[Federal Register Volume 85, Number 139 (Monday, July 20, 2020)]
[Rules and Regulations]
[Pages 43946-43986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09260]



[[Page 43945]]

Vol. 85

Monday,

No. 139

July 20, 2020

Part II





Department of Homeland Security





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Federal Emergency Management Agency





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44 CFR Parts 59, 61, and 62





National Flood Insurance Program: Conforming Changes To Reflect the 
Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) and the 
Homeowners Flood Insurance Affordability Act of 2014 (HFIAA), and 
Additional Clarifications for Plain Language; Final Rule

  Federal Register / Vol. 85, No. 139 / Monday, July 20, 2020 / Rules 
and Regulations  

[[Page 43946]]


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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Parts 59, 61, and 62

[Docket ID FEMA-2018-0026]
RIN 1660-AA95


National Flood Insurance Program: Conforming Changes To Reflect 
the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) and the 
Homeowners Flood Insurance Affordability Act of 2014 (HFIAA), and 
Additional Clarifications for Plain Language

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Final rule.

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SUMMARY: This final rule revises the National Flood Insurance Program 
(NFIP) regulations to codify certain provisions of the Biggert-Waters 
Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance 
Affordability Act of 2014, and to clarify certain existing NFIP rules 
relating to NFIP operations and the Standard Flood Insurance Policy.

DATES: This rule is effective on October 1, 2021.

ADDRESSES: The docket for this rulemaking is available for inspection 
using the Federal eRulemaking Portal at http://www.regulations.gov and 
can be viewed by following that website's instructions.

FOR FURTHER INFORMATION CONTACT: Kelly Bronowicz, Director, 
Policyholder Services Division, Federal Insurance and Mitigation 
Administration, Federal Emergency Management Agency, 400 C Street SW, 
Washington, DC 20472, (202) 557-9488.

SUPPLEMENTARY INFORMATION: 

I. Background and Discussion of the Rule

    On July 16, 2018, FEMA published a Notice of Proposed Rulemaking 
(NPRM) (83 FR 32956) proposing to make several non-substantive changes 
to the NFIP regulations to improve their readability, uniformity, and 
clarity. In addition, FEMA proposed to codify certain requirements of 
the Biggert-Waters Flood Insurance Reform Act of 2012 (Pub. L. 112-141, 
126 Stat. 916) (BW-12) and the Homeowner Flood Insurance Affordability 
Act of 2014 (Pub. L. 113-89, 128 Stat. 1020) (HFIAA).
    The NPRM proposed to codify the provisions of BW-12 that require 
FEMA to (1) increase the maximum coverage amount for multi-family 
properties to the same amount as that allowed for commercial 
properties; (2) establish a minimum deductible amount for NFIP polices; 
(3) stop denying payment to policyholders for damage or loss to a 
condominium unit under the Dwelling Form based solely on the fact that 
the condominium association has inadequate flood insurance coverage on 
the entire condominium; and (4) review, among other things, the 
processes and procedures for making flood in progress determinations. 
The NPRM also proposed to codify HFIAA's requirement that FEMA offer a 
high deductible option of $10,000.
    The NPRM solicited public comment on these proposed changes. FEMA 
received three comments related to the rulemaking and five unrelated 
comments that were outside the scope of the rulemaking. FEMA does not 
consider the five comments unrelated to this rulemaking in this 
preamble. In this final rule, FEMA adopts the changes it proposed in 
the NPRM, with some minor revisions in consideration of the related 
comments and corrections of typographical errors. FEMA describes these 
changes below.

II. Summary and Discussion of Public Comments

    Of the three comments germane to this rulemaking, one anonymous 
commenter [FEMA-2018-0026-0005] commented on the need for more dams, 
the second, from the Association of State Floodplain Managers (ASFPM) 
[FEMA-2018-0026-0004], commented on the inclusion of spouses on the 
General Property Form of the Standard Flood Insurance Form (SFIP) and 
identified a typographical error, and the third, a member of the public 
[FEMA-2018-0026-0003], suggested that FEMA should modify the 
Residential Condominium Building Association Policy (RCBAP) to better 
take into account certain State laws concerning the maintenance and 
repair of condominium buildings and the units therein.

A. Dams

    The anonymous commenter [FEMA-2018-0026-0005] suggested that FEMA 
``build more dams to hold back the waters from flooding.'' FEMA is 
committed to building a culture of preparedness by, in part, 
incentivizing investments that reduce risk--including pre-disaster 
mitigation--and reduce disaster costs at all levels.\1\ This includes 
encouraging the investment in infrastructure that reduces future 
disaster costs, such as dams and levees. However, this comment suggests 
actions beyond the scope of this rulemaking, which focuses on making 
conforming and clarifying changes to the National Flood Insurance 
Program's regulations and policy forms. For this reason, FEMA declines 
to make changes to this rulemaking in response to this comment.
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    \1\ Federal Emergency Management Agency, 2018-2022 Strategic 
Plan, https://www.fema.gov/media-library-data/1533052524696-b5137201a4614ade5e0129ef01cbf661/strat_plan.pdf.
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B. Spouse as Named Insured in General Property Form

    The Association of State Floodplain Managers (ASFPM) [FEMA-2018-
0026-0004] noted that it supports FEMA's effort to revise the NFIP's 
regulations to clarify rules relating to the NFIP's operation and align 
them with BW-12 and HFIAA. ASFPM disagreed, however, with FEMA's 
proposal to add the insured's spouse as a named insured for both the 
Dwelling Form and the General Property Form of the SFIP. While ASFPM 
understands that a homeowners policy may typically include the 
insured's spouse as a named insured, it is not included in a commercial 
policy. ASFPM spoke with insurance specialists who confirmed that there 
may be a good chance that the spouse is not part of the commercial 
venture and has no interest in the business and therefore, should not 
be automatically included in the General Property Form. ASFPM therefore 
recommended removing the spouse as a named insured in the General 
Property Form.
    FEMA did not intend to modify this provision in the NPRM and agrees 
with ASFPM's comments that the spouse of a named insured should not 
automatically be included as an insured in the General Property Form of 
the SFIP. The current General Property Form of the SFIP does not 
automatically include the spouse of a named insured as an insured under 
the policy. See 44 CFR part 61, App. A(2), II.A. Accordingly, this 
final rule will not modify the provision from the status quo. FEMA 
thanks ASFPM for identifying this inadvertent proposed change.

C. Replacement of ``Covered'' With ``Insured''

    ASFPM [FEMA-2018-0026-0004] also noted that while it has no issues 
with FEMA's proposal to replace the word ``covered'' with the word 
``insured'' in the SFIP, the NPRM did not propose doing so throughout 
the

[[Page 43947]]

SFIP, including the title of Section IV, ``Property Not Covered.'' 
ASFPM recommended that FEMA review the different SFIP forms and ensure 
they are consistent with the use of ``insured.''
    FEMA proposed to replace the word ``covered'' with the word 
``insured'' in the SFIP because ``covered'' is a generic and undefined 
term that does not conform to common industry or Agency usage. FEMA 
agrees with ASFPM's comment and has replaced the word ``covered'' with 
``insured'' in all instances where appropriate throughout the three 
SFIP forms.

D. Residential Condominium Building Association Policy (RCBAP)

    A member of the public [FEMA-2018-0026-0003] suggested several 
modifications to the Residential Condominium Building Association 
Policy (RCBAP). The RCBAP insures residential condominium association 
buildings and offers building coverage up to $250,000 multiplied by the 
number of units and contents coverage up to $100,000 per building. 
Under existing NFIP regulations, the RCBAP acts as primary coverage for 
an entire condominium building, including portions of a condominium 
building which an individual unit owner is responsible for maintaining, 
such as interior walls and cabinetry.\2\ Individual unit owners may 
choose to purchase a Dwelling Form policy that provides excess building 
coverage beyond that offered by an RCBAP, subject to statutory coverage 
limits. The requirement that the RCBAP act as primary coverage for all 
losses to condominium buildings and the units therein simplifies the 
claims process by allowing the NFIP to pay claims without having to 
divide payments between unit owners and condominium associations based 
on a wide array of condominium building bylaws and relevant state laws.
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    \2\ See SFIP Dwelling Form, Art. VII.C.2.
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    The commenter suggested that FEMA modify the RCBAP to better take 
into account certain state laws concerning the maintenance and repair 
of condominium buildings and the units therein. The commenter explained 
that many state laws divide responsibility for maintaining and 
repairing condominium buildings between a condominium association and 
individual unit owners. According to the commenter, the RCBAP's present 
design causes FEMA to deem the excess building coverage of an 
individual unit owner's Dwelling Form policy duplicative, excessive, 
and unable to provide coverage that an individual policyholder could 
use upon suffering a loss. The commenter stated that treating the 
Dwelling Form's building coverage as excess to the RCBAP causes delays 
in insurance payments reaching individual unit owners, which in turn 
delays repairs, ultimately leading to litigation between condominium 
owners and their associations. The commenter is concerned that as a 
result, informed individual owners will cease purchasing building 
coverage under a Dwelling Form policy if they are aware that they will 
only receive payment of loss if the loss exceeds coverage under the 
RCBAP.
    In addition, the commenter also stated that FEMA's treatment of a 
unit owner's Dwelling Form policy as excess to a condominium 
association's RCBAP violates section 1312(c) of the National Flood 
Insurance Act of 1968 (42 U.S.C. 4019(c)) (added by section 100214 of 
BW-12), which generally prohibits FEMA from denying or limiting 
coverage under an individual condominium unit owner's policy based 
solely or in part on the flood insurance coverage of the condominium 
association on the overall property.
    The commenter also suggested defining the term ``common elements'' 
or making clear to policyholders that the applicable state definition 
will be used in interpreting the policy, likely for the purposes of 
interpreting Dwelling Form SFIP, Art. III.C.3.a. Moreover, the 
commenter recommended expanding the condominium loss assessment 
coverage provisions in III.C.3 of the Dwelling Form to clearly state 
what flood damaged items, if any, are excluded from coverage under the 
condominium loss assessment provision.
    In sum, the commenter proposed that FEMA redesign the RCBAP so that 
it conforms with the laws in most states regarding condominiums (e.g., 
individuals insure the inside of their units, and the associations 
insure what they are responsible for under state law to repair). The 
commenter believes that this would (1) encourage individual unit owners 
to purchase building coverage, and (2) protect financial institutions, 
as a unit owner's financial institution is usually only named on the 
individual's Dwelling Form policy but not the RCBAP.
    FEMA appreciates the commenter's suggestions on substantive changes 
FEMA could make to the SFIP to increase its marketability. As part of 
its 2018-2022 Strategic Plan, FEMA is committed to building a culture 
of preparedness by, in part, taking steps to double the number of 
properties covered by flood insurance through the private sector or the 
government. FEMA believes that designing flood insurance products that 
meet consumer needs will help achieve this goal. However, FEMA does not 
intend to make such substantive changes to the SFIP in this rulemaking. 
FEMA's intent in this rule is to clarify the SFIP to improve overall 
readability as well as conform it to BW-12 and HFIAA. FEMA thanks the 
commenter for this comment and will take it under advisement if FEMA 
considers substantive changes to the SFIP in the future.
    FEMA disagrees with the commenter's view that making coverage under 
a unit owner's Dwelling Form policy excess to the condominium 
association's RCBAP violates 42 U.S.C. 4019(c). Condominium 
associations commonly charge individual unit owners loss assessments 
when the association's insurance coverage is insufficient to cover 
damage after a flood. When a Dwelling Form policy insures a condominium 
unit, the policy provides coverage for loss assessments charged to the 
policyholder by their condominium association for covered flood damage. 
See Dwelling Form SFIP, Art. III.C.3.a. Prior to the enactment of BW-
12, the policy excluded coverage for loss assessments if the reason for 
the assessment is due to application of the RCBAP's coinsurance penalty 
provision. See Dwelling Form SFIP, Art. III.C.3.b.4. As a result, FEMA 
would deny coverage for a portion of flood damage under both the RCBAP 
and the Dwelling Form of the SFIP.
    Section 100214 of BW-12 now prohibits FEMA from denying or limiting 
coverage under an individual condominium unit owner's policy based 
solely or in part on the flood insurance coverage of the condominium 
association on the overall property, including situations where the 
condominium association did not maintain a minimum amount of coverage 
through an RCBAP. See 42 U.S.C. 4019(c). As a result, FEMA no longer 
denies coverage for a loss assessment under the Dwelling Form SFIP that 
results from the application of the RCBAP's coinsurance penalty, and 
this rulemaking removes the contrary provision. See Dwelling Form SFIP, 
Art. III.C.3.b.4.
    Contrary to the commentor's assertion, the current structure of the 
RCBAP acting as primary coverage for a condominium building and the 
Dwelling Form acting as excess coverage does not violate 42 U.S.C. 
4019(c). The Dwelling Form's excess coverage provision (VII.C.2) does 
not result in the denial of otherwise covered damage. Rather, it merely 
apportions the coverage between the Dwelling Form and the RCBAP. 
Ultimately, the flood

[[Page 43948]]

damage is still covered, though the payment may go to the condominium 
association rather than directly to the unit owner.
    Additionally, interpreting 42 U.S.C. 4019(c) to prohibit treating 
the Dwelling Form as excess coverage to the RCBAP coverage would be 
contrary to FEMA's statutory authority, fundamental tenets of insurance 
law, and Congressional intent. If FEMA were not able to treat Dwelling 
Form coverage as excess to RCBAP coverage, Dwelling Form policyholders 
could be entitled to receive payments for damage that FEMA would also 
be required to pay for under an RCBAP. Congress has not given FEMA 
authority to ``double pay'' for the same damage.\3\ Further, such 
double payments would also be contrary to fundamental principles of 
insurance law.\4\ Finally, Congress' intent in enacting 42 U.S.C. 
4019(c) was to ensure Dwelling Form policyholders can still receive 
payments where RCBAP coverage is inadequate; it was not intended to 
require FEMA pay for the same damage under two separate policies.\5\ 
Treating the Dwelling Form coverage as excess to the RCBAP coverage 
comports with this purpose.
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    \3\ Congress has only authorized FEMA to sell ``insurance 
against loss resulting from physical damage to or loss of real 
property or personal property.'' 42 U.S.C. 4011(a).
    \4\ For instance, one such principle is that of indemnity, which 
requires that ``the value of the benefit paid the insured will not 
exceed the amount of the loss.'' 1 New Appleman on Insurance Law 
Library Edition Sec.  1.05 (2019). (This principle is essential for 
mitigating the moral hazard that would result from policyholders 
profiting from insured losses). And ``Congress did not intend to 
abrogate standard insurance law principles'' when it created the 
National Flood Insurance Program. Leland v. Fed. Ins. Adm'r, 934 
F.2d 524, 530 (4th Cir. 1991) (quoting Drewett v. Aetna Cas. & Sur. 
Co., 539 F.2d 496, 498 (5th Cir.1976)).
    \5\ In December 2011, the Senate Banking Committee explained the 
intent behind section 116 of the Flood Insurance Reform and 
Modernization Act of 2011 (2011 S. 1940), which eventually became 
law as Section 100214 of BW-12. The Committee explained that the 
provision ``[c]larifies that condominium owners with flood insurance 
policies should receive claims payments regardless of the adequacy 
of flood insurance coverage of the condominium association and other 
condominium owners.'' See Senate Report 112-98, p. 8.
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    FEMA appreciates the commenter's suggestions to clarify parts of 
the Dwelling Form's coverage for condominium loss assessments. However, 
FEMA does not agree with the commenter's suggestion of defining 
``common elements'' based on applicable state laws. The NFIP is a 
national program that is best implemented through uniform guidance 
irrespective of various state laws. Defining ``common elements'' based 
on state law, rather than a uniform standard, would increase 
policyholder confusion and complicate claims adjusting processes.
    FEMA also does not agree that it is necessary to list in the SFIP 
items excluded from coverage of condominium loss assessments. FEMA has 
already provided guidance in this respect in the NFIP Claims Manual.\6\ 
On page 54, the Manual explains ``[The Dwelling Form's coverage of 
condominium loss assessments] does not include an assessment from the 
Condominium Association for property not covered by the SFIP, such as 
the cleanup of debris, sand, landscape lighting, repairs to parking 
lots, decks, sidewalks, pools, etc.'' It is FEMA's position that this 
guidance states with sufficient clarity what flood damaged items are 
excluded from coverage under the condominium loss assessment provision.
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    \6\ https://www.fema.gov/media-library-data/1559248107320-0943773d439f0ea73003ce1adcf48be7/NFIP_Claims_Manual.pdf.
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    FEMA also wishes to point out that Coverage B (Personal Property) 
in the Dwelling Form of the SFIP will continue to include coverage for 
``interior walls, floor, and ceiling'' not otherwise covered by an 
RCBAP policy. This coverage is limited to no more than 10 percent of 
the contents coverage limit chosen by the insured. This allows an 
individual unit owner to purchase his or her own policy that provides 
coverage beyond that offered by the RCBAP.

III. Summary of Other Changes

    The final rule also includes corrections of typographical errors 
and other non-substantive stylistic changes from the NPRM. For 
instance, FEMA corrects the capitalization of some section headings to 
ensure consistency. FEMA also removed an inadvertent inclusion of 
``initial installment payment'' in the revised 44 CFR 61.11(c) and 
added an inadvertently-removed unnumbered paragraph in the revised 
RCBAP section III.C.2.a (stating ``[t]his coverage does not increase 
the Coverage A or Coverage B limit of liability.''). FEMA also 
hyphenated the usage of ``single-family'' and ``two-to-four'' through 
the rule to conform to current NFIP styles. FEMA also updated cross-
references to the Dwelling Form in 44 CFR 61.17(g).
    Last, in the Maximum Amounts of Coverage Table at 44 CFR 61.6(a), 
FEMA replaced the term ``Condominium Building'' with ``Residential 
Condominium Building'' to make clear that the particular coverage limit 
is limited to condominium buildings used for residential purposes, 
rather than non-residential condominium buildings. This change reflects 
current practice and is for clarification purposes only.

IV. Regulatory Analysis

A. Executive Orders 12866, ``Regulatory Planning and Review'', 13563, 
``Improving Regulation and Regulatory Review'', and 13771, ``Reducing 
Regulation and Controlling Regulatory Costs''

    Executive Orders 13563 (``Improving Regulation and Regulatory 
Review'') and 12866 (``Regulatory Planning and Review'') direct 
agencies to assess the costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits, of reducing costs, of harmonizing 
rules, and of promoting flexibility. Executive Order 13771 (``Reducing 
Regulation and Controlling Regulatory Costs'') directs agencies to 
reduce regulation and control regulatory costs and provides that ``for 
every one new regulation issued, at least two prior regulations be 
identified for elimination, and that the cost of planned regulations be 
prudently managed and controlled through a budgeting process.''
    The Office of Management and Budget (OMB) has not designated this 
rule a ``significant regulatory action'' under section 3(f) of 
Executive Order 12866. Accordingly, OMB has not reviewed it. As this 
rule is not a significant regulatory action, this rule is exempt from 
the requirements of Executive Order 13771. See OMB's Memorandum 
``Guidance Implementing Executive Order 13771, Titled `Reducing 
Regulation and Controlling Regulatory Costs' '' (April 5, 2017).
    In this rule FEMA makes several nonsubstantive changes to the 
National Flood Insurance Program (NFIP) regulations at 44 CFR parts 59, 
61, and 62, as well as the Appendices to Part 61. FEMA is codifying 
certain provisions of the Biggert Waters Flood Insurance Reform Act of 
2012 (BW-12) and the Homeowner Flood Insurance Affordability Act of 
2014 (HFIAA) that it has already implemented in its Flood Insurance 
Manual and other related guidance documents. FEMA is also revising 
certain provisions of the NFIP regulations relating to NFIP operations 
and the Standard Flood Insurance Policy to consolidate and update the

[[Page 43949]]

regulatory text and standardize key terminology.
    There are 34 regulatory changes in this rule (itemized in Table 1). 
The majority of these changes are nonsubstantive clarifications. The 
remaining changes codify an existing practice, policy, or process.
    Pursuant to OMB Circular A-4, FEMA assesses the impacts of this 
rule against a no-action baseline and a pre-statutory baseline. With 
the no-action baseline, FEMA assesses what the world would be like 
absent the final rule. With the pre-statutory baseline, FEMA assesses 
what the world would be like absent the relevant statute(s) (in this 
case, BW-12 and HFIAA). With this approach, FEMA considers the full 
impacts of the rule.
    Under a no-action baseline, this rule has no quantifiable 
transfers, costs, or benefits. The rule makes non-substantive 
improvements to the language and organization of the NFIP regulations 
through clarifications and codifications, which do not result in any 
quantifiable transfers, costs, or benefits. The rule also codifies 
certain provisions of BW-12 and HFIAA that FEMA has already implemented 
via the Flood Insurance Manual and other related guidance documents, 
which results in no quantifiable transfers or benefits. WYO (Write Your 
Own) companies will, however, incur opportunity costs as they spend 
time becoming familiar with the rule's changes. Pursuant to the final 
rule, FEMA will no longer require individual waivers for condominium 
loss assessment restrictions; this results in cost savings.
    The analysis below utilizes a pre-statutory baseline of 2012. The 
summary of changes table (Table 1) lists all changes the rule makes to 
FEMA's current regulations, a description of each change, and their 
impact.

                                                             (a) Table 1--Summary of Changes
                                                                [Pre-statutory baseline]
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                                                                                                    Mandatory or discretionary
 Current section No./ subject matter                          Rule change                                     action                      Impact
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                                                     Non-substantive Clarifications & Consolidations
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1. Sec.   59 Definitions............  FEMA will add and revise definitions to support             Discretionary................  No change in compliance
                                       clarifications and codifications described below. This is                                  burden.
                                       a non-substantive change that clarifies existing
                                       definitions and does not alter the administration of the
                                       program.
2. Sec.   61.1 Purpose of part......  FEMA will remove irrelevant second sentence that does not   Discretionary................  No change in compliance
                                       relate to the substantive content of part 61. This is a                                    burden.
                                       non-substantive change that does not alter the
                                       administration of the program but rather provides greater
                                       clarity for the reader.
3. Sec.   61.3 Coverage and benefits  FEMA will clarify language to provide a more complete       Discretionary................  No change in compliance
 provided under the SFIP.              statement of coverage and benefits provided by the SFIP.                                   burden.
                                       The coverage and benefits provided under the SFIP are
                                       already stated in regulations; this is just a
                                       consolidated, unified statement of coverage and benefits
                                       under the SFIP. This is a non-substantive change that
                                       does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
4. Sec.   61.5 Deductibles..........  An application of BW-12 section 100210 and HFIAA section    Mandatory....................  No change in compliance
                                       12, that will clarify existing policy/practice by moving                                   burden.
                                       content of 61.5 to new unified cancellation/nullification
                                       section in 44 CFR 62.5 (discussed below). FEMA also will
                                       replace the current deductible tables with provisions
                                       describing the minimum deductibles required by BW-12
                                       section 100210 and the $10,000 deductible option required
                                       by HFIAA section 12. This is a non-substantive change
                                       because FEMA has always had this authority and has always
                                       made these deductible options available to policyholders
                                       despite not being explicitly provided for in the CFR.
5. Sec.   61.6 Maximum amounts of     FEMA will clarify the maximum coverage limit tables in      Discretionary................  No change in compliance
 coverage available.                   section 61.6 with non-substantive changes to improve                                       burden.
                                       readability and conformance with standard program
                                       terminology and terminology introduced by BW-12. This is
                                       a non-substantive change that does not alter the
                                       administration of the program but rather provides greater
                                       clarity for the reader.
6. Sec.   61.10 Requirements for      FEMA will clarify/consolidate existing regulation           Discretionary................  No change in compliance
 Issuance or Renewal of Flood          language. This new provision will clarify that no flood                                    burden.
 Insurance Coverage.                   insurance coverage will be issued unless there is (a)
                                       receipt of full amount due and (b) submission of a
                                       complete application with all the required rating
                                       information. Although this has always been the case, and
                                       these concepts are covered in sections 61.5 and 61.11,
                                       FEMA believes that increased clarity is needed by adding
                                       a consolidated statement in the regulations. This is a
                                       non-substantive change that does not alter the
                                       administration of the program but rather provides greater
                                       clarity for the reader.
7. Sec.   61.13 Standard Flood        This provision will clarify that SFIP is authorized only    Discretionary................  No change in compliance
 Insurance Policy.                     under terms and conditions established by Act,                                             burden.
                                       regulations, SFIP, and Administrator interpretations.
                                       FEMA also will clarify that the agent acts only for
                                       policyholder and that the risk of loss is borne by the
                                       National Flood Insurance Fund, not the WYO company. This
                                       does not represent a substantive change in policy or
                                       terms and conditions of the SFIP, but instead will make
                                       terms clearer.

[[Page 43950]]

 
8. Sec.   62.5 Policy Nullification   FEMA will make changes that will clarify and consolidate    Discretionary................  No change in compliance
 and Cancellation.                     the existing reasons for which a policy may be cancelled                                   burden.
                                       or nullified. The current reasons for which a policy may
                                       be cancelled or nullified are spread throughout the
                                       regulations and FEMA's interpretations of those
                                       regulations in the Flood Insurance Manual. This will
                                       consolidate those reasons into one section for greater
                                       clarity and transparency to the public. This is a non-
                                       substantive change that does not alter the administration
                                       of the program but rather provides greater clarity for
                                       the reader.
9. Sec.   62.6 Broker and Agents for  This provision will clarify FEMA's existing policy by       Discretionary................  No change in compliance
 Servicing Agent.                      adding it to regulation that a broker or agent selling                                     burden.
                                       NFIP policies must be licensed in the state in which the
                                       property is located. This is a non-substantive change
                                       that does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
10. SFIP Article I..................  FEMA will change SFIP Article I to clarify the types of     Discretionary................  No change in compliance
                                       property insured by the SFIP. Clarifications are about                                     burden.
                                       coverage limits and multiple policies covering one
                                       building. This is a non-substantive change that does not
                                       alter the administration of the program but rather
                                       provides greater clarity for the reader.
11. SFIP Article II--Definitions....  FEMA will revise and add some definitions for clarity. In   Discretionary................  No change in compliance
                                       particular, the changes will clarify that the named                                        burden.
                                       insured must also include the building owner if building
                                       coverage is purchased. This is a non-substantive change
                                       that does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
12. SFIP Article III................  FEMA will clarify that references to insured property do    Discretionary................  No change in compliance
                                       not extend coverage to any type or item of property not                                    burden.
                                       otherwise insured in accordance with the terms and
                                       conditions of SFIP. This is a non-substantive change that
                                       does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
13. SFIP Article III.A..............  FEMA is making minor non-substantive changes to Article     Discretionary................  No change in compliance
                                       III.A.5.b.2 to improve the grammar of the section; revise                                  burden.
                                       Article III.A.8 to remove the phrase ``in a building
                                       enclosure.'' This is a non-substantive change that does
                                       not alter the administration of the program but rather
                                       provides greater clarity for the reader.
14. SFIP Article III.B..............  FEMA will revise the numbering in this section to improve   Discretionary................  No change in compliance
                                       readability and organization; revise Article III.B.3 by                                    burden.
                                       removing the phrase ``in a building enclosure.'' This is
                                       a non-substantive change that does not alter the
                                       administration of the program but rather provides greater
                                       clarity for the reader.
15. SFIP Article III.D..............  FEMA will revise the language in this section so that the   Discretionary................  No change in compliance
                                       word ``structure'' is replaced by the word ``building''                                    burden.
                                       throughout the section except at III.D.5.c. The reason
                                       for this change is the NFIP insures SFIP defined
                                       ``buildings,'' not any structure that does not meet the
                                       definition of ``building'' as defined in the SFIP. FEMA
                                       also will improve the language in III.D.3.d and III.D.3.e
                                       by replacing the phrase ``this coverage'' with the phrase
                                       ``Coverage D'' to clarify that the coverage referred to
                                       in these provisions is Coverage D. This is a non-
                                       substantive change that does not alter the administration
                                       of the program but rather provides greater clarity for
                                       the reader.
16. SFIP Article V.B................  FEMA is making a non-substantive, clarifying adjustment to  Discretionary................  No change in compliance
                                       the Flood in Progress Exclusion at SFIP Art. V.B to align                                  burden.
                                       with reports required by BW-12 section 100227. This
                                       change does not impact the application of the exclusion,
                                       but will help support more consistent reading of the
                                       provison.
17. SFIP Article VII.B..............  FEMA will move the provision on concealment of fraud and    Discretionary................  No change in compliance
                                       policy voidance for consolidation into unified section on                                  burden.
                                       policy cancellations and nullifications (discussed
                                       below). This is a non-substantive change that does not
                                       alter the administration of the program but rather
                                       provides greater clarity for the reader.
18. SFIP Article VII.E..............  FEMA will remove Article VII.E, Cancellation of the Policy  Discretionary................  No change in compliance
                                       by You, and incorporate the language into a new                                            burden.
                                       consolidated section on policy nullifications,
                                       cancellations, and non-renewals. This is a non-
                                       substantive change that does not alter the administration
                                       of the program but rather provides greater clarity for
                                       the reader.

