1
Flood Facts for 2007

• David Thompson
• Florida Association of Insurance Agents
• Dthompson_at_faia.com

2
HOUSEKEEPING INFO

• Class times 815 a.m. to 1200 p.m.
• 10 minute break each hour
• Restroom locations

3
DFS Rule 69B-228.060(5)(c) Prohibits

• Sleeping
• Reading of non-course books, newspapers, or other
  non-course material
• Using a cellular phone or other electronic device
  except to take class notes or to complete
  mathematical exercises
• Leaving the class other than during authorized
  breaks. gt

4
Unauthorized Entity Issues

• Appropriate pages in the back of your textbook.
• DFS Help Line 1-800-342-2762
• DFS Web Page www.fldfs.com

5
FAIA Web Page
6
Links to This Class

• Go to www.faia.com
• Click on Education
• Click on Flood Facts for 2007 Links gt

7
The Lingo

• SFHA Special Flood Hazard Area
• Flood zones A, V (Grey map areas)
• Non-SFHA Zones B, C, X (While map areas)
• BFE Base Flood Elevation
• SFP Standard Flood Policy
• PRP Preferred Risk Policy
• RCBAP Residential Condominium Building
  Association Policy
• ICC Increased Cost of Compliance gt

8
NFIP Required Training

• Federal requirement
• Flood Insurance Reform Act of 2004
• Establish minimum training and education
  requirements for all insurance agents who sell
  flood insurance policies
• State enforcement
• No such requirement in Florida CE law

9
Statistics
10
Most Costly Disasters ????

• Katrina - 15.7B (95K average loss)
• Ivan - 1.5B (54K average loss)
• T.S. Allison - 1.1B (36K average loss)
• Isabel - 472M (24K average loss)
• Floyd - 462K (22K average loss)
• Rita - 432M (47K average loss)
• Andrew - 169M (30K average loss) gt

11
Policies per State Most ???

• 1 Florida 2,100,000
• 2 Texas 615,000
• 3 Louisiana 483,000
• 4 California 269,000
• 5 New Jersey 210,000

12
Policies per State Least ???

• 46 Vermont 3,163
• 47 South Dakota 3,142
• 48 Alaska 2,565
• 49 Wyoming 2,406
• 50 District of Columbia 1,463

13
NFIP History Community Participation

• Established in what year????
• 1968
• Who was elected President then?
• Richard Nixon
• Communities must agree to floodplain management
• How many communities participate???
• Over 20,000 gt

14
NFIP History

• Program revised in 1994
• Current 250K max was what???
• 185K
• Current 30-day wait was what?
• 5 days

15
Emergency Program

• Initial phase No FIRMs
• Higher rates
• Limited coverage
• 35,000/10,000 1-4 family
• 100,000/10,000 other residential
• 100,000/10,000 other

16
Regular Program

• FIRMs in place
• Actuarially sound rates
• Coverage available
• 250,000/100,000 all residential
• 500,000/500,000 non-residential

17
Community Rating System

• Voluntary system
• Class 1 (45) to class 9 (5)
• 1,049 communities participate (67 of policies
  benefit)
• Only class 1 city. ????
• Roseville, CA
• In case you want to move there..

18
Eligible Buildings

• Two or more outside rigid walls
• Fully secured roof
• 51 or more above ground level
• Mobile homes affixed to permanent foundation (No
  weight on wheels). Must be anchored if in SFHA

19
Ineligible Buildings

• Silos/cisterns
• Buildings over water 10/1/82 date
• Course of construction 90 day rule
• 51 or more underground
• Basement/Elevated building enclosures

20
Ineligible Buildings

• In violation of floodplain management
• Over water, built after 10/1/82

21
Coastal Barrier Resource Act

• Passed in 1982
• Restricts federal financial assistance
• Two dates
• 1983 1990
• Newly built or substantially improved buildings
  ineligible for flood coverage

22
Who Needs Flood Insurance?

• Everyone who doesnt sign a waiver!
• 20 to 30 of flood losses are paid to people
  who are not in a flood zone gt

23
Mandatory Purchase of Flood Insurance
24
Mandatory Purchase of Flood Insurance

• Applies to federally regulated lenders
• SFHA risks
• The amount of flood insurance must be at least
  equal to the outstanding principal balance of the
  loan or the maximum amount of coverage made
  available under the 1994 Reform Act for the
  particular type of property, whichever is less.
  gt

25
The NFIP policy does not provide coverage for
losses to unimproved real estate, i.e., raw land.
The lending regulations provide that flood
insurance coverage under the NFIP is limited to
the overall value of the building. Accordingly, a
lender must evaluate the amount of coverage
required in relation to the portion of the loan
that is associated with the improved real estate
(excluding the appraised value of the land), or
the maximum amount of insurance available under
the NFIP, whichever is less.  
26
This is especially significant in cases where the
loan exceeds the value of the insurable
building(s). Where the outstanding principal
balance of the loan exceeds the value of the
building, the lender should exclude the value of
the land in determining the amount of coverage
needed. When the lender does not take into
account separate valuations of landand
improvements the insured may be paying for
coverage that exceeds the amount the NFIP will
pay in the event of a loss. Lenders should avoid
creating such a situation.
27
Mandatory Purchase

