to be implemented at the
State or local level.
FEMA therefore proposes to implement the repetitive loss aspect of
ICC by having the coverage respond to a State or local ordinance or law
requiring actions based on cumulative substantial damage (i.e., two
losses within a 10-year period causing cumulative damage totaling 50%
or more of the building's value) in combination with the NFIP's having
a history of paying repetitive insurance claims on the property. FEMA
believes that this approach meets the intent of the legislation in a
manner that preserves State or local control over building practices,
provides ICC coverage in response to a State or local ordinance or law
requiring property owner action, and meets the statutory definition of
repetitive loss structure. In that connection, the proposed rule uses
the statutory definition for repetitive losses, i.e., a structure
``covered by a contract for flood insurance under this title that has
incurred flood-related damage on 2 occasions during a 10-year period
ending on the date of the event for which a second claim is made, in
which the cost of repair, on the average, equaled or exceeded 25
percent of the value of the structure at the time of each such flood
event'' (42 U.S.C. 4121(a)(7)).
The benefit of ICC under the SFIP for repetitive loss structures
requires that two conditions be met. First the community has to have in
place a cumulative flood damage ordinance consistent with the statutory
definition of repetitive loss structure, i.e., involving 2 flood losses
within a 10-year period. Secondly, the NFIP must have a history of
claims payments for a property that match the flood losses used by the
community in enforcing this ordinance for the structure and that
satisfy the statutory definition of repetitive loss structure. FEMA has
structured the proposed addition to the SFIP to incorporate both those
criteria. While States and communities participating in the NFIP are
not required to adopt a floodplain management ordinance or law for
repetitive loss structures, FEMA recognizes that many NFIP communities
may already have an existing provision in their floodplain management
law or ordinance which addresses repetitive loss structures. States or
communities with a repetitive or cumulative substantial damage/
improvement provision in current floodplain management laws or
ordinances that are similar or more restrictive than the definition for
``repetitive loss structure'' in the Act (42 U.S.C. 4121(a)(7)) are
acceptable as long as the provision is applied consistently to all
structure in special flood hazard areas regardless of whether or not
the structure is covered by a contract of flood insurance. Also, for a
State or local repetitive loss provision to be acceptable, the two
losses, when combined, must equal or exceed 50 percent of the value of
the structure within a 10-year period ending on the date of the event
for which the second claim is made. Since ``repetitive loss
structures'' are not addressed in the NFIP's minimum floodplain
management requirements, FEMA will provide model repetitive loss law or
ordinance language and other guidance to States and communities so that
they may adopt such measures prior to the effective date of the final
rule providing ICC coverage under the SFIP. FEMA expects that States
and communities will require the first of the 2 losses meeting the
statutory definition of ``repetitive loss structure'' to occur after
the State or community's repetitive loss ordinance or law is in effect.
Also, a State or community official must determine that a structure
is substantially or repetitively damaged in accordance with the adopted
floodplain management law or ordinance. However, the proposed ICC
coverage does not pay for the increased cost of construction to meet
State or community floodplain management laws or ordinances which
exceed the minimum floodplain management criteria at 44 CFR 60.3,
except as provided for properties that are repetitive loss structures
in special flood hazard areas as defined in the Act (42 U.S.C.
4121(a)(7)). For example, ICC coverage will not pay for the increased
cost of construction to meet substantial damage thresholds which are
less than 50 percent of the market value of the structure. Buildings in
these communities must be damaged to 50 percent or more of their market
value to be eligible for the ICC benefit. ICC coverage will pay for the
elevation or floodproofing of structures up to the base flood level but
not for elevation or floodproofing above the base flood level. For
example, where States or local communities require 1 or 2 feet of
freeboard above the BFE, ICC coverage will pay for costs to elevate
only to the BFE. Also, ICC coverage will not pay for the cost to
elevate or otherwise alter flood-damaged structures located outside of
special flood hazard areas. The surcharge limit of $75 per policy for
ICC coverage set by Congress prevents extending ICC benefits to damaged
structures that must meet State or community laws or ordinances that
are more restrictive than the minimum criteria of the NFIP. On the
other hand, ICC coverage will not pay for rebuilding to standards that
do not meet the NFIP's minimum requirements, i.e., when the property
owner has received a variance from the community to rebuild the
property to an elevation below the BFE.