[[Page 43951]]

 
19. SFIP Article VII.F..............  FEMA will remove Article VII.F, Non-Renewal of the Policy   Discretionary................  No change in compliance
                                       by Us, and incorporate the language into a new Article                                     burden.
                                       VIII discussing policy nullifications, cancellations, and
                                       non-renewals. This is a non-substantive change that does
                                       not alter the administration of the program but rather
                                       provides greater clarity for the reader.
20. SFIP Article VII.G..............  This provision will revise the reformation section for      Discretionary................  No change in compliance
                                       clarity/readability. This is a non-substantive change                                      burden.
                                       that does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
21. SFIP Article VII.U..............  FEMA will move the provision on duplicate policies for      Discretionary................  No change in compliance
                                       consolidation into unified section on policy                                               burden.
                                       cancellations and nullifications (discussed below). This
                                       is a non-substantive change that does not alter the
                                       administration of the program but rather provides greater
                                       clarity for the reader.
22. SFIP Article VII.V..............  FEMA will revise Article VII.V.1.a.1 of the current policy  Discretionary................  No change in compliance
                                       to remove all the language after ``It is your principal                                    burden.
                                       residence.'' The reason for this change is that this
                                       language, which is essentially a definition of the term
                                       ``principal residence,'' has been incorporated into the
                                       new definition of ``principal residence'' being added to
                                       Definitions section in Article II. This is a non-
                                       substantive change that does not alter the administration
                                       of the program but rather provides greater clarity for
                                       the reader.
23. SFIP Article VIII...............  FEMA will clarify the existing reasons for which a policy   Discretionary................  No change in compliance
                                       may be cancelled, nullified, or not renewed. This will                                     burden.
                                       mirror similar section being established at 44 CFR 62.5
                                       (discussed above). This is a non-substantive change that
                                       does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
24. SFIP Article IX.................  FEMA will clarify that the SFIP and all disputes arising    Discretionary................  No change in compliance
                                       from the insurer's policy issuance, policy                                                 burden.
                                       administration, or the handling of any claim under the
                                       SFIP are governed by the National Flood Insurance Act and
                                       the regulations. This is a non-substantive change that
                                       does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
25. Entire SFIP--Global Language      FEMA will replace the word ``covered'' with the word        Discretionary................  No change in compliance
 Replacements.                         ``insured'' because the word ``covered'' does not conform                                  burden.
                                       to common industry or Agency usage. This is a non-
                                       substantive change that does not alter the administration
                                       of the program but rather provides greater clarity for
                                       the reader.
26. 62.22 Judicial Review (preamble   FEMA will replace references to the ``Federal Insurance     Discretionary................  No change in compliance
 sec. III.F.5).                        Administration'' with the current organizational title,                                    burden.
                                       ``Federal Insurance and Mitigation Administration.'' This
                                       is a non-substantive change that does not alter the
                                       administration of the program but rather provides greater
                                       clarity for the reader.
27. SFIP Article VII.D..............  FEMA will redesignate Article VII.D as Article VII.C.       Discretionary................  No change in compliance
                                       Replaces the phrase ``structure during the course of                                       burden.
                                       construction'' in Article VII.D.2 of the current rule
                                       with ``building under construction,'' which is the proper
                                       term of art, as used in Article III.A.5.a and Article
                                       VI.A. This is a non-substantive change that does not
                                       alter the administration of the program but rather
                                       provides greater clarity for the reader.
28. Sec.   61.4 Limitations on        FEMA will delete this provision because some of the         Discretionary................  No change in compliance
 Coverage.                             language is duplicative with language in other sections,                                   burden.
                                       and the rest of the language is more appropriately moved
                                       to other sections of the regulation. Move 61.5(a) and (b)
                                       to become a new 44 CFR 61.4. This is a non-substantive
                                       change that does not alter the administration of the
                                       program but rather provides greater clarity for the
                                       reader.
29. Sec.   62.3 Servicing agent.....  FEMA will remove the name of specific direct servicing      Discretionary................  No change in compliance
                                       agent. This is a non-substantive change that codifies                                      burden.
                                       current practices that began more than a decade before
                                       the baseline regarding the public announcement of the
                                       direct servicing agent.
30. Part 59 Authority Citation......  FEMA will replace the citations to Reorganization Plan No.  Discretionary................  No change in compliance
                                       3 and Executive Order 12127 with a citation to the                                         burden.
                                       codification of the Homeland Security Act of 2002, 6
                                       U.S.C. 101 et seq. This is a non-substantive change that
                                       does not alter the administration of the program but
                                       rather provides greater clarity for the reader.
31. Part 61 Authority Citation......  FEMA will update authority citations to reflect changes to  Discretionary................  No change in compliance
                                       FEMA's source of authority from Executive orders to                                        burden.
                                       statute. This is a non-substantive change that does not
                                       alter the administration of the program but rather
                                       provides greater clarity for the reader.

[[Page 43952]]

 
32. Part 62 Authority Citation......  FEMA will update authority citations to reflect changes to  Discretionary................  No change in compliance
                                       FEMA's source of authority from Executive orders to                                        burden.
                                       statute. This is a non-substantive change that does not
                                       alter the administration of the program but rather
                                       provides greater clarity for the reader.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Codification of Existing Policy and Practice
--------------------------------------------------------------------------------------------------------------------------------------------------------
33. Sec.   61.11 Effective date and   FEMA will codify BW-12's addition of the Post-Wildfire      Mandatory....................  No change in compliance
 time of coverage under the Standard   Exception to the 30-day waiting period required by 42                                      burden.
 Flood Insurance Policy--New           U.S.C. 4013(c). This change does not alter the current
 Business Applications and             administration of the program because FEMA immediately
 Endorsements.                         complied with the law.
                                      FEMA also is making a clarification by removing the second
                                       clause of the first sentence of 61.11(e) and 61.11(f)
                                       because these clauses accommodate a business model that
                                       the WYO companies no longer use. This change does not
                                       alter the current administration of the program but
                                       rather provides greater clarity for the reader.
34. SFIP Article III.C..............  FEMA will codify BW-12 section 100214, which prohibits the  Mandatory....................  Cost savings of $2,048
                                       application of SFIP Article III.C.3.b.4 (disallowing the                                   over 10 years ($1,799
                                       payment of a condominium loss assessment on a unit policy                                  at 3 percent and
                                       if the condominium building is underinsured). Prior to BW-                                 $1,539 at 7 percent
                                       12, FEMA issued individual waivers of this provision as                                    discount rates.)
                                       the need arose. The changes will delete Article
                                       III.C.3.b.4, thus no longer requiring FEMA to issue
                                       individual waivers.
--------------------------------------------------------------------------------------------------------------------------------------------------------

1. Costs
    This rule makes non-substantive improvements to the language and 
organization of the NFIP regulations. These changes do not result in 
any quantifiable costs, other than opportunity costs, that WYO 
companies will incur as they spend time becoming familiar with the 
changes.
    This rule revises section 61.11 to codify an additional exception 
to the 30-day waiting period before coverage on a flood insurance 
policy takes effect. Prior to BW-12, there were only two exceptions to 
this 30-day waiting period. The first exception was for the initial 
purchase of flood insurance in connection with the making, increasing, 
extension, or renewal of a loan. The second exception was for the 
initial purchase of flood insurance pursuant to a revision or updating 
of floodplain areas or flood risk zones, if such purchase took place 
within 1 year of the notice of such revision.
    The final rule codifies Section 100241 of BW-12, which amended 
Section 1306(c) of the NFIA (42 U.S.C. 4013(c)), by placing a third 
exception to the 30-day new policy waiting period. This new exception 
applies to situations where the flooding to an insured privately owned 
property is the result of flooding on Federal land that was caused or 
exacerbated by post-wildfire conditions, also on Federal land. FEMA 
implemented this new exception via bulletin. See WYO Bulletin W-12045 
(July 10, 2012) (announcing the implementation of Section 100241), see 
also, WYO Bulletin W-18001 (Jan. 16, 2018) (replacing WYO Bulletin W-
12045). To date, circumstances have not existed requiring FEMA to apply 
this exception. The change updates the regulations to reflect the 
revised statutory language and existing Agency practice.
    According to FEMA's NFIP claim data, since implementation of this 
exception in July 2012, no parties have made claims that apply to this 
provision. Additionally, due to both the brief window of applicability 
(the 30-day waiting period after initial enrollment in the NFIP) and 
the narrow circumstances to which this exception applies (flood damage 
due to flood on Federal land caused, or exacerbated, by post-wildfire 
conditions), invocation of this exception will be rare. This provision 
serves as an added enticement to potential enrollees of the NFIP to 
join the NFIP if they believe that a wildfire on Federal land may 
cause, or exacerbate, flooding on their property. In accordance with 
the data, there has not been and FEMA estimates that there will 
continue to be no additional burden on any party.
2. Benefits
    The majority of provisions represent clarifications of the 
regulation, or remove regulations that are no longer applicable. The 
few non-clarifying provisions reflect certain provisions that FEMA has 
already implemented through policy. These provisions streamline 
operations or meet greater potential needs of policyholders 
(codifications). It is only with codifications where any quantifiable 
impacts appear. This analysis considers the following as possible 
benefits of this rule:
i. Clarification of NFIP Terms & Conditions
    This analysis looks at the many efficiencies of the final rule; 
FEMA cannot quantify the bulk of these benefits. Although FEMA has not 
quantified them, they are essential to the justification of the final 
rule and provide significant benefits for stakeholders.
    Under current conditions, the NFIP-related sections of the CFR 
contain inconsistencies or vague language that may cause confusion to 
stakeholders. The following are selected examples of changes presented 
in Table 1:
a. Making Explicit the Implicit
    The current NFIP deductible charts at 44 CFR 61.5(d) show several 
possible deductible options, but not all the deductible options 
available under the program. A note to these tables indicates that 
policyholders may submit any other deductible amounts not currently 
listed in this chart (including the $10,000 deductible option required 
under HFIAA). Notwithstanding this note, the current regulation's 
listing of deductible options may give readers the impression that the 
list is exhaustive. In this rulemaking, FEMA removes the

[[Page 43953]]

deductible charts and replaces them with a requirement that FEMA must 
provide policyholders with deductible options in various amounts, up to 
and including $10,000, subject to certain minimum deductibles. This 
change does not expand or contract the deductible options the NFIP 
offers; rather, it clarifies that FEMA offers various options, 
including the $10,000 deductible, subject to other restrictions.
    This rulemaking also changes the language in Appendix A(1) of Part 
61 to clarify that FEMA also insures personal property under this 
policy. FEMA has always insured personal property under this policy, 
but the change makes this more explicit in the initial coverage 
statement. This rulemaking also changes Appendix A(2) to Part 61 to 
state that the policy insures only one building and that the insured 
building is the one specifically described in the Flood Insurance 
Application. FEMA has always limited coverage under the SFIP to one 
building; with this change, FEMA clearly states this at the very 
beginning of the SFIP.
b. Modifying, Adding or Removing Definitions
    In this rule, FEMA revises definitions such as ``deductible,'' 
``emergency program,'' ``act,'' and ``basement.'' These non-substantive 
changes are clearer and more consistent with the language in the 
Articles of the SFIP, as are the addition of acronyms for ease of 
repetitive use (such as that for the Special Flood Hazard Area as 
``SFHA'') or to remove a term or definition that FEMA no longer uses 
(e.g., ``Expense Constant'' which no longer applies, or ``Probation 
Premium'' which is better changed to ``Probation Surcharge'').
    This increased precision and consistent use of terms increases 
clarity of FEMA's NFIP regulations for the insurance companies, flood 
insurance policyholders, academic researchers, and private citizens. 
This improved accuracy will minimize confusion.
ii. Codification of Dwelling Policy Underinsurance Exception
    Article III.C.3.b.4 of the SFIP, found in Appendix A(1) to Part 61, 
prevents payment of condominium loss assessments on a unit policy if 
the condominium building is underinsured. The SFIP also requires 
policyholders to exhaust the coverage limits of the RCBAP policy (the 
primary policy) before the Dwelling Policy (the secondary policy) can 
take effect. This poses a challenge in the event FEMA disallows the 
primary policy in the above circumstance. Since 2007, FEMA required 
policyholders facing such a predicament to obtain a waiver from FEMA to 
process such claims.
    Pursuant to Section 100214 of BW-12, this rule removes Article 
III.C.3.b.4 of the SFIP, which prohibits such claim payments and 
necessitates the submission and processing of waivers. As a result of 
this statutory change, FEMA no longer requires waivers for this 
prohibition.
    To estimate the cost savings that result from FEMA's removal of 
this requirement, FEMA considered the frequency of these specific 
circumstances. Between 2007, when FEMA began issuing the waivers, and 
2013, when FEMA terminated the waiver process (following the passage 
and FEMA's provisional implementation of BW-12), there were four 
occurrences: Twice in Illinois, once in Texas, and once in Tennessee. 
Four occurrences over 6 years equate to an estimated frequency of 0.667 
instances each year, assuming that the rate remains consistent in the 
future.
    FEMA requires 3 hours to process a waiver request. Two General 
Schedule (GS) Federal employees in the National Capital Region, at the 
GS-14 and GS-15 levels, process waiver requests in equal proportion. 
Utilizing 2018 GS scale \7\ published hourly wage rates from the Office 
of Personnel Management (OPM) for the midpoint (step 5) of these grade 
levels FEMA calculated fully loaded \8\ wage rates of $90.85 and 
$106.87 per hour, respectively. At approximately 90 minutes per officer 
for each expected waiver, the subtotal is $136.28 \9\ and $160.30,\10\ 
respectively. An Assistant Administrator at the Senior Executive 
Service (SES) level must clear each waiver. This review and approval 
takes approximately 5 minutes.\11\ FEMA estimates that a fully loaded 
SES hourly rate is $126.66 per hour.\12\ The subtotal of the SES time 
is $10.56.\13\ The total opportunity cost to process each waiver is 
$307.16.\14\
---------------------------------------------------------------------------

    \7\ GS Scale based on 2018 OPM tables, hourly basic wage rates 
by grade and step for the locality pay area of Washington-Baltimore-
Arlington, DC-MD-VA-WV-PA. Accessed March 1st, 2018. https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/18Tables/html/DCB_h.aspx.
    \8\ Bureau of Labor Statistics, Employer Cost for Employee 
Compensation News Release, Table 1. Employer costs per hour worked 
for employee compensation and costs as a percent of total 
compensation; civilian workers, by major occupational and industry 
group, December 2017. https://www.bls.gov/news.release/archives/ecec_03202018.htm.
    The per hour benefits multiplier is calculated by dividing total 
compensation for all workers ($35.87) by wages and salaries for all 
workers ($24.49), which yields a per hour benefits multiplier of 
1.46. ($35.87 / $24.49 = 1.46468). Fully-loaded wage rates are 
calculated by multiplying the per hour benefits multiplier by the 
applicable wage rate. GS-14: $62.23 x 1.46 = $90.85 and GS-15: 
$73.20 x 1.46 = $106.87.
    \9\ $90.85 (hourly wage rate of $62.23 x 1.46) * 1.5 hours = 
$136.28.
    \10\ $106.87 (hourly wage rate of $73.20 x 1.46) * 1.5 hours = 
$160.30.
    \11\ FEMA bases SES salary estimates on OPM's Senior Executive 
Service Report. The latest report available is for 2016. Across all 
agencies the median SES pay is $173,882 (see table 13 at the 
following link) https://www.opm.gov/policy-data-oversight/data-analysis-documentation/federal-employment-reports/reports-publications/ses-summary-2016.pdf. Accessed June 4, 2018.
    \12\ $173,882 annual wage/2087 annual hours = $83.32 hourly wage 
rate x 1.46 benefits multiplier = $121.65 fully loaded hourly wage x 
1.04115 inflation adjustment = $126.66 fully loaded $2018 hourly 
wage. We calculated the inflation adjustment by subtracting the July 
2016 CPI-U (240.6) from the April 2018 CPI-U (250.5). We divided the 
result (9.9) by the July 2016 CPI-U (240.0). Calculation: (250.5-
240.6)/240.6 = 0.04115. BLS CPI-U data is available at http://data.bls.gov/cgi-bin/surveymost?bls. Select CPI for All Urban 
Consumers (CPI-U) 1982-84 = 100 (Unadjusted)--CUUR0000SA0 and click 
the Retrieve data button. Accessed June 8, 2018.
    \13\ $126.96 * 5 minutes = $10.56.
    \14\ $136.28 + $160.30 + $10.56 = $307.14.

         (b) Table 2--Projected Cost Savings of Codification of Dwelling Policy Underinsurance Exception
----------------------------------------------------------------------------------------------------------------
                                   Avg frequency  Total cost per    Annual cost
                                    of waivers        waiver          savings      NPV at 3% (m)   NPV at 7% (m)
----------------------------------------------------------------------------------------------------------------
Year 1..........................            0.67            $307            $205             205             205
Year 2..........................            0.67             307             205             199             191
Year 3..........................            0.67             307             205             193             179
Year 4..........................            0.67             307             205             187             167
Year 5..........................            0.67             307             205             182             156
Year 6..........................            0.67             307             205             177             146
Year 7..........................            0.67             307             205             171             136

[[Page 43954]]

 
Year 8..........................            0.67             307             205             166             128
Year 9..........................            0.67             307             205             162             119
Year 10.........................            0.67             307             205             157             111
                                 -------------------------------------------------------------------------------
    Total.......................            6.67           3,072           2,048          $1,799          $1,539
----------------------------------------------------------------------------------------------------------------

    Applying this cost to the estimated frequency of occurrence of 0.67 
waivers per year and extending the avoided costs over a 10-year period 
will project a total undiscounted cost savings of $2,048. The 10-year 
total equates to $1,799 and $1,539, when discounted at 3 percent and 7 
percent respectively.
3. Alternatives Considered
    Given that this rule has no direct compliance costs, no less 
burdensome alternatives to the final rule are available. In the absence 
of this final rule, stakeholders will continue to experience the 
negative repercussions of inconsistences between the statutes, 
regulations, and agency policy documents.
4. Summary
    For the 10-year period analyzed, FEMA does not anticipate any costs 
resulting from the selected provisions of BW-12 and HFIAA that the rule 
is implementing. During that same period analyzed, the estimated 
quantified benefits total $2,048. The present value, discounted at 7 
percent, of the estimated quantified benefits is approximately $1,539 
and $1,799 discounted at 3 percent. FEMA's ability to administer the 
NFIP in a more streamlined manner and the public's enhanced 
understanding of the terms and conditions of the program justify the 
final rule.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as 
amended, requires Federal agencies to consider the potential impact of 
regulations on small entities. The term ``small entities'' comprises 
small businesses, not-for-profit organizations that are independently 
owned and operated and are not dominant in their fields, and 
governmental jurisdictions with populations of less than 50,000. 29 of 
the 67 WYO companies participating in the NFIP (43 percent) are small 
entities.\15\ However, this rule will not have a significant economic 
impact on any company because this rule does not impose burdens on any 
participating WYO company. The rule makes non-substantive improvements 
to the language and organization of the NFIP regulations through 
clarifications and codifications. The rule also codifies certain 
provisions of BW-12 and HFIAA that FEMA has already implemented via the 
Flood Insurance Manual and other related guidance documents. 
Accordingly, FEMA certifies under 5 U.S.C. 605(b) that this rule would 
not have a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \15\ See Initial Regulatory Flexibility Analysis in the Notice 
of Proposed Rulemaking at 84 FR 32983.
---------------------------------------------------------------------------

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small 
entities in understanding this rule. If the rule would affect your 
small business, organization, or governmental jurisdiction and you have 
questions concerning its provisions or options for compliance, please 
contact the person listed in the FOR FURTHER INFORMATION CONTACT 
section.

C. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 658, 1501-1504, 
1531-1536, 1571, pertains to any rulemaking which is likely to result 
in the promulgation of any rule that includes a Federal mandate that 
may result in the expenditure by State, local, and Tribal governments, 
in the aggregate, or by the private sector, of $100 million (adjusted 
annually for inflation) or more in any one year. If the rulemaking 
includes a Federal mandate, the Act requires an agency to prepare an 
assessment of the anticipated costs and benefits of the Federal 
mandate. The Act also pertains to any regulatory requirements that 
might significantly or uniquely affect small governments. Before 
establishing any such requirements, an agency must develop a plan 
allowing for input from the affected governments regarding the 
requirements.
    FEMA has determined that this rulemaking will not result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
nor by the private sector, of $100,000,000 or more in any one year as a 
result of a Federal mandate, and it will not significantly or uniquely 
affect small governments. Therefore, no actions are deemed necessary 
under the provisions of the Unfunded Mandates Reform Act of 1995.

D. Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995 (PRA), as amended, 44 
U.S.C. 3501-3520, an agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless the 
agency obtains approval from the Office of Management and Budget (OMB) 
for the collection and the collection displays a valid OMB control 
number. See 44 U.S.C. 3506, 3507. This rulemaking does not call for a 
new collection of information under the PRA. There is an existing 
collection of information, 1660-0006, the National Flood Insurance 
Program Policy Forms, Public Law 90-448 (1968) (expanded by Pub. L. 93-
234 (1973)) included in this rulemaking. BW-12 and HFIAA require 
modifications to the NFIP. Program changes resulting from BW-12 and 
HFIAA necessitated revision of the NFIP Policy Forms to assure proper 
classification of properties for rating purposes and to rate and issue 
the policies in accordance with the provisions of BW-12 and HFIAA. 
However, this rule will not impact this collection because the forms 
have already been updated as needed.

E. Privacy Act/E-Government Act

    Under the Privacy Act of 1974, 5 U.S.C. 552a, an agency must 
determine whether implementation of a proposed regulation will result 
in a system of records. A ``record'' is any item, collection, or 
grouping of information about an individual that is maintained by an 
agency, including, but not limited to, his/her education, financial 
transactions, medical history, and criminal or employment history and 
that contains his/her name, or the

[[Page 43955]]

identifying number, symbol, or other identifying particular assigned to 
the individual, such as a finger or voice print or a photograph. See 5 
U.S.C. 552a(a)(4). A ``system of records'' is a group of records under 
the control of an agency from which information is retrieved by the 
name of the individual or by some identifying number, symbol, or other 
identifying particular assigned to the individual. See id. section 
552a(a)(5). An agency cannot disclose any record which is contained in 
a system of records except by following specific procedures.
    The E-Government Act of 2002, 44 U.S.C. 3501 note, also requires 
specific procedures when an agency takes action to develop or procure 
information technology that collects, maintains, or disseminates 
information that is in an identifiable form. This Act also applies when 
an agency initiates a new collection of information that will be 
collected, maintained, or disseminated using information technology if 
it includes any information in an identifiable form permitting the 
physical or online contacting of a specific individual.
    In accordance with DHS policy, FEMA has completed a Privacy 
Threshold Analysis (PTA) for this rule. DHS/FEMA has determined that 
this rulemaking does not affect the 1660-0006 OMB Control Number's 
current compliance with the E-Government Act of 2002 or the Privacy Act 
of 1974, as amended. As a result, DHS/FEMA has concluded that the 1660-
0006 OMB Control Number is covered by the DHS/FEMA/PIA-011--National 
Flood Insurance Program Information Technology Systems (NFIP ITS) 
Privacy Impact Assessment (PIA). Additionally, DHS/FEMA has decided 
that the 1660-0006 OMB Control Number is covered by the DHS/FEMA-003 
National Flood Insurance Program Files, 79 FR 28747, May 19, 2014 
System of Records Notice (SORN).

F. Executive Order 13175, ``Consultation and Coordination With Indian 
Tribal Governments''

    Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments,'' 65 FR 67249, (Nov. 9, 2000), applies to agency 
regulations that have Tribal implications, that is, regulations that 
have substantial direct effects on one or more Indian Tribes, on the 
relationship between the Federal government and Indian Tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian Tribes. Under this Executive Order, to the extent 
practicable and permitted by law, no agency shall promulgate any 
regulation that has Tribal implications, that imposes substantial 
direct compliance costs on Indian Tribal governments, and that is not 
required by statute, unless funds necessary to pay the direct costs 
incurred by the Indian Tribal government or the Tribe in complying with 
the regulation are provided by the Federal government, or the agency 
consults with Tribal officials.
    Nor, to the extent practicable by law, may an agency promulgate a 
regulation that has Tribal implications and preempts Tribal law, unless 
the agency consults with Tribal officials. This rule involves no 
policies that have Tribal implications under Executive Order 13175. 
This rule makes limited changes to the comprehensive, longstanding 
National Flood Insurance Program regulations applicable to communities, 
including participating Indian Tribal governments and Tribes, which 
voluntarily choose to participate in the program. Because these program 
updates are limited, they will not have substantial direct effects on 
Indian Tribes, on the relationship between the national government and 
Indian Tribes, or the distribution of power between the Federal 
Government and Indian Tribes.

G. Executive Order 13132, ``Federalism''

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), 
sets forth principles and criteria that agencies must adhere to in 
formulating and implementing policies that have federalism 
implications, that is, regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.'' For the 
purposes of this Executive Order, the term States also includes local 
governments or other subdivisions established by the States. Under this 
Executive Order, Federal agencies must closely examine the statutory 
authority supporting any action that would limit the policymaking 
discretion of the States. Further, to the extent practicable and 
permitted by law, no agency shall promulgate any regulation that has 
federalism implications, that imposes substantial direct compliance 
costs on State and local governments, and that is not required by 
statute, unless the Federal Government provides funds necessary to pay 
the direct costs incurred by the State and local governments in 
complying with the regulation, or the agency consults with State and 
local officials. Nor, to the extent practicable by law, may an agency 
promulgate a regulation that has federalism implications and preempts 
State law, unless the agency consults with State and local officials.
    FEMA has reviewed this rule under Executive Order 13132 and has 
determined that it does not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, and therefore does not have federalism 
implications as defined by the Executive Order. This rule makes limited 
changes to the comprehensive, longstanding National Flood Insurance 
Program regulations governing the communities' participation in the 
program. Because these program updates are limited, they will not have 
substantial direct effects on the States or participating communities, 
on the relationship between the national government and the States or 
participating communities, or the distribution of power among the 
various levels of government.

H. Executive Order 11988, ``Floodplain Management''

    Pursuant to Executive Order 11988, each agency must provide 
leadership and take action to reduce the risk of flood loss and to 
minimize the impact of floods on human safety, health and welfare. In 
addition, each agency must restore and preserve the natural and 
beneficial values served by floodplains in carrying out its 
responsibilities for (1) acquiring, managing, and disposing of Federal 
lands and facilities; (2) providing Federally undertaken, financed, or 
assisted construction and improvements; and (3) conducting Federal 
activities and programs affecting land use, including but not limited 
to water and related land resources planning, regulating, and licensing 
activities. In carrying out these responsibilities, each agency must 
evaluate the potential effects of any actions it may take in a 
floodplain; ensure that its planning programs and budget requests 
reflect consideration of flood hazards and floodplain management; and 
prescribe procedures to implement the policies and requirements of the 
Executive Order.
    Before promulgating any regulation, an agency must determine 
whether the proposed regulations will affect a floodplain(s), and if 
so, the agency must consider alternatives to avoid adverse effects and 
incompatible development in the floodplain(s). If the head of the 
agency finds that the only practicable alternative consistent with the 
law and with the policy set forth in Executive Order 11988 is to 
promulgate a

[[Page 43956]]

regulation that affects a floodplain(s), the agency must, prior to 
promulgating the regulation, design or modify the regulation in order 
to minimize potential harm to or within the floodplain, consistent with 
the agency's floodplain management regulations and prepare and 
circulate a notice containing an explanation of why the action is 
proposed to be located in the floodplain.
    The purpose of this rule is to implement insurance-related 
administrative changes to clarify coverage, rates, and terms and 
conditions. FEMA included the Federal Insurance actions covered in the 
purpose of this rule as part of the NFIP Nationwide Programmatic 
Environmental Impact Statement, published on November 3, 2017, and 
completed in accordance with the Council on Environmental Quality's 
National Environmental Policy Act implementing regulations in 40 CFR 
1500-1508 and in accordance with FEMA Directive 108-1 and Instruction 
108-1-1. FEMA determined that these actions will not have a significant 
effect on land use, floodplain management, or wetlands.