• No coverage if land only loan
• Course of construction coverage must be
  effective when construction starts
• Coverage required for home equity loans gt

28
Mandatory Purchase

• Lender is free to require coverage outside SFHA
• Lender penalties for failure to make certain
  coverage is in effect
• Per incident fine
• 385 (Increasing to 2,000 in 2007)
• Annual max
• 125,000 gt

29
Mandatory Purchase

• 30 day wait except
• Initial purchase in connection w/loan
• Zone is not a factor
• Refinancing, 2nd mortgages also qualify for no
  wait
• Initial purchase at re-mapping
• Must escrow flood if taxes hazard are also
  escrowed gt

30
Mandatory PurchaseCondominiums

• A unit owners mortgage lender has no direct
  interest in an RCBAP and is not to be named an
  additional named insured.
• Supply unit owners lender with copy of RCBAP
• When unit owner is and is not required to buy
  coverage to meet lender guidelines

31
Mandatory PurchaseCondominiums

• Example 1
• 10-unit condo
• 2 million replacement cost
• RCBAP coverage amount 2 million. (No problem
  w/250K x of units)
• No unit owner coverage requiredRCBAP insured to
  value

32
Mandatory PurchaseCondominiums

• Example 2
• 10-unit condo
• 3 million replacement cost
• RCBAP coverage amount 2.5 million.max
  available under NFIP
• No unit owner coverage required. 250,000 per
  unit limitation.

33
Mandatory PurchaseCondominiums

• Example 3
• 10-unit condo
• 2 million replacement cost
• RCBAP coverage amount 1.6m (Suffices for 80
  coinsurance)
• 400K shortfall40K per unit can be required by
  lender

34
Loss Assessment Condo Unit Owner Coverage
(Pages 19/20)
35
Condo Unit Owner Coverage (19)

• 5. If you are the owner of a unit and have
  insured personal property under Coverage B in
  this policy, we will also cover your interior
  walls, floor, and ceiling (not otherwise covered
  under a flood insurance policy purchased by your
  condominium association) for not more than 10
  percent of the limit of liability shown for
  personal property on the Declarations Page. gt

36
Condo Unit Owner Coverage

• 10 of Coverage B built in for building items
• Increase the 10 via building coverage
• Reasons to have building coverage
• No master policy in place
• Loss assessment gt

37
Condo Loss Assessments (20)

• Only for condos, not for other HOAs
• Loss must be from flood, to the buildings common
  elements
• Not all assessments covered.. gt

38
Assessments Not Covered (20)

• Resulting from an association deductible
• Losses to association personal property
• Buildings insured to less than 80 of value
• If the assessment coverage plus the amount paid
  by the master policy benefits a resident for more
  than 250,000

39
Assessments Covered

• Examples
• No master policy in place.
• Damage to a non-insured building (Up for debate)
• Building insured to 80, total loss.
• Assessment made for the 20. gt

40
Damage to Non-Insured Building

• From the NFIP manual, page CONDO 7
• The Dwelling Form will respond, up to the
  building coverage limit, to assessments against
  unit owners for damages to common areas of any
  building owned by the condominium association,
  even if the building is not insured,

41
Before You Tell the Condo Dweller not to Buy
Coverage..
42
How Would You Like This to be Your Name in
Lights??

• Leonard v. Nationwide
• Hurricane Katrina wind vs. flood lawsuit

43
Judge Rules in Favor of Insurer in Mississippi
Wind vs. Water Case (8/15/06)   The Leonards
filed suit against Nationwide, their homeowners
insurer, after the company paid them around
1,660 for wind damage to their home that
resulted from Hurricane Katrina. They had claimed
that their insurance agent, Jay Fletcher had
represented that all wind and water damage
arising out of a hurricane would be covered by
their insurance policy. The Leonards, who did
not carry flood insurance on their house, also
claimed that Fletcher told them they did not need
it.
44
  From the judges written opinion Fletcher
sometimes discouraged his clients from purchasing
flood insurance policies. That much is clear from
the testimony of a variety of witnesses,
including Fletchers office assistant, Cindy Byrd
Collins. There was enough evidence on this point
to warrant the conclusion that Fletcher, as a
matter of habit and routine, expressed his
opinion, when he was asked, that customers should
not purchase flood insurance unless they lived in
a flood prone area (Flood Zone A) where flood
insurance was required in connection with
mortgage loans.
45
Non-SFHA Zones

• 20 to 30 of claims come from non-SFHA policies
• Customer comment
• Am I in a flood zone.
• Agent response
• When you crossed the state line into Florida,
  you entered a flood zone. gt

