In case of loss to an article that is part of a pair or set, the policy has the option of paying either an amount equal to the cost of replacing the lost, damaged, or destroyed article, minus its depreciation; or the amount that represents 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.
This is the "teeth" provision, which states that in respect to all insureds under the policy, this policy is void, has no legal force or effect, cannot be renewed and cannot be replaced by a new NFIP policy; if, before or after a loss, the insured or agent have at any time intentionally concealed or misrepresented any material fact or circumstance; engaged in fraudulent conduct; or made false statements; relating to this policy or any other NFIP insurance—and will be void as of the date these acts were committed. Fines, civil penalties, and imprisonment under applicable Federal laws may also apply to the acts of fraud or concealment described above.
This policy is also void ab initio (from inception) for reasons other than fraud, misrepresentation, or wrongful act, such as 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 if the property listed on the application is otherwise not eligible for coverage under the NFIP.
While it may be difficult to find other flood insurance, if the loss is a loss covered by this policy is also covered by other insurance that includes flood coverage not issued under the Act, The NFIP policy will not pay more than the amount of insurance that the policyholder is entitled to for lost, damaged, or destroyed property insured under this policy subject to the following: this policy will pay only the proportion of the loss that the amount of insurance that applies under this policy bears to the total amount of insurance covering the loss, unless if the other policy has a provision stating that it is excess insurance, this policy will be primary. This policy will be primary (but subject to its own deductible) up to the deductible in the other flood policy and when the other deductible amount is reached, this policy will participate in the same proportion that the amount of insurance under this policy bears to the total amount of both policies, for the remainder of the loss.
For condominium owners, if there is other insurance in the name of the policyholder's condominium association covering the same property covered by this policy, then this policy will be in excess over the other insurance.
This policy cannot be changed nor can any of its provisions be waived without the express written consent of the Federal Insurance Administrator. No action taken by the NFIP taken under the terms of the policy constitutes a waiver of any rights. The policyholder may assign this policy in writing when the policyholder transfers title of his property to someone else, except when the policy covers only personal property; or when the policy covers a structure during the course of construction.
Policy cancellation is fully covered under another section.
If the premium received by the insurer was not enough to buy the kind and amount of coverage requested, the policyholder will be provided only the amount of coverage that can be purchased for the premium payment received.
However, the policy can be reformed to increase the coverage that was reduced. The policy can be reformed to increase the amount of coverage resulting from the reduction described in G.1. above to the amount requested as follows:
a. Discovery of insufficient premium or incomplete rating information before a loss.
(1) If the policyholder suffers a flood loss that his premium payment was not enough to buy the requested amount of coverage, the insurer will send the policyholder and any mortgagee or trustee known to the insurer, a bill for the required additional premium for the current policy term (or that portion of the current policy term following any endorsement changing the amount of coverage). If the policyholder or the mortgagee or trustee pays the additional premium within 30 days from the date of the bill, the insurer will reform the policy to increase the amount of coverage to the originally requested amount effective to the beginning of the current policy term (or subsequent date of any endorsement changing the amount of coverage).
(2) If it is determined before the policyholder has a flood loss that the rating information the insurer has is incomplete and prevents the insurer from calculating the additional premium, the policyholder will be asked to send the required information, which must be submitted within 60 days of the request. Once the insurer determines the amount of additional premium for the current policy term, then the proper coverage amount will be provided.
(3) If the insurer does not receive the additional premium (or additional information) by the date it is due, the amount of coverage can only be increased by endorsement subject to any appropriate waiting period.
If it is discovered after a flood loss that the premium was not enough to buy the requested amount of coverage, the policyholder and any mortgagee or trustee known to the insurer will be sent a bill for the required additional premium for the current and the prior policy terms. If the policyholder or the mortgagee or trustee pays the additional premium within 30 days from the date of the bill, the policy will be reformed so as to increase the amount of coverage to the originally requested amount effective to the beginning of the prior policy term.