I. Executive Order 11990, ``Protection of Wetlands''

    Executive Order 11990, ``Protection of Wetlands,'' 42 FR 26961 (May 
24, 1977) sets forth that each agency must provide leadership and take 
action to minimize the destruction, loss or degradation of wetlands, 
and to preserve and enhance the natural and beneficial values of 
wetlands in carrying out the agency's responsibilities. These 
responsibilities include (1) acquiring, managing, and disposing of 
Federal lands and facilities; and (2) providing Federally undertaken, 
financed, or assisted construction and improvements; and (3) conducting 
Federal activities and programs affecting land use, including but not 
limited to water and related land resources planning, regulating, and 
licensing activities. Each agency, to the extent permitted by law, must 
avoid undertaking or providing assistance for new construction located 
in wetlands unless the head of the agency finds (1) that there is no 
practicable alternative to such construction, and (2) that the proposed 
action includes all practicable measures to minimize harm to wetlands 
which may result from such use. In making this finding, the head of the 
agency may take into account economic, environmental and other 
pertinent factors.
    In carrying out the activities described in Executive Order 11990, 
each agency must consider factors relevant to a proposal's effect on 
the survival and quality of the wetlands. These include public health, 
safety, and welfare, including water supply, quality, recharge and 
discharge; pollution; flood and storm hazards; sediment and erosion; 
maintenance of natural systems, including conservation and long term 
productivity of existing flora and fauna, species and habitat diversity 
and stability, hydrologic utility, fish, wildlife, timber, and food and 
fiber resources. They also include other uses of wetlands in the public 
interest, including recreational, scientific, and cultural uses. The 
purpose of this rule is to implement insurance-related administrative 
changes to clarify coverage, rates, and terms and conditions. FEMA 
included the Federal Insurance actions covered in the purpose of this 
rule as part of the NFIP Nationwide Programmatic Environmental Impact 
Statement, published on November 3, 2017, and completed in accordance 
with the Council on Environmental Quality's National Environmental 
Policy Act implementing regulations in 40 CFR 1500-1508 and in 
accordance with FEMA Directive 108-1 and Instruction 108-1-1. FEMA has 
determined that these actions will not have a significant effect on 
land use, floodplain management, or wetlands.

J. National Environmental Policy Act of 1969 (NEPA)

    Section 102 of the National Environmental Policy Act of 1969 
(NEPA), 83 Stat. 852 (Jan. 1, 1970) (42 U.S.C. 4321 et seq.) requires 
agencies to consider the impacts of their proposed actions on the 
quality of the human environment. The Council on Environmental 
Quality's procedures for implementing NEPA, 40 CFR 1500 et seq., 
require Federal agencies to prepare Environmental Impact Statements 
(EIS) for major Federal actions significantly affecting the quality of 
the human environment. Each agency can develop categorical exclusions 
to cover actions that have been demonstrated to not typically trigger 
significant impacts to the human environment individually or 
cumulatively. Agencies develop environmental assessments (EA) to 
evaluate those actions that do not fit an agency's categorical 
exclusion and for which the need for an EIS is not readily apparent. At 
the end of the EA process, the agency will determine whether to make a 
Finding of No Significant Impact (FONSI) or whether to initiate the EIS 
process.
    Rulemaking is a major Federal action subject to NEPA. FEMA included 
the Federal Insurance actions covered in the purpose of this rule as 
part of the NFIP Nationwide Programmatic Environmental Impact 
Statement, published on November 3, 2017, and completed in accordance 
with the Council on Environmental Quality's National Environmental 
Policy Act implementing regulations in 40 CFR 1500-1508 and in 
accordance with FEMA Directive 108-1 and Instruction 108-1-1. FEMA has 
determined that these actions will not have a significant effect on the 
human environment.

K. Executive Order 12898 Environmental Justice

    Under Executive Order 12898, ``Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations,'' 59 FR 7629 (Feb. 16, 1994), as amended by Executive 
Order 12948, 60 FR 6381, (Feb. 1, 1995), FEMA incorporates 
environmental justice into its policies and programs. The Executive 
Order requires each Federal agency to conduct its programs, policies, 
and activities that substantially affect human health or the 
environment in a manner that ensures that those programs, policies, and 
activities do not have the effect of excluding persons from 
participation in programs, denying persons the benefits of programs, or 
subjecting persons to discrimination because of race, color, or 
national origin.
    FEMA included the Federal Insurance actions covered in the purpose 
of this rule as part of the NFIP Nationwide Programmatic Environmental 
Impact Statement, published on November 3, 2017, and completed in 
accordance with the Council on Environmental Quality's National 
Environmental Policy Act implementing regulations in 40 CFR 1500-1508 
and in accordance with FEMA Directive 108-1 and Instruction 108-1-1. 
FEMA has determined that these actions will not have a 
disproportionately high or adverse effect on human health or the 
environment, nor will it exclude persons from participation in FEMA 
programs, deny persons the benefits of FEMA programs, or subject 
persons to discrimination because of race, color, or national origin.

L. Congressional Review of Agency Rulemaking

    Under the Congressional Review of Agency Rulemaking Act (CRA), 5 
U.S.C. 801-808, before a rule can take effect, the Federal agency 
promulgating the rule must submit to Congress and to the Government 
Accountability Office (GAO) a copy of the rule; a concise general 
statement relating to the rule, including whether it is a major rule; 
the proposed effective date of the rule; a

[[Page 43957]]

copy of any cost-benefit analysis; descriptions of the agency's actions 
under the Regulatory Flexibility Act and the Unfunded Mandates Reform 
Act; and any other information or statements required by relevant 
executive orders.
    FEMA has sent this final rule to the Congress and to GAO pursuant 
to the CRA. The rule is not a ``major rule'' within the meaning of the 
CRA. It will not have an annual effect on the economy of $100,000,000 
or more; it will not result in a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions; and it will not have significant 
adverse effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic and export markets.

List of Subjects

44 CFR Parts 59 and 61

    Flood insurance, Reporting and recordkeeping requirements.

44 CFR Part 62

    Claims, Flood insurance, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, FEMA amends 44 CFR Chapter 
I as follows:

PART 59--GENERAL PROVISIONS

0
1. Revise authority citation for part 59 to read as follows:

    Authority:  42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.


0
2. In Sec.  59.1, remove definition for ``Emergency Flood Insurance 
Program or emergency program,'' and add definitions, in alphabetical 
order, for ``Condominium Building,'' ``Mixed Use Building,'' 
``Multifamily Building,'' ``Non-Residential Building,'' ``Non-
Residential Property,'' ``Other Residential Building,'' ``Other 
Residential Property,'' ``Residential Building,'' ``Residential 
Property,'' ``Single-Family Dwelling,'' and ``Two-to-Four Family 
Building'' and revise the definitions for ``Act,'' ``Deductible,'' and 
``Emergency Program'' to read as follows:


Sec.  59.1   Definitions.

* * * * *
    Act means the statutes authorizing the National Flood Insurance 
Program that are incorporated in 42 U.S.C. 4001- et seq.
* * * * *
    Condominium Building means a type of building in the form of 
ownership in which each unit owner has an undivided interest in common 
elements of the building.
* * * * *
    Deductible means the amount of an insured loss that is the 
responsibility of the insured and that is incurred before any amounts 
are paid for the insured loss under the insurance policy.
* * * * *
    Emergency Program means the initial phase of a community's 
participation in the National Flood Insurance Program, as prescribed by 
Section 1306 of the Act.
* * * * *
    Mixed Use Building means a building that has both residential and 
non-residential uses.
* * * * *
    Multifamily Building means an other residential building that is 
not a condominium building.
* * * * *
    Non-Residential Building means a commercial or mixed-use building 
where the primary use is commercial or non-habitational.
    Non-Residential Property means either a non-residential building, 
the contents within a non-residential building, or both.
* * * * *
    Other Residential Building means a residential building that is 
designed for use as a residential space for 5 or more families or a 
mixed use building in which the total floor area devoted to non-
residential uses is less than 25 percent of the total floor area within 
the building.
    Other Residential Property means either an other residential 
building, the contents within an other residential building, or both.
* * * * *
    Residential Building means a non-commercial building designed for 
habitation by one or more families or a mixed use building that 
qualifies as a single-family, two-to-four family, or other residential 
building.
    Residential Property means either a residential building or the 
contents within a residential building, or both.
* * * * *
    Single-Family Dwelling means either (a) a residential single-family 
building in which the total floor area devoted to non-residential uses 
is less than 50 percent of the building's total floor area, or (b) a 
single-family residential unit within a two-to-four family building, 
other-residential building, business, or non-residential building, in 
which commercial uses within the unit are limited to less than 50 
percent of the unit's total floor area.
* * * * *
    Two-to-Four Family Building means a residential building, including 
an apartment building, containing two-to-four residential spaces and in 
which commercial uses are limited to less than 25 percent of the 
building's total floor area.
* * * * *

PART 61--INSURANCE COVERAGE AND RATES

0
3. Revise the authority citation for part 61 to read as follows:

    Authority:  42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.


0
4. Revise Sec.  61.1 to read as follows:


Sec.  61.1   Purpose of part.

    This part describes the types of properties eligible for flood 
insurance coverage under the Program, the limits of such coverage, and 
the premium rates actually to be paid by insureds.

0
5. Revise Sec.  61.3 to read as follows:


Sec.  61.3   Coverage and benefits provided under the Standard Flood 
Insurance Policy.

    (a) Insurance coverage under the Program is available for buildings 
and their contents. Coverage for each may be purchased separately.
    (b) In addition to building and contents coverage, the Dwelling 
Form of the Standard Flood Insurance Policy (SFIP) covers debris 
removal, loss avoidance measures, and condominium loss assessments. The 
General Property Form of the SFIP covers debris removal, loss avoidance 
measures, and pollution damage. The Residential Condominium Building 
Association Policy Form of the SFIP covers debris removal and loss 
avoidance measures.
    (c) With the purchase of building coverage, the Standard Flood 
Insurance Policy covers the costs associated with bringing the building 
into compliance with local floodplain ordinances.

0
6. Revise Sec.  61.4 to read as follows:


Sec.  61.4   Special terms and conditions.

    (a) No new flood insurance or renewal of flood insurance policies 
will be written for properties declared by a duly constituted State or 
local zoning or other authority to be in violation of any floodplain, 
mudslide (i.e., mudflow), or flood-related erosion area management or 
control law, regulation, or ordinance.
    (b) In order to reduce the administrative costs of the Program, of 
which the Federal Government pays a major share, applicants must pay 
the

[[Page 43958]]

full policy premium at the time of application.

0
7. Revise Sec.  61.5 to read as follows:


Sec.  61.5   Deductibles.

    FEMA must provide policyholders with deductible options in various 
amounts, up to and including $10,000, subject to the following minimum 
deductible amounts:
    (a) The minimum deductible for policies covering pre-FIRM buildings 
charged less than full-risk rates with building coverage amounts less 
than or equal to $100,000 is $1,500.
    (b) The minimum deductible for policies covering pre-FIRM buildings 
charged less than full-risk rates with building coverage amounts 
greater than $100,000 is $2,000.
    (c) The minimum deductible for policies covering post-FIRM 
buildings and pre-FIRM buildings charged full risk rates, with building 
coverage amounts equal to or less than $100,000 is $1,000.
    (d) The minimum deductible for policies covering post-FIRM 
buildings and pre-FIRM buildings charged full risk rates, with building 
coverage amounts greater than $100,000 is $1,250.

0
8. Revise Sec.  61.6 to read as follows:


Sec.  61.6   Maximum amounts of coverage available.

    (a) Pursuant to section 1306 of the Act, the following are the 
limits of coverage available under the emergency program and under the 
regular program.

   Table 1 to Paragraph (a)--Maximum Amounts of Coverage Available \1\
------------------------------------------------------------------------
                                    Emergency        Regular Program
                                     Program    ------------------------
           Occupancy            ----------------
                                     Amount               Amount
------------------------------------------------------------------------
                            Bulding Coverage
------------------------------------------------------------------------
Single-Family Dwelling.........       * $35,000  $250,000.
Two-to-Four Family Building....        * 35,000  $250,000.
Other Residential Building           ** 100,000  $500,000.
 (including Multifamily
 Building).
Residential Condominium                     N/A  $250,000 times the
 Building.                                        number of units in the
                                                  building.
Non-Residential Building.......      ** 100,000  $500,000.
------------------------------------------------------------------------
                          Contents Coverage \2\
------------------------------------------------------------------------
Residential Property \3\.......          10,000  $100,000.
Non-Residential Property.......         100,000  $500,000.
------------------------------------------------------------------------
\1\ This Table provides the maximum coverage amounts available under the
  Emergency Program and the Regular Program, and the columns cannot be
  aggregated to exceed the limits in the Regular Program, which are
  established by statute. The aggregate limits for building coverage are
  the maximum coverage amounts allowed by statute for each building
  included in the relevant Occupancy Category.
\2\ The policy limits for contents coverage are not per building.
  Although a single insured may not have more than one policy covering
  contents in a building, several insureds may have separate policies of
  up to the policy limits.
\3\ The Residential Property occupancy category includes the Single-
  Family Dwelling, Two-to-Four Family Building, Other Residential
  Building, and Condominium Building occupancies categories.
* In Alaska, Guam, Hawaii, and U.S. Virgin Islands, the amount available
  is $50,000.
** In Alaska, Guam, Hawaii, and U.S. Virgin Islands, the amount
  available is $150,000.

    (b) Coverage and benefits payable under the SFIP pursuant to Sec.  
61.3(b) and (c) are included in, not in addition to, the coverage 
limits provided by the Act or stated in paragraph (a) of this section.

0
9. Add Sec.  61.10 to read as follows:


Sec.  61.10   Requirements for issuance or renewal of flood insurance 
coverage.

    FEMA will not issue or renew flood insurance unless FEMA receives:
    (a) The full amount due (including applicable premiums, surcharges, 
and fees); and
    (b) A complete application, including the information necessary to 
establish a premium rate for the policy, or submission of corrected or 
additional information necessary to calculate the premium for the 
renewal of the policy.

0
10. Amend Sec.  61.11 by revising paragraphs (c) through (g) to read as 
follows:


Sec.  61.11   Effective date and time of coverage under the Standard 
Flood Insurance Policy--New business applications and endorsements.

* * * * *
    (c) Where the following conditions are met, the effective date and 
time of any initial purchase of flood insurance coverage for any 
privately-owned property will be 12:01 a.m. (local time) on the first 
calendar day after the application date and the presentment of payment 
of premium:
    (1) The Administrator has determined that the property is affected 
by flooding on Federal land that is a result of, or is exacerbated by, 
post-wildfire conditions, after consultation with an authorized 
employee of the Federal agency that has jurisdiction of the land on 
which the wildfire that caused the post-wildfire conditions occurred; 
and
    (2) The flood insurance coverage was purchased not later than 60 
calendar days after the fire containment date, as determined by the 
appropriate Federal employee, relating to the wildfire that caused the 
post-wildfire conditions described in clause (1).
    (d) Except as provided by paragraphs (a), (b), and (c) of this 
section, the effective date and time of any new policy, added coverage, 
or increase in the amount of coverage will be 12:01 a.m. (local time) 
on the 30th calendar day after the application date and the presentment 
of payment of premium; for example, a flood insurance policy applied 
for with the payment of the premium on May 1 will become effective at 
12:01 a.m. on May 31.
    (e) Adding new coverage or increasing the amount of coverage in 
force is permitted during the term of any policy, subject to any 
applicable waiting periods. The additional premium for any new coverage 
or increase in the amount of coverage will be calculated pro rata in 
accordance with the rates currently in force.
    (f) With respect to any submission of an application in connection 
with new business, the payment by an insured to an agent or the 
issuance of premium

[[Page 43959]]

payment by the agent does not constitute payment to the NFIP. 
Therefore, it is important that an application for flood insurance, as 
well as the full amount due, be mailed to the NFIP promptly in order to 
have the effective date of the coverage based on the application date 
plus the waiting period. If the application and the full amount due are 
received at the office of the NFIP within ten (10) calendar days from 
the date of application, the waiting period will be calculated from the 
date of application. Also, as an alternative, in those cases where the 
application and premium payment are mailed by certified mail within 
four (4) calendar days from the date of application, the waiting period 
will be calculated from the date of application even though the 
application and full amount due are received at the office of the NFIP 
after ten (10) calendar days following the date of application. Thus, 
if the application and premium payment are received after ten (10) 
calendar days from the date of the application or are not mailed by 
certified mail within four (4) calendar days from the date of 
application, the waiting period will be calculated from the date of 
receipt at the office of the NFIP. To determine the effective date of 
any coverage added by endorsement to a flood insurance policy already 
in effect, substitute the term endorsement for the term application in 
this paragraph (f).
    (g) The rules set forth in paragraphs (a) through (f) of this 
section apply to Write Your Own (WYO) companies, except that agents 
must mail the premium payments and accompanying applications and 
endorsements to the WYO company and the WYO company must receive the 
applications and endorsements, rather than the NFIP.

0
11. Amend Sec.  61.13 by revising paragraphs (e) and (f) and adding 
paragraphs (g) and (h) to read as follows:


Sec.  61.13   Standard Flood Insurance Policy.

* * * * *
    (e) Authorized only under terms and conditions established by the 
Act and Regulation. The Standard Flood Insurance Policy is authorized 
only under terms and conditions established by Federal statute, the 
program's regulations, the Federal Insurance Administrator's 
interpretations, and the express terms of the policy itself. 
Accordingly, representations regarding the extent and scope of coverage 
that are not consistent with Federal statute, the program's 
regulations, the Federal Insurance Administrator's interpretations, and 
the express terms of the policy itself, are void.
    (f) Agent acts only for policyholder. The duly licensed property or 
casualty agent acts for the policyholder and does not act as agent for 
the Federal Government, the Federal Emergency Management Agency, the 
Write Your Own (WYO) program participating insurance company authorized 
by part 62 of this chapter, or the NFIP servicing agent.
    (g) Oral and written binders. No oral binder or contract will be 
effective. No written binder will be effective unless issued with 
express authorization of the Federal Insurance Administrator.
    (h) The Standard Flood Insurance Policy and endorsements may be 
issued by private sector Write Your Own (WYO) property insurance 
companies, based upon flood insurance applications and renewal forms, 
all of which instruments of flood insurance may bear the name, as 
Insurer, of the issuing WYO company. In the case of any Standard Flood 
Insurance Policy, and its related forms, issued by a WYO company, 
wherever the names ``Federal Emergency Management Agency'' and 
``Federal Insurance and Mitigation Administration'' appear, a WYO 
company must substitute its own name therefore. Standard Flood 
Insurance Policies issued by WYO companies may be executed by the 
issuing WYO company as Insurer, in the place and stead of the Federal 
Insurance Administrator, but the risk of loss is borne by the National 
Flood Insurance Fund, not the WYO company.

0
12. Amend Sec.  61.17 by revising paragraph (g) introductory text and 
(g)(2) and (3) to read as follows:


Sec.  61.17   Group Flood Insurance Policy.

* * * * *
    (g) The GFIP is the Standard Flood Insurance Policy Dwelling Form 
(a copy of which is included in Appendix A(1) of this part), except 
that:
* * * * *
    (2) VIII. POLICY NULLIFICATION, CANCELLATION, AND NON-RENEWAL, C. 
Cancellation of the Policy by You, does not apply to the GFIP.
    (3) VII. GENERAL CONDITIONS, E. Policy Renewal, does not apply to 
the GFIP.
* * * * *

0
13. Revise Appendix A(1) to part 61 to read as follows:

Appendix A(1) to Part 61

Federal Emergency Management Agency, Federal Insurance and Mitigation 
Administration

Standard Flood Insurance Policy

Dwelling Form

    Please read the policy carefully. The flood insurance provided 
is subject to limitations, restrictions, and exclusions.

I. Agreement

    A. This policy insures the following types of property only:
    1. A one to four family residential building, not under a 
condominium form of ownership;
    2. A single-family dwelling unit in a condominium building; and
    3. Personal property in a building.
    B. The Federal Emergency Management Agency (FEMA) provides flood 
insurance under the terms of the National Flood Insurance Act of 
1968 and its amendments, and Title 44 of the Code of Federal 
Regulations.
    C. We will pay you for direct physical loss by or from flood to 
your insured property if you:
    1. Have paid the full amount due (including applicable premiums, 
surcharges, and fees);
    2. Comply with all terms and conditions of this policy; and
    3. Have furnished accurate information and statements.
    D. We have the right to review the information you give us at 
any time and revise your policy based on our review.
    E. This policy insures only one building. If you own more than 
one building, coverage will apply to the single building 
specifically described in the Flood Insurance Application.
    F. Subject to the exception in I.G below, multiple policies with 
building coverage cannot be issued to insure a single building to 
one insured or to different insureds, even if separate policies were 
issued through different NFIP insurers. Payment for damages may only 
be made under a single policy for building damages under Coverage 
A--Building Property.
    G. A Dwelling Form policy with building coverage may be issued 
to a unit owner in a condominium building that is also insured under 
a Residential Condominium Building Association Policy (RCBAP). 
However, no more than $250,000 may be paid in combined benefits for 
a single unit under the Dwelling Form policy and the RCBAP. We will 
only pay for damage once. Items of damage paid for under an RCBAP 
cannot also be claimed under the Dwelling Form policy.

II. Definitions

    A. In this policy, ``you'' and ``your'' refer to the named 
insured(s) shown on the Declarations Page of this policy and the 
spouse of the named insured, if a resident of the same household. 
Insured(s) also 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

[[Page 43960]]

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.
    B. Flood, as used in this flood insurance policy, means:
    1. A general and temporary condition of partial or complete 
inundation of two or more acres of normally dry land area or of two 
or more properties (one of which is your property) from:
    a. Overflow of inland or tidal waters;
    b. Unusual and rapid accumulation or runoff of surface waters 
from any source;
    c. Mudflow.
    2. Collapse or subsidence of land along the shore of a lake or 
similar body of water as a result of erosion or undermining caused 
by waves or currents of water exceeding anticipated cyclical levels 
that result in a flood as defined in B.1.a above.
    C. The following are the other key definitions we use in this 
policy:
    1. Act. The National Flood Insurance Act of 1968 and any 
amendments to it.
    2. Actual Cash Value. The cost to replace an insured item of 
property at the time of loss, less the value of its physical 
depreciation.
    3. Application. The statement made and signed by you or your 
agent in applying for this policy. The application gives information 
we use to determine the eligibility of the risk, the kind of policy 
to be issued, and the correct premium payment. The application is 
part of this flood insurance policy.
    4. Base Flood. A flood having a one percent chance of being 
equaled or exceeded in any given year.
    5. Basement. Any area of a building, including any sunken room 
or sunken portion of a room, having its floor below ground level on 
all sides.
    6. Building
    a. A structure with two or more outside rigid walls and a fully 
secured roof that is affixed to a permanent site;
    b. A manufactured home, also known as a mobile home, is a 
structure: Built on a permanent chassis, transported to its site in 
one or more sections, and affixed to a permanent foundation; or
    c. A travel trailer without wheels, built on a chassis and 
affixed to a permanent foundation, that is regulated under the 
community's floodplain management and building ordinances or laws.
    Building does not mean a gas or liquid storage tank, shipping 
container, or a recreational vehicle, park trailer, or other similar 
vehicle, except as described in C.6.c above.
    7. Cancellation. The ending of the insurance coverage provided 
by this policy before the expiration date.
    8. Condominium. That form of ownership of one or more buildings 
in which each unit owner has an undivided interest in common 
elements.
    9. Condominium Association. The entity made up of the unit 
owners responsible for the maintenance and operation of:
    a. Common elements owned in undivided shares by unit owners; and
    b. Other buildings in which the unit owners have use rights; 
where membership in the entity is a required condition of ownership.
    10. Condominium Building. A type of building for which the form 
of ownership is one in which each unit owner has an undivided 
interest in common elements of the building.
    11. Declarations Page. A computer-generated summary of 
information you provided in your 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.
    12. Deductible. The amount of an insured loss that is your 
responsibility and that is incurred by you before any amounts are 
paid for the insured loss under this policy.
    13. Described Location. The location where the insured 
building(s) or personal property are found. The described location 
is shown on the Declarations Page.
    14. Direct Physical Loss By or From Flood. Loss or damage to 
insured property, directly caused by a flood. There must be evidence 
of physical changes to the property.
    15. Dwelling. A building designed for use as a residence for no 
more than four families or a single-family unit in a condominium 
building.
    16. 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.
    17. Emergency Program. The initial phase of a community's 
participation in the National Flood Insurance Program. During this 
phase, only limited amounts of insurance are available under the Act 
and the regulations prescribed pursuant to the Act.
    18. Federal Policy Fee. A flat rate charge you must pay on each 
new or renewal policy to defray certain administrative expenses 
incurred in carrying out the National Flood Insurance Program.
    19. Improvements. Fixtures, alterations, installations, or 
additions comprising a part of the dwelling or apartment in which 
you reside.
    20. Mudflow. A river of liquid and flowing mud on the surface of 
normally dry land areas, 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.
    21. National Flood Insurance Program (NFIP). 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.
    22. Policy. 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 dwelling, 
which you specifically described in the application, may be insured 
under this policy.
    23. Pollutants. Substances that include, but are not limited to, 
any solid, liquid, gaseous, or thermal irritant or contaminant, 
including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and 
waste. ``Waste'' includes, but is not limited to, materials to be 
recycled, reconditioned, or reclaimed.
    24. Post-FIRM Building. 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.
    25. Principal Residence. The dwelling in which you or your 
spouse have lived for at least 80 percent of:
    a. The 365 days immediately preceding the time of loss; or
    b. The period of ownership of you or your spouse, if either you 
or your spouse owned the dwelling for less than 365 days immediately 
preceding the time of loss.
    26. Probation Surcharge. 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.
    27. Regular Program. 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 and the regulations prescribed 
pursuant to the Act.
    28. Special Flood Hazard Area (SFHA). An area having special 
flood or mudflow, and/or flood-related erosion hazards, and shown on 
a Flood Hazard Boundary Map or Flood Insurance 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.
    29. Unit. A single-family residential space you own in a 
condominium building.
    30. Valued Policy. A policy in which the insured and the insurer 
agree on the value of the property insured, that value being payable 
in the event of a total loss. The Standard Flood Insurance Policy is 
not a valued policy.