46
Flood Insurance vs. Disaster Assistance

• Made simple
• Flood insurance
• You get to keep the money
• Disaster assistance
• You pay the money back gt

47
SBA Loans/Aid

• Per USA Today on 10/18/05
• Six weeks after Katrina, 58,000 applications for
  aid received.
• 1,049 processed.
• 58 checks issues.for 533,000 gt

48
Flood Maps Zone Determinations

• http//msc.fema.gov

49
Flood Hazard Boundary Maps(FHBM)

• For Emergency Program communities

50
Flood Insurance Rate MapsFIRM

• Regular Program communities
• Official source of flood risk data
• Show zones, BFE, base flood depths

51
Pre-FIRM Post-FIRM

• Pre-FIRM
• Built before effective date of first Flood
  Insurance Rate Map
• Post-FIRM
• Built after effective date of first Flood
  Insurance Rate Map
• Compare lowest floor to BFE for rating

52
Special Flood Hazard Area(SFHA)

• What the customer calls a flood zone
• Area where NFIP floodplain regulations must be
  enforced
• Area where mandatory purchase applies
• Zones A V
• 26 chance of flooding over a 30-year mortgage

53
Base Flood Elevation (BFE)

• The computed elevation to which floodwater is
  anticipated to rise during the base flood

54
Flood Zone Determination Companies
55
Three Policies (4)

• 1. Dwelling
• 2. General Property
• 3. RCBAP
• Preferred Risk Policy (PRP)

56
Dwelling Form (4)

• Eligibility
• 1-4 dwellings with permitted incidental
  occupancies
• Dwelling unit in a condominium
• Residential rowhouse/townhouse

57
General Property Form (4)

• 5 family residential
• Non-residential buildings

58
Residential Condominium Building Association
Policy(RCBAP) (4)

• Regular program only
• 75 or more space used for residential purposes
• If the risk qualifies for the RCBAP, that policy
  must be used

59
Preferred Risk Policy (4)

• B, C, X zones only must remain in these zones at
  renewal
• Residential limits
• 250,000/100,000
• Non-residential limits
• 500,000/500,000

60
Preferred Risk PolicyLoss History

• Short version of ineligibility
• Two or more claims or federal disaster aids may
  disqualify you from PRP
• Dollar amount are a factor

61
SFP to PRP

• Can go back six years to convert SFP to PRP
• Why convert???
• 250,000/100,000 policy
• PRP 317
• SFP 950

62
Dwelling Policy Analysis(Page 15)
63
Eligibility (15)

• 1-4 family dwelling or
• Residential condo unit

64
II. Definitions (15)
65
Flood, as used in this flood insurance policy,
means   1. A general and temporary condition of
partial or complete inundation of two or more
acres of normally dry land area or of two or more
properties (at least one of which is your
property) from   a. Overflow of inland or tidal
waters   b. Unusual and rapid accumulation or
runoff of surface waters from any source   c.
Mudflow
66
Two Acres or Two Premises (15)

• If water covers at least two acres covered.
• If water touches two properties covered. Not
  necessary for two structures to be damaged.
• Water confined to your premises, must cover at
  least two acres. gt

67
Basements (16)

• 5. Basement. Any area of the building, including
  any sunken room or sunken portion of a room,
  having its floor below ground level (subgrade) on
  all sides.
• Coverage for property in a basement is very
  limited! gt

68
6. Building. (16)   a. A structure with two or
more outside rigid walls and a fully secured
roof, that is affixed to a permanent site  
69
Described Location (16)

• 11. Described Location. The location where the
  insured building(s) or personal property are
  found. The described location is shown on the
  Declarations Page. gt

70
Dwelling (16)

• 13. Dwelling. A building designed for use as a
  residence for no more than four families or a
  single-family unit in a building under a
  condominium form of ownership. gt 

71
III. Property Covered (17)
72
Coverage A Building Property (17)

• We insure against direct physical loss by or from
  flood to
• 1. The dwelling at the described location, or for
  a period of 45 days at another location as set
  forth in III.C.2.b., Property Removed to Safety.
  gt

73
Other Structures (17)

• 3. A detached garage at the described location.
  Coverage is limited to no more than 10 percent of
  the limit of liability on the dwelling. Use of
  this insurance is at your option but reduces the
  building limit of liability. We do not cover any
  detached garage used or held for use for
  residential (i.e., dwelling), business, or
  farming purposes. gt