While the proposed rule responds to the first two categories of
properties, it would not however attempt to address the third category
of losses--``multiple losses''--which are not quantified in the
statute. The third situation, which is discretionary, may be added to
future proposed changes to the SFIP based on greater loss experience
and the status of the National Flood Insurance Fund at that time.
FEMA also considered the generic building law and ordinance
coverage offered by the insurance industry in homeowners and other
property insurance contracts to cover the costs to rebuild, in
compliance with State or local ordinances or laws, a structure damaged
by a number of covered perils. The sole ``triggering loss event''
however for ICC coverage proposed in this rule is a loss from ``flood''
(including covered flood-related erosion) as defined in the SFIP. This
is required by the statute which restricts ICC coverage to pay for the
increased cost of construction to comply with a State or local
floodplain management ordinance or law requiring elevation of the
structure to the BFE or other appropriate mitigation measure after a
flood loss.
The proposed rule would establish a limit of $15,000 for ICC
coverage. The $15,000 limit considers the average range of actual costs
to elevate, relocate, or floodproof various types of construction
during reconstruction after a flood, e.g., from slab-on-grade
foundations to structures already elevated but below base flood
elevation.
In many cases, the maximum limit of $15,000 will enable the insured
to pay for most of the costs to elevate or floodproof an existing
structure
[[Page 49720]]
following a flood loss. Insureds will still have to bear a portion of
the costs to improve the structure so that it meets current State or
local floodplain management ordinances or laws. In practically all
cases, however, the limit of ICC coverage will make a significant
contribution toward rebuilding flood-damaged structures in conformity
with the NFIP's elevation and floodproofing standards.
In arriving at a limit for ICC coverage, FEMA wanted to establish
the highest amount possible for insureds. In light of the maximum
surcharge for ICC coverage allowed under law ($75) and the
Congressional intent that the program be actuarially sound, however,
FEMA has determined that $15,000 is the maximum benefit that could be
currently justified under the SFIP.
Additionally, the ICC benefit would be added to the payment for
direct loss from flood but the total reimbursement for ICC coverage and
direct loss from flood would not be greater than the maximum limits of
coverage for that class of structure established under the National
Flood Insurance Act of 1968, as amended.
FEMA also considered the appropriate scope and limits of ICC
coverage for condominiums. Under the Dwelling Form of the SFIP,
individual condominium unit owners may, in addition to the coverage
purchased by the condominium association for the commonly owned
portions of the complex, receive coverage for the portions of their
unit not covered by the association policy and also for assessments
placed by the association on the unit owner to pay a prorated portion
of the physical damage from flood exceeding the association's policy
limits. FEMA considered whether ICC coverage should be provided to
individual unit owners in a condominium for the increased costs to
ensure that elevation or other alterations of commonly owned portions
of the condominium complex substantially or repetitively damaged by
flood would comply with State or local floodplain management laws or
ordinances. The surcharge limit of $75 per policy for ICC coverage set
by Congress prevents extending ICC benefits to individual condominium
unit owners for assessments.
FEMA also considered the appropriate approach for providing ICC
payments. On the one hand, delaying payment of the ICC benefit until
after the flood-damaged structure had been rebuilt or otherwise altered
to comply with State or local ordinances or laws would make it
impossible for many insureds to initiate the extensive mitigation
effort necessary to bring the structure into compliance with floodplain
management ordinances or laws. On the other hand, a full payment of the
ICC benefit before the necessary mitigation effort is undertaken
creates the potential to abandon the structure. Given the financial
hardships of many flood victims and the inability to pay out-of-pocket
the costs to elevate or floodproof a building before a claim is
adjusted, FEMA plans to provide partial payments for ICC claims. Making
partial payments is an accepted practice under the NFIP's adjustment
process for flood loss. This practice will enable the insured to
initiate the mitigation activity required by the State or local
ordinance or law. FEMA also plans holdbacks of final payments until the
community ensures that the mitigation activity is satisfactorily
completed.