If it is discovered after a flood loss that the rating information submitted was incomplete and prevented the insurer from calculating the additional premium, the policyholder will be asked to send the required information. This information must be submitted before the claim can be paid. Once the insurer determines the amount of additional premium for the current and prior policy terms, the proper coverage will be provided.
If the additional information is not received when it is due, the flood insurance claim will be settled based on the reduced amount of coverage. The amount of coverage can only be increased by endorsement subject to any appropriate waiting period.
However, if the policyholder or agent did not tell the insurer or falsified any important fact or circumstance or did anything fraudulent relating to this insurance, the policy will be voided under the previous provisions.
This policy will expire at 12:01 a.m. on the last day of the policy term and renewal premium must be received by the insurer within 30 days of the expiration date.
If the mailing of the renewal notice was delayed because of a mistake of the insurer and therefore, the renewal date was not met, then if the insurer was notified (by policyholder or agent) of intent to renew, not later than one year after which the renewal premium was due, that no renewal notice had been received, then a second notice will be mailed with a new due date of 30 days after the date on which the bill is mailed.
Then if the required premium is still not received, the policy will not be renewed and the policy will expire on the expiration date shown on the policy.
The policyholder may be required to complete a Recertification Questionnaire (provided by the insurer), the rating information used to rate the most recent application for or renewal of insurance.
The insurer is not liable for loss that occurs while there is a hazard that is increased by any means within the control of the policyholder or within the policyholder's knowledge.
Requirements in case of loss have been discussed earlier, but should be reiterated as the policy is most definitive as to the duties of the policyholder. The following is the exact policy wording of these duties:
"1. Give prompt written notice to us.
2. As soon as reasonably possible. separate the damaged and undamaged property, putting it in the best possible order so that we may examine it:
3. Prepare an inventory of damaged property showing the quantity, description, actual cash value, and amount of loss. Attach all bills, receipts, and related documents;
4. Within 60 days after the loss, send us a proof of loss, which is your statement of the amount you are claiming under the policy signed and sworn to by you, and which furnishes us with the following information:
a. The date and time of loss:
b. A brief explanation of how the loss happened:
c. Your interest (for example, "owner") and the interest, if any, of others in the damaged property;
d. Details of any other insurance that may cover the loss;
e. Changes in title or occupancy of the covered property during the teen of the policy:
f. Specifications of damaged buildings and detailed repair estimates.
g. Names of mortgagees or anyone else having a lien, charge, or claim against the covered property.
h. Details about who occupied any insured building at the time of loss and for what purpose: and
i. The inventory of damaged personal property described in 3.3. above.
5. In completing the proof of loss, you must use your own judgment concerning the amount of loss and justify that amount.
6. You must cooperate with the adjuster or representative in the investigation of the claim.
7. The insurance adjuster whom we hire to investigate your claim may furnish you with a proof of loss form. and she or he may help you complete it. However, this is a matter of courtesy only, and you must still send us a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it.
8. We have not authorized the adjuster to approve or disapprove claims or to tell you whether we will approve your claim.
9. At our option. we may accept the adjuster's report of the loss instead of your proof of loss. The adjuster's report will include information about your loss and the damages you sustained. You must sign the adjuster's report. At our option. we may require you to swear to the report."
There are certain additional things that the insurance company may require before a loss can be settled.
l. At a time and place that the insurer designated, the insured must show them or their representative the damaged property and submit to examination under oath and while not in the presence of another insured, sign the necessary papers and then allow the insurer to examine and make extracts and copies of
(1) Any policies of property insurance insuring the insured against loss and the deed establishing the ownership of the insured real property;
(2) Condominium association documents including the Declaration of the condominium, its Articles of Association or Incorporation, Bylaws, rules and regulations, and other relevant documents if the policyholder is a unit owner in a condominium building; and all books of accounts, bills, invoices and other vouchers, or certified copies pertaining to the damaged property if the originals are lost.