74
Under Construction (17)
75
5. A building under construction, alteration, or
repair at the described location.   a. If the
structure is not yet walled or roofed as
described in the definition for building (see
II.B. 6.a.) then coverage applies   (1) Only
while such work is in progress or   (2) If such
work is halted, only for a period of up to 90
continuous days thereafter.
76
7. Building Items (18)
77
7. The following items of property which are
covered under Coverage A only   a. Awnings and
canopies   b. Blinds   c. Built-in
dishwashers   d. Built-in microwave ovens e.
Carpet permanently installed over unfinished
flooring
78
f. Central air conditioners   g. Elevator
equipment   h. Fire sprinkler systems   i.
Walk-in freezers   j. Furnaces and radiators
  k. Garbage disposal units l. Hot water
heaters, including solar water heaters
79
m. Light fixtures   n. Outdoor antennas and
aerials fastened to buildings   o. Permanently
installed cupboards, bookcases, cabinets,
paneling, and wallpaper   p. Plumbing fixtures
  q. Pumps and machinery for operating pumps
80
r. Ranges, cooking stoves, and ovens   s.
Refrigerators and   t. Wall mirrors,
permanently installed. gt
81
Items Below The Lowest Elevated Floor (18)

• 8. Items of property in a building enclosure
  below the lowest elevated floor of an elevated
  post-FIRM building located in Zones A1-A30, AE,
  AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or
  VE, or in a basement, regardless of the zone.
  Coverage is limited to the following

82
(1) Central air conditioners (2) Cisterns and
the water in them (3) Drywall for walls and
ceilings in a basement and the cost of labor to
nail it, unfinished and unfloated and not taped,
to the framing (4) Electrical junction and
circuit breaker boxes (5) Electrical outlets
and switches (6) Elevators, dumbwaiters, and
related equipment, except for related equipment
installed below the base flood elevation after
September 30, 1987 (7) Fuel tanks and the fuel
in them
83
(8)   Furnaces and hot water heaters (9)   
Heat pumps (10)  Nonflammable insulation in a
basement (11)   Pumps and tanks used in solar
energy systems (12)  Stairways and staircases
attached to the building, not separated
from it by elevated walkways (13)  Sump pumps
(14)  Water softeners and the chemicals in them,
water filters, and faucets installed as
an integral part of the plumbing system (15) 
 Well water tanks and pumps (16)   Required
utility connections for any item in this list
and (17)   Footings, foundations, posts,
pilings, piers, or other foundation
walls and anchorage systems required to support a
building.
84
Items Below The Lowest Elevated Floor

• Examples of whats not covered
• Paint on drywall
• Wallpaper
• Carpet
• Paneling
• Ranges ovens
• Refrigerators gt

85
Property CoveredCoverage B Personal Property
(18)
86
B. COVERAGE B - PERSONAL PROPERTY (18)   1. If
you have purchased personal property coverage, we
insure against direct physical loss by or from
flood to personal property inside a building at
the described location, if   a. The property is
owned by you or your household family members
and   b. At your option, the property is owned
by guests or servants. Personal property is also
covered for a period of 45 days at another
location as set forth in III.C.2.b., Property
Removed to Safety.  
87
Coverage B Items (18)

• a. Air conditioning units, portable or window
  type
• b. Carpets, not permanently installed, over
  unfinished flooring
• c. Carpets over finished flooring
• d. Clothes washers and dryers
• e. "Cook-out" grills
• f. Food freezers, other than walk-in, and food in
  any freezer and
• g. Portable microwave ovens and portable
  dishwashers. gt

88
Personal Property Below the Lowest Elevated Floor
or in a Basement (18)

• Only the following
• Air conditioning units, portable or window type
• Clothes washers and dryers and
• Food freezers, other than walk-in, and food in
  any freezer. gt

89
Personal Property Below the Lowest Elevated Floor
or in a Basement

• None of the following is covered
• Carpet
• Couch, chair, tables
• TV, stereo, computer
• Beds
• Clothing
• Any other personal property gt

90
Special Limits - 2,500 Total (19)

• a. Artwork, photographs, collectibles, or
  memorabilia, etc
• b. Rare books or autographed items  
• c. Jewelry, watches, etc 
• d. Furs etc
• e. Personal property used in any business.
• 7. We will pay only for the functional value of
  antiques. gt

91
Debris Removal (19)

• a. We will pay the expense to remove non-owned
  debris on or in insured property and owned debris
  anywhere.
• b. If you or a member of your household perform
  the removal work, the value of your work will be
  based on the Federal minimum wage.

92
Loss Avoidance Measures (19)

• 1,000 maximum
• Sandbags, sand, pumps, plastic sheeting, etc
• Your own labor at minimum wage rate

93
Property Removed to Safety (19)

• 1,000 to protect from further damage
• Your labor paid at minimum wage rate
• Property covered at that location for 45 days,
  inside a fully enclosed building

94
ICCIncreased Cost of Compliance (20)

• Complex issue
• Difficult for it to respond
• This is not building code coverage!!

