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Fema Nfip Claims-Manual 2020
Fema Nfip Claims-Manual 2020
Purpose ......................................................................................................................................................... 1
Introduction .................................................................................................................................................. 3
1 National Flood Insurance Program ....................................................................................................... 4
2 Standard Flood Insurance Policy........................................................................................................... 4
2.1 Dwelling Form ........................................................................................................................... 5
2.2 General Property Form ............................................................................................................. 5
2.3 Residential Condominium Building Association Policy Form .................................................... 5
3 Emergency and Regular Programs ........................................................................................................ 5
3.1 Emergency Program .................................................................................................................. 5
3.2 Regular Program ....................................................................................................................... 5
4 Amounts of Insurance Available ........................................................................................................... 6
5 Deductibles ........................................................................................................................................... 7
6 Group Flood Insurance Policy ............................................................................................................... 8
7 Disaster Response ................................................................................................................................. 9
7.1 FEMA Joint Field Office ............................................................................................................. 9
7.2 Disaster Response NFIP Field Offices ........................................................................................ 9
7.3 Adjuster Briefings .................................................................................................................... 10
8 Claims Professionals Expectations ...................................................................................................... 10
8.1 NFIP Core Values ..................................................................................................................... 11
8.2 Customer Service Standards ................................................................................................... 11
9 NFIP Adjuster Participation ................................................................................................................. 13
9.1 Adjuster Authority................................................................................................................... 13
9.2 NFIP Knowledge ...................................................................................................................... 13
9.3 Required NFIP Adjuster Authorization .................................................................................... 13
9.4 Adjuster Qualifications ............................................................................................................ 14
9.5 Adjuster Authorization Process .............................................................................................. 15
9.6 Independent Adjuster Registration and Code of Conduct ...................................................... 16
9.7 NFIP Fee Schedule ................................................................................................................... 17
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10 Examiner Participation in the NFIP ..................................................................................................... 18
10.1 Authority ................................................................................................................................. 18
10.2 Responsibilities ....................................................................................................................... 19
10.3 Knowledge of the NFIP ............................................................................................................ 19
11 Training for Claims Professionals ........................................................................................................ 19
11.1 NFIP Sponsored Training ......................................................................................................... 19
11.2 Annual NFIP Claims Presentations .......................................................................................... 21
11.3 Other Training ......................................................................................................................... 21
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6 Claim Closed Without Payment Reasons .......................................................................................... 224
7 Communications from Attorneys, Public Adjusters, and Other Policyholder Representatives ....... 225
8 Condominium Claims Handling......................................................................................................... 227
9 Contents Manipulation ..................................................................................................................... 227
10 Cooperative Buildings ....................................................................................................................... 228
11 Countertops ...................................................................................................................................... 230
11.1 Common Countertop Types and their Repair or Replacement ........................................... 230
11.2 Countertop Adjustment Concerns ....................................................................................... 231
12 Electronic Signatures ........................................................................................................................ 232
13 Expense Payments ............................................................................................................................ 232
13.1 Adjuster Fees........................................................................................................................ 232
14. Flood-In-Progress Exclusion .............................................................................................................. 233
14.1 When the Flood-in-Progress Exclusions May Apply.............................................................. 233
14.2 Flood-in-Progress Exclusion Adjustment Concerns .............................................................. 234
14.3 Requesting Assistance and Tracking Flood-In-Progress ........................................................ 235
15 GFIP Claims Handling ........................................................................................................................ 235
16 Guidance on the Use of Outside Professional Services .................................................................... 236
16.1 When to request a Building Structural Evaluation............................................................... 236
16.2 Outside Financial Accounting Professionals ........................................................................ 237
16.3 Insurers must comply with the following requirements regarding the use of outside
professional services ......................................................................................................................... 238
17 General Adjuster (GA) Re-inspection Request.................................................................................. 240
18 Heating, Ventilation and Air Conditioning (HVAC) Equipment and Heating Machinery .................. 240
18.1 HVAC Equipment ................................................................................................................... 240
18.2 Heating Machinery ................................................................................................................ 241
19 Identification of Building Equipment, Appliances, Electronics, and Mechanicals ............................ 241
20 Improvements and Betterments ...................................................................................................... 243
20.1 Tenants’ Contents Only Policies ............................................................................................ 243
20.2 Building Owner and Tenant Named on Same Policy with Coverage A ................................. 243
20.3 Duplicate Policies with Coverage A Not Allowed .................................................................. 243
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41 Remediation, Drying, and Emergency Service Contractors .............................................................. 265
42 Reporting .......................................................................................................................................... 266
42.1 Timely Reporting ................................................................................................................... 266
42.2 Preliminary Report ................................................................................................................ 267
42.3 Interim Report....................................................................................................................... 270
42.4 Narrative Report ................................................................................................................... 270
42.5 NFIP Final Report .................................................................................................................. 270
42.6 Proof of Loss.......................................................................................................................... 271
43 Requests for Additional Payment ..................................................................................................... 272
44 Reservation of Rights ........................................................................................................................ 273
45 Salvage .............................................................................................................................................. 273
46 SFHAs and Non-SFHAs ...................................................................................................................... 274
46.1 Special Flood Hazard Areas (SFHAs)...................................................................................... 274
46.2 Non-Special Flood Hazard Areas (Non-SFHAs) ...................................................................... 274
47 Special Allocated Loss Adjustment Expense (SALAE) Processes ...................................................... 275
48 Statute of Limitations ....................................................................................................................... 286
48.1 Interplay Between the Extension of the Proof of Loss Deadline for NFIP Policyholders and
the 1-Year Statute of Limitations in 42 U.S.C. § 4072 (VII.R. Suit Against Us) .................................. 286
49 Subrogation....................................................................................................................................... 287
50 Underwriting Referral ....................................................................................................................... 288
51 Waiver of Elevated Building Coverage Limitation ............................................................................ 289
52 Wildfires ............................................................................................................................................ 290
52.1 Application of Post Wildfire Exception to 30-Day Waiting Period for New Policies ............. 290
52.2 Assistance with the Proper Application of Post Wildfire Exception ..................................... 291
53 Wind/Flood Loss ............................................................................................................................... 291
53.1 Wind and Water Investigative Tips ....................................................................................... 291
53.2 Handling guidance when wind carrier pays wind limits ....................................................... 294
54 Withdrawal Letters and Denial Letters ............................................................................................. 295
54.1 Withdrawal Letters ............................................................................................................... 295
54.2 Partial Denial Letters and Full Denial Letters ........................................................................ 295
55 Oversight ........................................................................................................................................... 295
55.1 Claims Oversight ................................................................................................................... 295
55.2 Claims Operation Reviews Description of Findings .............................................................. 297
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56 Claim Overpayment Recovery .......................................................................................................... 299
56.1 Claim Overpayment Recovery Process ................................................................................. 299
56.2 Methods of Claim Overpayment Reimbursement to the NFIP ............................................. 299
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FEMA | FIMA | NFIP
Claims Manual
Purpose
Purpose
The purpose of the NFIP Claims Manual is to improve clarity of claims guidance to WYOs,
vendors, adjusters, and examiners so that policyholders experience consistent and reliable
service. The manual provides processes for handling claims from the notice of loss to final
payment.
All NFIP bulletins, other than those announcing Flood Insurance Claims Office numbers, Flood
Response Office locations, claims adjuster briefings, and current and future program changes,
are superseded by this manual and of no further effect.
Disclaimer: This document represents the current FEMA guidance on the covered topics and may
assist NFIP insurers, adjusters, vendors, and policyholders apply applicable statutory and
regulatory requirements, as well as the terms and conditions of the Standard Flood Insurance
Policy. This document is not a substitute for applicable legal requirements, nor is it itself a rule. It
is not intended to, nor does it impose, legally-binding requirements on any party, except where
parties have voluntarily entered into an agreement requiring compliance with FEMA guidance.
FEMA’s discussion of any brand, trademark, or registered mark is not an endorsement.
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Introduction
Introduction
Message to National Flood Insurance Program Claims Professionals
Over the past several years, the Federal Emergency Management
Agency (FEMA) has highlighted our commitment to our
policyholders. We are transforming the ways we manage the
National Flood Insurance Program (NFIP). This transformation will
enable our partners and stakeholders, Write Your Own (WYO)
insurance companies, insurance company vendors, agents, adjusting
firms, adjusters, and examiners as claims professionals, to improve
our policyholders’ experience when they have a flood claim.
We are getting policyholders on the road to recovery faster through
a more robust advance payment process. We are committed to
David Maurstad, Deputy
making our products and processes easier to understand from the
Associate Administrator for
policyholder’s point of view. This includes rewriting of our claims and
Insurance and Mitigation
underwriting manuals in plain language so insurance professionals
understand the NFIP and can provide policyholders with consistency and reliability of service.
One of FEMA’s strategic goals is to build a culture of preparedness, which promotes the idea that
everyone should be prepared when disaster strikes. One way an individual can be prepared is to
purchase proper insurance coverage. As representatives of FEMA and the NFIP, we will treat
each policyholder with empathy and respect, ensuring the NFIP adjusts each claim fairly, without
unnecessary delay, and handles each claim as if it were our home or business. Policyholders’
positive word-of-mouth to family, friends, neighbors, and the wider community regarding their
claims experience can influence these individuals to purchase flood insurance.
All of you represent the NFIP and our improved customer experience. You will likely be the first
and maybe the only NFIP representative the policyholder engages with after a flood event. FEMA
depends on your continued expertise and compassion to help our policyholders recover from
what may be a devastating experience for them.
As a claims professional, you are the one that will guide the policyholders through the entire
NFIP claims process – from the notice of loss to their final payment. With your knowledge of the
Standard Flood Insurance Policy (SFIP), you can make the policyholder’s recovery smoother by
communicating what they should do to move their claim along the adjustment journey.
I would like to take a moment to recognize the hard work you do on our behalf. I have had the
pleasure of observing quality adjusting by riding along on several loss adjustments. I saw first-
hand how much time, effort, and care claims adjusters put into serving our policyholders. It is a
tough job entering dangerous spaces, dealing with conditions such as mold and other hazards,
and meeting the needs of NFIP policyholders still processing the toll of a recent flood.
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Introduction
I know first-hand how tough this is because my dad was an adjuster. In addition, during my 20+
years as an agent, I experienced the challenge of settling property losses many times. I
understand the dilemma claims professionals face trying to provide as much assistance to
someone in need within the constraints of the flood insurance contract.
We recognize your job is not easy. However, you have the opportunity to affect the claims
experience positively for NFIP policyholders. I appreciate that you go the extra mile to make sure
we are treating our policyholders with integrity and respect and getting every dollar allowed to
them from the policy they purchased. Together we can help close the insurance gap and create
more resilient communities.
1
44 C.F.R. pt. 61, App. A(1) (2018)
2
44 C.F.R. pt. 61, App. A(2) (2018)
3
44 C.F.R. pt. 61, App. A(3) (2018)
4
See 44 C.F.R. § 61.13 (2018); see also id. pt. 61, App. A(1), A(2), A(3)
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Introduction
5
See P.L. 90-448 § 1336, as added P.L. 91-152 § 91-152 § 408, 83 Stat. 396 (1969), 42 U.S.C. § 4056; 44 C.F.R. §
59.3 (2018)
6
See 44 C.F.R. § 59.2 (2018)
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Introduction
7
See P.L 90-448 § 1306, 82 Stat. 575 (1968) (42 U.S.C. § 4013); 44 C.F.R. § 61.6 (2018)
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Introduction
5 Deductibles
Table 2 shows the minimum deductibles available under the SFIP for building coverage and
contents coverage, in both Emergency Program and Regular Program communities.
Table 2. Minimum Deductibles1
Minimum
Deductible for Minimum
Coverage of Deductible for
Program $100,000 or Coverage Over
Type Rating Less2 $100,000
Refer to the Flood Insurance Manual for more information on deductibles, including maximum
and optional deductibles.
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Introduction
Section Details
The GFIP covers the building and personal property of an owner. As of the
publication of this manual, the policyholder has the choice of whether to use the
funds solely for building damages, solely for personal property damages, or for a
Covered combination of building and personal property. For renter policyholders, the
Property GFIP is for damaged personal property owned by the policyholder. A renter
cannot have building coverage under the GFIP.
There is no Increased Cost of Compliance (ICC) coverage under the GFIP.
The term of the GFIP is for 36 months and begins 60 days after the date of the
disaster declaration. Coverage for individual grantees begins on the 30th day
Term after NFIP Direct receives the required data for the grantees and their premium
payments. The NFIP Direct will send a Certificate of Flood Insurance to each
individual under the GFIP.2
The GFIP uses the SFIP Dwelling Form, except that Section VI. Deductibles do not
apply. FEMA applies separate deductibles of $200 each to any building loss and
any personal property loss. This deductible applies to flood-damaged losses
sustained to the insured property during the term of the GFIP.
Deductible The deductible does not apply to the SFIP Section III.C.2. Loss Avoidance
Measures, or Section III. C.3. Condominium Loss Assessments Coverage.
8
See 44 C.F.R. § 61.17(a) (2018); see also id. 206.119(d) (explaining purchase of GFIP)
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Introduction
Section Details
The policyholder cannot cancel a GFIP. However, the policyholder may purchase
Cancellation a regular SFIP through the NFIP. Upon the purchase of an SFIP, the group flood
certificate becomes void and the NFIP does not refund the GFIP premium.
NFIP Direct will send a notice to the GFIP certificate holders approximately 60
days before the end of the 36-month term of the GFIP. The notice encourages
the certificate holder to contact an insurance agent or private insurance
Renewal company selling NFIP policies under the WYO program to purchase the amount
of flood insurance coverage they must have to maintain their eligibility for future
disaster assistance.4
1 See 44 C.F.R. § 61.17(c) (2018); 42 U.S.C. § 5174(h) (setting the limit at $25,000 with an annual adjustment)
2 See 44 C.F.R. § 61.17 (d)-(f)
4 See 44 C.F.R. § 61.17(g)
4 See 44 C.F.R. § 61.17(h)
7 Disaster Response
Every year disasters put millions of Americans in danger and cause billions of dollars of property
damage. FEMA is always ready, helping communities reduce their risk, helping emergency
officials prepare for all hazards, and assisting our insured survivors on their road to recovery.
Following are disaster response efforts and offices established in support of disasters.
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Claims Manual
Introduction
• Educates and informs the insured public, agents, adjusters, and federal and state officials
in matters related to the NFIP's total catastrophic response procedures through the
distribution of posters, notices, and NFIP material, and attendance and support of FEMA
at community meetings.
• Conducts special adjuster briefings, surveys flood disaster areas, assesses the extent of
damage, and advises FEMA of findings.
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Claims Manual
Introduction
• Claims professionals to include all allowances payable in the policy in the estimate. NFIP
coverage differs from other insurance policies therefore claims professionals may need to
spend additional time addressing differences with the policyholder.
• Claims professionals to explain coverage early in the claim process in a clear manner. For
example, post-FIRM elevated building and basement coverage can confuse the
policyholder and require additional explanation.
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Claims Manual
Introduction
• Claims professionals to inform the policyholder of the exclusions in the SFIP and the steps
necessary to pay their claim promptly.
• NFIP adjusters to review and explain the building estimate and proactively assist
policyholders with the contents claim and proof of loss.
• NFIP examiners to confirm that all payment recommendations made by the adjuster are
in line with the SFIP.
B. Be Prepared
FEMA expects:
• Claims professionals to have their resources on hand and to understand all three SFIP
forms Dwelling, General Property, and RCBAP and the GFIP. All claims professionals must
have a good command of the SFIP and its application of coverages so they can
successfully support the policyholder.
• Claims professionals to remember the flood loss may create a traumatic experience and
response by the policyholder. Claims professionals often work with people under stress
and should recognize this and create a positive policyholder claims experience.
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Claims Manual
Introduction
• To understand and communicate to the policyholders that the adjuster does not have the
authority to approve or deny a claim but should explain the policy to the policyholder and
make recommendations to the insurer.
• To understand that all adjustments are only recommendations and subject to review by
the NFIP insurer.
Important: Adjusters should follow the insurer’s guidelines, however, any questions requiring
clarification should be forwarded through their internal chain of command.
• To know the provisions of the applicable SFIP forms and the GFIP.
• To know the coverage interpretations issued by FEMA and explained at the NFIP Claims
Presentations.
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Claims Manual
Introduction
below and attend an annual NFIP claims presentation to become a registered adjuster or to
maintain active status. The NFIP BSA verifies credentials before an adjuster receives an FCN.
FEMA holds annual NFIP claims presentations to keep the adjusting community current on claims
procedures and guidance required to adjust losses under the three forms of the SFIP.
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Introduction
• Residential
• Condominium (RCBAP)
New applicants and adjusters seeking upgrades to their existing registration must submit a
completed Adjuster Registration Application to the NFIP BSA via any of the following methods:
E-mail: [email protected]
Mail: NFIP BSA, PO Box 310, Lanham, MD 20703-0310
Adjusters seeking to maintain their active registered status do not need to submit an application.
The NFIP BSA will automatically renew previously registered adjusters when they attend an
annual NFIP Claims Presentation for the current calendar year.
The NFIP BSA will email new adjusters and adjusters who request an upgrade to their
classification of the approval or denial of their application. All approved adjusters who attend the
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Introduction
annual NFIP claims presentation receive an emailed FCN card confirming their registration to
handle NFIP flood claims.
Important: Adjusters who do not attend an annual NFIP Claims Presentation become inactive
and cannot adjust flood claims until they attend an approved NFIP claims presentation and are
reactivated.
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Introduction
firms also have an obligation to protect the integrity of the NFIP. When a WYO company, NFIP
Direct, or adjusting firm becomes aware of a violation, they are required to conduct an internal
investigation. If a violation is confirmed, they will immediately notify FEMA and provide all
supporting documentation that includes their findings and recommendations. If FEMA
determines that there was a violation of the NFIP’s Code of Conduct, FEMA will act to revoke the
FCN for a period of one year or longer and provide notification to the adjuster.
Documentation should be mailed to: NFIP BSA, Attn: Adjuster Authorization, Post Office Box 310,
Lanham, MD 20706; or sent via email to: [email protected].
Once FEMA revokes the FCN, the adjuster can no longer adjust claims on behalf of the NFIP or
hold an FCN. If code of conduct violations are evident within the firm, the firm may lose the
authority to adjust claims on behalf of the NFIP.
An adjusting firm or adjuster may appeal a temporary suspension or indefinite revocation by
submitting a request with supporting documentation to the Assistant Administrator for Federal
Insurance for review and consideration. The Assistant Administrator for Federal Insurance is
responsible for reviewing and making final determinations concerning all revocation appeals. The
Assistant Administrator for Federal Insurance holds the ultimate authority to revoke or reinstate
an FCN.
D. Applicability
This applies to all past, present, and future authorized adjusters and adjusting firms.
• Current Adjuster Fee Schedule effective August 24, 2017 (See Appendix A)
• For ICC claims, use the ICC fee schedule effective September 1, 2004 (See Appendix B)
A. Gross Loss
The Adjuster Fee Schedule sets compensation amounts based on the claim’s gross loss. Gross
loss is the agreed cost to repair or replace before application of depreciation, applicable
deductible(s), and salvage buy-back. Gross loss must not exceed any or all of the following policy
limitations: Building and personal property policy limits stated in the Declarations Page; Program
Limits building or personal property; damage values no greater than 10% for a detached garage
(Dwelling Form); Special Limits ($2,500); Loss Avoidance Measures for Sandbags, Supplies, and
Labor ($1,000); Property Removed to Safety ($1,000); Pollution Damage - General Property form
($10,000); Policy Exclusions.
B. Increased Cost of Compliance (ICC) Claims
For Increased Cost of Compliance claims, use the ICC Fee Schedule whether the claim is paid or
closed without payment.
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Claims Manual
Introduction
10.1 Authority
Examiners are the claims administrators of the NFIP insurers and have the authority through
their management, to pay claims, make and confirm coverage determinations, and to deny
coverage when appropriate. Examiners should provide guidance to adjusters as needed.
FEMA expects every examiner handling NFIP flood losses to:
• Understand their first obligation to a policyholder is to identify coverage under the SFIP.
• Understand they should not take their authority lightly to determine coverage under the
SFIP and be aware that their decisions have a direct impact on policyholders.
• Though not required, FEMA encourages WYO examiners handling flood claims to attend
an Annual NFIP Claims Presentations.
Important: Examiners should follow their insurers’ internal settlement authority guidelines.
Examiners should also refer coverage questions that require clarification through their internal
chain of command.
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Introduction
10.2 Responsibilities
Claims examiner responsibilities include:
• Assigning an adjuster within 24 hours of receipt of claim or document why they did not
make the assignment in the time required.
• To know the provisions of the three forms of the SFIP and the GFIP.
• To know the guidance issued by FEMA and as explained at the NFIP claims presentations.
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Claims Manual
Introduction
Independent Study courses are free and available to anyone. All students must have a FEMA
Student Identification (SID) number to take a course and can register for a SID at
https://cdp.dhs.gov/FEMASID.
Find out more about EMI Independent Study Courses at
https://training.fema.gov/is/searchis.aspx?search=claims, and NFIP Perspectives informational
videos along with other training information at
https://nfipservices.floodsmart.gov/home/training. The Independent Study catalog is available at
https://training.fema.gov/is/crslist.aspx. Below is a list of relevant courses.
B. Adjuster Courses
− IS-1104 NFIP Claims Review for Adjusters
− IS-1107 Adjuster Customer Service
− IS-1109.a Understanding Basement Coverage
− IS-1111 Introduction to Commercial Claims
− IS-1112 Introduction to Flood Claims
C. Agent Courses
− IS-1100.a Increased Cost of Compliance
− IS-1101.b Basic Agent Tutorial
− IS-1102 Theory of Elevation Rating
− IS-1108 Insuring Condominiums
− IS-1110.a Writing Commercial Exposures
− IS-1113 Coastal Barrier Resources
− IS-1115 Claims Process for Agents
− IS-1116 Sales for Agents
− IS-1117 Severe Repetitive Loss for Agents
D. All Audiences
− IS-1100.a Increased Cost of Compliance
− IS-1105a EC Made Easy: Elevation Certificate Overview
− IS-1106a FEMA Mapping Changes
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Introduction
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Claims Manual
Section 1: SFIP Forms – Dwelling Form
Each form insures a different type of property; however, many coverage terms and conditions are
the same. This manual will detail coverages for each of the three forms. The following tables
include the actual policy language in the left columns, with commentary in the right columns.
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Section 1: SFIP Forms – Dwelling Form
2 Dwelling Form
Please read the policy carefully. The flood insurance provided is subject to limitations, restrictions, and exclusions. This policy
covers only:
1. A non-condominium residential building designed for principal use as a dwelling place of one to four families; or
2. 2. A single-family dwelling unit in a condominium building.
I. Agreement
Policy Language Additional Explanation
The Federal Emergency Management Agency (FEMA) provides flood This policy is under Federal law, unlike other property lines. Relevant definition at
insurance under the terms of the National Flood Insurance Act of 1968 and II.B.12 (direct physical loss). Policyholder responsibilities appear at Section VII.J, K.
its Amendments, and Title 44 of the Code of Federal Regulations. post-loss underwriting at Section VII.G.
We will pay you for direct physical loss by or from flood to your insured
property if you:
1. Have paid the correct premium;
2. Comply with all terms and conditions of this policy; and
3. Have furnished accurate information and statements.
We have the right to review the information you give us at any time and to
revise your policy based on our review.
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Section 1: SFIP Forms – Dwelling Form
II. Definitions
Policy Language Additional Explanation
A. In this policy, “you” and “your” refer to the insured(s) shown on the Declarations Page of this policy and your spouse, if a resident of the same
household. Insured(s) includes: Any mortgagee and loss payee named in the Application and Declarations Page, as well as any other mortgagee or loss
payee determined to exist at the time of loss in the order of precedence. “We,” “us,” and “our” refer to the insurer.
Some definitions are complex because they are provided as they appear in the law or regulations or result from court cases. The precise definitions are intended to
protect you.
Flood, as used in this flood insurance policy, means: For a general condition of flood to exist, the inundation must cover two or more
1. A general and temporary condition of partial or complete inundation of acres of normally dry land or two or more parcels of land, one of which can be
two or more acres of normally dry land area or of two or more properties public property (such as a roadway).
(one of which is your property) from: The reference to “partial or complete inundation of two or more acres of normally
a. Overflow of inland or tidal waters, dry land area or of two or more properties” requires that the two or more acres
must be continuous acres, and that the two or more inundated parcels of land must
b. Unusual and rapid accumulation or runoff of surface waters from any
touch.
source,
For mudflow definition, see SFIP Section II.B.19.
c. Mudflow.
2. Collapse or subsidence of land along the shore of a lake or similar body of The SFIP also defines a flood as the collapse or subsidence of land along the shore
water as a result of erosion or undermining caused by waves or currents of a lake or similar body of water from erosion or undermining caused by waves or
of water exceeding anticipated cyclical levels that result in a flood as currents of water (velocity flow) exceeding anticipated cyclical levels during a flood
defined in A.1.a. above. from the overflow of inland or tidal waters.
The SFIP does not cover damage from any other cause, form, or type of earth
movement or gradual erosion. See Exclusions at SFIP Section V.C.
B. The following are the other key definitions we use in this policy:
1. Act N/A
The National Flood Insurance Act of 1968 and any amendments to it.
2. Actual Cash Value The cost to replace a building, a building item or a personal property item that
The cost to replace an insured item of property at the time of loss, less the includes all charges related to material, labor, and equipment. This price may
value of its physical depreciation. include charges such as delivery, assembly, sales tax, and any applicable overhead
and profit, and the like. Actual cash value is this cost to replace less applicable
depreciation on all components of the cost.
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Section 1: SFIP Forms – Dwelling Form
II. Definitions
Policy Language Additional Explanation
3. Application The statement made and signed by the prospective policyholder or the agent
The statement made and signed by you or your agent in applying for this policy. when applying for a policy. The application contains information including the
The application gives information we use to determine the eligibility of the risk, property description, information to determine eligibility, the policy form selected,
the kind of policy to be issued, and the correct premium payment. The the selected coverage and limits, deductible, and the premium amount.
application is part of this flood insurance policy. For us to issue you a policy, the
correct premium payment must accompany the application.
5. Basement The SFIP definition for a basement means the floor level of a room or any area of a
Any area of the building, including any sunken room or sunken portion of a floor level in a building that is below the ground level on all sides. This definition may
room, having its floor below ground level (subgrade) on all sides. differ from what policyholders consider as their “basement.” The SFIP considers a
sunken room or sunken portion of a room to be a basement if the floor level is below
the ground level on all sides. The entire below-ground-floor-level area, including
walls and the ceiling that may extend above grade, is subject to basement coverage
limitations.
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II. Definitions
Policy Language Additional Explanation
5. Basement continued Figure 2. Sunken Room
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Policy Language Additional Explanation
5. Basement continued Figure 4. Egress
The insurer may need to engage a qualified, licensed professional (for example: a
surveyor) to measure the floor level in question. See Section 2 of this manual.
Sump wells are not basements because they are not a floor level.
6. Building • The SFIP covers a building, manufactured home (mobile home), or travel trailer
a. A structure with two or more outside rigid walls and a fully secured roof, located at the described location as shown on the Declaration Page and only
that is affixed to a permanent site; insures one building.
b. A manufactured home (a “manufactured home,” also known as a mobile • The SFIP requires a building to be affixed to a permanent site, whereas it
home, is a structure: built on a permanent chassis, transported to its site requires a manufactured home and a travel trailer to be affixed to a permanent
in one or more sections, and affixed to a permanent foundation); or foundation.
c. A travel trailer without wheels, built on a chassis and affixed to a • A travel trailer (recreational vehicle) with attached wheels is not a building.
permanent foundation, that is regulated under the community’s • A storage or shipping container, if it is used as a shed, storage building or
floodplain management and building ordinances or laws. residence, must meet the definition of an eligible building.
Building does not mean a gas or liquid storage tank or a recreational • “Affixed by weight” does not constitute affixed to a permanent site as used in
vehicle, park trailer or other similar vehicle, except as described in B.6.c. the SFIP.
above.
7. Cancellation • The NFIP Flood Insurance Manual provides a list of all valid policy cancellation
reasons.
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II. Definitions
Policy Language Additional Explanation
The ending of the insurance coverage provided by this policy before the • The expiration date is the ending of the policy term, the period of coverage
expiration date. provided by the insurance policy.
• The policy term for the SFIP is one year, after any applicable waiting period.
8. Condominium N/A
That form of ownership of real property in which each unit owner has an
undivided interest in common elements.
11. Described Location Each SFIP insures only one building. Under the Dwelling Form, an eligible detached
The location where the insured building(s) or personal property are found. The garage can be covered along with the dwelling at the option of the policyholder.
described location is shown on the Declarations Page. Part of this eligibility requires the detached garage to be located at the described
location stated on the Declarations Page. Personal property is covered within any
building, but only at the described location.
12. Direct Physical Loss By or From Flood The SFIP only pays for damage caused by a direct physical loss by or from flood, as
Loss or damage to insured property, directly caused by a flood. There must be defined by the SFIP. A direct physical loss means flood must physically contact the
evidence of physical changes to the property. insured property and there must be evidence of physical change by or from flood to
the insured building or to insured personal property.
Several SFIP provisions, each with its own criteria, address specific situations where
the condition of direct physical loss by or from flood occurs despite an exclusion. In
these particular situations, listed below, the insurer must thoroughly document the
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II. Definitions
Policy Language Additional Explanation
presence of the relevant criteria in the claim file for coverage and payment:
• Losses from mudflow and collapse or subsidence of land as a result of erosion
specifically covered under the SFIP definition of flood (see SFIP Section V.C., as
well as II.A.1.c and II.A.2)
• Back up of water and water-borne material through sewers or drains, where a
flood is the proximate cause of the sewer or drain backup (see SFIP Section
V.D.5.a.)
• Discharge or overflow from a sump, sump pump, or related equipment, where
a flood is the proximate cause of the sump pump discharge or overflow (see
SFIP Section V.D.5.b.)
• Seepage or leakage on or through the insured building, where a flood is the
proximate cause of the seepage of water (see SFIP Section V.D.5.c.)
• Pressure or weight of water, where a flood is the proximate cause of the
damage from the pressure or weight of water (see SFIP Section V.D.6.)
13. Dwelling N/A
A building designed for use as a residence for no more than four families or a
single-family unit in a building under a condominium form of ownership.
14. Elevated Building For more information about elevated buildings, see Section 2 of this manual, Lowest
A building that has no basement and that has its lowest elevated floor raised Floor Elevation. If an elevated floor in the building is in part supported by a structural
above ground level by foundation walls, shear walls, posts, piers, pilings, or slab-on-grade foundation, additional documentation may be necessary to verify the
columns. elevated rating for the building.
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II. Definitions
Policy Language Additional Explanation
17. Federal Policy Fee N/A
A flat charge you must pay on each new or renewal policy to defray certain
administrative expenses incurred in carrying out the National Flood Insurance
Program. This fee covers expenses not covered by the Expense Constant.
19. Mudflow A mudflow is liquified soil flowing in a manner akin to water flowing, which causes
A river of liquid and flowing mud on the surface of normally dry land areas, as damage in a manner similar to moving water.
when earth is carried by a current of water. Other earth movements, such as
landslide, slope failure, or a saturated soil mass moving by liquidity down a
slope, are not mudflows.
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II. Definitions
Policy Language Additional Explanation
be recycled, reconditioned, or reclaimed.
23. Post-FIRM Building Community Status Book
A building for which construction or substantial improvement occurred after
December 31, 1974, or on or after the effective date of an initial Flood Insurance
Rate Map (FIRM), whichever is later.
24. Probation Premium N/A
A flat charge you must pay on each new or renewal policy issued covering
property in a community the NFIP has placed on probation under the provisions
of 44 CFR 59.24.
26. Special Flood Hazard Area All zones listed are SFHAs. However, the post-FIRM elevated building coverage
An area having special flood or mudflow, and/or flood-related erosion hazards, limitations apply only to Zones A1–A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1–
and shown on a Flood Hazard Boundary Map or Flood Insurance Rate Map as A30, V1–V30, and VE, at SFIP Section III.A.8.
Zone A, AO, A1–A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1– A30,
V1–V30, VE, or V.
28. Valued Policy The SFIP is not a valued policy; it is a direct physical loss policy. The insurer agrees to
A policy in which the insured and the insurer agree on the value of the pay a policyholder for insured property damaged by direct physical by or from flood,
property insured, that value being payable in the event of a total loss. The subject to the terms, conditions, and exclusion of the SFIP.
Standard Flood Insurance Policy is not a valued policy.
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1. The dwelling at the described location, or for a period of 45 days at another N/A
location as set forth in III.C.2.b., Property Removed to Safety.
2. Additions and extensions attached to and in contact with the dwelling by A property owner has the option to separately insure an addition under its own SFIP
means of a rigid exterior wall, a solid load-bearing interior wall, a stairway, if the addition, considered by itself, meets the definition of a building at SFIP II.B.6.
an elevated walkway, or a roof. At your option, additions and extensions Otherwise, the Dwelling Form covers an addition or extension as part of the building.
connected by any of these methods may be separately insured. Additions
Figure 5. Examples of additions and extensions and the five means of connection
and extensions attached to and in contact with the building by means of a
common interior wall that is not a solid load-bearing wall are always
considered part of the dwelling and cannot be separately insured.