The insurer may request (in writing) that the policyholder furnish them with a complete inventory of the lost, damaged, or destroyed property, including:
a. Quantities and costs;
b. Actual cash values or replacement cost (whichever is appropriate);
c. Amounts of loss claimed;
d. Any written plans and specifications for repair of the damaged property that you can reasonably make available; and
e. Evidence that prior flood damage has been repaired.
The insurer reserves the right, if they have given written notice within 30 days after they receive the signed, sworn proof of loss, to repair, rebuild, or replace any part of the lost, damaged or destroyed property with material or property of like kind and quality or its functional equivalent and to take all or any part of the damaged property at the value they agree upon or its appraised value.
No person or organization other than the policyholder, having custody of covered property will benefit from this insurance
All losses will be adjusted with the insured and payments will be to the policyholder unless some person/entity is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after the insurer receives the proof of loss (or within 90 days after the insurance adjuster files an adjuster's report signed and sworn to by the policyholder in lieu of a proof of loss) and either there is an agreement with the policyholder or there is an entry of final judgment, or a filing of an appraisal award with the insurer.
If the insurer rejects the policyholder's proof of loss in whole or in part, the policyholder may accept the claim denial, exercise the policyholder rights under this policy, or file an amended proof of loss, as long as it is filed within 60 days of the date of the loss.
The insured cannot abandon the damaged or undamaged property to the insurer. However, the insurer may permit the insured to keep damaged insured property after a loss, and the amount of the loss will be payable to the policyholder under the policy depending upon the value of the salvage.
If the insurer and the policyholder are unable to agree on the actual cash value or, if applicable, replacement cost of the damaged property to settle upon the amount of loss, then either may demand an appraisal of the loss. In this event, the policyholder and the insurer 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, the policyholder or the insurer 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 the insurer, 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 pay its own appraiser and bear the other expenses of the appraisal and umpire equally.
The word "mortgagee" includes trustee.
Any loss payable under Coverage A - Building Property will be paid to any mortgagee that has been submitted as such to the insurer, as well as any other mortgagee or loss payee determined to exist at the time of loss, and the policyholder, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.
If the insurer denies the claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee so notifies the insurer of any change in the ownership or occupancy, or substantial change in risk of which the mortgagee is aware, pays any premium due under this policy on demand if the policyholder has not paid the premium and submits a signed, sworn proof of loss within 60 days after receiving notice from the insurer of the failure of the policyholder 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 the insurer decides to cancel or not renew the policy, it will continue in effect for the benefit of the mortgagee only for 30 days after the insurer notifies the mortgagee of the cancellation or nonrenewal.
If the insurer pays the mortgagee for any loss and denies payment to the policyholder, the insurer is 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.
The policyholder may not sue the insurer to recover money under this policy unless he has complied with all the requirements of the policy. If the policyholder does sue, the suit must be started within 1 year after the date of the written denial of all or part of the claim, and the policyholder must file the suit in the United States District Court of the district in which the insured property was located at the time of loss. This requirement applies to any claim that the policyholder may have under this policy and to any dispute that the policyholder may have arising out of the handling of any claim under the policy.
This is a rather unique provision that states that if the insured building has been flooded by rising lake waters continuously 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, this policy will pay the policyholder the lesser of these two amounts without waiting for the further damage to occur, providing the policyholder signs a release agreeing:
a. To make no further claim under this policy;
b. Not to seek renewal of this policy;
c. Not to apply for any flood insurance under the Act for property at the described location; and
d. Not to seek a premium refund for current or prior terms. (Sort of "Good-bye, it's been nice to know you…")
If the policy term ends before the insured building has been flooded continuously for 90 days, this provision will apply when the insured building suffers a covered loss before the policy term ends.