III. Property Insured

A. Coverage A--Building Property

    We insure against direct physical loss by or from flood to:
    1. The dwelling at the described location, or for a period of 45 
days at another location as set forth in III.C.2.b, Property Removed 
to Safety.
    2. Additions and extensions attached to and in contact with the 
dwelling by means of a rigid exterior wall, a solid load-bearing 
interior wall, a stairway, an elevated walkway, or a roof. At your 
option, additions and extensions connected by any of these methods 
may be separately insured. Additions 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.
    3. A detached garage at the described location. Coverage is 
limited to no more than 10 percent of the limit of liability on the 
dwelling. Use of this insurance is at your option but reduces the 
building limit of

[[Page 43961]]

liability. We do not cover any detached garage used or held for use 
for residential (i.e., dwelling), business, or farming purposes.
    4. Materials and supplies to be used for construction, 
alteration, or repair of the dwelling or a detached garage while the 
materials and supplies are stored in a fully enclosed building at 
the described location or on an adjacent property.
    5. A building under construction, alteration, or repair at the 
described location.
    a. If the structure is not yet walled or roofed as described in 
the definition for building (see II.B.6.a) then coverage applies:
    (1) Only while such work is in progress; or
    (2) If such work is halted, only for a period of up to 90 
continuous days thereafter.
    b. However, coverage does not apply until the building is walled 
and roofed if the lowest floor, including the basement floor, of a 
non-elevated building or the lowest elevated floor of an elevated 
building is:
    (1) Below the base flood elevation in Zones AH, AE, A1-A30, AR, 
AR/AE, AR/AH, AR/A1-A30, AR/A, AR/AO; or
    (2) Below the base flood elevation adjusted to include the 
effect of wave action in Zones VE or V1-V30.
    The lowest floor level is based on the bottom of the lowest 
horizontal structural member of the floor in Zones VE or V1-V30 or 
the top of the floor in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/
A1-A30, AR/A, and AR/AO.
    6. A manufactured home or a travel trailer, as described in the 
II.C.6. If the manufactured home or travel trailer is in a special 
flood hazard area, it must be anchored in the following manner at 
the time of the loss:
    a. By over-the-top or frame ties to ground anchors; or
    b. In accordance with the manufacturer's specifications; or
    c. In compliance with the community's floodplain management 
requirements unless it has been continuously insured by the NFIP at 
the same described location since September 30, 1982.
    7. The following items of property which are insured under 
Coverage A only:
    a. Awnings and canopies;
    b. Blinds;
    c. Built-in dishwashers;
    d. Built-in microwave ovens;
    e. Carpet permanently installed over unfinished flooring;
    f. Central air conditioners;
    g. Elevator equipment;
    h. Fire sprinkler systems;
    i. Walk-in freezers;
    j. Furnaces and radiators;
    k. Garbage disposal units;
    l. Hot water heaters, including solar water heaters;
    m. Light fixtures;
    n. Outdoor antennas and aerials fastened to buildings;
    o. Permanently installed cupboards, bookcases, cabinets, 
paneling, and wallpaper;
    p. Plumbing fixtures;
    q. Pumps and machinery for operating pumps;
    r. Ranges, cooking stoves, and ovens;
    s. Refrigerators; and
    t. Wall mirrors, permanently installed.
    8. Items of property below the lowest elevated floor of an 
elevated post-FIRM building located in Zones A1-A30, AE, AH, AR, AR/
A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement 
regardless of the zone. Coverage is limited to the following:
    a. Any of the following items, if installed in their functioning 
locations and, if necessary for operation, connected to a power 
source:
    (1) Central air conditioners;
    (2) Cisterns and the water in them;
    (3) Drywall for walls and ceilings in a basement and the cost of 
labor to nail it, unfinished and unfloated and not taped, to the 
framing;
    (4) Electrical junction and circuit breaker boxes;
    (5) Electrical outlets and switches;
    (6) Elevators, dumbwaiters and related equipment, except for 
related equipment installed below the base flood elevation after 
September 30, 1987;
    (7) Fuel tanks and the fuel in them;
    (8) Furnaces and hot water heaters;
    (9) Heat pumps;
    (10) Nonflammable insulation in a basement;
    (11) Pumps and tanks used in solar energy systems;
    (12) Stairways and staircases attached to the building, not 
separated from it by elevated walkways;
    (13) Sump pumps;
    (14) Water softeners and the chemicals in them, water filters, 
and faucets installed as an integral part of the plumbing system;
    (15) Well water tanks and pumps;
    (16) Required utility connections for any item in this list; and
    (17) Footings, foundations, posts, pilings, piers, or other 
foundation walls and anchorage systems required to support a 
building.
    b. Clean-up.

B. Coverage B--Personal Property

    1. If you have purchased personal property coverage, we insure 
against direct physical loss by or from flood to personal property 
inside a building at the described location, if:
    a. The property is owned by you or your household family 
members; and
    b. At your option, the property is owned by guests or servants.
    2. Personal property is also insured for a period of 45 days at 
another location as set forth in III.C.2.b, Property Removed to 
Safety.
    3. Personal property in a building that is not fully enclosed 
must be secured to prevent flotation out of the building. If the 
personal property does float out during a flood, it will be 
conclusively presumed that it was not reasonably secured. In that 
case, there is no coverage for such property.
    4. Coverage for personal property includes the following 
property, subject to B.1 above, which is insured under Coverage B 
only:
    a. Air conditioning units, portable or window type;
    b. Carpets, not permanently installed, over unfinished flooring;
    c. Carpets over finished flooring;
    d. Clothes washers and dryers;
    e. ``Cook-out'' grills;
    f. Food freezers, other than walk-in, and food in any freezer; 
and
    g. Portable microwave ovens and portable dishwashers.
    5. Coverage for items of property below the lowest elevated 
floor of an elevated post-FIRM building located in Zones A1-A30, AE, 
AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a 
basement regardless of the zone, is limited to the following items, 
if installed in their functioning locations and, if necessary for 
operation, connected to a power source:
    a. Air conditioning units, portable or window type;
    b. Clothes washers and dryers; and
    c. Food freezers, other than walk-in, and food in any freezer.
    6. If you are a tenant and have insured personal property under 
Coverage B in this policy, we will cover such property, including 
your cooking stove or range and refrigerator. The policy will also 
cover improvements made or acquired solely at your expense in the 
dwelling or apartment in which you reside, but for not more than 10 
percent of the limit of liability shown for personal property on the 
Declarations Page. Use of this insurance is at your option but 
reduces the personal property limit of liability.
    7. If you are the owner of a unit and have insured personal 
property under Coverage B in this policy, we will also cover your 
interior walls, floor, and ceiling (not otherwise insured under a 
flood insurance policy purchased by your condominium association) 
for not more than 10 percent of the limit of liability shown for 
personal property on the Declarations Page. Use of this insurance is 
at your option but reduces the personal property limit of liability.
    8. Special Limits. We will pay no more than $2,500 for any one 
loss to one or more of the following kinds of personal property:
    a. Artwork, photographs, collectibles, or memorabilia, including 
but not limited to, porcelain or other figures, and sports cards;
    b. Rare books or autographed items;
    c. Jewelry, watches, precious and semi-precious stones, or 
articles of gold, silver, or platinum;
    d. Furs or any article containing fur that represents its 
principal value; or
    e. Personal property used in any business.
    9. We will pay only for the functional value of antiques.

C. Coverage C--Other Coverages

1. Debris Removal

    a. We will pay the expense to remove non-owned debris that is on 
or in insured property and debris of insured property anywhere.
    b. If you or a member of your household perform the removal 
work, the value of your work will be based on the Federal minimum 
wage.
    c. This coverage does not increase the Coverage A or Coverage B 
limit of liability.

2. Loss Avoidance Measures

a. Sandbags, Supplies, and Labor

    (1) We will pay up to $1,000 for costs you incur to protect the 
insured building from a flood or imminent danger of flood, for the 
following:
    (a) Your reasonable expenses to buy:

[[Page 43962]]

    (i) Sandbags, including sand to fill them;
    (ii) Fill for temporary levees;
    (iii) Pumps; and
    (iv) Plastic sheeting and lumber used in connection with these 
items.
    (b) The value of work, at the Federal minimum wage, that you or 
a member of your household perform.
    (2) This coverage for Sandbags, Supplies, and Labor only applies 
if damage to insured property by or from flood is imminent and the 
threat of flood damage is apparent enough to lead a person of common 
prudence to anticipate flood damage. One of the following must also 
occur:
    (a) A general and temporary condition of flooding in the area 
near the described location must occur, even if the flood does not 
reach the building; or
    (b) A legally authorized official must issue an evacuation order 
or other civil order for the community in which the building is 
located calling for measures to preserve life and property from the 
peril of flood.
    This coverage does not increase the Coverage A or Coverage B 
limit of liability.

b. Property Removed to Safety

    (1) We will pay up to $1,000 for the reasonable expenses you 
incur to move insured property to a place other than the described 
location that contains the property in order to protect it from 
flood or the imminent danger of flood. Reasonable expenses include 
the value of work, at the Federal minimum wage, you or a member of 
your household perform.
    (2) If you move insured property to a location other than the 
described location that contains the property in order to protect it 
from flood or the imminent danger of flood, we will cover such 
property while at that location for a period of 45 consecutive days 
from the date you begin to move it there. The personal property that 
is moved must be placed in a fully enclosed building or otherwise 
reasonably protected from the elements.
    (3) Any property removed, including a moveable home described in 
II.6.b and c, must be placed above ground level or outside of the 
special flood hazard area.
    (4) This coverage does not increase the Coverage A or Coverage B 
limit of liability.

3. Condominium Loss Assessments

    a. Subject to III.C.3.b below, if this policy insures a 
condominium unit, we will pay, up to the Coverage A limit of 
liability, your share of loss assessments charged against you by the 
condominium association in accordance with the condominium 
association's articles of association, declarations and your deed. 
The assessment must be made because of direct physical loss by or 
from flood during the policy term, to the unit or to the common 
elements of the NFIP insured condominium building in which this unit 
is located.
    b. We will not pay any loss assessment:
    (1) Charged against you and the condominium association by any 
governmental body;
    (2) That results from a deductible under the insurance purchased 
by the condominium association insuring common elements;
    (3) That results from a loss to personal property, including 
contents of a condominium building;
    (4) In which the total payment combined under all policies 
exceeds the maximum amount of coverage available under the Act for a 
single unit in a condominium building where the unit is insured 
under both a Dwelling Policy and a RCBAP; or
    (5) On any item of damage that has already been paid under a 
RCBAP where a single unit in a condominium building is insured by 
both a Dwelling Policy and a RCBAP.
    c. Condominium Loss Assessment coverage does not increase the 
Coverage A Limit of Liability and is subject to the maximum coverage 
limits available for a single-family dwelling under the Act, payable 
between all policies issued and covering the unit, under the Act.

D. Coverage D--Increased Cost of Compliance

1. General

    This policy pays you to comply with a State or local floodplain 
management law or ordinance affecting repair or reconstruction of a 
building suffering flood damage. Compliance activities eligible for 
payment are: elevation, floodproofing, relocation, or demolition (or 
any combination of these activities) of your building. Eligible 
floodproofing activities are limited to:
    a. Non-residential buildings.
    b. Residential buildings 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

    We will pay you up to $30,000 under this Coverage D--Increased 
Cost of Compliance, which only applies to policies with building 
coverage (Coverage A). Our payment of claims under Coverage D is in 
addition to the amount of 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

    a. A building insured under Coverage A--Building Property 
sustaining a loss caused by a flood as defined by this policy must:
    (1) Be a ``repetitive loss building.'' A repetitive loss 
building is one that meets the following conditions:
    (a) The building is insured by a contract of flood insurance 
issued under the NFIP.
    (b) The building has suffered flood damage on two occasions 
during a 10-year period which ends on the date of the second loss.
    (c) The cost to repair the flood damage, on average, equaled or 
exceeded 25 percent of the market value of the building at the time 
of each flood loss.
    (d) In addition to the current claim, the NFIP must have paid 
the previous qualifying claim, and the State or community must have 
a cumulative, substantial damage provision or repetitive loss 
provision in its floodplain management law or ordinance being 
enforced against the building; or
    (2) Be a building that has had flood damage in which the cost to 
repair equals or exceeds 50 percent of the market value of the 
building at the time of the flood. The State or community must have 
a substantial damage provision in its floodplain management law or 
ordinance being enforced against the building.
    b. This Coverage D pays you to comply with State or local 
floodplain management laws or ordinances that meet the minimum 
standards of the National Flood Insurance Program found in the Code 
of Federal Regulations at 44 CFR 60.3. We pay for compliance 
activities that exceed those standards under these conditions:
    (1) 3.a.1 above.
    (2) Elevation or floodproofing in any risk zone to preliminary 
or advisory base flood elevations provided by FEMA which the State 
or local government has adopted and is enforcing for flood-damaged 
buildings in such areas. (This includes compliance activities in B, 
C, X, or D zones which are being changed to zones with base flood 
elevations. This also includes compliance activities in zones where 
base flood elevations are being increased, and a flood-damaged 
building must comply with the higher advisory base flood elevation.) 
Increased Cost of Compliance coverage does not apply to situations 
in B, C, X, or D zones where the community has derived its own 
elevations and is enforcing elevation or floodproofing requirements 
for flood-damaged buildings to elevations derived solely by the 
community.
    (3) Elevation or floodproofing above the base flood elevation to 
meet State or local ``free-board'' requirements, i.e., that a 
building must be elevated above the base flood elevation.
    c. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States 
and communities must require the elevation or floodproofing of 
buildings in unnumbered A zones to the base flood elevation where 
elevation data is obtained from a Federal, State, or other source. 
Such compliance activities are eligible for Coverage D.
    d. Coverage D will pay for the incremental cost, after 
demolition or relocation, of elevating or floodproofing a building 
during its rebuilding at the same or another site to meet State or 
local floodplain management laws or ordinances, subject to Coverage 
D Exclusion 5.g below.
    e. Coverage D will pay to bring a flood-damaged building into 
compliance with State or local floodplain management laws or 
ordinances even if the building had received a variance before the 
present loss from the applicable floodplain management requirements.

4. Conditions

    a. When a building insured under Coverage A--Building Property 
sustains a loss caused by a flood, our payment for the loss under 
this Coverage D will be for the increased cost to elevate, 
floodproof, relocate, or demolish (or any combination of these 
activities) caused by the enforcement of current State or local 
floodplain management ordinances or laws. Our payment for eligible 
demolition

[[Page 43963]]

activities will be for the cost to demolish and clear the site of 
the building debris or a portion thereof caused by the enforcement 
of current State or local floodplain management ordinances or laws. 
Eligible activities for the cost of clearing the site will include 
those necessary to discontinue utility service to the site and 
ensure proper abandonment of on-site utilities.
    b. When the building is repaired or rebuilt, it must be intended 
for the same occupancy as the present building unless otherwise 
required by current floodplain management ordinances or laws.

5. Exclusions

    Under this Coverage D (Increased Cost of Compliance), we will 
not pay for:
    a. The cost to comply with any floodplain management law or 
ordinance in communities participating in the Emergency Program.
    b. The cost associated with enforcement of any ordinance or law 
that requires any insured or others to test for, monitor, clean up, 
remove, contain, treat, detoxify or neutralize, or in any way 
respond to, or assess the effects of pollutants.
    c. The loss in value to any insured building due to the 
requirements of any ordinance or law.
    d. The loss in residual value of the undamaged portion of a 
building demolished as a consequence of enforcement of any State or 
local floodplain management law or ordinance.
    e. Any Increased Cost of Compliance under this Coverage D:
    (1) Until the building is elevated, floodproofed, demolished, or 
relocated on the same or to another premises; and
    (2) Unless the building is elevated, floodproofed, demolished, 
or relocated as soon as reasonably possible after the loss, not to 
exceed two years.
    f. Any code upgrade requirements, e.g., plumbing or electrical 
wiring, not specifically related to the State or local floodplain 
management law or ordinance.
    g. Any compliance activities needed to bring additions or 
improvements made after the loss occurred into compliance with State 
or local floodplain management laws or ordinances.
    h. Loss due to any ordinance or law that you were required to 
comply with before the current loss.
    i. Any rebuilding activity to standards that do not meet the 
NFIP's minimum requirements. This includes any situation where the 
insured has received from the State or community a variance in 
connection with the current flood loss to rebuild the property to an 
elevation below the base flood elevation.
    j. Increased Cost of Compliance for a garage or carport.
    k. Any building insured under an NFIP Group Flood Insurance 
Policy.
    l. Assessments made by a condominium association on individual 
condominium unit owners to pay increased costs of repairing commonly 
owned buildings after a flood in compliance with State or local 
floodplain management ordinances or laws.

6. Other Provisions

    a. Increased Cost of Compliance coverage will not be included in 
the calculation to determine whether coverage meets the 80 percent 
insurance-to-value requirement for replacement cost coverage as set 
forth in Art. VII.R (``Loss Settlement'') of this policy.
    b. All other conditions and provisions of this policy apply.

IV. Property Not Insured

    We do not insure any of the following:
    1. Personal property not inside a building.
    2. A building, and personal property in it, located entirely in, 
on, or over water or seaward of mean high tide if it was constructed 
or substantially improved after September 30, 1982.
    3. Open structures, including a building used as a boathouse or 
any structure or building into which boats are floated, and personal 
property located in, on, or over water.
    4. Recreational vehicles other than travel trailers described in 
the Definitions section (see II.B.6.c) whether affixed to a 
permanent foundation or on wheels.
    5. Self-propelled vehicles or machines, including their parts 
and equipment. However, we do cover self-propelled vehicles or 
machines not licensed for use on public roads that are:
    a. Used mainly to service the described location; or
    b. Designed and used to assist handicapped persons, while the 
vehicles or machines are inside a building at the described 
location.
    6. Land, land values, lawns, trees, shrubs, plants, growing 
crops, or animals.
    7. Accounts, bills, coins, currency, deeds, evidences of debt, 
medals, money, scrip, stored value cards, postage stamps, 
securities, bullion, manuscripts, or other valuable papers.
    8. Underground structures and equipment, including wells, septic 
tanks, and septic systems.
    9. Those portions of walks, walkways, decks, driveways, patios 
and other surfaces, all whether protected by a roof or not, located 
outside the perimeter, exterior walls of the insured building or the 
building in which the insured unit is located.
    10. Containers, including related equipment, such as, but not 
limited to, tanks containing gases or liquids.
    11. Buildings or units and all their contents if more than 49 
percent of the actual cash value of the building is below ground, 
unless the lowest level is at or above the base flood elevation and 
is below ground by reason of earth having been used as insulation 
material in conjunction with energy efficient building techniques.
    12. Fences, retaining walls, seawalls, bulkheads, wharves, 
piers, bridges, and docks.
    13. Aircraft or watercraft, or their furnishings and equipment.
    14. Hot tubs and spas that are not bathroom fixtures, and 
swimming pools, and their equipment, such as, but not limited to, 
heaters, filters, pumps, and pipes, wherever located.
    15. Property not eligible for flood insurance pursuant to the 
provisions of the Coastal Barrier Resources Act and the Coastal 
Barrier Improvement Act and amendments to these acts.
    16. Personal property you own in common with other unit owners 
comprising the membership of a condominium association.

V. Exclusions

    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;
    2. Loss of access to the insured property or described location;
    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 construction, demolition, remodeling, renovation, or 
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
    7. Any other economic loss you suffer.
    B. Flood in Progress. If this policy became effective as of the 
time of a loan closing, as provided by 44 CFR 61.11(b), we will not 
pay for a loss caused by a flood that is a continuation of a flood 
that existed prior to coverage becoming effective. In all other 
circumstances, we will not pay for a loss caused by a flood that is 
a continuation of a flood that existed on or before the day you 
submitted the application for coverage under this policy and the 
full amount due. We will determine the date of application using 44 
CFR 61.11(f).
    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;
    2. Landslide;
    3. Land subsidence;
    4. Sinkholes;
    5. Destabilization or movement of land that results from 
accumulation of water in subsurface land area; or
    6. Gradual erosion.
    We do, however, pay for losses from mudflow and land subsidence 
as a result of erosion that are specifically insured under our 
definition of flood (see II.B.1.c and II.B.2).
    D. We do not insure for direct physical loss caused directly or 
indirectly by any of the following:
    1. The pressure or weight of ice;
    2. Freezing or thawing;
    3. Rain, snow, sleet, hail, or water spray;
    4. Water, moisture, mildew, or mold damage that results 
primarily from any condition:
    a. Substantially confined to the dwelling; or
    b. That is within your control, including but not limited to:
    (1) Design, structural, or mechanical defects;

[[Page 43964]]

    (2) Failure, stoppage, or breakage of water or sewer lines, 
drains, pumps, fixtures, or equipment; or
    (3) Failure to inspect and maintain the property after a flood 
recedes;
    5. Water or water-borne material that:
    a. Backs up through sewers or drains;
    b. Discharges or overflows from a sump, sump pump, or related 
equipment; or
    c. Seeps or leaks on or through the insured property;

unless there is a flood in the area and the flood is the proximate 
cause of the sewer or drain backup, sump pump discharge or overflow, 
or the seepage of water;
    6. The pressure or weight of water unless there is a flood in 
the area 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 direct physical loss by or from flood to power, heating, or 
cooling equipment on the described location;
    8. Theft, fire, explosion, wind, or windstorm;
    9. Anything you or any member of your household do or conspire 
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 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 required by law or ordinance.

VI. Deductibles

    A. When a loss is insured 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.
    C. The deductible does NOT apply to:
    1. III.C.2. Loss Avoidance Measures;
    2. III.C.3. Condominium Loss Assessments; or
    3. III.D. Increased Cost of Compliance.

VII. General Conditions

A. Pair and Set Clause

    In case of loss to an article that is part of a pair or set, we 
will have the option of paying you:
    1. An amount equal to the cost of replacing the lost, damaged, 
or destroyed article, minus its depreciation; or
    2. 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.

B. Other Insurance

    1. If a loss insured by this policy is also insured by other 
insurance that includes flood coverage not issued under the Act, we 
will not pay more than the amount of insurance you are entitled to 
for lost, damaged, or destroyed property insured under this policy 
subject to the following:
    a. We 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 VII.B.1.b or c 
immediately below applies.
    b. If the other policy has a provision stating that it is excess 
insurance, this policy will be primary.
    c. This policy will be primary (but subject to its own 
deductible) up to the deductible in the other flood policy (except 
another policy as described in VII.B.1.b above). 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.
    2. If there is other insurance issued under the Act in the name 
of your condominium association covering the same property insured 
by this policy, then this policy will be in excess over the other 
insurance, except where a condominium loss assessment to the unit 
owner results from a loss sustained by the condominium association 
that was not reimbursed under a flood insurance policy written in 
the name of the association under the Act because the building was 
not, at the time of loss, insured for an amount equal to the lesser 
of:
    a. 80 percent or more of its full replacement cost; or
    b. The maximum amount of insurance permitted under the Act.
    The combined coverage payment under the other NFIP insurance and 
this policy cannot exceed the maximum coverage available under the 
Act, of $250,000 per single unit.

C. Amendments, Waivers, Assignment

    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 we take under the terms of this policy 
constitutes a waiver of any of our rights. You may assign this 
policy in writing when you transfer title of your property to 
someone else except under these conditions:
    a. When this policy insures only personal property; or
    b. When this policy insures a building under construction.

D. Insufficient Premium or Rating Information

    1. Applicability. The following provisions apply to all 
instances where the premium paid on this policy is insufficient or 
where the rating information is insufficient, such as where an 
Elevation Certificate is not provided.
    2. Reforming the Policy with Reduced Coverage. Except as 
otherwise provided in VII.D.1, if the premium we received from you 
was not sufficient to buy the kinds and amounts of coverage you 
requested, we will provide only the kinds and amounts of coverage 
that can be purchased for the premium payment we received.
    a. For the purpose of determining whether your premium payment 
is sufficient to buy the kinds and amounts of coverage you 
requested, we will first deduct the costs of all applicable fees and 
surcharges.
    b. If the amount paid, after deducting the costs of all 
applicable fees and surcharges, is not sufficient to buy any amount 
of coverage, your payment will be refunded. Unless the policy is 
reformed to increase the coverage amount to the amount originally 
requested pursuant to VII.D.3, this policy will be cancelled, and no 
claims will be paid under this policy.
    c. Coverage limits on the reformed policy will be based upon the 
amount of premium submitted per type of coverage, but will not 
exceed the amount originally requested.
    3. Discovery of Insufficient Premium or Rating Information. If 
we discover that your premium payment was not sufficient to buy the 
requested amount of coverage, the policy will be reformed as 
described in VII.D.2. You have the option of increasing the amount 
of coverage resulting from this reformation to the amount you 
requested as follows:
    a. Insufficient Premium. If we discover that your premium 
payment was not sufficient to buy the requested amount of coverage, 
we will send you, and any mortgagee or trustee known to us, 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 it is discovered that the 
initial amount charged to you for any fees or surcharges is 
incorrect, the difference will be added or deducted, as applicable, 
to the total amount in this bill.
    (1) If you or the mortgagee or trustee pays the additional 
premium amount due within 30 days from the date of our bill, we 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 you or the mortgagee or trustee do not pay the additional 
amount due within 30 days of the date of our bill, any flood 
insurance claim will be settled based on the reduced amount of 
coverage.
    (3) As applicable, you have the option of paying all or part of 
the amount due out of a claim payment based on the originally 
requested amount of coverage.
    b. Insufficient Rating Information. If we determine that the 
rating information we have is insufficient and prevents us from 
calculating the additional premium, we will ask you to send the 
required information. You must submit the information within 60 days 
of our request.
    (1) If we receive the information within 60 days of our request, 
we will determine the amount of additional premium for the current 
policy term, and follow the procedure in VII.D.3.a above.
    (2) If we do not receive the information within 60 days of our 
request, no claims will be paid until the requested information is

[[Page 43965]]

provided. Coverage will be limited to the amount of coverage that 
can be purchased for the payments we received, as determined when 
the requested information is provided.
    4. Coverage Increases. If we do not receive the amounts 
requested in VII.D.3.a or the additional information requested in 
VII.D.3.b by the date it is due, the amount of coverage under this 
policy can only be increased by endorsement subject to the 
appropriate waiting period. However, no coverage increases will be 
allowed until you have provided the information requested in 
VII.D.3.b.
    5. Falsifying Information. However, if we find that you or your 
agent intentionally did not tell us, or falsified any important fact 
or circumstance or did anything fraudulent relating to this 
insurance, the provisions of VIII.A apply.

E. Policy Renewal

    1. This policy will expire at 12:01 a.m. on the last day of the 
policy term.
    2. We must receive the payment of the appropriate renewal 
premium within 30 days of the expiration date.
    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 incorrect, incomplete, or illegible 
address, which delayed its delivery to you before the due date for 
the renewal premium, then we will follow these 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 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.

F. Conditions Suspending or Restricting Insurance

    We are not liable for loss that occurs while there is a hazard 
that is increased by any means within your control or knowledge.

G. Requirements in Case of Loss

    In case of a flood loss to insured property, you must:
    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 insured property during 
the term 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 insured 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 G.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.

H. Our Options After a Loss

    Options we may, in our sole discretion, exercise after loss 
include the following:
    1. At such reasonable times and places that we may designate, 
you must:
    a. Show us or our representative the damaged property;
    b. Submit to examination under oath, while not in the presence 
of another insured, and sign the same; and
    c. Permit us to examine and make extracts and copies of:
    (1) Any policies of property insurance insuring you against loss 
and the deed establishing your ownership of the insured real 
property;
    (2) Condominium association documents including the Declarations 
of the condominium, its Articles of Association or Incorporation, 
Bylaws, rules and regulations, and other relevant documents if you 
are a unit owner in a condominium building; and
    (3) All books of accounts, bills, invoices and other vouchers, 
or certified copies pertaining to the damaged property if the 
originals are lost.
    2. We may request, in writing, that you furnish us 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 to us; and
    e. Evidence that prior flood damage has been repaired.
    3. If we give you written notice within 30 days after we receive 
your signed, sworn proof of loss, we may:
    a. 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
    b. Take all or any part of the damaged property at the value 
that we agree upon or its appraised value.

I. No Benefit to Bailee

    No person or organization, other than you, having custody of 
insured property will benefit from this insurance.

J. Loss Payment

    1. We will adjust all losses with you. We will pay you unless 
some other person or entity is named in the policy or is legally 
entitled to receive payment. Loss will be payable 60 days after we 
receive your proof of loss (or within 90 days after the insurance 
adjuster files the adjuster's report signed and sworn to by you in 
lieu of a proof of loss) and:
    a. We reach an agreement with you;
    b. There is an entry of a final judgment; or
    c. There is a filing of an appraisal award with us, as provided 
in VII.M.
    2. If we reject your proof of loss in whole or in part you may:
    a. Accept our denial of your claim;
    b. Exercise your rights under this policy; or
    c. File an amended proof of loss as long as it is filed within 
60 days of the date of the loss.

K. Abandonment

    You may not abandon to us damaged or undamaged property insured 
under this policy.

