For the first time in more than 20 years, FEMA has announced plans to make changes to its Standard Flood Insurance Policy (SFIP). As part of the proposal, FEMA would introduce a new Homeowner’s Flood Form, to be published in Appendix A(4) of 44 CFR 61, which would provide flood coverage for one to four residential properties. FEMA also proposed adding five endorsements to the new form: increased cost of compliance coverage, settlement of loss of actual cash value, temporary housing charge, basement coverage, and builder’s risk. These endorsements would be codified in 44 CFR 61 Appendices A(101)-(105). owners of individual residences.
The National Flood Insurance Program operated by FEMA currently provides flood insurance through three different flood insurance policy forms: the Residential Form, the General Property Form, and the of the residential condominium construction association (RCBAP). The housing form covers a one to four family apartment building or a single family unit in a condominium building. The new Landlord Flood Form, when adopted, will replace the Housing Form for the owner of a family residence of one to four people, but the Housing Form will continue to be used for owners, tenants and owners of mobile homes, trailers, and condominium units. The general property form is issued for a residential building of five or more families or a non-residential building, and the RCBAP form insures condominium residential buildings.
The addition of a new Homeowner Flood Form will likely impact the private flood policy review process currently required of regulated institutions. The Biggert-Waters Flood Insurance Reform Act of 2012 required interagency regulators to issue a final rule requiring financial institutions to accept private flood insurance, and on February 13, 2019, Interagency regulators have announced the release of this joint final rule. The final rule requires regulated institutions to accept flood insurance policies that meet Biggert-Waters’ statutory definition of “private flood insurance” through four main elements: (1) mandatory acceptance of private flood insurance; (2) assistance with mandatory acceptance compliance; (3) discretionary acceptance of private flood insurance; and (4) flood coverage provided by mutuals. Upon publication of the new SFIP form, regulated institutions will need to review, and possibly revise, their private flood acceptance policies and procedures to ensure compliance with the private flood insurance rule in light of the new form against homeowners flooding.
© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XI, Number 350