95
ICC

• 30,000 coverage limit (Text says 20,000)
• Additional insurance, but not above the 250,000
  maximum
• Applies only when building coverage is purchased
  on the policy
• Does not apply to condo unit owner
  policies gt

96
ICC

• Property must be either
• Substantially damaged, (50 or more of its market
  value) or
• A repetitive loss structure (2 or more flood
  losses in 10 years, each at 25 or more or market
  value)

97
ICC

• ICC responds for
• Elevating
• Floodproofing
• Demolition
• Relocation

98
Property Not Covered (22)

• Personal property not inside a fully enclosed
  building
• Building located entirely over water
• Open structures boathouses
• Recreational vehicles
• Self propelled vehicles (2 exceptions)

99
Property Not Covered (23)

• Underground structures septic tanks!
• Walkways, decks, drivewayslocated outside the
  perimeter walls
• Fences, seawalls, piers, docks!
• Swimming pools

100
Exclusions (23)

• Loss of revenue or profits
• Loss of access
• Loss of use
• Business income losses
• Additional living expense
• Ordinance law other than ICC

101
Deductibles (24)

• If under construction and no rigid walls and
  secured roof, deductibles are double
• Separate to building, separate to contents
• No deductible for
• Loss avoidance measures (1,000 max)
• Condo loss assessment
• ICC gt

102
General ConditionsOther Insurance (25)

• NFIP is excess unless other policy is shown to be
  excess in which case NFIP is primary
• When writing excess flood its usually required
  to max out the NFIP policy

103
Assignment (25)

• Policy may be transferred to another party when
  title to property is transferred.
• Avoids the 30-day wait

104
Reduction and Reformation (25)

• Rating errors
• 30 days to pay additional premium
• If additional premium is not paid, coverage is
  adjusted down

105
Policy Renewal (26)

• A true 30-day grace period to pay the premium.

106
Duplicate Policies (30)

• Not permitted
• Avoids the ability to go above the maximum NFIP
  coverage limits available

107
Loss Settlement (30)

• NFIP is ACV except
• Some dwellings
• RCBAP

108
Dwellings (30)

• ACV unless ALL the following apply
• Single family
• Owner occupied
• Principle residence (80 of 365 days)
• Insured to at least 80 of RC, or 250,000 on
  higher value dwellings
• Only the dwelling is RC contents ACV gt

109
RC Settlement Problem

• ACV paid, until the money is actually spent on
  replacement
• FEMA has waived this in some disasters
• The Florida statute on no holdback does not
  apply to the NFIP

110
The 180-Day Rule (31)

• You may disregard the replacement cost conditions
  above and make claim under this policy for loss
  to dwellings on an actual cash value basis. You
  may then make claim for any additional liability
  according to V.2.a., b., and c. above, provided
  you notify us of your intent to do so within 180
  days after the date of loss.

111
Other ACV Items (31/32)

• 2-3-4 family dwelling
• Detached garages
• Personal property
• Appliances, carpets, carpet pads
• Outdoor awnings and antenna
• Non-primary residences
• Mobile homes gt

112
Determining the Replacement Cost of the Dwelling
(32)

• Do not include
• Footings, foundations, piers
• Underground pipes, flues, wiring, and drains
• But note, these items are covered by the
  policy gt

113
General Property Form(Not in Text) (4)
114
Direct Physical Loss

• Direct damage required
• Not covered
• Indirect damage (Business Income)
• Property on a higher floor not damaged
• Upper/lower cabinet example

115
General Property FormOther Coverages

• As a tenant, 10 of Coverage B for TIB
• As a condo unit owner, 10 of Coverage B for
  walls, floors, and ceilings. (Note No ability to
  purchase building coverage)
• No business income or ALE
• ACV settlementALWAYS

116
RCBAP

• Remember
• F.S. 718.111(11) dealing with condominium
  insurance does NOT apply to NFIP

117
RCBAP Building Coverage

• The residential condominium building described on
  the Declarations Page at the described location,
  including all units within the building and the
  improvements within the units.
• RCBAP covers a lot more than the commercial
  property form does

118
RCBAP Building Coverage

• In the units within the building, installed
• (1) Built-in dishwashers
• (2) Built-in microwave ovens
• (3) Garbage disposal units
• (4) Hot water heaters, including solar water
  heaters
• (5) Kitchen cabinets
• (6) Plumbing fixtures
• (7) Radiators
• (8) Ranges
• (9) Refrigerators and
• (10) Stoves.

119
RCBAP Contents Coverage

• Contents owned in common by unit owners
• Owned solely by the condo association
• Covered at the insured location, inside a fully
  enclosed building45 days elsewhere

120
RCBAPProperty Not Covered

• Open structures
• Vehicles (exception)
• Land, trees, etc
• Decks outside perimeter walls of building

• Docks
• Ordinance/law
• Fences
• Retaining walls, seawalls

121
RCBAPGeneral Provisions

• Coinsurance
• 80 or maxed out
• Only improvements installed by the association
  factor into the replacement cost estimates
• Include foundation in calculations

122
RCBAPGeneral Provisions

• Replacement cost coverage on building
• We will not be liable for any loss on a
  Replacement Cost Coverage basis unless and until
  actual repair or replacement of the damaged
  building or parts thereof is completed.