L. Salvage

    We may permit you to keep damaged property insured under this 
policy after a loss, and we will reduce the amount of the loss 
proceeds payable to you under the policy by the value of the 
salvage.

M. Appraisal

    If you and we fail to agree on the actual cash value or, if 
applicable, 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 insured property is

[[Page 43966]]

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
    2. Bear the other expenses of the appraisal and umpire equally.

N. Mortgage Clause

    1. The word ``mortgagee'' includes trustee.
    2. Any loss payable under Coverage A--Building Property will be 
paid to any mortgagee of whom we have actual notice, as well as any 
other mortgagee or loss payee determined to exist at the time of 
loss, and you, 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.
    3. If we deny your claim, that denial will not apply to a valid 
claim of the mortgagee, if the mortgagee:
    a. Notifies us of any change in the ownership or occupancy, or 
substantial change in risk of which the mortgagee is aware;
    b. Pays any premium due under this policy on demand if you have 
neglected to pay the premium; and
    c. Submits a signed, sworn proof of loss within 60 days after 
receiving notice from us of your failure to do so.
    4. All of the terms of this policy apply to the mortgagee.
    5. The mortgagee has the right to receive loss payment even if 
the mortgagee has started foreclosure or similar action on the 
building.
    6. 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.
    7. 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.

O. Suit Against Us

    You may not sue us to recover money under this policy unless you 
have complied with all the requirements of the policy. If you do 
sue, you must start the suit within one year after the date of the 
written denial of all or part of the claim, and you 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 you may have under this policy 
and to any dispute that you may have arising out of the handling of 
any claim under the policy.

P. Subrogation

    Whenever we make a payment for a loss under this policy, we are 
subrogated to your right to recover for that loss from any other 
person. That means that your right to recover for a loss that was 
partly or totally caused by someone else is automatically 
transferred to us, to the extent that we have paid you for the loss. 
We may require you to acknowledge this transfer in writing. After 
the loss, you may not give up our right to recover this money or do 
anything that would prevent us from recovering it. If you make any 
claim against any person who caused your loss and recover any money, 
you must pay us back first before you may keep any of that money.

Q. Continuous Lake Flooding

    1. If an 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 an insured 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;
    c. Not to apply for any flood insurance under the Act for 
property at the described location;
    d. Not to seek a premium refund for current or prior terms.
    If the policy term ends before the insured building has been 
flooded continuously for 90 days, the provisions of this paragraph 
Q.1 will apply when the insured building suffers a covered loss 
before the policy term ends.
    2. If your insured building is subject to continuous lake 
flooding from a closed basin lake, you may elect to file a claim 
under either paragraph Q.1 above or Q.2 (A ``closed basin lake'' is 
a natural lake from which water leaves primarily through evaporation 
and whose surface area now exceeds or has exceeded one 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 paragraph Q.2, we will pay your claim as 
if the building is a total loss even though it has not been 
continuously inundated for 90 days, subject to the following 
conditions:
    a. Lake floodwaters must damage or imminently threaten to damage 
your building.
    b. Before approval of your claim, you must:
    (1) Agree to a claim payment that reflects your buying back the 
salvage on a negotiated basis; and
    (2) 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 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 paragraph Q.2. 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
    (3) Comply with paragraphs Q.1.a through Q.1.d above.
    c. Within 90 days of approval of your claim, you must move your 
building to a new location outside the ASC. FEMA will give you an 
additional 30 days to move if you show there is sufficient reason to 
extend the time.
    d. Before the final payment of your claim, you must acquire an 
elevation certificate and a floodplain development permit from the 
local floodplain administrator for the new location of your 
building.
    e. Before the approval of your claim, the community having 
jurisdiction over your 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 in paragraph 
Q.2.b 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 Q.2.b 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 non-profit 
land trust organization receives the property as a donation, that 
organization must maintain the property as deed-restricted, 
consistent with the provisions of paragraph Q2.b above.
    f. Before the approval of your claim, the affected State must 
take all action set forth in FEMA's ``Policy Guidance for Closed 
Basin Lakes.''
    g. You must have NFIP flood insurance coverage continuously in 
effect from a date established by FEMA until you file a claim under 
paragraph Q.2. If a subsequent owner buys NFIP insurance that goes 
into effect within 60 days of the date of transfer of title,

[[Page 43967]]

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 under this paragraph Q.2, we 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 in-
creased coverage in the amount suggested by your insurer as an 
inflation adjustment.
    h. This paragraph Q.2 will be in effect for a community when the 
FEMA Regional Administrator for the affected region provides to the 
community, in writing, the following:
    (1) Confirmation that the community and the State are in 
compliance with the conditions in paragraphs Q.2.e and Q.2.f above; 
and
    (2) The date by which you must have flood insurance in effect.

R. Loss Settlement

1. Introduction

    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 paragraphs a-c below.
    a. Replacement Cost Loss Settlement, described in R.2 below, 
applies to a single-family dwelling provided:
    (1) It is your principal residence; and
    (2) At the time of loss, the amount of insurance in this policy 
that applies to the dwelling is 80 percent or more of its full 
replacement cost immediately before the loss, or is the maximum 
amount of insurance available under the NFIP.
    b. Special Loss Settlement, described in R.3 below, applies to a 
single-family dwelling that is a manufactured or mobile home or a 
travel trailer.
    c. Actual Cash Value Loss Settlement applies to a single-family 
dwelling not subject to replacement cost or special loss settlement, 
and to the property listed in R.4 below.

2. Replacement Cost Loss Settlement

    The following loss settlement conditions apply to a single-
family dwelling described in R.1.a above:
    a. We 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 your 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.
    b. If the dwelling is rebuilt at a new location, the cost 
described above is limited to the cost that would have been incurred 
if the dwelling had been rebuilt at its former location.
    c. 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 under 
R.2.a above or R.4.a.2 below unless and until actual repair or 
replacement is completed.
    d. You may disregard the replacement cost conditions above and 
make claim under this policy for loss to dwellings on an actual cash 
value basis. You may then make claim for any additional liability 
according to R.2.a, b, and c above, provided you notify us of your 
intent to do so within 180 days after the date of loss.
    e. If the community in which your dwelling is located has been 
converted from the Emergency Program to the Regular Program during 
the current policy term, then we will consider the maximum amount of 
available NFIP insurance to be the amount that was available at the 
beginning of the current policy term.

3. Special Loss Settlement

    a. The following loss settlement conditions apply to a single-
family dwelling that:
    (1) is a manufactured or mobile home or a travel trailer, as 
defined in II.C.6.b and c;
    (2) 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
    (3) is your principal residence as specified in R.1.a.1 above.
    b. If such a dwelling is totally destroyed or damaged to such an 
extent that, in our judgment, it is not economically feasible to 
repair, at least to its pre-damage condition, we will, at our 
discretion pay the least of the following amounts:
    (1) The lesser of the replacement cost of the dwelling or 1.5 
times the actual cash value; or
    (2) The building limit of liability shown on your Declarations 
Page.
    c. If such a dwelling is partially damaged and, in our judgment, 
it is economically feasible to repair it to its pre-damage 
condition, we will settle the loss according to the Replacement Cost 
conditions in R.2 above.

4. Actual Cash Value Loss Settlement

    The types of property noted below are subject to actual cash 
value (or in the case of R.4.a.2., below, proportional) loss 
settlement.
    a. 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. In that case, we will pay the 
greater of the following amounts, but not more than the amount of 
insurance that applies to that dwelling:
    (1) The actual cash value, as defined in II.C.2, of the damaged 
part of the dwelling; or
    (2) 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.
    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 equipment.
    h. Any property insured 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.

5. Amount of Insurance Required

    To determine the amount of insurance required for a dwelling 
immediately before the loss, we 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 listed in R.5.a above, 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.
    Note: The Coverage D--Increased Cost of Compliance limit of 
liability is not included in the determination of the amount of 
insurance required.

VIII. Policy Nullification, Cancellation, and Non-Renewal

A. Policy Nullification for Fraud, Misrepresentation, or Making 
False Statements

    1. With respect to all insureds under this policy, this policy 
is void and has no legal force and effect if at any time, before or 
after a loss, you or any other insured or your agent have, with 
respect to this policy or any other NFIP insurance:
    a. Concealed or misrepresented any material fact or 
circumstance;
    b. Engaged in fraudulent conduct; or
    c. Made false statements.
    2. Policies voided under A.1 cannot be renewed or replaced by a 
new NFIP policy.
    3. Policies are void as of the date the acts described in A.1 
above were committed.
    4. Fines, civil penalties, and imprisonment under applicable 
Federal laws may also apply to the acts of fraud or concealment 
described above.

B. Policy Nullification for Reasons Other Than Fraud

    1. This policy is void from its inception, and has no legal 
force or effect, if:
    a. The property listed on the application is located in a 
community that was not participating in the NFIP on this policy's 
inception date and did not join or reenter the program during the 
policy term and before the loss occurred;

[[Page 43968]]

    b. The property listed on the application is otherwise not 
eligible for coverage under the NFIP at the time of the initial 
application;
    c. You never had an insurable interest in the property listed on 
the application;
    d. You provided an agent with an application and payment, but 
the payment did not clear; or
    e. We receive notice from you, prior to the policy effective 
date, that you have determined not to take the policy and you are 
not subject to a requirement to obtain and maintain flood insurance 
pursuant to any statute, regulation, or contract.
    2. In such cases, you will be entitled to a full refund of all 
premium, fees, and surcharges received. However, if a claim was paid 
for a policy that is void, the claim payment must be returned to 
FEMA or offset from the premiums to be refunded before the refund 
will be processed.

C. Cancellation of the Policy by You

    1. You may cancel this policy in accordance with the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.
    2. If you cancel this policy, you may be entitled to a full or 
partial refund of premium, surcharges, or fees under the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.

D. Cancellation of the Policy by Us

    1. Cancellation for Underpayment of Amounts Owed on Policy. This 
policy will be cancelled, pursuant to VII.D.2, if it is determined 
that the premium amount you paid is not sufficient to buy any amount 
of coverage, and you do not pay the additional amount of premium 
owed to increase the coverage to the originally requested amount 
within the required time period.
    2. Cancellation Due to Lack of an Insurable Interest.
    a. If you no longer have an insurable interest in the insured 
property, we will cancel this policy. You will cease to have an 
insurable interest if:
    (1) For building coverage, the building was sold, destroyed, or 
removed.
    (2) For contents coverage, the contents were sold or transferred 
ownership, or the contents were completely removed from the 
described location.
    b. If your policy is cancelled for this reason, you may be 
entitled to a partial refund of premium under the applicable rules 
and regulations of the NFIP.
    3. Cancellation of Duplicate Policies
    a. Except as allowed under Article I.G, your property may not be 
insured by more than one NFIP policy, and payment for damages to 
your property will only be made under one policy.
    b. Except as allowed under Article I.G, if the property is 
insured by more than one NFIP policy, we will cancel all but one of 
the policies. The policy, or policies, will be selected for 
cancellation in accordance with 44 CFR 62.5 and the applicable rules 
and guidance of the NFIP.
    c. If this policy is cancelled pursuant to VIII.D.4.b, you may 
be entitled to a full or partial refund of premium, surcharges, or 
fees under the terms and conditions of this policy and the 
applicable rules and regulations of the NFIP.
    4. Cancellation Due to Physical Alteration of Property
    a. If the insured building has been physically altered in such a 
manner that it is no longer eligible for flood insurance coverage, 
we will cancel this policy.
    b. If your policy is cancelled for this reason, you may be 
entitled to a partial refund of premium under the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.

E. Non-Renewal of the Policy by Us

    Your policy will not be renewed if:
    1. The community where your insured property is located is 
suspended or stops participating in the NFIP;
    2. Your building is otherwise ineligible for flood insurance 
under the Act;
    3. You have failed to provide the information we requested for 
the purpose of rating the policy within the required deadline.

IX. Liberalization Clause

    If we make a change that broadens your coverage under this 
edition of our policy, but does not require any additional premium, 
then that change will automatically apply to your insurance as 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.

X. What Law Governs

    This policy and all disputes arising from the insurer's policy 
issuance, policy administration, or the handling of any claim under 
the policy are governed exclusively by the flood insurance 
regulations issued by FEMA, the National Flood Insurance Act of 
1968, as amended (42 U.S.C. 4001, et seq.), and Federal common law.
    In Witness Whereof, we have signed this policy below and hereby 
enter into this Insurance Agreement.

Administrator, Federal Insurance and Mitigation Administration

0
14. Revise Appendix A(2) to Part 61 to read as follows:

Appendix A(2) to Part 61

    Federal Emergency Management Agency, Federal Insurance and 
Mitigation Administration

Standard Flood Insurance Policy

General Property Form

    Please read the policy carefully. The flood insurance provided 
is subject to limitations, restrictions, and exclusions.

I. Agreement

    A. Coverage Under This Policy
    1. Except as provided in I.A.2, this policy provides coverage 
for multifamily buildings (residential buildings designed for use by 
5 or more families that are not condominium buildings), non-
residential buildings, and their contents.
    2. There is no coverage for a residential condominium building 
in a regular program community, except for personal property 
coverage for a unit in a condominium building.
    B. The Federal Emergency Management Agency (FEMA) provides flood 
insurance under the terms of the National Flood Insurance Act of 
1968 and its amendments, and Title 44 of the Code of Federal 
Regulations.
    C. We will pay you for direct physical loss by or from flood to 
your insured property if you:
    1. Have paid the full amount due (including applicable premiums, 
surcharges, and fees);
    2. Comply with all terms and conditions of this policy; and
    3. Have furnished accurate information and statements.
    D. We have the right to review the information you give us at 
any time and revise your policy based on our review.
    E. This policy insures only one building. If you own more than 
one building, coverage will apply to the single building 
specifically described in the Flood Insurance Application.
    F. Multiple policies with building coverage cannot be issued to 
insure a single building to one insured or to different insureds, 
even if issued through different NFIP insurers. Payment for damages 
may only be made under a single policy for building damages under 
Coverage A--Building Property.

II. Definitions

    A. In this policy, ``you'' and ``your'' refer to the named 
insured(s) shown on the Declarations Page of this policy. Insured(s) 
also 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.
    B. Flood, as used in this flood insurance policy, means:
    1. A general and temporary condition of partial or complete 
inundation of two or more acres of normally dry land area or of two 
or more properties (one of which is your property) from:
    a. Overflow of inland or tidal waters;
    b. Unusual and rapid accumulation or runoff of surface waters 
from any source;
    c. Mudflow.
    2. Collapse or subsidence of land along the shore of a lake or 
similar body of water as a result of erosion or undermining caused 
by waves or currents of water exceeding anticipated cyclical levels 
that result in a flood as defined in B.1.a above.
    C. The following are the other key definitions we use in this 
policy:
    1. Act. The National Flood Insurance Act of 1968 and any 
amendments to it.
    2. Actual Cash Value. The cost to replace an insured item of 
property at the time of loss, less the value of its physical 
depreciation.
    3. Application. The statement made and signed by you or your 
agent in applying for this policy. The application gives information 
we use to determine the

[[Page 43969]]

eligibility of the risk, the kind of policy to be issued, and the 
correct premium payment. The application is part of this flood 
insurance policy.
    4. Base Flood. A flood having a one percent chance of being 
equaled or exceeded in any given year.
    5. Basement. Any area of a building, including any sunken room 
or sunken portion of a room, having its floor below ground level on 
all sides.
    6. Building
    a. A structure with two or more outside rigid walls and a fully 
secured roof that is affixed to a permanent site;
    b. A manufactured home, also known as a mobile home, is a 
structure built on a permanent chassis, transported to its site in 
one or more sections, and affixed to a permanent foundation; or
    c. A travel trailer without wheels, built on a chassis and 
affixed to a permanent foundation, that is regulated under the 
community's floodplain management and building ordinances or laws.
    Building does not mean a gas or liquid storage tank, shipping 
container, or a recreational vehicle, park trailer, or other similar 
vehicle, except as described in C.6.c above.
    7. Cancellation. The ending of the insurance coverage provided 
by this policy before the expiration date.
    8. Condominium. That form of ownership of one or more buildings 
in which each unit owner has an undivided interest in common 
elements.
    9. Condominium Association. The entity made up of the unit 
owners responsible for the maintenance and operation of:
    a. Common elements owned in undivided shares by unit owners; and
    b. Other buildings in which the unit owners have use rights 
where membership in the entity is a required condition of unit 
ownership.
    10. Condominium Building. A type of building for which the form 
of ownership is one in which each unit owner has an undivided 
interest in common elements of the building.
    11. Declarations Page. A computer-generated summary of 
information you provided in your 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.
    12. Deductible. The fixed amount of an insured loss that is your 
responsibility and that is incurred by you before any amounts are 
paid for the insured loss under this policy.
    13. Described Location. The location where the insured 
building(s) or personal property are found. The described location 
is shown on the Declarations Page.
    14. Direct Physical Loss By or From Flood. Loss or damage to 
insured property, directly caused by a flood. There must be evidence 
of physical changes to the property.
    15. 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.
    16. Emergency Program. The initial phase of a community's 
participation in the National Flood Insurance Program. During this 
phase, only limited amounts of insurance are available under the Act 
and the regulations prescribed pursuant to the Act.
    17. Federal Policy Fee. A flat rate charge you must pay on each 
new or renewal policy to defray certain administrative expenses 
incurred in carrying out the National Flood Insurance Program.
    18. Improvements. Fixtures, alterations, installations, or 
additions comprising a part of the dwelling or apartment in which 
you reside.
    19. Mudflow. A river of liquid and flowing mud on the surface of 
normally dry land areas, 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.
    20. National Flood Insurance Program (NFIP). 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.
    21. Policy. 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.
    22. Pollutants. Substances that include, but are not limited to, 
any solid, liquid, gaseous, or thermal irritant or contaminant, 
including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and 
waste. ``Waste'' includes, but is not limited to, materials to be 
recycled, reconditioned, or reclaimed.
    23. Post-FIRM Building. 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 Surcharge. 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.
    25. Regular Program. 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 and the regulations prescribed 
pursuant to the Act.
    26. Residential Condominium Building. A condominium building, 
containing one or more family units and in which at least 75 percent 
of the floor area is residential.
    27. Special Flood Hazard Area (SFHA). An area having special 
flood or mudflow, and/or flood-related erosion hazards, and shown on 
a Flood Hazard Boundary Map or Flood Insurance 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.
    28. Stock means 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 insured under Section IV. Property Not Insured, 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.
    29. Unit. A single-family residential or non-residential space 
you own in a condominium building.
    30. Valued Policy. A policy in which the insured and the insurer 
agree on the value of the property insured, that value being payable 
in the event of a total loss. The Standard Flood Insurance Policy is 
not a valued policy.

III. Property Insured

A. Coverage A--Building Property

    We insure against direct physical loss by or from flood to:
    1. The building described on the Declarations Page at the 
described location. 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. Building property located at another location for a period of 
45 days at another 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 means of a rigid exterior wall, a solid load-bearing 
interior wall, a stairway, an elevated walkway, or a roof. At your 
option, additions and extensions connected by any of these methods 
may be separately insured. Additions 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 
insured under Coverage A only:
    a. Awnings and canopies;
    b. Blinds;
    c. Carpet permanently installed over unfinished flooring;
    d. Central air conditioners;
    e. Elevator equipment;
    f. Fire extinguishing apparatus;
    g. Fire sprinkler systems;
    h. Walk-in freezers;
    i. Furnaces;
    j. Light fixtures;
    k. Outdoor antennas and aerials attached to buildings;
    l. Permanently installed cupboards, bookcases, paneling, and 
wallpaper;
    m. Pumps and machinery for operating pumps;
    n. Ventilating equipment;
    o. Wall mirrors, permanently installed; and
    p. In the units within the building, installed:

[[Page 43970]]

    (1) Built-in dishwashers;
    (2) Built-in microwave ovens;
    (3) Garbage disposal units;
    (4) Hot water heaters, including solar water heaters;
    (5) Kitchen cabinets;
    (6) Plumbing fixtures;
    (7) Radiators;
    (8) Ranges;
    (9) Refrigerators; and
    (10) Stoves.
    5. Materials and supplies to be used for construction, 
alteration, or repair of the insured building while the materials 
and supplies are stored in a fully enclosed building at the 
described location or on an adjacent property.
    6. A building under construction, alteration, or repair at the 
described location.
    a. If the structure is not yet walled or roofed as described in 
the definition for building (see II.B.6.a.) then coverage applies:
    (1) Only while such work is in progress; or
    (2) If such work is halted, only for a period of up to 90 
continuous days thereafter.
    b. However, coverage does not apply until the building is walled 
and roofed if the lowest floor, including the basement floor, of a 
non-elevated building or the lowest elevated floor of an elevated 
building is:
    (1) Below the base flood elevation in Zones AH, AE, A1-A30, AR, 
AR/AE, AR/AH, AR/A1-A30, AR/A, AR/AO; or
    (2) Below the base flood elevation adjusted to include the 
effect of wave action in Zones VE or V1-V30.
    The lowest floor level is based on the bottom of the lowest 
horizontal structural member of the floor in Zones VE or V1-V30 or 
the top of the floor in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/
A1-A30, AR/A, and AR/AO.
    7. A manufactured home or a travel trailer, as described in the 
II.C.6. If the manufactured home or travel trailer is in a special 
flood hazard area, it must be anchored in the following manner at 
the time of the loss:
    a. By over-the-top or frame ties to ground anchors; or
    b. In accordance with the manufacturer's specifications; or
    c. In compliance with the community's floodplain management 
requirements unless it has been continuously insured by the NFIP at 
the same described location since September 30, 1982.
    8. Items of property below the lowest elevated floor of an 
elevated post-FIRM building located in zones A1-A30, AE, AH, AR, AR/
A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement 
regardless of the zone. Coverage is limited to the following:
    a. Any of the following items, if installed in their functioning 
locations and, if necessary for operation, connected to a power 
source:
    (1) Central air conditioners;
    (2) Cisterns and the water in them;
    (3) Drywall for walls and ceilings in a basement and the cost of 
labor to nail it, unfinished and unfloated and not taped, to the 
framing;
    (4) Electrical junction and circuit breaker boxes;
    (5) Electrical outlets and switches;
    (6) Elevators, dumbwaiters, and related equipment, except for 
related equipment installed below the base flood elevation after 
September 30, 1987;
    (7) Fuel tanks and the fuel in them;
    (8) Furnaces and hot water heaters;
    (9) Heat pumps;
    (10) Nonflammable insulation in a basement;
    (11) Pumps and tanks used in solar energy systems;
    (12) Stairways and staircases attached to the building, not 
separated from it by elevated walkways;
    (13) Sump pumps;
    (14) Water softeners and the chemicals in them, water filters, 
and faucets installed as an integral part of the plumbing system;
    (15) Well water tanks and pumps;
    (16) Required utility connections for any item in this list; and
    (17) Footings, foundations, posts, pilings, piers, or other 
foundation walls and anchorage systems required to support a 
building.
    b. Clean-up.

B. Coverage B--Personal Property

    1. If you have purchased personal property coverage, we insure, 
subject to B.2-4 below, against direct physical loss by or from 
flood to personal property inside the fully enclosed insured 
building:
    a. Owned solely by you, or in the case of a condominium, owned 
solely by the condominium association and used exclusively in the 
conduct of the business affairs of the condominium association; or
    b. Owned in common by the unit owners of the condominium 
association.
    2. We also insure such personal property for 45 days while 
stored at a temporary location, as set forth in III.C.2.b, Property 
Removed to Safety.
    3. When this policy insures personal property, coverage will be 
either for household personal property or other than household 
personal property, while within the insured building, but not both.
    a. If this policy insures household personal property, it will 
insure household personal property usual to a living quarters, that:
    (1) Belongs to you, or a member of your household, or at your 
option:
    (a) Your domestic worker;
    (b) Your guest; or
    (2) You may be legally liable for.
    b. If this policy insures other than household personal 
property, it will insure your:
    (1) Furniture and fixtures;
    (2) Machinery and equipment;
    (3) Stock; and
    (4) Other personal property owned by you and used in your 
business, subject to IV, Property Not Insured.
    4. Coverage for personal property includes the following 
property, subject to B.1.a and B.1.b above, which is insured under 
Coverage B, only:
    a. Air conditioning units, portable or window type;
    b. Carpets, not permanently installed, over unfinished flooring;
    c. Carpets over finished flooring;
    d. Clothes washers and dryers;
    e. ``Cook-out'' grills;
    f. Food freezers, other than walk-in, and food in any freezer;
    g. Outdoor equipment and furniture stored inside the insured 
building;
    h. Ovens and the like; and
    i. Portable microwave ovens and portable dishwashers.
    5. Coverage for items of property below the lowest elevated 
floor of an elevated post-FIRM building located in Zones A1-A30, AE, 
AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a 
basement regardless of the zone, is limited to the following items, 
if installed in their functioning locations and, if necessary for 
operation, connected to a power source:
    a. Air conditioning units, portable or window type;
    b. Clothes washers and dryers; and
    c. Food freezers, other than walk-in, and food in any freezer.
    6. Special Limits. We will pay no more than $2,500 for any loss 
to one or more of the following kinds of personal property:
    a. Artwork, photographs, collectibles, or memorabilia, including 
but not limited to, porcelain or other figures, and sports cards.
    b. Rare books or autographed items.
    c. Jewelry, watches, precious and semi-precious stones, or 
articles of gold, silver, or platinum.
    d. Furs or any article containing fur that represents its 
principal value.
    7. We will pay only for the functional value of antiques.
    8. If you are a tenant, you may apply up to 10 percent of the 
Coverage B limit to improvements:
    a. Made a part of the building you occupy; and
    b. You acquired, or made at your expense, even though you cannot 
legally remove.
    This coverage does not increase the amount of insurance that 
applies to insured personal property.
    9. If you are a condominium unit owner, you may apply up to 10 
percent of the Coverage B limit to cover loss to interior:
    a. walls,
    b. floors, and
    c. ceilings,

that are not insured under a policy issued to the condominium 
association insuring the condominium building.
    This coverage does not increase the amount of insurance that 
applies to insured personal property.
    10. If you are a tenant, personal property must be inside the 
fully enclosed building.

C. Coverage C--Other Coverages

1. Debris Removal

    a. We will pay the expense to remove non-owned debris that is on 
or in insured property and debris of insured property anywhere.
    b. If you or a member of your household perform the removal 
work, the value of your work will be based on the Federal minimum 
wage.
    c. This coverage does not increase the Coverage A or Coverage B 
limit of liability.

2. Loss Avoidance Measures

    a. Sandbags, Supplies, and Labor
    (1) We will pay up to $1,000 for costs you incur to protect the 
insured building from a flood or imminent danger of flood, for the 
following:

[[Page 43971]]

    (a) Your reasonable expenses to buy:
    (i) Sandbags, including sand to fill them;
    (ii) Fill for temporary levees;
    (iii) Pumps; and
    (iv) Plastic sheeting and lumber used in connection with these 
items.
    (b) The value of work, at the Federal minimum wage, that you 
perform.
    (2) This coverage for Sandbags, Supplies, and Labor only applies 
if damage to insured property by or from flood is imminent and the 
threat of flood damage is apparent enough to lead a person of common 
prudence to anticipate flood damage. One of the following must also 
occur:
    (a) A general and temporary condition of flooding in the area 
near the described location must occur, even if the flood does not 
reach the building; or
    (b) A legally authorized official must issue an evacuation order 
or other civil order for the community in which the building is 
located calling for measures to preserve life and property from the 
peril of flood.
    This coverage does not increase the Coverage A or Coverage B 
limit of liability.
    b. Property Removed to Safety
    (1) We will pay up to $1,000 for the reasonable expenses you 
incur to move insured property to a place other than the described 
location that contains the property in order to protect it from 
flood or the imminent danger of flood. Reasonable expenses include 
the value of work, at the Federal minimum wage, you or a member of 
your household perform.
    (2) If you move insured property to a location other than the 
described location that contains the property in order to protect it 
from flood or the imminent danger of flood, we will cover such 
property while at that location for a period of 45 consecutive days 
from the date you begin to move it there. The personal property that 
is moved must be placed in a fully enclosed building or otherwise 
reasonably protected from the elements.
    (3) Any property removed, including a moveable home described in 
II.6, must be placed above ground level or outside of the special 
flood hazard area.
    (4) This coverage does not increase the Coverage A or Coverage B 
limit of liability.