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(6) Elevators, dumbwaiters, and related equipment, except for An elevator or dumbwaiter is covered if within the covered building
related equipment installed below the base flood elevation enclosure or attached to and in contact with the insured building or directly
after September 30, 1987; attached to the 16 square foot landing area used for egress if unattached.
For elevators and dumbwaiters installed below the BFE after September 30,
1987, coverage is limited to the cab and the included controls installed on or
in the cab. Related equipment is everything except the cab and the included
controls and is not covered unless the damaged equipment is installed above
the level at or above the BFE.
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(7) Fuel tanks and the fuel in them; Fuel tanks and the fuel in them include a connected fuel gauge or fuel filter.
(8) Furnaces and hot water heaters; Furnaces and hot water heaters include boilers and permanently installed
equipment for humidification, air filtering, and ventilation. This includes those
portions of the central HVAC in a building enclosure below the Lowest Floor
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Figure 13. Covered stairs where the finish material is the base material; however, no
coverage to paint, stain, or coat:
The SFIP does not cover the basement exterior egress staircase located
outside of the perimeter building walls, even if covered by a roof or door.
See SFIP Section IV.9.
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1. General N/A
This policy pays you to comply with a State or local floodplain management
law or ordinance affecting repair or reconstruction of a structure suffering
flood damage. Compliance activities eligible for payment are: elevation,
floodproofing, relocation, or demolition (or any combination of these
activities) of your structure. Eligible floodproofing activities are limited to:
a. Non-residential structures.
b. Residential structures with basements that satisfy FEMA’s standards
published in the Code of Federal Regulations [44 CFR 60.6 (b) or (c)].
2. Limit of Liability All three SFIP forms provide Increased Cost of Compliance (ICC) benefits as Coverage
We will pay you up to $30,000 under this Coverage D—Increased Cost of D. ICC provides up to $30,000 toward the cost of bringing a flood-damaged structure
Compliance, which only applies to policies with building coverage (Coverage A). into compliance with state or community floodplain management laws or ordinances
Our payment of claims under Coverage D is in addition to the amount of governing repair or reconstruction following a flood.
coverage which you selected on the application and which appears on the
Declarations Page. But the maximum you can collect under this policy for both
Coverage A— Building Property and Coverage D—Increased Cost of Compliance
cannot exceed the maximum permitted under the Act. We do not charge a
separate deductible for a claim under Coverage D.
3. Eligibility To be eligible for ICC, the community must declare the building substantially
a. A structure covered under Coverage A—Building Property sustaining a damaged. The amount paid for Coverage D – ICC and Coverage A – Building Property
loss caused by a flood as defined by this policy must: combined cannot exceed the maximum program limits of $250,000 for the Dwelling
Form.
(1) Be a “repetitive loss structure.” A repetitive loss structure is one
that meets the following conditions: ICC is not available in Emergency Program communities. ICC is not available for:
• Contents-only policies.
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2. A building, and personal property in it, located entirely in, on, • The SFIP allows coverage for a building not entirely over water, for example:
or over water or seaward of mean high tide if it was when part of the exterior perimeter wall and foundation of the building is on
constructed or substantially improved after September 30, land or the landward side of mean high tide (mean high water).
1982; • When the exterior perimeter walls of the building are completely over water and
the support system or foundation underneath the insured building extends onto
land, or the extension of any mechanism for access into a building (including, but
not limited to, stairs, decks, walkways, piers, posts, pilings, docks, or driveways),
even if the mechanism is on or partially on land, the building or the access will
not be eligible for coverage.
• If the exterior perimeter walls of a building are completely over water, but
connected to another eligible building by means of an elevated walkway,
stairway, roof, or rigid exterior wall, or there is an appurtenant structure on the
same slab, foundation, or other continuous support system that is on land (such
as a shed or garage), the presence of the connected building or appurtenant
structure on land does not allow coverage to be afforded to the building that has
its exterior perimeter walls entirely over water.
3. Open structures, including a building used as a boathouse or any The SFIP does not cover boathouses or buildings into which boats can float and
structure or building into which boats are floated, and personal personal property located within buildings used solely as boathouses.
property located in, on, or over water; When a boathouse is also used as a dwelling, the SFIP covers the dwelling portion and
its foundation, even when the foundation includes the foundation and other building
elements shared with the boathouse subject to the provisions of the SFIP including IV.
Property Not Covered.
The SFIP does not cover a building and personal property within it, located in, on, or
over water or seaward of mean high tide if the building was constructed or
substantially improved after September 30, 1982.
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5. Self-propelled vehicles or machines, including their parts and The SFIP does not cover self-propelled vehicles or machinery. There are two specific
equipment. However, we do cover self-propelled vehicles or instances where coverage is provided, so long as:
machines not licensed for use on public roads that are: (1) the vehicle or machinery is not licensed for use on public roads.
a. Used mainly to service the described location or (2) specific documentation is provided to support the claim.
b. Designed and used to assist handicapped persons, Under (a), the described location must be the type that would reasonably require
service by means of the vehicle or machinery in question. Secondly, there must be
while the vehicles or machines are inside a building at the described evidence the described location is routinely serviced in support of what is claimed
location; under this provision. Vehicles and machinery that are part of or service a business
operation at the described location do not qualify for coverage under this provision.
Under (b) a vehicle or machinery is covered if it is designed and used as mobility
vehicles for persons with disabilities. The vehicle or machinery is not covered if it is
not designed to assist persons with disabilities, or not used by persons with
disabilities. As an example, a typical golf cart is not covered under this provision,
even if it is used by persons with disabilities unless designed or modified specifically
to assist persons with disabilities.
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The SFIP does not cover the second set of stairs of the double staircase, as shown in
Figure 18, because a single set of stairs provides egress.
Figure 18. Deck with Double Staircase
The SFIP does not cover the cost to comply with Americans with Disabilities Act of
1990 (ADA) regulations; however, the SFIP will repair or replace an existing flood
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10. Containers, including related equipment, such as, but not limited to, The SFIP does not cover fuel tanks, pressure tanks, and well water tanks located
tanks containing gases or liquids; outside of the insured building or an eligible detached garage. The SFIP does not
cover containers outside of the building, including shipping containers used for
storage or residential purposes, unless the container meets the definition of a
building.
The SFIP covers fuel tanks, water tanks, and pressure tanks inside or directly
underneath the building, including in a basement or crawlspace, under Coverage A –
Building Property, when installed as part of a utility system that services the building.
Under Coverage B – Personal Property, the SFIP will cover any container inside of a
building that is used for household or personal purposes such as oxygen tanks for
medical reasons, small fuel tanks for filling lawn equipment, or sealed portable fuel
canisters for cooking such as for camping or outdoor grilling. Containers used for the
storage of food do not apply to this provision. Containers such as paint cans can be
covered but only for the value of what is stored, and not for the value of the
container.
Because containers and tanks are either sealed or made of material meant for
contact with liquid, including corrosive liquids, the claim should take into account the
proper scope of damage and first consider if the item is reusable after rinsing and
cleaning.
11. Buildings or units and all their contents if more than 49% of the A building must have over 51 percent of its actual cash value above ground level. This
actual cash value of the building is below ground, unless the lowest calculation relies solely upon the ACV, not on concepts like square footage, volume,
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V. Exclusions
Policy Language Additional Explanation
A. We only pay for direct physical loss by or from flood, which means that we do not pay you for:
1. Loss of revenue or profits; • The SFIP does not cover the costs to pack, move, or store personal property
2. Loss of access to the insured property or described location; Loss of from the insured building or return it to the building when an owner repairs the
use of the insured property or described location; Loss from building or cannot occupy it.
interruption of business or production; • The SFIP does not cover replacing non-flood damaged property required to
3. Any additional living expenses incurred while the insured building is comply with government codes, ordinances, or regulations. For example, the
being repaired or is unable to be occupied for any reason; SFIP does not cover the cost of replacing an undamaged interior HVAC unit to
match a replaced exterior HVAC unit because of a change in size, Seasonal
4. The cost of complying with any ordinance or law requiring or
energy efficiency ratio (SEER)-rating, refrigerant, or any other reason even if
regulating the construction, demolition, remodeling, renovation, or
local, state, or federal code required the upgrade.
repair of property, including removal of any resulting debris. This
exclusion does not apply to any eligible activities we describe in
Coverage D—Increased Cost of Compliance; or,
5. Any other economic loss you suffer.
B. We do not insure a loss directly or indirectly caused by a flood that is already in progress at the time and date:
1. The policy term begins; or NFIP adjusts flood insurance losses individually. Flood insurance benefits are
2. Coverage is added at your request. available if an insured property suffers a covered loss caused by a general condition
of flooding, as defined by the SFIP.
See Flood-in-Progress Exclusion in Section 2 of this manual.
C. We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement
that we do not cover are:
1. Earthquake; The SFIP is a single-peril policy that only pays for covered damage due to direct
2. Landslide; physical loss by or from flood, defined in the policy in Section II. The SFIP does not
cover damage resulting from an intervening cause of loss, even if the resulting cause
3. Land subsidence;
is due to flood. The SFIP does not cover damage that results when saturated soils
4. Sinkholes; cause the soil below ground level to sink, expand, compact, destabilize, or otherwise
5. Destabilization or movement of land that results from accumulation lose its load-bearing capacity such as from voids or rotten organic matter when the
of water in subsurface land area; or soil dries. The SFIP does not cover earth movement; each form of earth movement is
6. Gradual erosion. an intervening cause of loss and a separate peril.
The SFIP’s exclusion for other perils, such as fire, exemplifies the exclusion of earth
movement as a cause of loss. When a flood causes a fire, which damages the
building during inundation or after floodwaters recede, the SFIP does not cover the
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V. Exclusions
Policy Language Additional Explanation
We do, however, pay for losses from mudflow and land subsidence as a result resulting fire and smoke damage to the building even if flood directly caused the
of erosion that are specifically covered under our definition of flood (see fire.
II.A.1.c. and II.A.2.). The SFIP covers damage to a building if the damage results from the collapse or
subsidence of land that is the direct result of sudden erosion or undermining to the
building’s support soil underneath or directly along the perimeter foundation of the
building from waves or currents of floodwater (velocity flow) during a flood from the
overflow of inland or tidal waters or mudflow. This includes damage to the
foundation of the building and any resulting damage to the interior and exterior
finishes. The SFIP does not cover damage caused by gradual erosion.
D. We do not insure for direct physical loss caused directly or indirectly by N/A
any of the following:
1. The pressure or weight of ice; When the policyholder is prevented access to promptly remove wetted building and
2. Freezing or thawing; personal property items, and this delay directly results in water, moisture, mildew or
mold damage to building and personal property items not in physical contact with
3. Rain, snow, sleet, hail, or water spray;
surface floodwater, this damage could be covered.
4. Water, moisture, mildew, or mold damage that results primarily
As examples:
from any condition:
• Local authorities restrict access to the area, or
a. Substantially confined to the dwelling; or
• Prolonged inundation of floodwater prevents access to the area.
b. That is within your control, including but not limited to:
The claim file must include proper documentation, such as but not limited to
(1) Design, structural, or mechanical defects;
photographs, an acceptable explanation provided by the adjuster, or a signed
(2) Failure, stoppage, or breakage of water or sewer lines, drains, statement from the policyholder or community official that supports the payment
pumps, fixtures, or equipment; or for property damages above the documented water height.
(3) Failure to inspect and maintain the property after a flood For instances when coverage and payment are not recommended, the claim file
recedes; should include information that documents the policyholder’s failure to inspect and
maintain their insured property or take reasonable measures to reduce damage
when it is feasible to do so.
The SFIP does not cover damage caused by long-term exposure to moisture, water,
rot, and insect infestation. This includes damage from the lack of climate control
inside the building when the approach to repair does not include the timely repair to
the building HVAC system.
The SFIP does not cover pre-existing damage to structural building components,
such as damage caused by rot, or for any resulting damage to non-structural finish
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V. Exclusions
Policy Language Additional Explanation
building material.
5. Water or water-borne material that: The adjuster must document that a flood occurred in the area and that the flood
a. Backs up through sewers or drains; was the proximate cause of the back-up of the sewer or drain, overflow of the sump
pump, pump failure, seepage of water, or damage due to the pressure or weight of
b. Discharges or overflows from a sump, sump pump or related
water (hydrostatic pressure) in the claim file. See SFIP Section II. A and related
equipment; or
commentary under the definition of flood.
c. Seeps or leaks on or through the covered property;
When paying a loss due to a flood in the area proximately causing discharge or
d. unless there is a flood in the area and the flood is the proximate cause overflow of water or water-borne material from a sump, sump pump, or related
of the sewer or drain backup, sump pump discharge or overflow, or equipment, the insurer must document the claim file to show that a homeowner’s
the seepage of water; policy endorsement or policy rider did not also cover the loss. If the homeowner’s
policy does provide coverage, the SFIP payment must apply a proportional loss
distribution, as stated under Section VII.C. Other Insurance.
The adjuster must document a flood occurred in the area, and that the flood was
the proximate cause of the back-up of the sewer or drain, overflow of the sump
pump, pump failure, seepage of water, or damage caused by the pressure or weight
of water (hydrostatic pressure). A flood is two or more parcels of partial or complete
inundation of normally dry land, or of two or more continuous acres of normally dry
land. For coverage under this provision, the condition of flood does not have to be
on the parcel of land described at the location; it may be within the proximate area.
6. The pressure or weight of water unless there is a flood in the area Refer to SFIP Section V.D.5. above.
and the flood is the proximate cause of the damage from the
pressure or weight of water;
7. Power, heating, or cooling failure unless the failure results from The SFIP does not cover damage to insured property when caused by a power surge
direct physical loss by or from flood to power, heating, or cooling or power outage that originates from the failure or shutting down of equipment that
equipment on the described location; is not located at the described location, even if the reason is a direct result of a
flood. For example, the local utility operator may shut down a section of the
electrical grid to avoid system damage from a flood. When the power returns to the
electrical grid, the initial surge of electricity can damage insured property. Under this
loss description, the damage is not covered.
The SFIP covers damage to any covered building or personal property item, such as
the building’s main service, home security system, a plugged-in television, or to the
HVAC system, when a flood physically damages related system equipment installed
at the described location. For example, if the flood damages power equipment at
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Policy Language Additional Explanation
the described location creating an electrical short within the power system resulting
in damage to another item of property part of or connected to the power system,
the damage to the item is also covered, even though it was not physically touched
by floodwater. Under this loss description, the damage is considered a direct
physical loss by or from flood. To cover the loss described, the adjuster must
document the cause of loss in the claim file to rule out the possibility of a non-
covered cause, such as described in the previous paragraph.
8. Theft, fire, explosion, wind, or windstorm; N/A
9. Anything you or any member of your household do or conspires to
do to deliberately cause loss by flood; or
10. Alteration of the insured property that significantly increases the risk
of flooding.
E. We do not insure for loss to any building or personal property N/A
located on land leased from the Federal Government, arising from
or incident to the flooding of the land by the Federal Government,
where the lease expressly holds the Federal Government harmless
under flood insurance issued under any Federal Government
program.
F. We do not pay for the testing for or monitoring of pollutants unless The SFIP only pays to test or monitor the removal of a pollutant when a law or
required by law or ordinance. ordinance requires it. Insurers must have a copy of the law or ordinance for the file
to support their decision to pay for the testing for or monitoring of pollutants.
The law or ordinance must be in effect at the date of loss to apply.
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VI. Deductibles
Policy Language Additional Explanation
A. When a loss is covered under this policy, we will pay only that part of the loss that exceeds your deductible amount, subject to the limit of liability that applies.
The deductible amount is shown on the Declarations Page.
However, when a building under construction, alteration, or repair does not have at least two rigid exterior walls and a fully secured roof at the time of loss, your
deductible amount will be two times the deductible that would otherwise apply to a completed building.
B. In each loss from flood, separate deductibles apply to the building and personal property insured by this policy.
1. III.C.2. Loss Avoidance Measures; The SFIP applies a separate deductible to both building and personal property losses.
2. III.C.3. Condominium Loss Assessments; or The SFIP will only pay that portion of the loss that exceeds the applicable deductibles.
3. III.D. Increased Cost of Compliance. For building (residence and a detached garage) and personal property losses, the
insurer should take the deductible from the gross loss before applying policy
limits. For example, if the covered loss is $110,000, the policy limit is $100,000,
and the deductible is $5,000, the insurer should apply the deductible to the
$110,000 loss, which leaves $105,000, meaning the insurer should pay the
$100,000 policy limit.
The SFIP does not apply coverage of excess damage from a covered detached
garage to the deductible.
The SFIP does not apply excess loss to items subject to Special Limits to reduce the
personal property deductible.
In case of loss to an article that is part of a pair or set, we will have the option If the damaged property item is ruined and cannot be replaced individually as a
of paying you: single item, and this renders the other item in the pair or the set unusable or
1. An amount equal to the cost of replacing the lost, damaged, or worthless, then the SFIP pays for the pair or set.
destroyed article, minus its depreciation, or Examples: Left shoe ruined by flood, and the right shoe undamaged. The left shoe
2. The amount that represents the fair proportion of the total value of cannot be purchased without the right, rendering the undamaged right shoe
the pair or set that the lost, damaged, or destroyed article bears to unusable. The SFIP allows for a new pair of shoes. Other similar examples include a
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Total $750,000
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b. Actual cash values or replacement cost (whichever is appropriate); • Replacement cost is the cost to replace a building, a building item, or a personal
property item that includes all charges related to material, labor, equipment,
any charges, if applicable, for design, delivery, assembly, sales tax, and
applicable overhead and profit.
• Actual cash value is replacement cost to replace, not repair, less applicable
depreciation of all components of the price.
c. Amounts of loss claimed; The amount of loss claimed is the amount of payment the policyholder asks to
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b. A two-, three-, or four-family dwelling. Appliances include refrigerators, stoves, ovens, ranges, trash compactors, garbage
c. A unit that is not used exclusively for single-family dwelling purposes. disposals, and the like.
d. Detached garages.
e. Personal property.
f. Appliances, carpets, and carpet pads.
g. Outdoor awnings, outdoor antennas or aerials of any type, and other
outdoor equipment.
h. Any property covered under this policy that is abandoned after a loss
and remains as debris anywhere on the described location.
i. A dwelling that is not your principal residence.
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I. Agreement
Policy Language Additional Explanation
The Federal Emergency Management Agency (FEMA) provides flood This policy is under Federal law, unlike other property lines. Relevant definition at
insurance under the terms of the National Flood Insurance Act of 1968 and its II.B.12 (direct physical loss). Policyholder responsibilities appear at Section VII.J, K.
Amendments, and Title 44 of the Code of Federal Regulations. post-loss underwriting at Section VII.G.
We will pay you for direct physical loss by or from flood to your
insured property if you:
1. Have paid the correct premium;
2. Comply with all terms and conditions of this policy; and
3. Have furnished accurate information and statements.
We have the right to review the information you give us at any time and
to revise your policy based on our review.
II. Definitions
Policy Language Additional Explanation
A. In this policy, “you” and “your” refer to the insured(s) shown on the Declarations Page of this policy. Insured(s) includes: Any mortgagee and loss payee named in
the Application and Declarations Page, as well as any other mortgagee or loss payee determined to exist at the time of loss in the order of precedence. “We,” “us,”
and “our” refer to the insurer.
Some definitions are complex because they are provided as they appear in the law or regulations or result from court cases. The precise definitions are intended
to protect you.
Flood, as used in this flood insurance policy, means: For a general condition of flood to exist, the inundation must cover two or more
1. A general and temporary condition of partial or complete inundation acres of normally dry land or two or more parcels of land, one of which can be public
of two or more acres of normally dry land area or of two or more property such as a roadway.
properties (one of which is your property) from: The reference to “partial or complete inundation of two or more acres of normally
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a. Overflow of inland or tidal waters; dry land area or of two or more properties” requires that the two or more acres must
b. Unusual and rapid accumulation or runoff of surface waters from be continuous acres, and that the two or more inundated parcels of land must touch.
any source; For mudflow definition, see SFIP Section II.B.19.
c. Mudflow.
2. Collapse or subsidence of land along the shore of a lake or similar The SFIP also defines a flood as the collapse or subsidence of land along the shore of
body of water as a result of erosion or undermining caused by waves a lake or a similar body of water from erosion or undermining caused by waves or
or currents of water exceeding anticipated cyclical levels which currents of water (velocity flow) exceeding anticipated cyclical levels during a flood
result in a flood as defined in A.1.a. above from the overflow of inland or tidal waters.
The SFIP does not cover damage from any other cause, form, or type of
earth movement or gradual erosion. See Exclusions at SFIP Section V.C.
B. The following are the other key definitions we use in this policy:
1. Act N/A
The National Flood Insurance Act of 1968 and any amendments to it.
2. Actual Cash Value The cost to replace a building, a building item or a personal property item that
The cost to replace an insured item of property at the time of loss, less Includes all charges related to material, labor, and equipment. This price may
the value of its physical depreciation. include charges such as delivery, assembly, sales tax, and any applicable overhead
and profit, and the like. Actual cash value is the cost to replace, less applicable
depreciation on all components of the cost.
3. Application The statement made and signed by the prospective policyholder or the agent when
The statement made and signed by you or your agent in applying for this applying for a policy. The application contains information including the property
policy. The application gives information we use to determine the eligibility of description, information to determine eligibility, the policy form selected, selected
the risk, the kind of policy to be issued, and the correct premium payment. coverage and limits, deductible, and the premium amount.
The application is part of this flood insurance policy. For us to issue you a
policy, the correct premium payment must accompany the application.
4. Base Flood N/A
A flood having a one percent chance of being equaled or exceeded in
any given year.
5. Basement The SFIP definition for a basement means the floor level of a room or any area of a
Any area of the building, including any sunken room or sunken portion of floor level in a building is below the ground level on all sides. This definition may
differ from what policyholders consider as their “basement.” The SFIP considers a
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II. Definitions
Policy Language Additional Explanation
a room, having its floor below ground level (subgrade) on all sides. sunken room or sunken portion of a room is a basement if the floor level is below the
ground level on all sides. The entire below-ground-floor-level area, including walls
and the ceiling that may extend above grade, is subject to basement coverage
limitations.
Ground-level is the surface of the ground immediately along the perimeter of the
building. If an exterior area of egress out of the building is below the ground level
on all sides, installed over a subgrade, the area of egress is below ground level. A
subgrade is a surface of earth leveled off to receive a foundation such as a concrete
slab of a building.
The insurer may need to engage a qualified, licensed professional (example:
surveyor) to measure the floor level in question. See Section 2 of this manual.
Sump wells are not basements because they are not a floor level.
6. Building • The SFIP covers a building, manufactured home (mobile home), or travel
a. A structure with two or more outside rigid walls and a fully trailer if located at the described location, as shown on the Declaration
secured roof, that is affixed to a permanent site; Page and only insures one building.
b. A manufactured home (a “manufactured home,” also known as • The SFIP requires a building to be affixed to a permanent site, whereas it
a mobile home, is a structure: built on a permanent chassis, requires a manufactured home and a travel trailer to be affixed to a
transported to its site in one or more sections, and affixed to a permanent foundation.
permanent foundation); or • A travel trailer (recreational vehicle) with attached wheels is not a
c. A travel trailer without wheels built on a chassis and affixed to a building.
permanent foundation, that is regulated under the community’s • A storage or shipping container, if used as a shed, storage building or
floodplain management and building ordinances or laws. residence, must meet the definition of an eligible building.
Building does not mean a gas or liquid storage tank or a recreational • “Affixed by weight” does not constitute affixed to a permanent site as used in
vehicle, park trailer, or other similar vehicle, except as described in the SFIP.
B.6.c., above.
7. Cancellation • The NFIP Flood Insurance Manual provides an exhaustive list for all valid policy
Represents the ending of the insurance coverage provided by this cancellation reasons.
policy before the expiration date. • The expiration date is the ending of the policy term, the period of
coverage provided by the insurance policy.
• The policy term for the SFIP is one year, after any applicable waiting period.
8. Condominium N/A
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A form of ownership of real property in which each unit owner has
an undivided interest in common elements.
9. Condominium Association A Condominium Association is an entity recognized by a state.
The entity, formed by the unit owners, responsible for the maintenance Homeowners’ associations, townhome associations, and cooperatives, and the like
and operation of: are not condominium associations.
a. Common elements owned in undivided shares by unit owners; and
b. Other real property in which the unit owners have use rights where
membership in the entity is a required condition of unit ownership.
10. Declarations Page N/A
A computer-generated summary of information you provided in the
application for insurance. The Declarations Page also describes the term of
the policy, limits of coverage, and displays the premium and our name. The
Declarations Page is a part of this flood insurance policy.
11. Described Location N/A
The location where the insured building or personal property is found.
The described location is shown on the Declarations Page.
12. Direct Physical Loss By or From Flood The SFIP only pays for damage caused by a direct physical loss by or from flood, as
Loss or damage to insured property, directly caused by a flood. There must defined by the SFIP. A direct physical loss means flood must physically contact the
be evidence of physical changes to the property. insured property and there must be evidence of physical change by or from flood to
the insured building or insured personal property.
Several SFIP provisions, each with its own criteria, address specific situations where
the condition of direct physical loss by or from flood occurs despite an exclusion. In
these specific situations, listed below, the insurer must thoroughly document the
presence of the relevant criteria in the claim file for coverage and payment:
• Losses from mudflow and collapse or subsidence of land as a result of erosion
specifically covered under the SFIP definition of flood (see SFIP Section V.C., as
well as II.A.1.c and II.A.2)
• Back up of water and water-borne material through sewers or drains, where a
flood is the proximate cause of the sewer or drain backup (see SFIP Section
V.D.5.a.)
• Discharge or overflow from a sump, sump pump, or related equipment, where
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a flood is the proximate cause of the sump pump discharge or overflow (see
SFIP Section V.D.5.b.)
• Seepage or leakage on or through the insured building, where a flood is the
proximate cause of the seepage of water (see SFIP Section V.D.5.c.)
• Pressure or weight of water, where a flood is the proximate cause of the
damage from the pressure or weight of water (see SFIP Section V.D.6.)
13. Elevated Building For more information about elevated buildings, see Section 2 of this manual, Lowest
A building that has no basement and has its lowest elevated floor raised Floor Elevation. If an elevated floor in the building is in part supported by a structural
above ground level by foundation walls, shear walls, posts, piers, pilings, or slab-on-grade foundation, additional documentation may be necessary to verify the
columns. elevated rating for the building.
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II. Definitions
Policy Language Additional Explanation
19. National Flood Insurance Program (NFIP) N/A
The program of flood insurance coverage and floodplain management
administered under the Act and applicable Federal regulations in Title 44
of the Code of Federal Regulations, Subchapter B.
20. Policy N/A
The entire written contract between you and us. It includes:
a. This printed form;
b. The application and Declarations Page;
c. Any endorsement(s) that may be issued; and,
d. Any renewal certificate indicating that coverage has been
instituted for a new policy and new policy term.
Only one building, which you specifically described in the application, may
be insured under this policy.
21. Pollutants The policy covers up to $10,000 damage caused by pollutants to covered property if
Substances that include, but that are not limited to, any solid, liquid, gaseous the discharge, seepage, migration, release, or escape of the pollutants is caused by or
or thermal irritant or contaminant, including smoke, vapor, soot, fumes, results from flood. Testing for or monitoring of pollutants is not covered unless
acids, alkalis, chemicals, and waste. "Waste" includes, but is not limited to, required by law. See the General Property Form Section III.C.3.
materials to be recycled, reconditioned, or reclaimed.
22. Post-FIRM Building Community Status Book
A building for which construction or substantial improvement occurred
after December 31, 1974, or on or after the effective date of an initial Flood
Insurance Rate Map (FIRM), whichever is later.
23. Probation Premium N/A
A flat charge you must pay on each new or renewal policy issued
covering property in a community that has been placed on probation
under the provisions of 44 CFR 59.24.
24. Regular Program N/A
The final phase of a community's participation in the National Flood Insurance
Program. In this phase, a Flood Insurance Rate Map is in effect and full limits
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of coverage are available under the Act.
25. Residential Condominium Building N/A
A building owned and administered as a condominium, containing one or
more family units and in which at least 75% of the floor area is residential.
26. Special Flood Hazard Area (SFHA) All zones listed are SFHAs. However, the post-FIRM elevated building coverage
An area having special flood or mudflow, and/or flood-related erosion limitations apply only to Zones A1–A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1–A30,
hazards, and shown on a Flood Hazard Boundary Map or Flood Insurance Rate V1–V30, and VE, at SFIP Section III.A.8.
Map as Zone A, AO, A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO,
AR/A1-A30, V1-V30, VE, V.
27. Stock N/A
Merchandise held in storage or for sale, raw materials, and in-process or
finished goods, including supplies used in their packing or shipping. Stock
does not include any property not covered under Section IV. Property Not
Covered, except the following:
a. Parts and equipment for self-propelled vehicles;
b. Furnishings and equipment for watercraft;
c. Spas and hot-tubs, including their equipment; and
d. Swimming pool equipment.
28. Unit N/A
A unit in a condominium building.
29. Valued Policy The SFIP is not a valued policy; it is a direct physical loss policy. The insurer agrees to
A policy in which the insured and the insurer agree on the value of the pay a policyholder for insured property damaged by direct physical by or from flood,
property insured, that value being payable in the event of a total loss. subject to the terms, conditions, and exclusion of the SFIP.
The Standard Flood Insurance Policy is not a valued policy.
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1. The building described on the Declarations Page at the described location. N/A
If the building is a condominium building and the named insured is the
condominium association, Coverage A includes all units within the building
and the improvements within the units, provided the units are owned in
common by all unit owners.
2. We also insure building property for a period of 45 days at another N/A
location, as set forth in III.C.2.b. Property Removed to Safety.
3. Additions and extensions attached to and in contact with the building by A property owner has the option to separately insure an SFIP-defined addition
means of a rigid exterior wall, a solid loadbearing interior wall, a stairway, if the insured property meets the definition of a building. Otherwise, an
an elevated walkway, or a roof. At your option, additions and extensions addition or extension meeting the requirements of General Property Form
connected by any of these methods may be separately insured. Additions III.A.3. is covered under the General Property Form as part of the building.
and extensions attached to and in contact with the building by means of a
common interior wall that is not a solid load-bearing wall are always
considered part of the building and cannot be separately insured.
4. The following fixtures, machinery, and equipment, which are covered • Blinds include vertical, horizontal, and wood or wood-like
under Coverage A only: blinds.
a. Awnings and canopies; • Central air conditioners include related built-in equipment for
b. Blinds; dehumidification, air filtering, and ventilation.
c. Carpet permanently installed over unfinished flooring; • Walk-in freezers and coolers must be permanently installed or built
d. Central air conditioners; in. Furnaces and radiators include heat pumps, boilers, and related
installed equipment for humidification, air filtering, and ventilation.
e. Elevator equipment;
• Ranges, cooking stoves, ovens include cooktops, range hoods, and
f. Fire extinguishing apparatus;
built-in cooking exhaust apparatuses.
g. Fire sprinkler systems;
• Refrigerators include beverage coolers and other major appliances
h. Walk-in freezers; that refrigerate.
i. Furnaces;
j. Light fixtures;
k. Outdoor antennas and aerials attached to buildings;
(6) Elevators, dumbwaiters, and related equipment, except for related An elevator or dumbwaiter is covered if within the covered building enclosure or
equipment installed below the base flood elevation after September attached to and in contact with the insured building or directly attached to the
30, 1987; 16 square foot landing area used for egress if unattached.
For elevators and dumbwaiters installed below the BFE after September 30,
1987, coverage is limited to the cab and the included controls installed on or in
the cab. Related equipment is everything except the cab and the included
controls and is not covered unless the damaged part of the equipment is
installed above the level at or above the BFE.
A chair lift is covered if within the covered building enclosure or attached to and
in contact with the insured building or attached directly to the 16 square foot
landing area attached to the building and used for egress (See Figures 21 and
22).
(7) Fuel tanks and the fuel in them; Fuel tanks and the fuel in them include a connected fuel gauge or fuel filter.
(8) Furnaces and hot water heaters; Furnaces and hot water heaters include boilers and permanently installed
equipment for humidification, air filtering, and ventilation. This includes those
portions of the central HVAC in a building enclosure below the LFE or
basement, including boilers and connected radiators and hot water
baseboards. This does not include electric baseboard heaters, whether
hardwired to the electrical system or not.
(9) Heat pumps; Heat pumps and other central HVAC units permanently installed equipment
related to humidification, dehumidification, air filtering, and ventilation.
(10) Nonflammable insulation in a basement; Nonflammable insulation in a basement includes:
• Nonflammable insulation in walls and ceilings.
For post-FIRM elevated buildings in SFHAs, coverage applies to:
• Insulation installed between joists within the lowest elevated floor
including plywood and any other material used to hold in the insulation.
• Unfinished protective weather barriers affixed to the floor framing.
The SFIP does not cover the basement exterior egress staircase located outside
of the perimeter building walls, even if covered by a roof or door. See SFIP
Section IV.9.
(13) Sump pumps N/A
(14) Water softeners and the chemicals in them, water filters, and The SFIP allows for a faucet that is affixed directly to the plumbing line, as
faucets installed as an integral part of the plumbing system; opposed to a faucet that is connected to plumbing lines but mounted onto a
sink as a finished fixture. See Section 2: Water Softeners in this manual.
