Disaster Assistance Guide for Local Governments – April 2008
Section V
CHAPTER 2
NATIONAL FLOOD INSURANCE PROGRAM
The National Flood Insurance Program (NFIP) is a federal program administered by the Federal Emergency Management Agency (FEMA) enabling property owners to purchase flood insurance. The purpose of this insurance is to provide an alternative to disaster assistance for meeting escalating costs of repairing flood-damaged buildings and contents. The Department of Ecology is the state of Washington’s Point of Contact for the NFIP and related issues. The NFIP is based on an agreement between communities and the federal government, which states that if a community will implement measures to reduce future flood risks, the federal government will make flood insurance available within the community as a financial protection against flood losses. A “community” is defined, for NFIP’s purposes, as any state, area, or political subdivision, Indian Tribe or authorized tribal organization, which has the authority to adopt and enforce floodplain management ordinances for the area under its jurisdiction. In most cases, a community is either an incorporated city or town, or an unincorporated area of a county. A “flood” is defined in the standard flood insurance policy, in part, as: “A general and temporary condition of partial or complete inundation of normally dry land areas from overflow of inland or tidal waters, or from the unusual and rapid accumulation or runoff of surface waters from any source.” Under the NFIP, FEMA is required to develop flood risk data for use in both insurance rating and floodplain management. This data is developed through Flood Insurance Studies (FIS). Using FIS results, FEMA prepares Flood Insurance Rate Maps, which identify Special Flood Hazard Areas (SFHA), within the studied community. Insurance rates, etc., are based on the SFHA. Community participation in the NFIP is voluntary. Each flood-prone community, as identified by FEMA, must assess its flood hazard and determine whether flood insurance and floodplain management would benefit the community. However, a community that chooses not to participate within one year after a flood hazard has been identified, is subject to withdrawal of certain federal programs. Further, certain reductions to federal assistance are also made for public facilities and private non-profit facilities without insurance, located in special flood hazard areas. Flood insurance can be obtained through most private insurance companies licensed and operated in Washington State. The insurance companies’ agents and brokers are held accountable to the State Insurance Commissioner to provide NFIP customers with the same level of standards and service that the state requires of them in selling their
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Disaster Assistance Guide for Local Governments – April 2008
other lines of insurance. Details regarding all covered perils, exclusions, and deductibles can be obtained from participating insurance companies. In the event of loss due to flood, a flood insurance policy holder should immediately report the loss to the insurance agent who wrote the policy. A claims adjuster will be assigned the loss. Also, the policyholder must file a “Proof of Loss” within 60 days of the date of loss. A proof of loss is a sworn statement by the policyholder substantiating the insurance claim. To ensure the safety of Washington State residents, the State legislature enacted Chapter 86.16 of the Revised Code of Washington (RCW), which contains standards designed to protect human health and safety while incorporating the NFIP standards as the core of the state’s program. The program is detailed in the Floodplain Management Handbook for Local Administrators (DOE 88-10), dated August 1988, published by the Washington State Department of Ecology, and the Floodplain Management, A Local Flood Administrator’s Guide to the NFIP, produced by FEMA Region X. It is important for all local jurisdictions to understand that RCW 86.16.031 requires that “every county and incorporated city and town shall submit to the Department of Ecology any new floodplain management ordinance or amendment to any existing floodplain management ordinance.” This ordinance is the cornerstone for local floodplain management activities. The State Department of Ecology is responsible to coordinate floodplain regulations and has available a model Flood Damage Prevention Ordinance for Washington State communities.
Effect of Nonparticipation in the National Flood Insurance Program
Flood insurance will no longer be available. No resident or business will be able to purchase a flood insurance policy. No federal grants or loans may be made for buildings located in identified flood hazard areas; this includes all federal agencies such as Housing and Urban Development, Economic Development Administration, Small Business Administration, Health and Human Services, etc. No federal disaster assistance may be provided in the form of grants or loans for repair or reconstruction purposes in identified flood hazard areas. This includes the Hazard Mitigation Grant Program, Flood Mitigation Assistance (FMA) program, and the PreDisaster Mitigation competitive (PDMc) program. No federal mortgage insurance may be provided in identified flood hazard areas. This includes Federal Housing Administration, Veterans Administration, Farmers Home Administration, etc. No Federal National Mortgage Association (FNMA) or Government National Mortgage Association (GNMA) purchase of mortgages in the secondary market may be made if the properties that are the subject of these mortgages are located in special flood hazard areas of non-participating communities.