In that connection, FEMA believes that the property owner should
accomplish required repairs within a reasonable period of time, i.e.,
within 2 years from the date of loss which time frame is consistent
with insurance industry practices. Also, the property owner may decide
which mitigation measure will be taken to accomplish the repair or
reconstruction of the structure under ICC coverage, (i.e., elevation,
retrofitting, floodproofing, relocation, demolition, or any combination
thereof). It is expected however that States or communities will work
closely with the property owner to discuss alternatives in determining
the most technically feasible and cost effective mitigation measure for
the damaged structure.
It is also the State or community's responsibility to ensure that
all other necessary Federal, State, or local permits have been received
pertaining to laws, ordinances, building codes, or other requirements
in conjunction with the repair, elevation, floodproofing, retrofitting,
relocation, demolition, or other alteration to the building and site on
which the property is or is to be located. Additionally, the State or
community must ensure that all work is completed in accordance with
State or local laws and ordinances prior to issuing an occupancy
permit. States or communities must obtain an elevation certificate or
floodproofing certificate for structures that are elevated or
floodproofed.
The FEMA Regional Offices are available to provide technical
assistance to property owners and communities on technically feasible
and cost effective mitigation measures that can be applied to the
structure and that qualify for the ICC benefit. FEMA also has a number
of publications to assist communities, individuals, architects,
engineers, builders, and contractors on various mitigation measures and
techniques including elevation, floodproofing, retrofitting, and
relocation.
Finally, FEMA considered how ICC coverage should be implemented
within the context of the insurance operations of the program. Under
the proposed rule, ICC coverage would not be subject to the
liberalization clause of the SFIP. Rather, since a premium surcharge
must be added to pay for the required additional ICC, policyholders
would obtain this coverage upon renewal of their policies with
effective dates on or after May 1, 1997--the target date for
inauguration of this coverage. After the effective date of the final
rule, policyholders with three-year policies in force would also have
the option of canceling their flood insurance policy on the anniversary
date and obtaining the coverage under a rewritten policy. All new flood
insurance policies with effective dates on or after May 1, 1997 would
include ICC coverage, and policyholders would be charged the premium
surcharge appropriate for their flood risk classification.
The proposed rule would add a new section on ICC coverage in the
SFIP. In implementing any such changes in coverage, however, insurance
companies participating in the Write Your Own program would have the
option of printing a new SFIP incorporating the changes in coverage for
ICC or attaching an endorsement to the SFIP.
National Environmental Policy Act
This proposed rule is categorically excluded from the requirements
of 44 CFR part 10, Environmental Consideration. No environmental
assessment has been prepared.
Executive Order 12898, Environmental Justice
The socioeconomic conditions to this proposed rule were reviewed
and a finding was made that no dispropor-tionately high and adverse
effect on minority or low income populations would result from this
proposed rule.
Executive Order 12866, Regulatory Planning and Review
This proposed rule would not be a significant regulatory action
within the meaning of sec. 2(f) of E.O. 12866 of September 30, 1993, 58
FR 51735, and has not been reviewed by the Office of Management and
Budget. Nevertheless, this proposed rule adheres to the regulatory
principles set forth in E.O. 12866.
[[Page 49721]]
Paperwork Reduction Act
This proposed rule does not contain a collection of information and
is therefore not subject to the provisions of the Paperwork Reduction
Act.
Executive Order 12612, Federalism
This proposed rule involves no policies that have federalism
implications under Executive Order 12612, Federalism, dated October 26,
1987.
Executive Order 12778, Civil Justice Reform
This proposed rule meets the applicable standards of section
2(b)(2) of Executive Order 12778.