If the insured building is subject to continuous lake flooding from a closed basin lake, the policyholder may choose to file a claim under the above provision, or file a claim where the cause is a "closed basin lake" which is a natural lake from which water leaves primarily through evaporation and whose surface area now exceeds or has exceeded 1 square mile at any time in the recorded past. Most of the nation's closed basin lakes are in the western half of the United States, where annual evaporation exceeds annual precipitation and where lake levels and surface areas are subject to considerable fluctuation due to wide variations in the climate. These lakes may overtop their basins on rare occasions. Under this "closed basin lake" coverage, the insurer will pay the claim as if the building is a total loss even though it has not been continuously inundated for 90 days, subject to the lake flood waters damaging or imminently threaten to damage, the policyholder's building.
Further, the policyholder must grant the conservation easement described in FEMA's "Policy Guidance for Closed Basin Lakes," to be recorded in the office of the local recorder of deeds. FEMA, in consultation with the community in which the property is located, will identify on a map an area or areas of special consideration (ASC) in which there is a potential for flood damage from continuous lake flooding. FEMA will give the community the agreed-upon map showing the ASC. This easement will only apply to that portion of the property in the ASC. It will allow certain agricultural and recreational uses of the land. The only structures that it will allow on any portion of the property within the ASC are certain simple agricultural and recreational structures. If any of these allowable structures are insurable buildings under the NFIP and are insured under the NFIP, they will not be eligible for the benefits of this "closed basin lake" treatment. If a U.S. Army Corps of Engineers certified flood control project or otherwise certified flood control project later protects the property, FEMA will, upon request, amend the ASC to remove areas protected by those projects. The restrictions of the easement will then no longer apply to any portion of the property removed from the ASC; and
The policyholder must also, within 90 days of approval of the claim, move his building to a new location outside the ASC. FEMA will allow an additional 30 days to move if it can be shown that there is sufficient reason to extend the time.
Before the final payment of the claim can be made, the policyholder must acquire an elevation certificate and a floodplain development permit from the local floodplain administrator for the new location of the building.
Also, before the approval of the claim, the community having jurisdiction over the building must:
(1) Adopt a permanent land use ordinance or a temporary moratorium for a period not to exceed 6 months to be followed immediately by a permanent land use ordinance that is consistent with the provisions specified in the easement required as discussed above.
(2) Agree to declare and report any violations of this ordinance to FEMA so that under Section 1316 of the National Flood Insurance Act of 1968, as amended, flood insurance to the building can be denied; and
(3) Agree to maintain as deed-restricted, for purposes compatible with open space or agricultural or recreational use only, any affected property the community acquires an interest in. These deed restrictions must be consistent with the provisions of paragraph above, except that, even if a certified project protects the property, the land use restrictions continue to apply if the property was acquired under the Hazard Mitigation Grant Program or the Flood Mitigation Assistance Program. If a nonprofit land trust organization receives the property as a donation, that organization must maintain the property as deed-restricted, consistent with the provisions of the policy.
Before the approval of the claim, the affected State must take all action set forth in FEMA's "Policy Guidance for Closed Basin Lakes."
The policyholder must have NFIP flood insurance coverage continuously in effect from a date established by FEMA until he files a claim under this section. If a subsequent owner buys NFIP insurance that goes into effect within 60 days of the date of transfer of title, any gap in coverage during that 60-day period will not be a violation of this continuous coverage requirement. For the purpose of honoring a claim, the insurer will not consider to be-in effect any increased coverage that became effective after the date established by FEMA. The exception to this is any increased coverage in the amount suggested by the insurer as an inflation adjustment.
This section will be in effect for a community when the FEMA Regional Director for the affected region provides to the community, in writing; the confirmation that the community and the State are in compliance with these conditions and the date by which the flood insurance must be in effect.
The insurer will not insure the policyholder's property under more than one NFIP policy.
Provisions are made in case the duplication was accidental and not knowingly created, wherein the insurer will so advise the policyholder. The policyholder may then choose from several options as outlined in the policy, including keeping one or the other policy. Whichever is chosen, prorate premium for any increased coverage limits must be paid within 30 days of the written notice, and a refund of premium will be given to the policyholder for the policy not kept in force.
If, however, such duplication was knowingly created, in which case the earlier policy is the only one that will apply and the later policy will be canceled.
