Flood

Created by Congress in 1968, The National Flood Insurance Program (NFIP) is the largest single peril insurance program in the world. FEMA contracts hundreds of “Write Your Own” (WYO) insurance carriers to administer underwriting and process claims. With only one peril to insure and carriers to help, insuring against flood loss should be simple – but that’s not always the case.

Our Experience with Flood Coverage

As a certified Flood agent, Liljenberg is familiar with technical coverage issues & can help bring clarity to convoluted flood insurance claims and litigation.

The National Flood Insurance Program (NFIP)

*Commercial Property under NFIP

The scope of commercial property coverage under the NFIP is also contingent upon certain regulations. Commercial property is eligible for NFIP coverage up to $500,000 each building and $500,000 contents. Replacement cost valuation and Business Income are not available for NFIP commercial flood policies. NFIP Increased Cost of Compliance is limited to $30,000, and is substantially different than Ordinance or Law coverage available on standard property policies.

*Excess Flood Coverage

Excess Flood coverage, offered by insurance carriers for both residential and commercial properties, must be structured with utmost care. Because excess flood policies contain different coverage terms and conditions than do NFIP policies, claim disputes may result when coverage is improperly coordinated. Thus, structuring policy terms of Excess Flood above NFIP limits is critical.

*Residential Property under NFIP

Under NFIP, the scope of flood coverage for residential properties depends on specific factors. NFIP maximum limits for residential property are $250,000 building and $100,000 contents. Replacement cost building coverage is available only for a single-family dwelling used as the insured’s principal residence. While homeowners’ policies typically provide replacement cost for contents, NFIP offers only Actual Cash Value (depreciated) coverage. Additional living expense covered by homeowners insurance is excluded in NFIP flood policies.

Complications of Flood Coverage and Claims

Other factors that potentially complicate coverage and claims include:

• Flood losses in the U.S. average more than $2.5 billion annually, with 30% of losses occurring in low flood risk areas.
• Excess Flood carriers may offer replacement cost coverage, whereas NFIP primary policies use actual cash value.
• Excess Flood policies may cover Business Income, whereas underlying NFIP policies exclude Business Income coverage.
• Flood devastation (from hurricanes like Sandy and Katrina) overwhelms emergency responders and insurance adjusters.
• Accuracy of flood zone determinations consistently improves with computer technology; what happens when updated Flood Insurance Rate Maps (FIRM) change a policyholder’s flood zone elevation?
• “Concurrent causation” arguments wind through insurance departments and the courts.