List of Subjects in 44 CFR Part 61
Flood insurance.
Accordingly, 44 CFR part 61 is proposed to be amended as follows:
PART 61--INSURANCE COVERAGE AND RATES
1. The authority citation for Part 61 continues to read as follows:
Authority: 42 U.S.C. 4001 et seq.; 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. Paragraph A. 6. of Article 3 of Appendix A (1) is proposed to be
amended to add the following phrase at the end:
* * * * *
* * * except as provided in Coverage D--Increased Cost of
Construction.
* * * * **
3. A new section is proposed to be added to Article 4 of Appendix A
(1) to read as follows:
* * * * *
Coverage D--Increased Cost of Construction Coverage (``Building Law and
Ordinance Coverage'')
Increased Cost of Construction coverage (Coverage D)is for the
consequential loss brought on by a floodplain management ordinance
or law affecting repair and reconstruction involving elevation,
relocation, retrofitting, or demolition of a structure (or any
combination), after a direct loss caused by a ``flood'' as defined
by this policy.
The limit of liability under this Coverage D (Increased Cost of
Construction) will not exceed $15,000. This coverage is only
applicable to policies with building coverage (Coverage A) and is in
addition to the Building limit you selected on your application, and
appears on the Declaration Page. No separate deductible applies. The
maximum amount collectible under this policy for both Coverage A
(Building Property) and Coverage D (Increased Cost of Construction)
cannot exceed the maximum permitted under the Act.
Eligibility
A structure covered under Coverage A--Dwelling sustaining a loss
caused by a ``flood'' as defined by this policy must:
1. Be a structure that is a repetitive loss structure. A
``repetitive loss structure'' means a structure, covered by a
contract for flood insurance issued pursuant to the Act, that has
incurred flood-related damage on 2 occasions during a 10-year period
ending on the date of the event for which a second claim is made, in
which the cost of repairing the flood damage, on the average,
equaled or exceeded 25% of the market value of the structure at the
time of each such flood event. The National Flood Insurance Program
must have paid the previous qualifying claim, and the State or
community must have a cumulative flood damage provision in its flood
plain management law or ordinance being enforced against the
structure.
Or
2. have 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 event.
This policy will not pay for Increased Cost of Construction to
meet State or local floodplain management laws or ordinances which
exceed the minimum criteria at 44 CFR 60.3, except as provided in
No. 1 above.
Conditions
1. When a structure covered under Coverage A--Dwelling sustains
a loss caused by a ``flood'' as defined by this policy, our payment
for the loss will be based on:
(a) The increased cost to repair, retrofit, relocate, or
otherwise alter the building caused by enforcement of current State
or local floodplain management ordinances or laws;
(b) The cost to demolish and clear the site of the building or a
portion thereof caused by 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.
2. 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 ordinance or laws.
3. If this coverage is concurrent with other insurance covering
the same loss, this coverage will be prorated with the other
insurance. This coverage is primary when the other insurance is
expressly excess insurance.
Exclusions
Under this Coverage D (Increased Cost of Construction), we will
not pay for:
(1) 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. Pollutants mean any
solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste
includes materials to be recycled, reconditioned or reclaimed.
(2) The loss in value to any covered building or other structure
due to the requirements of any ordinance or law;
(3) Any increased cost of construction under this Coverage D:
(a) Until the covered building is actually demolished, repaired,
retrofitted, or otherwise altered at the same or another premise;
and
(b) Unless the covered building is demolished, repaired,
retrofitted, or otherwise altered as soon as reasonably possible
after the loss, not to exceed two years.
(4) Loss due to any ordinance or law that you were required to
comply with before the current loss.
(5) Increased cost of construction to appurtenant structure(s).
(6) 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.
Note: Increased Cost of Construction coverage will not be
included in the calculation to determine whether coverage meets the
80% insurance-to-value requirement for replacement cost coverage
under Article 8 or for payment under Article 3.B.3 for loss from
land subsidence, sewer backup, or seepage of water.