123
RCBAPGeneral Provisions

• ACV settlement on
• Personal property
• Antenna
• Awnings
• Carpet pad
• Appliances

124
RCBAPDeductibles

• Standard deductible
• 500/500
• Maximum deductibles permitted
• 25,000/25,000

125
Deductibles Freddie Mac

• 1-4 unit properties
• 5 max (except flood)
• PUDs/Condos
• 5 max (except flood)
• Condo flood
• Deductible may not exceed maximum amount allowed
  under NFIP
• 100 to value required

126
General Rules Underwriting
127
Limits Available (5)

• Residential
• 250,000/100,000
• Non-residential
• 500,000/500,000
• RCBAP
• 250,00 x number of units, or replacement cost
  whichever is less

128
Deductible Options (5)

• Residential 1-4 family
• 5,000/5,000 (.740 .750 factor)
• Other residential/non-residential
• 50,000/50,000 (.50 .45 factor)
• RCBAP
• 25,000/25,000 (.725 .715 factor)

129
Insurance to Value (5)

• Coinsurance only in RCBAP
• Residential where RC applies
• Must insure to at least 80, otherwise ACV is
  paid
• Include foundations in calculations for RCBAP.
  Not required to do so in dwelling policy

130
Loss Settlement (5)

• ACV at all times except
• Some single family residences
• RCBAP, if insured to value (80)

131
Reduction/Reformation (5)

• Discovered before a loss
• Bill sent if paid within 30 days then the
  originally requested amount is provided. If not
  paid, policy reformed.
• Discovered after a loss
• Same as above. Premium now collected
  prospectively, not retrospectively. (FEMA Policy
  Issuance 1-2005)

132
Binders (6)

• Binder--A temporary agreement between company,
  producer, and insured that the policy is in
  effect. Binders are not permitted under the NFIP

133
Binders/Evidence of Insurance

• Copy of the Flood Insurance Application and
  premium payment, or
• Copy of the declarations page
• The NFIP does not recognize an oral binder or
  contract of insurance. gt

134
Waiting Period (6)

• 30-days with exceptions
• Wait is waived for the person/entity getting loan
• Condo unit owner vs. association

135
Waiting Period (6)

• 30-day waiting period for new applications and
  coverage increases. (Exceptions)
• Application must be received within 10 days or
  mailed by certified mail (FEDEX UPS, also) within
  4 days of date of application
• If not received, the 30-days starts when received
  by NFIP/WYO gt

136
Waiting period30-Day Wait Exceptions

• New policy in connection with making, increasing,
  extending, or renewing a loan, whether
  conventional or otherwise.
• Lender determines a SFHA building should be
  covered by a flood policy.
• Flood map revised/building in SFHA
• RCBAP if association is required to obtain flood
  coverage as part of a loan in the name of the
  association.

137
Waiting Period30-Day Wait Exceptions

• Standard flood policy to PRP rewrite.
• SFP must cover building and contents for no wait
  to apply under PRP.
• PRP to SFP rewrite.

138
Waiting PeriodRequired Documentation

• Agents representation is as good as gold
  unless.
• claim in first 30 days. Agent must supply proof
  of no wait

139
Waiting PeriodGeneral Change Endorsements

• Can increase coverage, subject to 30-day wait.
• Cant reduce or remove coverage except under
  certain circumstances
• Rating errors can be corrected back six years
• Deductibles can be increased, but can not be
  decreased gt

140
Waiting PeriodEndorsements

• 30-day wait for increased coverage applies
  except
• Map revisions
• In connection with a loan

141
Waiting PeriodOther 30-Day Exceptions

• Renewal when the higher limit is selected
• PRP renewal at next higher level
• Reduction of deductible at renewal

142
Policy Term (6)

• One-year

143
Cancellation (6)

• A flood policy may be cancelled at any time
• Question is Do I get a refund?
• Refunds due in 23 situations

144
Most Common Reasons Where A Refund is Due

• Building sold or removed
• Contents sold or removed
• Common expiration date
• Duplicate policies

• Bad check to agent
• No Closing
• No longer required by mortgagee
• Mortgage paid off
• Fraud

145
Elevation CertificateWhen Required (6)

• 1/1/07 New certificate must be used
• Required for post-FIRM buildings in SFHA
• Not required for pre-FIRM buildings, but savings
  possible
• Elevation Certificates must be prepared and
  certified by a land surveyor, engineer, or
  architect who is authorized by commonwealth,
  state, or local law to certify elevation
  information. Community officials who are
  authorized by local law or ordinance to provide
  floodplain management information may also sign
  the certificate.

146
Map Grandfather Rule (6)

• Choice of
• Current map, or
• Map in effect at construction date
• The building must have had continuous coverage,
  even in change of owners, if pre-FIRM. Post-FIRM
  must show building was built in compliance
• Grandfathering does not apply to PRP

147
Coastal Barrier Resource Act (6)

• Previously addressed

148
Course of Construction (6)

• Previously addressed

149
Single Building (6)
150
Single Buildings

• To qualify as a single building, a building must
• Be separated by clear space, or
• Be separated by solid, load-bearing, division
  walls

151
Single Building

• Advantages
• Write as one policy one deductible
• Lower premium than separate policies
• Disadvantages
• Subject to maximum limits
• Higher limits available with multiple policies
  gt

152
Additions and Extensions (7)

• From the manual.