(15) Well water tanks and pumps; Well water tanks and pumps include the pressure switch, pressure valve, and
gauge.
(16) Required utility connections for any item in this list; and N/A
(17) Footings, foundations, posts, pilings, piers, or other foundation walls Footings, foundations, posts, pilings, piers, or other foundation walls and
and anchorage systems required to support a building. anchorage systems required to support a building:
• Includes windows and doors installed in the perimeter foundation walls
of an SFIP-defined basement area such as a perimeter wall basement
garage door or sliding glass door.
• Include vents installed in and considered part of the covered
foundation walls of a post-FIRM elevated building. However, there is no
coverage for breakaway walls or vents in breakaway walls.
• Does not include screen or storm doors, or a door covering or
1. If you have purchased personal property coverage, we insure, subject to • The SFIP does not cover personal property items not within the fully
B.2., 3. and 4. below, against direct physical loss by or from flood to enclosed insured building at the described location. This differs from
personal property inside the fully enclosed insured building: the Dwelling Form in that the Dwelling Form covers personal property
a. Owned solely by you, or in the case of a condominium, owned solely by within any SFIP-defined building at the described location.
the condominium association and used exclusively in the conduct of the • See SFIP Section III.C.2.b. for Property Removed to Safety.
business affairs of the condominium association; or • Property leased under a “capital lease,” a contract that entitles a renter
b. Owned in common by the unit owners of the condominium association. the temporary use of an item and to account for the financial effect of
We also insure such personal property for 45 days while stored at a temporary ownership on the balance sheet, qualifies as insurable interest and can be
location, as set forth in III.C.2.b. Property Removed to Safety. claimed even if the property is not solely owned by the policyholder.
In contrast, an “operating lease” is a contract that entitles a renter the
temporary use of an item but does not convey ownership rights. Property
in the possession of a policyholder obtained through an operating lease
cannot be represented in balancing sheet financials according to
Generally Accepted Accounting Principles (GAAP) and is not covered
1. Debris Removal Insured property means the insured dwelling and covered personal property.
a. We will pay the expense to remove non-owned debris that is on or The SFIP does not pay for removal of:
in insured property and debris of insured property anywhere. • Non-covered debris anywhere, such as a non-covered damaged
b. If you or a member of your household perform the removal work, the property or debris located in the yard, driveway, or on another parcel
value of your work will be based on the Federal minimum wage. of land.
c. This coverage does not increase the Coverage A or Coverage B limit • Non-covered items of property, even if the removal of the item
of liability facilitates cleanup of covered building repairs, such as the removal of
carpet installed inside a basement, or the removal of plants, shrubs, or
trees along the perimeter of the building to access foundation or
siding repairs.
2. Loss Avoidance Measures The SFIP only covers those items specifically noted. The policyholder must
a. Sandbags, Supplies, and Labor provide receipts for covered materials they purchased. Additionally, the NFIP
reimburses the policyholder labor at the Federal minimum wage at the time of
(1) We will pay up to $1,000 for the costs you incur to protect the
the loss.
insured building from a flood or imminent danger of flood, for the
following: Water-filled bladders, as shown in Figure 25, are considered a temporary
(a) Your reasonable expenses to buy: levee for the purposes of loss avoidance coverage. However, because these
are reusable, the SFIP will pay the cost to purchase the bladder once, but only
(i) Sandbags, including sand to fill them; when the initial purchased is in connection to the claimed flood event. After
that event, any future claim for loss avoidance here is limited to the labor and
1. General N/A
This policy pays you to comply with a State or local floodplain management law or
ordinance affecting repair or reconstruction of a structure suffering flood damage.
1. Personal property not inside the fully enclosed building; This provision applies to tenants and building owners for personal property
inside the insured building.
2. A building, and personal property in it, located entirely in, on, or over water • The SFIP allows coverage for a building not entirely over water, for
or seaward of mean high tide, if it was constructed or substantially example: when part of the exterior perimeter wall and foundation of
improved after September 30, 1982; the building is on land or the landward side of mean high tide (mean
high water).
• When the exterior perimeter walls of the building are completely
over water and the support system or foundation underneath the
insured building extends onto land, or the extension of any
mechanism for access into a building (including, but not limited to,
stairs, decks, walkways, piers, posts, pilings, docks, or driveways),
even if the mechanism is on or partially on land, the building or the
access will not be eligible for coverage.
• If the exterior perimeter walls of a building are completely over water,
but connected to another eligible building by means of an elevated
walkway, stairway, roof, and/or rigid exterior wall, or there is an
appurtenant structure on the same slab, foundation, or other continuous
support system that is on land (such as a shed or garage), the presence
of the connected building or appurtenant structure on land does not
allow coverage to be afforded to the building that has its exterior
perimeter walls entirely over water.
3. Open structures, including a building used as a boathouse or any structure The SFIP does not cover boathouses or buildings into which boats can
or building into which boats are floated, and personal property located in, float and personal property located within buildings used solely as
on, or over water; boathouses.
The SFIP does not cover a building and personal property within it, located in,
on, or over water or seaward of mean high tide if the building was
constructed or substantially improved after September 30, 1982.
5. Self-propelled vehicles or machines, including their parts and equipment. The SFIP does not cover self-propelled vehicles or machinery. There are two
However, we do cover self-propelled vehicles or machines, provided they specific instances where coverage is provided, so long as:
are not licensed for use on public roads and are: (1) the vehicle or machinery is not licensed for use on public roads.
a. Used mainly to service the described location; or (2) specific documentation is provided to support the claim.
b. Designed and used to assist handicapped persons, while the vehicles or Under (a), the described location must be the type that would reasonably
machines are inside a building at the described location; require service by means of the vehicle or machinery in question. Secondly,
there must be evidence the described location is routinely serviced in
support of what is claimed under this provision. Vehicles and machinery that
are part of or service a business operation at the described location do not
qualify for coverage under this provision.
Under (b), a vehicle or machinery is covered if it is designed and used as
mobility vehicles for persons with disabilities. The vehicle or machinery is not
covered if it is not designed to assist persons with disabilities, or not used by
persons with disabilities. As an example, a typical golf cart is not covered
under this provision, even if it is used by persons with disabilities, unless
10. Containers including related equipment, such as, but not limited to, tanks The SFIP does not cover fuel tanks, pressure tanks, and well water tanks
containing gases or liquids; located outside of the insured building or an eligible detached garage. The
SFIP does not cover containers outside of the building, including shipping
containers used for storage or residential purposes, unless the container
meets the definition of a building.
The SFIP covers fuel tanks, water tanks, and pressure tanks inside or directly
underneath the building, including in a basement or crawlspace, under
Coverage A – Building Property, when installed as part of a utility system
that services the building.
Under Coverage B – Personal Property, the SFIP will cover any container
V. Exclusions
Policy Language Additional Explanation
A. We only pay for direct physical loss by or from flood, which means that we do not pay you for:
1. Loss of revenue or profits; The SFIP does not cover the costs to pack, move, or store personal property from the
2. Loss of access to the insured property or described location; insured building or return it to the building when an owner repairs the building or
cannot occupy it.
3. Loss of use of the insured property or described location;
4. Loss from interruption of business or production;
5. Any additional expenses incurred while the insured building is being
repaired or is unable to be occupied for any reason;
V. Exclusions
Policy Language Additional Explanation
6. The cost of complying with any ordinance or law requiring or The SFIP does not cover replacing non-flood damaged property required to comply
regulating the construction, demolition, remodeling, renovation, or with government codes, ordinances, or regulations. For example, the SFIP does not
repair of property, including removal of any resulting debris. This cover the cost of replacing an undamaged interior HVAC unit to match a replaced
exclusion does not apply to any eligible activities we describe in exterior HVAC unit because of a change in size, SEER-rating, refrigerant, or any other
Coverage D—Increased Cost of Compliance; or reason even if local, state, or federal code required the upgrade.
7. Any other economic loss you suffer.
B. We do not insure a loss directly or indirectly caused by a flood that is already in progress at the time and date:
1. The policy term begins; or NFIP adjusts flood insurance losses individually. Flood insurance benefits are available
2. Coverage is added at your request. if an insured property suffers a covered loss caused by a general condition of
flooding, as defined by the SFIP.
See Flood-In-Progress Exclusion in Section 2 of this manual.
C. We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that
we do not cover are:
1. Earthquake; The SFIP is a single-peril policy that only pays for covered damage due to direct
2. Landslide; physical loss by or from flood, defined in the policy in Section II. The SFIP does not
cover damage resulting from an intervening cause of loss, even if the resulting cause
3. Land subsidence;
is due to flood. The SFIP does not cover damage that results when saturated soils
4. Sinkholes; cause the soil below ground level to sink, expand, compact, destabilize, or otherwise
5. Destabilization or movement of land that results from accumulation lose its load-bearing capacity such as from voids or rotten organic matter when the
of water in subsurface land areas; or soil dries. The SFIP does not cover earth movement; each form of earth movement is
6. Gradual erosion an intervening cause of loss and a separate peril.
We do, however, pay for losses from mudflow and land subsidence as a result The SFIP’s exclusion for other perils, such as fire, exemplifies the exclusion of earth
of erosion that are specifically covered under our definition of flood (see A.1.c. movement as a cause of loss. When a flood causes a fire, which damages the building
and II.A.2.). during inundation or after floodwaters recede, NFIP does not cover the resulting fire
and smoke damage to the building even if flood directly caused the fire.
The SFIP covers damage to a building if the damage results from the collapse or
subsidence of land that is the direct result of sudden erosion or undermining to the
building’s support soil underneath or directly along the perimeter foundation of the
building from waves or currents of floodwater (velocity flow) during a flood from the
overflow of inland or tidal waters or mudflow. This includes damage to the
foundation of the building and any resulting damage to interior and exterior finishes.
V. Exclusions
Policy Language Additional Explanation
The SFIP does not cover damage caused by gradual erosion.
D. We do not insure for direct physical loss caused directly or indirectly N/A
by:
1. The pressure or weight of ice; When the policyholder is prevented access to promptly remove wetted building and
2. Freezing or thawing; personal property items, and this delay directly results in water, moisture, mildew or
mold damage to building and personal property items not in physical contact with
3. Rain, snow, sleet, hail, or water spray;
surface floodwater, this damage could be covered.
4. Water, moisture, mildew, or mold damage that results primarily
As examples:
from any condition:
• Local authorities restrict access to the area, or
a. Substantially confined to the insured building; or
b. That is within your control including, but not limited to: • Prolonged inundation of floodwater prevents access to the area.
The claim file must include proper documentation, such as but not limited to
(1) Design, structural, or mechanical defects;
photographs, an acceptable explanation provided by the adjuster, or a signed
(2) Failures, stoppages, or breakage of water or sewer lines, drains, statement from the policyholder or community official that supports the payment for
pumps, fixtures, or equipment; or property damages above the documented water height.
(3) Failure to inspect and maintain the property after a flood For instances when coverage and payment are not recommended, the claim file
recedes; should include information that documents the policyholder’s failure to inspect and
maintain their insured property or take reasonable measures to reduce damage when
it is feasible to do so.
The SFIP does not cover damage caused by long-term exposure to moisture, water,
rot, and insect infestation. This includes damage from the lack of climate control
inside the building when the approach to repair does not include the timely repair
to the building HVAC system.
The SFIP does not cover pre-existing damage to structural building components, such
as damage caused by rot, or for any resulting damage to non-structural finish building
material.
5. Water or water-borne material that: The adjuster must document that a flood occurred in the area and that the flood was
a. Backs up through sewers or drains; the proximate cause of the back-up of the sewer or drain, overflow of the sump
pump, pump failure, seepage of water, or damage due to the pressure or weight of
b. Discharges or overflows from a sump, sump pump, or related
water (hydrostatic pressure), in the claim file. See SFIP Section II.A and related
equipment; or
commentary under the definition of flood.
c. Seeps or leaks on or through the covered property;
When paying a loss due to a flood in the area proximately causing discharge or
overflow of water or water-borne material from a sump, sump pump, or related
V. Exclusions
Policy Language Additional Explanation
unless there is a flood in the area and the flood is the proximate cause of equipment, the insurer must document the claim file to show that a property policy
the sewer or drain backup, sump pump discharge or overflow, or the endorsement or policy rider did not also cover the loss. If the property policy does
seepage of water; provide coverage, the SFIP payment must apply a proportional loss distribution, as
stated under Section VII.C. “Other Insurance”.
The adjuster must document a flood occurred in the area, and that the flood was the
proximate cause of the back-up of the sewer or drain, overflow of the sump pump,
pump failure, seepage of water, or damage due to the pressure or weight of water
(hydrostatic pressure). A flood is two or more parcels of partial or complete
inundation of normally dry land, or two or more continuous acres of normally dry
land. For coverage under this provision, the condition of flood does not have to be on
the parcel of land described at the location; it may be within the proximate area.
6. The pressure or weight of water unless there is a flood in the area Refer to SFIP Section V.D.5. above.
and the flood is the proximate cause of the damage from the
pressure or weight of water;
7. Power, heating, or cooling failure unless the failure results from The SFIP does not cover damage to insured property when caused by a power surge or
direct physical loss by or from flood to power, heating, or cooling power outage that originates from the failure or shutting down of equipment that is
equipment situated on the described location; not located at the described location, even if the reason is a direct result of a flood. For
example, the local utility operator may shut down a section of the electrical grid to
avoid system damage from a flood. When the power returns to the electrical grid, the
initial surge of electricity can damage insured property. Under this loss description, the
damage is not covered.
The SFIP covers damage to any covered building or personal property item, such as the
building’s main service, home security system, a plugged-in television, or to the HVAC
system, when a flood physically damages related system equipment installed at the
described location. For example, if the flood damages power equipment at the
described location creating an electrical short within the power system resulting in
damage to another item of property part of or connected to the power system, the
damage to the item is also covered, even though it was not physically touched by
floodwater. Under this loss description, the damage is considered a direct physical loss
by or from flood. To cover the loss described, the adjuster must document the cause
of loss in the claim file to rule out the possibility of a non-covered cause, such as
described in the previous paragraph.
V. Exclusions
Policy Language Additional Explanation
8. Theft, fire, explosion, wind, or windstorm; N/A
9. Anything that you or your agents do or conspire to do to cause loss
by flood deliberately; or
10. Alteration of the insured property that significantly increases the risk
of flooding.
E. We do not insure for loss to any building or personal property N/A
located on land leased from the Federal Government, arising from or
incident to the flooding of the land by the Federal Government,
where the lease expressly holds the Federal Government harmless
under flood insurance issued under any Federal Government
program.
VI. Deductibles
Policy Language Additional Explanation
A. When a loss is covered under this policy, we will pay only that part of the loss that exceeds the applicable deductible amount, subject to the limit of liability that
amount, subject to the limit of liability that applies. The deductible amount is shown on the Declarations Page.
However, when a building under construction, alteration, or repair does not have at least two rigid exterior walls and a fully secured roof at the time of loss, your
deductible amount will be two times the deductible that would otherwise apply to a completed building.
B. In each loss from flood, separate deductibles apply to the building and personal property insured by this policy.
1. III.C.2. Loss Avoidance Measures; or The SFIP applies a separate deductible to both building and personal property losses.
2. III.D. Increased Cost of Compliance. The SFIP will only pay that portion of the loss that exceeds the applicable deductibles.
For building and personal property losses, the insurer should take the deductible
from the gross loss before applying policy limits. For example, if the covered loss is
$340,000, the policy limit is $300,000, and the deductible is $10,000. The insurer
should apply the deductible to the $340,000 loss, which leaves $330,000, meaning
the insurer should pay the $300,000 policy limit.
The SFIP does not apply the excess loss to items subject to Special Limits to reduce
the personal property deductible.
In case of loss to an article that is part of a pair or set, we will have the option If the damaged property item is ruined, and cannot be replaced individually as a
of paying you: single item, and this renders the other item in the pair or the set unusable or
1. An amount equal to the cost of replacing the lost, damaged, or worthless, then the SFIP pays for the pair or set.
destroyed article, less depreciation, or Examples: Left shoe ruined by flood, and the right shoe undamaged. The left shoe
2. An amount which represents the fair proportion of the total value of cannot be purchased without the right, rendering the undamaged right shoe
the pair or set that the lost, damaged, or destroyed article bears to unusable. The SFIP covers a new pair of shoes. Other similar examples include a
the pair or set. ruined china base cabinet and undamaged matching china base top; half the seats
1. With respect to all insureds under this policy, this policy: When claims professionals suspect wrongful acts or misrepresentations on a claim
a. Is void, by a policyholder or their representatives:
b. Has no legal force or effect, • The adjuster should promptly submit written notification with supporting
documentation to the insurer. The adjuster should not draw any conclusions
c. Cannot be renewed, and
regarding the suspected fraud and should only present facts in written reports.
d. Cannot be replaced by a new NFIP policy, if, before or after a loss, you
or any other insured or your agent have at any time: • The examiner should engage management to determine if the insurer should
refer the matter to the FEMA Fraud Unit (email:
(1) Intentionally concealed or misrepresented any material fact or [email protected]) and the insurer’s investigative unit for a
circumstance, Reservation of Rights.
1. If a loss covered by this policy is also covered by other insurance that Other insurance includes primary flood coverage provided by a private carrier or
includes flood coverage not issued under the Act, we will not pay more any other insurance that duplicates SFIP coverage.
than the amount of insurance that you are entitled to for lost, damaged, or Personal lines and commercial policies may have endorsements for sewer and
destroyed property insured under this policy subject to the following: sump or drain backup. Considerations include:
a. We will pay only the proportion of the loss that the amount of 1. The other insurance clause of the other policy would determine which policy is
insurance that applies under this policy bears to the total amount of excess or primary.
insurance covering the loss, unless C.1.b. or c. below applies.
2. If the other policy is silent, proportion the claim.
b. If the other policy has a provision stating that it is excess insurance,
3. If the endorsement excludes the peril of flood, the SFIP is primary for the direct
this policy will be primary.
physical damage by or from flood.
c. This policy will be primary (but subject to its own deductible) up to
• Use the following formula to determine the NFIP’s share of the loss:
the deductible in the other flood policy (except another policy as
described in C.1.b. above). When the other deductible amount is NFIP share = ((SFIP policy limit ÷ total insurance) x loss) - other insurance
reached, this policy will participate in the same proportion that the deductible
• Use the following formula to determine the other insurance’s share of the loss:
This policy cannot be changed nor can any of its provisions be waived without The SFIP allows the assignment of the policy when the title to the property transfers
the express written consent of the Federal Insurance Administrator. No action to a new owner.
that we take under the terms of this policy can constitute a waiver of any of The SFIP does not allow the assignment of a claim. The only exception to this is a
our rights. You may assign this policy in writing when you transfer title of your Coverage D – Increased Cost of Compliance (ICC) claim that can transfer in
property to someone else except under these conditions: conjunction with a FEMA project, such as a Hazard Mitigation Grant Program (HMGP)
1. When this policy covers only personal property; or grant. Typically, the policyholder assigns the claim to a community, which typically
2. When this policy covers a structure during the course of construction. uses the payment for the community’s non-Federal match for the project. The
1. You may cancel this policy in accordance with the applicable rules and Policyholders must have a valid reason to cancel their flood insurance coverage
regulations of the NFIP. during a policy term.
2. If you cancel this policy, you may be entitled to a full or partial refund of See the Flood Insurance Manual for detailed information.
premium also under the applicable rules and regulations of the NFIP.
F. Non-Renewal of Policy by Us
Your policy will not be renewed: When a community no longer participates in the NFIP, an active SFIP will remain in
1. If the community where your covered property is located stops force up to the day before the policy renewal date.
participating in the NFIP; or Coverage may not be available for a building constructed or altered in violation of
2. If your building has been declared ineligible under section 1316 of the Act. state or local floodplain management laws, regulations, or ordinances. Section 1316
of the Act allows a state or community to declare a building in violation of its
floodplain management rules. When a state or community declares that a building is
in violation of Section 1316, the building and any contents in it are not eligible for
SFIP coverage. Insurers have a list of buildings with Section 1316 violations that are
ineligible for NFIP coverage. When the owner corrects the violation, the building
becomes eligible for coverage again. The examiner should verify the building’s
eligibility.
G. Reduction and Reformation Coverage
1. If the premium we received from you was not enough to buy the kind and If the policyholder gives the insurer a premium that will not purchase the amounts of
amount of coverage that you requested, we will provide only the amount insurance requested, the insurer must issue the policy for the insurance coverage
of coverage that can be purchased for the premium payment we received. amount the premium will purchase for a one-year policy term.
2. The policy can be reformed to increase the amount of coverage resulting After a Loss:
from the reduction described in G.1. above to the amount you requested • The insurer will send a bill for the required additional premium for the current
as follows: policy term only. This is an exception to the SFIP Provisions requiring the
a. Discovery of Insufficient Premium or Incomplete Rating Information current and the prior policy terms.
Before a Loss. • If the insurer receives the premium within 30 days from the date of the bill, the
(1) If we discover before you have a flood loss that your premium insurer should increase the policy limits to the originally requested amount
payment was not enough to buy the requested amount of effective as of the beginning of the current policy term.
1. This policy will expire at 12:01 a.m. on the last day of the policy term. The SFIP is not a continuous policy. It is a contract for a one-year term. Every policy
2. We must receive the payment of the appropriate renewal premium within contract expires at 12:01 a.m. on the last day of the policy term. Renewal of an
30 days of the expiration date. expiring policy establishes a new policy term and new contractual agreement. See
the Flood Insurance Manual for detailed information.
3. If we find, however, that we did not place your renewal notice into the U.S.
Postal Service, or if we did mail it, we made a mistake, e.g., we used an The adjuster should investigate the claim under a signed non-waiver agreement or
incorrect, incomplete, or illegible address, which delayed its delivery to you reservation of rights by the insurer when a policyholder reports a loss and there
a
before the due date for the renewal premium, then we will follow these is uncertainty as to whether a policy is active.
procedures:
a. If you or your agent notified us, not later than one year after the date
on which the payment of the renewal premium was due, of
nonreceipt of a renewal notice before the due date for the renewal
premium, and we determine that the circumstances in the preceding
paragraph apply, we will mail a second bill providing a revised due
date, which will be 30 days after the date on which the bill is mailed.
b. If we do not receive the premium requested in the second bill by the
revised due date, then we will not renew the policy. In that case, the
policy will remain as an expired policy as of the expiration date shown
on the Declarations Page.
We are not liable for loss that occurs while there is a hazard that is increased The SFIP will not cover a flood loss or increased flood damage to insured property
by any means within your control or knowledge. that the policyholder purposely or inadvertently causes. For example: a policyholder
constructs a flood barrier to prevent floodwater from a river form reaching the
building; however, the improvement now causes runoff during heavy rainfall events
to collect behind the barrier and flood the building and a neighboring parcel or
causes a prolonged condition of inundation creating additional damage inside the
building.
When the investigation of a loss reveals this provision might apply, the adjuster
should notify the insurer at once and request immediate guidance.
J. Requirements in Case of Loss
In case of a flood loss to insured property, you must: The policyholder’s claim begins with the written notice of loss.
1. Give prompt written notice to us; The policyholder must report the loss to the insurer immediately; failure to provide a
notice of loss to the insurer could prejudice the ability of the insurer to inspect the
loss, identify the cause and extent of damage, and determine applicable coverage
under the SFIP. If the policyholder delays reporting a loss, adjusters cannot help
policyholders protect the property and avoid further damage.
A policyholder’s failure to provide timely notice of loss can be a basis for denial of a
claim.
• The adjuster should document the reason for a delay in the policyholder
reporting a loss to the insurer.
• The adjuster should execute a non-waiver agreement when there is a delay
in reporting the loss. The non-waiver agreement should include the reason
for the non- waiver and the policyholder’s explanation for the delay. The
adjuster should have the policyholder sign the non-waiver agreement
immediately. If the policyholder refuses to sign the non-waiver agreement,
Options we may, in our sole discretion, exercise after loss includes the This section sets forth the steps that insurers may take to require action on the part
following: of the policyholder. If the policyholder fails to comply with the insurer’s request, the
policyholder is in breach of the insuring agreement, which may affect the payment of
the claim.
b. Actual cash values; The actual cash value represents the replacement cost to replace, not repair, less
applicable depreciation of all components of the price.
c. Amounts of loss claimed; The amount of loss claimed is the amount of payment the policyholder asks to
receive for the damaged and covered property.
d. Any written plans and specifications for repair of the damaged Written plans and specifications for repair of the damaged property include
property that you can reasonably make available to us; and contractor estimates, subcontractor bids, invoices, architectural reports and
drawings, engineering reports, etc. This also includes water restoration or structural
drying invoices and supporting documentation.
NFIP will not accept a non-itemized, lump sum, or single line estimate or invoice in
support of a claim.
e. Evidence that prior flood damage has been repaired. Policyholders must provide evidence of repair from the previous flood damage
whether or not they owned or insured the property. This includes any damage
unrepaired by a previous owner.
NFIP expects policyholders to maintain proof of repairs such as receipts, canceled
checks, etc. in a safe location away from the threat of flood.
When policyholders do not have proof of repairs, adjusters should request other
forms of documentation such as:
• Pre-flood photographs (social media or other family members) to compare
old and replaced items.
• Credit card or bank statements showing dates and dollar amounts of
payments to contractors.
No person or organization, other than you, having custody of covered property Bailment is the delivery of personal property by one person (the bailor) to another
will benefit from this insurance. (the bailee) who holds the property for a certain purpose, such as service, under
an expressed or implied-in-fact contract.
The SFIP does not cover the bailee because bailment is a change of possession, not a
change of ownership or title. When a customer (bailor) takes personal clothing to the
dry cleaner (bailee) illustrates a good example. A bailment exists when the bailee has
the clothing. The articles of clothing in the possession of the bailee are bailee goods
and are not covered.
Consignment is a written agreement where a consignor provides owned personal
property to a consignee for sale and gives the consignee a percentage of the sale
price when sold. The SFIP does not cover property on consignment.
M. Loss Payment
1. We will adjust all losses with you. We will pay you unless some other Adjusters and examiners should work with a policyholder or their authorized
person or entity is named in the policy or is legally entitled to receive representative to understand the loss, prepare the estimate, and reach an agreed
payment. Loss will be payable 60 days after we receive your proof of loss value for the loss.
(or within 90 days after the insurance adjuster files an adjuster’s report The insurer’s obligation to pay and the 60-day timeframe to pay begin once the
signed and sworn to by you in lieu of a proof of loss) and: policyholder meets the requirements in Paragraph J, a proof of loss that meets all
a. We reach an agreement with you; NFIP requirements, or after the signed and sworn to adjuster’s report is received,
b. There is an entry of a final judgment; or and,
c. There is a filing of an appraisal award with us, as provided in VII.P. • Insurer and the policyholder agree on the payment amount, or
You may not abandon damaged or undamaged insured property to us. N/A
O. Salvage
We may permit you to keep damaged insured property after a loss, and we will The insurer always has the right to seek salvage or to take possession of damaged
reduce the amount of the loss proceeds payable to you under the policy by the property. Insurers should pursue opportunities for financial recovery when
value of the salvage. available.
See Salvage in Section 2 of this manual.
If you and we fail to agree on the actual cash value of the damaged property so See Appraisal in Section 2 of this manual.
as to determine the amount of loss, either may demand an appraisal of the
loss. In this event, you and we will each choose a competent and impartial
appraiser within 20 days after receiving a written request from the other. The
two appraisers will choose an umpire. If they cannot agree upon an umpire
within 15 days, you or we may request that the choice be made by a judge of a
court of record in the state where the insured property is located. The
appraisers will separately state the actual cash value and the amount of loss to
each item. If the appraisers submit a written report of an agreement to us, the
amount agreed upon will be the amount of loss. If they fail to agree, they will
submit their differences to the umpire. A decision agreed to by any two will set
the amount of actual cash value and loss.
Each party will:
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.
Q. Mortgage Clause
The word “mortgagee” includes trustee. The SFIP pays claims for building property to the named policyholder, mortgage
Any loss payable under Coverage A—Building Property will be paid to any holders, lienholders, other loss payees for whom we have actual notice, and any loss
mortgagee of whom we have actual notice, as well as any other mortgagee or payee determined to exist at the time of loss. The mortgage clause is a contract
loss payee determined to exist at the time of loss, and you, as interests appear. within a contract. It is a contract between the mortgagee and the insurer within the
If more than one mortgagee is named, the order of payment will be the same contract between the policyholder and the insurer. Including the name of the
as the order of precedence of the mortgages. If we deny your claim, that mortgagee on each building claim payment is the surest way to keep this promise to
denial will not apply to a valid claim of the mortgagee, if the mortgagee: the mortgagee. For all building payments, except Coverage C – Other Coverages and
Coverage D – ICC, include all known mortgagees, as they are additional insureds.
1. Notifies us of any change in the ownership or occupancy, or substantial
change in risk of which the mortgagee is aware; The insurer may potentially include a loss payee or lienholder on Coverage B –
Personal Property of whom the insurer received actual notice, such as from the
2. Pays any premium due under this policy on demand if you have neglected
U.S. Small Business Administration (SBA). If the insurer receives a letter of an SBA-
to pay the premium; and
approved loan, the SBA must be included on the building check(s) and the contents
3. Submits a signed, sworn proof of loss within 60 days after receiving notice check(s) if the loan is for both real estate and personal or business property.
from us of your failure to do so.
All terms of this policy apply to the mortgagee.
You may not sue us to recover money under this policy unless you have The statute of limitations begins with the insurer’s first written denial of the claim.
complied with all the requirements of the policy. If you do sue, you must start Subsequent denial letters do not re-start the statute of limitations. Policyholders
the suit within one year of the date of the written denial of all or part of the must file suit in a U.S. District Court in the district where the loss occurred within one
claim, and you must file the suit in the United States District Court of the year after the insurer’s first written denial. Neither the Federal Insurance
district in which the insured property was located at the time of loss. This Administrator nor the insurer may extend the one-year statute of limitations to file
requirement applies to any claim that you may have under this policy and to suit.
any dispute that you may have arising out of the handling of any claim under
the policy.
S. Subrogation
Whenever we make a payment for a loss under this policy, we are subrogated When the adjuster believes there may be potential for subrogation, the adjuster
to your right to recover for that loss from any other person. That means that completes FEMA Form 086-0-16 – Cause of Loss and Subrogation Report, to identify
your right to recover for a loss that was partly or totally caused by someone a potentially responsible third party; and characterize how their actions may have
else is automatically transferred to us, to the extent that we have paid you for caused or worsened flood damage. Claim handling, review, and payment should
the loss. We may require you to acknowledge this transfer in writing. After the proceed as normal. The insurer should make sure the Cause of Loss and Subrogation
loss, you may not give up our right to recover this money or do anything that Report is complete and escalates the matter for a subrogation review.
would prevent us from recovering it. If you make any claim against any person See Subrogation in Section 2 of this manual.
who caused your loss and recover any money, you must pay us back first
before you may keep any of that money.
T. Continuous Lake Flooding
1. If an insured building has been flooded by rising lake waters continuously N/A
for 90 days or more and it appears reasonably certain that a continuation
1. Property may not be insured under more than one NFIP policy. The policyholder cannot benefit from the duplicate flood insurance coverage if a
If we find that the duplication was not knowingly created, we will give you policyholder has two NFIP policies insuring the same property. The first policy
written notice. The notice will advise you that you may choose one of several purchased is the policy in force at the time of loss.
options under the following procedures: When there is no loss involved, the policyholder may choose to keep either policy. If
a. If you choose to keep in effect the policy with the earlier effective the policyholder chooses to combine the coverage amounts purchased, and the
date, you may also choose to add the coverage limits of the later combined coverage does not exceed the maximum statutory limits, the effective
policy to the limits of the earlier policy. The change will become date of the increased coverage begins on the renewal date of the second policy
effective as of the effective date of the later policy. purchased.
b. If you choose to keep in effect the policy with the later effective date,
you may also choose to add the coverage limits of the earlier policy to
the limits of the later policy. The change will be effective as of the
effective date of the later policy.
In either case, you must pay the pro rata premium for the increased coverage
limits within 30 days of the written notice. In no event will the resulting
coverage limits exceed the permissible limits of coverage under the Act or your
insurable interest, whichever is less.
We will make a refund to you, according to applicable NFIP rules, of the
premium for the policy not being kept in effect.
2. Your option under this Condition U. Duplicate Policies Not Allowed to elect
which NFIP policy to keep in effect does not apply when duplicates have
been knowingly created. Losses occurring under such circumstances will be
adjusted according to the terms and conditions of the earlier policy. The
policy with the later effective date must be canceled.
V. Loss Settlement
We will pay the least of the following amounts after application of the An actual cash value loss settlement is the cost to repair or replace insured building
deductible: items at the time of the loss, less the building deductible and less its physical
1. The applicable amount of insurance under this policy; depreciation.
2. The actual cash value; or
3. The amount it would cost to repair or replace the property with material of
like kind and quality within a reasonable time after the loss.
II. Definitions
Policy Language Additional Explanation
A. In this policy, "you" and "your" refer to the insured(s) shown on the Declarations Page of this policy. Insured(s) includes: Any mortgagee and loss payee named in
the Application and Declarations Page, as well as any other mortgagee or loss payee, determined to exist at the time of loss in the order of precedence. "We,"
"us," and "our" refer to the insurer.
Some definitions are complex because they are provided as they appear in the law or regulations or result from court cases. The precise definitions are intended
to protect you.