The three methods of settling losses, Replacement Cost, Special Loss Settlement, and Actual Cash Value, are discussed in some detail elsewhere in this text. To elaborate (and reiterate some) each method is used for a different type of property
The policy will pay to repair or replace the damaged dwelling after application of the deductible and without deduction for depreciation, but not more than the least of the following amounts:
(1) The building limit of liability shown on the Declarations Page;
(2) The replacement cost of that part of the dwelling damaged, with materials of like kind and quality, and for like use; or
(3) The necessary amount actually spent to repair or replace the damaged part of the dwelling for like use.
If the dwelling is rebuilt at a new location, the cost described above will be limited to the cost that would have been incurred if the dwelling had been rebuilt at its former location.
When the full cost of repair or replacement is more than $1,000 or more than 5 percent of the whole amount of insurance that applies to the dwelling, we will not be liable for any loss unless and until actual repair or replacement is completed.
The policyholder has the option of making claim under the policy for loss to dwellings on an actual cash value basis and can then make claim for any additional liability as stated above, provided the policyholder notifies the insurer of his intent to do so within 180 days after the date of loss.
If the community in which the insured dwelling is located has been converted from the Emergency Program to the Regular Program during the current policy term, then the maximum amount of available NFIP insurance will be the amount that was available at the beginning of the current policy term.
Special Loss settlement conditions apply to a single-family dwelling that is a manufactured or mobile home or travel trailer is at least 16 feet wide when fully assembled and has an area of at least 600 square feet within its perimeter walls when fully assembled; and is the principle residence of the policyholder.
If such a dwelling is totally destroyed or damaged to such an extent that, in the judgment of the insurer, it is not economically feasible to repair, at least to its predamage condition, the insurer has the option of paying either the replacement cost of the dwelling or 1.5 times the actual cash value; or the building limit of liability shown on the policy—whichever is least.
If such a dwelling is partially damaged and the insurer determines that it is economically feasible to repair it to its predamage condition, then the policy will pay the amount of loss according to the Replacement Cost conditions as discussed above.
ACTUAL CASH VALUE LOSS SETTLEMENT
Certain types of property are subject to actual cash value loss settlement (or proportional as discussed below).
a. If a dwelling, at the time of loss, when the amount of insurance on the dwelling is both less than 80 percent of its full replacement cost immediately before the loss and less than the maximum amount of insurance available under the NFIP, then the insurer will pay the greater of the cash value or the damaged part of the dwelling, or a proportion of the cost to repair or replace the damaged part of the dwelling without deduction for physical depreciation and after application of the deductible, whichever is less.
This proportion is determined as follows: If 80 percent of the full replacement cost of the dwelling is less than the maximum amount of insurance available under the NFIP, then the proportion is determined by dividing the actual amount of insurance on the dwelling by the amount of insurance that represents 80 percent of its full replacement cost. But if 80 percent of the full replacement cost of the dwelling is greater than the maximum amount of insurance available under the NFIP, then the proportion is determined by dividing the actual amount of insurance on the dwelling by the maximum amount of insurance available under the NFIP.
b. A two-, three-, or four-family dwelling.
c. A unit that is not used exclusively for single-family dwelling purposes.
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
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 the principal residence of the policyholder.
To determine the amount of insurance required for a dwelling immediately before the loss, do not include the value of:
a. Footings, foundations, piers, or any other structures or devices that are below the undersurface of the lowest basement floor and support all or part of the dwelling;
b. Those supports that are below the surface of the ground inside the foundation walls if there is no basement, and
c. Excavations and underground flues, pipes, wiring, and drains.
The Coverage D - Increased Cost of Compliance limit of liability is not included in the determination of the amount of insurance required.
If the insurer makes a change that broadens the coverage under this edition of the policy, but does not require any additional premium, then that change will automatically apply to this insurance policy of the date we implement the change, provided that this implementation date falls within 60 days before, or during, the policy term stated on the Declarations Page.