153
The NFIP insures additions and extensions
attached to and in contact with the dwelling by
means of a rigid exterior wall, a solid
load-bearing interior wall, a stairway, an
elevated walkway, or a roof. At the insureds
option, additions and extensions connected by any
of these methods may be separately insured.
154
Eligible/Ineligible Buildings (7)

• Previously addressed

155
Increased Cost of Compliance (7)

• Previously addressed

156
Buildings in More Than One Zone (7)

• Buildings, not the land, located in more than one
  flood zone must be rated using the more hazardous
  zone.
• This condition applies even though the portion of
  the building located in the more hazardous zone
  may not be covered under the SFIP, such as a
  deck.

157
Maps (7)

• Previously addressed
• http//msc.fema.gov

158
LOMA (7)

• Used to show property not in SFHA
• May apply on line
• Fees No charge for single-lot LOMA
• On line tutorial/application
• http//www.fema.gov/media/fhm/loma/ot_lmafl.htm

159
Helping the Client File a Claim (8)
160
(No Transcript)
161
Claim Appeal Process (8)

• 1. Talk to adjuster
• 2. Contact adjusters supervisor
• 3. Contact the insurance companys claim
  representative
• 4. Contact FEMA in writing. (Address on web page)

162
Claims Handbook (8)
163
Notification Requirements to the Policyholder
Flood Insurance Reform Act of 2004 (8)

• New requirements on agents. Why? From FEMA
• The reason that much of this language has come
  about is the perception among legislators that
  agents do not know that flood is excluded from
  property policies, do not know that there is a
  specialty program for flood, do not advise their
  clients of the flood risk and availability of
  flood insurance, and do not appreciate the
  limited nature of the flood insurance policy.

164
Notification Requirements to the Policyholder
Flood Insurance Reform Act of 2004

• Point of Sale Responsibilities (Agent)
• Policy exclusions that apply
• Explanation regarding how losses will be adjusted
  (ACV vs RCV)
• FEMA
• Notification of coverages being purchased
• Number and dollar amount of claims for property
  address
• Acknowledgement forms

165
Summary of CoverageExclusions That Apply

• http//www.fema.gov/library/viewRecord.do?id1904

166
NFIP Letters Publications Sent to the
Policyholder
167
FEMA Letter to Policyholder
168
(No Transcript)
169
Claims HandbookSent by FEMA
170
(No Transcript)
171
Acknowledgment of ReceiptSent by FEMA (2 Copies)
172
(No Transcript)
173
Prior Loss History(Sent by FEMA)
174
(No Transcript)
175
Proposed Changes to NFIP (9)

• PROPOSED changes
• Not final
• Passed by U.S. House
• HR 4973 Flood Insurance Reform and Modernization
  Act of 2006 (FIRM)
• U.S. status Senate
• Dead in the water (S. 3589)

176
Proposed Changes to NFIP

• Study feasibility of mandatory purchase by all
  risks in SFHA
• Study feasibility of mandatory purchase when
  non-federal lender involved
• Phase in actuarially sound rates for
  non-residential, pre-FIRM, and non-primary
  residential gt

177
Proposed Changes to NFIP

• Reduce 30-day wait to 15-days
• No wait for purchases without a loan
• Residential
• Increase building 250K max to 335K
• Increase contents 100K max to 135K
• Non-residential
• Increase 500,000K max to 670K

178
Proposed Changes to NFIP

• Include 1,000 of ALE
• Make increased ALE available for purchase
• Basement coverage available for purchase
• Business income coverage available for purchase
• Replacement cost on contents available for
  purchase on all policies gt

179
Proposed Changes to NFIP

• Increase annual cap on premium increases from 10
  to 15
• Increased borrowing authority to 25B

180
Elevation Certificate (9)

• Training available
• http//training.nfipstat.com/portal2/default.asp

181
Elevation Certificate

• Key points
• The surveyor is being paid to do this form
  correctly
• Force him/her to do it right
• If its not done correctly, the agent is put in a
  spot where he/she does not want to bein an EO
  landmine field

182
Elevation Certificate

• New EC approved for use 2/13/06 through 2/28/09
• Mandatory to use new EC 1/1/07
• Certifier must provide area of enclosure below
  elevated floor
• Certifier must provide two photographs, digital
  or 3 x 3 minimum
• Four pages in length, instructions are 16 pages! gt

183
Elevation Certificate

• Refer to appendix, page 34

184
(No Transcript)
185
(No Transcript)
186
(No Transcript)
187
(No Transcript)
188
(No Transcript)
189
Elevation Certificates Role in Policy Rating

• Required for post-FIRM risks in SFHA
• Optional for pre-FIRM risks in SFHA
• Not required for B, C, or X zones

190
Enclosure

• That portion of an elevated building below the
  lowest elevated floor that is either partially or
  fully shut in by rigid walls.