All other conditions and provisions of the policy apply.
* * * * *
4. Paragraph A.6. of Article 3 of Appendix A (2) would be amended
to add the following phrase at the end:
* * * * *
* * * except as provided in Coverage D-- Increased Cost of
Construction.
* * * * *
5. A new section would be added to Article 4 of Appendix A (2), to
read as follows:
* * * * *
Coverage D--Increased Cost of Construction Coverage ``Building Law and
Ordinance Coverage'')
Increased Cost of Construction coverage (Coverage D) is for the
consequential loss brought on by a floodplain management ordinance
or law affecting repair and reconstruction involving elevation,
relocation, retrofitting, or demolition of a structure (or any
combination), after a direct loss caused by a ``flood'' as defined
by this policy.
The limit of liability under this Coverage D (Increased Cost of
Construction) will not exceed $15,000. This coverage is only
applicable to policies with building coverage (Coverage A) and is in
addition to the Building limit you selected on your application, and
appears on the Declaration Page. No separate deductible applies. The
maximum amount collectible under this policy for both Coverage A
(Building Property) and Coverage D (Increased Cost of Construction)
cannot exceed the maximum permitted under the Act.
[[Page 49722]]
Eligibility
A structure covered under Coverage A--Building sustaining a loss
caused by a ``flood'' as defined by this policy must:
1. Be a structure that is a repetitive loss structure. A
``repetitive loss structure'' means a structure, covered by a
contract for flood insurance issued pursuant to the Act, that has
incurred flood-related damage on 2 occasions during a 10-year period
ending on the date of the event for which a second claim is made, in
which the cost of repairing the flood damage, on the average,
equaled or exceeded 25% of the market value of the structure at the
time of each such flood event. The National Flood Insurance Program
must have paid the previous qualifying claim, and the State or
community must have a cumulative flood damage provision in its flood
plain management law or ordinance being enforced against the
structure.
Or
2. Have 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 event.
This policy will not pay for Increased Cost of Construction to
meet State or local floodplain management laws or ordinances which
exceed the minimum criteria at 44 CFR 60.3, except as provided in
No. 1 above.
Conditions
1. When a structure covered under Coverage A--Building sustains
a loss caused by a ``flood'' as defined by this policy, our payment
for the loss will be based on:
(a) The increased cost to repair, retrofit, relocate, or
otherwise alter the building caused by enforcement of current State
or local floodplain management ordinances or laws;
(b) The cost to demolish and clear the site of the building or a
portion thereof caused by enforcement of current State or local
floodplain management ordinance 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.
2. 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 ordinance or laws.
3. If this coverage is concurrent with other insurance covering
the same loss, this coverage will be prorated with the other
insurance. This coverage is primary when the other insurance is
expressly excess insurance.
Exclusions
Under this Coverage D (Increased Cost of Construction), we will
not pay for:
(1) The cost associated with enforcement of any ordinance or law
which 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. Pollutants mean any
solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste
includes materials to be recycled, reconditioned or reclaimed.
(2) The loss in value to any covered building or other structure
due to the requirements of any ordinance or law;
(3) Any increased cost of construction under this Coverage D:
(a) Until the covered building is actually demolished, repaired,
retrofitted, or otherwise altered at the same or another premise;
and
(b) Unless the covered building is demolished, repaired,
retrofitted, or otherwise altered as soon as reasonably possible
after the loss, not to exceed two years.
(4) loss due to any ordinance or law that you were required to
comply with before the current loss.
Note: Increased Cost of Construction coverage will not be
included in the calculation to determine whether coverage meets the
80% insurance-to-value requirement for payment under Article 3. B.3
for loss from land subsidence, sewer backup, or seepage of water.
All other conditions and provisions of the policy apply.
* * * * *
6. Paragraph A.6. of Article 3 of Appendix A (3) would be amended
to add to the end the following phrase:
* * * * *
* * * except as provided in Coverage D--Increased Cost of
Construction.