Flood For a general condition of flood to exist, the inundation must cover two or more
1. A general and temporary condition of partial or complete inundation of acres of normally dry land or two or more parcels of land, one of which can be public
two or more acres of normally dry land area or of two or more properties property such as a roadway).
(one of which is your property) from: The reference to “partial or complete inundation of two or more acres of normally
a. Overflow of inland or tidal waters, dry land area or two or more properties” requires that the two or more acres must
be continuous acres, and that the two or more inundated parcels of land must touch.
b. Unusual and rapid accumulation or runoff of surface waters from
any source, For mudflow definition, see SFIP Section II.B.19.
c. Mudflow.
2. Collapse or subsidence of land along the shore of a lake or similar body of The SFIP also defines a flood as the collapse or subsidence of land along the shore of
water as a result of erosion undermining caused by waves or currents of a lake or similar body of water from erosion or undermining caused by waves or
water exceeding anticipated cyclical levels which result in a flood as currents of water (velocity flow) exceeding anticipated cyclical levels during a flood
defined in A.1.a. above. from the overflow of inland or tidal waters.
The SFIP does not cover damage from any other cause, form, or type of earth
movement. It also does not cover gradual erosion. See Exclusions at SFIP Section V.C.
B. The following are the other key definitions we use in this policy:
1. Act N/A
The National Flood Insurance Act of 1968 and any amendments to it.
2. Actual Cash Value The cost to replace a building, a building item, or a personal property item that
The cost to replace an insured item of property at the time of loss, less the includes all charges related to material, labor, and equipment. This price may include
value of its physical depreciation. charges such as delivery, assembly, sales tax, and any applicable overhead and profit,
and the like. Actual cash value is this cost to replace less applicable depreciation on
all components of the cost.
3. Application The statement made and signed by the prospective policyholder or the agent when
The statement made and signed by you or your agent in applying for this applying for a policy. The application contains information including the property
policy. The application gives information we use to determine the eligibility of description, information to determine eligibility, the policy form chosen, selected
II. Definitions
Policy Language Additional Explanation
the risk, the kind of policy to be issued, and the correct premium payment. coverage and limits, deductible, and the premium amount.
The application is part of this flood insurance policy. For us to issue you a
policy, the correct premium payment must accompany the application.
4. Base Flood N/A
A flood having a one percent chance of being equaled or exceeded in
any given year.
5. Basement The SFIP definition for a basement means the floor level of a room or any area of a
Any area of the building, including any sunken room or sunken portion of floor level in a building is below the ground level on all sides. This definition may
a room, having its floor below ground level (subgrade) on all sides. differ from what policyholders may consider as their “basement.” The SFIP considers
a sunken room or sunken portion of a room to be a basement if the floor level is
below the ground level on all sides. The entire below-ground-floor-level area,
including walls and ceiling that may extend above grade, is subject to basement
coverage limitations.
Figure 29. Sunken Room
II. Definitions
Policy Language Additional Explanation
Figure 30. Ground Level vs. Below Ground Level
II. Definitions
Policy Language Additional Explanation
transported to its site in one or more sections, and affixed to a • The SFIP requires a building to be affixed to a permanent site, whereas it
permanent foundation); or requires a manufactured home and a travel trailer to be affixed to a permanent
A travel trailer without wheels, built on a chassis and affixed to a foundation.
permanent foundation, that is regulated under the community's • A travel trailer (recreational vehicle) with attached wheels is not a building.
floodplain management and building ordinances or laws. • A storage or shipping container, if it is used as a shed, storage building, or
c. Building does not mean a gas or liquid storage tank or a residence, must meet the definition of an eligible building.
recreational vehicle, park trailer or other similar vehicle, except • “Affixed by weight” does not constitute affixed to a permanent site as used in
as described in B.6.c., above. the SFIP.
7. Cancellation • The NFIP Flood Insurance Manual provides an exhaustive list for all valid policy
The ending of the insurance coverage provided by this policy before cancellation reasons.
the expiration date. • The expiration date is the ending of the policy term, the period of coverage
provided by the insurance policy.
• The policy term for the SFIP is one year, after any applicable waiting period.
8. Condominium N/A
That form of ownership of real property in which each unit owner has
an undivided interest in common elements.
9. Condominium Association A condominium association is an entity recognized by a state. Homeowners’
The entity made up of the unit owners responsible for the maintenance associations, townhome associations, and cooperatives, and the like, are not
and operation of: condominium associations.
a. Common elements owned in undivided shares by unit owners; and
b. Other real property in which the unit owners have use rights;
where membership in the entity is a required condition of unit
ownership.
10. Declarations Page N/A
A computer-generated summary of information you provided in the
application for insurance. The Declarations Page also describes the term of
the policy, limits of coverage, and displays the premium and our name. The
Declarations Page is a part of this flood insurance policy.
11. Described Location N/A
The location where the insured building(s) or personal property are found. The
described location is shown on the Declarations Page.
II. Definitions
Policy Language Additional Explanation
12. Direct Physical Loss By or From Flood The SFIP only pays for damage caused by a direct physical loss by or from flood, as
Loss or damage to insured property, directly caused by a flood. There must defined by the SFIP. A direct physical loss means flood must physically contact the
be evidence of physical changes to the property. insured property and there must be evidence of physical change by or from flood to
the insured building or insured personal property.
Several SFIP provisions, each with its own criteria, address specific situations where
the condition of direct physical loss by or from flood occurs despite an exclusion. In
these specific situations, listed below, the insurer must thoroughly document the
presence of the relevant criteria in the claim file for coverage and payment:
• Losses from mudflow and collapse or subsidence of land as a result of erosion
specifically covered under the SFIP definition of flood (see SFIP Section V.C., as
well as II.A.1.c and II.A.2)
• Back up of water and water-borne material through sewers or drains, where a
flood is the proximate cause of the sewer or drain backup (see SFIP Section
V.D.5.a.)
• Discharge or overflow from a sump, sump pump, or related equipment, where a
flood is the proximate cause of the sump pump discharge or overflow (see SFIP
Section V.D.5.b.)
• Seepage or leakage on or through the insured building, where a flood is the
proximate cause of the seepage of water (see SFIP Section V.D.5.c.)
• Pressure or weight of water, where a flood is the proximate cause of the damage
from the pressure or weight of water (see SFIP Section V.D.6.)
13. Elevated Building For more information about elevated buildings, see Section 2 of this manual, Floor
A building that has no basement and that has its lowest elevated floor Elevation Lowest Floor Elevation. If the elevated floor in the building is in part
raised above ground level by foundation walls, shear walls, posts, piers, supported by a structural slab-on-grade foundation, additional documentation may
pilings, or columns. be necessary to verify the elevated rating for the building.
II. Definitions
Policy Language Additional Explanation
16. Federal Policy Fee N/A
A flat charge you must pay on each new or renewal policy to defray certain
administrative expenses incurred in carrying out the National Flood
Insurance Program. This fee covers expenses not covered by the Expense
Constant.
17. Improvements N/A
Fixtures, alterations, installations, or additions comprising a part of the
insured dwelling or the apartment in which you reside.
18. Mudflow A mudflow is liquified soil flowing in a manner akin to water flowing, which causes
A river of liquid and flowing mud on the surface of normally dry land areas, damage in a manner similar to moving water.
as when earth is carried by a current of water. Other earth movements, such
as landslide, slope failure, or a saturated soil mass moving by liquidity down
a slope, are not mudflows.
19. National Flood Insurance Program (NFIP) N/A
The program of flood insurance coverage and floodplain management
administered under the Act and applicable Federal regulations in Title 44
of the Code of Federal Regulations, Subchapter B.
20. Policy N/A
The entire written contract between you and us. It includes:
a. This printed form;
b. The application and Declarations Page;
c. Any endorsement(s) that may be issued; and
d. Any renewal certificate indicating that coverage has been
instituted for a new policy and new policy term.
b. Only one dwelling, which you specifically described in the application,
may be insured under this policy.
21. Pollutants Testing for or monitoring of pollutants is not covered unless required by law. See
Substances that include, but are not limited to, any solid, liquid, gaseous, or Section V.F. of the SFIP.
thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids,
II. Definitions
Policy Language Additional Explanation
alkalis, chemicals, and waste. “Waste” includes, but is not limited to,
materials to be recycled, reconditioned, or reclaimed.
22. Post-FIRM Building Community Status Book
A building for which construction or substantial improvement occurred
after December 31, 1974, or on or after the effective date of an initial
Flood Insurance Rate Map (FIRM), whichever is later.
23. Probation Premium N/A
A flat charge you must pay on each new or renewal policy issued covering
property in a community the NFIP has placed on probation under the
provisions of 44 CFR 59.24.
24. Regular Program N/A
The final phase of a community’s participation in the National Flood Insurance
Program. In this phase, a Flood Insurance Rate Map is in effect and full limits
of coverage are available under the Act.
25. Residential Condominium Building N/A
A building, owned and administered as a condominium, containing one or
more family units and in which at least 75% of the floor area is residential.
26. Special Flood Hazard Area All zones listed are SFHAs. However, the post-FIRM elevated building coverage
An area having special flood or mudflow, and/or flood-related erosion limitations apply only to Zones A1–A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1–A30,
hazards, and shown on a Flood Hazard Boundary Map or Flood Insurance V1–V30, and VE, at SFIP Section III.A.8.
Rate Map as Zone A, AO, A1–A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH,
AR/AO, AR/A1– A30, V1– V30, VE, or V.
27. Unit N/A
A single-family unit you own in a condominium building.
28. Valued Policy The SFIP is not a valued policy; it is a direct physical loss policy. The insurer agrees to
A policy in which the insured and the insurer agree on the value of the pay a policyholder for insured property damaged by direct physical by or from flood,
property insured, that value being payable in the event of a total loss. subject to the terms, conditions, and exclusion of the SFIP.
The Standard Flood Insurance Policy is not a valued policy.
4. The following fixtures, machinery and equipment, including its units, which • Blinds include vertical and horizontal types.
are covered under Coverage A only: • Central air conditioners include related built-in equipment for dehumidification,
a. Awnings and canopies; air filtering, and ventilation.
b. Blinds; • Walk-in freezers and coolers must be permanently installed or built in. Furnaces
c. Carpet permanently installed over unfinished flooring; and radiators include heat pumps, boilers, and related installed equipment for
humidification, air filtering, and ventilation.
(6) Elevators, dumbwaiters, and related equipment, except for related An elevator or dumbwaiter is covered if within the covered building enclosure or
equipment installed below the base flood elevation after September attached to and in contact with the insured building or directly attached to the 16
30, 1987; square foot landing area used for egress if unattached.
Figure 37. Covered stairs where the finished material is the base material; however, no
coverage to paint, stain, or coat
The SFIP does not cover the basement exterior egress staircase located outside of
the perimeter building walls, even if covered by a roof or door. See SFIP Section IV.9.
(13) Sump pumps N/A
(14) Water softeners and the chemicals in them, water filters, and The SFIP allows for a faucet that is affixed directly to the plumbing line, as opposed
faucets installed as an integral part of the plumbing system; to a faucet that is connected to plumbing lines but mounted onto a sink as a finished
fixture. See Section 2: Water Softeners in this manual.
1. If you have purchased personal property coverage, we insure, subject to • The SFIP does not cover personal property items not within the fully enclosed
B.2. and B.3. below, against direct physical loss by or from flood to insured building at the described location. This differs from the Dwelling Form in
personal property that is inside the fully enclosed insured building and is: that the Dwelling Form covers personal property within any SFIP-defined
building at the described location.
1. Debris Removal Insured property means the insured dwelling and covered personal property. The
a. We will pay the expense to remove non-owned debris that is SFIP does not pay for removal of:
on or in insured property and debris of insured property • Non-covered debris anywhere, such as a non-covered damaged property or
anywhere. debris located in the yard, driveway, or on another parcel of land.
b. If you or a member of your household perform the removal work, • Non-covered items of property, even if the removal of the item facilitates
the value of your work will be based on the Federal minimum wage. cleanup of covered building repairs, such as the removal of carpet installed
c. This coverage does not increase the Coverage A or Coverage B inside a basement, or the removal plants, shrubs, or trees along the perimeter
limit of liability. of the building to access foundation or siding repairs.
5. Self-propelled vehicles or machines, including their parts and equipment. The SFIP does not cover self-propelled vehicles or machinery. There are two specific
However, we do cover self-propelled vehicles or machines, provided they instances where coverage is provided, so long as:
are not licensed for use on public roads and are: (1) the vehicle or machinery is not licensed for use on public roads.
a. Used mainly to service the described location; or (2) specific documentation is provided to support the claim.
b. Designed and used to assist handicapped persons, while the vehicles Under (a) the described location must be the type that would reasonably require
or machines are inside a building at the described location; service by means of the vehicle or machinery in question. Secondly, there must be
evidence the described location is routinely serviced in support of what is claimed
under this provision. Vehicles and machinery that are part of or service a business
operation at the described location do not qualify for coverage under this provision.
Under (b) a vehicle or machinery is covered if it is designed and used as mobility
vehicles for persons with disabilities. The vehicle or machinery is not covered if it is
6. Land, land values, lawns, trees, shrubs, plants, growing crops, or animals; • The SFIP does not cover any type of live plant located inside or outside of the
building. This provision does not apply to artificial plants used as indoor decor.
• The SFIP will pay the cost to replace land removed by sudden erosion caused by
waves or currents of water during a specific type of flood as defined at SFIP
Section II.A. when such soil directly supports the insured building.
7. Accounts, bills, coins, currency, deeds, evidences of debt, medals, money, • Scrip is a form of money issued by a local government or private organization,
scrip, stored value cards, postage stamps, securities, bullion, manuscripts, such as gift cards, coupons, or any substitute for legal tender.
or other valuable papers; • The SFIP does not cover financial loss from damage or destruction of electronic
data or the cost of restoring that data.
• Other valuable papers include stocks, certificates, and bonds.
8. Underground structures and equipment, including wells, septic tanks, and • Underground structures and equipment include, but are not limited to, wires,
septic systems; conduits, pipes, sewers, tanks, tunnels, sprinkler systems, similar property, and
any apparatus connected beneath the surface of the ground. The SFIP provides
coverage if other SFIP requirements are met for equipment installed used in the
operation of underground structures and equipment installed above ground
and within a building, for example, sprinkler timer.
• When installed, a sewage grinder pump is an integral part of the building’s
septic system. The grinder pump pulverizes waste for discharge into the septic
drainage field. This item of property is not covered. However, the SFIP covers
the sewage grinder pump’s alarm service panel if installed above ground level
and affixed to the building or its foundation. The SFIP does not cover the
V. Exclusions
Policy Language Additional Explanation
A. We only pay for direct physical loss by or from flood, which means that we do not pay you for:
1. Loss of revenue or profits; The SFIP does not cover the costs to pack, move, or store personal property from
2. Loss of access to the insured property or described location; the insured building or return it to the building when an owner repairs the building
or cannot occupy it.
3. Loss of use of the insured property or described location;
4. Loss from interruption of business or production;
5. Any additional living expenses incurred while the insured building is being
repaired or is unable to be occupied for any reason;
6. The cost of complying with any ordinance or law requiring or regulating The SFIP does not cover replacing non-flood damaged property required to comply
the construction, demolition, remodeling, renovation, or repair of with government codes, ordinances, or regulations. For example, the SFIP does not
property, including removal of any resulting debris. This exclusion does cover the cost of replacing an undamaged interior HVAC unit to match a replaced
not apply to any eligible activities we describe in Coverage D—Increased exterior HVAC unit because of a change in size, SEER-rating, refrigerant, or any other
Cost of Compliance; or reason even if local, state, or federal code required the upgrade.
7. Any other economic loss you suffer.
B. We do not insure a loss directly or indirectly caused by a flood that is already in progress at the time and date:
1. The policy term begins; or NFIP adjusts flood insurance losses individually. Flood insurance benefits are
2. Coverage is added at your request. available if an insured property suffers a covered loss caused by a general condition
of flooding, as defined by the SFIP.
See Flood-In-Progress Exclusion in Section 2 of this manual.
C. We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that
we do not cover are:
1. Earthquake; The SFIP is a single-peril policy that only pays for covered damage due to direct
2. Landslide; physical loss by or from flood, defined in the policy in Section II. The SFIP does not
cover damage resulting from an intervening cause of loss, even if the resulting cause
3. Land subsidence;
is due to flood. The SFIP does not cover damage that results when saturated soils
4. Sinkholes; cause the soil below ground level to sink, expand, compact, destabilize, or otherwise
5. Destabilization or movement of land that results from accumulation of lose its load-bearing capacity such as from voids or rotten organic matter when the
water in subsurface land areas; or soil dries. The SFIP does not cover earth movement; each form of earth movement is
6. Gradual erosion an intervening cause of loss and a separate peril.
The SFIP’s exclusion for other perils, such as fire, exemplifies the exclusion of earth
movement as a cause of loss. When a flood causes a fire, which damages the
V. Exclusions
Policy Language Additional Explanation
We do, however, pay for losses from mudflow and land subsidence as a result building during inundation or after floodwaters recede, the SFIP does not cover the
of erosion that are specifically covered under our definition of flood (see A.1.c. resulting fire and smoke damage to the building even if flood directly caused the
and II.A.2.). fire.
The SFIP covers damage to a building if the damage results from the collapse or
subsidence of land that is the direct result of sudden erosion or undermining to the
building’s support soil underneath or directly along the perimeter foundation of the
building from waves or currents of floodwater (velocity flow) during a flood from the
overflow of inland or tidal waters or mudflow. This includes damage to the
foundation of the building and any resulting damage to the interior and exterior
finishes. The SFIP does not cover damage caused by gradual erosion.
D. We do not insure for direct physical loss caused directly or indirectly by:
1. The pressure or weight of ice; When the policyholder is prevented access to promptly remove wetted building and
2. Freezing or thawing; personal property items, and this delay directly results in water, moisture, mildew or
mold damage to building and personal property items not in physical contact with
3. Rain, snow, sleet, hail, or water spray;
surface floodwater, this damage could be covered.
4. Water, moisture, mildew, or mold damage that results primarily from any
As examples:
condition:
• local authorities restrict access to the area or
a. Substantially confined to the insured building; or
• prolonged inundation of floodwater prevents access to the area.
b. That is within your control including, but not limited to:
The claim file must include proper documentation, such as but not limited to
(1) Design, structural, or mechanical defects;
photographs, an acceptable explanation provided by the adjuster, or a signed
(2) Failures, stoppages, or breakage of water or sewer lines, drains, statement from the policyholder or community official that supports the payment
pumps, fixtures, or equipment; or for property damages above the documented water height.
(3) Failure to inspect and maintain the property after a flood For instances when coverage and payment are not recommended, the claim file
recedes; should include information that documents the policyholder’s failure to inspect and
maintain their insured property or take reasonable measures to reduce damage
when it is feasible to do so.
The SFIP does not cover damage caused by long-term exposure to moisture, water,
rot, and insect infestation. This includes damage from the lack of climate control
inside the building when the approach to repair does not include the timely repair to
the building HVAC system.
The SFIP does not cover pre-existing damage to structural building components,
such as damage caused by rot, or for any resulting damage to non-structural finish
V. Exclusions
Policy Language Additional Explanation
building material.
5. Water or water-borne material that: The adjuster must document that a flood occurred in the area and that the flood
a. Backs up through sewers or drains; was the proximate cause of the back-up of the sewer or drain, overflow of the sump
pump, pump failure, seepage of water, or damage due to the pressure or weight of
b. Discharges or overflows from a sump, sump pump, or related
water (hydrostatic pressure), in the claim file. See SFIP Section II.A and related
equipment; or
commentary under the definition of flood.
c. Seeps or leaks on or through insured property; unless there is a flood
When paying a loss due to a flood in the area proximately causing discharge or
in the area and the flood is the proximate cause of the sewer, drain,
overflow of water or water-borne material from a sump, sump pump, or related
or sump pump discharge or overflow, or the seepage of water;
equipment, the insurer must document the claim file to show that a homeowner’s
policy endorsement or policy rider did not also cover the loss. If the homeowner’s
policy does provide coverage, the SFIP payment must apply a proportional loss
distribution, as stated under Section VIII.C. Other Insurance.
The adjuster must document a flood occurred in the area, and that the flood was the
proximate cause of the back-up of the sewer or drain, overflow of the sump pump,
pump failure, seepage of water, or damage due to the pressure or weight of water
(hydrostatic pressure). A flood is two or more parcels of partial or complete
inundation of normally dry land, or of two or more continuous acres of normally dry
land. For coverage under this provision, the condition of flood does not have to be
on the parcel of land described at the location; it may be within the proximate area.
6. The pressure or weight of water unless there is a flood in the area and the Refer to SFIP Section V.D.5. above.
flood is the proximate cause of the damage from the pressure or weight of
water;
7. Power, heating, or cooling failure unless the failure results from direct The SFIP does not cover damage to insured property when caused by a power surge
physical loss by or from flood to power, heating, or cooling equipment or power outage that originates from the failure or shutting down of equipment that
situated on the described location; is not located at the described location, even if the reason is a direct result of a
flood. For example, the local utility operator may shut down a section of the
electrical grid to avoid system damage from a flood. When the power returns to the
electrical grid, the initial surge of electricity can damage insured property. Under this
loss description, the damage is not covered.
The SFIP covers damage to any covered building or personal property item, such as
the building’s main service, home security system, a plugged-in television, or to the
HVAC system, when a flood physically damages related system equipment installed
at the described location. For example, if the flood damages power equipment at
V. Exclusions
Policy Language Additional Explanation
the described location creating an electrical short within the power system resulting
in damage to another item of property part of or connected to the power system,
the damage to the item is also covered, even though it was not physically touched
by floodwater. Under this loss description, the damage is considered a direct
physical loss by or from flood. To cover the loss described, the adjuster must
document the cause of loss in the claim file to rule out the possibility of a non-
covered cause, such as described in the previous paragraph.
8. Theft, fire, explosion, wind, or windstorm; N/A
9. Anything that you or your agents do or conspire to do to cause loss by
flood deliberately; or
10. Alteration of the insured property that significantly increases the risk of
flooding.
E. We do not insure for loss to any building or personal property N/A
located on land leased from the Federal Government, arising from
or incident to the flooding of the land by the Federal Government,
where the lease expressly holds the Federal Government harmless
under flood insurance issued under any Federal Government
program.
F. We do not pay for the testing for or monitoring of pollutants unless The SFIP only pays to test or monitor the removal of a pollutant when a law or
required by law or ordinance. ordinance requires it. Insurers must have a copy of the law or ordinance for the file
to support their decision to pay for the testing for or monitoring of pollutants.
The law or ordinance must be in effect at the date of loss to apply.
VI. Deductibles
Policy Language Additional Explanation
A. When a loss is covered under this policy, we will pay only that part of the loss that exceeds the applicable deductible amount, subject to the limit of insurance that
applies. The deductible amount is shown on the Declarations Page.
However, when a building under construction, alteration, or repair does not have at least two rigid exterior walls and a fully secured roof at the time of loss, your
deductible amount will be two times the deductible that would otherwise apply to a completed building.
B. In each loss from flood, separate deductibles apply to the building and personal property insured by this policy.
1. III.C.2. Loss Avoidance Measures; The SFIP applies a separate deductible to both building and personal property losses.
2. III.D. Increased Cost of Compliance. The SFIP will only pay that portion of the loss that exceeds the applicable
deductibles.
For building and personal property losses, the insurer should take the deductible
from the gross loss before applying policy limits. For example, if the covered loss is
$110,000, the policy limit is $100,000, and the deductible is $5,000, the insurer
should apply the deductible to the $110,000 loss, which leaves $105,000, meaning
the insurer should pay the $100,000 policy limit unless coinsurance applies (see SFIP
Section VII Coinsurance).
The SFIP does not apply excess loss to items subject to Special Limits to reduce the
personal property deductible.
VII. Coinsurance
B. We will impose a penalty on loss payment unless the amount of insurance applicable to the damaged building is:
VII. Coinsurance
C. If the actual amount of insurance on the building is less than the required amount in accordance with the terms of VII.B. above, then loss payment is determined
as follows (subject to all other relevant conditions in this policy, including those pertaining to valuation, adjustment, settlement, and payment of loss):
1. Divide the actual amount of insurance carried on the building by the Do not use the formula on the RCBAP form to determine the proportional loss
required amount of insurance. amount. Use the formula below.
2. Multiply the amount of loss, before application of the deductible, by the Proportional loss amount = ((insurance purchased ÷ required insurance) x (ACV plus
figure determined in C.1. above. recoverable depreciation)) – deductible
3. Subtract the deductible from the figure determined in C.2. above. IMPORTANT – Use the order of operations as shown, starting within the innermost
parentheses, for accurate calculation.
We will pay the amount determined in C.3. above, or the amount of insurance Table 8: Example of Inadequate Insurance
carried, whichever is less. The amount of insurance carried, whichever is less.
Item Value
The amount of insurance carried, if in excess of the applicable maximum
amount of insurance available under the NFIP, is reduced accordingly. RC Value $2,499,872.60
Example #1 (Inadequate Insurance)
Replacement value of the building $250,000 Required Insurance $1,999,898.08
Required amount of insurance $200,000
(80% of replacement value of $250,000) Insurance Purchased $1,800,000.00
Actual amount of insurance carried $180,000
ACV plus Recoverable Depreciation $46,132.16
Amount of the loss $150,000
Deductible $500 • (($1,800,000.00 ÷ $1,999,898.08) x 46,132.16) = $41,521.06 - $5,000
Step 1: 180,000 ÷ 200,000 = .90 (90% of what should be carried.) deductible = $36,521.06 Amount Owed.
Step 2: 150,000 X .90 = 135,000
Step 3: 135,000 - 500 = 134,500
We will pay no more than $134,500. The remaining $15,500 is not covered due
to the coinsurance penalty ($15,000) and application of the deductible ($500).
VII. Coinsurance
1. The replacement cost value of any covered building property will be Refer to policy definition.
included;
2. The replacement cost value of any building property not covered under
this policy will not be included; and
3. Only the replacement cost value of improvements installed by the
condominium association will be included.
1. With respect to all insureds under this policy, this policy: When claims professionals suspect wrongful acts or misrepresentations on a claim
a. Is void; by a policyholder or their representatives:
b. Has no legal force or effect; • The adjuster should promptly submit written notification with supporting
documentation to the insurer. The adjuster should not draw any conclusions
c. Cannot be renewed; and
regarding the suspected fraud and should only present facts in written reports.
d. Cannot be replaced by a new NFIP policy, if, before or after a loss, you
• The examiner should engage management to determine if the insurer should
or any other insured or your agent have at any time:
refer the matter to the FEMA Fraud Unit (email:
(1) Intentionally concealed or misrepresented any material fact or [email protected]) and the insurer’s investigative unit for a
circumstance; Reservation of Rights.
(2) Engaged in fraudulent conduct; or
(3) Made false statements; relating to this policy or any other NFIP
insurance.
2. This policy will be void as of the date wrongful acts described in B.1. above The SFIP will be void if the proper authorities determine any part of a claim was
were committed. fraudulent.
3. Fines, civil penalties, and imprisonment under applicable Federal laws may
also apply to the acts of fraud or concealment described above.
4. This policy is also void for reasons other than fraud, misrepresentation, or When a community no longer participates in the NFIP, an active SFIP will remain in
wrongful act. This policy is void from its inception and has no legal force force up to the day before the policy renewal date. Refer to the Flood Insurance
under the following conditions: Manual for other reasons why a building may be ineligible for coverage.
a. If the property is located in a community that was not participating in
the NFIP on the policy’s inception date and did not join or reenter
the program during the policy term and before the loss occurred; or
b. If the property listed on the application is otherwise not eligible for
coverage under the NFIP.
C. Other Insurance
1. If a loss covered by this policy is also covered by other insurance that The RCBAP is primary, and the SFIP Dwelling Form provides excess coverage for the
includes flood coverage not issued under the Act, we will not pay more same loss. The total amount of insurance available for the Dwelling Form and the
than the amount of insurance that you are entitled to for lost, damaged or RCBAP is $250,000 combined; the total claim payment may not exceed this amount.
destroyed property insured under this policy subject to the following: Other insurance includes primary flood coverage provided by a private carrier or any
a. We will pay only the proportion of the loss that the amount of other insurance that duplicates SFIP coverage.
This policy cannot be changed nor can any of its provisions be waived without The SFIP allows the assignment of the policy when the title to the property transfers
the express written consent of the Federal Insurance Administrator. No action to a new owner.
we take under the terms of this policy constitutes a waiver of any of our rights. The SFIP does not allow the assignment of a claim. The only exception to this is a
You may assign this policy in writing when you transfer title of your property to Coverage D – Increased Cost of Compliance (ICC) claim that can transfer in
someone else except under these conditions: conjunction with a FEMA project, such as a Hazard Mitigation Grant Program
1. When this policy covers only personal property; or (HMGP) grant. Typically, the policyholder assigns the claim to a community, which
2. When this policy covers a structure during the course of construction. typically uses the payment for the community’s non-Federal match for the project.
The policyholder may only assign the part of the ICC benefit used to meet the
project requirements.
E. Cancellation of the Policy by You
1. You may cancel this policy in accordance with the applicable rules and Policyholders must have a valid reason to cancel their flood insurance coverage
regulations of the NFIP. during a policy term.
2. If you cancel this policy, you may be entitled to a full or partial refund of See the Flood Insurance Manual for detailed information.
premium also under the applicable rules and regulations of the NFIP.
F. Non-Renewal of the Policy by Us
Your policy will not be renewed: When a community no longer participates in the NFIP, an active SFIP will remain in
1. If the community where your covered property is located stops force up to the day before the policy renewal date.
Coverage may not be available for a building constructed or altered in violation of
1. If the premium we received from you was not enough to buy the kind and If the policyholder gives the insurer a premium that will not purchase the amounts
amount of coverage you requested, we will provide only the amount of of insurance requested, the insurer must issue the policy for the insurance coverage
coverage that can be purchased for the premium payment we received. amount the premium will purchase for a one-year policy term.
2. The policy can be reformed to increase the amount of coverage resulting After a Loss:
from the reduction described in G.1. above to the amount you requested • The insurer will send a bill for the required additional premium for the current
as follows: policy term only. This is an exception to the SFIP Provisions requiring the
a. Discovery of Insufficient Premium or Incomplete Rating Information current and the prior policy terms.
Before a Loss: • If the insurer receives the premium within 30 days from the date of the bill, the
(1) If we discover before you have a flood loss that your premium insurer should increase the policy limits to the originally requested amount
payment was not enough to buy the requested amount of effective as of the beginning of the current policy term.
coverage, we will send you and any mortgagee or trustee • If the insurer does not receive the additional premium by the due date, the
known to us a bill for the required additional premium for the insurer must settle the claim based on the previously submitted premium and
current policy term (or that portion of the current policy term results in reduced policy limits.
following any endorsement changing the amount of coverage).
Exceptions for Incorrect Flood Zone or BFE After a Loss. When the insurer discovers
If you or the mortgagee or trustee pay the additional premium
that an incorrect flood zone or BFE resulted in insufficient premium, the following
within 30 days from the date of our bill, we will reform the
exceptions apply:
policy to increase the amount of coverage to the originally
requested amount effective to the beginning of the current • The insurer should calculate any additional premium due prospectively from
policy term (or subsequent date of any endorsement changing the date of discovery.
the amount of coverage). • The insurer should apply the automatic reduction in policy limits effective on
(2) If we determine before you have a flood loss that the rating the date of discovery.
information we have is incomplete and prevents us from Incorrect Policy Form. The insurer must use the correct policy form before making a
calculating the additional premium, we will ask you to send the loss payment. When the insurer issues coverage using an incorrect SFIP form, the
required information. You must submit the information within policy is void and the insurer must rewrite the coverage under the correct form. The
60 days of our request. Once we determine the amount of
1. This policy will expire at 12:01 a.m. on the last day of the policy term. The SFIP is not a continuous policy. It is a contract for a one-year term. Every policy
2. We must receive the payment of the appropriate renewal premium within contract expires at 12:01 a.m. on the last day of the policy term. Renewal of an
30 days of the expiration date. expiring policy establishes a new policy term and new contractual agreement. See
the Flood Insurance Manual for detailed information.
3. If we find, however, that we did not place your renewal notice into the U.S.
Postal Service, or if we did mail it, we made a mistake, e.g., we used an The adjuster should investigate the claim under a signed non-waiver agreement or a
incorrect, incomplete, or illegible address, which delayed its delivery to you reservation of rights by the insurer when a policyholder reports a loss, and there is
before the due date for the renewal premium, then we will follow these uncertainty as to whether a policy is active.
procedures:
a. If you or your agent notified us, not later than 1 year after the date on
which the payment of the renewal premium was due, of non-receipt
of a renewal notice before the due date for the renewal premium,
and we determine that the circumstances in the preceding paragraph
apply, we will mail a second bill providing a revised due date, which
will be 30 days after the date on which the bill is mailed.
b. If we do not receive the premium requested in the second bill by the
revised due date, then we will not renew the policy. In that case,
the policy will remain an expired policy as of the expiration date
shown on the Declarations Page.
4. In connection with the renewal of this policy, we may ask you during the
policy term to recertify, on a Recertification Questionnaire we will provide
to you, the rating information used to rate your most recent application for
or renewal of insurance.