(Note: The sample policy (Exhibit A) has an Endorsement that applies to a specific coverage area and is for example only.
1. Before or after a loss, if the insured or agent have at any time intentionally concealed or misrepresented any material fact or circumstance; engaged in fraudulent conduct; or made false statements; relating to this policy or any other NFIP insurance
A. the policy will be reissued under a new agent.
B. the policy will remain in force but the agent will be fired.
C. this policy is void, has no legal force or effect, cannot be renewed and cannot be replaced by a new NFIP policy.
D. this will be reported to the MIB and a temporary policy will be issued for 6 months.
2. For condominium owners, if there is other insurance in the name of the policyholder's condominium association covering the same property covered by this policy,
A. then the new policy will be in excess over the other insurance
B. the loss will be shared pro-rata.
C. the last policy will be cancelled from time of issue.
D. the first policy will be cancelled from time of issue.
3. If it is discovered after a flood loss that the rating information submitted was incomplete and prevented the insurer from calculating the additional premium,
A. the policyholder will be asked to send the required information.
B. the loss will be reduced by the amount of the premium due.
C. the policy will be nullified until the correct information has been obtained, and then a new policy will be issued effective on the date of issue of the new policy.
D. the policyholder will be given 10 days to submit the proper information and pay a $50 fine, otherwise the policy will be nullified.
4. Frank has the SFIP on his home. He lives next to a house that has a large pond behind the house. Frank offers to help his neighbor build up around the pond in case the water rises because of a lot of rain. While digging around the pond, Frank accidentally backs his tractor blade over the dirt berm at the edge of the pond, causing it to rupture and a large amount of water runs into Frank's home, causing considerable flood damage. Frank makes a claim on his SFIP.
A. The policy will cover such exposure as it was caused by accident.
B. Frank's policy would not pay, but his neighbors flood policy would.
C. The insurer is not liable for loss that occurs while there is a hazard that is increased by any means within the control of the policyholder or within the policyholder's knowledge, so a claim on Frank's SFIP will be denied.
D. Frank's SFIP and his neighbors SFIP would quota-share in the loss.
5. In case of a loss, the flood insurance company insuring the property, cannot
A. require the insured to show them or their representative the damaged property.
B. submit to examination under oath.
C. destroy flood-damaged property prior to notifying the policyholder.
D. remove damaged property after giving the policyholder notice in writing of its intent within 30 days after receiving proof of loss.
6. All losses will be adjusted with the insured and payments will be
A. made to the insured on a monthly basis over 24 months.
B. always paid to a trustee who can determine how much should go to the mortgage holder (if any), creditors and the policyholder.
C. always paid to the policyholder.
D. to the policyholder unless some person/entity is named in the policy or is legally entitled to receive payment.
7. If the insurer and the policyholder are unable to agree on the actual cash value or, if applicable, replacement cost of the damaged property to settle upon the amount of loss,
A. then it automatically goes to court.
B. then either may demand an appraisal of the loss.
C. the final decision is the claims department of the insurer.
D. the final decision will be made by FEMA.
8. Jake find himself with two flood insurance policies. The SFIP provides several alternatives from which he can choose if the duplication is accidental. If Jake purposely purchased two flood insurance policies so that he can get twice the coverage in case of loss,
A. the earlier policy is the only one that will apply and the later policy will be canceled.
B. both policies will pay.
C. neither policy will pay/.
D. each policy will pay half of any loss up to the maximum of the policy that has the lowest maximum loss payable.
9. The method of loss replacement is Special loss settlement for
A. condominiums.
B. elevated houses.
C. a single-family dwelling that is a manufactured or mobile home or a travel trailer.
D. houses with no history of flooding and no likelihood of it ever flooding.
10. To determine the amount of insurance required for a dwelling immediately before the loss, do not include the value of
A. excavations and underground flues, pipes, wiring, and drains.
B. stairs and stairwells outside the house but attached to the house.
C. contents on the first floor of an elevated house.
D. attic air conditioners and goods stored in an attic.