* * * * *
7. A new section would be added to Article 4 of Appendix A (3), to
read as follows:
* * * * *
Coverage D--Increased Cost of Construction Coverage ``Building Law and
Ordinance Coverage'')
Increased Cost of Construction coverage (Coverage D) is for the
consequential loss brought on by a floodplain management ordinance
or law affecting repair and reconstruction involving elevation,
relocation, retrofitting, or demolition of a structure (or any
combination), after a direct loss caused by a ``flood'' as defined
by this policy.
The limit of liability under this Coverage D (Increased Cost of
Construction) will not exceed $15,000. This coverage is only
applicable to policies with building coverage (Coverage A) and is in
addition to the Building limit you selected on your application, and
appears on the Declaration Page. No separate deductible applies. The
maximum amount collectible under this policy for both Coverage A
(Building Property) and Coverage D (Increased Cost of Construction)
cannot exceed the maximum permitted under the Act.
Eligibility
A structure covered under Coverage A--Building sustaining a loss
caused by a ``flood'' as defined by this policy must:
1. Be a structure that is a repetitive loss structure. A
``repetitive loss structure'' means a structure, covered by a
contract for flood insurance issued pursuant to the Act, that has
incurred flood-related damage on 2 occasions during a 10-year period
ending on the date of the event for which a second claim is made, in
which the cost of repairing the flood damage, on the average,
equaled or exceeded 25% of the market value of the structure at the
time of each such flood event. The National Flood Insurance Program
must have paid the previous qualifying claim, and the State or
community must have a cumulative flood damage provision in its flood
plain management law or ordinance being enforced against the
structure.
Or
2. Have 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 event.
This policy will not pay for Increased Cost of Construction to
meet State or local floodplain management laws or ordinances which
exceed the minimum criteria at 44 CFR 60.3, except as provided in
No. 1 above.
Conditions
1. When a structure covered under Coverage A--Building sustains
a loss caused by a ``flood'' as defined by this policy, our payment
for the loss will be based on:
(a) The increased cost to repair, retrofit, relocate, or
otherwise alter the building caused by enforcement of current State
or local floodplain management ordinances or laws;
(b) The cost to demolish and clear the site of the building or a
portion thereof caused by enforcement of current State or local
floodplain management ordinance or laws. Eligible activities for the
cost of clearing the site will include those necessary to
discontinue utility service to the site and to ensure proper
abandonment of on-site utilities.
2. 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 ordinance or laws.
3. If this coverage is concurrent with other insurance covering
the same loss, this coverage will be prorated with the other
insurance. This coverage is primary when the other insurance is
expressly excess insurance.
Exclusions
Under this Coverage D (Increased Cost of Construction), we will
not pay for:
(1) 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. Pollutants mean any
solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste
includes materials to be recycled, reconditioned or reclaimed.
(2) The loss in value to any covered building or other structure
due to the requirements of any ordinance or law;
(3) Any increased cost of construction under this Coverage D:
(a) Until the covered building is actually demolished, repaired,
retrofitted, or otherwise altered at the same or another premise;
and
[[Page 49723]]
(b) Unless the covered building is demolished, repaired,
retrofitted, or otherwise altered as soon as reasonably possible
after the loss, not to exceed two years.
(4) Loss due to any ordinance or law that you were required to
comply with before the current loss.
Note: Increased Cost of Construction coverage will not be
included in the calculation to determine whether coverage meets the
80% replacement cost requirement under Article 9 or for payment
under Article 3. B.3 for loss from land subsidence, sewer backup, or
seepage of water.
All other conditions and provisions of the policy apply.
* * * * *
(Catalog of Federal Domestic Assistance No. 83.100,``Flood
Insurance'')
Dated: September 12, 1996.
James L. Witt,
Director.
[FR Doc. 96-24319 Filed 9-20-96; 8:45 am]
BILLING CODE 6718-03-P