191
Venting

• Permanent opening in a wall that allows the free
  passage of water in both directions,
  automatically, without human intervention.
• A window, a door, or a garage door is not
  considered an opening.

192
Vents A Zones

• Minimum of 2 vents or openings
• 1 square inch for every square foot of
  enclosure/crawl space
• Must be within 1 foot of grade

193
V Zones Breakaway Walls

• Not part of the structural support of the
  building
• Designed to collapse under specific lateral
  loading forces without causing damage to the
  elevated portion of the building or foundation
  system

194
V Zones

• Must be free of obstruction
• If enclosure greater than 300 square feet,
  different rates apply

195
Lowest Floor
Section C3.a is lowest floor for (Diagrams 1-5) A
zones, if M/E above BFE. Section C3.b is lowest
floor for (Diagrams 6-8) A zones, if
enclosure/crawl space has proper openings.
196
Miscellaneous Issues
197
Non-NFIP Primary Coverage
198
Non-NFIP Primary Coverage

• RC loss settlement
• Broader basement coverage
• Increased special limits (5,000 vs. 2,500)
• 50,000 flood loss assessment coverage
• ALE/FRV coverage no deductible
• Civil authority ALE 30 days
• 5,000 for loss avoidance measures

199
Non-NFIP Primary Coverage

• OL and ICC coverage
• Non-assignable policy
• Higher deductibles for vacant homes
• Subject to state regulation statutes
• Eligibility contingent upon carrier writing the
  homeowners policy. HO cancels, so does floodon
  same day!
• Fully earned premium if a claim occurs gt

200
Excess Flood Products
201
Excess FloodCool Features

• 15 million limit
• Broader definition of flood
• Replacement cost loss settlement
• Broader basement coverage
• Increased coverage for high value items
• ALE FRV
• Ordinance law

202
Excess FloodCautions

• Underlying coverage must be in place
• Typically max NFIP limits are required
• Failure to maintain underlying results in gap in
  coverage
• Non-standard policy wording

203
CBRA Zones Lenders

• Thoughts/Problems???
• NFIP provides no coverage
• Lender must still make certain flood coverage is
  in force
• Lender may
• Accept non-NFIP product
• Decline the loan gt

204
Zone Disputes

• Policyholder can dispute lender or 3rd party
  determination that risk is in SFHA
• LODR Letter of Determination Review
• 80 fee, paid by policyholder
• Allow 8 weeks
• FEMA makes the final determination of zone

205
Rating ErrorsRefund Processing Procedures

• WYO carrier responsible for current and prior
  policy term
• NFIP Bureau refunds 3 years, after documentation
  submitted

206
Where to List the Lender as Loss Payee

• Thoughts???
• Options
• List on RCBAP (No real interest, but it squelches
  the lender)
• List on unit owner policy
• List nowhere. (You drive the insurance
  bus) gt

207
Construction Loans

• To avoid 30-day wait, coverage must be effective
  at closing.
• Vacant land is eligible if owner intends to build
  on that land.

208
FloodSmart Web Page
209
FloodSmart Agent Site(Free Registration Required)
210
IIABA Virtual University(Free Registration
Required)
211
IRMI
212
Trivia Time
213
Trivia Question 1

• Spot the error on this FloodSmart web page

214
(No Transcript)
215
Trivia 2

• How much is the federal policy fee on the
  dwelling flood policy?
• 30.00

216
Trivia 3

• Of participating communities in the Regular
  Program, what percent of single family dwellings
  are located in a flood zone?
• 100

217
Trivia 4

• What is the PRP policy fee?
• 11.00

218
Trivia 5

• Is sewer backup covered under NFIP? If so when?
  If not, why not?
• Damage caused by sewer or drain backup, or
  overflows from a sump pump or related equipment
  are covered if the event is a direct result of
  flooding.

219
Trivia 6

• Loss avoidance measures are paid to the
  policyholder under the NFIP policy at the federal
  minimum wage rate. What is the rate per hour
  paid?
• 5.15 per hour

220
Trivia 7

• A home located in a SFHA has a 26 chance of
  being damaged by flood over the life of a 30-year
  loan. What is the chance of the same house being
  damaged by fire during that same 30-year time
  period?
• 4

221
Trivia 8

• Youve owned your house six years. It has
  suffered covered flood damage four times. Which
  is true
• A. Youre policy may be non-renewed.
• B. Your policy will renew, at a higher rate
• C. Your policy will renew at the same premium
  ?????
• Correct answer C

222
Trivia 9

• Who is the Director of FEMAs Mitigation
  Division.the main man for flood insurance?
• David Maurstad

223
Trivia 10

• Whats the best restaurant on the planet?

224
Thanks For Being Here Today

• David Thompson
• Florida Association of Insurance Agents
• Dthompson_at_faia.com