3. Pollution Damage

    We will pay for damage caused by pollutants to insured property 
if the discharge, seepage, migration, release, or escape of the 
pollutants is caused by or results from flood. The most we will pay 
under this coverage is $10,000. This coverage does not increase the 
Coverage A or Coverage B limits of liability. Any payment under this 
provision when combined with all other payments for the same loss 
cannot exceed the replacement cost or actual cash value, as 
appropriate, of the insured property. This coverage does not include 
the testing for or monitoring of pollutants unless required by law 
or ordinance.

D. Coverage D--Increased Cost of Compliance

1. General

    This policy pays you to comply with a State or local floodplain 
management law or ordinance affecting repair or reconstruction of a 
building suffering flood damage. Compliance activities eligible for 
payment are: elevation, floodproofing, relocation, or demolition (or 
any combination of these activities) of your building. Eligible 
floodproofing activities are limited to:
    a. Non-residential buildings.
    b. Residential buildings with basements that satisfy FEMA's 
standards published in the Code of Federal Regulations [44 CFR 
60.6(b) or (c)].

2. Limits of Liability

    We will pay you up to $30,000 under this Coverage D (Increased 
Cost of Compliance), which only applies to policies with building 
coverage (Coverage A). Our payment of claims under Coverage D is in 
addition to the amount of coverage which you selected on the 
application and which appears on the Declarations Page. However, 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

    a. A building insured under Coverage A (Building Property) 
sustaining a loss caused by a flood as defined by this policy must:
    (1) Be a ``repetitive loss building.'' A repetitive loss 
building is one that meets the following conditions:
    (a) The building is insured by a contract of flood insurance 
issued under the NFIP.
    (b) The building has suffered flood damage on two occasions 
during a 10-year period which ends on the date of the second loss.
    (c) The cost to repair the flood damage, on average, equaled or 
exceeded 25 percent of the market value of the building at the time 
of each flood loss.
    (d) In addition to the current claim, the NFIP must have paid 
the previous qualifying claim, and the State or community must have 
a cumulative, substantial damage provision or repetitive loss 
provision in its floodplain management law or ordinance being 
enforced against the building; or
    (2) Be a building that has had flood damage in which the cost to 
repair equals or exceeds 50 percent of the market value of the 
building at the time of the flood. The State or community must have 
a substantial damage provision in its floodplain management law or 
ordinance being enforced against the building.
    b. This Coverage D pays you to comply with State or local 
floodplain management laws or ordinances that meet the minimum 
standards of the National Flood Insurance Program found in the Code 
of Federal Regulations at 44 CFR 60.3. We pay for compliance 
activities that exceed those standards under these conditions:
    (1) 3.a.1 above.
    (2) Elevation or floodproofing in any risk zone to preliminary 
or advisory base flood elevations provided by FEMA which the State 
or local government has adopted and is enforcing for flood-damaged 
buildings in such areas. (This includes compliance activities in B, 
C, X, or D zones which are being changed to zones with base flood 
elevations. This also includes compliance activities in zones where 
base flood elevations are being increased, and a flood-damaged 
building must comply with the higher advisory base flood elevation.) 
Increased Cost of Compliance coverage does not apply to situations 
in B, C, X, or D zones where the community has derived its own 
elevations and is enforcing elevation or floodproofing requirements 
for flood-damaged buildings to elevations derived solely by the 
community.
    (3) Elevation or floodproofing above the base flood elevation to 
meet State or local ``free-board'' requirements, i.e., that a 
building must be elevated above the base flood elevation.
    c. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States 
and communities must require the elevation or floodproofing of 
buildings in unnumbered A zones to the base flood elevation where 
elevation data is obtained from a Federal, State, or other source. 
Such compliance activities are also eligible for Coverage D.
    d. This coverage will pay for the incremental cost, after 
demolition or relocation, of elevating or floodproofing a building 
during its rebuilding at the same or another site to meet State or 
local floodplain management laws or ordinances, subject to the 
exclusion at III.D.5.g.
    e. This coverage will pay to bring a flood-damaged building into 
compliance with State or local floodplain management laws or 
ordinances even if the building had received a variance before the 
present loss from the applicable floodplain management requirements.

4. Conditions

    a. When a building insured under Coverage A--Building Property 
sustains a loss caused by a flood, our payment for the loss under 
this Coverage D will be for the increased cost to elevate, 
floodproof, relocate, or demolish (or any combination of these 
activities) caused by the enforcement of current State or local 
floodplain management ordinances or laws. Our payment for eligible 
demolition activities will be for the cost to demolish and clear the 
site of the building debris or a portion thereof caused by the 
enforcement of current State or local floodplain management 
ordinances or laws. Eligible activities for the cost of clearing the 
site will include those necessary to discontinue utility service to 
the site and ensure proper abandonment of on-site utilities.
    b. When the building is repaired or rebuilt, it must be intended 
for the same occupancy as the present building unless otherwise 
required by current floodplain management ordinances or laws.

5. Exclusions

    Under this Coverage D (Increased Cost of Compliance), we will 
not pay for:
    a. The cost to comply with any floodplain management law or 
ordinance in communities participating in the Emergency Program.
    b. The cost associated with enforcement of any ordinance or law 
that requires any insured or others to test for, monitor, clean up, 
remove, contain, treat, detoxify or neutralize, or in any way 
respond to, or assess the effects of pollutants.

[[Page 43972]]

    c. The loss in value to any insured building due to the 
requirements of any ordinance or law.
    d. The loss in residual value of the undamaged portion of a 
building demolished as a consequence of enforcement of any State or 
local floodplain management law or ordinance.
    e. Any Increased Cost of Compliance under this Coverage D:
    (1) Until the building is elevated, floodproofed, demolished, or 
relocated on the same or to another premises; and
    (2) Unless the building is elevated, floodproofed, demolished, 
or relocated as soon as reasonably possible after the loss, not to 
exceed two years.
    f. Any code upgrade requirements, e.g., plumbing or electrical 
wiring, not specifically related to the State or local floodplain 
management law or ordinance.
    g. Any compliance activities needed to bring additions or 
improvements made after the loss occurred into compliance with State 
or local floodplain management laws or ordinances.
    h. Loss due to any ordinance or law that you were required to 
comply with before the current loss.
    i. Any rebuilding activity to standards that do not meet the 
NFIP's minimum requirements. This includes any situation where the 
insured has received from the State or community a variance in 
connection with the current flood loss to rebuild the property to an 
elevation below the base flood elevation.
    j. Increased Cost of Compliance for a garage or carport.
    k. Any building insured under an NFIP Group Flood Insurance 
Policy.
    l. Assessments made by a condominium association on individual 
condominium unit owners to pay increased costs of repairing commonly 
owned buildings after a flood in compliance with State or local 
floodplain management ordinances or laws.

6. Other Provisions

    All other conditions and provisions of the policy apply.

IV. Property Not Insured

    We do not insure any of the following property:
    1. Personal property not inside the fully enclosed building.
    2. A building, and personal property in it, located entirely in, 
on, or over water or seaward of mean high tide if it was constructed 
or substantially improved after September 30, 1982.
    3. Open structures, including a building used as a boathouse or 
any structure or building into which boats are floated, and personal 
property located in, on, or over water.
    4. Recreational vehicles other than travel trailers described in 
the II.C.6.c, whether affixed to a permanent foundation or on 
wheels.
    5. Self-propelled vehicles or machines, including their parts 
and equipment. However, we do cover self-propelled vehicles or 
machines not licensed for use on public roads and are:
    a. Used mainly to service the described location; or
    b. Designed and used to assist handicapped persons, while the 
vehicles or machines are inside a building at the described 
location.
    6. Land, land values, lawns, trees, shrubs, plants, growing 
crops, or animals.
    7. Accounts, bills, coins, currency, deeds, evidences of debt, 
medals, money, scrip, stored value cards, postage stamps, 
securities, bullion, manuscripts, or other valuable papers.
    8. Underground structures and equipment, including wells, septic 
tanks, and septic systems.
    9. Those portions of walks, walkways, decks, driveways, patios, 
and other surfaces, all whether protected by a roof or not, located 
outside the perimeter, exterior walls of the insured building.
    10. Containers, including related equipment, such as, but not 
limited to, tanks containing gases or liquids.
    11. Buildings or units and all their contents if more than 49 
percent of the actual cash value of the building is below ground, 
unless the lowest level is at or above the base flood elevation and 
is below ground by reason of earth having been used as insulation 
material in conjunction with energy efficient building techniques.
    12. Fences, retaining walls, seawalls, bulkheads, wharves, 
piers, bridges, and docks.
    13. Aircraft or watercraft, or their furnishings and equipment.
    14. Hot tubs and spas that are not bathroom fixtures, and 
swimming pools, and their equipment, such as, but not limited to, 
heaters, filters, pumps, and pipes, wherever located.
    15. Property not eligible for flood insurance pursuant to the 
provisions of the Coastal Barrier Resources Act and the Coastal 
Barrier Improvement Act and amendments to these Acts.
    16. Personal property owned by or in the care, custody or 
control of a unit owner, except for property of the type and under 
the circumstances set forth under III. Coverage B--Personal Property 
of this policy.
    17. A residential condominium building located in a Regular 
Program community.

V. Exclusions

    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;
    2. Loss of access to the insured property or described location;
    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 construction, demolition, remodeling, renovation, or 
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
    7. Any other economic loss you suffer.
    B. Flood in Progress. If this policy became effective as of the 
time of a loan closing, as provided by 44 CFR 61.11(b), we will not 
pay for a loss caused by a flood that is a continuation of a flood 
that existed prior to coverage becoming effective. In all other 
circumstances, we will not pay for a loss caused by a flood that is 
a continuation of a flood that existed on or before the day you 
submitted the application for coverage under this policy and the 
correct premium. We will determine the date of application using 44 
CFR 611.11(f).
    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;
    2. Landslide;
    3. Land subsidence;
    4. Sinkholes;
    5. Destabilization or movement of land that results from 
accumulation of water in subsurface land areas; or
    6. Gradual erosion.
    We do, however, pay for losses from mudflow and land subsidence 
as a result of erosion that are specifically insured under our 
definition of flood (see II.B.1.c and II.B.2).
    D. We do not insure for direct physical loss caused directly or 
indirectly by:
    1. The pressure or weight of ice;
    2. Freezing or thawing;
    3. Rain, snow, sleet, hail, or water spray;
    4. Water, moisture, mildew, or mold damage that results 
primarily from any condition:
    a. Substantially confined to the insured building; or
    b. That is within your control including, but not limited to:
    (1) Design, structural, or mechanical defects;
    (2) Failures, stoppages, or breakage of water or sewer lines, 
drains, pumps, fixtures, or equipment; or
    (3) Failure to inspect and maintain the property after a flood 
recedes;
    5. Water or water-borne material that:
    a. Backs up through sewers or drains;
    b. Discharges or overflows from a sump, sump pump, or related 
equipment; or
    c. Seeps or leaks on or through the insured property;
    unless there is a flood in the area and the flood is the 
proximate cause of the sewer or drain backup, sump pump discharge or 
overflow, or the seepage of water;
    6. The pressure or weight of water unless there is a flood in 
the area 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 direct physical loss by or from flood to power, heating, or 
cooling equipment on the described location;
    8. Theft, fire, explosion, wind, or windstorm;
    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.

[[Page 43973]]

    E. We do not insure for loss to any building or personal 
property 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

    A. When a loss is insured 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.
    C. The deductible does NOT apply to:
    1. III.C.2. Loss Avoidance Measures; or
    2. III.D. Increased Cost of Compliance.

VII. General Conditions

A. Pair and Set Clause

    In case of loss to an article that is part of a pair or set, we 
will have the option of paying you:
    1. An amount equal to the cost of replacing the lost, damaged, 
or destroyed article, minus its depreciation; or
    2. 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.

B. Other Insurance

    1. If a loss insured by this policy is also insured by other 
insurance that includes flood coverage not issued under the Act, we 
will not pay more than the amount of insurance that you are entitled 
to for lost, damaged, or destroyed property insured under this 
policy subject to the following:
    a. We 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 VII.B.1.b or c below 
applies.
    b. If the other policy has a provision stating that it is excess 
insurance, this policy will be primary.
    c. This policy will be primary (but subject to its own 
deductible) up to the deductible in the other flood policy (except 
another policy as described in VII.B.1.b above). 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.
    2. Where this policy insures a condominium association and there 
is a National Flood Insurance Program flood insurance policy in the 
name of a unit owner that insures the same loss as this policy, then 
this policy will be primary.

C. Amendments, Waivers, Assignment

    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 that we take under the terms of this policy 
can constitute a waiver of any of our rights. You may assign this 
policy in writing when you transfer title of your property to 
someone else except under these conditions:
    1. When this policy insures only personal property; or
    2. When this policy insures a building under construction.

D. Insufficient Premium or Rating Information

    1. Applicability. The following provisions apply to all 
instances where the premium paid on this policy is insufficient or 
where the rating information is insufficient, such as where an 
Elevation Certificate is not provided.
    2. Reforming the Policy with Reduced Coverage. Except as 
otherwise provided in VII.D.1 and VII.D.4, if the premium we 
received from you was not sufficient to buy the kinds and amounts of 
coverage you requested, we will provide only the kinds and amounts 
of coverage that can be purchased for the premium payment we 
received.
    a. For the purpose of determining whether your premium payment 
is sufficient to buy the kinds and amounts of coverage you 
requested, we will first deduct the costs of all applicable fees and 
surcharges.
    b. If the amount paid, after deducting the costs of all 
applicable fees and surcharges, is not sufficient to buy any amount 
of coverage, your payment will be refunded. Unless the policy is 
reformed to increase the coverage amount to the amount originally 
requested pursuant to VII.D.3, this policy will be cancelled, and no 
claims will be paid under this policy.
    c. Coverage limits on the reformed policy will be based upon the 
amount of premium submitted per type of coverage, but will not 
exceed the amount originally requested.
    3. Discovery of Insufficient Premium or Rating Information. If 
we discover that your premium payment was not sufficient to buy the 
requested amount of coverage, the policy will be reformed as 
described in VII.D.2. You have the option of increasing the amount 
of coverage resulting from this reformation to the amount you 
requested as follows:
    a. Insufficient Premium. If we discover that your premium 
payment was not sufficient to buy the requested amount of coverage, 
we will send you, and any mortgagee or trustee known to us, 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 it is discovered that the 
initial amount charged to you for any fees or surcharges is 
incorrect, the difference will be added or deducted, as applicable, 
to the total amount in this bill.
    (1) If you or the mortgagee or trustee pay the additional amount 
due within 30 days from the date of our bill, we 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 you or the mortgagee or trustee do not pay the additional 
amount due within 30 days of the date of our bill, any flood 
insurance claim will be settled based on the reduced amount of 
coverage.
    (3) As applicable, you have the option of paying all or part of 
the amount due out of a claim payment based on the originally 
requested amount of coverage.
    b. Insufficient Rating Information. If we determine that the 
rating information we have is insufficient and prevents us from 
calculating the additional premium, we will ask you to send the 
required information. You must submit the information within 60 days 
of our request.
    (1) If we receive the information within 60 days of our request, 
we will determine the amount of additional premium for the current 
policy term and follow the procedure in VII.D.3.a above.
    (2) If we do not receive the information within 60 days of our 
request, no claims will be paid until the requested information is 
provided. Coverage will be limited to the amount of coverage that 
can be purchased for the payments we received, as determined when 
the requested information is provided.
    4. Coverage Increases. If we do not receive the amounts 
requested in VII.D.3.a or the additional information requested in 
VII.D.3.b by the date it is due, the amount of coverage under this 
policy can only be increased by endorsement subject to the 
appropriate waiting period. However, no coverage increases will be 
allowed until you have provided the information requested in 
VII.D.3.b is provided.
    5. Falsifying Information. However, if we find that you or your 
agent intentionally did not tell us, or falsified, any important 
fact or circumstance or did anything fraudulent relating to this 
insurance, the provisions of VIII.A apply.

E. Policy Renewal

    1. This policy will expire at 12:01 a.m. on the last day of the 
policy term.
    2. We must receive the payment of the appropriate renewal 
premium within 30 days of the expiration date.
    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 incorrect, incomplete, or illegible 
address, which delayed its delivery to you before the due date for 
the renewal premium, then we will follow these 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 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 as an

[[Page 43974]]

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 that we will provide to you, the rating information 
used to rate your most recent application for or renewal of 
insurance.

F. Conditions Suspending or Restricting Insurance

    We are not liable for loss that occurs while there is a hazard 
that is increased by any means within your control or knowledge.

G. Requirements in Case of Loss

    In case of a flood loss to insured property, you must:
    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 insured property during 
the term 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 insured 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 G.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.

H. Our Options After a Loss

    Options we may, in our sole discretion, exercise after loss 
include the following:
    1. At such reasonable times and places that we may designate, 
you must:
    a. Show us or our representative the damaged property;
    b. Submit to examination under oath, while not in the presence 
of another insured, and sign the same; and
    c. Permit us to examine and make extracts and copies of:
    (1) Any policies of property insurance insuring you against loss 
and the deed establishing your ownership of the insured real 
property;
    (2) Condominium association documents including the Declarations 
of the condominium, its Articles of Association or Incorporation, 
Bylaws, rules and regulations, and other relevant documents if you 
are a unit owner in a condominium building; and
    (3) All books of accounts, bills, invoices and other vouchers, 
or certified copies pertaining to the damaged property if the 
originals are lost.
    2. We may request, in writing, that you furnish us 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 to us; and
    e. Evidence that prior flood damage has been repaired.
    3. If we give you written notice within 30 days after we receive 
your signed, sworn proof of loss, we may:
    a. 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
    b. Take all or any part of the damaged property at the value 
that we agree upon or its appraised value.

I. No Benefit to Bailee

    No person or organization, other than you, having custody of 
insured property will benefit from this insurance.

J. Loss Payment

    1. We will adjust all losses with you. We will pay you unless 
some other person or entity is named in the policy or is legally 
entitled to receive payment. Loss will be payable 60 days after we 
receive your proof of loss (or within 90 days after the insurance 
adjuster files the adjuster's report signed and sworn to by you in 
lieu of a proof of loss) and:
    a. We reach an agreement with you;
    b. There is an entry of a final judgment; or
    c. There is a filing of an appraisal award with us, as provided 
in VII.M.
    2. If we reject your proof of loss in whole or in part you may:
    a. Accept our denial of your claim;
    b. Exercise your rights under this policy; or
    c. File an amended proof of loss as long as it is filed within 
60 days of the date of the loss.

K. Abandonment

    You may not abandon damaged or undamaged insured property to us.

L. Salvage

    We may permit you to keep damaged insured property after a loss, 
and we will reduce the amount of the loss proceeds payable to you 
under the policy by the value of the salvage.

M. Appraisal

    If you and we fail to agree on the actual cash value of the 
damaged property so 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.

N. Mortgage Clause

    1. The word ``mortgagee'' includes trustee.
    2. Any loss payable under Coverage A--Building Property will be 
paid to any mortgagee of whom we have actual notice, as well as any 
other mortgagee or loss payee determined to exist at the time of 
loss, and you, 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.
    3. If we deny your claim, that denial will not apply to a valid 
claim of the mortgagee, if the mortgagee:
    a. Notifies us of any change in the ownership or occupancy, or 
substantial change in risk of which the mortgagee is aware;
    b. Pays any premium due under this policy on demand if you have 
neglected to pay the premium; and
    c. Submits a signed, sworn proof of loss within 60 days after 
receiving notice from us of your failure to do so.
    4. All terms of this policy apply to the mortgagee.
    5. The mortgagee has the right to receive loss payment even if 
the mortgagee has started foreclosure or similar action on the 
building.
    6. 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.

[[Page 43975]]

    7. 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.

O. Suit Against Us

    You may not sue us to recover money under this policy unless you 
have complied with all the requirements of the policy. If you do 
sue, you must start the suit within one year of the date of the 
written denial of all or part of the claim, and you 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 you may have under this policy 
and to any dispute that you may have arising out of the handling of 
any claim under the policy.

P. Subrogation

    Whenever we make a payment for a loss under this policy, we are 
subrogated to your right to recover for that loss from any other 
person. That means that your right to recover for a loss that was 
partly or totally caused by someone else is automatically 
transferred to us, to the extent that we have paid you for the loss. 
We may require you to acknowledge this transfer in writing. After 
the loss, you may not give up our right to recover this money or do 
anything that would prevent us from recovering it. If you make any 
claim against any person who caused your loss and recover any money, 
you must pay us back first before you may keep any of that money.

Q. Continuous Lake Flood

    1. If an 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 an insured 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;
    c. Not to apply for any flood insurance under the Act for 
property at the described location;
    d. Not to seek a premium refund for current or prior terms.
    If the policy term ends before the insured building has been 
flooded continuously for 90 days, the provisions of this paragraph 
Q.1 will apply when the insured building suffers a covered loss 
before the policy term ends.
    2. If your insured building is subject to continuous lake 
flooding from a closed basin lake, you may elect to file a claim 
under either paragraph Q.1 above or Q.2 (A ``closed basin lake'' is 
a natural lake from which water leaves primarily through evaporation 
and whose surface area now exceeds or has exceeded one 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 paragraph Q.2, we will pay your claim as 
if the building is a total loss even though it has not been 
continuously inundated for 90 days, subject to the following 
conditions:
    a. Lake floodwaters must damage or imminently threaten to damage 
your building.
    b. Before approval of your claim, you must:
    (1) Agree to a claim payment that reflects your buying back the 
salvage on a negotiated basis; and
    (2) 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 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 paragraph Q.2. 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
    (3) Comply with paragraphs Q.1.a through Q.1.d above.
    c. Within 90 days of approval of your claim, you must move your 
building to a new location outside the ASC. FEMA will give you an 
additional 30 days to move if you show there is sufficient reason to 
extend the time.
    d. Before the final payment of your claim, you must acquire an 
elevation certificate and a floodplain development permit from the 
local floodplain administrator for the new location of your 
building.
    e. Before the approval of your claim, the community having 
jurisdiction over your 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 in paragraph 
Q.2.b 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 Q.2.b 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 non-profit 
land trust organization receives the property as a donation, that 
organization must maintain the property as deed-restricted, 
consistent with the provisions of paragraph Q2.b. above.
    f. Before the approval of your claim, the affected State must 
take all action set forth in FEMA's ``Policy Guidance for Closed 
Basin Lakes.''
    g. You must have NFIP flood insurance coverage continuously in 
effect from a date established by FEMA until you file a claim under 
paragraph Q.2. 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 under this paragraph Q.2, we 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 your insurer as an inflation adjustment.
    h. This paragraph Q.2 will be in effect for a community when the 
FEMA Regional Administrator for the affected region provides to the 
community, in writing, the following:
    (1) Confirmation that the community and the State are in 
compliance with the conditions in paragraphs Q.2.e and Q.2.f above; 
and
    (2) The date by which you must have flood insurance in effect.

R. Loss Settlement

    We will pay the least of the following amounts after application 
of the deductible:
    1. The applicable amount of insurance under this policy;
    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.

VIII. Policy Nullification, Cancellation, and Non-Renewal

A. Policy Nullification for Fraud, Misrepresentation, or Making 
False Statements

    1. With respect to all insureds under this policy, this policy 
is void and has no legal force and effect if at any time, before or 
after a loss, you or any other insured or your agent have, with 
respect to this policy or any other NFIP insurance:
    a. Concealed or misrepresented any material fact or 
circumstance;
    b. Engaged in fraudulent conduct; or
    c. Made false statements.
    2. Policies voided under A.1 cannot be renewed or replaced by a 
new NFIP policy.
    3. Policies are void as of the date the acts described in A.1 
above were committed.

[[Page 43976]]

    4. Fines, civil penalties, and imprisonment under applicable 
Federal laws may also apply to the acts of fraud or concealment 
described above.

B. Policy Nullification for Reasons Other Than Fraud

    1. This policy is void from its inception, and has no legal 
force or effect, if:
    a. The property listed on the application is located in a 
community that was not participating in the NFIP on this policy's 
inception date and did not join or reenter the program during the 
policy term and before the loss occurred;
    b. The property listed on the application is otherwise not 
eligible for coverage under the NFIP at the time of the initial 
application;
    c. You never had an insurable interest in the property listed on 
the application;
    d. You provided an agent with an application and payment, but 
the payment did not clear; or
    e. We receive notice from you, prior to the policy effective 
date, that you have determined not to take the policy and you are 
not subject to a requirement to obtain and maintain flood insurance 
pursuant to any statute, regulation, or contract.
    2. In such cases, you will be entitled to a full refund of all 
premium, fees, and surcharges received. However, if a claim was paid 
for a policy that is void, the claim payment must be returned to 
FEMA or offset from the premiums to be refunded before the refund 
will be processed.

C. Cancellation of the Policy by You

    1. You may cancel this policy in accordance with the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.
    2. If you cancel this policy, you may be entitled to a full or 
partial refund of premium, surcharges, or fees under the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.

D. Cancellation of the Policy by Us

    1. Cancellation for Underpayment of Amounts Owed on Policy. This 
policy will be cancelled, pursuant to VII.D.2, if it is determined 
that the premium amount you paid is not sufficient to buy any amount 
of coverage, and you do not pay the additional amount of premium 
owed to increase the coverage to the originally requested amount 
within the required time period.
    2. Cancellation Due to Lack of an Insurable Interest.
    a. If you no longer have an insurable interest in the insured 
property, we will cancel this policy. You will cease to have an 
insurable interest if:
    (1) For building coverage, the building was sold, destroyed, or 
removed.
    (2) For contents coverage, the contents were sold or transferred 
ownership, or the contents were completely removed from the 
described location.
    b. If your policy is cancelled for this reason, you may be 
entitled to a partial refund of premium under the applicable rules 
and regulations of the NFIP.
    3. Cancellation of Duplicate Policies.
    a. Your property may not be insured by more than one NFIP 
policy, and payment for damages to your property will only be made 
under one policy.
    b. If the property is insured by more than one NFIP policy, we 
will cancel all but one of the policies. The policy, or policies, 
will be selected for cancellation in accordance with 44 CFR 62.5 and 
the applicable rules and guidance of the NFIP.
    c. If this policy is cancelled pursuant to VIII.D.4.b, you may 
be entitled to a full or partial refund of premium, surcharges, or 
fees under the terms and conditions of this policy and the 
applicable rules and regulations of the NFIP.
    4. Cancellation Due to Physical Alteration of Property
    a. If the insured building has been physically altered in such a 
manner that it is no longer eligible for flood insurance coverage, 
we will cancel this policy.
    b. If your policy is cancelled for this reason, you may be 
entitled to a partial refund of premium under the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.

E. Non-Renewal of the Policy by Us

    Your policy will not be renewed if:
    1. The community where your insured property is located is 
suspended or stops participating in the NFIP;
    2. Your building is otherwise ineligible for flood insurance 
under the Act;
    3. You have failed to provide the information we requested for 
the purpose of rating the policy within the required deadline.

IX. Liberalization Clause

    If we make a change that broadens your coverage under this 
edition of our policy, but does not require any additional premium, 
then that change will automatically apply to your insurance as 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.

X. What Law Governs

    This policy and all disputes arising from the insurer's policy 
issuance, policy administration, or the handling of any claim under 
the policy are governed exclusively by the flood insurance 
regulations issued by FEMA, the National Flood Insurance Act of 
1968, as amended (42 U.S.C. 4001, et seq.), and Federal common law.
    In Witness Whereof, we have signed this policy below and hereby 
enter into this Insurance Agreement.

Administrator, Federal Insurance and Mitigation Administration

0
15. Revise Appendix A(3) to Part 61 to read as follows:

Appendix A(3) to Part 61

Federal Emergency Management Agency, Federal Insurance and Mitigation 
Administration

Standard Flood Insurance Policy

Residential Condominium Building Association Policy

    Please read the policy carefully. The flood insurance provided 
is subject to limitations, restrictions, and exclusions.