I. Conditions Suspending or Restricting Insurance
We are not liable for loss that occurs while there is a hazard that is increased The SFIP will not cover a flood loss or increased flood damage to insured property
by any means within your control or knowledge. that the policyholder purposely or inadvertently causes. For example: a policyholder
constructs a flood barrier to prevent floodwater from a river form reaching the
building; however, the improvement now causes runoff during heavy rainfall events
to collect behind the barrier and flood the building and a neighboring parcel or
causes a prolonged condition of inundation creating additional damage inside the
building.
In case of a flood loss to insured property, you must: The policyholder’s claim begins with the written notice of loss.
1. Give prompt written notice to us; The policyholder must report the loss to the insurer immediately; failure to provide a
notice of loss to the insurer could prejudice the ability of the insurer to inspect the
loss, identify the cause and extent of damage, and determine applicable coverage
under the SFIP. If the policyholder delays reporting a loss, the adjuster cannot help
the policyholder protect the property and avoid further damage.
A policyholder’s failure to provide timely notice of loss can be a basis for denial of a
claim.
• The adjuster should document the reason for a delay in the policyholder
reporting a loss to the insurer.
• If the WYO elects, the adjuster should execute a non-waiver agreement when
there is a delay in reporting the loss. The non-waiver agreement should include
the reason for the non-waiver and the policyholder’s explanation for the delay.
The adjuster should have the policyholder sign the non-waiver agreement
immediately. If the policyholder refuses to sign the non-waiver agreement, the
insurer may decide to send a Reservation of Rights. The adjuster should
continue the inspection and review. The insurer cannot waive FEMA’s rights.
2. As soon as reasonably possible, separate the damaged and undamaged The SFIP requires that the policyholder separate damaged from undamaged
property, putting it in the best possible order so that we may examine it; property, putting it in the best possible order, so the adjuster may examine it. It is
3. Prepare an inventory of damaged property showing the quantity, the policyholder’s duty to perform the separation described above and prepare an
description, actual cash value, and amount of loss. Attach all bills, receipts, inventory of damaged property, including quantity, description, and the total
and related documents; amount of loss claimed. Any bills, receipts, photographs of damages, and related
documents should be attached to the inventory.
If flood-damaged building or contents property is removed before the adjuster can
examine it, the policyholder must photograph the items in their damaged location
prior to moving the property and prepare the inventory.
To minimize potential documentation issues, if possible, the policyholder should
retain for the adjuster, samples or swatches of carpeting, wallpaper, furniture
upholstery, window treatments, and other items of exceptional value where the
type and quality of material will influence the amount payable on the claim.
Options we may, in our sole discretion, exercise after loss include the This section sets forth the steps that insurers may take to require action on the part
following: of the policyholder. If the policyholder fails to comply with the insurer’s request, the
policyholder is in breach of the insuring agreement, which may affect the payment
of the claim.
1. At such reasonable times and places that we may designate, you must: The policyholder must make the flood-damaged property available for examination
a. Show us or our representative the damaged property; as often as needed to verify the loss and claim. Insurer representatives will give the
policyholder advance notice of the specific time and meeting place to inspect the
damaged property.
The policyholder should document their loss with photographs before removing or
disposing of damaged items that pose a health hazard, such as perishable food.
b. Submit to examination under oath, while not in the presence of The insurer can require the policyholder to submit to an examination under oath but
another insured, and sign the same; and not in the presence of another insured when there are questions concerning the
claim. An examination under oath is a formal proceeding, typically conducted prior
to a lawsuit, during which the insurer’s representative questions an insured under
oath in the presence of a court reporter. The insurer should ask the policyholder to
present information and documentation necessary to evaluate their claim when
requiring an examination under oath. This can include books of accounts, financial
records, receipts, income tax records, property settlement records, invoices,
purchase orders, affidavits, and other materials to verify the loss.
c. Permit us to examine and make extracts and copies of: The SFIP will not pay more than the amount of insurance that the policyholder is
entitled to for the damaged, lost, or destroyed property insured under this policy if
b. Actual cash values or replacement cost (whichever is appropriate); • Replacement cost is the cost to replace a building, a building item, or a personal
property item that includes all charges related to material, labor, equipment,
any charges, if applicable, for design, delivery, assembly, sales tax, and
applicable overhead and profit.
• Actual cash value is replacement cost, less applicable depreciation of all
components of the price.
c. Amounts of loss claimed; The amount of loss claimed is the amount of payment the policyholder asks to
receive for the damaged and covered property.
d. Any written plans and specifications for repair of the damaged Written plans and specifications for repair of the damaged property include
No person or organization, other than you, having custody of covered property Bailment is the delivery of personal property by one person (the bailor) to another
will benefit from this insurance. (the bailee) who holds the property for a certain purpose, such as a service, under
an expressed or implied-in-fact contract.
The SFIP does not cover the bailee because bailment is a change of possession, not a
change of ownership or title. An example is when a customer (bailor) takes personal
clothing to the dry cleaner (bailee). A bailment exists when the bailee has the
clothing. The articles of clothing in the possession of the bailee are bailee goods and
1. We will adjust all losses with you. We will pay you unless some other Adjusters and examiners should work with a policyholder or their authorized
person or entity is named in the policy or is legally entitled to receive representative to understand the loss, prepare the estimate, and reach an agreed
payment. Loss will be payable 60 days after we receive your proof of loss value for the loss.
(or within 90 days after the insurance adjuster files the adjuster’s report The insurer’s obligation to pay and the 60-day timeframe to pay begin once the
signed and sworn to by you in lieu of a proof of loss) and: policyholder meets the requirements in Paragraph J, a proof of loss that meets all
a. We reach an agreement with you; NFIP requirements, or after the signed and sworn to adjuster’s report is received,
b. There is an entry of a final judgment; or and,
c. There is a filing of an appraisal award with us, as provided in VIII.P. • Insurer and the policyholder agree on the payment amount, or
• There is an entry of final judgment or an appraisal award by a court of
competent jurisdiction.
The insurer should promptly process all claims and payment requests. The insurer
should communicate to policyholders any unforeseen delays in the claim
examination process and advance undisputed claimed amounts at the earliest
opportunity.
When the insurer cannot pay a completed proof of Loss, the examiner and the
adjuster should promptly communicate the necessary adjustments or
documentation required to the policyholder. Insurers should work with
policyholders to settle the loss without resorting to a denial of the claim by the
insurer.
See Section 4 Appeals of this manual for information on denial letters.
2. If we reject your proof of loss in whole or in part you may: Courts have not accepted the language “reject your proof of loss” as sufficient to
a. Accept our denial of your claim; communicate to the policyholder that the insurer has denied their claim in whole or
in part. Hence, insurers should not use this language to deny all or part of a claim.
b. Exercise your rights under this policy; or
When the insurer issues a written denial, the policyholder has certain rights, which
c. File an amended proof of loss as long as it is filed within 60 days of include filing an appeal directly to FEMA (see Section 4 Appeals), filing suit against
the date of the loss. the insurer, or submitting an amended proof of loss with the documentation to
support the requested loss and payment amount.
You may not abandon to us damaged or undamaged property insured under N/A
this policy.
O. Salvage
We may permit you to keep damaged property insured under this policy after The insurer always has the right to seek salvage or to take possession of damaged
a loss, and we will reduce the amount of the loss proceeds payable to you property. Insurers should pursue opportunities for financial recovery when
under the policy by the value of the salvage. available.
See Salvage in Section 2 of this manual.
P. Appraisal
If you and we fail to agree on the actual cash value or, if applicable, See Appraisal in Section 2 of this manual.
replacement cost of your damaged property to settle upon the amount of loss,
then either may demand an appraisal of the loss. In this event, you and we will
each choose a competent and impartial appraiser within 20 days after
receiving a written request from the other. The two appraisers will choose an
umpire. If they cannot agree upon an umpire within 15 days, you or we may
request that the choice be made by a judge of a court of record in the State
where the covered property is located. The appraisers will separately state the
actual cash value, the replacement cost, and the amount of loss to each item.
If the appraisers submit a written report of an agreement to us, the amount
agreed upon will be the amount of loss. If they fail to agree, they will submit
their differences to the umpire. A decision agreed to by any two will set the
amount of actual cash value and loss, or if it applies, the replacement cost and
loss.
Each party will:
1. Pay its own appraiser; and
The word “mortgagee” includes trustee. The SFIP pays claims for building property to the named policyholder, mortgage
Any loss payable under Coverage A—Building Property will be paid to any holders, lienholders, other loss payees for whom we have actual notice, and any loss
mortgagee of whom we have actual notice, as well as any other mortgagee or payee determined to exist at the time of loss. The mortgage clause is a contract
loss payee determined to exist at the time of loss, and you, as interests appear. within a contract. It is a contract between the mortgagee and the insurer within the
If more than one mortgagee is named, the order of payment will be the same contract between the policyholder and the insurer. Including the name of the
as the order of precedence of the mortgages. mortgagee on each building claim payment is the surest way to keep this promise to
the mortgagee. For all building payments, except Coverage C – Other Coverages and
If we deny your claim, the denial will not apply to a valid claim of the
Coverage D – ICC, include all known mortgagees, as they are additional insureds.
mortgagee, if the mortgagee:
The insurer may potentially include a loss payee or lienholder on Coverage B –
1. Notifies us of any change in the ownership or occupancy, or substantial
Personal Property of whom the insurer received actual notice, such as from the U.S.
change in risk of which the mortgagee is aware;
Small Business Administration (SBA). If the insurer receives a letter of an SBA-
2. Pays any premium due under this policy on demand if you have neglected approved loan, the SBA must be included on the building check(s) and the contents
to pay the premium; and check(s) if the loan is for both real estate and personal or business property.
3. Submits a signed, sworn proof of loss within 60 days after receiving notice
from us of your failure to do so.
All of the terms of this policy apply to the mortgagee.
The mortgagee has the right to receive loss payment even if the mortgagee
has started foreclosure or similar action on the building.
If we decide to cancel or not renew this policy, it will continue in effect for the
benefit of the mortgagee only for 30 days after we notify the mortgagee of the
cancellation or non-renewal.
If we pay the mortgagee for any loss and deny payment to you, we are
subrogated to all the rights of the mortgagee granted under the mortgage on
the property. Subrogation will not impair the right of the mortgagee to recover
the full amount of the mortgagee’s claim.
You may not sue us to recover money under this policy unless you have The statute of limitations begins with the insurer’s first written denial of the claim.
complied with all the requirements of the policy. If you do sue, you must start Subsequent denial letters do not re-start the statute of limitations. Policyholders
the suit within 1 year after the date of the written denial of all or part of the must file suit in a U.S. District Court in the district where the loss occurred within
claim, and you must file the suit in the United States District Court of the one year after the insurer’s first written denial. Neither the Federal Insurance
district in which the covered property was located at the time of loss. This Administrator nor the insurer may extend the one-year statute of limitations to file
requirement applies to any claim that you may have under this policy and to suit.
any dispute that you may have arising out of the handling of any claim under
the policy.
S. Subrogation
Whenever we make a payment for a loss under this policy, we are subrogated When the adjuster believes there may be potential for subrogation, the adjuster
to your right to recover for that loss from any other person. That means that completes FEMA Form 086-0-16 – Cause of Loss and Subrogation Report, to identify
your right to recover for a loss that was partly or totally caused by someone a potentially responsible third party; and characterize how their actions may have
else is automatically transferred to us, to the extent that we have paid you for caused or worsened flood damage. When the adjuster believes the cause of loss
the loss. We may require you to acknowledge this transfer in writing. After the may be completely or in part due to an intentional or human cause, the adjuster
loss, you may not give up our right to recover this money or do anything that should complete the NFIP Subrogation Form. Claim handling, review, and payment
would prevent us from recovering it. If you make any claim against any person should proceed as normal. The insurer should make sure the subrogation form
who caused your loss and recover any money, you must pay us back first Cause
before you may keep any of that money. of Loss and Subrogation Report is complete and escalate the matter for a
subrogation review.
See Subrogation in Section 2 of this manual.
T. Continuous Lake Flooding
1. If an insured building has been flooded by rising lake waters continuously N/A
for 90 days or more and it appears reasonably certain that a continuation
of this flooding will result in a covered loss to the insured building equal to
or greater than the building policy limits plus the deductible or the
maximum payable under the policy for any one building loss, we will pay
you the lesser of these two amounts without waiting for the further
damage to occur if you sign a release agreeing:
a. To make no further claim under this policy;
b. Not to seek renewal of this policy;
2. If your insured building is subject to continuous lake flooding from a closed The only Closed Basin Lake recognized by FEMA at this time is Devils Lake, North
basin lake, you may elect to file a claim under either paragraph T.1. above Dakota.
or T.2. (A “closed basin lake” is a natural lake from which water leaves Subject to all other provisions of the SFIP, if an insured building is subject to
primarily through evaporation and whose surface area now exceeds or has continuous lake flooding from Devils Lake, the following requirements must be met
exceeded 1 square mile at any time in the recorded past. Most of the to be eligible for coverage under the terms of all SFIP forms:
nation’s closed basin lakes are in the western half of the United States
• The building must be in a participating community eligible for this
where annual evaporation exceeds annual precipitation and where lake
coverage; and,
levels and surface areas are subject to considerable fluctuation due to wide
variations in the climate. These lakes may overtop their basins on rare • The subject building must have had NFIP flood insurance coverage
occasions.) Under this paragraph T.2. we will pay your claim as if the continuously beginning on November 30, 1999, and any subsequent owner on
building is a total loss even though it has not been continuously inundated or after November 30, 1999, must have an NFIP policy in effect within 60 days
for 90 days, subject to the following conditions: of the transfer of title (see: T. 2. g.); and,
a. Lake flood waters must damage or imminently threaten to damage • The policyholder must grant a conservation easement (see: T. 2. b. (2),
your building. and the community must have adopted a permanent land-use ordinance
b. Before approval of your claim, you must: on or before July 15, 2001 (see: T. 2. e. (1), (2), and (3).
(1) Agree to a claim payment that reflects your buying back the FEMA will not recognize any increases in coverage limits with effective dates on or
salvage on a negotiated basis; and after November 30, 1999 (see: T. 2. g.), except when offered by the insurer as a
routine inflation-guard increase and purchased by the policyholder. Insured buildings
(2) Grant the conservation easement described in FEMA’s “Policy
not eligible for the provisions of T. 2. described above, but damaged by continuous
Guidance for Closed Basin Lakes” to be recorded in the office of
lake flooding, will be eligible for those provisions described at T. 1. of the SFIP, subject
the local recorder of deeds. FEMA, in consultation with the
to the terms and conditions of the T. 1. and the SFIP.
community in which the property is located, will identify on a
map an area or areas of special consideration (ASC) in which Buildings in eligible communities that are subject to damage from the effects of
there is a potential for flood damage from continuous lake the Closed Basin Lake, Devils Lake, North Dakota, may file claims if any portion of
flooding. FEMA will give the community the agreed-upon map the insured building, as defined in the SFIP, is at the still-water level derived by
showing the ASC. This easement will only apply to that portion official National Weather Service (NWS) still-water levels.
of the property in the ASC. It will allow certain agricultural and See Appendix C in this manual for FEMA’s “Policy Guidance for Closed Basin Lakes”.
recreational uses of the land. The only structures it will allow on
any portion of the property within the ASC are certain simple
1. We will not insure your property under more than one NFIP policy. The policyholder cannot benefit from the duplicate flood insurance coverage if a
If we find that the duplication was not knowingly created, we will give you policyholder has two NFIP policies insuring the same property. The first policy
written notice. The notice will advise you that you may choose one of several purchased is the policy in force at the time of loss.
options under the following procedures: When there is no loss involved, the policyholder may choose to keep either policy.
a. If you choose to keep in effect the policy with the earlier effective The effective date of the increased coverage begins on the renewal date of the
date, you may also choose to add the coverage limits of the later second policy purchased if the policyholder chooses to combine the coverage
1. Introduction N/A
This policy provides three methods of settling losses: Replacement Cost,
Special Loss Settlement, and Actual Cash Value. Each method is used for a
different type of property, as explained in a–c. below.
a. Replacement Cost Loss settlement described in V.2. below applies to
buildings other than manufactured homes or travel trailers.
b. Special Loss Settlement described in V.3. below applies to a
residential condominium building that is a travel trailer or a
manufactured home.
c. Actual Cash Value loss settlement applies to all other property
covered under this policy, as outlined in V.4. below.
2. Replacement Cost Loss Settlement The insurer does not have to withhold the recoverable depreciation until the owner
a. We will pay to repair or replace a damaged or destroyed building, makes the building repairs as required in SFIP Section VIII.V.2.b. and c. when the
after application of the deductible and without deduction for structure is eligible for replacement cost loss settlement.
• For the purpose of claim handling, the adjuster should complete and submit an APDA
when the estimated cost to repair flood damage approaches or exceeds 50 percent of
the RCV of the building.
• While the APDA form contains space for two separate claims, ONLY submit one claim per
form. Submitting one claim per form helps to avoid confusion during the review process
at the community level.
• The timely submission of the APDA is important. FEMA requests that adjusters submit the
APDA as soon as possible following the initial inspection. Email the APDA forms to the
NFIP at [email protected]. The subject line should read “APDA
Enclosed.” Submit a copy of the APDA to the company along with the Preliminary Report.
Claims Examiners
The examiner should confirm the adjuster timely submits an APDA on applicable claims by checking for a copy of
the APDA with the Preliminary Report. When an APDA is not included with the Preliminary Report the examiner
should assume the adjuster did not submit an APDA. The examiner should contact the adjusting firm to ensure the
APDA is submitted to the NFIP BSA and to request a copy for the claim file. Note, the local building official is the
authority who determines a building is substantially damaged and the requirement for compliance with the local
floodplain management ordinance.
2 Advance Payments
FEMA encourages advance payments to policyholders whenever it is warranted. The adjuster
should notify the policyholder that they may request an advance payment on their behalf, and to
expect the payment through their local U.S. mail carrier or express mail service. Therefore, the
adjuster must verify the mailing address. FEMA recommends two advance payment opportunity
types for insurers to use as they find suitable:
2. The insurer verifies that the subject property is covered by an active flood insurance policy
and confirms current coverage terms, amounts, and deductibles.
3. The policyholder gives verbal or written statements to the adjuster or examiner. The
adjuster or examiner documents these statements and provides additional information to
the insurer confirming the following:
a. Relating to the flood:
iii. Briefly describes how the flood occurred; when in doubt, obtain supporting
documentation available from an official weather bureau or reputable news media.
iv. Explains other effects from the flood event to support that the loss is in excess of
the advanced amount: Was the street flooded? Are neighboring properties and
buildings also flooded?
b. Relating to flood depth and damage:
i. Provides the approximate depth of floodwater on the exterior of the building and
the approximate depth inside the interior floor level.
ii. Details whether the extent of damage is limited to an area subject to coverage
limitations such as a basement or lower enclosure, or the extent of damage is in a
ground-level floor or elevated floor level.
iii. Briefly describes damage to the building and personal property items.
iv. Addresses any prior loss to avoid a duplication of payment of non-repaired property
items.
$20,000 pre-inspection advance (The enhanced process is only available when activated by
FEMA). An NFIP insurer may issue a larger advance payment amount before the loss is inspected
by an adjuster when it obtains more substantive documentation.
The NFIP allows a payment of this type up to $20,000 on building and contents losses combined
less deductibles. For this type of pre-inspection advance payment, in addition to obtaining and
verifying the above items 1 to 3, the insurer should also obtain the following:
1. Photographs. Obtain the proper number of photographs depicting floodwater depths and
damage to the building and personal property items.
2. Documentation of cost. Verify out-of-pocket expenses related to the repair or replacement
of covered property, such as with paid receipts, invoices, or estimates with canceled
checks; or an estimate signed by the contractor on letterhead that itemizes the repair or
the facilitation of repairs, to covered property.
reserve amount indicated on the Preliminary Report for building coverage less deductible. For
this type of post-inspection advance payment, in addition to obtaining and verifying the above in
the preceding paragraph, the insurer should also obtain a signed contract between the
policyholder and the contractor along with the estimate of repair. The estimate should itemize
the repair and cost to covered property.
Building Valuation Loss Assessment (This enhanced process is only available when activated by
FEMA). The insurer may issue a post-inspection advance payment based on the FEMA-authorized
Building Valuation Loss Assessment (BVLA) advance payment method. In addition to the
Preliminary Report and any other applicable documentation that is normally submitted or
required with the Preliminary Report, including but not limited to the proper photographs,
policyholder-signed Advance Payment Request form, any underwriting memorandum, APDA or
adjuster narrative addressing a prior NFIP paid loss, the adjuster must also submit a properly
completed BVLA worksheet to the insurer. See Appendix J in this manual for the BVLA method
and frequently asked questions.
WYO’s proprietary approach. The insurer may issue a post-inspection advance payment based on
the WYO Company’s own proprietary estimation approach. This approach and payment method
may not broaden or change any coverage term in the SFIP. The insurer must document any
deviations from normal FEMA processes and include a reference to the proprietary process in
the claim file. As with the BVLA advance payment method, a claim payment under the insurer’s
own proprietary estimation approach is subject to all standard FEMA claim documentation and
payment standards.
An NFIP insurer may offer an advance payment upon written, verbal, or electronic request by the policyholder.
With any advance payment, the insurer must include a written notice conditioning the advance payment on the
policyholder’s acknowledgment that:
1. The NFIP advance payment is not intended to provide reimbursement to the policyholder for non-SFIP insured
expenses, such as costs related to evacuation, temporary housing while the home is non-inhabitable, a rental
car to cover the loss of a personal vehicle, or any other expense not covered by the SFIP.
2. The issuance and acceptance of an advance payment does not prejudice or waive any claim or defense
available to either the policyholder or insurer.
3. The issuance and acceptance of an advance payment does not constitute an admission of coverage under the
policy.
4. The policyholder must assert the insured property has suffered a covered loss.
5. If the insurer determines the claim is not a covered loss, or if the advance payment exceeds the amount of the
covered loss, the policyholder is ineligible for the payment and agrees to repay the advanced payment in
excess of the covered loss.
6. Acceptance of an advance payment will not affect the policyholder’s right to seek additional payment under
the terms and conditions of the SFIP.
7. After the claim is settled, the insurer will reduce the final payment by the amount of any advance(s) payment
made to the policyholder.
Claims Examiners
8. Building only: The insurer must include as co-payee any mortgagee shown on the Declaration Page of the
policy or any known mortgagee on any advance payment for building coverage.
9. To finalize the claim, the policyholder must execute a proof of loss meeting the requirements of the SFIP for all
amounts received, including the amount of the advance payment, except as may otherwise be authorized by
the Administrator under any applicable waiver.
Claims Examiners
If an NFIP insurer issues an advance payment to the policyholder in excess of the covered loss, the NFIP insurer
must attempt to recoup the funds. The following are the minimum steps the NFIP insurer must perform under
such circumstances:
1. The insurer must send a letter via certified mail or equivalent trackable delivery service to the policyholder
containing the following information:
a. The amount due.
b. A description of the charges.
c. A description of the remedies available to the NFIP upon failure to repay the amount due by the
deadline, including but not limited to Federal Debt Collection pursuant to 44 CFR Part 11, Subpart A.
d. The deadline for either submitting payment or disputing the validity of the overpayment, which must be
at least 30 days from the date of the letter.
e. Contact information for an individual representing the insurer that the policyholder can contact directly
to dispute the validity of the overpayment or seek more information.
2. If the policyholder does not pay the amount due by the stated deadline, the insurer must attempt to contact
the policyholder via phone and then send a follow-up letter via certified mail or equivalent trackable delivery
service to the policyholder's last known address.
If an NFIP insurer is not able to recoup the overpayment after making its best efforts, the NFIP insurer must provide
FEMA with the following documentation:
Claims Examiners
1. A narrative explaining the basis of the overpayment determination and identifying the insurer's efforts to recoup
the funds.
2. Copies of all written correspondence with the policyholder regarding the overpayment.
3. A copy of the claim file.
3 Appraisal
Claims professionals should only use appraisal to resolve disputes involving the amount to pay
for flood damages. The policyholder may not use appraisal to determine the scope, coverage, or
causation of damage.
Appraisal is an option of last resort and does not replace the claims adjustment process. Filing a
lawsuit is the last resort for settling a disputed claim.
FEMA encourages the policyholder and the insurer to exhaust all other avenues available to
determine the fair price for an agreed-to loss. This includes the policyholder providing
contractors’ estimates, receipts, invoices, photographs, and any other relevant documentation
or a written explanation to support their claim of a fair price for the agreed-to loss.
The SFIP allows appraisal under the following conditions:
• The policyholder and the insurer must agree on the scope of loss (damage). There must
be an agreed list of covered items damaged by flood. Appraisal is not available if the
policyholder and insurer cannot agree on the scope of loss. Insurers cannot use appraisal
if the policyholder submits an appeal to FEMA or initiates litigation. Appraisal must result
in a complete resolution of the entire claim.
• The policyholder must submit a timely and completed proof of loss with supporting
documentation for the items the policyholder seeks appraisal. If the policyholder
submitted a signed and sworn proof of loss and the insurer paid the amount in full, there
is no dispute regarding pricing and no need for appraisal.
• The policyholder must provide documentation with the proof of loss that explains,
supports, or otherwise justifies the increased cost. The insurer should not accept the
request for appraisal simply from an estimate with increased unit pricing and no
justification included. This is not a complete proof of loss.
• Appraisal is available only when the insurer and the policyholder agree on eligibility,
causation, coverage, and scope of loss, except they do not agree on the value of the
covered loss. Appraisal is only available under the SFIP for differences with unit pricing,
which also includes differences with the scope to repair the agreed covered scope of loss.
• If the policyholder invokes the Appraisal Clause and attempts to resolve a coverage or
scoping issue outside the previously agreed upon scope of the appraisal, then the
policyholder did not properly invoke the Appraisal Clause. As the Appraisal Clause was
not properly invoked, the appraisal process, including any award, is not valid. If the WYO
inappropriately issues payment to the policyholder or if the WYO inappropriately used
the Appraisal Clause, the WYO is responsible to FEMA for any erroneous payments,
including fees.
Appraisers and umpires must be competent and impartial. Appraisers and umpires cannot profit
from a higher claim payment made to a policyholder. If the policyholder hires a public adjuster or
attorney, and the basis of their fee is securing a higher claims payment for the policyholder, no
one employed, affiliated with, or related to the public adjuster or attorney can serve as the
appraiser or the umpire. The same rule applies to the insurer. No one employed, affiliated with,
or related to the adjuster or owner of the adjusting company who receives a fee based upon the
policyholder receiving a higher payment can serve as an appraiser or umpire.
If the insurer agrees and invokes the policyholder’s request for appraisal, the policyholder may
not subsequently file an appeal to FEMA on the same items or the same dispute reason.
Similarly, if the policyholder submits an appeal to FEMA, the insurer may not invoke the appraisal
provision at their policyholder’s request.
5 Claims Adjustment
The adjuster must understand what factors may be involved with the claim that may or may not
affect the covered scope of loss and the dollar amount to repair or replace an item and explain
these factors in detail in the narrative to support the adjuster’s recommendation.
Claims Examiners
policyholder agrees to buy-back items, this should be fully disclosed in the content loss as a
credit under the applicable property line item.
5.5 Depreciation
The adjuster should apply depreciation based on the age and physical condition of each line item
in the building estimate and the personal property inventory. The adjuster should apply
depreciation to the material, labor, and equipment usage, including overhead and profit and
sales tax. All estimates must reflect depreciation regardless of whether the loss qualifies for
replacement cost or ACV loss settlement. The adjuster should document the claim file to support
the rate of depreciation or the lack of depreciation. Lump-sum depreciation or application of the
same rate of depreciation to all building and personal property items throughout the adjustment
or estimate, despite the many differences in material type, age, and usage, is not acceptable.
Building materials and personal property have a certain useful life or life expectancy.
Replacement of an item clearly results in betterment; however, certain repairs can also result in
betterment, and the adjuster should use sound judgment in determining if depreciation is
appropriate. Some examples to consider:
• A repair of a small area of drywall, called a patch, would not result in betterment, even if
the repair requires multiple patches. The same could be said if replacing a section of
drywall in one room; however, the replacement of drywall at a 2’, 4’, or 8’ height in an
entire room(s) or throughout the entire building is betterment and should be depreciated
based on the age and condition at the time of loss.
• Replacing the feet on a sofa or hutch or repairing a split leg on a table would be a repair;
however, refinishing the entire item or reupholstering the sofa would be betterment and
subject to depreciation.
It is important to document any exceptions.
• Adequately reflects the progress of the claim and communications with the policyholder;
• The scope of damage, calculations of replacement cost and actual cash value, and a
diagram of the insured building with measurements; and
Claims Examiners
Claims Examiners
The examiner should carefully review the adjuster’s report for claims that are to be closed without payment, and
use the correct Closed Without Payment (CWOP) reason code in accordance with PIVOT (NFIP system of Record).
the. Proper coding is necessary to ensure the appropriate expense payment is issued. Use the erroneous
assignment code when the adjuster receives an assignment in error prior to inspection.
Code Reason
01 Claim denied that was less than deductible
02 Seepage
03 Backup drains
04 Shrubs not covered
05 Sea wall
06 Not actual flood
07 Loss in progress
08 Failure to pursue claim
Attorney representation. When the policyholder becomes represented by an attorney, and the
proper letter of representation and privacy release signed by the policyholder is obtained,
adjusters and examiners must ensure all verbal and written communications are held directly
with the attorney, unless approved by the attorney to communicate directly with the
policyholder.
Public adjusters. A public adjuster is an individual who negotiates coverage, scope, and price on
behalf of the policyholder. When the policyholder is represented by a public adjuster, and the
proper letter of representation and privacy release signed by the policyholder is obtained, FEMA
recommends that the adjuster and examiner send all written communications, including the
insurer-adjuster-prepared proof of loss, to both the public adjuster and the policyholder. A best
practice after verbally communicating with the public adjuster during an inspection or over the
telephone is to follow up with a written correspondence or email to the public adjuster copying
the policyholder. Keep in mind that a public adjuster must be licensed and in good standing in
the state and have a signed contract with the policyholder before they may communicate with
NFIP representatives regarding the claim.
Other types of representatives. Whether given the permission to speak with the NFIP stakeholder
or not, only attorneys and public adjusters are legally permitted to negotiate coverage, scope,
and price on behalf of the policyholder but are required to complete a signed privacy release or
letter of representation. Neighbors, other adjusters, estimators, or contractors are not allowed
to practice “public adjusting” on the claim; that is negotiating coverage, scope, and price with
the insurer or one of its representatives. With the proper documentation provided, a
policyholder’s representative may be the spouse or an immediate family member acting on the
policyholder’s behalf. This is often the case when the policyholder is ill, in the hospital, out-of-
the-country, or otherwise incapacitated.
Claims Examiners
When an insurer receives a communication that contains a time demand (a specific action by a specific date), a
request to reopen the claim, a request for additional payment, or a proof of loss submission, the examiner
should promptly review the request and determine the appropriate action.
When a policyholder or representative submits a proof of loss, the examiner should review to determine if the
proof of loss supports payment of the claim in part or in whole and issue the appropriate payment. If the proof of
loss is received after the 60 days (or after any extension granted by the Administrator), a proof of loss Waiver is
required before payment can be made. See Proof of Loss Waiver in Section 2 of this manual.
When the information provided does not support the request for payment outlined in the proof of loss, the
examiner should reject the proof of loss, in whole or in part, and communicate the decision to the policyholder
or representative along with a partial denial letter when appropriate. The claims examiner should include in the
communication what the policyholder or their representative needs to provide to consider an additional
payment under the existing claim.
9 Contents Manipulation
When a building or room in a building suffers damage, and the contents items stored within the
building or area require movement to facilitate building repairs, the task is known as “contents
manipulation.” To be eligible for coverage for contents manipulation, the policyholder must have
purchased both Coverage A – Building Property (building) coverage and Coverage B – Personal
Property (contents) coverage.
FEMA recognizes that the policyholder may need to manipulate undamaged insured contents to
repair covered building damage. These charges are often included in the contractor’s unit cost(s)
for items repaired or replaced and are not a separate charge to the policyholder. When
contractors present an itemized breakdown of their charges and contents manipulation is a
separate line item, the adjuster may separately allow for contents manipulation. Adjusters may
not make lump sum allowances or room-by-room contents manipulation allowances in the
estimate without providing supporting documentation of those costs. Coverage for contents
manipulation is subject to the following:
• Contents manipulation does not extend to items already included in the contents claim as
a repair or as a replacement.
• Manipulation of the tenant’s personal property is not covered under the owner’s building
policy, even when the tenant has purchased contents coverage. In such cases when a
tenant has contents coverage and incurs reasonable costs to move contents to facilitate
flood damage repairs, the charge is covered only under the tenant’s contents policy.
• Coverage for contents manipulation does not include the additional labor or cost to
remove or store contents outside of the insured building, or another appurtenant
building at the described location (Dwelling Form only), such as a portable storage
container placed at the described location, or personal property moved to storage at a
building at another location. The SFIP will only consider reasonable costs to move
personal property items within the insured building or within an appurtenant structure
(Dwelling Form only), to facilitate flood repairs to the building.
10 Cooperative Buildings
Buildings in a cooperative form of ownership (referred to by FEMA as “cooperative buildings”)
are typically owned and managed by a corporation, and their ownership is different from the
condominium form of ownership. Residents within cooperative buildings typically buy shares of
the corporation, rather than the real estate (building, land, or both building and land) itself.