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Disaster Assistance Guide for Local Governments – April 2008
Lenders of conventional loans: 1. Must notify buyer or lessee that property is in a flood hazard area; and 2. Must notify buyer or lessee that property in a flood hazard area is not eligible for federal disaster relief in a declared disaster. Actuarial rates go into effect for the first layer coverage of all construction occurring after the effective date of the Flood Insurance Rate Map, regardless of whether or not the community participates in the program at that time. Construction that is allowed to be prone to flood damage will not be rebuilt with federal funds because of the lack of flood insurance rates when the community does enter the program. Also, the risk of flood damages and expensive flood insurance premiums will adversely affect the future market values of such structures. Construction within the areas of identified floodways, without regard to the fact that such regulatory areas have been designated and that such construction does adversely affect (increase) floodwater depths and velocities, will incur the possible liability of causing increased flood damages to adjacent properties in the event of major flooding. Building of, or rebuilding of substantially damaged homes, in the floodway is prohibited by RCW 86.16.041. If flooding occurs, it is possible the local government could be held liable by residents and/or businesses that could not get flood insurance because of the decision not to participate in the National Flood Insurance Program.
Reduction in Federal Assistance for Uninsured Facilities in Special Hazard Areas – Excerpt from Amended Public Law 93-288, Flood Insurance
The following is an excerpt from the Stafford Act, Section 406 (d) “Flood Insurance” which deals with a reduction in federal assistance to public and private non-profit facilities that are located in special flood hazard areas but not covered by flood insurance. 1. Reduction of Federal Assistance. If a public facility or private non-profit facility located in a special flood hazard area identified for more than one year by the Director pursuant to the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.) is damaged or destroyed, after the 180th day following November 23, 1988, by flooding in a major disaster and such facility is not covered on the date of such flooding by flood insurance, the federal assistance which would otherwise be available under this section with respect to repair, restoration, reconstruction and replacement of such facility and associated expenses shall be reduced in accordance with paragraph (2). 2. Amount of Reduction. The amount of reduction in federal assistance under this section with respect to a facility shall be the lesser of – a. The value of such facility on the date of the flood damage or destruction, or V.2-3
Disaster Assistance Guide for Local Governments – April 2008
b. The maximum amount of insurance proceeds which would have been payable with respect to such facility if such facility had been covered by flood insurance under the National Flood Insurance Act of 1968 on such date. 3. Exception. Paragraphs (1) and (2) shall not apply to a private non-profit facility that is not covered by flood insurance solely because of the local government’s failure to participate in the flood insurance program established by the National Flood Insurance Act.
Suggested Local Actions
Review flood hazard areas in the jurisdiction with a view toward flood insurance. (Further specific information is available in the Floodplain Management Handbook for Local Administrators, available from the Washington State Department of Ecology and the Floodplain Management, A Local Flood Administrator’s Guide to the NFIP, produced by FEMA Region X.)
FLOOD INSURANCE PROGRAM, ADDRESS, AND TELEPHONE DIRECTORY
For insurance questions, call local property insurance agents or brokers or call toll-free (800) 638-6620. 1. For information pertaining to hazard identification mapping and floodplain management, contact the FEMA Regional Office listed below:
FEMA Region X
Federal Regional Center 130 228th Street Southwest Bothell, Washington 98021-9796 (425) 487-4678 The Washington State coordinating agency for Flood Insurance is:
2.
Dan Sokol
Department of Ecology Post Office Box 47600 Olympia, Washington 98504-7600 (360) 407-6796 For general program information or inquiries about the laws, regulations, or administrative policies related to the NFIP, write:
3.
Federal Emergency Management Agency
Federal Insurance Administration 500 C. Street Southwest Washington, D.C. 20472
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