I. Agreement

    A. This policy insures only a residential condominium building 
in a regular program community. If the community reverts to 
emergency program status during the policy term and remains as an 
emergency program community at time of renewal, this policy cannot 
be renewed.
    B. The Federal Emergency Management Agency (FEMA) provides flood 
insurance under the terms of the National Flood Insurance Act of 
1968 and its amendments, and Title 44 of the Code of Federal 
Regulations.
    C. We will pay you for direct physical loss by or from flood to 
your insured property if you:
    1. Have paid the full amount due (including applicable premiums, 
surcharges, and fees);
    2. Comply with all terms and conditions of this policy; and
    3. Have furnished accurate information and statements.
    D. We have the right to review the information you give us at 
any time and revise your policy based on our review.
    E. This policy insures only one building. If you own more than 
one building, coverage will apply to the single building 
specifically described in the Flood Insurance Application.
    F. Subject to the exception in Section I.G below, multiple 
policies with building coverage cannot be issued to insure a single 
building to one insured or to different insureds, even if issued 
through different NFIP insurers. Payment for damages may only be 
made under a single policy for building damages under Coverage A--
Building Property.
    G. A Dwelling Form policy with building coverage may be issued 
to a unit owner in a condominium building that is also insured under 
a Residential Condominium Building Association Policy (RCBAP). 
However, no more than $250,000 may be paid in combined benefits for 
a single unit under the Dwelling Form and the RCBAP. We will only 
pay for damage once. Items of damage paid for under a RCBAP cannot 
also be claimed under the Dwelling Form policy.

II. Definitions

    A. In this policy, ``you'' and ``your'' refer to the named 
insured(s) shown on the Declarations Page of this policy. The named 
insured must also include the building owner if building coverage is 
purchased. 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 have an existing interest

[[Page 43977]]

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.
    B. Flood, as used in this flood insurance policy, means:
    1. A general and temporary condition of partial or complete 
inundation of two or more acres of normally dry land area or of two 
or more properties (one of which is your property) from:
    a. Overflow of inland or tidal waters;
    b. Unusual and rapid accumulation or runoff of surface waters 
from any source;
    c. Mudflow.
    2. Collapse or subsidence of land along the shore of a lake or 
similar body of water as a result of erosion or undermining caused 
by waves or currents of water exceeding anticipated cyclical levels 
which result in a flood as defined in B.1.a above.
    C. The following are the other key definitions we use in this 
policy:
    1. Act. The National Flood Insurance Act of 1968 and any 
amendments to it.
    2. Actual Cash Value. The cost to replace an insured item of 
property at the time of loss, less the value of its physical 
depreciation.
    3. Application. The statement made and signed by you or your 
agent in applying for this policy. The application gives information 
we use to determine the eligibility of the risk, the kind of policy 
to be issued, and the correct premium payment. The application is 
part of this flood insurance policy.
    4. Base Flood. A flood having a one percent chance of being 
equaled or exceeded in any given year.
    5. Basement. Any area of a building, including any sunken room 
or sunken portion of a room, having its floor below ground level on 
all sides.
    6. Building
    a. A structure with two or more outside rigid walls and a fully 
secured roof that is affixed to a permanent site;
    b. A manufactured home, also known as a mobile home, is a 
structure built on a permanent chassis, transported to its site in 
one or more sections, and affixed to a permanent foundation; or
    c. A travel trailer without wheels, built on a chassis and 
affixed to a permanent foundation, that is regulated under the 
community's floodplain management and building ordinances or laws.
    Building does not mean a gas or liquid storage tank, shipping 
container, or a recreational vehicle, park trailer, or other similar 
vehicle, except as described in C.6.c above.
    7. Cancellation. The ending of the insurance coverage provided 
by this policy before the expiration date.
    8. Condominium. That form of ownership of one or more buildings 
in which each unit owner has an undivided interest in common 
elements.
    9. Condominium Association. The entity made up of the unit 
owners responsible for the maintenance and operation of:
    a. Common elements owned in undivided shares by unit owners; and
    b. Other buildings in which the unit owners have use rights; 
where membership in the entity is a required condition of ownership.
    10. Condominium Building. A type of building for which the form 
of ownership is one in which each unit owner has an undivided 
interest in common elements of the building.
    11. Declarations Page. A computer-generated summary of 
information you provided in your 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.
    12. Deductible. The fixed amount of an insured loss that is your 
responsibility and that is incurred by you before any amounts are 
paid for the insured loss under this policy.
    13. Described Location. The location where the insured building 
or personal property are found. The described location is shown on 
the Declarations Page.
    14. Direct Physical Loss By or From Flood. Loss or damage to 
insured property, directly caused by a flood. There must be evidence 
of physical changes to the property.
    15. 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.
    16. Emergency Program. The initial phase of a community's 
participation in the National Flood Insurance Program. During this 
phase, only limited amounts of insurance are available under the Act 
and the regulations prescribed pursuant to the Act.
    17. Federal Policy Fee. A flat rate charge you must pay on each 
new or renewal policy to defray certain administrative expenses 
incurred in carrying out the National Flood Insurance Program.
    18. Improvements. Fixtures, alterations, installations, or 
additions comprising a part of the residential condominium building, 
including improvements in the units.
    19. Mudflow. A river of liquid and flowing mud on the surface of 
normally dry land areas, 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.
    20. National Flood Insurance Program (NFIP). 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.
    21. Policy. 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.
    22. Pollutants. Substances that include, but are not limited to, 
any solid, liquid, gaseous, or thermal irritant or contaminant, 
including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and 
waste. ``Waste'' includes, but is not limited to, materials to be 
recycled, reconditioned, or reclaimed.
    23. Post-FIRM Building. 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 Surcharge. 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.
    25. Regular Program. 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 and the regulations prescribed 
pursuant to the Act.
    26. Residential Condominium Building. A building, condominium, 
containing one or more family units and in which at least 75 percent 
of the floor area is residential.
    27. Special Flood Hazard Area (SFHA). An area having special 
flood or mudflow, and/or flood-related erosion hazards, and shown on 
a Flood Hazard Boundary Map or Flood Insurance 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.
    28. Unit. A single-family residential space in a residential 
condominium building.
    29. Valued Policy. A policy in which the insured and the insurer 
agree on the value of the property insured, that value being payable 
in the event of a total loss. The Standard Flood Insurance Policy is 
not a valued policy.

III. Property Insured

A. Coverage A--Building Property

    We insure against direct physical loss by or from flood to:
    1. The residential condominium building described on the 
Declarations Page at the described location, including all units 
within the building and the improvements within the units.
    2. We also insure such building property for a period of 45 days 
at another 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 means of a rigid exterior wall, a solid load-bearing 
interior wall, a stairway, an elevated walkway, or a roof. At your 
option, additions and extensions connected by any of these methods 
may be separately insured. Additions 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, including 
its units, which are insured under Coverage A only:
    a. Awnings and canopies;
    b. Blinds;
    c. Carpet permanently installed over unfinished flooring;

[[Page 43978]]

    d. Central air conditioners;
    e. Elevator equipment;
    f. Fire extinguishing apparatus;
    g. Fire sprinkler systems;
    h. Walk-in freezers;
    i. Furnaces;
    j. Light fixtures;
    k. Outdoor antennas and aerials fastened to buildings;
    l. Permanently installed cupboards, bookcases, paneling, and 
wallpaper;
    m. Pumps and machinery for operating pumps;
    n. Ventilating equipment;
    o. Wall mirrors, permanently installed; and
    p. In the units within the building, installed:
    (1) Built-in dishwashers;
    (2) Built-in microwave ovens;
    (3) Garbage disposal units;
    (4) Hot water heaters, including solar water heaters;
    (5) Kitchen cabinets;
    (6) Plumbing fixtures;
    (7) Radiators;
    (8) Ranges;
    (9) Refrigerators; and
    (10) Stoves.
    5. Materials and supplies to be used for construction, 
alteration or repair of the insured building while the materials and 
supplies are stored in a fully enclosed building at the described 
location or on an adjacent property.
    6. A building under construction, alteration, or repair at the 
described location.
    a. If the structure is not yet walled or roofed as described in 
the definition for building (see II.B.6.a.) then coverage applies:
    (1) Only while such work is in progress; or
    (2) If such work is halted, only for a period of up to 90 
continuous days thereafter.
    b. However, coverage does not apply until the building is walled 
and roofed if the lowest floor, including the basement floor, of a 
non-elevated building or the lowest elevated floor of an elevated 
building is:
    (1) Below the base flood elevation in Zones AH, AE, A1-30, AR, 
AR/AE, AR/AH, AR/A1-30, AR/A, AR/AO; or
    (2) Below the base flood elevation adjusted to include the 
effect of wave action in Zones VE or V1-30.
    The lowest floor level is based on the bottom of the lowest 
horizontal structural member of the floor in Zones VE or V1-V30 or 
top of the floor in Zones AH, AE, A1-A30, AR, AR/AE, AR/AH, AR/A1-
A30, AR/A, and AR/AO.
    7. A manufactured home or a travel trailer, as described in the 
II.C.6. If the manufactured home is in a special flood hazard area, 
it must be anchored in the following manner at the time of the loss:
    a. By over-the-top or frame ties to ground anchors; or
    b. In accordance with the manufacturer's specifications; or
    c. In compliance with the community's floodplain management 
requirements unless it has been continuously insured by the NFIP at 
the same described location since September 30, 1982.
    8. Items of property below the lowest elevated floor of an 
elevated post-FIRM building located in zones A1-A30, AE, AH, AR, AR/
A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a basement 
regardless of the zone. Coverage is limited to the following:
    a. Any of the following items, if installed in their functioning 
locations and, if necessary for operation, connected to a power 
source:
    (1) Central air conditioners;
    (2) Cisterns and the water in them;
    (3) Drywall for walls and ceilings in a basement and the cost of 
labor to nail it, unfinished and unfloated and not taped, to the 
framing;
    (4) Electrical junction and circuit breaker boxes;
    (5) Electrical outlets and switches;
    (6) Elevators, dumbwaiters, and related equipment, except for 
related equipment installed below the base flood elevation after 
September 30, 1987;
    (7) Fuel tanks and the fuel in them;
    (8) Furnaces and hot water heaters;
    (9) Heat pumps;
    (10) Nonflammable insulation in a basement;
    (11) Pumps and tanks used in solar energy systems;
    (12) Stairways and staircases attached to the building, not 
separated from it by elevated walkways;
    (13) Sump pumps;
    (14) Water softeners and the chemicals in them, water filters, 
and faucets installed as an integral part of the plumbing system;
    (15) Well water tanks and pumps;
    (16) Required utility connections for any item in this list; and
    (17) Footings, foundations, posts, pilings, piers, or other 
foundation walls and anchorage systems required to support a 
building.
    b. Clean-up.

B. Coverage B--Personal Property

    1. If you have purchased personal property coverage, we insure, 
subject to B.2 and B.3 below, against direct physical loss by or 
from flood to personal property that is inside the fully enclosed 
insured building and is:
    a. Owned by the unit owners of the condominium association in 
common, meaning property in which each unit owner has an undivided 
ownership interest; or
    b. Owned solely by the condominium association and used 
exclusively in the conduct of the business affairs of the 
condominium association.
    2. We also insure such personal property for 45 days while 
stored at a temporary location, as set forth in III.C.2.b, Property 
Removed to Safety.
    3. Coverage for personal property includes the following 
property, subject to B.1. above, which is insured under Coverage B 
only:
    a. Air conditioning units, portable or window type;
    b. Carpets, not permanently installed, over unfinished flooring;
    c. Carpets over finished flooring;
    d. Clothes washers and dryers;
    e. ``Cook-out'' grills;
    f. Food freezers, other than walk-in, and food in any freezer;
    g. Outdoor equipment and furniture stored inside the insured 
building;
    h. Ovens and the like; and
    i. Portable microwave ovens and portable dishwashers.
    4. Coverage for items of property in a building enclosure below 
the lowest elevated floor of an elevated post-FIRM building located 
in zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, 
or VE, or in a basement regardless of the zone, is limited to the 
following items, if installed in their functioning locations and, if 
necessary for operation, connected to a power source:
    a. Air conditioning units, portable or window type;
    b. Clothes washers and dryers; and
    c. Food freezers, other than walk-in, and food in any freezer.
    5. Special Limits. We will pay no more than $2,500 for any one 
loss to one or more of the following kinds of personal property:
    a. Artwork, photographs, collectibles, or memorabilia, including 
but not limited to, porcelain or other figures, and sports cards.
    b. Rare books or autographed items.
    c. Jewelry, watches, precious and semi-precious stones, or 
articles of gold, silver, or platinum.
    d. Furs or any article containing fur which represents its 
principal value.
    6. We will pay only for the functional value of antiques.

C. Coverage C--Other Coverages

1. Debris Removal

    a. We will pay the expense to remove non-owned debris that is on 
or in insured property and debris of insured property anywhere.
    b. If you or a member of your household perform the removal 
work, the value of your work will be based on the Federal minimum 
wage.
    c. This coverage does not increase the Coverage A or Coverage B 
limit of liability.

2. Loss Avoidance Measures

a. Sandbags, Supplies, and Labor

    (1) We will pay up to $1,000 for costs you incur to protect the 
insured building from a flood or imminent danger of flood, for the 
following:
    (a) Your reasonable expenses to buy:
    (i) Sandbags, including sand to fill them;
    (ii) Fill for temporary levees;
    (iii) Pumps; and
    (iv) Plastic sheeting and lumber used in connection with these 
items.
    (b) The value of work, at the Federal minimum wage, that you 
perform.
    (2) This coverage for Sandbags, Supplies, and Labor only applies 
if damage to insured property by or from flood is imminent and the 
threat of flood damage is apparent enough to lead a person of common 
prudence to anticipate flood damage. One of the following must also 
occur:
    (a) A general and temporary condition of flooding in the area 
near the described location must occur, even if the flood does not 
reach the building; or
    (b) A legally authorized official must issue an evacuation order 
or other civil order for the community in which the building is 
located calling for measures to preserve life and property from the 
peril of flood.

[[Page 43979]]

    This coverage does not increase the Coverage A or Coverage B 
limit of liability.

b. Property Removed to Safety

    (1) We will pay up to $1,000 for the reasonable expenses you 
incur to move insured property to a place other than the described 
location that contains the property in order to protect it from 
flood or the imminent danger of flood. Reasonable expenses include 
the value of work, at the Federal minimum wage, you or a member of 
your household perform.
    (2) If you move insured property to a location other than the 
described location that contains the property in order to protect it 
from flood or the imminent danger of flood, we will cover such 
property while at that location for a period of 45 consecutive days 
from the date you begin to move it there.
    (3) The personal property that is moved must be placed in a 
fully enclosed building or otherwise reasonably protected from the 
elements. Any property removed, including a moveable home described 
in II.6.b and c, must be placed above ground level or outside of the 
special flood hazard area.
    (4) This coverage does not increase the Coverage A or Coverage B 
limit of liability.

D. Coverage D--Increased Cost of Compliance

1. General

    This policy pays you to comply with a State or local floodplain 
management law or ordinance affecting repair or reconstruction of a 
building suffering flood damage. Compliance activities eligible for 
payment are: elevation, floodproofing, relocation, or demolition (or 
any combination of these activities) of your building. Eligible 
floodproofing activities are limited to:
    a. Non-residential buildings.
    b. Residential buildings 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

    We will pay you up to $30,000 under this Coverage D (Increased 
Cost of Compliance), which only applies to policies with building 
coverage (Coverage A). Our payment of claims under Coverage D is in 
addition to the amount of 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

    a. A building insured under Coverage A (Building Property) 
sustaining a loss caused by a flood as defined by this policy must:
    (1) Be a ``repetitive loss building.'' A repetitive loss 
building is one that meets the following conditions:
    (a) The building is insured by a contract of flood insurance 
issued under the NFIP.
    (b) The building has suffered flood damage on two occasions 
during a 10-year period which ends on the date of the second loss.
    (c) The cost to repair the flood damage, on average, equaled or 
exceeded 25 percent of the market value of the building at the time 
of each flood loss.
    (d) In addition to the current claim, the NFIP must have paid 
the previous qualifying claim, and the State or community must have 
a cumulative, substantial damage provision or repetitive loss 
provision in its floodplain management law or ordinance being 
enforced against the building; or
    (2) Be a building that has had flood damage in which the cost to 
repair equals or exceeds 50 percent of the market value of the 
building at the time of the flood. The State or community must have 
a substantial damage provision in its floodplain management law or 
ordinance being enforced against the building.
    b. This Coverage D pays you to comply with State or local 
floodplain management laws or ordinances that meet the minimum 
standards of the National Flood Insurance Program found in the Code 
of Federal Regulations at 44 CFR 60.3. We pay for compliance 
activities that exceed those standards under these conditions:
    (1) 3.a.1 above.
    (2) Elevation or floodproofing in any risk zone to preliminary 
or advisory base flood elevations provided by FEMA which the State 
or local government has adopted and is enforcing for flood-damaged 
buildings in such areas. (This includes compliance activities in B, 
C, X, or D zones which are being changed to zones with base flood 
elevations. This also includes compliance activities in zones where 
base flood elevations are being increased, and a flood-damaged 
building must comply with the higher advisory base flood elevation.) 
Increased Cost of Compliance coverage does not apply to situations 
in B, C, X, or D zones where the community has derived its own 
elevations and is enforcing elevation or floodproofing requirements 
for flood-damaged buildings to elevations derived solely by the 
community.
    (3) Elevation or floodproofing above the base flood elevation to 
meet State or local ``freeboard'' requirements, i.e., that a 
building must be elevated above the base flood elevation.
    c. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States 
and communities must require the elevation or floodproofing of 
buildings in unnumbered A zones to the base flood elevation where 
elevation data is obtained from a Federal, State, or other source. 
Such compliance activities are also eligible for Coverage D.
    d. Coverage D will pay for the incremental cost, after 
demolition or relocation, of elevating or floodproofing a building 
during its rebuilding at the same or another site to meet State or 
local floodplain management laws or ordinances, subject to Exclusion 
D.5.g below relating to improvements.
    e. Coverage D will pay to bring a flood-damaged building into 
compliance with State or local floodplain management laws or 
ordinances even if the building had received a variance before the 
present loss from the applicable floodplain management requirements.

4. Conditions

    a. When a building insured under Coverage A--Building Property 
sustains a loss caused by a flood, our payment for the loss under 
this Coverage D will be for the increased cost to elevate, 
floodproof, relocate, or demolish (or any combination of these 
activities) caused by the enforcement of current State or local 
floodplain management ordinances or laws. Our payment for eligible 
demolition activities will be for the cost to demolish and clear the 
site of the building debris or a portion thereof caused by the 
enforcement of current State or local floodplain management 
ordinances or laws. Eligible activities for the cost of clearing the 
site will include those necessary to discontinue utility service to 
the site and ensure proper abandonment of on-site utilities.
    b. When the building is repaired or rebuilt, it must be intended 
for the same occupancy as the present building unless otherwise 
required by current floodplain management ordinances or laws.

5. Exclusions

    Under this Coverage D (Increased Cost of Compliance) we will not 
pay for:
    a. The cost to comply with any floodplain management law or 
ordinance in communities participating in the Emergency Program.
    b. The cost associated with enforcement of any ordinance or law 
that requires any insured or others to test for, monitor, clean up, 
remove, contain, treat, detoxify or neutralize, or in any way 
respond to, or assess the effects of pollutants.
    c. The loss in value to any insured building due to the 
requirements of any ordinance or law.
    d. The loss in residual value of the undamaged portion of a 
building demolished as a consequence of enforcement of any State or 
local floodplain management law or ordinance.
    e. Any Increased Cost of Compliance under this Coverage D:
    (1) Until the building is elevated, floodproofed, demolished, or 
relocated on the same or to another premises; and
    (2) Unless the building is elevated, floodproofed, demolished, 
or relocated as soon as reasonably possible after the loss, not to 
exceed two years.
    f. Any code upgrade requirements, e.g., plumbing or electrical 
wiring, not specifically related to the State or local floodplain 
management law or ordinance.
    g. Any compliance activities needed to bring additions or 
improvements made after the loss occurred into compliance with State 
or local floodplain management laws or ordinances.
    h. Loss due to any ordinance or law that you were required to 
comply with before the current loss.
    i. Any rebuilding activity to standards that do not meet the 
NFIP's minimum requirements. This includes any situation where the 
insured has received from the State or community a variance in 
connection with the current flood loss to rebuild the property to an 
elevation below the base flood elevation.
    j. Increased Cost of Compliance for a garage or carport.
    k. Any building insured under an NFIP Group Flood Insurance 
Policy.

[[Page 43980]]

    l. Assessments made by a condominium association on individual 
condominium unit owners to pay increased costs of repairing commonly 
owned buildings after a flood in compliance with State or local 
floodplain management ordinances or laws.

6. Other Provisions

    a. Increased Cost of Compliance coverage will not be included in 
the calculation to determine whether coverage meets the coinsurance 
requirement for replacement cost coverage under Art. VIII.R. (``Loss 
Settlement'').
    b. All other conditions and provisions of this policy apply.

IV. Property Not Insured

    We do not insure any of the following:
    1. Personal property not inside a building.
    2. A building, and personal property in it, located entirely in, 
on, or over water or seaward of mean high tide if it was constructed 
or substantially improved after September 30, 1982.
    3. Open structures, including a building used as a boathouse or 
any structure or building into which boats are floated, and personal 
property located in, on, or over water.
    4. Recreational vehicles other than travel trailers described in 
the Definitions section (see II.C.6.c) whether affixed to a 
permanent foundation or on wheels.
    5. Self-propelled vehicles or machines, including their parts 
and equipment. However, we do cover self-propelled vehicles or 
machines not licensed for use on public roads that are:
    a. Used mainly to service the described location; or
    b. Designed and used to assist handicapped persons, while the 
vehicles or machines are inside a building at the described 
location.
    6. Land, land values, lawns, trees, shrubs, plants, growing 
crops, or animals.
    7. Accounts, bills, coins, currency, deeds, evidences of debt, 
medals, money, scrip, stored value cards, postage stamps, 
securities, bullion, manuscripts, or other valuable papers.
    8. Underground structures and equipment, including wells, septic 
tanks, and septic systems.
    9. Those portions of walks, walkways, decks, driveways, patios, 
and other surfaces, all whether protected by a roof or not, located 
outside the perimeter, exterior walls of the insured building.
    10. Containers, including related equipment, such as, but not 
limited to, tanks containing gases or liquids.
    11. Buildings and all their contents if more than 49 percent of 
the actual cash value of the building is below ground, unless the 
lowest level is at or above the base flood elevation and is below 
ground by reason of earth having been used as insulation material in 
conjunction with energy efficient building techniques.
    12. Fences, retaining walls, seawalls, bulkheads, wharves, 
piers, bridges, and docks.
    13. Aircraft or watercraft, or their furnishings and equipment.
    14. Hot tubs and spas that are not bathroom fixtures, and 
swimming pools, and their equipment such as, but not limited to, 
heaters, filters, pumps, and pipes, wherever located.
    15. Property not eligible for flood insurance pursuant to the 
provisions of the Coastal Barrier Resources Act and the Coastal 
Barrier Improvements Act of 1990 and amendments to these Acts.
    16. Personal property used in connection with any incidental 
commercial occupancy or use of the building.

V. Exclusions

    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;
    2. Loss of access to the insured property or described location;
    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 construction, demolition, remodeling, renovation, or 
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
    7. Any other economic loss you suffer.
    B. Flood in Progress. If this policy became effective as of the 
time of a loan closing, as provided by 44 CFR 61.11(b), we will not 
pay for a loss caused by a flood that is a continuation of a flood 
that existed prior to coverage becoming effective. In all other 
circumstances, we will not pay for a loss caused by a flood that is 
a continuation of a flood that existed on or before the day you 
submitted the application for coverage under this policy and the 
correct premium. We will determine the date of application using 44 
CFR 611.11(f).
    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;
    2. Landslide;
    3. Land subsidence;
    4. Sinkholes;
    5. Destabilization or movement of land that results from 
accumulation of water in subsurface land areas; or
    6. Gradual erosion.
    We do, however, pay for losses from mudflow and land subsidence 
as a result of erosion that are specifically covered under our 
definition of flood (see II.B.1.c and II.B.2).
    D. We do not insure for direct physical loss caused directly or 
indirectly by:
    1. The pressure or weight of ice;
    2. Freezing or thawing;
    3. Rain, snow, sleet, hail, or water spray;
    4. Water, moisture, mildew, or mold damage that results 
primarily from any condition:
    a. Substantially confined to the insured building; or
    b. That is within your control including, but not limited to:
    (1) Design, structural, or mechanical defects;
    (2) Failures, stoppages, or breakage of water or sewer lines, 
drains, pumps, fixtures, or equipment; or
    (3) Failure to inspect and maintain the property after a flood 
recedes;
    5. Water or water-borne material that:
    a. Backs up through sewers or drains;
    b. Discharges or overflows from a sump, sump pump, or related 
equipment; or
    c. Seeps or leaks on or through the insured property; unless 
there is a flood in the area and the flood is the proximate cause of 
the sewer or drain backup, sump pump discharge or overflow, or the 
seepage of water;
    6. The pressure or weight of water unless there is a flood in 
the area 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 direct physical loss by or from flood to power, heating, or 
cooling equipment on the described location;
    8. Theft, fire, explosion, wind, or windstorm;
    9. Anything 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 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 required by law or ordinance.

VI. Deductibles

    A. When a loss is insured 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.
    C. No deductible applies to:
    1. III.C.2. Loss Avoidance Measures; or
    2. III.D. Increased Cost of Compliance.

VII. Coinsurance

    A. This Coinsurance Section applies only to coverage on the 
building.
    B. We will impose a penalty on loss payment unless the amount of 
insurance applicable to the damaged building is:
    1. At least 80 percent of its replacement cost; or
    2. The maximum amount of insurance available for that building 
under the NFIP, whichever is less.

[[Page 43981]]

    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 required amount of insurance.
    2. Multiply the amount of loss, before application of the 
deductible, by the figure determined in C.1 above.
    3. Subtract the deductible from the figure determined in C.2 
above.
    We will pay the amount determined in C.3 above, or the amount of 
insurance carried, whichever is less. The amount of insurance 
carried, if in excess of the applicable maximum amount of insurance 
available under the NFIP, is reduced accordingly.

Examples

Example #1 (Inadequate Insurance)
Replacement value of the building--$250,000
Required amount of insurance--$200,000
(80 percent of replacement value of $250,000)
Actual amount of insurance carried--$180,000
Amount of the loss--$150,000
Deductible--$500
Step 1: 180,000/200,000 = .90
(90 percent of what should be carried.)
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).

Example #2 (Adequate Insurance)
Replacement value of the building--$500,000
Required amount of insurance--$400,000
(80 percent of replacement value of $500,000)
Actual amount of insurance carried--$400,000
Amount of the loss--$200,000
Deductible--$500

    In this example there is no coinsurance penalty, because the 
actual amount of insurance carried meets the required amount. We 
will pay no more than $199,500 ($200,000 amount of loss minus the 
$500 deductible).
    D. In calculating the full replacement cost of a building:
    1. The replacement cost value of any insured building property 
will be included;
    2. The replacement cost value of any building property not 
insured under this policy will not be included; and
    3. Only the replacement cost value of improvements installed by 
the condominium association will be included.

VIII. General Conditions

A. Pair and Set Clause

    In case of loss to an article that is part of a pair or set, we 
will have the option of paying you:
    1. An amount equal to the cost of replacing the lost, damaged, 
or destroyed article, minus its depreciation; or
    2. 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.

B. Other Insurance

    1. If a loss insured by this policy is also insured by other 
insurance that includes flood coverage not issued under the Act, we 
will not pay more than the amount of insurance that you are entitled 
to for lost, damaged, or destroyed property insured under this 
policy subject to the following:
    a. We 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 VIII.B.1.b or c 
immediately below applies.
    b. If the other policy has a provision stating that it is excess 
insurance, this policy will be primary.
    c. This policy will be primary (but subject to its own 
deductible) up to the deductible in the other flood policy (except 
another policy as described in VIII.B.1.b. above). 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.
    2. If there is a National Flood Insurance Program flood 
insurance policy in the name of a unit owner that covers the same 
loss as this policy, then this policy will be primary.