Shareholders of the cooperative corporation are provided a preferential lease agreement from
the corporation, which affords them the right to occupy a specific space or “unit” within the
cooperative building. Under the rules of the NFIP, cooperative-owned buildings where at least 75
percent of the area is used for residential purposes are considered residential occupancies.
These buildings in a Regular Program community can be insured for the maximum building
coverage of $500,000 under the General Property Form in the cooperative corporation’s name.
Because they are not in the condominium form of ownership, these cooperative buildings are
not eligible for insurance under the RCBAP Form.
A shareholder in a cooperative building typically does not receive a real estate interest in the
building or unit, but rather shares of stock in the cooperative corporation with the right to
occupy a particular “unit” under a lease or rental agreement. Similar to tenants of non-
condominium apartment buildings, the shareholders of a cooperative building cannot purchase
building coverage under an SFIP Dwelling Form to cover their individual units. Shareholders of a
residential cooperative building can only access the maximum $100,000 contents coverage in
Regular Program communities under the Dwelling Form. Under certain circumstances, at the
policyholder’s option, 10 percent of the content’s coverage may be applied to betterments or
improvements to the unit made at the insured shareholder’s expense.
FEMA is aware that there may be unusual forms of cooperative ownership. In some
cooperatives, a large number of the structures are owned by the individual shareholders through
an arrangement whereby the shareholders lease the buildings to the cooperative, and the
cooperative leases the buildings back to the shareholders, and the land on which the buildings
are located is owned by the cooperative corporation. At the termination of a lease, the owner of
the building may remove the structure from the land owned by the cooperative. Under this
arrangement, the shareholders have an ownership interest in the buildings. Based on this
information, such owner-shareholders are eligible to purchase building coverage under the
appropriate SFIP.
In this situation, the cooperative corporation should be named as an additional loss payee, as its
interest may appear, and any mortgagee should also be named as an additional payee. Claims on
SFIPs issued to individuals or businesses owning buildings in such cooperatives are payable,
subject to all other requirements and limitations.
Claims Examiners
FEMA encourages insurers to review underlying cooperative documents to determine how cooperative buildings
are owned, as other cooperative arrangements may exist that allow an individual to actually own the building,
and therefore be able to purchase building coverage.
11 Countertops
11.1 Common Countertop Types and their Repair or Replacement
When questions arise regarding the removal and resetting of countertop materials or replacing
the material following a flood, the adjuster’s judgment and obtained documentation are
important. FEMA developed the following guidelines to enhance the adjuster’s knowledge of the
various types of materials and precautions regarding removal and resetting countertops:
• Job-built, laid flat, or self-edge laminated countertops are similar in material to the above
described “roll-top,” but are built at the job site to exact specifications. Its common
identifier is that the front edge and sides are always squared. When removal is necessary
to facilitate repairs, replacement is often required as the finished surface may partially
delaminate, resulting in damage to the substrate base material or the backsplash. When a
job-built laminate countertop layout design is curved or L-shaped, damage during
removal is likely, requiring replacement.
• Formed concrete and ceramic tile countertops are built on the job site to exact
specifications. They are constructed over a wood or rock-board type substrate material
that may be screwed or glued to the cabinet framing, or both. When removal is possible,
handling may cause twisting or bending of the countertop, which will crack mortar or
separate the finish material from the substrate. Replacing the top may be necessary.
• Natural or man-made stone materials such as granite and Silestone® can typically be
removed and reinstalled without damage. If the top is joined by two or more individual
pieces, a chemical is applied to the seam to dissolve the polymer, which bonds the
material together prior to removal. If two or more slabs of stone countertop are installed
over a wooden substrate, typically 2 centimeters thick type, then successful removal may
not be likely. If a backsplash is made of the same material and set over top of the
countertop’s rear edge, it is also possible to remove it without damage. However, if the
backsplash is a material such as ceramic tile, its removal is necessary to prevent damage
to the countertop and replacement of the backsplash may be required. Only supervised
labor experienced in handling this material should attempt to remove this type of
countertop, as the SFIP does not cover avoidable damage resulting from poor handling.
• Corian® and other solid-surface (acrylic polymer) countertops can typically be removed
and reinstalled without damage. If the material cracks or breaks off during removal or
handling, the countertop material can be successfully repaired with the application of an
epoxy applied to the surface of each crack, creating an invisible or near-invisible bond.
FEMA is aware of unique instances when a countertop can be damaged beyond repair directly by
or from flood. In cases in which an adjuster recommends replacement of the countertop, the
claim file must include documentation that explains and supports the judgment to replace,
rather than remove and reset.
c. Address salvage.
12 Electronic Signatures
FEMA expects insurers to handle NFIP claims in a customer-centric manner as part of their
normal business practices. To improve the policyholder’s experience and to reduce
administrative burden, FEMA is approving and encouraging the use of electronic signatures on
proofs of loss and other NFIP-related submissions. FEMA will not deny the legal effect, validity,
or enforceability of a signature solely because it is in electronic form. 9 Insurers should accept
electronic signatures in accordance with their general business practices and applicable laws.
The General Services Administration (GSA) and the Federal Chief Information Officers Council
have provided joint comprehensive guidance on the best practices for accepting electronic
signatures. 10 Insurers may find this guidance helpful.
13 Expense Payments
13.1 Adjuster Fees
FEMA uses the current NFIP Adjuster Fee Schedule to make payment to insurers; the insurers, in
turn, make payment to the adjusters.
Current Adjuster Fee Schedule effective August 24, 2017 (See Appendix A)
9
See Gov’t Paperwork Elimination Act (GPEA), Pub. L. 105-277 § 1707 (44 U.S.C. § 3504 note); Electronic Signatures in Glob. &
Nat’l Commerce Act (E-SIGN), Pub. L. 106-229 § 101(a) (15 U.S.C. § 7001(a)).
10
Use of Electronic Signatures in Federal Organization Transaction, Version 2 (January 25, 2013), at
https://bsa.nfipstat.fema.gov/wyobull/2017/w-17008.pdf
For ICC claims, use the ICC fee schedule effective September 1, 2004 (See Appendix B)
Claims Examiners
Important: FEMA expects examiners to take appropriate action when the adjuster’s work performance is
deficient:
1. Does not comply with NFIP standards,
2. Is improperly prepared, thereby requiring the claim to be substantially readjusted, or
3. When the claim handling is not timely or responsive to expectation with customer service and requires
reassignment.
a. A spillway opening,
b. A levee breaching,
d. Water escaping from the banks of a waterway (stream, river, creek, etc.).
FEMA will apply the Section V.B. exclusion regardless of individual property, city, county, or
parish boundaries.
FEMA does not interpret the Section V.B. exclusion as triggered only when floodwaters physically
touch the insured building.
The applicability of the Section V.B. exclusion applies regardless of any waiting period provisions
found at 44 C.F.R. § 61.11. An insurance policy may be purchased without the 30-day waiting
period, but that does not mean that section V.B. of the SFIP does not apply.
3. The date the flooding as defined by the policy at Section II.A began;
4. Evidence of flood prevention prior to the effective date of the policy, e.g., temporary
levees, sandbagging, constructed berms, pumps, etc.; and
a. National Oceanic and Atmospheric Administration (NOAA) for data on river and lake
levels;
b. News reports and social media or other sources that may help the adjuster to
determine when flooding was first reported; and
c. The community or other official for assistance in determining lake or river levels.
The adjuster should interview the policyholder and conduct a neighborhood canvass to
determine the location of the floodwaters in relation to the insured property location at the time
the policy became effective. The adjuster must detail in the narrative their process and evidence
used for recommending coverage or denial under the SFIP.
If the adjuster needs assistance in confirming when a flood began, the adjuster should notify the
insurer. The insurer may contact the NFIP BSA for assistance at
[email protected].
Claims Examiners
Carriers must determine when exclusions apply to claims on a case-by-case basis, based on the available
information and adjuster’s investigation. When determining whether the flood-in-progress exclusion applies to a
claim as part of a coverage determination, examiners should consider:
a. Did the adjuster determine if the flood was in progress prior to the effective date and time of the flood policy
or the effective date and time of when coverage is added or changed at the request of the policyholder?
b. If a different flood caused by another source damages the insured property -
i. Determine if a separate flood-in-progress applies to this loss, requiring the exclusion. The insurer
will consider the date the policy term began or additional SFIP coverage became effective and
compare it to the start date of this flood.
ii. The SFIP may cover this flood damage subject to the terms of the SFIP. Do not forget to exclude
any prior unrepaired damage.
c. The flood-in-progress exclusion will not affect most claims. The flood-in-progress exclusion will primarily affect
applicants or policyholders who wait to purchase flood insurance or increase their coverage until flooding is
imminent.
• Maximum GFIP coverage limit is equivalent to the maximum grant amount established
under section 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act
(42 U.S.C. § 5174) which FEMA updates at the start of each fiscal year through
publication in the Federal Register, 83 Fed. Reg. 53,281.
• The homeowner policyholder has the choice of whether to use the funds solely for owned
building damages, solely for owned contents damages, or for a combination of owned
building and contents damages; but the total cannot exceed the maximum GFIP limits. A
separate $200.00 deductible is applied to each coverage.
• Adjuster must verify the policyholder is the owner of the home to qualify for building
coverage. The adjuster may request a copy of the deed or obtain information from the
local property assessor’s office or assessor’s website.
• For renter policyholders, the GFIP is only for damaged contents owned by the
policyholder.
• GFIP coverage is only available at actual cash value and does not provide Coverage D –
Increased Cost of Compliance Coverage.
• Policyholder contests the recommended loss settlement due to structural issues or due to
issues of causation with certain building items.
Adjusters should submit a request to the insurer to have the building’s structure evaluated as
soon as the need is identified. Adjusters do not have the authority to assign an expert. Table 12
details the issues that may require assistance from a qualified outside professional service.
Table 12. Issues pointing towards a Building Structural Evaluation
Type Qualifications
16.3 Insurers must comply with the following requirements regarding the use of
outside professional services
Claims Examiners
The licensure and rules regarding professional services vary by state. The NFIP insurer is responsible for making
sure the professional services it hires are familiar and compliant with state licensing requirements and the rules
that regulate the profession. When a report from a professional service is used to support the decision of the NFIP
insurer, the report must disclose that it complies with state rules regulating licensure and professional conduct. If a
report does not meet the state’s requirement, the claim decision may become invalid, and FEMA will not approve
the insurer’s Special Allocated Loss Adjustment Expense (SALAE) Type 1 -Expert Expense, request for
reimbursement.
A. Ensuring Compliance with Applicable Laws and Use of Reports
Insurers may only rely upon the use of an outside professional service who perform work in accordance with all
applicable laws regarding professional licensure and conduct. For the purposes of this requirement, insurers and
their retained service providers may not assert that they are exempt from state licensing laws because they are
Federal employees, Federal contractors, or performing work for the Federal Government unless FEMA expressly
authorizes an exemption in writing.
FEMA will not pre-authorize an assignment to an expert, or expert fees. Insurers must obtain FEMA approval to
pay a SALAE 1 expense regardless of the dollar amount.
Only an insurer, or WYO vendor if authorized by the insurer (excludes adjusting firms and independent adjusters),
can request outside professional services.
When making an assignment, insurers must verify the entity and that the individual from whom services are sought
is qualified and licensed in good standing with the state where the insured property is located, before authorizing
an inspection.
• Specify the type of service needed including the covered property to be inspected. The assignment
should be clear that non-covered property is not part of the assignment unless the assignment involves
such determination. FEMA will not authorize expenses incurred to inspect or evaluate non-covered
property, example: pools, pool decks, sidewalks, retaining walls that are not an integral part of the
foundation, bulkheads, non-covered buildings, etc.
• Secure a pre-inspection expense cost estimate to confirm expenses are fair and responsible before
authorizing the inspection. FEMA will not authorize payment for any expense that exceeds the original
quoted fee unless the engineer can document pre-approval from the insurer or authorized vendor prior
to incurring the expense.
• FEMA will not pay for multiple engineers to conduct an inspection unless pre-approval was received from
the insurer with a detailed explanation that the inspection requires different expertise or disciplines to
evaluate the damage, for example, a structural and electrical engineer.
• In addition, any co-signer of a report holding themselves out as a professional engineer (PE) must have a
current license in the inspection state and include the engineer license number on the report.
• Engineer travel expenses must be fair and reasonable and conform with GSA travel rates. FEMA will not
pay the following:
• Insurers may not request changes to final reports; however, insurers may request that experts prepare an
addendum to the final report.
• Insurers must keep the entire expert report in the claim file and provide a copy of the final expert report
and any addendums to the policyholder.
• Insurers must rely on the professional service to prepare requested reports in accordance with all
applicable state laws regarding professional licensure and conduct. To be reimbursed for engineering
expenses, documentation must validate that the engineer of record is qualified and licensed to work in
the state of the property inspected. Insurers and their retained experts may not assert that they are
exempt from state licensing laws because they are Federal employees, Federal contractors, or performing
work for the Federal government unless FEMA expressly authorizes an exemption in writing.
• Date of inspection
• Individual who performs the inspection
• Building description and foundation type – all components
• Site observations supported with annotated photographs, analytical discussion, and conclusion
• Cost-effective method to repair, when applicable
• Signature of the engineer of record with professional seal or state license number
• Name and curriculum vitae of all persons who assisted with the technical content of the report
• The engineer should not interpret SFIP terms and conditions or discuss coverage.
Claims Examiners
All re-inspection requests must come directly from the NFIP insurer or the Federal Insurance Directorate to
[email protected].
The re-inspection program is designed to assist in maintaining quality claims processing within the NFIP. Re-
inspections are performed in cooperation with the insurers. There are five types of re-inspections:
1. Special Assist;
2. Congressional;
3. FEMA Appeals;
4. FEMA Requests;
5. Random Claims Quality Check (RCQC).
For Special Assist re-inspections, the insurer claims management makes a request by email to the NFIP BSA at
[email protected]. The email subject line should include the policy number and
the type of submission (ex. 1234567890 – Request for Re-inspection). The body of the email should contain the
policy number, policyholder name, property address, date of loss, and a brief description of the issues. Attach a
copy of the complete claim file or upload it to the SFTP site.
A GA will be assigned for a desk review or on-site re-inspection. The GA will contact the requestor to discuss the
file and determine if an insurer will accompany the GA on the on-site re-inspection.
Congressional, FEMA Appeals, and FEMA Requests are all sent by FEMA’s Federal Insurance Directorate.
RCQC is a practice by which the NFIP BSA chooses random claim files for review during disasters to
determine if the adjusters are properly handling the claim.
11
SFIP (II)(B)(12).
to measure the energy efficiency of building HVAC systems. As with refrigerants, federal
regulations require periodic increases in SEER ratings. Both rules were established to help our
nation consume energy more efficiently. Federal law requires the phase-out of older refrigerant
types starting in 2010.
Although not covered by the SFIP, retrofit of the existing undamaged component could solve the
issue of component incompatibility. The most common retrofit in an undamaged interior HVAC
unit (air-handler) is to replace the evaporator coil (E-coil). With an undamaged exterior HVAC
unit, a retrofit may be possible by replacing the compressor. Depending on the system and
incompatibility issues, simpler modifications may be available by installing a pressure regulator
or replacing the refrigerant with a different, but equally efficient, Environmental Protection
Agency (EPA)-accepted variety.
In accordance with the SFIP, Section V.A.6-7, and because the SFIP only covers direct physical
loss by or from flood to insured property, the NFIP insurer cannot pay for the cost to upgrade
the HVAC system when the policyholder is forced to do so by law, regulation, or ordinance.
Additionally, the Pairs and Sets provision under the SFIP (Section VII.A. of the Dwelling and
General Property Forms and Section VIII.A. of the RCBAP Form) does not provide coverage for
the undamaged component as the provision states it will pay only the fair proportion of the total
value of the pair or set that the lost, damaged, or destroyed article bears to the pair or set.
insured building unless the equipment is hard-wired and in an insured building as defined in the
SFIP II.B.6 or in a building physically attached to the covered structure by means of a qualifying
addition or extension per III.A.2. Generators stored in a building at the described location are
personal property. Generators and other such equipment in a basement are not covered.
See Figure 44 for an example of a non-covered generator. It is not in a building as defined in the
SFIP. See Figure 45 for an example of an attached utility shed. A generator is covered under the
building when it is hard-wired to the building’s electrical system, is installed within an area of the
insured building, such as an attached utility shed or closet, or within an SFIP-covered porch or
detached SFIP-eligible garage.
Figure 44 Non-Covered Generator
Claims Examiners
The examiner should confirm the adjuster provided identifying information (manufacturer, model and serial
number, and whenever possible, capacity, etc.) on major building equipment such as furnaces, central air
conditioning units, and major appliances such as refrigerators, washers, dryers, televisions, etc. and follow-up to
secure this information if not in the report.
20.2 Building Owner and Tenant Named on Same Policy with Coverage A
As stated in the General Rules section of the Flood Insurance Manual, the building owner must
be named on a flood insurance policy with Coverage A. If the building coverage is purchased by a
tenant due to a lease agreement, the tenant may be named as an additional policyholder on the
policy. The NFIP does not designate any of the named policyholders as primary or secondary. The
rule is intended to ensure that all parties with an insurable interest in the building are named on
any claim settlement proceeds for building damage. Any claim payment would be made to all
parties named as policyholders on the policy.
residential 1–4 family building or condominium unit is $250,000 per policy. The SFIP prohibits
duplicate building coverage by the same policyholder. This means that the NFIP will only pay for
building coverage under one policy, and the owner must be a named policyholder.
The NFIP also will not pay twice for the same covered loss (either Coverage A or Coverage B)
when an RCBAP provides coverage for a condominium unit insured under the Dwelling Form.
Claims Examiners
The examiner oversees or can directly handle ICC claims, which involves securing from the policyholder the
necessary documentation to include:
• The community’s substantial damage determination letter confirming a compliance requirement
resulting from substantial damage. The community determination factors in all perils. For ICC, the SFIP
requires the percentage of damage to be by or from flood, whether covered by the SFIP or not;
• When ICC is required for repetitive loss, the examiner confirms the community has a repetitive loss
provision in its floodplain management ordinance, such as two losses during a 10-year period. The
state or community must have a cumulative or repetitive loss provision already within its floodplain
ordinance at the time of the flood. See Dwelling Form Section III.D.3;
• Bids to perform the work and confirmation that work is only for covered mitigation activities. The SFIP
does not allow payment of the ICC claim until the approved mitigation activity is completed and the
community has confirmed in writing that the activity resulted in a building that complies with their
floodplain management ordinance. However, FEMA encourages advance payments when the
policyholder signs a written agreement attesting the funds will be used only for eligible ICC mitigation
work and agrees that any dollar amount not spent by a specific date will be returned to the insurer;
and
• A new elevation certificate for provision to underwriting for re-rating the new policy.
The ICC Policyholder’s Processing Checklist (See Appendix K) is a useful tool to send to the policyholder.
See Section 3 Increased Cost of Compliance of this manual for detailed guidance.
22 Inspection
The adjuster essentially has one opportunity to make a good first impression; that opportunity
should not be wasted. FEMA expects the adjuster to be punctual for inspections and present
oneself in a professional manner. Professional attire should be worn, for example: no ripped or
torn jeans, t-shirts, offensive branding, etc. The adjuster should present their FCN card and any
government-issued photo ID to the policyholder at the start of the inspection. When minors are
present in the building that requires inspection, the adjuster should never enter unless there is
an adult present, preferably the policyholder or policyholder’s representative.
The adjuster’s site visit to the insured property is the most important part of the claim handling
process. Adjuster professionalism and empathy towards the policyholder for the loss to their
property and potential financial ramifications, as well as meaningful communication, are key
aspects to the inspection that help avoid issues. These three key aspects lay the groundwork for
a prompt and successful claim resolution. The adjuster should spend time with the policyholder
explaining the adjustment and claim processes and give a realistic timeline for completion of the
estimate. This will help avoid future issues and help ensure a good working relationship. These
conversations are the adjuster’s investment in a successful claim result for the policyholder and
for the adjuster.
The adjuster must provide the policyholder a copy of the Flood Insurance Claims Handbook and
ICC Brochure and spend time reviewing the documents with the policyholder. The adjuster must
discuss with the policyholder SFIP coverage and non-coverage issues, and how they apply to the
loss, but cannot say whether the insurer will approve or deny the claim. The adjuster must
confirm that the mortgagee is correct and identify all parties to the contract.
If the adjuster cannot inspect within a reasonable timeframe, the adjuster should promptly
submit a status report explaining the cause(s) for the delay. The adjuster should also address
inspection delays caused by the policyholder, or their representatives, including their failure to
set a reasonable time and date to conduct the inspection and the reason for the delay. The
adjuster should avoid visiting the insured risk without an appointment.
Claims Examiners
The examiner should send a Reservation of Rights (ROR) outlining requirements in case of loss when the
policyholder, or their representative, either refuses an inspection or unreasonably delays the timeframe to
conduct the inspection.
If an elevated floor is constructed over a crawlspace and the crawlspace is below the ground
level on all sides, the building is not elevated and the building’s lowest floor is the below ground
level crawlspace floor, meeting the SFIP definition of a basement. If the building is rated
elevated it will require correction.
An elevated building with an attached garage that has been converted to living space is
considered a non-elevated building. The SFIP may require reformation. Please send a referral to
the Underwriting Department.
Please refer to the Flood Insurance Manual.
• The cost to set up the replacement mobile home on the existing foundation including tie-
downs or anchors, etc.
The value would not include:
• The cost to comply with any code compliance except ICC if it qualifies;
• Upgrades; or
• The cost to relocate the mobile home on another location requiring a new foundation,
extending or moving utility connections, etc.
Claims Examiners
The examiner should confirm that the adjuster appropriately completed a Manufactured (Mobile) Home/Travel
Trailer Worksheet for every manufactured (mobile) home/travel trailer claim with a covered loss.
26 Non-Waiver Agreement
A non-waiver agreement allows the adjuster to investigate a loss where a potential coverage
concern exists without waiving the rights of the program. A non-waiver agreement is necessary
in these circumstances, even if there is evidence of a flood or flood damage to the insured
property.
The adjuster secures a non-waiver signed by the policyholder for late reports or when the
adjuster identifies a coverage issue. To the extent possible, the adjuster must include all known
reasons for the non-waiver agreement. If the policyholder will not sign the non-waiver
agreement, contact the insurer to send a Reservation of Rights letter. See Reservation of Rights
in this section of the manual.
27 Notice of Loss
The first report or notice of loss from the policyholder is the first step in the claims process. The
SFIP requires the policyholder to give prompt written notice of loss to the insurer. In addition to
the normal information required on the notice of loss, every loss assignment to an adjusting firm
should include a brief description of the loss, even if the loss is minor. Information about the
loss, such as water depth, affected room areas, and unique circumstances such as accessibility,
high valued property, and extent of the damage, is important as it helps to ensure assignment to
an adjuster with the appropriate level of experience and will help to prioritize the loss.
When the policyholder delays the notice of loss, the adjuster should ask questions so he or she
understands the circumstances. The concern here is, if an avoidable delay caused damage to
undamaged property or increased damage from salvageable to non-salvageable property, the
SFIP may not provide coverage and the adjuster will face challenges. A justified delay in such
instances could be an order issued by local authorities or prolonged inundation which prevented
the policyholder’s prompt access to the insured property. There may be others, but it is
important that the adjuster understand the delay and clearly report the explanation.
• Salaries and benefits for office personnel who may not work on the site, such as
bookkeepers and administrative employees.
• Office rent, utilities, supplies, phone and internet lines, business insurance and, licenses,
etc.
• Various ongoing expenses such as marketing, advertising, travel costs, legal fees, etc.
Direct overhead costs are typically those ongoing costs for a particular job, such as:
• Short-term office structures such as trailers, architect’s stations, and leased office space,
• Cleanup
• Building dry-out
• HVAC
• Kitchen appliances
Claims Examiners
Important: If the insurer receives proof of loss that is not supported or agreed to, the insurer should pay the
undisputed claim and issue a partial proof of loss rejection letter.
Remember, the lienholder is not required on payments under Coverage B – Personal Property unless there is a
loan specific to the coverage. SBA loans can apply to personal property, Coverage C – Other Coverages, or
Coverage D – Increased Cost of Compliance.
• Invoke any options afforded to the insurer necessary to investigate a claim. See SFIP
Section VII.K.
• Assert any applicable exclusion or limitation of coverage. See SFIP Sections, III, IV, and V.
• Retain a licensed engineer or other qualified professional to assist the insurer, as may be
necessary.
Additionally, when a policyholder claims flood damage to perimeter wall sheathing, an NFIP
insurer must verify:
1. The presence and classification of sheathing in an insured building at the time of a flood;
2. That floodwater came into contact and damaged such sheathing; and,
• The SFIP pays for the direct physical damage by or from flood. It does not cover the cost
to match undamaged building components.
• The SFIP does not cover damage to sheathing or exterior siding, including masonry
veneer, when installed in a wall that is below the lowest elevated floor of a post-FIRM
elevated building located in a special flood hazard area or basement.
• Adjusters must identify and document any pre-existing damage to the perimeter wall
sheathing from insect damage, rot, improper installation or construction defect, prior
unrepaired flood damages, other evidence of deterioration from continuous exposure to
moisture, or other non- covered causes.
31 Photographs
The adjuster should take as many photographs as necessary to portray the damage; to include
photographs of undamaged property and damage from other causes. Photographs should
document the flood damage and the condition and quality of building finishes and contents. The
adjuster must label the photographs, provide the date, the room, and a description of what the
photograph represents to include:
1. All sides, elevations, and foundation components of the building, to include any
vents if applicable;
2. Interior and exterior water lines on the building;
6. Appliances and building equipment including make, model, serial number identification;
9. Photographs of the curbside debris including contents and building material set out at the
curb.
10. Avoid taking or including photographs that can be considered inappropriate and have no
bearing on documenting or supporting the claim.
32 Pollutants
The cost to test for and monitor pollutants is only covered if the ordinance or law was in effect at
the date of loss. When a flood causes direct physical damage to covered building material
containing asbestos, the removal and proper disposal of the covered building material is covered
as part of the covered repair, including necessary abatement charges when incurred. The claim
file should contain a copy of the mandated requirement for testing or monitoring, a paid invoice
documenting the policyholder incurred the expense, other costs associated with increased
disposal fees, and special handling process, including detailing, in the narrative.
The SFIP will not cover to test for, monitor, remove, or mitigate areas of the home not directly
damaged by flood. For example, tile in the living room damaged by flood is found to contain
asbestos, and asbestos was also found in insulation around plumbing lines not directly damaged
by flood. Coverage is limited to the asbestos tile in the living room.
Under the Dwelling and RCBAP Forms, the cost to remove the flood-damaged building material
containing asbestos is limited only by the building property coverage limit, less the deductible.
The General Property Form contains a $10,000 limit for testing and monitoring of pollutants
when required by ordinance or law and any damage caused by pollutants. Under this provision,
excess damage greater than this limit may not be applied to the building deductible.
33 Porches
Porch design and construction has varied over time. It may be original to the building or an
attached addition. A porch can be fully or partially enclosed, screened or open; it can be built on
the ground or elevated.
A porch is covered if it shares a continuous roofline and continuous foundation type with the
main dwelling.
If the porch is an addition or extension attached to and in contact with the dwelling by one of
the five means of connection as fully described in Section III. Property Covered A.2., it can be
covered.
The adjuster should use good judgment in determining coverage for a porch. Good judgment
includes clear photographs of the complete construction of the porch’s roof, walls, and
foundation, and the reasonable explanation or documentation that justifies the coverage
recommendation.
Adjusters should also keep in mind building materials that are used to construct a porch are
exterior-rated, which may resist damage from flood inundation. The same is true with common
porch furniture. The scope of loss should be reasonable, and the adjuster should consider if a
repair and refinish is the extent of the loss. A scope that replaces porch building materials or
porch contents should be documented on the claim file.
For claims filed under the SFIP Dwelling form, an NFIP insurer may adjust a claim without
obtaining a prior flood claim file if there is evidence of completed repairs following a prior flood
loss. Examples of evidence include an inspection of the property that clearly shows repairs to or
replacement of prior damage and a review of available documentation, such as paid contractor
invoices and receipts.
FEMA relies on the flood adjuster and insurer personnel to evaluate and document in the claim
file the evidence demonstrating prior repairs. If the adjuster cannot substantiate repairs based on
their preliminary assessment, the adjuster should recommend obtaining and review of the prior
loss file to the insurer. The adjuster should provide the insurer with adequate documentation and
photographs of any unrepaired prior damage.
Claims Examiners
Examiners should identify prior losses as quickly as possible following a new report of a claim and provide the
estimate and photographs to the adjuster to assist with confirming prior damage and repairs.
If the current insurer needs prior loss information on a claim handled by a previous insurer, the current insurer
can make a request by email to the NFIP at [email protected]. The email subject line should
include the current policy number and the type of submission (ex.1234567890 – Request for Prior Loss
Information). The body of the email should contain the current policy number, property address, and date of
loss. It should also contain any information you have regarding the prior loss and your reason for the request.
Requestor should expect to receive an initial reply containing basic information, building amount paid and
contents amount paid for each prior loss requested, within 48 hours of the request.
If a copy of the file is needed, the NFIP BSA will request the claim file from the previous insurer and relevant
information will be forwarded to the requestor upon receipt; typically, within 72 hours.
35 Prompt Communications
NFIP flood adjusters must contact the policyholder within 24-48 hours of the claim assignment,
or as soon as reasonably possible depending size and scope of the storm. This initial contact will
preferably be by telephone; however, if contact by telephone is not possible, the adjuster will
send the policyholder or designated agent an electronic message, postcard, or letter
acknowledging the assignment and providing the adjuster’s telephone number and any other
means of contact.
FEMA expects the adjuster to return telephone or electronic messages within 24 hours after
receipt of a message from a policyholder, agent, or company staff person. When unable to
contact the policyholder, the adjuster should contact the carrier to seek guidance on how to
proceed with the loss and document their efforts to make contact in the activity log.
FEMA expects adjusters to provide each policyholder timely status and to set appropriate
expectations or to advise when issues arise.
Claims Examiners
Claims Examiners
When the examiner receives the Final Report or POL after 60 days from the date of loss, or after the ending date of
a FEMA-issued POL extension, the examiner must submit a POL Waiver request through PIVOT and receive
approval on the waiver before issuing payment. The carrier does not have the authority to extend the timeframe
for filing a POL per SFIP Section VII.D.
Claims Examiners
acknowledge acceptance.
6. After affirming the disclaimer, click the “Submit Waiver” button to generate the pop-up
confirmation window.
7. Within the pop-up confirmation window, click the “OK” button to submit the waiver to FEMA as a
New Request.
8. FEMA will review and approve or return the waiver request.
Quick Tip: Clicking the “Save and Exit” button will save the In Draft form and direct you back to the proof of loss
Waiver homepage. The “Back” button will exit the page without saving the form. In addition, when you see in red
at the top "POL Alert: This waiver is a possible duplicate" it means that a previous waiver was submitted on the
claim. Additional payments must be submitted under the same waiver. You can locate the previous waiver by
searching “All” by the insurers’ policy number. Delete this submission and submit under the prior proof of loss
waiver.
Claims Examiners
Quick Tip: You may also access the additional payment waiver by clicking the “POL ID” hyperlink of an existing
approved waiver from the proof of loss Waiver homepage.
Claims Examiners
3. After you locate a specific waiver, click the “POL ID” hyperlink to access and review the waiver
request.
Quick Tip: You may check the status of an Additional Payment Waiver Request by clicking on the “POL ID” of
the original or additional Payment request on the POL Waiver homepage.
Claims Examiners
Claims Examiners
You may not endorse an SFIP to change the insured property location. This includes relocation from one unit to
another unit within the same building and relocation of a mobile home or travel trailer to a new location. You
may not submit an endorsement when it will result in a change to the actual building to be insured regardless of
whether a loss has or has not occurred. You must submit a new application and a new premium. Any applicable
waiting period for the SFIP to become effective will apply.
An endorsement may be submitted to correct an erroneous property address (example: one made through
typographical error or an Emergency 911 property address change) when it does not result in a change of the
building to be insured. You may make a correction in the case where there are no paid or pending claims,
without a waiver from the Federal Insurance Administrator of the requirement to submit accurate information in
Section I of the SFIP. You may correct the address in the following situations:
• The property address submitted on the Application was typed incorrectly, and the building
description, coverage, and rating elements belong to the building at the address indicated on the
correction endorsement; or
• The address used to describe the insured building indicated on the Application has changed with
the United States Postal Service; or
• A postal address is being supplied for a descriptive or legal address originally provided on the Application.
In a situation where there is a pending claim, and the agent indicates that the address on the policy is not the
correct address for the building intended to be insured, you may seek a waiver from the Federal Insurance
Administrator of the requirement to submit accurate information in Section I of the SFIP in the following
instances:
• The property address submitted on the Application was typed incorrectly, and the building description,
coverage, and rating elements belong to the building at the address indicated on the correction
endorsement, and the policyholder has no insurable interest in the building at the address incorrectly
indicated on the application; or
• The address used to describe the insured building indicated on the Application has changed with the
United States Postal Service. The agent must demonstrate that the building description, coverage, and
rating elements belong to the building at the address indicated on the correction endorsement; or
• A postal address is being supplied for a descriptive or legal address originally provided on the
Application. The agent must demonstrate that the building description, coverage, and rating elements
belong to the building at the address indicated on the waiver request.