C. Amendments, Waivers, Assignment

    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 we take under the terms of this policy 
constitutes a waiver of any of our rights. You may assign this 
policy in writing when you transfer title of your property to 
someone else except under these conditions:
    1. When this policy insures only personal property; or
    2. When this policy insures a building under construction.

D. Insufficient Premium or Rating Information

    1. Applicability. The following provisions apply to all 
instances where the premium paid on this policy is insufficient or 
where the rating information is insufficient, such as where an 
Elevation Certificate is not provided.
    2. Reforming the Policy with Reduced Coverage. Except as 
otherwise provided in VIII.D.1 and VIII.D.4, if the premium we 
received from you was not sufficient to buy the kinds and amounts of 
coverage you requested, we will provide only the kinds and amounts 
of coverage that can be purchased for the premium payment we 
received.
    a. For the purpose of determining whether your premium payment 
is sufficient to buy the kinds and amounts of coverage you 
requested, we will first deduct the costs of all applicable fees and 
surcharges.
    b. If the amount paid, after deducting the costs of all 
applicable fees and surcharges, is not sufficient to buy any amount 
of coverage, your payment will be refunded. Unless the policy is 
reformed to increase the coverage amount to the amount originally 
requested pursuant to VIII.E.3, this policy will be cancelled, and 
no claims will be paid under this policy.
    c. Coverage limits on the reformed policy will be based upon the 
amount of premium submitted per type of coverage, but will not 
exceed the amount originally requested.
    3. Discovery of Insufficient Premium or Rating Information. If 
we discover that your premium payment was not sufficient to buy the 
requested amount of coverage, the policy will be reformed as 
described in VIII.D.2. You have the option of increasing the amount 
of coverage resulting from this reformation to the amount you 
requested as follows:
    a. Insufficient Premium. If we discover that your premium 
payment was not sufficient to buy the requested amount of coverage, 
we will send you, and any mortgagee or trustee known to us, 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 it is discovered that the 
initial amount charged to you for any fees or surcharges is 
incorrect, the difference will be added or deducted, as applicable, 
to the total amount in this bill.
    (1) If you or the mortgagee or trustee pay the additional amount 
due within 30 days from the date of our bill, we 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 you or the mortgagee or trustee do not pay the additional 
amount due within 30 days of the date of our bill, any flood 
insurance claim will be settled based on the reduced amount of 
coverage.
    (3) As applicable, you have the option of paying all or part of 
the amount due out of a claim payment based on the originally 
requested amount of coverage.
    b. Insufficient Rating Information. If we determine that the 
rating information we have is insufficient and prevents us from 
calculating the additional premium, we will ask you to send the 
required information. You must submit the information within 60 days 
of our request.
    (1) If we receive the information within 60 days of our request, 
we will determine the amount of additional premium for the current 
policy term and follow the procedure in VIII.D.3.a above.
    (2) If we do not receive the information within 60 days of our 
request, no claims will be paid until the requested information is 
provided. Coverage will be limited to the amount of coverage that 
can be purchased for the payments we received, as determined when 
the requested information is provided.
    4. Coverage Increases. If we do not receive the amount requested 
in VIII.D.3.a or VIII.D.4.a, or the additional information requested 
in VIII.D.3.b or VIII.D.4.b by the date it is due, the amount of 
coverage under this policy can only be increased by endorsement 
subject to the appropriate waiting period. However, no coverage 
increases will be allowed until you have provided the information 
requested in VIII.D.3.b or VIII.D.4.b.
    5. Falsifying Information. However, if we find that you or your 
agent intentionally did

[[Page 43982]]

not tell us, or falsified, any important fact or circumstance or did 
anything fraudulent relating to this insurance, the provisions of 
IX.A apply.

E. Policy Renewal

    1. This policy will expire at 12:01 a.m. on the last day of the 
policy term.
    2. We must receive the payment of the appropriate renewal 
premium within 30 days of the expiration date.
    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 incorrect, incomplete, or illegible 
address, which delayed its delivery to you before the due date for 
the renewal premium, then we will follow these 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 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 as an expired policy as of the 
expiration date shown on the Declarations Page.
    c. In connection with the renewal of this policy, we may ask you 
during the policy term to recertify, on a Recertification 
Questionnaire that we will provide you, the rating information used 
to rate your most recent application for or renewal of insurance.

F. Conditions Suspending or Restricting Insurance

    We are not liable for loss that occurs while there is a hazard 
that is increased by any means within your control or knowledge.

G. Requirements in Case of Loss

    In case of a flood loss to insured property, you must:
    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 insured property during 
the term 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 insured 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 G.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.

H. Our Options After a Loss

    Options we may, in our sole discretion, exercise after loss 
include the following:
    1. At such reasonable times and places that we may designate, 
you must:
    a. Show us or our representative the damaged property;
    b. Submit to examination under oath, while not in the presence 
of another insured, and sign the same; and
    c. Permit us to examine and make extracts and copies of:
    (1) Any policies of property insurance insuring you against loss 
and the deed establishing your ownership of the insured real 
property;
    (2) Condominium association documents including the Declarations 
of the condominium, its Articles of Association or Incorporation, 
Bylaws, and rules and regulations; and
    (3) All books of accounts, bills, invoices and other vouchers, 
or certified copies pertaining to the damaged property if the 
originals are lost.
    2. We may request, in writing, that you furnish us 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 to us; and
    e. Evidence that prior flood damage has been repaired.
    3. If we give you written notice within 30 days after we receive 
your signed, sworn proof of loss, we may:
    a. 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
    b. Take all or any part of the damaged property at the value 
that we agree upon or its appraised value.

I. No Benefit to Bailee

    No person or organization, other than you, having custody of 
insured property will benefit from this insurance.

J. Loss Payment

    1. We will adjust all losses with you. We will pay you unless 
some other person or entity is named in the policy or is legally 
entitled to receive payment. Loss will be payable 60 days after we 
receive your proof of loss (or within 90 days after the insurance 
adjuster files the adjuster's report signed and sworn to by you in 
lieu of a proof of loss) and:
    a. We reach an agreement with you;
    b. There is an entry of a final judgment; or
    c. There is a filing of an appraisal award with us, as provided 
in VIII.M.
    2. If we reject your proof of loss in whole or in part you may:
    a. Accept our denial of your claim;
    b. Exercise your rights under this policy; or
    c. File an amended proof of loss as long as it is filed within 
60 days of the date of the loss.

K. Abandonment

    You may not abandon damaged or undamaged insured property to us.

L. Salvage

    We may permit you to keep damaged insured property after a loss, 
and we will reduce the amount of the loss proceeds payable to you 
under the policy by the value of the salvage.

M. Appraisal

    If you and we fail to agree on the actual cash value or, if 
applicable, replacement cost of the damaged property so as to 
determine 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 insured 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
    2. Bear the other expenses of the appraisal and umpire equally.

N. Mortgage Clause

    1. The word ``mortgagee'' includes trustee.

[[Page 43983]]

    2. Any loss payable under Coverage A--Building Property will be 
paid to any mortgagee of whom we have actual notice, as well as any 
other mortgagee or loss payee determined to exist at the time of 
loss, and you, 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.
    3. If we deny your claim, that denial will not apply to a valid 
claim of the mortgagee, if the mortgagee:
    a. Notifies us of any change in the ownership or occupancy, or 
substantial change in risk of which the mortgagee is aware;
    b. Pays any premium due under this policy on demand if you have 
neglected to pay the premium; and
    c. Submits a signed, sworn proof of loss within 60 days after 
receiving notice from us of your failure to do so.
    4. All terms of this policy apply to the mortgagee.
    5. The mortgagee has the right to receive loss payment even if 
the mortgagee has started foreclosure or similar action on the 
building.
    6. 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.
    7. 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.

O. Suit Against Us

    You may not sue us to recover money under this policy unless you 
have complied with all the requirements of the policy. If you do 
sue, you must start the suit within one year of the date of the 
written denial of all or part of the claim, and you 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 you may have under this policy 
and to any dispute that you may have arising out of the handling of 
any claim under the policy.

P. Subrogation

    Whenever we make a payment for a loss under this policy, we are 
subrogated to your right to recover for that loss from any other 
person. That means that your right to recover for a loss that was 
partly or totally caused by someone else is automatically 
transferred to us, to the extent that we have paid you for the loss. 
We may require you to acknowledge this transfer in writing. After 
the loss, you may not give up our right to recover this money or do 
anything that would prevent us from recovering it. If you make any 
claim against any person who caused your loss and recover any money, 
you must pay us back first before you may keep any of that money.

Q. Continuous Lake Flood

    1. If an 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 an insured 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;
    c. Not to apply for any flood insurance under the Act for 
property at the described location;
    d. Not to seek a premium refund for current or prior terms.
    If the policy term ends before the insured building has been 
flooded continuously for 90 days, the provisions of this paragraph 
Q.1 will apply when the insured building suffers a covered loss 
before the policy term ends.
    2. If your insured building is subject to continuous lake 
flooding from a closed basin lake, you may elect to file a claim 
under either paragraph Q.1 above or this paragraph Q.2 (A ``closed 
basin lake'' is a natural lake from which water leaves primarily 
through evaporation and whose surface area now exceeds or has 
exceeded one 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 paragraph Q.2, 
we will pay your claim as if the building is a total loss even 
though it has not been continuously inundated for 90 days, subject 
to the following conditions:
    a. Lake floodwaters must damage or imminently threaten to damage 
your building.
    b. Before approval of your claim, you must:
    (1) Agree to a claim payment that reflects your buying back the 
salvage on a negotiated basis; and
    (2) Grant the conservation easement contained 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 paragraph Q.2. 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
    (3) Comply with paragraphs Q.1.a through Q.1.d above.
    c. Within 90 days of approval of your claim, you must move your 
building to a new location outside the ASC. FEMA will give you an 
additional 30 days to move if you show there is sufficient reason to 
extend the time.
    d. Before the final payment of your claim, you must acquire an 
elevation certificate and a floodplain development permit from the 
local floodplain administrator for the new location of your 
building.
    e. Before the approval of your claim, the community having 
jurisdiction over your 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 in paragraph 
Q.2.b 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 Q.2.b 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 non-profit 
land trust organization receives the property as a donation, that 
organization must maintain the property as deed-restricted, 
consistent with the provisions of paragraph Q.2.b above.
    f. Before the approval of your claim, the affected State must 
take all action set forth in FEMA's ``Policy Guidance for Closed 
Basin Lakes.''
    g. You must have NFIP flood insurance coverage continuously in 
effect from a date established by FEMA until you file a claim under 
this paragraph Q.2. 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 under this paragraph Q.2, we 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 your insurer as an inflation 
adjustment.
    h. This paragraph Q.2 will be in effect for a community when the 
FEMA Regional Administrator for the affected region provides to the 
community, in writing, the following:
    (1) Confirmation that the community and the State are in 
compliance with the conditions in paragraphs Q2.e and Q.2.f above; 
and

[[Page 43984]]

    (2) The date by which you must have flood insurance in effect.

R. Loss Settlement

1. Introduction

    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 R.2 below 
applies to buildings other than manufactured homes or travel 
trailers.
    b. Special Loss Settlement, described in R.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 insured under this policy, as outlined in R.4. below.

2. Replacement Cost Loss Settlement

    a. We will pay to repair or replace a damaged or destroyed 
building, after application of the deductible and without deduction 
for depreciation, but not more than the least of the following 
amounts:
    (1) The amount of insurance in this policy that applies to the 
building;
    (2) The replacement cost of that part of the building damaged, 
with materials of like kind and quality, and for like occupancy and 
use; or
    (3) The necessary amount actually spent to repair or replace the 
damaged part of the building for like occupancy and use.
    b. We will not be liable for any loss on a Replacement Cost 
Coverage basis unless and until actual repair or replacement of the 
damaged building or parts thereof, is completed.
    c. If a building is rebuilt at a location other than the 
described location, we will pay no more than it would have cost to 
repair or rebuild at the described location, subject to all other 
terms of Replacement Cost Loss Settlement.

3. Special Loss Settlement

    a. The following loss settlement conditions apply to a 
residential condominium building that is:
    (1) A manufactured home or travel trailer, as defined in 
II.C.6.b and c; and
    (2) at least 16 feet wide when fully assembled and has at least 
600 square feet within its perimeter walls when fully assembled.
    b. If such a building is totally destroyed or damaged to such an 
extent that, in our judgment, it is not economically feasible to 
repair, at least to its pre-damaged condition, we will, at our 
discretion, pay the least of the following amounts:
    (1) The lesser of the replacement cost of the manufactured home 
or travel trailer or 1.5 times the actual cash value; or
    (2) The building limit of liability shown on your Declarations 
Page.
    c. If such a manufactured home or travel trailer is partially 
damaged and, in our judgment, it is economically feasible to repair 
it to its pre-damaged condition, we will settle the loss according 
to the Replacement Cost Loss Settlement conditions in R.2 above.

4. Actual Cash Value Loss Settlement

    a. The types of property noted below are subject to actual cash 
value loss settlement:
    (1) Personal property;
    (2) Insured property abandoned after a loss and that remains as 
debris at the described location;
    (3) Outside antennas and aerials, awnings, and other outdoor 
equipment;
    (4) Carpeting and pads;
    (5) Appliances; and
    (6) A manufactured home or mobile home or a travel trailer as 
defined in II.C.6.b or c that does not meet the conditions for 
special loss settlement in R.3 above.
    b. We will pay the least of the following amounts:
    (1) The applicable amount of insurance under this policy;
    (2) The actual cash value, as defined in II.C.2; 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.

IX. Policy Nullification, Cancellation, and Non-Renewal

A. Policy Nullification for Fraud, Misrepresentation, or Making 
False Statements

    1. With respect to all insureds under this policy, this policy 
is void and has no legal force and effect if at any time, before or 
after a loss, you or any other insured or your agent have, with 
respect to this policy or any other NFIP insurance:
    a. Concealed or misrepresented any material fact or 
circumstance;
    b. Engaged in fraudulent conduct; or
    c. Made false statements.
    2. Policies voided under A.1 cannot be renewed or replaced by a 
new NFIP policy.
    3. Policies are void as of the date the acts described in 
A.1.above were committed.
    4. Fines, civil penalties, and imprisonment under applicable 
Federal laws may also apply to the acts of fraud or concealment 
described above.

B. Policy Nullification for Reasons Other Than Fraud

    1. This policy is void from its inception, and has no legal 
force or effect, if:
    a. The property listed on the application is located in a 
community that was not participating in the NFIP on this policy's 
inception date and did not join or reenter the program during the 
policy term and before the loss occurred;
    b. The property listed on the application is otherwise not 
eligible for coverage under the NFIP at the time of the initial 
application;
    c. You never had an insurable interest in the property listed on 
the application;
    d. You provided an agent with an application and payment, but 
the payment did not clear; or
    e. We receive notice from you, prior to the policy effective 
date, that you have determined not to take the policy and you are 
not subject to a requirement to obtain and maintain flood insurance 
pursuant to any statute, regulation, or contract.
    2. In such cases, you will be entitled to a full refund of all 
premium, fees, and surcharges received. However, if a claim was paid 
for a policy that is void, the claim payment must be returned to 
FEMA or offset from the premiums to be refunded before the refund 
will be processed.

C. Cancellation of the Policy by You

    1. You may cancel this policy in accordance with the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.
    2. If you cancel this policy, you may be entitled to a full or 
partial refund of premium, surcharges, or fees under the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.

D. Cancellation of the Policy by Us

    1. Cancellation for Underpayment of Amounts Owed on This Policy. 
This policy will be cancelled, pursuant to VIII.D.2, if it is 
determined that the premium amount you paid is not sufficient to buy 
any amount of coverage, and you do not pay the additional amount of 
premium owed to increase the coverage to the originally requested 
amount within the required time period.
    2. Cancellation Due to Lack of an Insurable Interest.
    a. If you no longer have an insurable interest in the insured 
property, we will cancel this policy. You will cease to have an 
insurable interest if:
    (1) For building coverage, the building was sold, destroyed, or 
removed.
    (2) For contents coverage, the contents were sold or transferred 
ownership, or the contents were completely removed from the 
described location.
    b. If your policy is cancelled for this reason, you may be 
entitled to a partial refund of premium under the applicable rules 
and regulations of the NFIP.
    3. Cancellation of Duplicate Policies.
    a. Except as allowed under Article I.F, your property may not be 
insured by more than one NFIP policy, and payment for damages to 
your property will only be made under one policy.
    b. Except as allowed under Article I.G, if the property is 
insured by more than one NFIP policy, we will cancel all but one of 
the policies. The policy, or policies, will be selected for 
cancellation in accordance with 44 CFR 62.5 and the applicable rules 
and guidance of the NFIP.
    c. If this policy is cancelled pursuant to VIII.D.3.a, you may 
be entitled to a full or partial refund of premium, surcharges, or 
fees under the terms and conditions of this policy and the 
applicable rules and regulations of the NFIP.
    4. Cancellation Due to Physical Alteration of Property.
    a. If the insured building has been physically altered in such a 
manner that it is no longer eligible for flood insurance coverage, 
we will cancel this policy.
    b. If your policy is cancelled for this reason, you may be 
entitled to a partial refund of premium under the terms and 
conditions of this policy and the applicable rules and regulations 
of the NFIP.

E. Non-Renewal of the Policy by Us

    Your policy will not be renewed if:

[[Page 43985]]

    1. The community where your insured property is located is 
suspended or stops participating in the NFIP;
    2. Your building is otherwise ineligible for flood insurance 
under the Act;
    3. You have failed to provide the information we requested for 
the purpose of rating the policy within the required deadline.

X. Liberalization Clause

    If we make a change that broadens your coverage under this 
edition of our policy, but does not require any additional premium, 
then that change will automatically apply to your insurance as 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.

XI. What Law Governs

    This policy and all disputes arising from the insurer's policy 
issuance, policy administration, or the handling of any claim under 
the policy are governed exclusively by the flood insurance 
regulations issued by FEMA, the National Flood Insurance Act of 
1968, as amended (42 U.S.C. 4001, et seq.), and Federal common law.
    In Witness Whereof, we have signed this policy below and hereby 
enter into this Insurance Agreement.

Administrator, Federal Insurance and Mitigation Administration

PART 62--SALE OF INSURANCE AND ADJUSTMENT OF CLAIMS

0
16. Revise the authority citation for Part 62 to read as follows:

    Authority:  42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.


0
17. Revise Sec.  62.3 to read as follows:


Sec.  62.3   Servicing agent.

    (a) Pursuant to sections 1345 and 1346 of the Act, the Federal 
Insurance Administrator may enter into an agreement with a servicing 
agent to authorize it to assist in issuing flood insurance policies 
under the Program in communities designated by the Federal Insurance 
Administrator and to accept responsibility for delivery of policies and 
payment of claims for losses as prescribed by and at the discretion of 
the Federal Insurance Administrator.
    (b) The servicing agent will arrange for the issuance of flood 
insurance to any person qualifying for such coverage under parts 61 and 
64 of this subchapter who submits an application to the servicing agent 
in accordance with the terms and conditions of the contract between the 
Agency and the servicing agent.

0
18. Revise Sec.  62.5 to read as follows:


Sec.  62.5  Nullifications, cancellations, and premium refunds.

    (a) Nullification--(1) Property ineligible at time of application. 
FEMA will void a policy for a property that was not eligible for 
coverage at the time of the initial application from the commencement 
of the policy. FEMA must pay the policyholder a refund of all premium, 
fees, and surcharges paid from the date of commencement of the policy, 
but no more than 5 years prior to the date of receipt of verifiable 
evidence that the property was ineligible for coverage at the time of 
the initial application. If FEMA paid a claim for an ineligible 
property, the policyholder must return the claim payment to FEMA, or 
offset the payment from the premiums to be refunded, before FEMA will 
process the refund.
    (2) Property later becomes ineligible. FEMA may not renew a policy 
for a property that was eligible for coverage at the time of the 
initial application, but later became ineligible for coverage. In such 
instances, FEMA must nullify the policy from the first renewal date 
after the property became ineligible. FEMA must refund all premium, 
fees, and surcharges paid from the first renewal date after the 
property became ineligible, but no more than 5 years prior to the date 
of receipt of verifiable evidence that the property was eligible for 
coverage at the time of the initial application, but later became 
ineligible for coverage. If FEMA paid a claim for a property after it 
became ineligible for coverage, the policyholder must return the claim 
payment to FEMA or FEMA must offset the amount of claim payment from 
the premiums to be refunded before FEMA may process the refund.
    (3) Nullification prior to policy effective date. If FEMA nullifies 
a policy prior to the policy effective date, that policy will be void 
from the commencement of the nullified policy term. In such case, FEMA 
will refund all premium, fees, and surcharges paid for the current 
policy term only. If FEMA paid a claim for a policy that was improperly 
issued, the policyholder must return the claim payment to FEMA or FEMA 
must offset the amount of claim payment from the premiums to be 
refunded before the NFIP may process the refund.
    (b) Cancellation due to lack of an insurable interest. If the 
policyholder had an insurable interest, but no longer has an insurable 
interest, in the insured property, FEMA must cancel the policy on the 
insured property. If FEMA cancels a policy for this reason, FEMA must 
refund the policyholder a pro rata share of the premium from the date 
the policyholder lost an insurable interest in the property, but no 
more than 5 years prior to the date of the cancellation request. FEMA 
must pay the policyholder a refund of all fees or surcharges for any 
full policy term during which the policyholder had no insurable 
interest in the insured property, but no more than 5 years prior to the 
date of the cancellation request. A policyholder ceases to have an 
insurable interest if:
    (1) For building coverage, the building was sold, destroyed, or 
removed.
    (2) For contents coverage, the contents were sold or transferred, 
or the contents were completely removed from the described location.
    (c) No insurance coverage requirement. A policyholder may cancel a 
policy if the policyholder was subject to a requirement by a lender, 
loss payee, or other Federal agency to obtain and maintain flood 
insurance pursuant to statute, regulation, or contract, but there is no 
longer such a requirement. The policyholder will receive a refund of a 
pro rata share of the premium for the current policy term only, 
calculated from the date of the cancellation request, but will not 
receive a refund of any fees or surcharges.
    (d) Establishment of a common expiration date. A policyholder may 
purchase a new policy and cancel an existing policy in order to 
establish a common expiration date between flood insurance coverage and 
other coverage. The policyholder will receive a refund of a pro rata 
share of the premium calculated from the effective date of the new 
policy to the end date of the previous policy. The policyholder will 
not receive a refund of any fees or surcharges. In order to rewrite and 
cancel the policy, the following conditions must apply:
    (1) The new policy must be written with the same company for the 
same or higher amount of coverage. If the policy is written for a 
higher amount or different type of coverage, the waiting period in 
Sec.  61.11 will apply.
    (2) The other insurance coverage for which the common expiration 
date is being established must be for coverage on the same building 
that is insured by the flood policy being cancelled and rewritten.
    (3) The coverage for the new policy must be effective prior to 
cancelling the existing policy.
    (e) Cancelation or nullification of duplicate NFIP policies--(1) 
Generally.
    (i) Except as described in 44 CFR 62.5(e)(2), if an insured 
property is insured by more than one NFIP policy not in accordance with 
applicable regulations and the Standard Flood Insurance Policy, FEMA 
must nullify the policy with the later effective date. The policy with 
the earlier effective date will continue. The policyholder will

[[Page 43986]]

receive a pro rata refund of all premium for the nullified policy from 
the effective date of the nullified policy, but no more than 5 years 
prior to the date of receipt of verifiable evidence that the insured 
property is insured by more than one NFIP policy. The policyholder will 
receive a refund of all fees or surcharges for any full policy term 
during which the policyholder was insured by more than one policy, but 
no more than 5 years prior to the date of receipt of verifiable 
evidence that the insured property is insured by more than one NFIP 
policy.
    (ii) If both polices have the same policy effective date, the 
policyholder may choose which policy will remain in effect, and the 
policyholder will receive a refund of all premium, fees, and surcharges 
for the cancelled policy from the effective date of the cancelled 
policy, but no more than 5 years prior to the date of receipt of 
verifiable evidence that the insured property is insured by more than 
one NFIP policy.
    (2) Exceptions. In the following cases, the policyholder may 
maintain the policy with the later policy effective date while 
cancelling the policy with the earlier policy effective date:
    (i) The policy with the earlier effective date has expired for more 
than 30 days. In such cases, the policyholder will receive a refund of 
a pro rata share of the premium, calculated from the effective date of 
the policy with the later effective date to the end date of the policy 
with the earlier effective date, but no more than 5 years prior to the 
date of cancellation. The policyholder will also receive a refund of 
all fees and surcharges for any full policy terms during which the 
insured property is insured by both policies, but no more than 5 years 
prior to the date of the cancellation request.
    (ii) The policy with the earlier policy effective date is a Group 
Flood Insurance Policy. In such cases, there will be no refund of any 
premium, fees, or surcharges.
    (iii) The policy with the earlier effective date is cancelled to 
establish a common policy expiration date pursuant to paragraph (d) of 
this section. In such cases, refunds will be provided in accordance 
with paragraph (d) of this section.
    (iv) The policy with the earlier effective date was force placed 
pursuant to 42 U.S.C. 4012a using the NFIP's Mortgage Portfolio 
Protection Program. In such cases, the policyholder will receive a 
refund of the pro rata share of the premium calculated from the policy 
effective date of the new policy to the expiration date of the 
cancelled policy. There will be no refund of any fees or surcharges.
    (v) The policy with the earlier effective date is a Dwelling Form 
policy with building coverage on a condominium unit that is also 
insured by a Residential Condominium Building Association Policy 
(RCBAP) that is issued at the statutory maximum coverage limit for 
buildings. In such cases, the policyholder will receive a refund of a 
pro rata share of the premium for the building coverage issued under 
the Dwelling Form policy, as calculated from the effective date of the 
RCBAP policy to the end date of the Dwelling Form policy. The 
policyholder will also receive a refund of all fees and surcharges for 
any full policy terms during which the condominium unit is insured by 
both a Dwelling Form policy and an RCBAP in which the coverage equals 
the statutory maximum coverage limits for buildings, but no more than 5 
years prior to the date of the cancellation request.
    (f) Other cancellations and nullifications. Except as indicated 
below, FEMA will not refund premiums, assessments, fees, or surcharges 
if FEMA cancels a policy for any of the following reasons:
    (1) Fraud. FEMA will cancel a policy for fraud committed by the 
policyholder or the agent. FEMA may cancel a policy for 
misrepresentation of a material fact by the policyholder or agent. Such 
cancellations will take effect as of the date of the fraudulent act or 
material misrepresentation of fact.
    (2) Administrative cancellation. FEMA may cancel and rewrite a 
policy to correct an administrative error, such as when the policy is 
written with the wrong policy effective date. In such cases, FEMA will 
apply any premium, assessments, fees, or surcharges to the new policy. 
FEMA will refund any excess premium, fees, surcharges, or assessments 
paid.
    (3) Nullification for properties ineligible due to physical 
alteration of property. A policy insuring a building or its contents, 
or both, may be cancelled if the building has been physically altered 
in such a manner that the building and its contents are no longer 
eligible for flood insurance coverage. The policyholder will receive a 
refund of a pro rata share of the premium for the current policy term 
only, but the policyholder will not receive a refund of any fees or 
surcharges.

0
18. Revise Sec.  62.6 to read as follows:


Sec.  62.6   Brokers and agents writing NFIP policies through the NFIP 
direct servicing agent.

    (a) A broker or agent selling policies of flood insurance placed 
with the NFIP at the offices of its servicing agent must be duly 
licensed by the state insurance regulatory authority in the state in 
which the property is located.
    (b) The earned commission which will be paid to any property or 
casualty insurance agent or broker, with respect to each policy or 
renewal the agent duly procures on behalf of the insured, in connection 
with policies of flood insurance placed with the NFIP at the offices of 
its servicing agent, but not with respect to policies of flood 
insurance issued pursuant to subpart C of this part, will not be less 
than $10 and is computed as follows:


Sec.  62.22   [Amended]

0
19. In Sec.  62.22, amend paragraph (a) by removing ``Federal Insurance 
Administration'' wherever it appears and adding in their place 
``Federal Insurance and Mitigation Administration.''

Peter T. Gaynor,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2020-09260 Filed 7-17-20; 8:45 am]
BILLING CODE 9111-52-P