You may not pay a pending claim on a policy requiring an address change without FEMA approval.
When the request is not due to a typographical error or an Emergency 911 property address change, the waiver
request must come from the insurer and be sent by email to the NFIP at
[email protected]. The email subject line should include the policy number and the type
of submission (ex. 1234567890 – Property Address Waiver).
For a Property Address Waiver, the following documentation is required:
• The complete underwriting file; documentation that was used to issue the policy, for example: Flood
Application, elevation certificate, photographs, etc.
Claims Examiners
• A signed statement from a community official that the policyholder has no insurable interest in the
property with the wrong address or that the property address does not exist.
• A signed statement from the agent as to why the wrong property address was written on the
Application. This may indicate that the property address submitted on the Application was typed
incorrectly, and the building description, coverage, and rating elements belong to the building at the
address indicated on the correction endorsement.
• A copy of the current claim file and any previous claim files, if applicable.
• For corrections on multiple buildings, submit the following supporting documentation:
• A sketch identifying each building.
• A schedule listing the correct building addresses.
• Photographs of each building showing the property address.
A Property Address Waiver is not required in the following instances:
Fraud Investigation
When a request is received from a third party’s special investigations unit, such as from a wind
insurer, disclosure of the WYO flood claim file for fraud is not authorized under the Privacy Act
and NFIP’s System of Records Notice (SORN).
The NFIP SORN’s routine use exception to the Privacy Act allows disclosure to certain entities
investigating fraud or potential fraud in connection with claims, subject to the approval of the
DHS Inspector General. 79 Fed. Reg. 28747, 28751 (May 19, 2014),
https://www.gpo.gov/fdsys/pkg/FR-2014-05-19/html/2014-11386.htm (allowing disclosure “[t]o
property loss reporting bureaus, state insurance departments, and insurance companies to
investigate fraud or potential fraud in connection with claims, subject to the approval of the DHS
Office of the Inspector General”).
The requesting party must make the request for disclosure direct to the DHS Inspector General
at https://www.oig.dhs.gov/foia.
12
See 44 CFR 62.23(i)(10) (2018).
9. Denial letter(s)
Insurers should include electronic mail or other electronic communications in the file (either as
print copies or in PDF or similar format).
NFIP insurers may only rely on documentation contained within a claim file when making a claim
determination. NFIP insurers are not required to obtain drafts of the documents described above
but must maintain and disclose them if acquired during the adjustment, investigation, or
payment of a claim.
NFIP insurers must ensure that individual claim files do not contain materials unrelated to the
claim. For instance, if an insurer receives communications pertaining to multiple policyholders,
the insurer must remove the personally identifiable information of other policyholders who are
not part of the claim file in question prior to including the communication in the claim file.
NFIP insurers may redact any privileged communications from a claim file prior to disclosure.
Privileged communications are limited to privileges that the insurer anticipates will be asserted
to preclude disclosure in court, such as the attorney-client privilege.
c. The length of time after the removal of unsalvageable building items, building
cleanup and sanitizing was performed, to the start of mechanical drying. The scope
and costs must be reasonable and in line with water mitigation costs.
3. When professional drying services are performed and a properly completed drying log is
provided along with the itemized invoice, the claim payment should consider the number
and type of equipment for the duration of time validated by the drying log. The scope and
costs must be reasonable and in line with water mitigation costs.
A drying log is a record of daily temperature and relative humidity readings of both indoor
and outdoor air, plus moisture readings and the recorded location of affected and
unaffected building materials, as well as the drying goal and dry standard for the affected
materials. The properly completed drying log, an industry-standard, should also include a
moisture map, the daily operating status of the building’s HVAC system and all the
instruments and equipment used by the technician.
4. The majority of the work performed to mitigate water damage can be addressed using
line-item unit cost pricing that includes labor and profit. Lump-sum, unexplained charges,
and charges based on time and expense should be investigated and documented to
identify the charge and to ensure charges are not duplicated. Ancillary charges for travel,
food, and lodging by the water mitigation company are not payable.
For more information, the claims professional may refer to the Structural Drying bulletin,
Appendix F, in this manual or the Institute of Inspection Cleaning and Restoration Certification
(IICRC). The IICRC is a certification and Standards Developing Organization (SDO), a non-profit
organization for the inspection, cleaning, and restoration industries. In partnership with regional
and international trade associates, the IICRC serves more than 25 countries with offices in the
United States, Canada, United Kingdom, Australia, New Zealand, and Japan. The industry
standard, Standard and Reference Guide for Professional Water Damage Restoration, is certified
by the American National Standards Institute (ANSI). The document is officially known as ANSI-
IICRC S-500 (2015).
42 Reporting
42.1 Timely Reporting
An adjuster should submit the NFIP Preliminary Report within 15 calendar days after receipt of
the loss assignment. The NFIP Final Report is due 30 days later. An adjuster should conclude the
claim within 45 days after the Preliminary Report. When the claim cannot be concluded within
45 days, an adjuster should file an interim report every 30 days until the claim is concluded or as
directed by the claims examiner.
Claims Examiners
The examiner should confirm the following and maintain a proper diary to ensure compliance:
• NFIP Preliminary Report received within 15 days after receipt of the loss assignment.
• Signed NFIP Final Report received by 30 days after receipt of Preliminary Report or an interim report
received every 30 days until the adjuster completes the adjustment.
• Signed proof of loss received from the policyholder within 60 days of the date of loss, or by the deadline
of a FEMA issued proof of loss extension.
Important: The examiner must receive a signed Final Report or signed proof of loss by the 60th day or ending
date of a FEMA issued proof of loss extension. If the examiner receives the signed document after the deadline,
the examiner must submit a proof of loss waiver request to FEMA through UCORT and receive approval on the
Claims Examiners
waiver request before issuing payment.
should look for an exterior debris line on all buildings and provide measurements. It is advisable
to have a photograph of the tape measure against the exterior and interior walls clearly showing
the waterline measurement.
Plantings and shrubbery may retain debris so the adjuster should photograph and report that
measurement. If the adjuster is not able to identify a debris line, address it in the narrative
report.
1. Waterlines: Must be recorded in inches.
2. Exterior: Waterlines are always recorded using a positive number. Adjusters should
measure the exterior water depth from the lowest point of the land immediately outside
the building.
3. Basements: Measure the interior waterline from the floor above the basement down and
record the value on the Preliminary Report with a negative sign in front of the recorded
inches. This is necessary for FEMA actuarial purposes. If the water enters the main living
area (the floor above the basement) – the measurement will be from that floor, up, and
will show as a positive number. Please also note the height of the basement ceiling.
4. Elevated Buildings: Measure the interior water height in a crawlspace or enclosure from
the lowest floor as defined in the Flood Insurance Manual. In non-V Zones, the reference
point of the lowest floor is the top of the floor. In V-Zones, the reference point of the
lowest floor is the lowest horizontal structural member. When the water depth is below
the lowest floor, the number of inches should be represented by a negative number.
*To collect accurate data of areas damaged, it is necessary that every adjuster use either
negative or positive numbers. A negative number reported indicates that flood water
was found only in the basement. In the case of elevated buildings, the negative number
indicates that floodwater did not enter above the floor used for rating.
Claims Examiners
The examiner ensures that the adjuster provides the NFIP Preliminary Report within 15 days after the adjusters’
receipt of the assignment, along with perimeter photographs of the risk and photographs of the damage. The
form must be signed by the adjuster and include the adjuster’s FCN. Review the form for accuracy, underwriting
or rating concerns, advance requests, and reserves. Communicate to the adjuster necessary changes, errors, or
omissions. The examiner should refer any rating issues to their underwriting department.
The adjuster must recommend reserves on the Preliminary Report based on the initial inspection
and provide updated reserves as the claim progresses. It is the adjuster’s best approximation of
the amount of damage to the covered building and personal property at the time of, and prior
to, an estimate being prepared.
Claims Examiners
Flood systems set minimal reserves when a flood claim is open. The examiner must promptly update the claim
reserves upon receipt of the Preliminary Report, any subsequent interim report(s) and Final Report. Company
systems should have the ability to update reserves as payments are made.
Claims Examiners
The examiner should confirm that the Narrative Report properly summarizes the loss including coverage, points
of interest, claim activities, adjustment decisions, and settlement recommendations and request an amended
report if additional information is required to support the adjustment and payment recommendation.
13
See SFIP, Section VII. General Conditions, paragraph (J) “Requirements in Case of Loss”
14
FEMA Fact Sheet, Flood Claims Process, https://www.fema.gov/media-library/assets/documents/114402
Claims Examiners
The examiner reviews the Final Report and proof of loss to confirm accuracy and that the policyholder
properly supported their claim for damage on the form.
When the proof of loss is not compliant in content or form, the examiner should reject the proof of loss and
communicate the decision directly to the policyholder. However, when the examiner can support payment of a
portion of the claim, issue a partial rejection of the proof of loss to allow payment of the undisputed claim. The
examiner should provide written notification of the rejection to the policyholder explaining all issues and request
the documentation required to resolve those issues.
15
FEMA.gov, Proof of Loss, https://www.fema.gov/media-library/assets/documents/9343
Claims Examiners
While policyholders are responsible for substantiating their claims, NFIP insurers must make best efforts to assist
policyholders and work collaboratively to reach agreement on the scope and cost to repair or replace covered
damage, regardless of the documentation provided, and when necessary:
• Provide the policyholder with guidance on the documentation necessary to support the
policyholder’s request for payment.
• Assign an adjuster to review the claim and, when warranted, inspect the property.
• Confirm that the property for which payment is sought is covered by the SFIP. This review likely will
assess whether the scope or price includes material improvements, repair re-design, costs incurred to
comply with building codes, undamaged or non-covered property items, damage resulting from causes
other than flood, pre-existing damage, duplicate allowances, or costs to repair that are outside of
industry standards.
• Use the services of an expert when there are questions concerning whether the damage was caused by
flood or the extent of the damage repairs.
To be eligible for additional NFIP payment, the policyholder must document that funds previously paid were used
to repair or replace covered damage and must show with specificity that additional funds to repair covered
damage are required. NFIP insurers should carefully review the evidence of actual loss, together with paid receipts,
paid invoices, canceled checks, and other evidence of payment for repairs, to ensure that the policyholder is not
seeking duplicate payments, payment for uncovered losses, or the values of applicable deprecation and the
deductible(s) in a request for additional payment.
44 Reservation of Rights
Claims Examiners
The examiner may send a Reservation of Rights letter when the policyholder does not sign the non-waiver
agreement, when there is a lack of cooperation on the part of the policyholder, or when it becomes necessary
to compel some action on the part of the policyholder seeking compliance with policy conditions. Non-Waiver
Agreements and Reservation of Rights letters must clearly state the issue in question. See Non-Waiver
Agreement in this section of the manual.
45 Salvage
The adjuster should address the potential for a financial recovery in one of three ways:
1. Readjust the scope of damage from replacement (non-salvageable) to repair (salvageable)
and reach an agreement with the policyholder on the cost to repair. This value should
include any applicable cost to disassemble, clean, repair, refinish, reassemble, plus any
handling by the repair provider.
2. Keep the scope of damage for the item as a replacement (ruined and non-salvageable) and
reach an agreement with the policyholder on the “buy-back” value.
a. The adjustment must specify the salvage and the buy-back value either within an
appendix to the estimate, or within the estimate itself.
b. The adjuster should keep in mind property damages settled under this option (2)
ruined and non- salvageable, are no longer insurable or claimable on a future loss;
hence the potential that option (1) (salvageable) is more suitable to the
policyholder’s interests.
3. When the policyholder is not amenable to either (1) or (2), the adjuster should promptly
inform the insurer, who may instruct the adjuster to contact an outside third party such
as a salvor. While uncommon for a loss on the Dwelling Form, residential salvage interest
exists with hardwood furniture, HVAC units, and major household appliances, especially
those with certain metals such as copper.
Financial recovery paid to the program by a third party salvor is contingent upon prompt
coordination between the adjuster and the salvor. The insurer should retain a list of reputable
salvors involved in past claims and make that list available to its adjusters. When applicable, the
adjuster should discuss with the policyholder, the potential visit by a salvor soon after the
adjuster’s inspection. An inspection by the salvor only involves inventorying damaged items
worth purchasing. The salvor may not take possession of any property before the loss is settled
until it is agreed upon by the policyholder and the insurer. The salvor should promptly provide
the salvage list and price to the adjuster for direction, and the adjuster should promptly discuss
the matter with the policyholder and the examiner. The salvor is entitled to an inspection fee if
the salvage offer is turned down by the insurer. See SALAE section in this manual for instructions
to request approval to pay the salvor’s fee. Otherwise, the salvors’ fee is taken from the sale of
the salvage. The salvor should issue payment for the overage to the insurer as a recovery. The
insurer may allow the adjuster to make decisions involving salvage on its behalf.
The adjuster’s narrative in the Final Report must address the “financial recovery” applicable to
the loss. Oftentimes this portion of the narrative is omitted or is incomplete, which may lead to
missed opportunities by the program. When financial recovery is not available, the narrative
should explain why.
The adjuster’s service charge is based on the gross loss at RCV before any salvage. The adjuster
or the adjusting firm may not act as salvor on a loss, in whole or in part. This includes taking
possession of the insured property for the inspection or purchase by a third party.
Claims Examiners
The examiner should confirm that the adjuster considered the salvage value of all replaced items. The
insurer is entitled to a 10 percent salvage allowance only when there is an actual cash collection of salvage
from the policyholder. The 10 percent allowance does not apply in any other situation.
The insurer’s share of salvage recoveries (10 percent) must be deducted from the net recovery proceeds prior to
remitting the remaining proceeds to the restricted bank account. The amounts of salvage recoveries reported to
FEMA (via the recovery after final payment transaction) will be for the total recoveries, inclusive of the insurer’s
entitlement.
Claims Examiners
IMPORTANT: All SALAE expenses need FEMA authority to pay regardless of the dollar amount.
• Engineer travel expenses must be fair and reasonable and conform with GSA travel rates. Engineers are
expected to apportion travel expenses between assignments. FEMA will not pay the following:
o food expenses;
o Travel time billed at the site study/inspection rate. Travel time must be reasonably discounted; or
• Experts must bill separately the administrative fee, site study/inspection, travel time (billed at no more
than half the hourly rate for the site study), report preparation, peer review if applicable, travel expenses,
mileage, etc. Experts must provide all applicable receipts for air travel, vehicle rental, hotel, tolls, parking,
etc., and clearly explain any exceptions. Mileage can be charged for distances traveled exceeding 100 miles
round trip and pro-rate between multiple assignments in the same area.
• The expert must thoroughly explain the need to use other subcontractors or vendors to complete the
assigned task and itemize the charges. FEMA will not pay for multiple engineers or experts to conduct an
inspection unless the expert receives pre-approval from the insurer with a detailed explanation or the
inspection needs different expertise or disciplines to evaluate the damage, for example: a structural and
electrical engineer.
• Experts should limit the number of individuals involved with producing the final work product to only those
who are essential.
• The total billing involved with producing the final report should be reflective and representative of
the complexity of the assignment.
Claims Examiners
• All expense submissions to FEMA require the specific recommendation for payment by the insurer’s
Principal Coordinator or their designee.
• The following expenses are never reimbursable under SALAE Type 1:
o Engineering fees charged by an unlicensed engineer.
o Engineer reports co-signed by an engineer who present themselves as a P.E. but are
unlicensed in the state where the inspection took place.
o Fees charged in excess of the pre-inspection fee quote unless there is evidence that the
engineer secured pre-approval prior to incurring or charging the excess expense.
o Undocumented expenses and expenses that exceed the GSA travel rates.
o Photos.
o Food expenses.
Claims Examiners
Claims Examiners
o Click “next” to continue to the Final Review Page.
• Step 6: Final Review Page
o On the Final Review Page, you can review the information pertaining to the request that was
previously entered.
o If you need to update information prior to sending it to FEMA, use the “edit” link in the section
headers to navigate back to the appropriate page.
o After reviewing and verifying the information on the Final Review Page, you can choose to provide
any additional comments or files they wish to attach to the SALAE request and submit to FEMA.
You are required to click “add comment/file(s)” to save comments/files to the request.
o Click “submit to FEMA” at the bottom of the Final Review Page to officially submit the request to
FEMA for review. You will be redirected back to the SALAE homepage.
• Once FEMA provides a determination, insurer users will receive an email notification informing you of
FEMA’s review decision (approved, rejected, or additional information requested).
Claims Examiners
• Adjusting firms and adjusters must have pre-approval and agreement from the insurer before incurring or
billing SALAE Type 2 expenses.
• All expenses must be fair and reasonable, billed at time and expense, and supported by receipts.
• The adjuster fee schedule fairly compensates adjusters for their time to adjust flood claims. This includes
revising flood claims when necessary. There may be a time when allowing an adjuster to bill on time and
expense makes sense due to the complexity of the claim. Time and expense must only be used when
necessary and when clearly supported.
• When it is necessary for an adjuster to revise a claim, the adjuster fee schedule pays the adjuster the
greater of:
o the difference in the fee based on the revised claim
o the CWOP fee.
When an insurer authorizes an adjuster to bill on time and expense, the adjuster can only receive
time and expense, not time and expense and the fee under the adjuster fee schedule. However,
the insurer must offset the time and expense by the applicable fee under the adjuster fee schedule.
Example SALAE Type 2 for time and expense:
The initial adjuster fee was $800 based on the amount of loss per the published fee schedule. The
adjuster submits an invoice for time and expense that total $937.50. The total expenses to date
$1,737.50. Based on the revised claim, the adjuster would be owed the $395 CWOP fee. The
examiner would deduct the $395 CWOP fee from the $937.50 time and expense and request a
SALAE Type 2 for $542.50. The SALAE Type 2 entries would show as follows:
The SALAE Type 2 request must include all fee bills to support the total adjusting expenses under
the claim and confirm the original claim amount used to determine the initial fee and the revised
claim used to determine the applicable adjuster fee based on the revised claim.
• Travel expenses must conform with GSA travel rates. Independent Adjusters are responsible to arrange for
and incur lodging expenses within the 48 contiguous states. FEMA will only reimburse lodging expenses
that exceed the average lodging expense normally incurred with the 48 contiguous states, not to exceed
the GSA travel rates for lodging. FEMA will not reimburse the following:
• FEMA will not accept lump-sum charges and there is no longer a $500 rate for SALAE Type 2.
• The insurer must thoroughly explain in writing the reason it was necessary for the adjuster to incur the
excess expense, details of the activity, what effect this activity or work had on the adjustment, any unusual
circumstances, and why FEMA should approve the expense. All SALAE Type 2 approval requests must be
accompanied by copies of the report (including any previous reports), all actual bills, and itemized time and
expense sheets.
• If an adjuster conducts an inspection on a covered flood loss, with an active policy, and the policyholder
withdraws the claim after an estimate is written, or fails to pursue the claim, the adjuster is paid the CWOP
fee under Loss Adjusting Expense (LAE). In exceptional circumstances, the insurer can seek approval to pay
the excess adjuster fee as a SALAE Type 2 when:
Claims Examiners
o After the adjuster and the insurer makes several documented reasonable attempts, using all
available contact sources (phone, mail, email, etc.), to secure the signed Proof of Loss so that the
claim can be paid and the policyholder:
Provides written confirmation that they will not pursue the claim;
The policyholder withdraws the claim;
It becomes reasonably clear that the policyholder will not pursue the claim due
to the policyholder’s failure to respond to all attempts to secure a signed Proof
of Loss. Documentation of all attempts to secure the signed Proof of Loss must
be provided, and the insurer must send a letter to the policyholder advising
that the claim is being closed without payment due to failure to pursue.
o FEMA will not give approval when the policyholder does not sign the Proof of Loss due to
disagreement with the settlement or coverage dispute.
• The following expenses are never reimbursable under SALAE Type 2:
o CWOP adjuster fees for supplemental adjustments, regardless of the number of CWOP adjuster
fees under any one claim
o Texas tax expenses are only payable as LAE per the published adjuster fee schedule and are never
reimbursable under SALAE Type 2.
o To reimburse adjusting expenses on an invalid policy. An example: It is determined after the
inspection and estimate that the insured property is in a COBRA requiring the policy to be
rescinded.
o Undocumented expenses and expenses that exceed the GSA travel rates.
Claims Examiners
o Use the appropriate Fee Schedule to calculate the “Total Adjusting Expenses Paid to Date” and
use the drop-down to indicate which Fee Schedule was used.
o Click “Next” to continue with your submission.
E. Step 5: Documentation Upload
o Enter invoice information.
o Under Invoice, click “Select Files . . .” to browse for the appropriate invoice(s) and upload to the
application.
o Under “Other”, click “Select Files . . .” to browse for other documentation related to the
submission.
o Click “Next” to continue with your submission.
F. Step 6: Review Your Submission
o Review all information entered into the system.
o Upon completion of data entry, click “Submit to FEMA.”
o Submission Complete
Claims Examiners
lawsuit are reimbursable. Prior to the filing of a lawsuit, the matter is considered claims handling and
ineligible for Type 3 SALAE reimbursement. This provision does not revise any of the expenses
typically reimbursed throughout the claims handling process.
FEMA requires WYO Companies to seek FEMA approval for all litigation expenses incurred to
defend a lawsuit within the scope of the Arrangement brought against an insurer for claims under a
WYO Company-issued policy.
2. Customary Standards
FEMA reimburses Type 3 SALAE Litigation expenses incurred by a WYO Company pursuant to the
Arrangement subject to FEMA Office of Chief Counsel, FIMA Legal Division guidance and direction.
The WYO Company is responsible for ensuring litigation expenses for which reimbursement is
sought are consistent with its own customary standards, staff, and independent contractor
resources, as it would in the ordinary and necessary conduct of its own business affairs, subject to
the Act, the SFIP, the Arrangement, and other regulations prescribed by FEMA. 44 C.F.R. § 62.23(e).
For example, if the customary standards of the WYO Company require a reduction of hourly rates or
expenses or other limitations on payment for outside expenses, the WYO Company is required to do
the same for any Type 3 SALAE-related expense.
Under the Arrangement, FEMA is not responsible for payment to counsel representing WYO
Companies. The WYO Company is responsible for paying its counsel without delay and for seeking
reimbursement for eligible expenses under the Arrangement. WYO Companies must submit
requests for reimbursement within 60 days of receipt of the invoice or bill from its outside counsel.
If outside counsel will not submit an invoice or bill within the 60-day period, the WYO Company
must notify FEMA of its existence and provide an explanation and estimation of when the outside
counsel will submit the invoice or bill.
Further, FEMA will deny any invoice or bill submitted after 180 days unless the WYO
Company provides sufficient justification, or FEMA expressly and in writing waived the 180-
day period authorizing an extension.
Prior to seeking FEMA’s approval for reimbursement, a WYO Company must review the invoice to
verify the work was completed, accuracy of the billing, reasonableness of the expenses incurred,
and that the reimbursement would be approved under the WYO Company’s customary standards
as submitted subject to the Arrangement, Act, Regulation and FEMA guidance. A certification
signed by the WYO Company representative must be attached as a cover sheet or the expense will
be denied. The certification must provide the following:
I have reviewed and understand the FEMA guidelines that govern the Type 3 Special Allocated
Loss Adjustment Expenses (SALAEs). I am responsible for reviewing and ensuring that Type 3
SALAE requests comply with the FEMA guidelines. I have reviewed the invoice for which
reimbursement is sought, and to the best of my knowledge, information and belief, confirm
that the invoice is reasonable, appropriate and complies with the applicable FEMA guidelines.
Executed on (date).
(Signature)
3. Overhead Expenses are Not Reimbursable
Customary charges such as overhead, ordinary office supply costs, and local telephone costs are
included in the hourly rate and are not reimbursable as Type 3 SALAE. The following expenses
are considered overhead and generally are not reimbursable. FEMA will consider
reimbursement on a case-by-case basis after pre-approval:
A. Fees attributed to secretarial and administrative services;
B. Organizing material for storage;
Claims Examiners
Claims Examiners
C. Navigating to the Litigation and Expense Module in Pivot
A. Accessing Pivot and requesting access to Pivot for a New User:
o Access the Pivot site: https://pivot.fema.gov
o Click on the “Register” hyperlink
o Complete the Registration form
o Request access to Litigation and Expense module and include a reason for access to complete
the registration
o Following administrator approval via email, affirm the Rules of Behavior to access Pivot
B. Navigating to the Litigation and Expense module homepage in Pivot:
o After logging in to Pivot, select the “Litigation and Expense” navigational tile under “Claims
Operations.” This brings you to the Litigation and Expense homepage.
Claims Examiners
b. The Filter panel allows you to search and filter SALAE requests by policyholder name,
policy number, insurer, engineering entity, owner, and status.
c. The “In-progress” tab displays SALAE requests that are in draft, in FEMA’s queue for review, or
ones that require additional information from the insurer prior to FEMA’s determination.
d. The “Complete” tab displays SALAE requests that are approved, rejected, or closed.
F. Submitting a NEW SALAE Request
A. Step 1: Requestor Information
o Edit your personal and company information (as needed) and click “Next”.
B. Step 2: SALAE Type Designation
o Select “Type 4 (Appraisal Expense)” from the drop-down menu.
o Click “Next” to continue with your submission.
C. Step 3: Policy Information
o Enter the policy information.
o Click “Next” to continue with your submission.
D. Step 4: Expense Details
a. Complete the expense details.
b. Fill in or use the “Auto Calculate” button to calculate the reimbursable amount.
c. Click “Next” to continue with your submission.
E. Step 5: Documentation Upload
o Enter invoice information.
o Under Invoice, click “Select Files . . .” to browse for the appropriate invoice(s) and upload to the
application.
o Under “Other”, click “Select Files . . .” to browse for other documentation related to the
submission.
o Click “Next” to continue with your submission.
F. Step 6: Review Your Submission
o Review all information entered into the system.
o Upon completion of data entry, click “Submit to FEMA.”
o Submission Complete
G. Notifying the Insurers
A. Once FEMA provides a determination, insurer users will receive an email notification informing you
of FEMA’s review decision (approved, rejected, or additional information requested).
H. Providing Additional Information for a Specific SALAE Request
A. To supply additional information on a request returned by FEMA:
a. Filter requests by status: “Action Needed” on the SALAE homepage.
b. Verify the policyholder’s name, date of loss, and policy number to ensure you are entering the
correct request.
c. Click “open request” to enter the request and supply additional information.
B. To review the request for more information:
a. Scroll to the comment section on the Final Review Page and review the comment left by
FEMA (comment also available in the email from UCORT).
b. Respond to/carry-out FEMA’s request prior to resubmitting the request.
i. To edit information, go to the correct page and update the information and return
to the Final Review Page for review and submission.
ii. To supply more files, utilize the comment section on the Final Review page to upload
Claims Examiners
documents and provide a description of the file. Click “add comment/file(s)” to save
the file to the request.
c. Click “return to FEMA” to re-submit the SALAE Type 1 request for review. Upon FEMA’s review,
you will receive an email notification, informing you that your request has been approved,
rejected, or if more information is needed.
Important: If FEMA returns a request to the insurer, the requestor has 14 business days to provide the
additional documentation or the request is automatically closed.
48 Statute of Limitations
48.1 Interplay Between the Extension of the Proof of Loss Deadline for NFIP
Policyholders and the 1-Year Statute of Limitations in 42 U.S.C. § 4072 (VII.R.
Suit Against Us)
NFIP Insurer
The SFIP is a Federal regulation promulgated by FEMA, which has three forms. The Dwelling form is found at 44
C.F.R. § 61, Appendix A(1), the General Property form is found in Appendix A(2), and the Residential
Condominium Building Association Policy (RCBAP) form is found in Appendix A(3). In these regulations, FEMA
established the 60-day proof of loss deadline. See Section VII(J) of the Dwelling and General Property forms and
Section VIII(J) of the RCBAP form. The Associate Administrator of the Federal Insurance and Mitigation
Administration has the authority to grant waivers of and extend the proof of loss deadline pursuant to 44 C.F.R. §
61.13(d). See also 44 C.F.R. § 61, Appendices A(1) and A(2), Section VII(D), and Appendix A(3), Section VIII(D).
Congress, in enacting the National Flood Insurance Act of 1968, as amended, (42 U.S.C. § 4001, et seq.) enacted
a 1-year statute of limitations for an NFIP policyholder to bring a lawsuit after the complete or partial
denial/disallowance of the policyholder’s claim. See 42 U.S.C. §4072. This 1-year statute of limitations was
incorporated into the SFIP by FEMA. See 44 C.F.R. § 61, Appendices A(1) and A(2), Section VII(R), and Appendix
A(3), Section VIII(R).
Unlike the SFIP proof of loss deadline, which is a regulation created by FEMA, FEMA cannot extend the time limit
for NFIP policyholders to bring a lawsuit. The applicable time limit to file a lawsuit was set by statute, not FEMA.
Although FEMA has the administrative authority to extend the proof of loss deadline it established by regulation,
FEMA lacks the authority to extend the time limit to file a lawsuit established by statute. This statute of
limitations has never been extended.
It is important to understand that the proof of loss is not the claim. The claim is the assertion by the policyholder
that they are entitled to be paid for a covered loss under their SFIP (i.e., the demand for money). An NFIP
policyholder whose insured property is damaged by an event only has one claim arising from that event,
regardless of the number of proofs of loss that the policyholder may submit in support of that claim.
Even in the instance of an Increased Cost of Compliance (ICC) claim under Coverage D of the SFIP there is only one
claim that arises from that substantial damage determination regardless of the number of proofs of loss
submitted by the policyholder.
The SFIP sets forth the process that the policyholder must follow in supporting his or her claim in the General
Conditions section of each form of the SFIP (which is Section VII for the Dwelling and General Property SFIP forms
NFIP Insurer
and Section VIII for the RCBAP SFIP form). For example, Section VII(J)(1) of the Dwelling SFIP form requires
prompt written notice of the loss. Also, Section VII(J)(4) of the same form and its subparts set forth what
information must be included for the proof of loss (which is the policyholder’s statement of the amount of money
demanded and submitted in support of their claim) and indicate that it must be sent within 60 days after the loss.
NFIP court rulings hold that if the policyholder does not comply with all the terms and conditions of the SFIP prior
to filing a lawsuit (including the proof of loss requirements), then the necessary conditions for the policyholder to
be able to bring a lawsuit have not been met. What this means is that, in the instance in which a denial letter has
been issued such that the statutory 1-year to bring the lawsuit will run before a proof of loss extended deadline
runs, the policyholder has to both file the lawsuit and have the required proof of loss requirements completed
within 1 year of the date of the denial or partial denial of the claim. This situation will typically arise when the
insurer determined that the policyholder did not suffer a “direct physical loss by or from flood” and there is no
coverage under the SFIP. For example, if the insurer determined that floodwaters did not reach the insured
building, a denial letter will be sent because there is no insured loss and no coverage under the SFIP.
In any event, FEMA requires NFIP insurers to continue to work with their policyholders. The NFIP can pay
additional amounts if properly supported, even if the formal proof of loss deadline has passed. FEMA does this
through the granting of the policyholder’s request of an individual waiver of the proof of loss deadline through
the insurer. The NFIP makes every possible effort to ensure that a proper claims payment and resolution of the
claim are achieved in every instance.
The limited waiver and extension of the proof of loss deadline recognizes the difficulties policyholders may
experience evaluating damage and supporting their flood insurance claim. The typical dispute arises after a
policyholder received payment based on an adjuster’s report and the insurer’s approval and later believes there
is additional uncompensated damage. However, as discussed above, there are instances when the claim may be
denied for reasons that do not require an adjuster’s report or proof of loss from the policyholder. Even in those
claims where the insurer issued a denial letter early, the policyholder still has a full year from the date of that
denial letter to collect all required documentation, file the proof of loss, and then file a lawsuit if believed
necessary.
The extended time to file the proof of loss is an effective mechanism that allows policyholders to fully present their
claims. For most claims, disputes will not arise until after the submission of the proof of loss and formal denial of
the amount sought. While FEMA does all it can to assist NFIP policyholders, it does not have the authority to waive
or extend the applicable statute of limitations.
49 Subrogation
Subrogation is the right of the insurer to claim damages caused by a third party and recover the
claim payment by the insurer to the policyholder for the loss. Pursuant to 44 C.F.R. § 62.23(i)(8),
FEMA has the right of first recovery in the event of any subrogation claim under the NFIP. The
adjuster must consider subrogation on every flood claim, confirm the potential for subrogation,
and address subrogation in the Narrative Report. This may require the use of an expert to
confirm causation and verifying the potential at-fault party. Investigations should be timely to
prevent the loss of key evidence that would allow a successful recovery. If the adjuster believes
there may be potential for subrogation, the adjuster should complete FEMA Form 086-0-16 -
Cause of Loss and Subrogation Report, to identify the potentially responsible third party and
characterize how their actions may have caused or worsened flood damage.
WYO companies and the NFIP Direct cannot waive subrogation or otherwise complicate FEMA’s
right to pursue subrogation. SALAE Type 3 does not apply to proactive litigation such as
subrogation. FEMA’s Office of Chief Counsel (OCC) assumes primary responsibility for all
subrogation recovery matters upon refusal by the WYO.
When reviewing a claim for subrogation, be sure to capture the who, what, where, when, and
how of the third-party event that caused the flooding. Adjusters should ask policyholders about
events like recent residential or commercial construction, changes to neighboring properties,
drainage issues, city pumps, and recent road work projects.
Claims Examiners
The insurer should evaluate subrogation recovery. Whether the insurer pursues recovery or not, the insurer should
notify the NFIP BSA and submit the Cause of Loss and Subrogation Report and a copy of the claim and underwriting
file.
Send subrogation-related documentation and information to the Office of Chief Counsel (OCC) at FIMA-OCC-
[email protected] and cc a copy to the NFIP BSA via electronic mail at
[email protected]. Upon receipt of the information, the NFIP BSA will log the information. OCC
will contact the insurer if additional information is required or necessary.
50 Underwriting Referral
It is important that the adjuster brings to the insurer’s attention any issue involving a potentially
improperly rated policy or ineligible building or contents promptly upon discovery. The sooner in
the claims process the adjuster raises a potential problem, the sooner Underwriting (UW) can
review the concern; minimizing delays to the loss settlement. A UW referral should cite the
current rating of the policy, followed by the facts and supporting photographs. When the issue
involves a potential basement or post-FIRM elevated building located within a special flood
hazard area, but the adjuster is unsure about the facts, the referral should disclose this and
recommend the insurer hire a qualified outside professional service.
Claims Examiners
With an issue involving an elevation status of a floor level, an elevation certificate, or a written elevation study, a
detailed “bird’s-eye” drawing is typically necessary. A bird’s-eye drawing plots all elevation points for each floor
level, area or room, in addition to recording the elevation points along the building’s exterior perimeter
foundation, and high and low points at the described location. A report of this nature generally requires
certification with a signature and seal from a professional land surveyor; however, some states also permit a
signature and seal from a professional engineer. The insurer should ensure the professional it hires complies with
all rules established by the state for land surveying.
The conversion of elevation “vertical datum” may also present a UW issue. A vertical datum is a base
measurement point (or set of points) from which elevations are determined. Historically, the standard datum
used by the federal government was the National Geodetic Vertical Datum of 1929 (NGVD 29). However, the
North American Vertical Datum of 1988 (NAVD 88) is now the national standard. Elevation values based on
different vertical datum cannot be used together directly since they are based on a different vertical reference
point. When comparing the updated flood hazard data released by FEMA with elevation information on elevation
certificates and other documents from different sources, the insurer must take care to ensure all elevations are
in the same datum. If they are not the same, the insurer must apply a conversion factor so that the values are
Claims Examiners
referenced to the same datum before they are used. Failure to do this can result in improper structure design
(for example: building at the wrong elevation), which can have serious implications in terms of complying with
community and state building requirements. Flood insurance rates can also be impacted, including eligibility for
the Waiver of the Limitation or a Letter of Map Amendment or Revision.
The examiner must carefully review the adjusters’ report for discrepancies in the declarations page, the
preliminary report, or photographs, and immediately refer any discrepancies to the UW Department for review
and provide the necessary supports, ex. photographs, surveyors report, etc.
How to address potential rating changes:
• When the rating change will result in greater coverage, the adjustment should proceed based on the
current rating and revised once underwriting confirms the rating, reforms the policy, and collects the
correct premium.
• When the rating change will potentially restrict coverage, have the adjuster secure a non-waiver
agreement, or send a Reservation of Rights letter addressing the coverage issue. The adjustment
continues and payment is issued based on the undisputed covered loss. The adjuster revises the
estimate once UW confirms the rating, reforms the policy, and collects the additional premium.
The examiner should keep the policyholder informed through the process and communicate the change to
the adjuster and the policyholder as necessary.
waiver is only applicable to the current loss, and a separate waiver request must be filed on any
future claim to ensure the use of the current flood map, the proper flood zone, and BFE.
Claims Examiners
The examiner must send the waiver request by email to the NFIP BSA at
[email protected]. The email subject line should include the policy number and the type
of submission (ex. 1234567890 – Waiver for Elevated Building Coverage Limitation).
Documentation to attach to the email must include:
• Complete Underwriting file.
• Documentation used to issue the policy.
• Current Flood Zone Determination.
• Elevation Certificate and datum conversions if applicable.
• Color photographs of all sides of the building and photographs showing machinery and equipment and
location
• Copy of current claim file and any previous claim files if applicable.
The NFIP BSA will send an acknowledgement of receipt of the waiver request to the insurer. If additional
information is required, the NFIP BSA will notify the insurer within 10 business days. Otherwise, the NFIP BSA will
submit the packaged documents to the FEMA Underwriting Branch for review and determination. If all
documentation is submitted timely and properly, the entire process should not take more than 15 business days.
52 Wildfires
52.1 Application of Post Wildfire Exception to 30-Day Waiting Period for New
Policies
In general, new policies for flood insurance become effective following a 30-day waiting period. 16
However, the Biggert-Waters Flood Insurance Reform Act of 2012 provided an additional
exception to this requirement related to flooding caused by post-wildfire conditions, referred to
as the Post-Wildfire Exception. 17 Under the Post-Wildfire Exception, the standard 30-day waiting
period does not apply to new policies if:
1. The covered property experiences damage caused by a flood that originated on Federal
land;
2. Post-wildfire conditions on Federal lands caused or worsened the flooding; and,
For the purposes of the Post-Wildfire Exception, the Federal Agency responsible for the land on
which the post-wildfire conditions existed determines the fire containment date.
16
See 42 U.S.C. 4013(c)(1); 44 CFR 61.11(c)
17
See 42 U.S.C 4013(c)(2)(C) (added by the Biggert-Waters Flood Insurance Reform Act of 2012 § 100241)
Where a policyholder meets the requirements of the Post-Wildfire Exception, the insurer must
make the policy effective at 12:01 a.m. (local time) on the date of the flood loss qualifying for the
exception. Once the policy is made effective, the insurer must adjust and pay claims in
accordance with the SFIP, including provisions governing a flood in progress and requiring that a
flood occurs after the purchase of the policy.
53 Wind/Flood Loss
When adjusting wind/water losses, the adjuster should use established and proven investigative
methods to document flood and wind damage to buildings and contents occurring during
hurricane or storm events. “Wind/Water Investigative Tips” below can also be helpful.
The adjuster should record the process they use when approaching a wind and water claim. In
addition to looking for signs of flood damage and a general condition of flood and documenting
the exterior water line, the adjusters should note any exterior wind damage, such as missing
shingles, turbines, or fascia damage. The adjuster should also photograph this damage and
mention what was observed in the narrative report.
The SFIP only pays for direct physical loss by or from flood to the insured property. Once inside
the building, the adjuster should always document the floodwater line. Damage below this line is
typically flood damage (exceptions like wicking should be noted in the narrative report). Damage
above the floodwater line is typically wind damage, such as water-stained ceilings or water
damage at broken windows or exterior doors. This damage should also be photographed and
mentioned in the narrative report.
Barometric Pressure
Amount of Rainfall
Tidal Heights
Storm Surge
Wave Heights
3. Record the distance and direction of the insured risk relative to the eye of the storm.
Remember that the waves are higher to the right of the storm’s path.
4. Research and record site conditions:
− Original ground elevation
− Distance from a body of water
− After-storm ground elevation or other indications of scour
− Amount and type of storm debris
5. Canvass the neighborhood for eyewitnesses and take their recorded or signed
statements. Be certain to identify where each witness was at the time of the storm,
document the wind speed versus wind gusts and flood levels each witness saw, and the
time of day observed that each saw it. Record in the claim files only what each witness
says verbatim—not hearsay or your own opinion.
6. Check for and photograph the debris line. Measure and record how many feet the
debris line is from the shoreline and how many feet from the insured risk. Be sure to
describe the topography in detail. Check for and photograph houses and objects
adjacent to the insured risk. If the damage appears to be different from that of the
insured risk, determine why and record the reason in the claim files. Usually, the
damage is different for one of two reasons:
− Different causes of damage (for example, a tornado can cut a relatively
narrow path, leaving neighboring buildings relatively undamaged).
− Different building construction and anchoring. Look for connectors or tie-down straps
for elevated buildings and enclosures beneath elevated buildings. Check the pilings for
evidence of scouring. Photograph the remaining pilings, showing patterns of the
leaning pilings. Determine how deep the pilings were installed and measure the
regarding causation, damages, or repair methods. Such notations can help resolve
disagreements later in the claims process.
• Set proper expectations for the policyholder, explaining what is needed to confirm
causation, direct physical damage by or from flood, and to set the amount of loss.
• Secure the services of a subject matter expert to document the cause of loss and damage
by wind versus. flood.
• The adjuster may need a subject matter expert to determine the pre-loss value. A
contractor’s rebuild estimate that considers like-kind and quality construction is an
acceptable method to prove the value.
• Determine the pre-loss value for the building immediately before the loss per VII.
GENERAL CONDITIONS, V. LOSS SETTLEMENT 5. Amount of Insurance Required and
attempt to reach an agreement with the policyholder. Once the value is established, the
adjuster will deduct applicable depreciation, the wind payment, and flood deductible to
determine the amount payable under the flood policy.
18
See: Halmekangas v. State Farm Ins. Co., 2008.
Claims Examiners
55 Oversight
55.1 Claims Oversight
FEMA maintains oversight of the NFIP claims processing performed by the insurers. This
oversight is conducted primarily through claims and underwriting Operation Reviews and
Random Claims Quality Checks (RCQC). The Operation Reviews are typically performed on closed
claim files. An RCQC is conducted during disasters on open and closed claims. The RCQC review
involves reviewing at least one claim from each adjuster to determine if the claim is on the right
path and provide guidance as necessary. Additionally, insurers engage Certified Public
Accounting (CPA) firms to perform biennial audits that include a claims audit section.
Adjusters and insurers should be mindful of the findings from the Operation Reviews, RCQC, and
biennial audits.
The NFIP is a federal program and therefore subject to the scrutiny of the Department of
Homeland Security (DHS) and other federal agencies, including the Government Accountability
Office (GAO), the DHS Office of Inspector General (OIG), and the Office of Management and
Budget (OMB). Adjusters and insurers should be aware and mindful of findings from the
following audits: DHS Improper Payment Elimination and Recovery Information Act (IPERIA), DHS
Financial Audit, and various GAO and OIG studies and reports.
Many of the findings can be avoided simply by adherence to good claims handling practices and
knowing the terms and provisions of the SFIP. Helpful tips may be included in the findings. The
following will identify findings and preferred methods when indicated:
The insurer may also set a bulk catastrophe reserve. The NFIP Preliminary Report and each
subsequent adjuster report should refine the case loss reserve amount as the insurer becomes
aware of additional facts, inspections, and estimates. The goal is that this knowledge along with
any reductions of partial or advance payments will result in a case loss reserve that closely
reflects the value of all future payments and ultimately the value of the final payment.
Claims Examiners
Clause is a contract within a contract. That is a contract between the mortgagee and the insurer within the
contract between the policyholder and the insurer. Including the name of the mortgagee on each building claim
payment is the surest method to keep this promise to the mortgagee. Building payments should include all
known mortgagees. Failure to pay a known mortgagee when required is an error because of the
potential exposure to not only the insurer, but also to the Federal Government If the failure to name the
mortgagee results in expenditures of Federal funds, that failure is a critical error.
F. Underwriting Issues
The insurer must carefully review the adjusters’ reports for any discrepancies from the Declaration page and refer
any discrepancies to the insurer’s UW Department for review. Non-money discrepancies may be non- critical
errors; however, if the discrepancy would result in an endorsement involving a change in premium, it is a critical
error.
G. Adjustment Issues
A claim file is deficient when the adjuster has not explained the facts satisfactorily enough to determine coverage,
or when the coverage is misapplied. These issues may result in critical errors depending upon delay or monetary
consequences.
H. Time Standards
The insurer must assign the notice of loss to an adjuster within 24 hours of the policyholder’s reporting. The
adjuster must contact or attempt to contact the policyholder within 48 hours of that assignment. The adjuster’s
preliminary reports are due to the insurer within 15 calendar days of assignment of the claim. In the absence of
the preliminary report, the claims examiner should have requested the report from the adjuster and taken action
if they recognize a trend with any particular adjuster and adjusting firm. Missing reporting deadlines may indicate
too many claims to adjust. Time standard infractions that result in a significant delay in payment to policyholders
are critical errors. All other unexplained time standard infractions are non-critical errors.
I. Special Allocated Loss Adjustment Expenses
All SALAE payments must be adequately documented with a valid reason for the payment and the proper SALAE
type must be used. SALAE payments made without the required FEMA approval are improper payments. If the
payment was ineligible, the error is considered a critical error.
J. Incorrect Payment Amount
Incorrect payment amount is the error for claim payments and adjuster fees that are improperly paid. The
insurer must make immediate arrangements to address the incorrect payments. The insurer must make the
correct payment to the policyholder or independent adjuster if underpaid or issue a reimbursement to the
National Flood Insurance Program if overpaid. The use of an improper CWOP code can generate an incorrectly
Allocated Loss Adjustment Expense (ALAE) payment. All incorrect payments are critical errors.
K. Deficient or Redundant Case Loss Reserves
The individual case loss reserves of the insurers do not effect the NFIP’s balance sheet. The minimal test will
compare the final case loss reserve(s) with the final payment(s). The insurer will need to revise its case reserve to
reflect new information about an individual claim. However, it is not critical that reserves are decreased or
increased in the same PIVOT (NFIP system of record) cycle that new information is learned. FEMA recognizes that
there will be occasions where the insurer will want additional time to evaluate the new information before revising
case reserves.
However, it is important that the claims examiner revise the reserves before the next payment. FEMA further
recognizes that it is sound business practice for case reserves, collectively, to be somewhat redundant. Reserve
redundancy of 10-15 percent is not discouraged.
Note: The above list is not exhaustive and may be changed with adequate notice.
3. Issue a disbursement for the overpayment amount to the U.S. Treasury via ACH, internet,
or wire transfer. Report the disbursement on the appropriate Exhibit VIII schedule.
4. Submit the supporting documents (policy number, date of loss, original loss payment,
adjusted loss payment, original error code generated, and original error code date) to:
DHS-FEMA Debt Collection Office
Attn: NFIP/Debt Collection Officer
400 C Street SW 6th Floor, SW
Washington, D.C. 20472-3010
B. Method B:
1. Reduce the claim payment by the overpaid amount on the financial statement, Write
Your Own Accounting Procedures Manual, Exhibit I, Line 115.
2. Reduce the claim payment by the overpaid amount on PIVOT (NFIP system of record)
3. Payment can be issued in the amount of overpayment by wire transfer or manual check
made payable to NFIP. Record the payment check as a disbursement to the U.S.
Treasury and report on the appropriate Exhibit VIII schedule.
4. Submit the manual check and supporting documents (policy number, date of loss,
original loss payment, adjusted loss payment, original error code generated, and original
error code date) to:
DHS-FEMA Debt Collection Office
Attn: NFIP/Debt Collection Officer
400 C Street, SW 6th Floor
Washington, D.C. 20472-3010
2. Relocation
3. Elevation
4. Demolition
19
See SFIP (III)(D)(2). See also 42 U.S.C. § 4013(b); 44 C.F.R. § 61.6 (2018).
20
See SFIP (III)(D)(3).
21
See SFIP (III)(D)(1).
regulations (“substantially” and “repetitively” are both defined in the SFIP at Section III.D.3.(1)
and (2)). If applicable, either substantial damage or repetitive damage must be adopted by the
community in their floodplain management ordinance and enforced uniformly in the community.
The policyholder’s submission of a substantial damage declaration letter to the insurer
demonstrates the policyholder’s intent to file for ICC Coverage D benefits, and the insurer should
begin the ICC benefit process.
Note: Some states, rather than the communities within the state, have land-use management
authority. Floodplain management guidelines may be in state law and not in community
ordinance. It is always good practice to include both in the claim file if there are questions.
For the purposes of ICC, flood damage must be to the percentage threshold adopted by law or
ordinance although other damages may be involved, such as wind or fire. The percentage
threshold is typically 50 percent but can be a lower threshold if adopted by law or ordinance.
Note that “substantial damage” and “substantial improvement” are often used interchangeably
by a community official for all causes of loss. For the purposes of ICC Coverage D, substantial
damage attributed only to flood is considered. All covered and non-covered damages sustained
to the insured building by flood may be considered in the community’s determination of
substantial damage.
The policyholder or adjuster is required to obtain a copy of the local ordinance and confirm the
community official’s market value (not replacement cost value) for the insured building used to
determine substantial damage. If the substantial damage letter signed by the authorized
community official advises of the specific standard enforced against the building is included, this
information can be used in lieu of obtaining the ordinance copy. The letter must also indicate the
market value. It is important to note that FEMA never determines market value; it is solely
determined by the community official.
Market value can be obtained from the following sources:
1. Independent appraisals by professional appraisers.
2. If the community prefers, a detailed estimate of the building’s ACV as a substitute for
market value.
3. Property appraisals used for tax assessment purposes can be used as a screening tool.
4. The value of the building taken from NFIP claims data can be used as a screening tool.
5. Qualified estimates based on the sound professional judgement made by the staff of
the local building department or local or state tax assessor’s office.
6. A copy of the detailed signed contract from the policyholder’s contractor confirming a
start and completion date of the mitigation work to be performed. The contract must
show the contractor’s and policyholder’s (property owner’s) signatures.
A community is a governmental body with the statutory authority to enact and enforce zoning,
building codes, subdivision, and other land use control measures. The authority of each unit of
government varies by State. Eligible communities can include:
1. Cities
2. Villages
3. Towns
4. Townships
5. Counties
6. Parishes
7. States
8. Native American tribes and Alaskan villages
22
See 44 C.F.R. Pt. 61, App. A(1)-(3).
23
See 42 U.S.C. § 4013.
24
See 44 C.F.R. pt. 61, App. (A)(1)-(3)(III)(D)(5)(e).
25
See 61 Fed. Reg. 49720 (1996).
26
44 C.F.R. pt. 61, App. (A)(1)-(3)(III)(D)(5)(e).
authorizes partial advance payments up to 50 percent of the available ICC limits or $15,000.
Specifically, the NFIP insurers may advance up to one-half of the available ICC funds under an
SFIP to an eligible policyholder, conditioned upon:
1. The policyholder signing a written agreement that the funds will be used only for
eligible ICC work, and
2. The policyholder signing a written agreement that if all or part of the advanced funds
are not used within the permitted time limits for completing the eligible work (or any
extensions that may be granted of that time), the policyholder agrees that those
amounts not spent on such eligible work will be refunded.
If a policyholder fails to complete the ICC eligible work within the authorized time, the
policyholder must return the ICC funds provided. Failure to do so will subject the policyholder to
any available administrative, civil, or criminal remedies. Those remedies include, but are not
limited to, a determination that an SFIP is void pursuant to its General Conditions, Sections
(VII)(B) and (G)(3) or (VIII)(B) and (G)(3) 27, a Federal debt collection action 28, and legal actions
under State or Federal laws.
If the policyholder does not agree to the above conditions, the terms of the SFIP will apply (i.e.,
no amount of ICC benefits will be paid until after completion of eligible work).
All other terms and conditions of the SFIP for ICC claims, including the ICC proof of loss
requirements, are not affected by the conditional waiver.
The conditional waiver applies to all ICC claims made on or after February 11, 2013.
If an insurer issues payment in accordance with the terms and conditions set forth here and
properly documents ICC advance partial payments, FEMA will apply these standards in all
reviews or audits of files, including any reviews under the Arrangement or the Improper
Payment Information Act of 2002. 29 However, if payment is incorrectly made to a policyholder, if
a claim is not properly documented, if the insurer omits an additional named policyholder or
mortgagee from being listed as an additional payee, or if the insurer otherwise does not act
consistent with the obligations set forth in the Arrangement or applicable law, the insurer will be
responsible for the erroneous payment.
27
44 C.F.R. pt. 61, App. (A)(1)-(2)(VII)(B), (G)(3), App. A(3)(Vlll)(B), (G)(3).
28
See 44 C.F.R. §11.1-11.2.
29
Pub. L. No. 107-300, 33 U.S.C. § 3321 (amended by Pub. L. No. 111-204 (2010)).
The local community official must also inspect the compliant building or demolished area and
provide the property owner with a certificate of occupancy, or a letter confirming compliance
with floodplain management regulations has been met.
Once all required ICC documents are received, including confirming all other eligibility criteria, an
insurer sends the policyholder an ICC proof of loss form for final payment that must be signed,
dated, and returned to the insurer for processing.
The insurer issues the final ICC payment once all required steps have been completed relating to
the eligible compliance measures and the building complies with minimum NFIP floodplain
management regulations and the community ordinance. This process requires that the
policyholder work closely with their local officials to ensure that the ICC work is completed
timely. This also requires that the policyholder work closely with the flood adjuster and claims
examiner to ensure timely submission of all required ICC documents. Please note that there can
be no duplication of allowances considered in the underlying flood claim and ICC Coverage D nor
does ICC provide coverage for deterioration or rot conditions of the building, additional costs
associated with structural modifications, upgrades, or any additional increase in square footage.
Table 13. Required ICC Claim File Documents
Document Details
• Once FEMA provides a community with the flood hazard information upon
which floodplain management regulations are based, the community is
Copy of the community’s required to adopt a floodplain management ordinance that meets or
floodplain management exceeds the minimum NFIP requirements.
ordinance. • The overriding purpose of the floodplain management regulations is to
ensure that participating communities take into account flood hazards, to
the extent that they are known, in all official actions relating to land use
management.
• Must be valid and must not be expired.
• A permit is required before construction or development begins within any
Permit copy for floodplain Special Flood Hazard Area (SFHA). Permits are required to ensure that
development associated proposed development projects meet the requirements of the NFIP and
with the compliance the community's floodplain management ordinance.
measure. • A community must also review all proposed developments to ensure that
all necessary permits have been received from those governmental
agencies from which approval is required by Federal or State law.
Document Details
• This can be pre- or post-construction.
• The elevation certificate (EC) is an administrative tool of the NFIP, which is
to be used to provide elevation information necessary to ensure
compliance with community floodplain management ordinances, to
determine the proper insurance premium rate, or support a request for a
Letter of Map Amendment (LOMA) or a Letter of Map Revision (LOMR)
Elevation Certificate (EC), based on fill.
for elevation projects.
− Letter of Map Amendment. An amendment to the current effective
FEMA map, which establishes that a property is not located in an
SFHA. A LOMA is issued only by FEMA. 30
− Letter of Map Revision. An official amendment to the current effective
FEMA map. A LOMR is issued by FEMA and changes flood zones,
delineations, and elevations. 31
30
See 44 C.F.R. pt. 70; see also https://www.fema.gov/letter-map-amendment-loma.
31
See 44 C.F.R. pt. 65; see also https://www.fema.gov/letter-map-revision.
B. Demolition
The ICC claim file should include:
1. Cost to demolish the insured building or foundation (plus associated cartage and dump
fees).
2. Cost to demolish other covered items other than the insured building, if applicable.
3. Cost to grade and stabilize the building site or fill for basements.
4. Cost of clearing the existing building site of any remaining materials of the insured
building, such as the foundation.
5. Cost to disconnect and cap required utilities (electricity, water, sewer or gas).
6. Cost to grade and stabilize the site in accordance with state or local regulations.
7. Before and after photographs of the structure and site.
The property may be redeveloped after demolition is complete, subject to all applicable Federal,
state, and local community laws and regulations.
C. Relocation
The ICC claim file should include:
1. Confirmation of the moving route preparation.
2. Costs for the building, transport, mileage, and cost.
3. Costs associated with installation and anchoring of the building to the new foundation.
4. Costs to disconnect electricity, water, sewer and gas and reconnection charges for
electricity, water, sewer, and gas.
5. Architectural and engineering fees associated with a design for relocating an eligible
insured building.
D. Floodproofing
The ICC claim file should include:
1. Completed Floodproofing Certificate.
2. Photographs of shields, gates, barriers, or components designed to provide
floodproofing protection to the building.
3. Written certification from a licensed professional engineer that all portions of the
building below the BFE are made watertight or substantially impermeable to the
passage of water and must perform in accordance with Title 44 Code of Federal
Regulations (44 CFR § 60.3(c)(3)).
See the Flood Insurance Manual for information regarding floodproofing.
Eligible structures for floodproofing:
1. Non-residential buildings in A zones (floodproofing is not allowable in any V zones). The
specifications for floodproofing ensure that the building is watertight, its floodproofed
walls will not collapse, and the floor at the base of the floodproofed walls will resist
flotation during flooding conditions.
2. Residential dwellings with basements, located in zones A1-30, AE, AR, AR Dual, AO, AH,
and A with BFE that are within communities specifically approved and authorized for
residential floodproofing by FEMA. For residential buildings, the building must be
watertight without human intervention.
2. The community official will provide the policyholder with an Assignment of Coverage
D Form (Appendix I).
3. The policyholder signs the form and provides the signed form to the community official.
4. The community official sends a copy of the completed form, along with the community's
signed declaration of substantial damage to the NFIP Bureau & Statistical Agent at
[email protected], or PO Box 310, Lanham, MD 20703-0310.
5. NFIP BSA maintains a database of the ICC information submitted by the community. The
NFIP BSA then sends the documents to the appropriate insurer, with instructions. The
insurer will then assign an adjuster.
6. The assigned adjuster contacts the policyholder to advise s/he has the claim and
contacts the local community official to coordinate and help complete the claim.
7. The adjuster receives/reviews the contract for demolition, elevation, relocation or
floodproofing to determine the cost.
8. The adjuster has the community official sign the proof of loss once the claim value
has been determined.
9. The adjuster sends the final report, along with the proof of loss to the insurer for payment.
10. The insurer issues the check to the community and advises the NFIP BSA of the
amount of the claim payment.
NOTE: The policyholder cannot assign an ICC claim when the owner transfers the title of the
property to a new property owner. The SFIP allows the policyholder to assign the policy in
writing when policyholder transfers title, but not a flood or ICC claim.
1.5 Grants
ICC benefits can be used as the non-Federal cost share that is the policyholder’s responsibility for
SFIP policyholders participating in a FEMA mitigation grant.
FEMA offers three Hazard Mitigation Assistance (HMA) grant programs to assist the states, U.S.
territories, federally recognized tribal governments, and local communities in implementing cost-
effective, long-term hazard mitigation measures including elevation. All three have different
periods of funding availability and eligibility considerations.
1. Hazard Mitigation Grant Program (HMGP) provides grants to states and local
governments to implement long-term hazard mitigation measures after a major
disaster declaration to protect public or private property through various mitigation
measures. When a Federal disaster declaration is made, new opportunities for
32
42 U.S.C. § 5170c.
33
42 U.S.C. § 5133.
34
42 U.S.C. § 4101(c).
35
Section II.B.14.14 Elevated Building. A building that has no basement and that has its lowest elevated floor raised above
ground level by foundation walls, shear walls, posts, piers, pilings, or columns.
E. Elevating on Fill
Elevation on Fill is allowed in A and AE zones to comply with NFIP minimum standards; however,
some communities prohibit the use of fill in their ordinances. The insurer should review the
community ordinance to verify the use of fill.
Note: Allowing a claim for fill dirt only is not true mitigation with no structure in place. ICC is
concerned with completed mitigation to the insured building and or a replacement structure.
F. Itemized Contractor Estimates
Lump-sum estimates are not acceptable for ICC purposes. The ICC adjuster is required to write
their own estimate to ensure the integrity of the pricing provided by the contractor is correct.
The examiner must also review the ICC estimate for validity which includes identifying non-
covered allowances related to ICC.
G. Asbestos Abatement
The SFIP excludes the cost associated with enforcement of any ordinance or law that requires
any policyholder or others to test for, monitor, clean up, remove, contain, treat, detoxify, or
neutralized, or in any way respond to or assess the effects of pollutants. 36
H. Opening in Foundation Walls and Wall Enclosures
Non-engineered openings are used to meet the NFIP’s prescriptive requirement of one-square-
inch of net open area for every square foot of enclosed area. As an alternative, engineered
openings that have characteristics that differ from non-engineered openings may be used
provided they are designed and certified by a registered design professional as meeting certain
performance characteristics. FEMA Technical Bulletin 1, Openings in Foundation Walls and Walls
of Enclosures Below Elevated Buildings in Special Flood Hazard Areas, August 2008 may be
helpful.
36
SFIP (III)(D)(5)(b).
submitted to FEMA for consideration of payment. A waiver should not be submitted to FEMA for
pre-approval.
See Section 2 of this manual for details on the ICC waiver process.
This ICC process is not exhaustive, and additional supporting documents may be required as
deemed necessary by the insurer. Not all buildings qualify for an ICC payment. ICC also does not
provide coverage for any duplication of an item included in the SFIP Coverage A-Building
Property payment made or for any amount over the Program’s statutory limit for the type of
building insured.
1.1 Eligibility
A policyholder may appeal a full or partial denial of a claim by the insurer and must appeal within
60 days of the date of the insurer’s written denial letter. The policyholder appeals to FEMA by
email at [email protected] or by postal or express mail at FEMA, 400 C Street
SW, 6th Floor Washington, DC 20472-3010. 37 FEMA calculates the 60-day time frame as follows:
FEMA begins counting the day after the date on the denial letter and counts every Saturday,
Sunday, and legal holiday. If the 60th day is a Saturday, Sunday, or legal holiday; FEMA extends
the period to the next day that is not a Saturday, Sunday, or legal holiday. FEMA considers an
email electronic time stamp, U.S. Mail postmark, or express carrier acceptance date as the time
of submission to FEMA.
Federal regulation prohibits policyholders who have filed suit against their insurer or entered
into appraisal to determine the amount of their loss from appealing their denial to FEMA. 38 With
an appraisal, an impartial third party determines the value of the covered scope of damage,
when the insurer and policyholder disagree on that dollar amount. 39
37
See 44 C.F.R. § 62.20(e)(1) (2018)
38
See 44 C.F.R. § 62.20(c)(1); (d) (2018)
39
See SFIP, Section VII or Section VIII. General Conditions, paragraph (P) “Appraisal”
40
See 44 C.F.R. § 62.20(e) (2018) for requirements
2. The flood insurance policy number (from the policy’s declarations page);
3. Contact information;
4. Letter of Representation: If the author of the letter is a representative of the policyholder
(for example: a relative, a public adjuster, an attorney, or a translator), he or she should
indicate the relationship and provide documents verifying and authorizing the relationship.
A letter of representation allowing access to personal information under the Privacy Act, 5
U.S.C. § 552a must include:
− The policyholder’s full name, current address, date and place of birth, the name(s) of
the representative(s), and the policyholder’s signature;
− The following statement from the policyholder: “I expressly grant permission to FEMA
to release my records to this third-party representative.”;
− The policyholder must have this document notarized or include the following
statement:
“I declare under penalty of perjury that the foregoing is true and correct.
Executed on <DATE>. <SIGNATURE>.” 41;
5. The details of the policyholder’s concern; and
6. Documentation that illustrates, explains, and supports the policyholder’s position.
FEMA reviews the incoming appeal package and then requests the claim file from the insurer to
verify the information the insurer relied upon is current and accurate. To best address the
issue(s) raised in an appeal, FEMA encourages policyholders to provide as much detail and
documentation as needed to support their position in the initial appeal.
Policyholders should provide all information relevant to their particular issue(s). 42 Policyholders
can access a sample list of documentation in the NFIP Flood Insurance Claims Handbook. This list
serves as an example, and policyholders need not submit all the documentation listed; only the
documentation that applies.
FEMA may require additional information depending on the circumstances of the disagreement.
The policyholder is allowed an additional 14 calendar days to supplement the appeal file, using
the same process and information described above. 43
41
See 28 U.S.C. § 1746.
42
See 44 C.F.R. § 62.20(e)(4) (2018)
43
See 44 C.F.R. § 62.20(f)(2) (2018)
44
See 44 C.F.R. § 62.20(f) (2018)
45
See 44 C.F.R. § 62.20(b) (2018)
the insurer requesting that they deal directly with the policyholder to resolve the matter by
making a final determination and send an adequate denial letter. Insurers should continue to
acknowledge coverage restrictions in their communications with policyholders.
Finally, FEMA currently receives appeals prior to the policyholder receiving a denial letter. FEMA
reminds the insurers that the SFIP does not authorize adjusters to approve or disapprove claims,
or to tell the policyholder whether the insurer will approve the claim. 46 The adjusters may
answer general flood insurance coverage questions in the effort to provide good customer
service to policyholders but should also inform policyholders that the insurer provides the final
claim decision. FEMA asks that the insurers have their adjusters inform policyholders that they
cannot file an appeal until they receive a denial letter. The proper sequence for claims-handling
and dispute resolution is explained in the FEMA Fact Sheet, “Flood Claims Process” available on
fema.gov.
46
See SFIP, Section (VII)(J)(8)
Appendix
Appendix Document
Appendix A – Adjuster Fee Schedule
Appendix I Assignment of
Coverage D
Appendix Document
Appendix K – ICC Policyholders Processing Checklist
SF Square foot/feet
SFHA Special Flood Hazard Area
SFIP Standard Flood Insurance Policy
SRL Severe Repetitive Loss
U.S.C. United States Code
UAV Unmanned Aerial Vehicle
UCORT Underwriting and Claims Operation Review Tool
UW Underwriting
WYO Company Write Your Own Company
Questions or suggestions regarding content or formatting errors in the NFIP Claims Manual, or
suggestions for improvement should be directed to [email protected].
All claims coverage questions should be directed to the insurer. The insurer may consult with
FEMA at [email protected].